The following discussion and analysis should be read in
conjunction with the FY 2013 fourth quarter statements filed with
SEDAR. Included in these documents may be forward-looking
statements with respect to the Company. These forward-looking
statements by their nature necessarily involve risks and
uncertainties that could cause actual results to differ materially
from those contemplated by such statements. The Company
considers the assumptions on which these forward-looking statements
are based to be reasonable at the time they were prepared but
cautions the reader that these assumptions regarding future events,
many of which are beyond the control of the Company, may ultimately
prove to be incorrect.
The unaudited interim consolidated financial statements were
prepared by the Company in accordance with IFRS and have not been
reviewed by the Company's auditors. Certain comparative figures
have been reclassified to conform with the presentation adopted in
the financial statements.
Additional documents and information are available at the
System for Electronic Document Analysis and Retrieval (SEDAR) and
can be accessed through the internet: For MRRM's profile or for
documents go to www.sedar.com Information is also
available on the Corporate website at www.MRRM.ca.
MONTREAL,
May 2, 2013 /CNW Telbec/ -
Consolidated Income And Comprehensive Income and Equity
Revenues for the year (last year) were
$58,953,000 ($59,456,000) decreasing by $503,000 (-0.8%). As shown in the segmented
information, sales and income from operating activities amounted to
$58,588,000 ($59,262,000) being 99.4% (99.7%) of total
revenues. Income from corporate totaled $365,000 ($194,000). Unrealized losses in fair market
value of the portfolio amounted to $153,000 compared to $21,000 last year. Operating Revenues decreased
by $674,000 (-1.1%) compared to last
year. Revenue from Corporate increased by $171,000; for details refer to Portfolio Income
Summary under Corporate.
Costs and expenses for the year (last
year) were $57,981,000 ($58,754,000), a decrease of $773,000 (-1.3%). Costs related to operating
activities, before exchange and interest, decreased by $707,000 (-1.2%). Expenses related to corporate
increased by $26,000.
Operating results are discussed later on in this
report.
The impact of the fluctuating Canadian dollar
resulted in a total currency exchange loss of $30,000 compared to $185,000 last year, all included under cost of
sales. As disclosed in the Notes, the net exposures were as
follows: at February 28, 2013, US
($312,000) and at February 29, 2012, US$2,565,000.
Interest expensed on bank indebtedness amounted
to $79,000 for the year compared to
interest expensed on bank indebtedness and reducing term loan of
$159,000 last year for a decrease of
$80,000. Interest related to the
long-term debt was $23,000 last
year.
Profit before income taxes for the year
(last year) was $972,000 ($702,000), an increase of $270,000. Profit from operating activities for
the year (last year) was $824,000
($700,000), an increase of
$124,000. Profit from corporate for
the year (last year) was $148,000
($2,000), an increase of $146,000.
Income taxes for the year (last year)
were $172,000 ($82,000). Details of the income tax components
are presented in the Notes to the financial statements.
Profit for the year (last year) was
$800,000 ($620,000) or $0.32
($0.24) per share.
Dividends paid during the year amounted
to $2,028,000. This represents a
special dividend of $0.80 per share.
The declaration and payment of dividends is at the discretion of
the Board of Directors.
ANNUAL RESULTS
(Expressed in thousands, except
for amounts per share -
unaudited) |
2013
IFRS
$ |
2012
IFRS
$ |
2011
IFRS
$ |
Revenues |
58,953 |
59,456 |
63,803 |
Profit |
800 |
620 |
1,777 |
Profit per share |
0.32 |
0.24 |
0.70 |
Total Assets |
33,028 |
36,946 |
38,052 |
Total non-current Financial
Liabilities |
0 |
0 |
290 |
Dividends Per share |
0.80 |
0.50 |
0.15 |
Summary of Quarterly Results
The following financial summary is derived from
the Company's financial statements for each of the eight most
recently completed fiscal quarters.
Summary of
Quarterly Financial
Results for the eight
most recent fiscal
quarters |
Feb
28,
2013
(2013.Q4) |
Nov
30,
2012
(2013.Q3) |
Aug
31,
2012
(2013.Q2) |
May
31,
2012
(2013.Q1) |
Feb
29,
2012
(2012.Q4) |
Nov
30,
2011
(2012.Q3) |
Aug
31,
2011
(2012.Q2) |
May
31,
2011
(2012.Q1) |
(Expressed in thousands,
except
for amounts per share -
unaudited) |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
Revenues |
14,671 |
14,778 |
14,801 |
14,703 |
16,014 |
16,522 |
12,572 |
14,348 |
Profit (loss) |
367 |
86 |
271 |
76 |
510 |
407 |
-119 |
-178 |
Profit (loss) per share |
0.15 |
0.03 |
0.11 |
0.03 |
0.20 |
0.16 |
-0.05 |
-0.07 |
Dividends per share |
0.00 |
0.80 |
0.00 |
0.00 |
0.00 |
0.50 |
0.00 |
0.00 |
Revenues for this quarter (last year)
were $14,671,000 ($16,014,000), a decrease of $1,343,000 (-8.4%). Revenue from operating
activities amounted to $14,424,000
($15,801,000) being 98.3% (98.7%) of
total revenues. Income from corporate totaled $247,000 ($213,000). Operating revenues for this quarter
decreased by $1,377,000 (-8.7%)
compared to this quarter last year. Revenue from Corporate
increased by $34,000.
Costs and expenses for this quarter (last
year) were $14,240,000 ($15,532,000), a decrease of $1,292,000 (-8.3%). Costs related to operating
activities, before exchange and interest, decreased by $1,315,000 (-8.5%).
Interest expense for this quarter (last year)
was $18,000 ($47,000) and was $16,000 in 2013Q3, $14,000 in 2013Q2 and $31,000 in 2013.Q1.
Profit before income taxes for this
quarter (last year) was $431,000
($482,000), a decrease of
$51,000. Profit from operating
activities was $246,000 ($281,000), a decrease of $35,000 and corporate was $185,000 ($201,000), a decrease of $16,000.
Income taxes for this quarter (last year)
were $64,000 (-$28,000). The effective tax rates are presented
in the Notes to the financial statements.
Profit for this quarter (last year) was
$367,000 ($510,000) or $0.15
($0.20) per share.
Consolidated Cash Flows, Liquidity and
Financial Position
In investing activities, the Company
added $2,102,000 of net property,
plant and equipment compared to $2,150,000 last year.
Available credit facilities
The credit facility available and reported at
last year-end remains substantially unchanged. The facility is
comprised of a revolving line of credit for $7,000,000 CDN {or its US equivalent}. The
Company may also take advantage of Bankers Acceptances. The
financial covenants and arrangements relating to financing facility
are detailed in the Notes to the audited consolidated financial
statements. These covenants are being respected and have been
met.
Trade receivables decreased by
$1,447,000 compared to last fiscal
year-end. Account balances are substantially current, there are no
anticipated serious collection issues and any potential write-offs
have been provided for in the accounts.
Inventories decreased by $1,455,000 (-16.8%) and overall volumes of rice
decreased by (-24.6%).
Marketable securities - see table of
Investment Mix in discussion of results.
Property, plant and equipment increased
by $610,000 comprised of additions of
$2,102,000 and amortization of
$1,492,000.
Bank indebtedness was $804,000 compared to $3,044,000 at last year-end.
Trade and other payables decreased by
$834,000 mainly due to timing on rice
purchases.
Deferred taxes, net liability, increased
by $27,000.
Total equity decreased by $1,069,000 to $17,631,000 from $18,700,000 and represents $6.96 ($7.38) per
share.
Capital stock remained unchanged at
$539,000 and represents 2,535,000
issued common shares.
The MRRM Inc. shares have a very limited
distribution and are infrequently traded on the TSX-Venture
Exchange under the symbol MRR.
www.TSX-Venture Exchange
Cash Flows, Liquidity and Financial Position
by operating segment
Food processing and selling
Trade receivables decreased by $704,000 compared to last fiscal year-end.
Account balances are substantially current, there are no
anticipated serious collection issues and any potential bad debts
have been provided for in the accounts.
Inventories decreased by $1,455,000 (-16.8%) and overall volumes of rice
decreased by (-24.6%).
Property, plant and equipment increased
by $610,000 comprised of additions of
$2,102,000 and amortization of
$1,492,000.
Bank indebtedness was $1,086,000 compared to $3,224,000 at last year-end.
Trade and other payables decreased by
$1,098,000 mainly due to timing on
rice purchases.
Deferred taxes, net liability, increased
by $19,000.
Ship agency services
Trade receivables decreased by $743,000 compared to last fiscal year-end.
Account balances are substantially current, there are no
anticipated serious collection issues and any potential bad debts
have been provided for in the accounts.
Bank position was $3,672,000 compared to $3,384,000 at last year-end.
Trade and other payables increased by
$258,000.
Corporate
Bank indebtedness was $3,390,000 compared to $3,203,000 at last year-end.
Portfolio was $3,288,000 compared to $4,988,000 at last year-end due to sales of
securities to fund the $.80 /share
special dividend paid at the end of the third quarter.
Deferred taxes, net liability, increased
by $8,000.
Critical Accounting Policies:
The Company's critical accounting policies are
those that it believes are the most important in determining its
financial condition and results. A summary of the Company's
significant accounting policies, including the critical accounting
policies, is set out in the notes to the consolidated financial
statements in the annual report for the year ended February 28, 2013. An extract of these
policies is set out in the notes to the quarterly consolidated
financial statements.
Future Accounting Changes:
At the date of authorization of the Company's
financial statements, certain new standards, amendments, and
interpretations to existing standards have been published but are
not yet effective, and have not been adopted early by the
Company.
Management anticipates that all of the relevant
pronouncements will be adopted in the Company's accounting policy
for the first period beginning after the effective date of the
pronouncement. Information on new standards, amendments and
interpretations that are expected to be relevant to the Company's
financial statements is provided below. Certain other new
standards and interpretations have been issued but are not expected
to have a material impact on the Company's financial
statements.
IFRS 9 Financial Instruments
The IASB aims to replace IAS 39 Financial
Instruments: Recognition and Measurement in its entirety. The
replacement standard (IFRS 9) is being issued in phases. To
date, the chapters dealing with recognition, classification,
measurement and de-recognition of financial assets and liabilities
have been issued. These chapters are effective for annual
periods beginning on or after January 1,
2015. Further chapters dealing with impairment methodology
and hedge accounting are still being developed.
Management has yet to assess the impact that
this amendment is likely to have on the consolidated financial
statements of the Company. However, they do not expect to implement
the amendments until all chapters of IFRS 9 have been published and
they comprehensively assess the impact of all changes.
IFRS 10 Consolidated Financial
Statements
In May 2011, the
IASB issued IFRS 10 Consolidated Financial Statements, which
is effective for annual periods beginning on or after January 1, 2013. IFRS 10 provides a single model
to be applied in the control analysis for all investees.The extent
of the impact of adoption of IFRS 10 is not expected to be
material.
IFRS 12 Disclosure of Interests in Other
Entities
In May 2011, the
IASB issued IFRS 12 Disclosure of Interest in Other
Entities, which is effective for annual periods beginning on or
after January 1, 2013. IFRS 12
contains disclosure requirements for companies that have interests
in subsidiaries, joint arrangements, associates and unconsolidated
structured entities. The extent of the impact of adoption of IFRS
12 is not expected to be material.
IFRS 13 Fair Value Measurement
In May 2011, the
IASB published IFRS 13 Fair Value Measurement, which is
effective prospectively for annual periods beginning on or after
January 1, 2013. IFRS 13 replaces the
fair value measurement guidance contained in individual IFRSs with
a single source of fair value measurement guidance. The standard
also establishes a framework for measuring fair value and sets out
disclosure requirements for fair value measurements. The extent of
the impact of adoption of IFRS 13 is not expected to be
material.
IAS 1 Presentation of Financial
Statements
In June 2011, the
IASB published amendments to IAS 1 Presentation of Financial
Statements which are effective for annual periods beginning on
or after July 1, 2012 and are to be
applied retrospectively. The amendments require that a company
present separately the items of Other Comprehensive Income that may
be reclassified to profit or loss in the future from those that
would never be reclassified to profit or loss. The extent of the
impact of adoption of the amendments is not expected to be
material.
IAS 19 Employee Benefits
In June 2011, the
IASB published an amended version of IAS 19 Employee
Benefits. Adoption of the amendment is required for annual
periods beginning on or after January 1,
2013. The amendment is generally applied retrospectively
with certain exceptions. The amendment will require actuarial gains
and losses to be recognized immediately in other comprehensive
income, past service costs to be fully recognized immediately in
profit or loss and the recognition of expected return on plan
assets in profit or loss to be calculated based on the rate used to
discount the defined benefit obligation. The amendment also
requires other additional disclosures. Management is currently
assessing the impact of this amended standard.
Discussion of Results:
In Food processing and selling, net sales
decreased by $57,000 (-0.1%) to
$53,663,000 for the year and
decreased by $1,376,000 (-9.5%) for
the quarter compared to last year while rice sales volumes
decreased by 3.2% for the year and by 19.4% for the quarter
compared to last year. The net sales decrease compared to last year
is a result of decreased sales to industrial customers. Costs
and expenses decreased by $334,000
(-0.6%) to $53,299,000 for the year
compared to last year. Costs and expenses decreased by
$1,331,000 (-9.3%) to $13,037,000 for the quarter compared to last
year. Profit before income taxes for the year increased by
$277,000 to $363,000 compared to last year and decreased by
$46,000 for the quarter compared to
last year.
The Company continues to pursue new value-added
retail products some of which will be outsourced. This outsourcing
will minimize capital investment while enhancing Dainty Foods'
offerings in the retail marketplace for both branded and private
label items. New selling relationships continue to be developed and
are intended to add strength to our retail sales efforts.
Dainty Foods International (DFI) continues to make inroads into the
US retail market.
Higher pricing and better profitability for
soybeans, wheat and corn during the last year prompted some
American growers to increase the share of their land devoted to
those crops. Early reports from USDA surveys predict a 3% drop in
acreage in the 2013 plantings in the
United States for long grain rice and for all rice types in
total.
The world rice market experienced a price split
during the last 18 months. The United
States, South America and
Thailand prices for long grain
milled rice have typically been 30% to 40% higher than the market
price in Vietnam, India and Pakistan.
The quality of rice harvested during the fall of
2010 was dismal, exhibiting low yields through North American rice
mills including Dainty's mill in Windsor. Dainty was forced to import some
foreign long grain rice to avoid shortages to our customers.
The quality of the American rice harvest during the fall of 2011
can be described as average. We are now consuming rice harvested
during the fall of 2012. The long grain crop this year is again
showing below average yields but not as severe as the 2010
crop.
Dainty has secured rice coverage going forward
through the current crop year to protect against cost increases due
to planted acreage reduction and the higher production costs in the
American mills due to the lower milling yields experienced this
crop year.
Aggressive pricing by American rice mills and
the weak US dollar have negatively impacted margins for rice flour
and bulk bagged food service products.
In Ship agency services, revenue
decreased by $617,000 (-11.1%) to
$4,925,000 for the year and by
$1,000 for the quarter compared to
last year.
Profit before income taxes for the year
decreased by $153,000 to $461,000 and increased by $11,000 compared to this quarter last year.
FY 2013 number of port calls were down compared
to last year. Industry volume on the west coast is
stable. Industry volume on the east coast is down
approximately 15% versus the same period last year due in part to
weakness in the European and Mediterranean economies.
Canadian grain exports and oil tanker imports have decreased.
As of March 1st,
2012, substantially all of the assets of MRRM (Canada) Inc. related to the ship agency's
business were transferred to Robert Reford Agency Inc., a
corporation incorporated under the Canada Business Corporations
Act on February 25, 2011, the
shares of which are wholly-owned by MRRM Inc.
Corporate, portfolio income is summarized
as follows:
|
For the
year |
For the quarter |
|
2013 |
2012 |
2013 |
2012 |
Dividend and interest income |
$159,000 |
$169,000 |
$45,000 |
$51,000 |
Capital gains / losses |
$359,000 |
-$12,000 |
$0 |
-$70,000 |
Unrealized change in Fair Value |
-$153,000
|
-$21,000 |
$202,000 |
$174,000 |
Totals: |
$365,000 |
$136,000 |
$247,000 |
$155,000 |
During this year, global financial markets
declined, the loss in Fair Market Value is $153,000 for the year compared to $21,000 last year. The portfolio remains
conservatively invested and no significant policy changes are
foreseen. Last year, revenues also included $58,000 representing the increase in cash
surrender value of life insurance policies, net of premiums
recorded in last quarter.
Investment Mix |
Feb 28,
2013
(2013.Q4) |
Nov 30,
2012
(2013.Q3) |
Aug 31,
2012
(2013.Q2) |
May 31,
2012
(2013.Q1) |
Feb 29,
2012
(2012.Q4) |
Cash & Equivalents |
1.0% |
0.2% |
2.2% |
0.6% |
0.9% |
Bonds |
3.2% |
3.5% |
25.1% |
25.5% |
25.3% |
Preferred Shares |
32.1% |
33.9% |
19.8% |
20.2% |
20.0% |
Canadian Equities |
35.9% |
35.4% |
33.6% |
34.4% |
35.4% |
U.S. & Foreign Equities |
27.8% |
27.0% |
19.3% |
19.3% |
18.4% |
The change in mix is a result of liquidating
part of the portfolio to fund the dividend declared and paid during
the third quarter.
Certification
The Company's management, under the direction
and supervision of the Chief Executive Officer and Chief Financial
Officer, continually evaluates the effectiveness of the Company's
disclosure controls and procedures and has concluded that such
disclosure controls and procedures are effective.
The Company's management is also responsible for
establishing and maintaining internal controls over financial
reporting. These controls were designed to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with IFRS.
There have been no changes in the Company's
internal controls over financial reporting during this quarter that
have materially affected, or are reasonably likely to materially
affect, its internal control over financial reporting.
Outlook
Dainty Foods expects to continue to increase
retail volumes of value-added products to existing and new
customers in Canada and the
USA.
Increased competitive pressure in the flour
segment will continue to impact margins. New flour accounts are
partially offsetting the volume reductions incurred year to
date.
Loss of rice flour volume as well as continued
aggressive competitive pricing of bagged rice for the food service
market coupled with the weak American dollar will continue to
impact profitability.
In the Robert Reford business our joint
operating agreement with Norton
Lilly and Montship continues to be beneficial, however, the
weakness in the European and Mediterranean economies will continue
to negatively impact profit.
While the Company is anticipating growth in food
processing and selling and maintaining a strong position within the
ship agency services business, growth will be impacted by several
factors including (i) the ability of the Company to secure rice at
competitive prices (ii) acceptance of new products (iii) the
ability within the marketplace to manage price increases to cover
increased costs (iv) the yield and quality of rice supply and (v)
general economic conditions.
Risks and Uncertainties
Overview
Management of risk includes properly
identifying, communicating and controlling the risks which may
cause a serious impact to the business. Management is confident
that the Company employs effective procedures to address all
material risks.
Detroit River International Crossing
Construction Impact:
April 11th , 2013,
the US Department of State issued a US Presidential permit as the
final political step before property acquisition and construction
can get underway for the Detroit River International Crossing.
Significant construction activities are expected
to continue on the property sites adjacent to the Dainty Foods
facility in Windsor, Ontario.
Dainty Foods has completed infrastructure changes to the facility
to protect our food products from the possibility of airborne
contamination. These changes primarily include fine particle
filtration units. The Canadian federal government reimbursed
1.6 million dollars of the
2.9 million dollar investment.
The company has initiated discussions with the
Ontario Ministry of Transport to recover the balance of the capital
costs, however the outcome of these discussions is uncertain at
this time.
The following items were discussed in the
MD&A in the last Annual Report and remain principally
unchanged. Please refer to these documents for this
information.
|
Ability to Sustain Revenue |
|
Ability to Address Cost and Expense Concerns |
|
Economic Conditions |
|
Environment |
For further information regarding financial risk
management, please refer to the Notes to the interim financial
statements.
On behalf of the Board
(signed)
Nikola M. Reford
Chairman |
|
(signed)
Terry Henderson
President & Chief Executive Officer |
Dated at Montreal (Westmount), Quebec, May 2,
2013.
SOURCE MRRM Inc.