Manufacturer and supplier of private label dry-blend food products and household products Associated Brands Income Fund has taken the step of suspending future distribution on its units until business performance improves on a sustained basis.

Based on preliminary unaudited results for the three months and year ended 31 December, the fund said that it expects to report sales of CDN$43m (US$37.57), up from CDN$40m in the fourth quarter of 2004. Sales for the year are expected to total CDN$150m, compared to CDN$156m for 2004.

Despite a strong fourth quarter performance, Associated Brands said gross profit margins have felt the negative impact of higher operating costs and two significant one-off special charges.

Associated Brands said that it expects distributable cash for the fourth quarter to be between CDN$0.04 and CDN$0.01 per fund unit, down from CDN$0.22 per fund unit for the fourth quarter of last year. For the year, distributable cash is down from CDN$0.89 per fund unit to between CDN$0.36 and CDN$0.41 per unit.

Poor financial results caused the fund to breach two credit agreements, which has limited the payouts permitted to be made to unitholders. Consequently, Associated Brands is suspending future distributions on its units.

“Management’s immediate goal is to deliver improved operating and financial results. Senior operating executives have been tasked to develop and execute very specific action plans to drive this improvement going forward. We must capitalise on the growth in revenues achieved in the fourth quarter and are focused on programs to increase margins and to manage costs down,” said Rob Dougans, president and CEO.