RW Packaging Ltd.
TSX VENTURE : RWP

RW Packaging Ltd.

March 23, 2007 12:35 ET

RW Packaging Ltd. 2006 Year-End Results

(FOR THE THREE (3) MONTHS AND YEAR ENDED DECEMBER 31, 2006)

WINNIPEG, MANITOBA--(CCNMatthews - March 23, 2007) - RW Packaging Ltd. (TSX VENTURE:RWP) -

The Board of Directors announced today the Company's unaudited financial results for the fourth quarter, and audited annual financial results for the year ended December 31, 2006.

Overall Performance

The Company reported a net loss for the year ended December 31, 2006 of $16,466 (or 0.2 cent per share) on sales of $10,393,794 compared to net earnings of $157,515 (or 2.3 cents per share) on sales of $10,675,589 in 2005.

The principal factors that caused the 2.6 per cent decrease in overall comparative sales for the year were:

- Domestic sales - decreased 1.9 per cent to $9,086,311 (2005 - $9,258,962) due to lower sales of household product's. A promotion by a customer launching a new household product in 2005 generating sales of approximately $380,000 was not repeated in the current year.

- U.S. sales - decreased 7.7 per cent to $1,307,483 (2005 - $1,416,627) due to a change in currency exchange rates. Prior to conversion into Canadian dollars, the Company's reporting currency, sales to the U.S. increased 0.3 per cent.

The principal factors that caused the decrease in comparative net earnings for the year were:

- a reduction in gross profit of $44,214 due to a product recall during the year;

- an increase in warehouse, selling and administrative expense of $74,818 due primarily to an increase in building operating and public company administration expenses;

- additional interest and deferred charge expenses totaling $49,432 due to the early repayment of long-term debt on June 30, 2006, and;

- a change in estimate of the Company's future tax benefit due to changes in federal and provincial income taxes and rates that have been substantively enacted.

Other than the increase in warehouse, selling and administration expense, the variation in year-over-year comparative net earnings were the result of items, which management does not expect to occur annually. In particular, the increase in interest and deferred charge expenses for the year, which although decreased earnings for the current year, improved the Company's overall financial condition and liquidity and will result in a reduction in interest expense in future periods.

Results of Operations

Sales for the three (3) months ended December 31, 2006 were $2,561,176 (2005 - $2,574,429), a decrease of 0.5 per cent. Domestic sales increased 2.0 per cent to $2,518,943 (2005 - $2,469,953) primarily due to higher sales of seasonal and household products. U.S sales declined 59.6 per cent to $42,232 (2005 - $104,476), during the period.

Sales for the year ended December 31, 2006 were $10,393,794 (2005 - $10,675,589), a decrease of 2.6 per cent. Domestic sales decreased 1.9 per cent to $9,086,311 (2005 - $9,258,962), while U.S sales declined 7.7 per cent to $1,307,483 (2005 - $1,416,627), during the period.

Gross profit for the quarter of $588,488 (2005 - $664,447) decreased 2.8 percentage points, to 23.0 per cent of sales, compared to 25.8 per cent of sales for the same period in 2005. A shift in product mix and higher comparable cost-of-goods were the primary factors for the decrease in gross profit for the period.

Gross profit for the year ended December 31, 2006 of $2,290,182 (2005 - $2,375,641) decreased 0.22 percentage points, to 22.03 per cent of sales, compared to 22.25 per cent of sales in 2005. A reduction in gross profit of $44,214 due to a product recall during the year was the primary cause for the decrease in percentage gross profit. Excluding the impact of the product recall, gross profit would have been 22.46 per cent of sales, an increase of 0.21 percentage points over the prior year.

Warehouse, selling and administrative expenses were $448,218 (2005 - $441,210) for the three months ended December 31, 2006, an increase of 1.6 per cent. Warehouse, selling and administrative expenses for the year ended December 31, 2006 were $1,654,466 (2005 - $1,579,748), an increase of 4.7 per cent. Increases in utilities, equipment repairs and maintenance, and public company administration were the primary causes for the overall increase compared to the year prior. Warehouse, selling and administrative expenses when expressed as a percentage of sales were 17.5 per cent (2005 - 17.1 per cent) for the quarter, and 15.9 per cent (2005 - 14.8 per cent) for the year ended December 31, 2006.

As a result of the reduction in gross profit and increase in warehouse, selling and administration expense, EBITA (Earnings before Interest, Taxes and Amortization) for the year decreased $160,277 or 20.1 percent to $635,616 (2005 - $795,893).

Amortization expense was $65,372 (2005 - $68,982) for the quarter, and $282,543 (2005 - $275,927) for the year ended December 31, 2006, respectively. The increase in amortization expense for the year is due to $18,569 of additional deferred charges for the early repayment of long-term debt on June 30, 2006.

Bank charges and interest expense for the quarter decreased 18.7 per cent to $56,692 (2005 - $69,705) due to the lower borrowing costs under the new mortgage(s) completed June 30, 2006. Bank charges and interest expense for the year ended December 31, 2006 increased 8.1 per cent, to $286,739 (2005 -$265,151) due to $30,863 of additional interest expense for the early repayment of long-term debt.

The Company's statutory tax rate for 2006 was 35.2 per cent (2005 - 35.6%) however; the effective rate in 2006 was 37.1 per cent (2005 - 38.2%), due to the effect of items that are not deductible for tax purposes. Income taxes that would otherwise have been payable of $24,600 (2005 - $97,300) were used to reduce the Company's future income tax benefit.

Changes in Income Taxes and Rates

Federal and provincial governments announced during the year a number of changes to income taxes and rates. As these changes are considered to have been substantively enacted, the Company made a change in estimate of its future tax benefit amounting to $58,200 (2005 - NIL) in the fourth quarter of 2006, most of which relates to future income taxes. The adjustment decreased earnings by $58,200 for the quarter and year ended December 31, 2006.

Normal Course Issuer Bid

On November 1, 2006, the Company commenced a normal course issuer bid for the purchase of up to 346,718 of its common shares for cancellation, being just less than 5% of the 6,934,398 common shares currently issued and outstanding. The bid will end no later than October 31, 2007. The Company initiated the normal course issuer bid as it believes that its common shares were trading in a price range which did not adequately reflect their value and that the purchase of the common shares would enhance shareholder value in general. Purchases pursuant to the bid are being made by Canaccord Capital Corporation on behalf of the Company through the facilities of the TSX Venture Exchange. Between November 1, 2006 and December 31, 2006, the Company purchased 79,000 shares at an average cost of $0.4186 per share plus brokerage fees, for a total cost of $34,848. Subsequent to year-end, the Company purchased a further 25,000 shares at an average cost of $0.42 per share. The normal course issuer bid is being funded from cash from operations.

For the year ended December 31, 2006, shareholder's equity decreased 1.6 per cent to $3,203,913 or 46.7 cents per share from $3,255,227 or 46.9 cents per share as a result of, the $16,466 loss reported for the year and the $34,848 invested to repurchase the Company's shares.

Outlook

Barring any unforeseen events, the Company expects to deliver growth in sales and earnings in 2007 resulting from:

- Sales generated from the new "Protecten" medicated skin cream, being marketed under "private label" to a major national retailer, which commenced in January, 2007;

- Organic growth resulting from new store openings by several of the Company's major retail customers;

- Selling price adjustments which have recently been implemented, and;

- A reduction in bank charges and interest expense of approximately $67,000 or 23.0 per cent from 2006, as a result of lower borrowing costs.



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

Three (3) months ended Twelve (12) months ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2006 2005 2006 2005

Revenue $ 2,561,176 $ 2,574,429 $ 10,393,794 $ 10,675,589
Manufacturing &
Operating Costs $ 2,420,906 $ 2,351,192 $ 9,758,178 $ 9,879,696
------------ ----------- ------------ ------------
EBITA $ 140,270 $ 223,237 $ 635,616 $ 795,893
Amortization $ 65,372 $ 68,982 $ 282,543 $ 275,927
------------ ----------- ------------ ------------
EBIT $ 74,898 $ 154,255 $ 353,073 $ 519,966
Bank Charges
and Interest $ 56,692 $ 69,705 $ 286,739 $ 265,151
------------ ----------- ------------ ------------
Earnings Before
Tax $ 18,206 $ 84,550 $ 66,334 $ 254,815
Future Income
Tax Benefit ($ 1,700) $ 36,000 $ 24,600 $ 97,300
Change in Estimate
of FIT $ 58,200 $ 0 $ 58,200 $ 0
------------ ----------- ------------ ------------
Net Earnings
(loss) for the
Period ($ 38,294) $ 48,550 ($ 16,466) $ 157,515

Excess
Consideration
on Shares
Purchased for
Cancellation ($ 20,134) $ 0 ($ 20,134) $ 0

Retained
Earnings,
Beginning
of Period $ 1,985,520 $ 1,915,142 $ 1,963,692 $ 1,806,177
Retained
Earnings,
End of Period $ 1,927,092 $ 1,963,692 $ 1,927,092 $ 1,963,692

Net Earnings
(loss) per
Share -
Basic and fully (0.5 cents 0.7 cents (0.2 cents 2.3 cents
diluted /share) /share /share) /share
(expressed in
cents per share)

Cash Flow from
Operations $ 251,742 $ 22,804 $ 386,527 $ 161,717

Shareholders 46.7 cents 46.9 cents
Equity per Share /share /share
(expressed in
cents per share)

Issued and
Outstanding
Common Shares 6,855,398 6,934,398


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

Additional information relating to the Company is available online at www.sedar.com or the Company's website at www.rwpackaging.com.

Shares Issued 6,775,898

Friday, March 23, 2007 2007-03-22 Close $0.42

The TSX Venture Exchange (TSX Venture) has not reviewed, and does not accept responsibility for, the adequacy or accuracy of this release.

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