Spigadoro, Inc. (AMEX: SRO), a leading manufacturer of branded and private label products in the Mediterranean food sector, yesterday announced its consolidated results of operations for the three and six month periods ended June 30, 2001.
The Company noted that the 2001 results include the operations of Pastificio Gazzola S.p.A., the Company’s private label pasta subsidiary, for the full three and six month periods of 2001 while the 2000 results include Gazzola’s results only for May and June. As a result, year-to-year results are not necessarily comparable.
Gross profit and profit margins during the first half of 2001 were up 15% and EBITDA and net income improved by over $3 million as compared to the second half of 2000, which is typically a seasonally stronger period. Despite this seasonal effect, overall sales were also marginally higher, while animal feed sales improved by over 10% as a result of price and volume increases. The Company’s Gazzola subsidiary, which has had a negative impact on the Company’s results, showed particular improvement, as personnel reductions of 25%, the elimination of certain low margin products and other restructuring efforts improved Gazzola’s margins to 10.7% in Q2 2001 from 8.8% in Q1 2001 and 3.1% during 2000.
The Company noted that these results demonstrate that the various measures initiated by the Company over the past 6-12 months in response to the difficult market conditions prevailing since last summer – including price increases, organizational restructuring, cost reductions and the hiring of a new CEO and General Manager of Food, as well as other senior managers – continue to dramatically improve the Company’s results of operations.
This initial success of the Company’s initiatives comes despite the fact that certain of the measures initiated by the Company did not take effect until well into the first half of 2001. Although margins and profitability for the first half of 2001 remained below the comparable levels achieved in the first half of 2000, the Company anticipates that the improved trends will continue into the second half of 2001, as the restructuring efforts it has already implemented take full effect.
The Company reported that net sales for the second quarter 2001 increased 11.2% to approximately $39.2 million from $35.3 million in the second quarter 2000, while net sales for the first half of 2001 increased 22.4% to $77.2 million from $63.1 million in the prior year period. These increases were primarily due to 12.6% and 10.9% increases in animal feed sales during the three and six month periods of 2001, respectively, and 9% and 43.7% increases in food sales during such periods. The increases in animal feed sales were due to the effect of sales price increases implemented by the Company, as well as 7.6% and 4.8% increases in volume of feed sold during the three and six months ended June 30, 2001. The increases in food sales were primarily due to the inclusion of the Gazzola operations for the entire 2001 periods versus only two months in 2000.
Gross profit for the second quarter of 2001 increased 16.6% to $7.9 million, or 20.1% of sales, from $6.8 million, or 19.1% of sales, in the prior year quarter. Gross profit for the first half of 2001 increased 12.3% to $15.7 million, or 20.3% of sales, from $14.0 million, or 22.2% of sales, in the first half of 2000. The increase in absolute gross profit was primarily the result of the inclusion of the Gazzola results for the entire 2001 period, partially offset by a 40% increase in energy costs and increases in raw material costs not entirely offset by price increases. The Company noted that Gazzola margins continued to show sequential improvement, increasing to 10.7% in Q2 2001 from 8.8% in Q1 2001 and 3.1% in 2000. This improvement was due in part to a 25% reduction in personnel at Gazzola during the first half of this year, as well as other restructuring efforts at Gazzola.
The Company noted that consolidated operating expenses increased by approximately 35% during the 2001 periods from the 2000 periods primarily due to the inclusion of Gazzola’s expenses for the entire period, as well as a number of one-time expenses recorded in the second quarter 2001. These one-time expenses aggregated approximately $1.3 million and included severance costs, an increase in bad debt reserve, consulting fees and expenses related to the conversion to the Euro.
Primarily as a result of the increase in operating expenses, EBITDA for Petrini and Gazzola (stand-alone) for the six and three month periods ended June 30, 2001 decreased to ($700,000) and ($1.3 million), respectively, from $1.7 million and $600,000 in the prior year periods. Consolidated Spigadoro EBITDA for the six and three month periods ended June 30, 2001 decreased to ($950,000) and ($1.2 million), respectively, from $1.5 million and $1.0 million, respectively, during the 2000 six and three month periods. The EBITDA losses are attributable entirely to the food division, and particularly the Company’s Gazzola private label pasta subsidiary, as the animal feed division reported positive EBITDA.
The Company reported a net loss for the 2001 second quarter of $4.5 million, compared to a net loss of $2.0 million in the prior year quarter. Net loss for the first half of 2001 was $7.5 million versus net income of $7.1 million, primarily the result of a gain on the sale of shares, in the prior year period.
Riccardo Carelli, the Chief Executive Officer of Spigadoro noted: “Our restructuring efforts continue to gain momentum, as demonstrated by the substantial increases in gross profit, EBITDA and net income during the first half of 2001 as compared to the second half of 2000. We are also pleased with the growth of our top line, especially in our animal feed division, as both price increases and volume growth helped boost animal feed sales by double digit percentages.”
Mr. Carelli continued, “In addition, while the low margins at Gazzola continue to have a negative impact on our overall results, our Gazzola restructuring efforts have enabled us to increase Gazzola’s margins from 3.1% during fiscal 2000 and 8.8% in the first quarter of this year, to 10.7% during Q2 2001. We anticipate further such increases this year.”
Mr. Carelli concluded, “Although we have not returned to the more favorable conditions of late 1999 and early 2000, we will continue our restructuring and cost control efforts and expect the positive trends of the past few months to continue into the second half of this year.”
Spigadoro is a leading manufacturer of branded and private label products in the Mediterranean food sector. Its pasta and other Mediterranean products are internationally recognized as high quality products and are marketed under the brand name “Spigadoro” (“Golden Ear of Wheat”) in Italy, Europe, the U.S. and the Far East. The Company’s animal feed products are manufactured at seven plants throughout Italy and are marketed under the “Petrini” name. The Company’s recent acquisition of Pastificio Gazzola also establishes it as a European leader in private label pasta. The Company has previously announced an aggressive growth strategy that includes a consolidation of small and mid-cap companies within the food and animal feed industries in Europe.
Statements in this press release that are not descriptions of historical facts are forward-looking statements that are subject to risks and uncertainties. Such statements, including those regarding among other things, our strategy, future prospects and results of operations, are dependent on any number of known and unknown factors, many of which are outside of our control. Actual results could differ materially from those currently anticipated or expressed or implied by any forward-looking statement due to a number of factors, including those set forth in our Securities and Exchange Commission filings under “Risk Factors.” These factors include the following: we have changed our principal business and we may not be successful operating a new business; Vertical Financial Holdings and affiliated entities control Spigadoro; our substantial debt may adversely affect our ability to obtain additional funds and increase our vulnerability to economic or business downturns; our operating results will be adversely affected by charges from acquisitions; our strategy of acquiring other companies for growth may not succeed and may adversely affect our financial condition, results of operations and cash flows; intense competition in the pasta and animal feed industries may adversely affect operating results; fluctuations in raw material costs could adversely affect our operating results; our business may be adversely affected by risks associated with foreign operations; and other risks. In addition, our acquisition discussions are in various stages and, except as previously announced, we have no agreements or arrangements relating to any acquisitions. We are unable to predict whether or when any of these negotiations will result in any definitive agreements. The words “anticipate”, “believe”, “expect”, “intend”, and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance upon any forward-looking statements contained in this press release, which speak only as of the date the statements are made. Spigadoro undertakes no obligation to update any forward-looking statement contained in this press release.
This release and prior releases are available on the KCSA Public Relations Worldwide Web site at www.kcsa.com.