Village Farms International Announces Second Quarter 2015 Results

TRADING SYMBOL: The Toronto Stock Exchange:   
Village Farms International, Inc. – VFF

VANCOUVER, Aug. 13, 2015 /CNW/ - Village Farms International, Inc. (the "Company") (TSX: VFF) (OTCQX:VFFIF), announced today results for the quarter ended June 30, 2015.

Conference Call

A conference call will be held August 14, 2015 to discuss the Company's second quarter and year to date 2015 results.  The conference call will begin at 8:00 a.m. Pacific Standard Time (11:00 a.m. Eastern Standard Time) and will be hosted by Messrs. Michael DeGiglio, Chief Executive Officer, and  Stephen Ruffini, Chief Financial Officer. 

To participate in the conference call, please dial into the conference call a few minutes before the start time:  1-888-390-0546 or 778-383-7413 or 416-764-8688

Michael DeGiglio, Chief Executive Officer, stated "Recent launches and demand for our new products, including three new exclusive varieties, are gaining momentum. In the last quarter, one of our customers, a national U.S. retailer, has commenced a nationwide program on one of these new products. The increase in our specialties coupled with an improved customer mix in our core commodities led to an increase in our average tomato pricing over 2014. However as we continue to replace our core commodity products with each new planting cycle, the challenge of retailer conversion from the traditional core commodities to specialties takes time. While specialty tomato product demand has seen over a 23% lift over last year's demand, as consumer taste continues to shift, our specialty penetration was slower than expected causing our second quarter expectations to be below plan." 

"Looking ahead to the remainder of the year we see increasing interest in our new products by our key retail accounts and believe our strategy is aligned with the outlook in consumer preferences. We will be ramping up our winter volume with the addition of Great Northern in Ontario, Canada, previously announced, as well as increasing our capacity with our Mexican marketing partners. All Village Farms facilities, both company owned and those of our marketing partners grow the same products, under the same stringent food safety and sustainability standards, in order to maintain nationwide distribution while providing our customers with the freshest vine ripened product 365-days a year."

Mr. DeGiglio continued "We remain steadfast in improving our existing facilities, increasing our market share in both the U.S. and Canada, introducing new products and varieties while we reduce our debt and explore strategic opportunities."

Year to Date Operating Summary:
(Note amounts in U.S. Dollars) 

  • Net sales increased $3.7 million, or 6%, to $69.0 million for the six months ended June 30, 2015 compared to $65.3 million for the six months ended June 30, 2014.
  • EBITDA for the six months ended June 30, 2015 increased by $0.4 million to $4.5 million, as compared to $4.1 million for the six months ended June 30, 2014.
  • Net (loss) decreased $0.7 million, or 6%, to ($0.1) million for the six months ended June 30, 2015 compared to ($0.8) million for the six months ended June 30, 2014.
  • (Loss) per share of ($0.00) for the six month period ended June 30, 2015 versus ($0.02) per share for the same period in 2014.
  • Net debt decreased by $0.8 million to $48.6 million on June 30, 2015 compared to $49.4 million on June 30, 2014.

Operational Summary:

(In thousands of U.S. Dollars)

Net Sales

Net sales for the six months ended June 30, 2015, increased $3,687, or 6%, to $68,958 compared to $65,271 for the six months ended June 30, 2014.  The increase in net sales is primarily due to a 12% increase in the average selling price of tomatoes, partially offset by a decrease of (5%) in tomato pounds, a (20%) decrease in pepper pounds and an (18%) decrease in cucumber pounds.  The increase in tomato prices is higher pricing on tomatoes-on-vine over the same period in 2014, as well as a higher percentage of specialty tomato sales.  The supply partner revenues decreased by (5%) due to a (9%) decrease in pounds purchased.

Cost of Sales

Cost of sales for the six months ended June 30, 2015, increased $4,429 or 8%, to $62,945 from $58,516 for the six months ended June 30, 2014. The increase is mostly due to the increase in cost per pound produced from the Company's facilities, which is attributable to the increase in specialty tomatoes acreage which cost more to grow and harvest than tomatoes-on-the-vine and beefsteak varieties.

Change in fair value of biological asset, net

The net change in fair value of biological asset for the six months ended June 30, 2015, increased $727, to $670 from ($57) for the six months ended June 30, 2014.  The increase is due to a combination of higher pricing in July 2015 versus the same period in 2014, partially offset by lower production for July 2015 versus the same period in 2014, and a lower beginning value on January 1, 2015 versus the January 1, 2014 value.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the six month period ended June 30, 2015 decreased ($588) or (9%) to $5,867 from $6,455 for the six month period ended June 30, 2014.   The decrease is due to various cost reductions in most departments. 

Income from Operations

Income from operations for the six months ended June 30, 2015, increased $573 to $816 from $243 for the six months ended June 30, 2014.  The increase is primarily a result of the change in fair value of biological asset increase of $727 and a decrease in selling, general and administrative expenses of $588 offset by an increase in cost of sales.

Interest Expense, net

Interest expense, net, for the six month period ended June 30, 2015 decreased ($178) to $1,146 from $1,324 for the six month period ended June 30, 2014.   The decrease is due to a decrease in the Company's borrowing rates and a lower principal balance on its term debt.

Other (expense)

Other (expense) for the six month period ended June 30, 2015, increased ($77) to ($102) from ($25) for the six month period ended June 30, 2014.  The increase was primarily due to a decrease in gain on foreign currency exchange of ($131) partially offset by a decrease of ($52) in amortization of intangible assets.

Income Taxes

Income tax (recovery) for the six month period ended June 30, 2015 was ($358) compared to ($332) for the six month period ended June 30, 2014.  The effective tax rate is 83% for the six month June 30, 2015 from 30% for the same period in 2014.  The 83% rate in 2015 is due to the change in effective tax on the biological asset from December 31, 2014.

Net (Loss) Income

Net (loss) for the six month period ended June 30, 2015 decreased ($700) to a loss of ($74) from a loss of ($774) for the six month period ended June 30, 2014.  The decrease is primarily a result of a decrease in selling, general and administrative expenses, a decrease in interest expense and an increase in change in biological asset partially offset by an increase in cost of sales.

EBITDA

EBITDA for the six month period ended June 30, 2015 increased $303 to $4,450 from $4,147 for the six month period ended June 30, 2014, primarily as a result of the decrease in selling, general and administrative expenses of $588 as compared to the same period in 2014, as well as the addition of the Company's co-generation facility.  See the EBITDA calculation in –"Non-IFRS Measures - Reconciliation of Net Earnings to EBITDA and Adjusted EBITDA", below.

Second Quarter 2015 Operating Results Summary:
(Note amounts in U.S. Dollars) 

  • Net sales of $41.2 million for the second quarter of 2015 compared to $41.3 million for the second quarter of 2014;
  • EBITDA decreased (22%) or ($0.7) million to $2.4 million in the second quarter of 2015 compared to $3.1 million in the second quarter of 2014.
  • Earnings (loss) per share of $0.02 for the second quarter of 2015 versus ($0.01) for the second quarter of 2014;
  • Net income (loss) increased $1.4 million to $0.9 million in the second quarter of 2015 compared to ($0.5) million in the second quarter of 2014.
  • Change in biological asset increased $2.7 million in the second quarter of 2015 to $1.5 million from the prior year second quarter decrease in change in biological asset of ($1.2) million.   

Operational Summary for the Quarter:

(In thousands of U.S. Dollars)

Net Sales 

Net sales for the three month period ended June 30, 2015 decreased to $41,211 from $41,267 for the three month period ended June 30, 2014.  The decrease in net sales is primarily due to a decrease of (6%) in tomato pounds sold and a decrease of (29%) in pepper pounds sold, offset by increased average selling price for tomatoes of 9% over the same period in 2014.  The decrease in tomato pounds sold is due to a change in the cropping cycle of one of the 40 acre facilities in west Texas, an increase in the area of specialties grown and lower light levels through most of the first five months of 2015 at the Company's Texas facilities. 

Cost of Sales

Cost of sales for the three month period ended June 30, 2015 increased by $1,215, or 3% to $38,014 from $36,799 for the three month period ended June 30, 2014.  The increase is mostly due to the increase in cost per pound produced from the Company's facilities due to the increase in specialty tomatoes.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three month period ended June 30, 2015 decreased ($405), to $2,923 from $3,328 for the three month period ended June 30, 2014.  The decrease is due to various cost reductions in most departments.

Change in Biological Asset

The net change in fair value of biological asset for the three months ended June 30, 2015 increased by $2,656 to $1,486 from ($1,170) for the three months ended June 30, 2014.  The increase is due to higher selling prices in July 2015 versus July 2014, partially offset by a decrease in pounds produced in 2015 from the same period in 2014.  The higher prices are mainly due to increases from the tomatoes-on-vine and beefsteak varieties.  The fair value of the biological asset at June 30, 2015 is $7,719 and was $7,885 at June 30, 2014. 

Income (Loss) from Operations

Income (loss) from operations for the three month period ended June 30, 2015 increased by $1,790 to $1,760 from a loss of ($30) for the three month period ended June 30, 2014.  The increase was primarily the result of the increase in change in biological asset of $2,656 and a decrease of $405 in selling, general and administrative expenses, partially offset by an increase in cost of sales of ($1,215).  

Interest Expense, net

Interest expense, net, for the three month period ended June 30, 2015 decreased by ($51), to $585 from $636 for the three month period ended June 30, 2014.  The decrease is due to a lower principal balance on the Company's term debt.

Income Taxes

Income tax expense/(recovery) for the three month period ended June 30, 2015 was an expense of $317 compared a recovery of ($194) for the three month period ended June 30, 2014.  The income tax expense in 2015 as compared to the (recovery) in the same period in 2014 is related to the tax effect on the change in fair value of biological asset.

Net Income (Loss) 

Net income for the three month period June 30, 2015 increased by $1,304 to $854 from a net loss of ($450) for the three month period ended June 30, 2014.  The increase was the result of an increase in change in fair value of biological asset of $2,656 and a decrease in selling, general and administrative expense by $405, offset by an increase in cost of sales of ($1,215) and an increase in the income tax provision of ($511).

EBITDA

EBITDA for the three month period ended June 30, 2015 decreased by (22%) or by ($686), to $2,430 from $3,116 for the three month period ended June 30, 2014, primarily as a result of an increase in the cost of sales of ($1,215), partially offset by a decrease in selling, general and administrative expenses of $405.   See the EBITDA calculation in "Calculation of EBITDA."

Calculation of EBITDA

References to "EBITDA" are to earnings before interest, taxes, depreciation, amortization, foreign currency exchange gains and losses on translation of long-term debt, unrealized gains on the changes in the value of derivative instruments, unrealized change in biological asset, stock compensation, and gains and losses on asset sales.  EBITDA is a cash flow measure that is not recognized under IFRS and does not have a standardized meaning prescribed by IFRS. Therefore, EBITDA may not be comparable to similar measures presented by other issuers. Investors are cautioned that EBITDA should not be construed as an alternative to net income or loss determined in accordance with IFRS as an indicator of the Company's performance or to cash flows from operating, investing and financing activities as measures of liquidity and cash flows. Management believes that EBITDA is an important measure in evaluating the historical performance of the Company.    

The following table is the calculation of net income to EBITDA:

(in thousands of U.S. dollars)

For the three months ended June 30, 


For the six months ended June 30,



2015


2014


2015


2014


Net Income (loss) 

$854


($450)


($74)


($774)


Add:









Amortization

2,102


1,910


4,180


3,736


Foreign currency exchange loss (gain)  

18


(43)


126


(5)


Interest expense

585


637


1,146


1,325


Income taxes

317


(194)


(358)


(332)


Stock compensation

40


85


100


139


Change in biological asset

(1,486)


1,170


(670)


57


Loss on asset disposal

-


1


-


1


EBITDA

$2,430


$3,116


$4,450


$4,147


About Village Farms

Village Farms is one of the largest producers, marketers and distributors of premium-quality, greenhouse-grown tomatoes, bell peppers and cucumbers in North America.  This premium product as well as premium product produced under exclusive arrangements with other greenhouse producers is grown in sophisticated, highly efficient and intensive agricultural greenhouse facilities located in British Columbia and Texas.  Product is marketed and distributed under the Village Farms® brand primarily to retail grocers and dedicated fresh food distributors throughout the United States and Canada.  Since its inception, Village Farms has been guided by friendly growing methods, growing produce vegetables 365 days a year from its facilities that are healthier for people and the planet.  Village Farms is Good for the Earth®.

Forward Looking Statements

This press release contains certain "forward looking statements". These statements relate to future events or future performance and reflect the Company's expectations regarding its growth, results of operations, performance, business prospects, opportunities, industry performance and trends and capital availability. These forward looking statements reflect the Company's current internal projections, expectations or beliefs and are based on information currently available to the Company. In some cases, forward looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict" , "potential", "continue" or the negative of these terms or other comparable terminology. A number of factors could cause actual events or results to differ materially from the results discussed in the forward looking statements. In evaluating these statements, you should specifically consider various factors, including, but not limited to, such risks and uncertainties as availability of resource, competitive pressures and changes in market activity, risks associated with U.S. and Canadian sales and foreign exchange, regulatory requirements and all of the other "Risk Factors" set out in the Company's current annual information form and management's discussion and analysis for the year ended December 30, 2014, which is available electronically at www.sedar.com.  Actual results may differ materially from any forward looking statement.  Although the Company believes that the forward looking statements contained in this press release are based upon reasonable assumptions, you cannot be assured that actual results will be consistent with these forward looking statements. These forward looking statements are made as of the date of this press release, and other than as specifically required by applicable law, the Company assumes no obligation to update or revise them to reflect new events or circumstances.

SOURCE Village Farms International, Inc.

For further information: Stephen C. Ruffini, Executive Vice President and Chief Financial Officer, Village Farms International, Inc., (407) 936-1190 ext. 340.


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