E-Malt.com News article: Canada: Russell Breweries Q3 net loss widens

Russell Breweries Inc., a producer of premium craft beer, reported consolidated results for its third quarter ("Q3 2008") and for the nine months ended March 31, 2008 ("YTD 2008"), according to Marketwire, May 26. These results include the operations of Fort Garry Brewing operations from October 23, 2007 to March 31, 2008.

Net sales for Q3 2008 increased $741,000 or 219% to $1,080,000 compared to $339,000 for Q3 2007 as a result of $638,000 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 $1,630,000 or 189% to $2,494,000 compared to $864,000 for YTD 2007, also due to the impact of Fort Garry net sales of $1,213,000 and volume sales growth in British Columbia operations.

Net loss for Q3 2008 increased $481,000 to $651,000 or $0.02 loss per share compared to $170,000 or $0.01 loss per share for Q3 2007. Net loss grew principally as a result of increased selling, general and administration costs and a decline in gross margins. Fort Garry contributed $156,000 of the loss. Net Loss for YTD 2008 grew $1,172,000 to $1,868,000 or $0.08 loss per share compared to $696,000 or $0.05 loss per share for YTD 2007, principally due to increased selling, general and administration costs.

Gross margin for Q3 2008 declined 9% to 62% compared to 71% in Q3 2007 as a result of the impact of lower margin products sold in the Manitoba market and increased materials, freight and amortization of keg costs in British Columbia operations. Gross margin for YTD 2008 declined 10% to 63% compared to 73% 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 Q3 2008 increased $614,000 or 170% to $976,000 compared to $362,000 in Q3 2007. Fort Garry expenses contributed $324,000 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 expenses in professional fees, advertising and promotion, investor relations and travel expenses. Selling, general and administration for YTD 2008 increased $1,560,000 or 130% to $2,757,000 compared to $1,197,000 for YTD 2007. Fort Garry contributed $545,000 of this increase and stock based compensation contributed $194,000 increase to $281,000 compared to $87,000 in YTD 2007. Advertising and marketing expense increased $345,000 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.

Other expenses (income) for Q3 2008 grew $293,000 or 610% to $341,000 compared to $48,000 for Q3 2007 and $556,000 or 431% to $685,000 for YTD 2008 compared to $129,000 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 and third quarters 2008 as well as 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, expanded distribution of draught products to Winnipeg on May 9, 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.


28 May, 2008