Winpak Reports Third Quarter Results
(firmenpresse) - WINNIPEG, MANITOBA -- (Marketwire) -- 10/25/12 -- Winpak Ltd. (TSX: WPK) today reports consolidated results in US dollars for the third quarter of 2012, which ended on September 30, 2012.
Winpak Ltd. manufactures and distributes high-quality packaging materials and related packaging machines. The Company's products are used primarily for the packaging of perishable foods, beverages and in health care applications.
(1) The 2012 fiscal year comprises 53 weeks and the 2011 fiscal year comprised 52 weeks. Each quarter of 2012 and 2011 comprises 13 weeks with the exception of the first quarter of 2012, which comprised 14 weeks.
(2) EBITDA is not a recognized measure under International Financial Reporting Standards (IFRS). Management believes that in addition to net income, this measure provides useful supplemental information to investors including an indication of cash available for distribution prior to debt service, capital expenditures and income taxes. Investors should be cautioned, however, that this measure should not be construed as an alternative to net income, determined in accordance with IFRS, as an indicator of the Company's performance. The Company's method of calculating this measure may differ from other companies, and accordingly, the results may not be comparable.
Forward-looking statements: Certain statements made in the following report contain forward-looking statements including, but not limited to, statements concerning possible or assumed future results of operations of the Company. Forward-looking statements represent the Company's intentions, plans, expectations and beliefs, and are not guarantees of future performance. Such forward-looking statements represent Winpak's current views based on information as at the date of this report. They involve risks, uncertainties and assumptions and the Company's actual results could differ, which in some cases may be material, from those anticipated in these forward-looking statements. Unless otherwise required by applicable securities law, we disclaim any intention or obligation to publicly update or revise this information, whether as a result of new information, future events or otherwise. The Company cautions investors not to place undue reliance upon forward-looking statements.
Financial Performance
Net income attributable to common shareholders for the third quarter of 2012 was $17.1 million or 26 cents in earnings per share compared to $14.4 million or 22 cents per share in the corresponding quarter of 2011, an increase of 18.5 percent. An improvement in gross profit margins added approximately 0.5 cents in earnings per share while a lower effective income tax rate bolstered earnings by 1.5 cents per share. A favorable foreign exchange impact contributed a further 2 cents in earnings per share in the quarter.
For the nine months ended September 30, 2012, net income attributable to common shareholders equalled $50.0 million or 77 cents in earnings per share, eclipsing the prior year three-quarter result of $45.3 million or 70 cents in earnings per share by 10.5 percent. Higher sales volumes added 3 cents to earnings per share while improved manufacturing performance raised earnings per share by an additional 1 cent. However, higher operating expenses offset some of this improvement by lowering earnings per share by 1 cent. A lower effective income tax rate and a lesser amount attributable to non-controlling interests further added to earnings per share by 1.5 cents and 0.5 cents respectively. Finally, foreign exchange favorably impacted earnings per share by 2 cents.
Revenue
Revenue for the third quarter of 2012 was $165.4 million, a decline of $5.3 million or 3.1 percent over the comparable quarter in 2011, primarily a result of lower selling prices in response to reduced raw material costs. Volumes in total were up marginally from the prior year comparable quarter, increasing by 0.3 percent. A realignment of inventory levels by a major specialty beverage customer in the first two months of the quarter resulted in shipment reductions of over 20 percent for that customer in the three-month period compared to the third quarter of 2011, and offset a general improvement in volume across many of the other product groups. Overall, demand in the third month of the quarter was particularly promising. Volumes in modified atmosphere and specialty film packaging advanced in the mid-single digit percentage range in the quarter versus the prior year corresponding period. Lidding volumes grew marginally while rigid container shipments retracted by a few percentage points. However, excluding specialty beverages, rigid container volumes rose in excess of 15 percent in the quarter due to strong performance in juice cups and custom containers. Also during the quarter, the Company concluded an agreement to divest its drink cup product line including equipment, inventory and customer lists to a Canadian competitor, representing approximately $7 million in revenue on an annualized basis. This divestiture is expected to be marginally accretive to earnings in the fourth quarter. As in the second quarter of this year, both packaging machinery and biaxially oriented nylon continued to experience weak demand, with double-digit percentage declines in revenue. Packaging machinery bookings, however, are much improved going into the final quarter of the year. The greatest impact on revenue for the period in relation to the third quarter of 2011 was an overall decline in selling prices, in response to lower raw material costs, which reduced revenue by 2.9 percent. A weaker Canadian dollar further reduced revenue by 0.5 percent in the current quarter in relation to the corresponding prior year period.
For the first nine months of 2012, revenue grew to $496.9 million, an increase of $16.3 million or 3.4 percent in relation to the comparable period in 2011. This was due entirely to increased volumes, which expanded by 3.8 percent. Demand was strongest in modified atmosphere packaging followed closely behind by lidding, specialty films and rigid containers, which all advanced in the mid-single digit percentage range. Biaxially oriented nylon and packaging machinery were most impacted by the lackluster performance of the economy, recording volume declines in percentage terms in the mid single-digit and low double-digit range respectively from the prior year. The combination of selling prices and product mix was neutral to revenues year-to-date while a weaker Canadian dollar compared to the prior year had only a minor effect on revenue, resulting in a reduction of 0.4 percent.
Gross profit margins
Gross profit margins widened to 28.8 percent of revenue in the third quarter of 2012 from the 27.6 percent of revenue recorded in the same quarter of 2011, an increase of 1.2 percentage points. An improvement in manufacturing performance as a result of greater efficiencies resulted in a contribution of 0.5 cents in earnings per share.
For the first three quarters of 2012, gross profit margins surpassed the comparable prior year period at 29.0 percent versus 28.6 percent in 2011. This added 1 cent in additional earnings per share as higher average material costs for product sold in the first nine months of 2012 were more than offset by enhanced production efficiencies and lower waste levels.
For reference, the following presents the weighted indexed purchased cost of Winpak's eight primary raw materials in the reported quarter and each of the preceding eight quarters, where base year 2001 = 100. The index was rebalanced as of December 26, 2011 to reflect the mix of the eight primary raw materials purchased in 2011.
The purchase price index fell by 4.1 percent in the third quarter of 2012 in relation to the second quarter. Certain raw materials experienced declines while others remained steady. Likewise, the index retreated by 8.5 percent from a year prior with several materials rising in price while others decreased. Overall, the outlook for the fourth quarter is a relatively stable raw material pricing environment.
Expenses and Other
Operating expenses were in line with the levels recorded in the third quarter of 2011 while foreign exchange had a favorable impact on earnings per share of 2 cents. The strengthening Canadian dollar in the third quarter of 2012 resulted in foreign exchange gains on the translation of Canadian net monetary assets, accounting for the majority of the favorable foreign exchange impact. A lower overall income tax rate in the third quarter of 2012, in relation to the comparable period in 2011, resulted in an additional 1.5 cents in earnings per share. A 1.5 percentage point decrease in the 2012 federal corporate income tax rate in Canada, an upward adjustment to the year-to-date income tax rate in the third quarter of 2011, and a larger proportion of net income being earned in lower tax jurisdictions in 2012 all contributed to this favorable result.
On a year-to-date basis, operating expenses progressed at a higher rate than the expansion in sales volumes over the prior year period, due to elevated freight costs, new hires in sales representation, and share-based incentive costs which rose in conjunction with the Company's stock price. This resulted in a reduction of approximately 1 cent in earnings per share. More than offsetting this decrease were the favorable foreign exchange gains, mainly on the translation of Canadian net monetary assets, which added 2 cents in earnings per share as well as a lower amount attributable to the non-controlling interests which augmented earnings per share by a further 0.5 cents. An additional 1.5 cents in earnings per share was a consequence of lower income tax rates in 2012.
Capital Resources, Cash Flow and Liquidity
The Company's cash and cash equivalents balance at the end of the third quarter of $120.3 million diminished by $2.4 million from the end of the previous quarter. Winpak continued to generate consistent cash flow from operating activities before changes in working capital amounting to $32.4 million in the three-month period, an improvement of $2.3 million from the third quarter of 2011. Cash was utilized to supplement working capital by $5.3 million, property, plant and equipment additions of $20.8 million, income tax payments of $5.3 million, dividends of $1.9 million, and other items of $1.5 million.
For the nine months ended September 30, 2012, the cash and cash equivalents balance decreased by $6.6 million. Cash flow from operating activities before changes in working capital advanced to $93.5 million, surpassing the prior year corresponding period by $4.8 million. Additions to working capital utilized $17.3 million in cash, with inventory levels rising by $9.5 million since the start of the year, but down from the $14.7 million escalation seen in the first half of 2012. Cash was also used for property, plant and equipment additions of $51.0 million, income tax payments of $20.6 million, dividends of $5.8 million, employee defined benefit plan payments of $3.6 million and other items totalling $1.8 million. The Company remains debt-free and has unutilized operating lines of $38 million, with the ability to increase borrowing capacity further should the need arise.
Looking Forward
The Company is cautiously optimistic heading into the fourth quarter. Sales volumes rebounded in the last month of the third quarter and appear to be trending in the right direction. From a raw material pricing standpoint, volatility appears to be at its lowest level in quite a while with a stable outlook. The Company's capital expenditure program is forging ahead. Over $50 million has been invested year-to-date and approximately $25 to $30 million more is planned for the final quarter of the year. This significant commitment in technology will provide the foundation for continued growth and keep the Company at the forefront of innovation and new product development. Much of the capital being spent in 2012 will be commercialized in the first half of 2013 with the associated revenue to begin flowing shortly thereafter. However, one should note that as this new capacity becomes available, costs may temporarily increase as development expenses peak and new capacity is not yet fully utilized. Margins, however, are not expected to deviate from current levels by more than a few percentage points during that period. In the months ahead, the Company will also continue to seek out acquisition opportunities in its core competencies of food and health care packaging while remaining strongly committed to the capital investment plan.
These interim condensed consolidated financial statements have not been audited or reviewed by the Company's independent external auditors, PricewaterhouseCoopers LLP. For a complete set of notes to the condensed consolidated financial statements, refer to or the Company's website, .
Contacts:
Winpak Ltd.
K.P. Kuchma
Vice President and CFO
(204) 831-2254
Winpak Ltd.
B.J. Berry
President and CEO
(204) 831-2216
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Datum: 25.10.2012 - 20:11 Uhr
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