Mr. O.Y. Muggli reports

WINPAK REPORTS 2024 FIRST QUARTER RESULTS

Winpak Ltd. has released consolidated results in U.S. dollars for the first quarter of 2024, which ended on March 31, 2024.

Financial performance

Net income attributable to equity holders of the company for the first quarter of 2024 of $35.5-million or 55 cents in earnings per share declined by 9.6 per cent from the $39.3-million or 60 cents per share recorded in the corresponding quarter of 2023. Lower sales volumes subtracted 3.5 cents from EPS. Operating expenses reduced EPS by a further 5.0 cents. Foreign exchange, income taxes and the level of net income attributable to non-controlling interests narrowed EPS by 1.5 cents, 1.0 cent and 1.0 cent, respectively. Conversely, the sizable expansion in gross profit raised EPS by 4.0 cents. Net finance income augmented EPS by 3.0 cents.

The fiscal year of the company ends on the last Sunday of the calendar year and is usually 52 weeks in duration. However, the 2023 fiscal year consisted of 53 weeks, with the first quarter comprising 14 weeks, one more week than the current year. The additional week included in first quarter 2023 was essentially the last week of the 2022 calendar year, which contained several statutory holidays. Consequently, it is estimated that this additional week contributed 6.0 per cent to first quarter 2023 sales volumes and net income results.

Looking forward

The first quarter provided solid earnings performance while sales volumes stabilized after declining in each of the three previous quarters. For the full year, Winpak is poised to set a new all-time high for net income attributable to equity holders.

The improved outlook for the North American economy, paired with a modest rebound in consumer demand, should have a positive impact on sales volumes for the rest of 2024. Making inroads with new customers and new products is a key focus. The outlook for these catalysts of growth is positive, especially with new production equipment being commercialized within the modified atmosphere packaging and rigid container facilities later this year. Winpak expects sales volume growth for the rest of 2024 to be in the range of 3 to 5 per cent.

In aggregate, raw material costs rose by 7 per cent over the past six months. The pass-through of these increases to customers with formal price indexing arrangements will be implemented, on average, after a time lag of four months. For the balance of 2024, market expectations are that overall resin prices will be relatively stable with some materials projected to increase moderately. The current rate of inflation remains well above recent norms, and key components of the company's cost structure continue to be impacted, especially personnel expenses. This is compounded by challenges in attracting and retaining personnel, which put further pressure on compensation levels. Within certain product markets, customer expectations for lower selling prices have intensified. Based on the preceding factors, gross profit margins for the rest of 2024 should be one to two percentage points lower than the level achieved in the first quarter of the year.

Capital expenditures for 2024 are forecast to be between $110-million and $120-million. The extensive expansion of the Winnipeg, Man., modified atmosphere packaging facility is well under way and will make up approximately half of the current year's spending. At another manufacturing site, the company is optimistic that by the second half of 2024, it will be in a position to undertake a sizable building expansion and acquire additional extrusion capacity. Concurrently, Winpak will assess prospective acquisition opportunities that align strategically with the company's core strengths in sophisticated high-barrier packaging for food, medical and pharmaceutical applications that provide long-term shareholder value. Based on the current share price, the company's normal course issuer bid program will be fulfilled by the end of 2024. Winpak will continue to evaluate the mechanisms and extent to which capital can be returned to shareholders.

We seek Safe Harbor.