Quarter 2 and YTD Fiscal
2020 - Earnings Conference
Call
Disclaimer
General
All references are to U.S. dollars unless stated otherwise. Any graphs, tables or other information in this presentation demonstrating the historical performance of IPLP or any other entity contained in this presentation are intended only to illustrate past performance of such entities and are not necessarily indicative of future performance of us or such other entities.
Forward-looking Information
This presentation may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements include all matters that are not historical facts. Specifically, forward- looking statements in this presentation include, but are not limited to, statements regarding expectations of the Company with respect to the outbreak of the Coronavirus (COVID-19) and its possible impact on the Company's Revenue and Adjusted EBITDA, the expected completion dates of certain of the Company's capital projects, the Company's ability to pass through material price input change to customers, the Company's expectations regarding resin and freight costs and the results from the Company's response thereto including the impact on gross margin and Adjusted EBITDA margin for Fiscal 2020, expectations regarding securing labor, labor cost inflation, our expected cash outflows for Fiscal 2020, and the Company's expectations with respect to foreign currency volatility and its impact on revenue and Adjusted EBITDA. These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events
or intentions.
In addition, our assessments of, and outlook for Fiscal 2020 are considered forward-looking information. See "Outlook" for additional information concerning our strategies, assumptions and market outlook in relation to these assessments
Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. Such information reflects IPLP's then current views with respect to future events based on certain material facts and assumptions and are subject to certain risks and uncertainties.
Forward-looking information is based on certain key expectations, opinions, assumptions and estimates made by the Company in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are appropriate and reasonable in the circumstances.
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Although IPLP believes that the expectations, opinions, assumptions and estimates on which such forward-looking information is based are reasonable, such forward-looking information should not be unduly relied upon since there can be no assurance that such expectations, opinions, assumptions and estimates will prove to be correct.
Many factors could cause our actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward- looking statements, including, without limitation, the following factors, which are discussed in greater detail in the "Risk Factors" section of this MD&A: the impact of the COVID-19 outbreak on our business and our operations; as well as risks relating to the Arrangement Agreement including the possibility that the Going Private Transaction will not be completed on the terms and conditions, or on the timing, currently contemplated, and that it may not be completed at all, due to a failure to obtain or satisfy, in a timely manner or otherwise, required shareholder, court and regulatory approvals and other conditions of closing necessary to complete the Going Private Transaction or for other reasons, as well as the possibility of adverse reactions or changes in business relationships resulting from the announcement or completion of the Going Private Transaction, our ability to successfully implement our business strategy; our highly competitive marketplace; a disruption in the overall economy and the financial market which may affect consumer demand; risks relating to Canada - U.S. trade; price volatility or a shortage of some of the raw materials we purchase; our results of operations may be impacted by different financial risks; our dependence on our manufacturing facilities and equipment, which require a high degree of capital expenditures to maintain or replace; changes in laws, regulations and related interpretations as well as changes in consumer trends; the loss of any key customers or a decrease in customer demand; our exposure to food industry risks; risks relating to our brand and reputation; brand and reputational risks associated with actions taken by our subcontractors; competition for acquisition candidates; our ability to execute our growth strategy being dependent on our ability to identify and acquire desirable candidates; our ability to successfully integrate recent acquisitions or future acquisitions; risks associated with our acquisition diligence procedures; failure to adapt to technological changes or the inability to continue to enhance existing products and develop and market new products that respond to customer needs and preferences; our ability to recruit and retain senior management and qualified personnel; failure to maintain good employee relations; increases in transportation costs; increases in energy costs; industry consolidation risk; potential exposure to product liability claims arising from the manufacture of faulty or contaminated products; failure to protect our intellectual property rights, including our unpatented proprietary know-how and trade secrets, or in avoiding claims that we infringed on the intellectual property rights of others; failure to comply with applicable laws and regulations; risks relating to environmental and health and safety laws and regulations; risks of downward pressure on pricing of our products; the inability to obtain appropriate funding; interest rate fluctuations;
failure in internal controls; risks relating to information technology interruptions or breaches; litigation risk including the possibility of litigation relating to the Going Private Transaction; potential indemnification obligations relating to divestments; counterparty credit risks; risks relating to future write-offs of our goodwill and other intangible assets; changes in applicable tax legislation; future sales of our securities by existing shareholders or by us could cause the market price for our common shares to fall; Caisse de dépôt et placement du Québec ("CDPQ") having significant influence with respect to matters put before the shareholders; our dependence on our subsidiaries for cash to fund our operations and expenses; our dividend policy; difficulties enforcing judgments against the Company's directors and officers who are not resident in Canada; risks relating to claims for indemnification by our directors and officers; risks relating to our forum selection by law; and the forward looking statements contained in this MD&A proving to be incorrect.
The above-mentioned factors should not be construed as exhaustive. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that may" cause results not to be as anticipated, estimated or intended.
All of the forward-looking information contained in this presentation are qualified by the foregoing cautionary statements and there can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. Unless otherwise noted or the context otherwise indicates, the forward- looking information contained in this presentation is provided as of the date of this presentation and the Company does not undertake to update or amend any forward-looking information contained herein whether as a result of new information, future events or otherwise, except as required by applicable securities laws. Readers are also cautioned that outlook information contained in this presentation should not be used for purposes other than for which it is disclosed herein.
Non-IFRS Measures
This presentation uses certain non-IFRS financial measures and ratios. Management uses these non-IFRS financial measures for purposes of comparison to prior periods, to prepare annual operating budgets, and for the development of future projections and earnings growth prospects. This information is also used by management to measure the profitability of ongoing operations and in analyzing our financial condition, business performance and trends. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS..
We use non-IFRS financial measures to provide supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures The financial measures applied include Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBIT, Adjusted Net Income, Adjusted Basic Earnings per Share, Adjusted Diluted Earnings per Share, and Adjusted Diluted Earnings per Share, Net Debt, Financial Leverage, and Adjusted Free Cash Flow.
Adjusted EBITDA and Adjusted EBIT is provided to assist investors in determining the financial performance of the Company and its divisions' operating activities on a consistent basis by excluding items such as business reorganization and integration costs share of loss of equity- accounted investee, other income (net), finance costs and tax charges as they are considered not being reflective of the operational performance of the Company. Adjusted EBITDA also excludes certain non-cash elements such as depreciation and amortization expense. Adjusted EBITDA margin provides a percentage of revenue analysis of the Adjusted EBITDA measure. These measures are also used by Management to measure the underlying trading performance of the Company's operating segments. We believe that these financial measures are useful financial metrics to assess our operating performance from period to period by excluding certain items that we believe are not representative of our core business.
Adjusted Net Income also assists key stakeholders in determining the financial performance of the Company on a consistent basis by excluding from net income certain one-off costs as noted above, amortization costs related to intangible assets recognized on acquisition of subsidiaries and adjusted to reflect the tax effect on these elements. Adjusted Basic and Diluted Earnings Per Share give a consistent measure of the earnings of the Company by dividing the Adjusted Net Income by the basic and diluted weighted average number of shares. Net Debt is a measure indicating the financial indebtedness of the Company assuming that all cash on hand is used to repay a portion of the outstanding debt. Financial Leverage is defined as the ratio of Net Debt to the last twelve months Adjusted EBITDA ("LTM Adjusted EBITDA") and measures the number of years it would take for the Adjusted EBITDA of the business to pay off the Net Debt in full. LTM Adjusted EBITDA is the Adjusted EBITDA of the business for the previous twelve-month period together with any Adjusted EBITDA of an acquired business also for the same twelve-month period adjusted to include any pre-acquisition period. Adjusted Free Cash Flow is a measure indicating the relative amount of cash generated by the Company during the period and available to fund dividends, debt repayments and acquisitions We believe that the presentation of these financial measures enhances an investor's understanding of our financial performance and financial condition.
The definitions of the measures noted above are included in the "Reconciliation of non-IFRS Measures" section of this MD&A.
Overview
- Q2 2020 revenue and adjusted EBITDA(1) behind prior year, but ahead of market expectations as economic recovery in the jurisdictions in which we operate improved through the quarter.
- Q2 2020 revenues were adversely impacted by the COVID-19 virus and associated containment measures that were scaled up in most economies in which we operate in early Q2 2020.
- Despite revenue decline from Q2 2019 to Q2 2020, Adjusted EBITDA(1) margin improved from 16.9% in Q2 2019 to 17.5% in Q2 2020.
- Health and safety of our employees remains of utmost importance.
- Comprehensive COVID-19 contingency planning measures continued into Q2 2020.
- Group business model proving resilient and is responding to the various COVID-19 challenges, proving the value of diversification in end market segments across the three divisions.
- On July 29, 2020 the Company announced that it had entered into an arrangement agreement to be acquired by Intelligent Packaging Limited Purchaser Inc., an entity managed by Madison Dearborn Partners, LLC, a Chicago-based private equity firm. Under the terms agreed, subject to shareholder and other customary approvals, Intelligent Packaging Limited Purchaser Inc. will acquire all of the issued and outstanding common shares of the Company at C$10.00 in cash per share.
3 - Earnings Conference Call | 1 See Appendix 1 for a reconciliation of this non-IFRS |
measure to its most directly comparable measure calculated | |
in accordance with IFRS. |
Q2 2020 and Fiscal 2020 YTD Results Overview
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Q2 and YTD 2020
Results Overview
USD$' millions | Q2 | Q2 2019 | Change | YTD | YTD | Change | ||
2020 | 2020 | 2019 | ||||||
Revenue | $153.3 | $168.6 | ↓ | (9.1%) | $294.4 | $310.4 | ↓ | (5.2%) |
Gross profit margin | 23.0% | 22.4% | ↑ | 2.7% | 20.9% | 20.6% | ↑ | 1.5% |
Adjusted EBITDA(1) | $26.8 | $28.5 | ↓ | (6.1%) | $45.8 | $45.8 | - | 0.1% |
Adjusted EBITDA(1) margin | 17.5% | 16.9% | ↑ | 3.6% | 15.6% | 14.8% | ↑ | 3.6% |
Net income | $5.3 | $8.5 | ↓ | (37.3%) | $7.2 | $9.5 | ↓ | (24.9%) |
Net cash flows from operating activities | $32.9 | $14.5 | ↑ | NM | $24.0 | $9.4 | ↑ | NM |
Adjusted Free Cash Flow(1) | $27.7 | $9.4 | ↑ | NM | $11.5 | $2.1 | ↑ | NM |
Net debt(1) to the last twelve months Adjusted EBITDA(1) | 3.22x | 3.64 x | ↑ | 11.5% |
5 - Earnings Conference Call | 1 See Appendix 1 for a reconciliation of this non-IFRS | 2 Not Meaningful ("NM"). |
measure to its most directly comparable measure calculated | ||
in accordance with IFRS. |
Impact of and response to COVID- 19
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Impact of COVID-19 on IPL's Operations
- Health and safety of our employees remains the utmost importance, with appropriate and responsive measures in place to protect their safety and well-being.
- Successfully maintained all 14 manufacturing facilities operational.
- Suspension and deferral of non-essential capital expenditure YTD 2020 - capital expenditure declined 33.9% when compared to YTD 2019.
- Continuing restructuring and cost reduction measures - expected to benefit Adjusted EBITDA margins(1).
- The Company availed of government wages subsidy programs (UK and Canada) in Q2 2020 - $4.0 million Q2 and YTD 2020.
- LF&E division continued to experience a slow down in sales of food services pails, material handling products and environmental products in North America which was partially offset by increased demand for environmental containers and material handling products in Europe.
- CPS division experienced an increase in sales volumes of food packaging products in North America and sales in the electronics sector, partially offset by a decrease in sales to customers in the hospitality sector in Europe.
- RPS division experienced a decrease in sales of MacroTrac products and automotive bins partially offset by increased sales volumes of agricultural products.
7 - Earnings Conference Call | 1 See Appendix 1 for a reconciliation of this non-IFRS |
measure to its most directly comparable measure calculated | |
in accordance with IFRS. |
Robust COVID-19 measures ensured all plants remained fully operational throughout first half-year 2020 without interruption
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IPL COVID-19 experience to-date
- Safety is a key pillar of our sustainability strategy, which allowed us to react quickly to COVID-19 challenges at our facilities.
- This ensured all staff were kept safe whilst also ensuring all 14 manufacturing facilities fully operational throughout first half-year 2020, without interruption.
- A 3rd party review of IPL's COVID-19 response concluded our actions are in-step with international best practices for leading organizations, and aligned with international guidelines.
- Our sustainability strategy continues to remain central to how we operate and engage with our employees, customers and the environment.
Our H&S and Sustainability teams were well positioned to
address the operational impacts of COVID-19
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The key pillars of our sustainability strategy
Second Quarter and
YTD 2020 Summary
Results
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Second Quarter and YTD 2020 Summary Results Satisfactory performance in Q2 2020
Q2 | Q2 | Q/Q | YTD | YTD | Y/Y | |
USD$'million | 2020 | 2019 | Change | 2020 | 2019 | Change |
Revenue | $153.3 | $168.6 | (9.1%) | $294.4 | $310.4 | (5.2%) |
Gross Profit | $35.2 | $37.8 | (6.9%) | $61.6 | $64.0 | (3.7%) |
Gross Profit Margin | 23.0% | 22.4% | 2.7% | 20.9% | 20.6% | 1.5% |
Adjusted EBITDA(1) | $26.8 | $28.5 | (6.1%) | $45.8 | $45.8 | 0.1% |
Adjusted EBITDA | 17.5% | 16.9% | 3.6% | 15.6% | 14.8% | 5.4% |
Margin(1) | ||||||
Net Income | $5.3 | $8.5 | (37.3%) | $7.2 | $9.5 | (24.9%) |
Adjusted Net Income(1) | $9.5 | $10.3 | (8.4%) | $14.1 | $14.7 | (4.5%) |
Diluted EPS (in $) | $0.10 | $0.16 | (37.5%) | $0.13 | $0.18 | (27.8%) |
- Adjusted EBITDA margin(1) increased from 16.9% in Q2 2019 to 17.5% in Q2 2020 and from 14.8% YTD 2019 to 15.6% YTD 2020.
- Gross Profit margin increased from 22.4% in Q2 2019 to 23.0% in Q2 2020 and from 20.6% YTD 2019 to 20.9% YTD 2020.
- Adjusted EBITDA(1) YTD 2020 when compared with YTD 2019 is flat despite the impact of COVID-19.
- Adjusted Net Income(1) in Q2 2020 decreased by 8.4% compared to Q2 2019 primarily due to the decline in revenue during the quarter, increased transaction, reorganisation and integration costs and unfavorable foreign exchange movements partially offset by decreased labor costs, owing to government wage subsidy schemes, tax charges and finance costs.
11 - Earnings Conference Call | 1 See Appendix 1 for a reconciliation of this non-IFRS |
measure to its most directly comparable measure calculated | |
in accordance with IFRS. |
Second Quarter 2020 Revenue and Adjusted EBITDA Bridge (1)
Note - All amounts in USD$'million
12 - Earnings Conference Call | 1 See Appendix 1 for a reconciliation of this non-IFRS |
measure to its most directly comparable measure calculated | |
in accordance with IFRS |
- Revenue was $153.3 million in Q2 2020 compared to $168.6 million in
Q2 2019, a decrease of $15.3 million, or 9.1%, due to COVID-19 related sales disruption in LF&E NA and RPS divisions which was partially offset by sales growth in CPS division in Q2 2020. - Adjusted EBITDA(1) decreased by $1.7 million or 6.1% in Q2 2020 when compared to Q2 2019 primarily driven by the reduction in revenue during Q2 2020 and unfavorable foreign exchange movements, offset by decreases in resin input costs, finance costs and the cost of labor owing to government wage subsidy schemes.
- The effect of passthroughs of lower resin input costs impacted revenue and Adjusted EBITDA(1) by $2.7 million in Q2 2020.
YTD 2020 Revenue and Adjusted EBITDA Bridge (1)
Note - All amounts in USD$'million
13 - Earnings Conference Call | 1 See Appendix 1 for a reconciliation of this non-IFRS |
measure to its most directly comparable measure calculated | |
in accordance with IFRS |
- Revenue YTD 2020 was $294.4 million compared to $310.4 million YTD 2019, a decrease of $16.0 million or 5.2% due to the Q2 2020 COVID-19 related sales disruptions.
- Adjusted EBITDA(1) YTD 2020 at $45.8 million is flat when comparted to Adjusted EBITDA(1) YTD 2019. The impact of the reduction in revenue YTD was offset by decreases in resin input costs, favorable foreign exchange movements YTD and reductions in the cost of labor owing to COVID-19 wage subsidy schemes.
- The effect of passthroughs of lower resin input costs impacted revenue and Adjusted EBITDA(1) by $4.3 million YTD 2020.
Q2 2020 Key Margin Drivers
Other(1) | Other(1) | ||||
Resin(2)(3) | Freight | ||||
Freight | 4.1% | Resin(2) | |||
6.0% | |||||
6.0% | |||||
5.0% | |||||
Labor | |||||
Labor | 36.0% | 31.5% | |||
20.0% | 19.0% | ||||
Q2 2019 | Q2 2020 | ||||
Revenue | Revenue | ||||
$168.6m | $153.3m |
16.9% | 17.5% | |
17.0% | 21.0% | |
Other COGS(4) | Adjusted EBITDA(5) | Other COGS(4) |
Adjusted EBITDA(5) |
(1) | Includes SG&A costs excluding SG&A labor costs | (4) | All directly attributable cost of sales excluding resin, labor and freight costs |
(2) | Q2 2019 Polypropylene (PP) ~55.0%. Polyethylene (PE) ~ 45.0% | (5) | See Appendix 1 for a reconciliation of this non-IFRS measure to its most directly comparable |
Q2 2020 Polypropylene (PP) ~60.0%. Polyethylene (PE) ~40.0% | measure calculated in accordance with IFRS | ||
(3) | Restated from 38.0% as per 2019 presentation |
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- Q2 2020 positively impacted by reduced resin input costs.
- Freight costs decreased by 1% from Q2 2019 to Q2 2020 following the continued focus on freight cost management.
- Increases in market driven labor costs arising from inflation and changes to labor agreements in North America were offset by COVID-19 wage subsidy schemes (UK and Canada).
Resin Pricing Update
Q2 2020 Index Prices (Q/Q Change)
Resin | Europe | North America |
HDPE | (22.1%) | (7.1%) |
LLDPE | N/A | (6.8%) |
PP | (15.4%) | (23.1%) |
Pricing Outlook 2020
ResinOutlook
HDPE
LLDPE
PP
• Q2 | 2020: Between Q2 2019 and |
Q2 | 2020, the average price of PP |
resin decreased by approximately | |
23.1%. PE resin prices have | |
decreased by 7.1% in Q2 2020 | |
from Q2 2019. | |
• Limited visibility on resin pricing for |
IHS MARKIT PRICING
LLDPE IM | HDPE IM | PP COPO IM |
- 1.000
- 0.950
- 0.900
- 0.850
- 0.800
- 0.750
- 0.700
- 0.650
- 0.600
- 0.550 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q2 '20
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the remainder of Fiscal 2020 given |
the current volatility in the markets. |
Cash conservation measures delivering
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Second Quarter and YTD 2020 Adjusted Free Cash Flow (1)
Q/Q | Y/Y | |||||
USD$'M | Q2 2020 | Q2 2019 | Change YTD 2020 YTD 2019 | Change | ||
Net cash flows from operating activities | $25.3 | $26.5 | (4.5%) | $39.6 | $42.8 | (7.5%) |
before working capital movements | ||||||
Movements in working capital | $7.6 | ($12.0) | NM | ($15.5) | ($33.4) | 53.6% |
Net cash flows from operating activities | $32.9 | $14.5 | NM | $24.0 | $9.4 | NM |
Transaction, reorganization and integration | $2.6 | $1.9 | 36.8% | $3.6 | $6.4 | (43.8%) |
costs paid | ||||||
Other income received | $0.2 | $0.1 | 100% | $0.8 | $0.1 | NM |
Adjusted net cash flow from operating | $35.7 | $16.5 | NM | $28.4 | $15.9 | 78.6% |
activities(1) | ||||||
Maintenance capital expenditure | ($4.0) | ($2.7) | 48.1% | ($8.5) | ($6.1) | 39.3% |
Finance costs paid | ($4.0) | ($4.4) | (9.0%) | ($8.5) | ($7.7) | 10.4% |
Adjusted Free Cash Flow(1) | $27.7 | $9.4 | NM | $11.5 | $2.1 | NM |
- Net cash flow from operating activities increased from $14.5 million (Q2 2019) to $32.9 million (Q2 2020).
- Adjusted Free Cash Flow was an inflow of $27.7 million for Q2 2020 compared to an inflow of $9.4 million in Q2 2019.
17 - Earnings Conference Call | 1 See Appendix 1 for a reconciliation of this non-IFRS | 2 Not Meaningful ("NM"). |
measure to its most directly comparable measure calculated | ||
in accordance with IFRS |
Condensed Balance Sheet and Key Ratios
USD$' Million | Q2 2020 | December 31 2019 | Q2 | 2019 |
Working Capital | $104.9 | $89.4 | $128.8 | |
Total Assets | $923.7 | $901.7 | $903.0 | |
Net Debt(1) | $296.6 | $297.4 | $342.9 | |
Total Shareholders' Equity | $372.2 | $372.1 | $363.5 | |
Key Ratios | Q2 2020 | December 31 2019 | Q2 2019 | |
Net Debt(1) to Equity | 0.80 | 0.80 | 0.94 | |
Financial Leverage; Net | ||||
Debt(1) to LTM Adjusted | 3.22x | 3.18x | 3.64x | |
EBITDA(1) | ||||
Interest coverage | 5.49x | 5.37x | 5.74x | |
18 - Earnings Conference Call | 1 See Appendix 1 for a reconciliation of this non-IFRS | |||
measure to its most directly comparable measure calculated |
in accordance with IFRS
- The financial leverage ratio(1), is defined as the ratio of Net Debt to the last twelve months Adjusted EBITDA(1) including the pre-acquisition period of the trade and assets of the U.K. based injection molding company, as at June 30, 2020.
- Net Debt has decreased from $297.4 million at December 31, 2019 to $296.6 million at June 30, 2020 primarily due to positive net cash flows from operating activities before working capital movements and favorable foreign exchange movements on net debt balances, offset in part by seasonal increases in working capital, the drawdown of borrowings to fund the acquisition of the trade and assets of a U.K. based injection molding company and ongoing capital expenditures
- Working capital increased 17.3% from $89.4 million (Fiscal 2019) to $104.9 million (Q2 2020) in line with seasonal trends in working capital.
CAPEX Update
Y/Y | |||
USD$'M | YTD 2020 | YTD 2019 | Change |
Consumer Packaging Solutions | $8.8 | $9.0 | (2.2%) |
Large Format Packaging & Environmental | $6.3 | $10.9 | (42.2%) |
Solutions | |||
Returnable Packaging Solutions | $4.3 | $9.1 | (52.7%) |
Other | $0.3 | $0.8 | (62.5%) |
Total | $19.7 | $29.8 | (33.9%) |
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- Cash outflow with respect to capital purchases of property, plant and equipment in YTD 2020 amounted to $19.7 million compared to YTD 2019 CAPEX of $29.8 million, with $11.2 million related to strategic and development capital expenditure and $8.5 million of maintenance capital expenditure.
- Suspension of non-essential capital expenditure commenced in March 2020 and has continued into Q2 2020.
- Included in CPS CAPEX in spend YTD 2020 is a $4.7 million carryover of CAPEX related to a significant project win with a CPS NA strategic customer in 2019.
Diversification supported divisional performance in Q2 2020
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Large Format Packaging & Environmental Solutions (LF&E)
USD$'Million | Q2 2020 | Q2 2019 | Q/Q Change |
Revenue | $64.1 | $77.6 | (17.3%) |
Gross Profit | $15.7 | $15.7 | - |
Gross Profit Margin | 24.4% | 20.3% | 20.2% |
Adjusted EBITDA(1) | $12.4 | $12.8 | (3.1%) |
Adjusted EBITDA Margin(1) | 19.3% | 16.5% | 17.0% |
21 - Earnings Conference Call | 1 See Appendix 1 for a reconciliation of this non-IFRS |
measure to its most directly comparable measure calculated | |
in accordance with IFRS |
Consumer Packaging Solutions (CPS)
USD$'Million | Q2 2020 | Q2 2019 | Q/Q Change |
Revenue | $63.5 | $59.6 | 6.6% |
Gross Profit | $15.2 | $13.3 | 14.3% |
Gross Profit Margin | 23.9% | 22.3% | 7.2% |
Adjusted EBITDA(1) | $14.0 | $12.3 | 13.7% |
Adjusted EBITDA Margin(1) | 22.0% | 20.6% | 6.8% |
22 - Earnings Conference Call | 1 See Appendix 1 for a reconciliation of this non-IFRS |
measure to its most directly comparable measure calculated | |
in accordance with IFRS |
Returnable Packaging Solutions (RPS)
USD$'Million | Q2 2020 | Q2 2019 | Q/Q Change |
Revenue | $23.8 | $26.5 | (9.9%) |
Gross Profit | $4.4 | $7.6 | (42.1%) |
Gross Profit Margin | 18.2% | 28.6% | (36.4%) |
Adjusted EBITDA(1) | $3.8 | $6.5 | (41.1%) |
Adjusted EBITDA Margin(1) | 16.0% | 24.4% | (34.4%) |
23 - Earnings Conference Call | 1 See the Company's most recent MD&A for a reconciliation |
of this non-IFRS measure to its most directly comparable | |
measure calculated in accordance with IFRS. |
Other
USD$'Million | Q2 2020 | Q2 2019 | Q/Q Change |
Adjusted EBITDA(1) | ($3.4) | ($3.0) | 12.6% |
24 - Earnings Conference Call | 1 See the Company's most recent MD&A for a reconciliation |
of this non-IFRS measure to its most directly comparable | |
measure calculated in accordance with IFRS. |
- Mainly comprised of the results of the Metals U.K. recycling business
Outlook and Priorities
- Guidance remains suspended as visibility remains low and revenue trends remain volatile.
- Our priorities continue to be:
- to ensure the health and safety of our employees;
- to continue to keep all 14 manufacturing facilities operational;
- to deliver quality and safe products to our customers;
- to eliminate or defer non-essential capital expenditure;
- reduce costs and rationalize areas of the business where demand has reduced; and
- maintain strong liquidity and balance sheet strength as we navigate the COVID-19 crisis.
- We continue to believe that the overall prospects for IPL remain positive, benefiting from strong management, significant product and end market diversification, financial strength and resilience together with a well invested asset base.
- On July 29, 2020 the Company announced that it had entered into an arrangement agreement to be acquired by Intelligent Packaging Limited Purchaser Inc., an entity managed by Madison Dearborn Partners, LLC, a Chicago-based private equity firm. Under the terms agreed, subject to shareholder and other customary approvals, Intelligent Packaging Limited Purchaser Inc. will acquire all of the issued and outstanding common shares of the Company at C$10.00 in cash per share.
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Outlook Fiscal 2020
Group priority is to protect the health and safety of our employees, maintain a strong balance sheet and position the business to leverage opportunities arising from the future market recovery.
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Appendix 1
Non-IFRS
Financial
Measures
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Reconciliation of Adjusted EBIT and Adjusted EBITDA to Net Income
Three months ended June | Six months ended June | ||||
30 | 30 | • Adjusted EBITDA consists of net income | |||
($'000) | 2020 | 2019 | 2020 | 2019 | before income taxes, net finance costs, share |
Net Income | 5,312 | 8,470 | 7,172 | 9,547 | |
of loss of equity-accounted investee, other | |||||
Income tax expense | 2,521 | 3,075 | 1,021 | 1,970 | income (net), transaction, reorganization, and |
Finance costs (net) | 3,782 | 4,465 | 8,122 | 8,392 | integration costs and depreciation and |
Share of loss of equity-accounted investee | - | - | - | 360 | amortization. Adjusted EBIT is Adjusted |
Other income (net) | (160) | (314) | (823) | (334) | EBITDA less depreciation and amortization. |
Operating Profit | 11,455 | 15,696 | 15,492 | 19,935 | |
Transaction, reorganization and integration costs | 3,000 | 667 | 5,836 | 2,874 | |
Adjusted EBIT | 14,455 | 16,363 | 21,328 | 22,809 | |
Depreciation and amortization | 12,322 | 12,158 | 24,518 | 22,978 | |
Adjusted EBITDA | 26,777 | 28,521 | 45,846 | 45,787 |
28 - Earnings Conference Call
Adjusted Net Income, Adjusted Basic Earnings per Share and Adjusted Diluted Earnings per Share
Three months ended June | Six months ended June | • Adjusted Net Income consists of net income | |||
30 | 30 | before transaction, reorganization, and | |||
($'000, unless otherwise stated) | 2020 | 2019 | 2020 | 2019 | integration costs, amortization of acquisition |
Net Income | 5,312 | 8,470 | 7,172 | 9,547 | |
related intangibles, other income (net), | |||||
Transaction, reorganization and integration costs | 3,000 | 667 | 5,836 | 2,874 | share of loss of equity-accounted investee |
Amortization of acquisition related intangibles | 2,112 | 2,036 | 3,466 | 3,670 | and income tax related to the above noted |
Other income (net) | (160) | (314) | (823) | (334) | items. Adjusted Basic Earnings per Share |
Share of loss of equity-accounted investee | - | - | - | 360 | and Adjusted Diluted Earnings per Share is |
Taxes related to the above noted items | (802) | (568) | (1,589) | (1,398) | calculated by dividing the Adjusted Net |
Income by the weighted-average number of | |||||
Adjusted Net Income | 9,462 | 10,291 | 14,062 | 14,719 | |
common shares outstanding. In the case of | |||||
Weighted-average number of common shares | 54,295 | 53,980 | 54,295 | 53,802 | |
Adjusted Diluted Earnings per Share, the | |||||
Adjusted basic earnings per share (in $) | 0.17 | 0.19 | 0.26 | 0.27 | |
number of outstanding common shares is | |||||
Equity instruments with a dilutive effect - share options | - | 608 | - | 607 | |
adjusted for the effects of options with a | |||||
Weighted-average number of common shares (diluted) | 54,295 | 54,588 | 54,295 | 54,409 | dilutive effect. |
Adjusted diluted earnings per share (in $) | 0.17 | 0.19 | 0.26 | 0.27 |
29 - Earnings Conference Call
Reconciliation of Net Debt
($'000) | June 30, 2020 December 31, 2019 | • The table below sets out the Net Debt of the | |
Loans and Borrowings | 384,119 | 349,708 | |
Company at June 30, 2020 and December 31, | |||
Lease Liabilities | 21,242 | 24,068 | 2019. Net Debt is defined as loans and |
Convertible loan notes | 1,388 | 1,393 | borrowings, lease liabilities and convertible |
loan notes less cash and cash equivalents. | |||
Cash and cash equivalents | (110,186) | (77,731) | |
Net Debt | 296,563 | 297,438 |
30 - Earnings Conference Call
Financial Leverage
($'000) | June 30, 2020 | December 31, 2019 | • The table below sets out the financial |
Net Debt | 296,563 | 297,438 | leverage ratio for the Company at June |
Adjusted EBITDA | 91,518 | 91,459 | 30, 2020 and December 31, 2019. The |
Loomans EBITDA pre-acquisition period | - | 1,970 | financial leverage ratio is defined as the |
ratio of Net Debt to the last twelve | |||
U.K. based injection molding company EBITDA pre-acquisition period | 512 | - | |
months Adjusted EBITDA including the | |||
LTM Adjusted EBITDA | 92,030 | 93,429 | pre-acquisition period of the U.K. based |
Financial Leverage | 3.22 | 3.18 | injection molding company for June 30, |
2020 and the pre-acquisition period of |
Loomans for December 31, 2019.
31 - Earnings Conference Call | 1 See the Company's most recent MD&A for a reconciliation |
of this non-IFRS measure to its most directly comparable | |
measure calculated in accordance with IFRS. |
Reconciliation of Adjusted Free Cash Flow
Three months ended June | Six months ended June | ||||
30 | 30 | • Adjusted Free Cash Flow represents cash | |||
($'000) | 2020 | 2019 | 2020 | 2019 | generated by IPLP activities and available for |
Net cash flows from operating activities | 32,895 | 14,518 | 24,018 | 9,380 | reinvestment elsewhere, including the early |
Transaction, reorganization and integration costs paid | repayment of debt. It is defined as the net cash | ||||
(excluding investing and financing related costs) | 2,639 | 1,914 | 3,597 | 6,381 | flow used in operating activities, less finance |
Other income (net) | 160 | 57 | 823 | 140 | costs and maintenance capital expenditure |
Adjusted net cash flow from operating activities | 35,694 | 16,489 | 28,438 | 15,901 | amounts paid, adding back transaction, |
reorganization and integration costs paid | |||||
Maintenance capital expenditure | (4,027) | (2,739) | (8,458) | (6,090) | |
(which excludes investing and financing | |||||
Finance costs paid | (3,995) | (4,352) | (8,465) | (7,707) | |
related costs) and other income (net). | |||||
Adjusted Free Cash Flow | 27,672 | 9,398 | 11,515 | 2,104 | |
32 - Earnings Conference Call
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IPL Plastics Inc. published this content on 11 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 11 August 2020 21:07:03 UTC