E-Malt.com News article: Canada: Russell Breweries announces Q2 2008 net loss of 49%

Russell Breweries Inc, a producer of premium craft beer, reported consolidated results for its second quarter ("Q2 2008") and for the six months ended December 31, 2007, Marketwire reported March 3.These results include the operations of Fort Garry Brewing operations from October 23, 2007 to December 31, 2007.

Net sales for Q2 2008 increased $702,000 or 270% to $962,000 compared to $260,000 for Q2 2007 as a result of $575,000 net sales contribution from Fort Garry operations and from sales volume increase from the Company's British Columbia operations. Net sales for YTD 2008 increased $889,000 or 169% to $1,414,000 compared to $525,000 for YTD 2007, also due to the impact of Fort Garry net sales of $575,000 and volume sales growth in British Columbia operations.

Net loss for Q2 2008 increased $179,000 or 49% to $546,000 or $0.02 loss per share compared to $367,000 or $0.03 loss per share for Q2 2007. Net loss grew principally as a result of increased selling, general and administration costs and a decline in gross margins. Fort Garry contributed $60,000 of the loss. Net Loss for YTD 2008 grew $691,000 or 131% to $1,217,000 or $0.05 loss per share compared to $526,000 or $0.04 loss per share for YTD 2007, principally due to increased selling, general and administration costs. The average number of weighted shares outstanding grew 10,229,000 for Q2 2008 and 10,223,000 for YTD 2008 to 24,686,000 and 22,463,000 respectively over Q2 and YTD 2007, reducing the impact of increased loss on loss per share numbers.

Gross margin for Q2 2008 declined 10% to 58% compared to 68% in Q2 2007 as a result of the impact of lower margin Fort Garry product and increased materials, freight and amortization of keg costs in British Columbia operations. Gross margin for YTD 2008 declined 7% to 64% compared to 71% for YTD 2007 also due to the impact of Fort Garry and overall increased costs for materials, freight and keg amortization in British Columbia operations.

Selling, general and administration expenses for Q2 2008 increased $328,000 or 64% to $838,000 compared to $510,000 in Q2 2007. Fort Garry expenses comprised $221,000 of this increase and the balance of increase principally reflects the growth of British Columbia sales and related operations and brewing facilities, as well as increased corporate expense, particularly professional and travel expense. Stock based compensation expense was $nil in Q2 2008 compared to $87,000 in Q2 2007. Selling, general and labour for YTD 2008 increased $957,000 or 16% to $1,781,000 compared to $824,000 for YTD 2007. Fort Garry contributed $221,000 of this increase; advertising and marketing expense increased $222,000 as a result of increased expenditures on branding of Russell product; and other expenses increased reflecting the growth in sales and related operations and brewing facilities and corporate activities. Stock based compensation for YTD 2008 grew $194,000 to $281,000 compared to $87,000 in YTD 2007.

Other (income) and expenses for Q2 2008 grew $227,000 or 667% to $261,000 compared to $34,000 for Q2 2007 and $267,000 or 351% to $343,000 for YTD 2008 compared to $76,000 for YTD 2007. The increase in amortization expense reflects the substantial increase in capital assets resulting from the Fort Garry acquisition as well as the growth of the British Columbia plant, equipment, vehicles and trucks.

"The acquisition of Fort Garry on October 22, 2007 has had a very material impact on our Company's second quarter 2008 and year to date 2008 results. Moreover, Russell's BC operations continue to grow compared with comparative quarter and year to date 2007," said Andrew Harris, President. "And whilst second and third quarters are typically seasonally slower quarters, we believe that continued substantial momentum for growth is in place, including the launch of Russell cans in private British Columbia liquor stores on February 19, 2008, and synergistic opportunities from the combined Russell and Fort Garry operations going forward."

Russell Brewing Company Ltd. produces premium beer in British Columbia. Products include: Russell Cream Ale, Russell Pale Ale, Russell Honey Blonde Ale, Russell Extra Special Lager plus two seasonal brews, Russell Lemon Ale and Russell Winter Porter. Fort Garry Brewing Company Ltd. is Manitoba's largest brewer and distributor of premium quality beers including Fort Garry Dark Ale, Fort Garry Pale Ale, Fort Garry Premium Light, Two Rivers Red and Stone Cold. Russell Brewing Company Ltd. and Fort Garry Brewing Company Ltd. are wholly owned subsidiaries of Russell Breweries Inc.


05 March, 2008