CANADA: Beta Brands says Q1 in-line with expectations
Beta Brands Inc, a manufacturer and distributor of confectionery and baked goods, has reported revenue of C$15.5m (US$9.95m) for the Q1 ended 31 March 2002, up slightly from C$15.4m for the corresponding period in the prior year.
Beta Brands sold the Canadian rights to the Life Savers mint brand to Kraft Foods in December of 2001, and so revenue, net of products associated with the Life Savers brand, was C$15.3m for the Q1 2002 and C$14.8m for the Q1 ended 31 March 2001. The company still manufactures Life Savers products for Kraft, however, under a two-year co-pack agreement.
Operating EBITDA amounted to a loss of C$0.2m for the Q1 2002, compared to C$0.5m for the corresponding period in the prior year. Resulting net loss was C$2.2m, or C$(0.05) per share, versus a loss of C$5.6m, or C$(0.14) per share, for the Q1 2001.
"Earnings were in-line with our internal expectations as slightly higher than expected revenues were offset by higher operating costs," said John Lambert, president and CEO. "In addition to seasonal influences which traditionally affect our Q1 results, we incurred certain preventative maintenance costs earlier in the fiscal year than previously scheduled."
Gross margins declined during the quarter from C$2.7m or 17.4% of sales to C$2.1m or 13.4% of sales during the current quarter. This was primarily due to the increased maintenance costs referred to above, unfavourable product mix in the quarter, increased material costs and the clearance of discontinued inventory.
The company enjoyed noteworthy success in its efforts to expand US sales initiatives into additional product categories and geographic regions. During the quarter, Beta Brands secured US licenses to produce themed confectionery and crackers based on the Spiderman and X-Men characters. Spiderman opened across the US on 3 May 2002 and the X-Men movie is to be released in the spring of 2003, providing the company with a sustained stream of products for this market. The company's geographic coverage was extended when Beta Brands USA secured its first orders from a large US food distributor after the quarter end. Shipments of baked goods products to this new customer should begin in June.
Lambert added: "Our focus remains on growing top line revenue while improving operating margins through the pursuit of large volume accounts."
In concert with increased sales focus, management continued to implement a series of planned improvements to the company's manufacturing operations during the quarter. During the Q1 work began on a fifth mogul line and new packaging lines. These equipment and process upgrades will add needed capacity to the company's operations and improve productivity. They are expected to be completed during the Q3 of this fiscal year.
As of 31 March 2002, the company held cash of C$4.7m contributing to positive working capital of about C$6.2m. This compares to cash of C$1.2m and a working capital deficiency of about C$(5.4)m for the corresponding period in 2001.
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