Canada, AB: Big Rock Brewery reports Q2 and H1 financial results
Big Rock Brewery Inc. on August 3 announced its financial results for the three and six months ended June 30, 2017.
"Big Rock continued to grow production volumes and gross profit during the second quarter of 2017," said Interim CEO Barbara Feit. "Sales of Big Rock's bottled and canned products increased in the quarter, particularly in Alberta. These increases were led by AGD, private label brands and the limited-edition Canada 150 Variety Pack, but also included increases in Big Rock's flagship Grasshopper and Traditional brands and newer brands such as Pilsner and Rhinestone Cowboy. Ontario also contributed to growth as the addition of the Etobicoke brewery in the fall of 2016 and Liberty Commons at Big Rock Brewery restaurant in early 2017 continued to gain a foothold in Canada's most populous province."
For the quarter ended June 30, 2017, compared to the second quarter of 2016, the company's:
• sales volumes increased by 9%, from 56,524 hectolitres ("hl") to 61,703 hl;
• net revenue increased by 11%, from C$12,117 thousand to C$13,496 thousand;
• operating profit decreased from C$656 thousand to C$246 thousand;
• net income decreased to C$207 thousand from C$383 thousand; and
• cash from operating activities increased to C$633 thousand from C$136.
For the six months ended June 30, 2017, compared to the first half of 2016, Big Rock's:
• sales volumes increased by 7%, from 98,224 hl to 105,180 hl;
• net revenue increased by 10%, from C$21,018 thousand to C$23,085 thousand;
• operating loss increased from C$529 thousand to C$911 thousand;
• net loss increased to C$700 thousand from C$400 thousand; and
• cash used in operating activities was C$595 compared to cash provided by operating activities of C$570
Big Rock's operating results continued to be hampered in the second quarter of 2017 by increased costs imposed by the Alberta government's revision in August 2016 to the markup and grant structure. Under this new structure, the maximum grant rate available to producers is based on an optimal annual sales level of 150,000 hl in Alberta. Big Rock's Alberta sales volumes exceed this threshold, which has resulted in higher net costs per hectolitre ("hl") as compared to the costs per hl imposed by the markup program that was in place during the first half of 2016.
The company has initiated discussions with the Alberta government and taken actions to mitigate the impact of the higher net cost by reducing the number of limited-time offer price promotions. In order to improve Big Rock's grant rate in the future, the company has taken steps to optimize its Alberta sales volumes by discontinuing two lower margin products, which is expected to bring Big Rock's Alberta sales volumes closer to the new 150,000 hl threshold. Big Rock anticipates these actions will reduce the net markup rate (markup less grant) in September 2017 and future periods. Big Rock will continue discussions with the Alberta government with the objective of improving the environment for growth.
Big Rock's beer sales in British Columbia declined in the quarter, partly due to a conscious effort to improve margins by de-emphasizing value-priced products, as well as reduced keg sales in the competitive on-premise market. The decline was partially offset by a healthy increase in BC cider sales and growing revenue from the Vancouver Big Rock Urban Restaurant.
Big Rock beer products are becoming increasingly available in all three key retail channels in Ontario – the Liquor Control Board of Ontario retail stores, Beer Store outlets and licensed grocery chains. The three months ended June 30, 2017 is the first full quarter of results from both the Etobicoke brewery and the Liberty Village restaurant, and this has facilitated an increase in beer sales in both packaged and keg formats in Ontario.
06 August, 2017
