E-Malt.com News article: Canada, AB: Big Rock Brewery reports Q3 and nine-month results

Big Rock Brewery Inc. announced on November 2 its financial results for the three and nine months ended September 30, 2021.

For the three months ended September 30, 2021, compared to the three months ended September 30, 2020, the company reported:

• sales volumes down 6% to 47,367 hectolitres ("hl") compared to 50,367 hl;
• net revenue increased to C$13.0 million from C$12.8 million;
• operating income down 73% to C$0.4 million compared to C$1.5 million;
• Adjusted EBITDA down 52% to C$1.3 million from C$2.7 million;
• net income down 77% to C$0.2 million (C$0.03 per share) from C$1.0 million (C$0.15 per share); and
• the acquisition from Fireweed Brewing Corp. ("Fireweed") of all of its licenses, trademarks and related intellectual property in exchange for the settlement of the Corporation's corresponding license obligation, which was a cash payment of C$0.5 million, resulting in a C$0.1 million gain on the extinguishment of such obligation.

For the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, the company reported:

• sales volumes down 3% to 129,201 hl from 133,550 hl;
• net revenue up 11% to C$37.2 million from C$33.7 million;
• operating income down 44% to C$0.9 million compared to C$1.6 million;
• Adjusted EBITDA down 22% to C$4.1 million from C$5.2 million;
• net income down to C$0.6 million from C$0.7 million;
• capital spending of C$5.4 million of the total C$9.5 million 2021 capital program; and
• C$8.0 million drawn on total credit facilities available of C$16 million.

Although the company’s sales volumes are in decline, the year-to-date rate of decline is consistent with the beer industry's national average and below Alberta's provincial average decline. In addition, Big Rock Brewery's year-over-year growth in the "Ready-to-Drink" category ("RTD") is currently outpacing the overall industry growth. Licensed and partner brands have continued to provide additional exposure to the RTD category that continues to grow nationally, and the company has had success in adapting to meet this noticeable shift in market demand.

Although net revenue on both a quarter-over-quarter and year-over-year basis has increased, higher than anticipated costs have contributed to the overall declines to operating income, Adjusted EBITDA and net income. Global supply chain disruptions have been the primary driver behind higher market prices impacting utilities, delivery and distribution costs as well as certain raw ingredient and material costs. These supply disruptions have also impacted lead times on the delivery of certain production inputs which has contributed to operating inefficiencies. In addition, Big Rock Brewery experienced higher than anticipated labour costs in the Calgary facilities as the strategic capital plan is being completed and the business is in a transition phase to position itself for significant growth in production and packaging volumes. In order to stabilize margins going forward into 2022, the company is taking measures to manage potential future cost volatility by securing cost certainty through contract renegotiations, operational efficiency projects, increasing our supplier network, hedging and other cost mitigation strategies.

"Despite overall market trends pointing to a decline in beer sales, Big Rock continues to grow net revenue through its year-over-year growth in its co-packing business and continued expansion into the RTD category through innovation and strategic partnerships," said President & CEO Wayne Arsenault. "While we expect continued pressure on costs moving into the fourth quarter, we remain focused on executing our 2021 capital expansion plan, which remains on budget, and growing volume through new co-packing agreements enabled by our new packaging capabilities."

"Softened demand due largely to ongoing COVID-19 restrictions and a rising-cost environment have placed pressure on our margins," said Chief Financial Officer, Don Sewell. "We expect that this theme will carry into the fourth quarter, however, we are confident in our ability to manage through it. Despite these pressures in the latter half of fiscal 2021, we believe the increased throughput expected in 2022 has the Corporation in a strong position to begin realizing the returns of its growth plan."


02 November, 2021