ROUGEMONT, QC, Nov. 6, 2020 /CNW Telbec/ - Lassonde Industries Inc. (TSX: LAS.A) ("Lassonde") posted sales of $495.2 million in the third quarter of 2020, up 17.1% year over year. Excluding the $47.3 million in sales from Sun–Rype, an entity acquired on January 3, 2020, and a $2.6 million favourable foreign exchange impact, adjusted sales were up 5.3% year over year. The Company's operating profit for the third quarter of 2020 totalled $40.0 million, up $15.0 million from $25.0 million in operating profit in the same quarter last year. The 2020 third–quarter profit attributable to the Company's shareholders totalled $25.3 million, up $10.0 million year over year.

Note: These are financial highlights only. Management's Discussion and Analysis, the unaudited interim condensed consolidated financial statements and notes thereto for the quarter ended September 26, 2020 are available on the SEDAR website at www.sedar.com and on the website of Lassonde Industries Inc.

"Growth in industry volumes continued in the third quarter of 2020, but it is too early to determine whether this phenomenon is sustainable. Strong demand for our products throughout the quarter had a favourable impact on our results with a 5.3% increase in adjusted sales driving more efficient asset utilization on both sides of the Canada/U.S. border. We are striving to meet product demand, but labour availability is affected by the need to maintain a safe environment for all our employees amid a second wave of COVID-19. On a separate note, I would like to thank our employees for their exceptional work during this difficult time," 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 that was paid at the close of the transaction. This amount included preliminary adjustments related to cash, working capital, and property, plant and equipment. During the second quarter of 2020, an amount of $2.2 million was received from the seller following the final settlement of adjustments related to working capital and other items. As part of the transaction, the Company assumed liabilities of $23.0 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 mainly 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 third quarter of 2020 include the results of Sun-Rype from January 3, 2020.

For the third quarter of 2020, the Company's sales totalled $495.2 million, up $72.3 million or 17.1% from $422.9 million in the same quarter of 2019. Sales from Sun-Rype added $47.3 million to the Company's third-quarter sales. Excluding Sun-Rype's sales and a $2.6 million favourable foreign exchange impact, the Company's third-quarter sales were up $22.4 million or 5.3% year over year. This increase was largely due to an increase in sales of private label products. The Company believes that a significant portion of this increase could be due to changes in food habits related to the impacts of COVID-19, as industry sales volumes have also benefited from a notable increase. For the first nine months of 2020, sales totalled $1,465.9 million, up 17.6% from $1,246.2 million in the first nine months of 2019.

The Company's operating profit for the third quarter of 2020 totalled $40.0 million, up $15.0 million from $25.0 million in the same quarter last year. As for Sun-Rype, it posted $2.5 million in operating profit. Excluding the impact of the Sun-Rype acquisition, the Company's third-quarter operating profit was up $12.5 million year over year. This increase was explained by higher gross margins from the Company's U.S. and Canadian operations, mainly due to an increase in sales volume, to a decrease in the cost of certain raw materials, and to an improvement in the production rate at one of the Company's plants, which had been slowed in 2019 by investment–related activities. The operating profit was also affected by higher performance related salary expenses. Operating profit for the first nine months of 2020 totalled $113.0 million, up $37.1 million from $75.9 million in the first nine months of 2019.

The Company's financial expenses went from $4.6 million in the third quarter of 2019 to $4.0 million in the third quarter of 2020. Excluding $0.7 million in interest expense related to the Sun-Rype acquisition, financial expenses were down $1.3 million. This decrease was essentially due to a decrease in the interest expense on long-term debt. For the nine-month periods, financial expenses went from $14.4 million in 2019 to $13.6 million in 2020.

"Other (gains) losses" went from a $0.9 million gain in the third quarter of 2019 to a $0.7 million loss in the third quarter of 2020. This 2020 third-quarter loss was due to $0.5 million in foreign exchange losses and to a $0.2 million loss resulting from a change in the fair value of financial instruments, whereas the 2019 third-quarter gain was mainly due to a $0.8 million gain resulting from a decrease in the fair value of a contingent consideration payable. For the nine-month periods, the "Other (gains) losses" item was a $2.1 million gain in 2020 compared to a $1.7 million loss in 2019.

Profit before income taxes stood at $35.2 million in the third quarter of 2020, up $14.0 million from $21.2 million in the third quarter of 2019. For the first nine months of 2020, profit before income taxes stood at $100.8 million, up $41.0 million from $59.8 million in the first nine months of 2019.

Income tax expense went from $5.6 million in the third quarter of 2019 to $8.8 million in the third quarter of 2020. At 25.1%, the 2020 third-quarter effective income tax rate was lower than the 26.5% rate in the same quarter of 2019. The 2019 third-quarter effective income tax rate reflected an unfavourable impact of a revised estimate affecting the deductibility of certain expenses incurred in 2019. Excluding this item, the 2020 third-quarter effective income tax rate was higher than the adjusted rate in the same quarter of 2019 and mainly reflects a decrease in the deductible amounts on the Company's interest expense. Income tax expense for the first nine months of 2020 stood at $23.2 million, up $8.0 million from $15.2 million in the first nine months of 2019.

The 2020 third-quarter profit totalled $26.4 million, up $10.8 million from $15.6 million in the third quarter of 2019. The current quarter's results include a profit of $1.8 million from Sun-Rype and an amount of $0.3 million, net of tax, in additional financial expenses related to the financing of the acquisition. For the first nine months of 2020, profit totalled $77.6 million versus profit of $44.6 million in the first nine months of 2019.

Profit attributable to the Company's shareholders was $25.3 million, resulting in basic and diluted earnings per share of $3.65 for the third quarter of 2020. In the third quarter of 2019, profit attributable to the Company's shareholders had totalled $15.3 million, resulting in basic and diluted earnings per share of $2.21. Excluding the impacts of the Sun-Rype acquisition, the 2020 third-quarter profit attributable to the Company's shareholders was up $8.5 million year over year. For the first nine months of 2020, profit attributable to the Company's shareholders totalled $74.3 million, resulting in basic and diluted earnings per share of $10.71 and, in the same nine-month period of 2019, profit had totalled $43.5 million, resulting in basic and diluted earnings per share of $6.27.

The Company's operating activities generated $65.9 million in cash during the third quarter of 2020, while they had generated $34.1 million in cash during the same quarter last year. As for Sun-Rype's operating activities, they generated $3.5 million in cash during the third quarter of 2020. Financing activities used $53.9 million in cash during the third quarter of 2020, while they had used $9.5 million in the same quarter of 2019. Investing activities used $11.1 million in cash during the third quarter of 2020 compared to $17.7 million used in the same quarter of 2019. At the end of the third quarter of fiscal 2020, the Company reported a cash and cash equivalents balance of $6.4 million and the bank overdraft balance was $0.1 million, whereas, at the end of the third quarter of 2019, the cash and cash equivalents balance was $1.1 million and the bank overdraft balance was $1.8 million.

Outlook

Both for the twelve-month period ended September 26, 2020 and for the twelve–week period ended September 26, 2020, the Company noted a marked increase in industry sales volumes in the U.S. and Canadian fruit juice and drinks markets. Excluding Sun-Rype's sales and foreign exchange impacts, the Company's sales were up 5.3% in the third quarter of 2020 compared to the same quarter in 2019. It believes that a non-negligible portion of this increase could be due to the direct and indirect effects of the pandemic on consumer behaviour. There is no reliable way to determine whether these changes in purchasing habits are permanent or will fade when COVID–19 is a thing of the past. Barring any significant external shocks, including the impacts of COVID-19's evolution (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 above that of 2019, but with a slight decrease from its current growth rate for the fourth quarter of 2020. However, the uncertainty surrounding such a forecast is higher than it is under normal circumstances, as the impact in 2020 of the lockdown and physical distancing measures on demand for the Company's products is hard to measure. The Company remains concerned about how the crisis will affect sales to the food service segment, especially as several regions of North America are returning to partial lockdown.

During the third quarter of 2020, the Company observed improved profitability at its U.S. operations due to strong demand for its products during the quarter, but it notes some uncertainties about the availability of labour related to the impacts of COVID-19. In Canada, there was improvement in the production rate at one of its specialty food products plants, which was significantly affected by investment–related activities in 2019.

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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