RW Packaging Ltd.
TSX VENTURE : RWP

RW Packaging Ltd.

August 25, 2005 15:36 ET

RW Packaging-2005, 2nd Quarter Results

WINNIPEG, MANITOBA--(CCNMatthews - Aug. 25, 2005) - RW Packaging Ltd. (TSX VENTURE:RWP):

(FOR THE THREE (3) AND SIX (6) MONTHS ENDED JUNE 30, 2005)

The Board of Directors announced today the Company's unaudited financial results for the three (3) and six (6) months ended June 30, 2005.

OVERALL PERFORMANCE

Sales for the second quarter of 2005 rose for the third consecutive quarter and were the highest sales reported for a period since the second quarter of 2000. New business, an increase in case volumes, and higher selling prices resulted in sales for the period increasing 24.7 per cent and the second consecutive quarterly improvement in gross margin dollars and net earnings. For the six (6) months ended June 30, 2005, sales increased 10.3 per cent over the same period a year ago.

Following the second quarter of 2005 being reported on, July sales increased 54.6 per cent over the comparative month last year, bringing the seven (7) month year-to-date sales increase to 14.9 per cent. As disclosed in the Company's news release of July 04, 2005 management has increased its sales forecast for the full year an additional $700,000 to $1.7 million with sales estimated for fiscal 2005 of approximately $11.3 million compared to sales of $9.6 million in 2004, an estimated increase of 18 per cent.

Barring any future unforeseen change, management expects the increase from selling price adjustments implemented, additional case volumes and new business will more than offset increases in cost-of-goods experienced over the same period and result in an overall improvement in gross margin dollars and an increase in net earnings for the full year. However, management does anticipate the additional new business and higher case volumes to affect its product mix and result in an overall decrease in percentage gross margin for the full year of approximately one-half to one full percentage point.

RESULTS OF OPERATIONS

The Company reported net earnings for the three (3) months ended June 30, 2005 of $40,893 (or 0.6 cents per share) on sales of $3,063,005 compared to a net loss of $8,500 (or 0.1 cents per share) on sales of $2,456,228 for the same period in 2004. Domestic sales for the period increased 34.7 per cent; resulting from a 9.9 per cent increase in comparative sales ($1,516,849 versus $1,380,712) at the Company's Winnipeg pharmaceutical facility, and a 138.4 per cent comparative increase in sales ($787,395 versus $330,234) at its one year old St. Albert location. Export sales to the U.S. for the second quarter increased 1.8 per cent ($758,761 versus $745,282). As a result, overall sales for the quarter were 24.7 per cent higher than the same period a year ago.

Net earnings for the six (6) months ended June 30, 2005 was $69,960 (or 1.0 cent per share) on sales of $5,775,513 compared to net earnings of $101,855 (or 1.5 cents per share) on sales of $5,236,463 for the same period in 2004. Domestic sales for the year-to-date have increased 9.9 per cent; resulting from a 8.0 per cent increase in comparative sales ($2,906,134 versus $2,690,826) at the Company's Winnipeg pharmaceutical facility, and a 13.2 per cent comparative increase in sales ($1,720,483 versus $1,519,200) at its St. Albert location. Export sales to the U.S. for the year-to-date have increased 11.9 per cent ($1,148,896 versus $1,026,437). As a result, overall sales for the year-to-date were 10.3 per cent higher than the same period a year ago.

Gross profit for the three (3) months ended June 30, 2005 was $595,097 (or 19.43%) compared to $515,181 (or 20.97%) for the three months ended June 30, 2004, an increase in gross margin dollars of $79,916 or 15.5 per cent. The 1.54 percentage point decrease in comparative gross margin during the second quarter was the result of; a 3.13 percentage point increase in cost-of-goods due primarily to a change in product mix, offset by a 1.59 percentage point reduction in freight and rebate expenses. Gross profit for the six (6) months ended June 30, 2005 was $1,150,377 (or 19.92%) compared to $1,219,918 (or 23.30%) for the same period a year ago. The 3.38 percentage point decrease in comparative gross margin during the first half of 2005 was the result of; 3.74 percentage point increase in cost-of-goods, offset by a 0.36 percentage point reduction in freight and rebate expenses. Gross profit margins during the second half of 2005 are expected to improve reducing the percentage year-over-year decline to between one-half and one percentage point, however overall gross margin dollars are expected to be 10 to 15 per cent higher than in 2004.

Warehouse, Selling and Administrative expenses were $394,190 (2004 - $342,508) for the three (3) months ended June 30, 2005 and $776,027 (2004 - $767,648) for the six (6) months ended June 30, 2005, an increase of 15.1 and 1.1 per cent, respectively. Warehouse, Selling and Administrative expenses for the quarter and year-to-date represented 12.9 per cent (2004 - 13.9 per cent) and 13.4 per cent (2004 - 14.7 per cent) of sales, respectively.

Earnings before Interest, Taxes and Amortization (EBITA) were $200,907 compared to $172,673 in the second quarter of 2004, an increase of 16.4 per cent. Amortization expense of $66,355 (2004 - $57,404) and interest expense of $67,859 (2004 -$54,192) resulted in earnings before tax of $66,693 compared to a loss of $8,800 in 2004. During the second quarter last year the Company reported a relocation & disposition expense of $69,877 (2005 - NIL) related to the closure of its Edmonton operation and relocation to its new facility in St. Albert, Alberta during the period. An expense to the Company's future income tax benefit of $25,800 was recorded during the period, versus a gain of $300 reported in 2004. As a result, net earnings for the second quarter were $40,893 or 0.6 cents per share compared to a loss of $8,500 or 0.1 cents per share the year prior.

For the six (6) months ended June 30, 2005 earnings before Interest, Taxes and Amortization (EBITA) was $374,350 compared to $452,270 for the corresponding period in 2004. Management expects a year-over-year improvement in EBITA during the remainder of 2005 to more than offset the decrease in EBITA reported during the first quarter, and result in an overall increase in EBITA for the full year. For the first-half of 2005 amortization expense was $137,963 (2004 - $114,808) and interest expense was $127,127 (2004 -$104,206) resulting in earnings before tax of $109,260 compared to $161,655 in 2004. During the first-half of 2004 the Company reported a relocation & disposition expense of $71,601 (2005 - NIL) related to the closure of its Edmonton operation and relocation to its new facility in St.Albert, Alberta during the period. For the year-to-date, management recorded an expense to the Company's future income tax benefit of $39,300 (or 35.97%) compared to $59,800 (or 36.99%) in 2004 reflecting the estimated taxes which would have otherwise been payable. Accordingly, net earnings for the six (6) months ended June 30, 2005 were $69,960 or 1.0 cent per share compared to $101,855 or 1.5 cents per share the year prior.

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

2005-08-24 Close $0.38



RW Packaging Ltd.
Statement of Operations and Retained Earnings
---------------------------------------------

Three (3) months ended Six (6) months ended
June 30, June 30, June 30, June 30,
2005 2004 2005 2004

Revenue $3,063,005 $2,456,228 $5,775,513 $5,236,463
Manufacturing &
Operating Costs $2,862,098 $2,283,555 $5,401,163 $4,784,193
---------- ---------- ---------- ----------
EBITA $200,907 $172,673 $374,350 $452,270
Amortization $66,355 $57,404 $137,963 $114,808
---------- ---------- ---------- ----------
EBIT $134,552 $115,269 $236,387 $337,462
Bank Charges and
Interest $67,859 $54,192 $127,127 $104,206
---------- ---------- ---------- ----------
Earnings Before
Other Items $66,693 $61,077 $109,260 $233,256
Relocation &
Disposition Costs $0 $69,877 $0 $71,601
---------- ---------- ---------- ----------
Earnings Before Tax $66,693 ($8,800) $109,260 $161,655
Current Income Tax $0 $0 $0 $59,000
Future Income Tax
Benefit $25,800 ($300) $39,300 $800
Change in Estimate
of FIT $0 $0 $0 $0
---------- ---------- ---------- ----------
Net Earnings for
the Period $40,893 ($8,500) $69,960 $101,855
Retained Earnings,
Beginning of
Period $1,835,244 $1,758,202 $1,806,177 $1,647,847
Retained
Earnings,
End of Period $1,876,137 $1,749,702 $1,876,137 $1,749,702

Net Earnings
per Share -
Basic and
Fully diluted $0.006/share ($0.001)/share $0.010/share $0.015/share

Cash Flow from
Operations $124,573 $409,736 $136,732 $13,566

Shareholder's
Equity $3,167,672 $3,041,237

Shareholders
Equity per Share $0.457/share $0.439/share

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


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