IPL Inc.
TSX : IPI.A

IPL Inc.

February 10, 2010 15:14 ET

IPL Reports Results for First Quarter of Fiscal 2010

SAINT-DAMIEN, QUEBEC--(Marketwire - Feb. 10, 2010) - IPL Inc. (TSX:IPI.A)

  • Sales of $36.9 million vs. $55.9 million in the first quarter of 2009
  • EBITDA of $0.5 million vs. $5.0 million
  • Net loss of $0.14 per share vs. net earnings of $0.04
  • Declaration of a quarterly dividend of $0.03 per share

IPL Inc. (TSX:IPI.A), one of North America's leading manufacturers of plastic products, today announced results for the first quarter of its 2010 fiscal year ended December 31, 2009.

Financial highlights
(thousands of dollars except per share amounts) unaudited
Three months ended
December 31, 2009 January 1, 2009
Sales 36,938 55,931
Earnings before interest, taxes, depreciation and amortization (EBITDA) 464 5,047
Earnings (loss) before income taxes (EBT) (2,888) 916
Net earnings (net loss) (1,990) 630
Net earnings (net loss) per share, fully diluted (0.14) 0.04

First-quarter results

Consolidated sales for the three-month period ended December 31, 2009 were $36.9 million, compared to $55.9 million for the first quarter of fiscal 2009. The decline of $19.0 million, or 34.0%, was due to:

(1) a decline of average selling prices amounting to $9.2 million between the two periods compared following a decline of resin prices early in fiscal 2009, including $2.0 million due to exchange rate variation between the two periods;

(2) an additional week of operations in the first quarter of fiscal 2009 relative to the first quarter of fiscal 2010, a difference that had the effect of adding $4.0 million to sales in fiscal 2009;

(3) the execution of a large contract valued at $5.0 million in the Environment sector in the first quarter of fiscal 2009;

(4) the fragility of the economy.

Sales in the United States were $16.4 million, or 44.4% of the Company's consolidated sales, in the first quarter of fiscal 2010, compared to $21.2 million, or 38.0% of consolidated sales, in the first quarter of fiscal 2009.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $0.5 million, or 1.3% of consolidated sales, compared to $5.0 million, or 9.0% of sales, in the first quarter of fiscal 2009. Other than the factors noted above, the lower EBITDA in the first quarter of fiscal 2010 reflects the reduction of sales volume and the resulting effect on the absorption of fixed costs, and $1.2 million in items not related to operations. The latter include a $0.9-million increase in charges related to the stock-based compensation program resulting from a rise in the price of IPL shares from October to December 2009 and fees of $0.3 million in connection with the Company's strategic alternatives process. Excluding these items, EBITDA in the first quarter of fiscal 2010 would have been $1.7 million, or 4.5% of sales.

In the first quarter of fiscal 2010, the Company incurred a net loss of $2.0 million, or $0.14 per share, fully diluted, compared to net earnings of $0.6 million, or $0.04 per share, fully diluted, in the corresponding quarter a year earlier.

Reflecting the decrease in profitability, cash flow from operating activities, before changes in non-cash working capital items, was $2.4 million, down 41.7% from $4.2 million in the first quarter of fiscal 2009.

IPL's financial position remained strong at the end of the quarter, with cash of $6.7 million and long-term debt, including the current portion, of $32.4 million. The ratio of total net debt to shareholder's equity was 0.33 at December 31, 2009 compared to 0.31 at the end of fiscal 2009, total net debt being defined as long-term debt, including the current portion, plus bank loans, less cash.

"As anticipated, the uncertain state of the North American economy had an effect on the sales of our two business segments in the first quarter," said Serge Bragdon, President and Chief Executive Officer. "Management's concern for lasting optimi­zation of operating efficiency helped to preserve operating margins in the segments less exposed to economic fluctuations. Finally, by maintaining a sound financial position the Company has secured the flexibility necessary to pursue execution of its development strategy while remaining proactive in the current market environment."

Segment results

Sales of packaging products were $18.7 million in the quarter ended December 31, 2009 compared to $25.3 million in the first quarter of fiscal 2009. The decline of 26.2% was due primarily to an average 20.4% reduction of prices per kilogram of resin sold between the two quarters compared, following a decrease in the price of plastic resins. This factor accounted for $5.2 million of the reduction in sales for the segment in the first quarter of fiscal 2010, including $1.1 million due to exchange rate variation. The broad weakness of the North American economy and the one-week-shorter duration of the first quarter of fiscal 2010 were also factors in the results of this segment. After adjustment for number of weeks in the quarter, volume shipments of packaging products were stable in the first quarter of fiscal 2010, with a rise in Retail Packaging offset­ting a decline in Bulk Packaging.

EBITDA for the packaging products segment was $1.5 million in the first quarter of fiscal 2010, down 29.4% from $2.1 million a year earlier. Packaging products EBITDA was 7.8% of sales in the first quarter of fiscal 2010 compared to 8.1% of sales in the corresponding quarter a year earlier. Excluding the effect of non-operating items attributable to the packaging products segment, EBITDA would have been $2.1 million, or 11.0% of sales, in the first quarter of fiscal 2010. On the whole, the Com­pany's sustained progress in operating efficiency was sufficient to counteract the effect on profitability of the reduction in average selling prices and the unfavourable variation in the exchange rate between the two periods compared.

Sales of industrial products in the first quarter of fiscal 2010 were $18.3 million, down 40.4% from $30.7 million in the first quarter of fiscal 2009. The difference between the two periods compared was due partly to the execution of a large contract valued at $5.0 million in the Environment sector in the first quarter of fiscal 2009. Also, following a decline in the price of plastic resins, sales of the segment as a whole were reduced by $4.0 million as a result of an average 13.1% reduction in the price per kilogram of resin sold between the two quarters compared. Of this amount, $0.9 million was due to exchange rate variation. In addition, the shakiness of the North American economy again reduced volume shipments in the markets more sensitive to the state of the economy, in particular the Engineered Products sector. Finally, segment results were also reduced in the 2010 quarter relative to the 2009 quarter by the one-week difference in duration between the two periods.

EBITDA for the industrial products segment was a negative $1.0 million for the three months ended December 31, 2009, for a negative operating margin of 5.4%. In the first quarter of fiscal 2009, EBITDA was $3.0 million, or 9.7% of sales. Excluding the effect of non-operating items, EBITDA would have been a negative $0.4 million in the first quarter of fiscal 2010, for a negative margin of 2.1%. On the whole, sustained progress in operating efficiency attenuated the unfavourable effect on financial performance of the broad slowdown of sales, the decline of average selling prices and the appreciation of the Canadian dollar against the U.S. dollar in the first quarter of fiscal 2010.

Declaration of a dividend

The Company's Board of Directors has declared a quarterly dividend of $0.03 per outstanding multiple voting share of IPL. The dividend will be payable March 19, 2010 to shareholders of record at the close of business on February 26, 2010.

Outlook

"Hesitant economic growth suggests that the business environment will remain challenging over the coming quarters. Although competition remains vigorous, we intend to maintain course and pursue the structured development of our business in growth markets. Despite a difficult start, we are confident of achieving solid operating results for the 2010 fiscal year and to this end we are continuing our sustained, targeted efforts to stimulate organic sales growth. In addition, our constant attention to operational excellence and to the improvement of our cost structure is likely to limit the negative effect of current business conditions over the remainder of the fiscal year," concluded Mr. Bragdon.

Conference call

IPL Inc. will hold a conference call to present its results on February 10 at 5 p.m. (Eastern Time). Those interested should call 1-888-231-8191 (Montreal, North America or overseas). The call can also be accessed via live webcast at www.cnw.ca.

Those unable to participate can hear a recording of the call. Dial 1-800-642-1687 and enter code 51220140 on your tele­phone keypad. The recording will be available from 8 p.m. February 10 (Eastern Time) to 11:59 p.m. February 17 (Eastern Time).

Non-GAAP measures

In this release the Company's financial management uses a non-GAAP measure, earnings before interest, taxes, deprecia­tion and amortization ("EBITDA"). Management notes that for purposes of presentation of the Company's financial results, EBITDA may not be formally identified in its financial statements and is the amount shown on the line preceding the line labelled "Financial expenses." A table showing reconciliation of the EBITDA used by the Company and reported net earnings is presented in the section headed "Non-GAAP Measures" of the Management Discussion and Analysis for the three-month period ended December 31, 2009.

While EBITDA is a non-GAAP measure, management, analysts, investors and others use it to assess the Company's finan­cial and operating management and performance. The Company's definition of EBITDA may be different from definitions used by other companies.

About IPL

IPL Inc. is one of the leading North American producers of injection- and extrusion-moulded plastic products for manufac­turers in a range of industries. IPL employs almost 900 people in its four plants located in Saint-Damien, Saint-Lazare and Lawrenceville, Quebec, and Edmundston, New Brunswick. The Company manufactures and markets more than 400 pack­aging, materials handling and environmental products. IPL also provides highly technical value-added custom moulding services for the transportation industry and for a range of industrial applications. Additional information on IPL is available at www.ipl-plastics.com.

Forward-looking statements

Except for historical information provided herein, this release may contain information and statements of a forward-looking nature concerning the future performance of the Company. Such statements are based on management's best possible evaluation of future events, and as such involve a number of risks and uncertainties. The factors can include, among others, fluctuations in quarterly results, change in demand for the Company's services, competitive pricing pressure, general market trends and changes in the economy. Readers are consequently advised that actual results may differ from expected results.

Note to readers: The unaudited consolidated financial statements for the first quarter of fiscal 2010 ended December 31, 2009, can be found on IPL's website at www.ipl-plastics.com.

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