For Immediate Release
October 31, 2019 – Calgary, Alberta – Big Rock Brewery Inc. (TSX: BR) (“Big Rock” or the “Corporation“) today announced its financial results for the three and nine months ended September 30, 2019.
“As the former Alberta beer mark-up policy persisted through the majority of the third quarter, our margins continued to be under significant pressure in Alberta, however, given the significant operating cost reductions we implemented in the second quarter of 2019, we reported EBITDA (as defined below) of $0.6 million and a significant margin improvement year-over-year when normalized for the new Alberta beer mark-up framework which came into effect in September,” said President & CEO Wayne Arsenault.
As previously announced, the Government of Alberta and the Alberta Gaming, Liquor and Cannabis agency (the “AGLC”) amended the mark-up policy for Alberta beer sales, effective September 13, 2019, which significantly reduced the Corporation’s Alberta beer mark-up rate back to a rate in-line with what the Corporation was subject to in 2018.
“Despite the significant regulatory headwinds faced through the majority of 2019 to-date, we managed to navigate the last two quarters at a much lower cost structure while still preserving our ability to pursue our long term strategy once a resolution was reached,” said President & CEO Wayne Arsenault. “Now that the policy has been amended and is in effect we believe the Big Rock business, being a pioneer of the Canadian craft brewing industry, has been restored. We look forward to evaluating long term, sustainable growth opportunities through utilization of our production, sales and distribution footprint in Canada moving forward.”
For the three months ended September 30, 2019, compared to the three months ended September 30, 2018, Big Rock reported:
For the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, Big Rock reported:
During the third quarter of 2019, Big Rock continued to experience year-over-year sales volume declines, especially from its value brands, as a result of overall market pressures and the significant price increases the Corporation was forced to implement in late 2018 and early 2019 as a result of the regulatory headwinds. Despite this loss in sales volume, the Corporation has been successful in mitigating asset utilization declines through the pursuit of and continued growth in contract manufacturing volumes. Additionally, the Corporation has been pleased with the early performance of many of the new products it has brought to market in 2019, including its Rock Creek Rosé Cider, Jackrabbit Light Lager, Big Rock Craft Lager and Cottage Springs Vodka Sodas, which it licensed in Alberta and British Columbia at the beginning of April 2019.
Big Rock reported a net loss of $0.2 million and $1.6 million, respectively, for the three and nine months ended September 30, 2019 as compared to a net income of $0.6 million and $0.4 million, respectively, for the same periods in 2018. Big Rock’s operating loss of $0.8 million and $3.5 million for the three and nine months ended September 30, 2019, increased by $1.5 million and $4.2 million, compared to operating income of $0.7 million and $0.7 million for the same periods in the prior year as a result of the increase in the Alberta beer tax for the Corporation in late 2018. Management estimates the loss in net revenue as a result of the late 2018 Alberta beer mark-up change (prior to the recent amendment described below) to be $2.2 million and $6.4 million for the three and nine months ended September 30, 2019, respectively.
As previously announced, the Corporation was impacted favourably by the August 21, 2019 amendment of the AGLC’s beer mark-up policy, effective September 13, 2019, which reduced the Corporation’s mark-up on beer sales in Alberta to $0.64 per litre from $1.25 per litre. The new, gradual Alberta beer mark-up framework is consistent with other provinces as opposed to the former provincial grant program that was in-place. Management believes the amendment will allow for the Corporation to be competitive in its current and future markets, as one of Canada’s first craft breweries and a business that has been supporting the industry for over 34 years.
Additionally, during the third quarter of 2019, the Corporation entered into an agreement with Fireweed Brewing Corp. (“Fireweed”) that reduced the Corporation’s license obligation with Fireweed and correspondingly, in addition to a penalty payable by Fireweed, fulfilled the write-off of account receivable balances owing by Fireweed.
Summary of Results
|Three months ended Sept 30||Nine months ended Sept 30|
|$000, except hl and per share amounts||2019||2018||2019||2018|
|Sales volumes (hl) (1)||50,327||55,741||134,202||152,564|
|Operating income (loss)||(761)||747||(3,485)||715|
|Net income (loss)||(201)||587||(1,625)||440|
|Income (loss) per share (basic and diluted)||$ (0.03)||$ 0.08||$ (0.23)||$ (0.06)|
|$ per hl|
|Cost of sales||$143.34||$136.94||$169.94||$136.17|
The unaudited consolidated financial statements and Management’s Discussion and Analysis for the three and nine months ended September 30, 2019, dated October 31, 2019, can be viewed on Big Rock’s website at www.bigrockbeer.com and on SEDAR at www.sedar.com under Big Rock Brewery Inc.
Certain statements contained in this news release constitute forward-looking statements. These statements relate to future events or Big Rock’s future performance. All statements, other than statements of historical fact, may be forward-looking statements. Forward-looking information are not facts, but only predictions and generally can be identified by the use of statements that include words or phrases such as, “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “likely”, “may”, “project”, “predict”, “propose”, “potential”, “might”, “plan”, “seek”, “should”, “targeting”, “will”, and similar expressions. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that may cause Big Rock’s actual results or events to differ materially from those anticipated in such forward-looking statements.
Big Rock believes that the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon by investors as actual results may vary. These statements speak only as of the date of this news release and are expressly qualified, in their entirety, by this cautionary statement.
This news release, in particular, contains forward-looking statements pertaining to the following:
With respect to forward-looking statements listed above and contained in this news release, Big Rock has made assumptions regarding, among other things, the following:
Some of the risks which could affect future results and could cause results to differ materially from those expressed in the forward-looking information and statements contained herein include, but are not limited to:
Readers are cautioned that the foregoing list of assumptions and risk factors is not exhaustive. The forward-looking information and statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking information and statements included in this news release are made as of the date hereof and Big Rock does not undertake any obligation to publicly update such forward-looking information and statements to reflect new information, subsequent events or otherwise unless so required by applicable securities laws.
The term “earnings before interest, taxes, depreciation and amortization” (EBITDA) is not a recognized measure under GAAP and may not be comparable to that reported by other companies. EBITDA is calculated by adding back to net income, interest, income taxes and depreciation and amortization. Management uses this measure to evaluate the Corporation’s operating results. A reconciliation of EBITDA to net income (loss), the nearest GAAP measure, is contained under the section “Liquidity and Capital Resources – Capital Strategy” in the Corporation’s Management’s Discussion and Analysis for the three and nine months ended September 30, 2019, dated October 31, 2019, which can be viewed on Big Rock’s website at www.bigrockbeer.com and on SEDAR at www.sedar.com under Big Rock Brewery Inc.
About Big Rock Brewery Inc.
In 1985, Ed McNally founded Big Rock to contest the time’s beer trends. Three bold, European-inspired offerings – Bitter, Porter and Traditional Ale – forged an industry at a time heavy on easy drinking lagers and light on flavour. Today, our extensive portfolio of signature beers, ongoing seasonal offerings, five ciders (Rock Creek Cider® series), custom-crafted private label products and other notable, licensed alcoholic beverages keeps us at the forefront of the craft beer revolution and still proudly contesting the beer and alcoholic beverage trends of today. Big Rock has brewing operations in Calgary, Alberta, Vancouver, British Columbia, and Toronto, Ontario. Big Rock trades on the TSX under the symbol “BR”. For more information on Big Rock visit www.bigrockbeer.com
For further information, please contact:
Chief Financial Officer
Phone: (403) 720-3239
Fax: (403) 720-3641