Lassonde Industries Inc. announces its Q1 2020 results

ROUGEMONT, QC, May 8, 2020 /CNW Telbec/ - Lassonde Industries Inc. (TSX: LAS.A) ("Lassonde") posted sales of $472.4 million in the first quarter of 2020, up 17.1% year over year. Excluding the $44.1 million in sales from Sun-Rype, an entity acquired on January 3, 2020, and a $2.6 million favourable foreign exchange impact, sales were up 5.5% year over year. The Company's operating profit for the first quarter of 2020 totalled $30.3 million, up $6.9 million from $23.4 million in operating profit in the same quarter last year. The 2020 first-quarter profit attributable to the Company's shareholders totalled $22.9 million, up $10.3 million year over year.

"The pandemic has affected our business in many ways, and it is still difficult to estimate all of the consequences. We will strive to meet the demand for our products while maintaining a safe environment for all employees according to the recommendations made by the public health authorities. Sales have risen significantly this quarter, but it is difficult to assess the impact that consumer accumulation of food reserves has had on our sales volumes. We would like to draw very special attention to the dedication shown by our employees during this difficult period," said the Chief Executive Officer of Lassonde Industries Inc., Nathalie Lassonde.

Financial Results

On January 3, 2020, the Company completed the acquisition of Sun-Rype for a cash consideration of $89.3 million, paid at the close of the transaction. This amount reflects preliminary adjustments related to cash, to working capital, and to property, plant and equipment. As part of the transaction, the Company assumed liabilities of $22.1 million related to lease liabilities for the Sun-Rype facilities. The acquisition was financed by the Company's existing Canadian credit facility. The transaction costs, incurred in the fourth quarter of 2019, were $1.5 million. The Company has recognized this business combination using the acquisition method in accordance with the provisions of IFRS 3. Therefore, the interim consolidated financial statements for the first quarter of 2020 include the results of Sun-Rype from January 3, 2020 to March 28, 2020.

For the first quarter of 2020, the Company's sales totalled $472.4 million, up $68.9 million or 17.1% from $403.5 million in the same quarter of 2019. Sales from Sun-Rype added $44.1 million to the Company's first-quarter sales. Excluding Sun-Rype's sales and a $2.6 million favourable foreign exchange impact, the Company's first-quarter sales were up $22.2 million year over year. This increase was largely due to an increase in sales of private label products. The Company believes that a non-negligible portion of this increase could be due to uncertainty surrounding the COVID-19 pandemic as consumers accumulate food reserves.

The Company's operating profit for the first quarter of 2020 totalled $30.3 million, up $6.9 million from $23.4 million in the same quarter last year. As for Sun-Rype, it posted $0.7 million in operating profit. Excluding the impact of the Sun-Rype acquisition, the Company's first-quarter operating profit was up $6.2 million year over year. This increase was due to a higher gross margin from the Company's U.S. and Canadian operations resulting mainly from an increase in sales volume and a decrease in the cost of raw materials. These items were partly offset by higher performance-related salary expenses.

The Company's financial expenses went from $4.8 million in the first quarter of 2019 to $5.0 million in the first quarter of 2020. Excluding $0.9 million in interest expense related to the Sun-Rype acquisition, financial expenses were down $0.7 million. This decrease was essentially due to a decrease in the interest expense on long-term debt.

"Other (gains) losses" went from a $1.1 million loss in the first quarter of 2019 to a $3.4 million gain in the first quarter of 2020. This 2020 first-quarter gain was mainly due to $3.1 million in foreign exchange gains resulting from the impact of a strong appreciation at quarter-end of the U.S. dollar against the Canadian dollar, whereas the 2019 first-quarter loss was mainly due to $0.7 million in foreign exchange losses and to a $0.5 million loss resulting from a change in the fair value of financial instruments.

Profit before income taxes stood at $28.5 million in the first quarter of 2020, up $11.1 million from $17.4 million in the first quarter of 2019.

Income tax expense went from $4.6 million in the first quarter of 2019 to $4.7 million in the first quarter of 2020. At 16.7%, the 2020 first-quarter effective income tax rate was clearly lower than the 26.5% rate in the same quarter of 2019. This lower effective tax rate mainly reflects the impact of incentive measures adopted by the U.S. government to help businesses deal with the COVID-19 crisis.

The 2020 first-quarter profit totalled $23.7 million, up $10.9 million from $12.8 million in the first quarter of 2019. It should be noted that the current quarter's results include a profit of $0.6 million from Sun-Rype and an amount of $0.5 million, net of tax, in additional financial expenses related to the financing of the acquisition.

Profit attributable to the Company's shareholders was $22.9 million, resulting in basic and diluted earnings per share of $3.31 for the first quarter of 2020. In the first quarter of 2019, profit attributable to the Company's shareholders had totalled $12.6 million, resulting in basic and diluted earnings per share of $1.80. Excluding the impacts of the Sun-Rype acquisition, the 2020 first-quarter profit attributable to the Company's shareholders was up $10.2 million year over year.

The Company's operating activities generated $24.9 million in cash during the first quarter of 2020, while they had generated $19.6 million in cash during the same quarter last year. As for Sun-Rype's operating activities, they generated $7.3 million in cash during the first quarter of 2020. Financing activities generated $110.3 million in cash during the first quarter of 2020, while they had used $18.4 million in the same quarter of 2019. During the first quarter of 2020, the cash inflows related to the financing of the Sun-Rype acquisition were $89.3 million, leaving a difference of $39.4 million on a comparable basis. Investing activities used $93.2 million in cash during the first quarter of 2020 compared to $7.7 million used in the same quarter of 2019. Excluding the $82.8 million in cash flows related to the Sun-Rype acquisition, investing activities used $2.7 million more cash during the first quarter of 2019. At the end of the first quarter of fiscal 2020, the Company reported a cash and cash equivalents balance of $31.7 million and the bank overdraft balance was $Nil, whereas, at the end of the first quarter of 2019, the cash and cash equivalents balance was $1.1 million and the bank overdraft balance was $3.2 million.

Outlook

For the twelve-month period ended March 28, 2020, the Company saw a slight decline in industry sales volumes in the U.S. and Canadian fruit juice and drinks markets. However, industry sales volumes have increased significantly over the twelve-week period ended March 28, 2020, in both Canada and the United States. Excluding Sun-Rype's sales and foreign exchange impacts, the Company's sales were up 5.5% in the first quarter of 2020 compared to the same quarter in 2019. It believes that a non-negligible portion of this increase could be due to uncertainty surrounding the pandemic as consumers accumulate food reserves. Barring any significant external shocks, including the impacts of COVID-19 (and excluding foreign exchange impacts and the impact of the Sun-Rype acquisition to maintain a comparable basis), the Company expects that, for 2020, it will be able to achieve a consolidated annual sales growth rate slightly above that of 2019. However, the uncertainty surrounding such a forecast is higher than it is under normal circumstances, as the impact in 2020 of the lockdown and social distancing measures on demand for the Company's products will depend heavily on the speed and extent to which these measures are reversed as well as on the strength of the economic recovery that follows the crisis. The Company is also concerned about how the crisis will affect sales to the food service segment.

During the first quarter of 2020, the Company observed improved profitability at its U.S. operations due to strong demand for its products towards the end of the quarter. It remains concerned about its ability to fully reflect certain cost increases in the selling prices on the U.S. market. In Canada, the production rate at one of its specialty food products plants, which was significantly affected by investment-related activities in 2019, has gradually improved.

About Lassonde

Lassonde Industries Inc. is a North American leader in the development, manufacture and sale of ready-to-drink juices and drinks marketed under brands such as Apple & Eve, Everfresh, Fairlee, Fruité, Graves, Oasis, Old Orchard, Rougemont and Sun-Rype. Lassonde is the largest producer of fruit and vegetable juices and drinks in Canada and one of the two largest producers of store brand shelf-stable fruit juices and drinks in the United States. It is also a major producer of cranberry sauces. The Company also produces fruit-based snacks in the form of bars and bites.

Lassonde also develops, manufactures and markets specialty food products under brands such as Antico and Canton. The Company also imports and markets selected wines from various countries and manufactures apple ciders and cider‑based beverages.

The Company produces superior quality products through the expertise of approximately 2,600 people working in 18 plants across Canada and the United States. To learn more, visit www.lassonde.com.

Caution Concerning Forward-Looking Statements

In this document and in other documents filed with Canadian regulatory authorities or in other communications, the Company may from time to time make written or oral forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements notably include estimates, expectations, forecasts, and projections of future investment spending, revenues, expenses, earnings, profit, indebtedness, financial position, losses, upcoming projects, business and management strategies, and business growth and expansion. In the context of this document, forward-looking statements are particularly used to discuss preliminary results, the rate of sales growth, and profit attributable to shareholders. The forward-looking statements contained herein are used to help readers better understand Lassonde's financial position and the results of its operations as at the dates presented and may not be appropriate for other purposes. Forward-looking statements can be recognized by such words as "may," "should," "believes," "predicts," "plans," "expects," "intends," "anticipates," "estimates," "projects," "objective," "continues," "proposes," "targets," or "aims" as well as words and expressions of a similar nature and whether they are used in the affirmative or negative or used in the conditional or future tense. Forward-looking statements also include any statements that do not refer to historical facts.

By their very nature, forward-looking statements are based on assumptions and involve inherent risks and uncertainties, both general and specific in nature. It is therefore possible that the forecasts, projections and other statements will not be achieved or will differ significantly from those expressed or implied in such forward-looking statements or could affect the extent to which a particular forecast, projection or other statement materializes. Although Lassonde believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurances that these expectations will prove to be correct.

Readers are cautioned against placing undue reliance on forward-looking statements when making decisions, as the actual results could differ considerably from the opinions, plans, objectives, expectations, forecasts, estimates and intentions expressed in such forward-looking statements due to various significant factors. Such factors include, among others, the economic, industrial, competitive and regulatory environment in which Lassonde operates or factors that are likely to have an impact on its operations, its ability to attract and retain customers, consumers, and qualified staff, the availability and cost of raw materials and transportation, its operating costs, and the price of its finished products in the various markets where it operates.

The Company cautions that the foregoing list of factors is not exhaustive. For additional information about the risks, uncertainties, and assumptions that could cause Lassonde's actual results to differ from its stated expectations, readers may also consult the "Uncertainties and Principal Risk Factors" section of the Company's most recent annual MD&A and the other documents it files from time to time with securities regulators in Canada and available on www.sedar.com. The forward-looking statements contained in this press release reflect the Company's expectations on this date and are subject to change after this date. Lassonde does not undertake to update publicly or to revise these forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable legislation or regulation.

SEDAR registration number: 00002099

SOURCE Lassonde Industries Inc.

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