Colabor Group Reports Slightly Miss Although Growth In Wholesale & Distribution Division

On Friday, before market opened, Colabor Group Inc. (GCL: CN) delivered second quarter EBITDA of $8.5 million versus our forecast of $8.9 million. The firm also reflected it came in confident in its ability to achieve its 2015 profitability targets.

“Colabor is very proud of its solid progress in comparable sales in the second quarter achieved on the strength of new contracts and organic growth. Profitability, though in line with our expectations, remains below potential and we continue to put forward initiatives aimed at reducing costs and increasing operating efficiency in order to reach our annual objective,” said Claude Gariépy, President and Chief Executive Officer of Colabor.

Consolidated sales for the 84-day period ended June 13, 2015 reached $366.6 million, up 5.6% from $347.2 million for the 84-day period ended June 14, 2014. The increase reflects the acquisition of Alimentation Marcotte (“Marcotte”) in September 2014 and a solid 4.2% comparable sales growth, related mainly to sustained gains in the meat category, the contribution of new supply agreements and organic growth, especially in Ontario.

Sales of the Distribution segment rose 9.4% to $247.4 million, versus $226.2 million a year earlier, as a result of the acquisition of Marcotte. Comparable sales were up 4.1%, mainly as a result of new contacts. Sales of the Wholesale segment were $119.2 million, down slightly from $121.0 million a year earlier. The difference reflects the elimination of sales to Marcotte by other Colabor divisions. Comparable sales excluding this factor were up 4.2% as a result of significant market share gains and price inflation in the meat category.

EBITDA was $8.5 million, or 2.3% of sales, compared to $9.5 million or 2.7% of sales in the second quarter of 2014. The variation reflects lower margins on new and renewed contracts, as well as operating expenses related to Marcotte’s operations.

Results for the second quarter of 2015 include charges not related to current operations of $507,000 related to the internal restructuring of operations. Excluding these charges, operating earnings, i.e. earnings before financial expenses and income taxes, were $5.1 million, up slightly from $5.0 million a year earlier. Net earnings for the second quarter were $1.0 million, compared to $1.6 million a year earlier.

For the 168-day period ended June 13, 2015, consolidated sales were $671.3 million, up 7.1% from $626.5 million for the 165-day period ended June 14, 2014. Comparable sales were up 3.6%.

EBITDA was $9.0 million, or 1.3% of sales, compared to $9.7 million, or 1.5% of sales, a year earlier. Operating earnings before charges of $3.1 million not related to current operations recorded in the first six months of 2015, including a non-cash charge for writedown of the investment in Investissements Colabor Inc. recorded in the first quarter, were $2.2 million, versus $0.9 million in 2014. For the six months ended June 13, 2015, the Corporation recorded a net loss of $5.3 million, compared to a net loss of $3.9 million a year earlier.

“The increase in sales volume attests to the validity of our strategy for stimulating sales growth and Colabor remains proactive in its approach to growing its sales in a highly competitive market. In this respect, it is important to remember that third-quarter operating profitability will reflect the renewal of supply agreements with Cara and the full effect of affiliated distributor contracts. Over the long term, the measures taken to reduce our costs and improve our ways of doing things will enable Colabor to realize improved and sustainable profitability,” concluded Mr. Gariépy.

 We rate GCL shares “Sector Perform”.


Terry Benhoff, MS in Financial Analysis, is equity analyst and focuses Consumer Goods, Financial & REIT and Healthcare sectors. Prior joining Equities Mogul, Terry Benhoff worked with Telsey Research. If you have a great story idea for Terry Benhoff, you can write at [ ].


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