CPI Plastics Group Limited Announces Q3 Results

Business Wire, Nov 9, 2005

MISSISSAUGA, Ontario -- CPI Plastics Group Ltd. ("CPI")(TSX:CPI) announces its unaudited financial results for the three and nine month periods ended September 30, 2005 and 2004.

Third Quarter           9 Months to
(in thousands except                  3 months          September 30
 per share amounts)

                       2005    2004      %      2005     2004      %
                                    Change                    Change
                      -----------------------------------------------
                       (unaudited)               (unaudited)

Net Sales           $39,482 $50,062 (21.1%) $120,256 $142,911 (15.9%)

Operating Margin     $3,764  $5,154 (27.0%)  $12,769  $14,807 (13.8%)
                       9.5%   10.3%            10.6%    10.4%

Net Income             $162  $1,059 (84.7%)   $1,780   $4,199 (57.6%)

Earnings per share
 - basic              $0.01   $0.08            $0.14    $0.32
 - diluted            $0.01   $0.08            $0.13    $0.31

Consolidated net sales for the quarter ended September 30, 2005 decreased by $10,580,000 or 21.1% to $39,482,000 as compared to third quarter 2004 sales of $50,062,000. On a quarter on quarter comparative basis sales in the third quarter were negatively impacted by approximately $2.5 million due to exchange rate changes. During the quarter the Company had US dollar denominated sales of $24,033,522 (2004 - $28,299,297) that were translated at contract and spot rates. The average translation rates realized during the third quarter of 2005 and 2004 were 1.2591 and 1.3539 respectively. Consolidated net sales for the nine months ended September 30, 2005 were $120,256,000, representing a decrease of $22,655,000 or 15.9% from 2004 sales of $142,911,000. On a year to date comparative basis sales for the nine months ended September 30, 2005 were negatively impacted by approximately $7.2 million due to exchange rate changes.

Sales for each of the operating segments are summarized as follows:

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(in thousands
 of dollars)       Q3        Q3      %     Year to    Year to      %
                 2005      2004 Change   date 2005  date 2004 Change
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Decking        $5,672    $9,242 (38.6%)    $18,983    $33,140 (42.7%)
Spa cladding   10,584    12,858 (17.7%)     32,686     33,432  (2.2%)
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Total Outdoor
 Living
 Products      16,256    22,100 (26.4%)     51,669     66,572 (22.4%)
Window          6,955     7,348  (5.4%)     17,551     18,694  (6.1%)
Other Custom    5,889     8,892 (33.8%)     19,648     24,595 (20.1%)
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Total Custom
 Products      12,844    16,240 (20.9%)     37,199     43,289 (14.1%)
Total Film
 Products      10,382    11,722 (11.4%)     31,388     33,050  (5.0%)

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Total         $39,482   $50,062 (21.1%)   $120,256   $142,911 (15.9%)
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Operating margin for the quarter ended September 30, 2005 decreased $1,390,000 to $3,764,000, representing a decrease of 27.0% from the same period in 2004. As a percentage of sales operating margin decreased to 9.5% from 10.3% in the third quarter of 2004. Operating margin for the third quarter includes additional one-time charges related to costs associated with the closure of the Company's Pefferlaw facility in the second quarter of $247,000. Exclusive of these one-time charges operating margin in the quarter would have been $4,011,000 or 10.2% of sales. On a year to date basis operating margin was $12,769,000 as compared to $14,807,000 in 2004, representing a decline of $2,038,000 or 13.8%.

Net earnings in the third quarter, inclusive of the after tax impact of the one-time charges of $161,000, decreased $897,000 to $162,000, representing a decrease of 84.7% from the same period in 2004. On a year to date basis net earnings decreased $2,419,000 to $1,780,000, representing a decrease of 57.6% from 2004 net earnings of $4,199,000.

Funded debt was $47.8 million as compared to $57.5 million at the end of the third quarter of 2004 and $52.6 million at December 31, 2004. The Company's funded debt to total capitalization ratio was 45.5% as compared to 50.6% at September 30, 2004 and 49.1% at December 31, 2004.

Peter F. Clark, CPI's Chief Executive Officer stated, "The third quarter of 2005 proved to be most challenging for CPI. We experienced record resin prices as a result of supply/demand issues and the violent storms in the U.S. Gulf coast which damaged or shut down much of the petrochemical infrastructure. A strengthening Canadian dollar put further pressure on our revenue line. We have taken steps to offset our resin cost increases by raising selling prices wherever possible and by further reducing operating costs. Despite a challenging quarter, we were pleased to continue on our stated path of debt reduction."