Lassonde Industries Inc. announces its results for the fourth quarter and fiscal 2017

26 March 2018

Rougemont, Quebec – Lassonde Industries Inc. (TSX: LAS.A) (“Lassonde”) posted sales of $1,526.1 million in 2017, a 2.4% year-over-year increase when excluding a $19.6 million unfavourable foreign exchange impact. The 2017 profit attributable to the Company’s shareholders totalled $89.9 million. Excluding a $10.2 million impact resulting from a reduction to deferred tax liabilities related to tax reform in the United States, the 2017 adjusted profit attributable to the Company’s shareholders would have been $79.7 million, up $11.5 million from 2016.

Financial highlights

(in thousands of dollars)

Fourth quarters

ended

Years

ended

  December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016
Sales $ 402,591 $ 385,646 $ 1,526,148 $ 1,509,505
Operating profit 42,224 36,115 133,290 126,175
Profit before income taxes 39,377 32,932 121,324 104,860
Profit attributable to the Company’s shareholders 37,193 21,915 89,949 68,152
Basic and diluted earnings per share (in $)  

$ 5.32

 

$ 3.14

 

$ 12.87

 

$ 9.75

 Note: These are financial highlights only. Management’s Discussion and Analysis and the audited consolidated financial statements and notes thereto for the year ended December 31, 2017 are available on the SEDAR website at www.sedar.com and on the website of Lassonde Industries Inc.

“For 2017, we are pleased with our growth in profitability and our pace of debt repayment, which we were able to maintain despite significant investments. We continue to pay close attention to potential tariff changes that could affect our operations in both Canada and the United States. We will adjust our business strategies to minimize any potential negative effects of such changes, including any resulting weakening of the Canadian dollar,” said Pierre-Paul Lassonde, Chairman of the Board and Chief Executive Officer of Lassonde Industries Inc.

2017 Financial Results

For 2017, the Company’s sales amounted to $1,526.1 million, up $16.6 million (1.1%) from $1,509.5 million in 2016. Excluding a $19.6 million unfavourable foreign exchange impact, annual sales were up 2.4% year over year. This sales growth was driven mainly by higher sales of private label products, partly offset by lower sales volumes of the Company’s national brands.

For the year ended December 31, 2017, the Company’s operating profit totalled $133.3 million, a $7.1 million year-over-year increase driven mainly by improved performance in the Company’s Canadian operations in both fruit juice and drinks and specialty food products. The 2017 operating profit from U.S. operations was down slightly year over year, largely due to a lower contribution from the Company’s national brands. The impact of exchange rate movements on the conversion of the U.S. entities’ financial results into Canadian dollars had a $1.8 million unfavourable impact.

The Company’s financial expenses went from $21.0 million in 2016 to $12.2 million in 2017. This $8.8 million decrease came largely from a $5.5 million decrease in interest expense, of which $2.6 million was due to a lower interest rate on the term loan of Lassonde Pappas and Company, Inc. (“LPC”) and $2.9 million to a reduction in indebtedness. During the third quarter of 2016, the Company had written off $1.3 million in capitalized financial costs following the modification and renewal of the U.S. credit facilities. The amortization of financial expenses was also down, decreasing by $1.2 million mainly due to the modification and renewal of the U.S. credit facilities. During the first six months of 2016, the Company had recorded a $0.6 million expense to reflect a change in the fair value of participating loans that were fully settled in May 2016.

“Other (gains) losses” went from a $0.4 million loss in 2016 to a $0.3 million gain in 2017. The $0.4 million loss in 2016 was essentially due to $0.5 million in losses resulting from a change in the fair value of interest rate swaps related to LPC’s term loan, partly offset by $0.1 million in foreign exchange gains. The $0.3 million gain in 2017 was essentially driven by foreign exchange gains.

Profit before income taxes totalled $121.3 million in 2017, up $16.4 million (15.7%) from $104.9 million in 2016.

Income tax expense stood at $25.8 million in 2017 (effective income tax rate of 21.3%) compared to $32.7 million in 2016. This significant change results from an $11.3 million favourable non-cash adjustment to the deferred tax liabilities of the U.S. entities. This downward adjustment to deferred tax liabilities stems from a reduction to the U.S. federal corporate tax rate following the U.S. tax reform adopted in December 2017. Excluding the impact of this adjustment, the 2017 adjusted effective income tax rate would have been 30.6% versus 31.2% last year; this decrease reflects a favourable geographic distribution of the profit before income taxes of the Company’s entities and a higher special deduction for domestic production activity in the United States.

The 2017 profit was $95.5 million, up $23.3 million from $72.2 million last year. Excluding the impact of the adjustment to deferred tax liabilities, adjusted profit for 2017 would have been $84.2 million, up $12.0 million from last year’s profit.

The 2017 profit attributable to the Company’s shareholders totalled $89.9 million, resulting in basic and diluted earnings per share of $12.87. Excluding a $10.2 million impact resulting from a reduction to deferred tax liabilities, the 2017 adjusted profit attributable to the Company’s shareholders would have been $79.7 million, resulting in an adjusted basic and diluted earnings per share of $11.41. In 2016, profit attributable to the Company’s shareholders had stood at $68.2 million, resulting in basic and diluted earnings per share of $9.75.

The Company’s cash flows from operating activities totalled $144.9 million during 2017 versus $147.4 million last year. Financing activities used $92.4 million in 2017 while they had used $115.8 million last year. Investing activities used $35.8 million during 2017 while they had used $28.2 million last year. At year-end 2017, the Company had $16.2 million in cash and cash equivalents and a $5.0 million bank overdraft compared to $0.5 million in cash and cash equivalents and a $6.4 million bank overdraft at the end of last year.

Fourth Quarter Financial Results

For the fourth quarter of 2017, the Company’s sales totalled $402.6 million, up $17.0 million or 4.4% from $385.6 million in the fourth quarter of 2016. This sales growth was mainly driven by higher sales of private label products and by higher sales volumes of the Company’s national brands, partly offset by an unfavourable foreign exchange impact.

The Company’s operating profit for the fourth quarter of 2017 totalled $42.2 million compared to $36.1 million in the same quarter last year, a $6.1 million year-over-year increase driven mainly by the favourable impact of higher sales on the Company’s contribution margin and by a decrease in the cost of raw materials, partly offset by an increase in performance-related salary expenses.

The Company’s financial expenses went from $3.4 million in the fourth quarter of 2016 to $2.9 million in the fourth quarter of 2017. This $0.5 million decrease was mainly due to a $0.6 million decrease in interest expense resulting from a reduction in indebtedness.

“Other (gains) losses” went from a $0.2 million gain in the fourth quarter of 2016 to a $0.1 million gain in 2017. These gains were essentially due to foreign exchange gains.

Fourth-quarter profit before income taxes stood at $39.4 million, up $6.5 million from $32.9 million in the fourth quarter of 2016.

Income tax expense went from a $9.8 million expense in the fourth quarter of 2016 to a $0.4 million credit in the fourth quarter of 2017, for an effective income tax rate of -1.0%. This significant change results from an $11.3 million favourable non-cash adjustment to the deferred tax liabilities of the U.S. entities. This downward adjustment to deferred tax liabilities stems from a reduction to the U.S. federal corporate tax rate following the U.S. tax reform adopted in December 2017. Excluding the impact of this adjustment, the 2017 fourth-quarter adjusted effective income tax rate would have been 27.8% versus 29.9% in the fourth quarter of 2016; this decrease reflects a favourable geographic distribution of the profit before income taxes of the Company’s entities and a higher special deduction for domestic production activity in the United States.

The 2017 fourth-quarter profit totalled $39.8 million, up $16.7 million from $23.1 million in the fourth quarter of 2016. Excluding the impact of the adjustment to deferred tax liabilities, the 2017 fourth-quarter adjusted profit would have been $28.5 million, up $5.4 million from last year’s fourth-quarter profit.

The 2017 fourth-quarter profit attributable to the Company’s shareholders was $37.2 million, resulting in basic and diluted earnings per share of $5.32. Excluding the $10.2 million impact resulting from a reduction to deferred tax liabilities, the 2017 fourth-quarter adjusted profit attributable to the Company’s shareholders would have been $27.0 million, resulting in adjusted basic and diluted earnings per share of $3.86. In the fourth quarter of 2016, profit attributable to the Company’s shareholders had totalled $21.9 million, resulting in basic and diluted earnings per share of $3.14.

Outlook

Industry volumes for the U.S. fruit juice and drinks market were down 1.5% in 2017. In the Canadian market, the situation is similar, as industry sales were also down during 2017. The Company does not see any signs of this trend reversing in 2018. The Company is seeking to limit the impact of this relative weakness in demand through national brand product innovation and continued private label customer development. It has observed, among other things, solid progress in its Canadian sales of low-calorie products in 2017. The Company is also paying close attention to the revision of Canada’s Food Guide and its potential impacts on the industry.

The Company posted sales growth of 1.1% in 2017. Excluding foreign exchange impacts, the adjusted growth rate was 2.4%. Barring any significant external shocks (and excluding foreign exchange impacts to maintain a comparable basis), the Company remains optimistic that, for 2018, its consolidated sales growth rate will be slightly below that of 2017. It should be noted, however, that this forecast could be affected by any changes in demand for the Company’s products stemming from price adjustments made as a result of major tariff changes affecting the raw material imports of the Company’s U.S. subsidiaries.

The Company expects its use of investing cash flows to be significantly higher in 2018 than the average of the past five years, as two major investment projects will be undertaken to provide the Company with additional capacity for fruit juice and drinks and specialty food products. The Company believes that its use of investing cash flows could reach between $55 million and $65 million in 2018. These disbursements will not have an immediate impact on the Company’s profit for 2018 and will solely affect its cash flows.

SEDAR registration number: 00002099

Caution Concerning Forward-Looking Statements

This press release contains forward-looking statements that are based on certain assumptions. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. Additional factors are discussed in materials filed from time to time with the securities regulatory authorities in Canada. Lassonde Industries Inc. disclaims any intention or obligation to update or revise any forward-looking statements except as required by law.