RW Packaging Ltd.

RW Packaging Ltd.

March 18, 2005 11:31 ET

RW Packaging-2004 Year-End Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: RW PACKAGING LTD.

TSX VENTURE SYMBOL: RWP

MARCH 18, 2005 - 11:31 ET

RW Packaging-2004 Year-End Results

WINNIPEG, MANITOBA--(CCNMatthews - March 18, 2005) - RW Packaging Ltd.
(TSX VENTURE:RWP) -

(FOR THE THREE (3) MONTHS AND YEAR ENDED DECEMBER 31, 2004)

The Board of Directors announced today the Company's unaudited financial
results for the three (3) months ended December 31, 2004, and audited
annual financial results for the year ended December 31, 2004.

OVERALL PERFORMANCE

2004 was another very challenging year in the retail-branded consumer
products market in which the Company competes. Strong global demand for
commodities in general and high oil prices resulted in many of the
Company's key raw materials rising to record levels. Isopropyl Alcohol
in particular, more than doubled in cost during the second half of 2004
due to a North American wide shortage. Earlier in the year, the Company
had to temporarily purchase another key material at a significant
premium from a secondary source when its primary supplier announced a
product allocation. Freight and delivery expenses increased as carriers
raised fuel surcharges in response to higher gas prices. Rebate expenses
increased as customers demanded more support for their brands from
suppliers as competition between retailers intensified. As a result,
gross profit margins contracted 4.2 percentage points during the last
three months of 2004, reducing gross profit margins for the full year by
0.5 percentage points. In response to the rise in material and freight
costs, compensating price increases were initiated to the wholesale and
retail trade prior to year-end. Gross profit margins are expected to
improve by the second quarter of 2005 as selling price adjustments take
effect.

Domestically, the Company's pharmaceutical division continued to
experience growth, reporting its seventh year-over-year sales increase,
while sales in the other domestic divisions were impacted by the
shut-down of the Company's operation in Edmonton, Alberta while it
successfully relocated to its new facility in St. Albert during the
second quarter of 2004. The strengthening of the Canadian dollar, the
Company's reporting currency, in addition to a change in delivery
arrangements as well as a reduction in orders from one U.S. customer,
negatively impacted sales denominated in U.S. dollars. As a result,
Canadian sales were 0.5 per cent lower than the year prior, U.S. sales
declined 28.5 per cent, and overall sales were 5.3 per cent lower.

The aforementioned reduction in comparative sales and gross margin for
the year were almost entirely offset by a corresponding reduction in
operating expenses resulting from the elimination of occupancy costs
related to the leased building the Company closed in April. As a result,
Earnings before Interest, Taxes and Amortization (EBITA) were only 1.4
per cent lower than the prior year. A 19.6 per cent reduction in
amortization expense offset a 15.4 per cent increase in interest
expense, resulting in an 11.9 per cent improvement in comparative
operating earnings. The Company incurred expenses totaling $110,680
during 2004 relating to the closure and relocation of its Alberta
operation and certain other disposition costs. A gain of $70,700 in the
expected future income tax benefit was recognized due to a change in
balances carried forward and a change in the expected tax rate. As a
result, net earnings for the year improved 29.2 per cent to $158,330 or
2.3 cents per share from $122,577 or 1.8 cents per share the year prior.

The improvement in net earnings contributed to shareholder's equity
increasing 5.4 per cent for the year, while total assets increased 16.3
per cent, resulting from an increase in long and short term debt used to
finance construction of the Company's new St. Albert facility and other
investments in property, plant and equipment.

RESULTS OF OPERATIONS

The Company reported a net loss for the three (3) months ended December
31, 2004 of $12,211 (or 0.2 cents per share) on sales of $2,423,636
compared to net earnings of $14,973 (or 0.2 cents per share) on sales of
$2,555,208 for the same period in 2003. A severe winter snowstorm on
December 31, 2004 in Winnipeg resulted in the complete closure of the
Company's head office and manufacturing facility, negatively impacting
both sales and earnings. The closure resulted in the loss of production
from two shifts, as well as, a reduction in orders being shipped in the
period.

Net earnings for the year ended December 31, 2004 were $158,330 (or 2.3
cents per share) on sales of $9,598,584 compared to net earnings of
$122,577 (or 1.8 cents per share) on sales of $10,135,421 for the same
period in 2003. Net earnings for the year increased $35,753 or 29.2 per
cent. Sales for the year decreased $536,837 or 5.3 per cent.

Gross profit for the three (3) months ended December 31, 2004 was
$448,619 (or 18.5%) compared to $460,694 (or 23.8%) during the preceding
third quarter, and $581,045 (or 22.7%) for the three months ended
December 31, 2003. The 4.2 percentage point decrease in comparative
gross margin was the result of; an increase in raw material costs,
customer rebates, and freight and delivery expenses. In response to the
rise in material and freight costs, compensating price increases were
initiated to the wholesale and retail trade prior to year-end. Gross
profit margins are expected to improve by the second quarter of 2005 as
selling price adjustments take effect. Gross profit for the year ended
December 31, 2004 was $2,129,231 (or 22.2%) compared to $2,303,069 (or
22.7%) in 2003.

Warehouse, Selling and Administrative expenses were $340,664 (2003 -
$408,314) for the three (3) months ended December 31, 2004 and
$1,425,898 (2003 - $1,589,785) for the year ended December 31, 2004, a
decline of 16.6 and 10.3 per cent respectively. The decrease in
Warehouse, Selling and Administrative expenses are attributed to the
elimination of occupancy costs after April 30, 2004 resulting from the
closure of the Company's leased facility in Edmonton, Alberta.
Warehouse, Selling and Administrative expenses for the quarter and year
represented 14.1 per cent (2003 - 16.0 per cent) and 14.9 per cent (2003
- 15.7 per cent) of sales, respectively. Included in warehouse expenses
for the year are $62,037 of occupancy costs for the period of January 1
to April 30, 2004, which are non-recurring in 2005, and future years.

Amortization expense for the three months and year ended December 31,
2004 declined 12.3 and 19.6 per cent respectively compared to the same
period(s) in 2003. Amortization expense in 2005 is expected to increase
$46,425 or 19.2 per cent from existing levels as a result of the
additional property, plant and equipment purchased in 2004.

Interest expense for the three months and year ended December 31, 2004
increased 33.9 and 15.4 per cent respectively compared to the same
period(s) in 2003. The higher reported interest expense for the year
reflects the additional debt borrowed to finance the construction of the
Company's new St. Albert facility, as well as, higher interest rates
compared to last year. Interest expense in 2005 is expected to increase
$34,261 or 16.1 per cent from existing levels as a result of the
additional debt used to finance property, plant and equipment.

A gain of $70,700 in the expected future income tax benefit was
recognized (2003 - loss of $8,500) due to a change in balances carried
forward and a change in the expected tax rate. Income taxes that would
otherwise have been payable of $50,100 (2003 - $80,900) were used to
reduce the Company's future income tax benefit. As with all estimates,
it is possible that changes in future conditions could require further
changes in the recognized amounts for income taxes. Should a change be
required it would be accounted for in the period in which those amounts
became known.

As a result, net earnings for the year improved 29.2 per cent to
$158,330 or 2.3 cents per share from $122,577 or 1.8 cents per share the
year prior. Shareholder's equity increased 5.4 per cent to $3,097,712 or
44.7 cents per share from $2,939,382 or 42.4 cents per share.



RW Packaging Ltd.
Statement of Operations and Retained Earnings

Three (3) Twelve (12)
months ended months ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003

Revenue $ 2,423,636 $ 2,555,208 $ 9,598,584 $10,135,421
Manufacturing &
Operating Costs $ 2,315,681 $ 2,382,477 $ 8,895,251 $ 9,422,137
----------- ----------- ----------- -----------
EBITA $ 107,955 $ 172,731 $ 703,333 $ 713,284
Amortization $ 69,256 $ 78,930 $ 241,468 $ 300,359
----------- ----------- ----------- -----------
EBIT $ 38,699 $ 93,801 $ 461,865 $ 412,925
Bank Charges
and Interest $ 50,579 $ 37,768 $ 213,455 $ 184,988
----------- ----------- ----------- -----------
Earnings Before
Other Items ($ 11,880) $ 56,033 $ 248,410 $ 227,937
Waste Disposal $ 0 $ 15,960 $ 0 $ 15,960
Relocation &
Disposition
Costs $ 37,331 $ 0 $ 110,680 $ 0
----------- ----------- ----------- -----------
Earnings Before
Tax ($ 49,211) $ 40,073 $ 137,730 $ 211,977
Current Income
Tax $ 0 $ 23,900 $ 0 $ 160,700
Future Income
Tax Benefit ($ 20,100) ($ 7,300) $ 50,100 ($ 79,800)
Change in
Estimate of FIT ($ 16,900) $ 8,500 ($ 70,700) $ 8,500
----------- ----------- ----------- -----------
Net Earnings
for the Period ($ 12,211) $ 14,973 $ 158,330 $ 122,577
Retained
Earnings,
Beginning of
Period $ 1,818,388 $ 1,632,874 $ 1,647,847 $ 1,547,683
Excess
consideration
on repurchased
shares $ 0 $ 0 $ 0 ($ 22,413)
Retained
Earnings,
End of Period $ 1,806,177 $ 1,647,847 $ 1,806,177 $ 1,647,847

Net Earnings
per Share -
Basic and Fully
diluted ($ 0.002) $ 0.002 $ 0.023 / $ 0.018 /
/ share / share share share

Cash Flow from
Operations $ 115,087 $ 527,390 $ 488,230 $ 552,709

Shareholders
Equity per
Share $ 0.447 / $ 0.424 /
share share

Issued and
Outstanding
Common Shares 6,934,398 6,934,398


RW is GMP and ISO 9001 & 9002 registered. The Company blends and
packages liquid and powder private brand consumer products for major
retailers and national brand marketers across North America.

For further information, please call Mr. Henry De Ruiter, President and
CEO, RW Packaging Ltd., toll free at 1-800-284-6338. E-mail inquiries
may be sent to rwp@rwpackaging.com. Additional information relating to
the Company is available online at www.sedar.com or the Company's
website at www.rwpackaging.com

Shares Issued 6,934,398

2005-03-17 Close $0.30

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    RW Packaging Ltd.
    Mr. Henry De Ruiter
    President and CEO
    toll free at 1-800-284-6338
    rwp@rwpackaging.com
    www.rwpackaging.com
    The TSX Venture Exchange (TSX Venture) has not reviewed, and does not
    accept responsibility for, the adequacy or accuracy of this release.