May 16, 2009, Vancouver — Village Farms Income Fund has reported a challenging first quarter, which ended March 31, 2009. Highlights include:
• Revenues of $21.4 million U.S. versus first quarter 2008 sales of $28.5 million.
• EBITDA of $3.6 million versus $10 million in the first quarter of 2008.
• Net income of $640,000 versus $3.3 million in the first quarter of 2008.
“We faced both market challenges and some internal production issues in the first quarter of 2009,” said Michael DeGiglio, chief executive officer of the Fund’s operating subsidiaries, “especially when compared to the first quarter of 2008, which was the company's best quarterly results since inception."
The market challenges came in the form of decreased consumption for fresh produce compared to 2008 resulting in an increased supply of hydroponic tomatoes. In addition, some competitors facing serious financial distress tried to raise cash to sustain their businesses by lowering their prices. "As a result, we saw a year-on-year decrease in our average selling price of nearly 19 per cent.”
Internal production issues were a result of the company’s Texas facilities “underperforming.” Production volumes were lower in the first quarter of 2009 versus 2008 due to a new variety not yielding the same pounds as 2008 varieties. "We have also replanted with our 2008 varieties, which will have us back on track with our 2009 fall production." There were also some biological issues, which have been addressed.
The company offset some of its internal production shortfall with additional third party produce, which resulted in an increase of 32 per cent in third party business on a year-on-year basis. "This income stream generates a much lower margin to the Fund, but is an integral part of our business strategy."
DeGiglio added the company will continue to experience pricing pressure and believes 2009 will remain a challenging year. "We are focused on creating long-term value for our shareholders through a disciplined operational and strategic approach to our business.”
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