Winpak Reports First Quarter Results

WINNIPEG, April 20, 2016 /CNW/ - Winpak Ltd. (WPK) today reports consolidated results in US dollars for the first quarter of 2016, which ended on March 27, 2016. 



Quarter Ended



March 27


March 29



2016


2015


(thousands of US dollars, except per share amounts)










Revenue

198,154


199,440


Net income

27,300


22,724







Income tax expense

12,310


10,914


Net finance (income) expense

(19)


35


Depreciation and amortization

8,331


7,747


EBITDA (1)

47,922


41,420







Net income attributable to equity holders of the Company

26,564


22,463


Net income attributable to non-controlling interests

736


261


Net income

27,300


22,724







Basic and diluted earnings per share (cents)

41


35












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 healthcare applications.


1 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.

(presented in US dollars)

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 equity holders of the Company for the first quarter of 2016 of $26.6 million or 41 cents in earnings per share exceeded the $22.5 million or 35 cents per share recorded in the corresponding quarter of 2015, an increase of 18.3 percent.  This represented the highest first quarter earnings performance since the inception of Winpak.  Organic volume growth contributed 2 cents in earnings per share and was supplemented by gross profit margin improvement and favorable foreign exchange impacts of 1.5 cents per share each.  Lower operating expenses and a lower effective income tax rate each added 1 cent to earnings per share while a greater proportion of earnings attributable to non-controlling interests subtracted 1 cent from earnings per share.

Revenue
Revenue in the first quarter of 2016 amounted to $198.2 million, falling just 0.6 percent short of the prior year-to-date level of $199.4 million.  Nonetheless, volume growth was solid at 4.7 percent in comparison to the first quarter of 2015 and was all organic.  All product groups advanced with the exception of packaging machinery and parts sales, which registered a particularly strong first quarter in 2015.  Biaxially oriented nylon volumes were robust, rising by low double-digit percentages in comparison to the first three months of 2015.  The remaining product groups of specialty films, modified atmosphere packaging, rigid packaging and lidding all progressed in the mid single-digit percentage range in volume growth.  Continued progress at business development in the core markets of meat and cheese drove success for both the specialty films and modified atmosphere packaging product groups.  Multi-pak yogurt and retort packaging propelled volumes in both the rigid container and lidding groups which more than offset weakness experienced in the specialty beverage market.  Selling price/mix changes had an unfavorable effect of 3.9 percent on 2016 first quarter revenues as indexed selling prices followed the decrease in raw material costs which occurred through most of 2015.  The decline in the value of the Canadian dollar in comparison to its US counterpart had a further 1.4 percent negative effect on revenue versus the comparable prior year quarter.

Gross profit margins
Gross profit margins in the first quarter of 2016 rose to 34.2 percent of revenue versus 31.6 percent of revenue in the comparable 2015 quarter, an improvement of 2.6 percentage points.  The fall in raw material costs in relation to those incurred a year prior was the main factor contributing to the margin improvement, resulting in an expansion in earnings per share of 1.5 cents.  While just over 70 percent of the Company's revenues are indexed whereby the selling prices move in concert with raw material cost changes, albeit with a time lag, market pricing for non-indexed accounts has remained fairly steady over the past year.  In addition, there was also some improvement in manufacturing performance, in terms of material waste and efficiency, at certain of the Company's operations which supplemented gross profit margins.

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 28, 2015 to reflect the mix of the eight primary raw materials purchased in 2015. 

Quarter and Year

1/16

4/15

3/15

2/15

1/15

4/14

3/14

2/14

1/14

Purchase Price Index

136.4

139.1

147.7

152.1

156.9

175.1

176.2

178.1

178.7

The purchase price index declined slightly by 1.9 percent in the current quarter compared to the final quarter of 2015.  Moderate declines in the price of many of the Company's raw materials in the quarter were offset in large degree by a significant escalation in polypropylene resin pricing.  In relation to a year ago, the purchase price index has fallen more noticeably by over 13 percent and was directly related to the decrease in the price of oil and natural gas, from which resins used by the Company are derived.

Expenses and Other
Operating expenses in the quarter, after eliminating the impact of foreign exchange, increased by less than 1 percent, well below the growth in sales volumes of 4.7 percent in relation to the first quarter of 2015.  This contributed 1 cent in earnings per share and was mainly due to lower share-based compensation costs versus the prior year period. The lower value of the Canadian dollar in the first three months of the current year versus the comparable 2015 period supplemented earnings per share by 1.5 cents as Canadian dollar expenses exceed Canadian dollar revenues.  A lower effective income tax rate in the 2016 first quarter added a further 1 cent to earnings per share as a greater proportion of income was earned in Canada where corporate income tax rates are more favorable.  On the other hand, an increase in net income attributable to non-controlling interests reduced earnings per share by 1 cent in the first three months of 2016 versus the comparable 2015 quarter.

Summary of Quarterly Results









Thousands of US dollars, except per share amounts (US cents)












Q1

2016

Q4

2015

Q3

2015

Q2

2015

Q1

2015

Q4

2014

Q3

2014

Q2

2014











Revenue

198,154

205,746

193,726

198,257

199,440

206,269

192,982

199,426

Net income attributable to equity holders









of the Company

26,564

27,635

22,305

26,845

22,463

23,343

19,448

19,406

EPS

41

43

34

41

35

36

30

30

Capital Resources, Cash Flow and Liquidity
The Company's cash and cash equivalents balance ended the first quarter of 2016 at $169.5 million, an increase of $4.5 million from the end of the prior year.  Winpak continued to generate strong and consistent cash flows from operating activities before changes in working capital of $47.4 million, surpassing the first quarter of 2015 by $6.2 million.  Cash was utilized to supplement working capital of $10.4 million, income tax payments of $15.2 million, plant and equipment additions of $15.1 million, dividends of $1.4 million and other items totaling $0.8 million.  

Looking Forward
After a strong start to the year, the Company remains optimistic with regard to volume growth and earnings performance for the rest of 2016.  Opportunities in the sales pipeline continue to progress along the path to becoming new sources of revenue.  World oil prices have risen in the last couple of months and this has put upward pressure on resin pricing as the second quarter begins, with price hikes announced for several of the Company's main raw materials.  However, it is difficult to predict whether this will be a longer term trend or just a short-term impact on raw material costs.  Gross profit margins will likely fall a couple of percentage points from the heightened levels experienced in the first quarter as higher resin costs make their way into cost of goods sold and eventually into higher indexed selling prices.  Manufacturing performance should continue to improve in areas where capacity constraints have caused operational difficulties.  Of particular importance will be the commercialization of the massive technologically-advanced cast coextrusion line, which is in the early stages of being commissioned at the Company's modified atmosphere packaging plant in Winnipeg.  Although there has been some strength in the Canadian dollar versus its US counterpart as of late, it still remains at a lower level than a year prior and will continue to be favorable to the Company's earnings, as Canadian dollar denominated costs exceed revenues in that currency.  In addition, further positive effects on earnings will be evident in 2016 as foreign currency forward contracts that are part of the Company's foreign exchange hedging policy mature at more favorable rates than those that came due in 2015.  Capital spending for 2016 will be higher than in the past several years at a level estimated to be between $75 million and $85 million as both the rigid container operations in Chicago and the shrink bag production unit in Georgia are embarking on facility expansions of 350,000 and 85,000 square feet respectively.  The Company will continue to pursue acquisition opportunities in Winpak's core competencies of sophisticated packaging for food, beverage and healthcare applications while it remains committed to substantial organic growth through capital investment.  With Winpak's solid financial position, it has the resources necessary to complete an acquisition when the proper fit and price are present to provide long-term shareholder value.

Winpak Ltd.
Interim Condensed Consolidated Financial Statements
First Quarter Ended: March 27, 2016

These interim condensed consolidated financial statements have not been audited or reviewed by the Company's independent external auditors, KPMG LLP.  For a complete set of notes to the condensed consolidated financial statements, refer to www.sedar.com or the Company's website, www.winpak.com.

 

Winpak Ltd.






Condensed Consolidated Balance Sheets






(thousands of US dollars) (unaudited)















March 27


December 27




2016


2015







Assets












Current assets:







Cash and cash equivalents



169,500


165,027


Trade and other receivables



109,160


107,805


Income taxes receivable



103


2,050


Inventories



97,542


96,498


Prepaid expenses



4,717


3,411


Derivative financial instruments



964


40




381,986


374,831







Non-current assets:







Property, plant and equipment



375,868


369,436


Intangible assets



14,574


14,745


Employee benefit plan assets



6,526


5,723


Deferred tax assets



1,320


1,408




398,288


391,312

Total assets



780,274


766,143







Equity and Liabilities












Current liabilities:







Trade payables and other liabilities



61,878


68,534


Income taxes payable



4,924


10,569


Derivative financial instruments



387


1,683




67,189


80,786







Non-current liabilities:







Employee benefit plan liabilities



9,432


8,885


Deferred income



13,691


14,071


Provisions



760


760


Deferred tax liabilities



38,335


38,250




62,218


61,966

Total liabilities



129,407


142,752







Equity:







Share capital



29,195


29,195


Reserves



441


(1,208)


Retained earnings



601,450


576,359

Total equity attributable to equity holders of the Company



631,086


604,346

Non-controlling interests



19,781


19,045

Total equity  



650,867


623,391

Total equity and liabilities



780,274


766,143







 

Winpak Ltd.





Condensed Consolidated Statements of Income





(thousands of US dollars, except per share amounts) (unaudited)







Quarter Ended



March 27


March 29



2016


2015






Revenue


198,154


199,440

Cost of sales


(130,387)


(136,469)

Gross profit


67,767


62,971






Sales, marketing and distribution expenses


(15,232)


(15,082)

General and administrative expenses


(7,946)


(8,967)

Research and technical expenses


(3,745)


(3,699)

Pre-production expenses


(169)


(346)

Other expenses


(1,084)


(1,204)

Income from operations


39,591


33,673

Finance income


133


85

Finance expense


(114)


(120)

Income before income taxes


39,610


33,638

Income tax expense


(12,310)


(10,914)

Net income for the period


27,300


22,724






Attributable to:






Equity holders of the Company


26,564


22,463


Non-controlling interests


736


261



27,300


22,724






Basic and diluted earnings per share - cents


41


35











Condensed Consolidated Statements of Comprehensive Income





(thousands of US dollars) (unaudited)







Quarter Ended



March 27


March 29



2016


2015






Net income for the period


27,300


22,724






Items that will not be reclassified to the statements of income:





Cash flow hedge gains recognized


32


-

Cash flow hedge losses transferred to property, plant and equipment


52


-

Income tax effect


-


-



84


-

Items that are or may be reclassified subsequently to the statements of income:





Cash flow hedge gains (losses) recognized


1,412


(1,568)

Cash flow hedge losses transferred to the statements of income


724


559

Income tax effect


(571)


270



1,565


(739)

Other comprehensive income (loss) for the period  - net of income tax


1,649


(739)

Comprehensive income for the period


28,949


21,985






Attributable to:






Equity holders of the Company


28,213


21,724


Non-controlling interests


736


261



28,949


21,985






  

Winpak Ltd.








Condensed Consolidated Statements of Changes in Equity

(thousands of US dollars) (unaudited)



















Attributable to equity holders of the Company
























Share

capital

 

Reserves

Retained

earnings

 

Total

Non-

controlling

interests

 

Total equity













Balance at December 29, 2014


29,195

(641)

555,697

584,251

17,136

601,387











Comprehensive (loss) income for the period










Cash flow hedge losses, net of tax


-

(1,149)

-

(1,149)

-

(1,149)



Cash flow hedge losses transferred to the statements
of income, net of tax


-

410

-

410

-

410


Other comprehensive loss


-

(739)

-

(739)

-

(739)


Net income for the period


-

-

22,463

22,463

261

22,724


Comprehensive (loss) income for the period


-

(739)

22,463

21,724

261

21,985











Dividends


-

-

(1,548)

(1,548)

-

(1,548)










Balance at March 29, 2015


29,195

(1,380)

576,612

604,427

17,397

621,824




























Balance at December 28, 2015


29,195

(1,208)

576,359

604,346

19,045

623,391











Comprehensive income for the period










Cash flow hedge gains, net of tax


-

1,067

-

1,067

-

1,067



Cash flow hedge losses transferred to the statements
of income, net of tax


-

530

-

530

-

530



Cash flow hedge losses transferred to property, plant and
equipment


-

52

-

52

-

52


Other comprehensive income


-

1,649

-

1,649

-

1,649


Net income for the period


-

-

26,564

26,564

736

27,300


Comprehensive income for the period


-

1,649

26,564

28,213

736

28,949











Dividends


-

-

(1,473)

(1,473)

-

(1,473)










Balance at March 27, 2016


29,195

441

601,450

631,086

19,781

650,867










 

Winpak Ltd.

Condensed Consolidated Statements of Cash Flows

(thousands of US dollars) (unaudited)


Quarter Ended


March 27


March 29


2016


2015





Cash provided by (used in):








Operating activities:









Net income for the period

27,300


22,724


Items not involving cash:






Depreciation

8,555


7,984



Amortization - deferred income

(394)


(392)



Amortization - intangible assets

170


155



Employee defined benefit plan expenses

878


976



Net finance (income) expense

(19)


35



Income tax expense

12,310


10,914



Other

(1,377)


(1,123)




Cash flow from operating activities before the following

47,423


41,273


Change in working capital:






Trade and other receivables

(1,355)


2,254



Inventories

(1,044)


3,131



Prepaid expenses

(1,306)


(932)



Trade payables and other liabilities

(6,681)


(7,782)






Provisions

-


36


Employee defined benefit plan contributions

(947)


(1,078)


Income tax paid

(15,185)


(3,714)


Interest received

51


62


Interest paid

(4)


(7)


Net cash from operating activities

20,952


33,243





Investing activities:









Acquisition of plant and equipment - net

(15,061)


(12,804)


Acquisition of intangible assets

(10)


(55)


(15,071)


(12,859)





Financing activities:









Dividends paid

(1,408)


(1,678)





Change in cash and cash equivalents

4,473


18,706





Cash and cash equivalents, beginning of period

165,027


143,761





Cash and cash equivalents, end of period

169,500


162,467





  

SOURCE Winpak Ltd.

Image with caption: "Winpak Ltd. (CNW Group/Winpak Ltd.)". Image available at: http://photos.newswire.ca/images/download/20160420_C3943_PHOTO_EN_669697.jpg

For further information: K.P. Kuchma, Vice President and CFO, (204) 831-2254; B.J. Berry, President and CEO, (204) 831-2216

RELATED LINKS
www.winpak.com

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890