IPL Inc.
TSX : IPI.A

IPL Inc.

August 07, 2008 16:30 ET

IPL Reports its Results for the Third Quarter of Fiscal 2008

- Consolidated sales of $51.3 million compared to $57.9 million in the third quarter of 2007 - EBITDA of $5.6 million compared to $8.2 million in the third quarter of 2007 - Net earnings of $825,000 ($0.06 per share) compared to $2.3 million ($0.16 per share) in the third quarter of 2007

SAINT-DAMIEN, QUEBEC--(Marketwire - Aug. 7, 2008) - IPL Inc. (TSX:IPI.A), one of North America's leading manufacturers of plastic products, announced its results today for the third quarter of its 2008 financial year ended June 26, 2008.



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Financial highlights Three months ended Nine months ended
(in thousands of dollars ----------------------------------------
except per share data) June 26, June 28, June 26, June 28,
unaudited 2008 2007 2008 2007
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Sales 51,259 57,938 135,063 159,536
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Earnings before interest,
taxes, depreciation and
amortization (EBITDA) 5,560 8,173 11,668 19,419
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EBITDA margin 10.8% 14.1% 8.6% 12.2%
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Earnings (loss) before
income taxes (EBT) 1,201 3,356 (1,398) 4,899
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Net earnings 825 2,303 33 3,332
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Net earnings per share,
fully diluted 0.06 0.16 0.00 0.23
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The Company's consolidated sales for the quarter ended June 26, 2008 totalled $51.3 million, compared to $57.9 million for the corresponding three-month period ended June 28, 2007. Packaging product sales amounted to $29.6 million in the third quarter of 2008, down 3.6% from $30.7 million for the third quarter of 2007. Industrial product sales for the last quarter totalled $21.7 million, down 20.5% year over year from $27.3 million in the third quarter of last year.

As in previous quarters, the decline in consolidated sales for the third quarter of 2008 was essentially attributable to slowing economic growth in North America, which affected many of the Company's areas of activity, particularly in the construction and automotive sectors. In the last quarter, competition once again had an adverse impact on sales, as did the conversion of the Company's US sales into Canadian dollars.

With regard to currency exchange, the difference between the average CAN/US exchange rate for the period from March 28, 2008 to June 26, 2008 and the average exchange rate for the third quarter of the previous year reduced consolidated sales by nearly $3.0 million for the third quarter of 2008.

Consolidated sales for the first nine months of 2008 totalled $135.1 million, down 15.3% from $159.5 million for the first three quarters of fiscal 2007. The difference between the average CAN/US exchange rate for the period from September 30, 2007 to June 26, 2008 and the average exchange rate for the first nine months of the previous year reduced consolidated sales by $9.2 million.

In the third quarter of 2008, earnings before interest, taxes, depreciation and amortization (EBITDA) totalled $5.6 million, down 32.0% from $8.2 million in the same period a year earlier. EBITDA represented 10.8% of consolidated sales, compared to 14.1% in the third quarter of fiscal 2007. For the nine-month period ended June 26, 2008, EBITDA was $11.7 million or 8.6% of consolidated sales, compared to $19.4 million or 12.2% of consolidated sales for the corresponding nine-month period ended June 28, 2007.

For the quarter ended June 26, 2008, the Company reported net earnings of $825,000 or $0.06 per share, fully diluted, compared to net earnings of $2.3 million or $0.16 per share, fully diluted, for the same period a year earlier. Net earnings for the first nine months of fiscal 2008 amounted to $33,000 or $0.00 per share, fully diluted, compared to $3.3 million or $0.23 per share, fully diluted, for the first nine months of the previous year.

In the third quarter of fiscal 2008, cash flow from operating activities before changes in non-cash working capital items totalled $4.5 million, compared to $6.4 million for the same quarter of fiscal 2007. This 29.9% decrease essentially reflects the decline in net profitability from one comparison period to the next. For the first nine months of fiscal 2008, cash flow from operating activities before changes in non-cash working capital items amounted to $9.3 million, compared to $16.5 million in the same nine months period a year earlier.

"The mix of products sold in the last quarter supported stronger profit margins," stated Serge Bragdon, President and Chief Executive Officer. "Consequently, the erosion of sales and operating earnings relative to last year was less marked in the third quarter than in the first two quarters of the year. Furthermore, good operating cost management practices and the optimization of production helped offset the impact of competitive pressures and steadily-rising energy costs and resin prices."

The Company's US sales data is shown in the following table:



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US sales Three months ended Nine months ended
unaudited -------------------------------------------
June 26, June 28, June 26, June 28,
2008 2007 2008 2007
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Thousands of Canadian $ 22,153 25,033 55,079 72,552
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% of consolidated sales 43.2 43.2 40.8 45.5
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For the third quarter of 2008, US dollar sales in the United States of US$21.7 million remained unchanged from the third quarter of 2007. A 4.5% increase in US packaging product sales to US$17.5 million compensated for the 16.3% decrease in US industrial product sales to US$4.2 million, which was in particular due to the weak American economy and the gradual reorientation of the product line toward higher value-added products. However, once converted into Canadian dollars, sales on the US market fell 11.5% in the third quarter of 2008 to $22.2 million from $25.0 million in the corresponding period a year earlier. In both cases, US sales represented 43.2% of the Company's quarterly consolidated sales.

For the nine-month period ended June 26, 2008, US dollar sales in the United States totalled US$53.9 million, down 11.9% from US$61.1 million in the first nine months of fiscal 2007. After conversion into Canadian dollars, sales on the US market declined by 24.1% to $55.1 million from $72.6 million for the comparison period a year earlier.

Segmented Results

Packaging Products

Packaging product sales amounted to $29.6 million in the third quarter of fiscal 2008, compared to $30.7 million for the three-month period ended June 28, 2007. This 3.6% decline in sales was partly due to the general slowdown in the US economy and the strength of the Canadian dollar against the American currency. Competitive pressures on the domestic market also had an effect on the value of third quarter shipments. A solid performance by food packaging products nevertheless compensated for the fragility on the industrial packaging product side. For the first nine months of fiscal 2008, packaging product sales totalled $74.2 million, down 9.9% from $82.4 million in the first nine months of fiscal 2007.

For the three-month period ended June 26, 2008, EBITDA was $3.3 million or 11.3% of segment sales, compared to $4.9 million or 15.8% of third quarter sales last year. This decline in EBITDA both on a monetary basis and as a percentage of sales in large part reflects the negative effect on profitability of greater competitive pressures in some of the Company's key markets, as well as the higher price of raw materials. However, the steady progress made in terms of operating efficiency, operating cost control and the development of products better tailored to the new market realities helped offset the effect of heightened competition on the Company's financial performance. For the first nine months of fiscal 2008, EBITDA totalled $7.3 million for an EBITDA margin of 9.8%, compared to $12.0 million with an EBITDA margin of 14.5% for the corresponding nine-month period ended June 28, 2007.

Industrial Products

Industrial product segment sales for the three-month period ended June 26, 2008, totalled $21.7 million, compared to $27.3 million in the third quarter of fiscal 2007. This 20.5% year-over-year decline in sales arose primarily from the slowdown in the US economy, which had the greatest impact in the Automotive and Materials Handling sectors. In contrast, the Waste Handling sector posted an increase in deliveries. For the first nine months of fiscal 2008, industrial product sales totalled $60.8 million, down 21.1% from $77.1 million for the nine-month period ended June 28, 2007.

For the three-month period ended June 26, 2008, EBITDA amounted to $2.2 million or 10.2% of segment sales, compared to $3.3 million or 12.2% of sales in the third quarter of fiscal 2007. This decline in profitability resulted both from lower sales, particularly in the Automotive and Materials Handling sector, and from greater pressure from competition in both the United States and Canada. For the first nine months of fiscal 2008, EBITDA was $4.4 million for an EBITDA margin of 7.2%, compared to $7.5 million or an EBITDA margin of 9.7% for the first nine months of last year.

Non-GAAP Measures

Company management uses a non-GAAP measure in this press release, namely earnings before interest, taxes, depreciation and amortization ("EBITDA"). However, management wishes to note that for earnings presentations purposes, EBITDA cannot be formally identified in the financial statements, and corresponds to the line preceding "Financial expenses". The reader may refer to the table reconciling the EBITDA used by the Company and net earnings, provided in a section entitled "Non-GAAP Measures" in the management discussion and analysis for the three-month period ended June 26, 2008.

While EBITDA is not a standard GAAP measure, management, analysts, investors and others use it as an indicator of the Company's financial and operating management and performance. The Company's method of calculating EBITDA may be different from those used by other companies.

Outlook

"Despite a competitive environment that remains difficult, the last few months generated a number of promising developments for the months ahead. First, there are signs that the compression of profit margins could be in the process of easing in some market segments, which would have a positive impact on the Company's profitability. At the same time, the signing in June of a large, long-term contract for wheeled carts for the city of Calgary promises sustained growth for the Waste Management sector in the coming quarters. Furthermore, the Company will soon begin manufacturing a round, thin-walled container using the In-Mold Labelling (IML) process. The imminent marketing of this container for the specialty dairy product market should have a positive effect on the value of the Company's food packaging product sales. Overall, management's short-term priorities remain unchanged, targeting in particular improvements to operations, the development of new, value-added products, expansion of the customer base and organic sales growth," concluded Serge Bragdon.

Conference Call

IPL Inc. will hold a conference call to present its results on August 8, 2008 at 11:00 a.m. (Eastern Daylight Time). Those interested should call 1-800-814-4861 (Montreal, North America and overseas). The call can also be accessed via a direct broadcast site at the following addresses: www.cnw.ca and www.q1234.com.

Those unable to participate can hear a recording of the call by dialling 1-877-289-8525 and entering the code 21278508# on the telephone keypad. This recording will be accessible from 1:00 p.m. on Friday, August 8, 2008 until 11:59 p.m. on Friday, August 15, 2008.

About IPL

IPL Inc. is one of the leading North American producers of moulded plastic products through injection and extrusion for various industrial manufacturing sectors. IPL employs close to 1,000 people in its four plants located in Saint-Damien, Saint-Lazare and Lawrenceville (Quebec), and Edmundston (New Brunswick). The Company manufactures and markets over 400 products for packaging and materials handling. IPL also provides highly technical value-added custom moulding services for the transportation industry, as well as for various industrial uses. Further information about IPL is available at www.ipl-plastics.com.

Forward-looking statements

Except for historical information provided herein, this press release may contain statements of a forward-looking nature concerning the future performance of the Company. These statements are based on management's best possible evaluation of future events, and as such involve a number of risks and uncertainties. The factors apt to cause variances in the results include, among others, any fluctuations in quarterly results, any change in demand for the Company's products and services, any impact of competition on prices and the market in general, and any events that could have an impact on the economy. As a result, readers are advised that actual results may differ from expected results.

Notice to readers: The Company's unaudited consolidated financial statements and management discussion and analysis for the quarter ended June 26, 2008 can be found on IPL's website at www.ipl-plastics.com.

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