First quarter results at Galaxy Nutritional Foods, the US-based producer of nutritious plant-based dairy alternatives for the retail and foodservice markets, saw the company return to the black with net profits of $771,925, a significant improvement on losses of $2.6 million in the first quarter of fiscal 2002.
The improvement was mirrored at the operating level, with operating profits for the three months to 30 June reaching $1.9 million compared to losses of $1.5 million a year earlier. Around $1.6 million of the profits came from a non-cash benefit related to stock options and warrants.
However, the increase in profits came despite a 15 per cent decline in net sales, which reached $10.1 million in Q1 2003 and $11.8 million in 2002. Although sales were lower year-on-year, the company said that first quarter revenues were roughly in line with those seen in the final quarter of the previous year, and were in line with overall expectations given its short term objectives for improving the operating profitability of the business and creating a more efficient organisation to more effectively manage the potential growth from existing and future contracts.
Angelo S. Morini, chairman, chief executive officer and president of Galaxy, said: "As I reported at the end of fiscal 2002, we indicated that the first quarter would mark the earnings and operating profitability turnaround for Galaxy due primarily to increased efficiencies, a streamlining of operations, a strengthening of internal controls and a stabilisation of raw material costs.
"We also expect that these internal efficiencies and control measures, which have already delivered positive operating margins and operating cash flow in excess of $1 million for the quarter, will continue to positively impact our gross margin, operating profit, cash flow and EBITDA for the subsequent quarters of fiscal 2003.
"The flat sales level for the quarter, which was in line with our expectations, remains a result of past shipping difficulties and our emphasis on creating a more efficient operation, both of which have been previously detailed in prior earnings releases during fiscal 2002. Moving forward and based upon contracts currently in place, sales are expected to improve during fiscal 2003 with the greatest sales improvement expected in our fiscal third and fourth quarters."
Morini continued by saying that the major expansion programme initiated in 1999 and 2000 and at a cost of some $12 million, had now been completed and the company was in a position to produce $1 billion in sales. The delays in the completion of this new production capacity were at the root of the company's problems during fiscal 2001 and 2002.
"This new equipment gives us the ability to take on major customers who look for suppliers with the ability to grow with them in the future. We are most excited to have completed this programme. The improved efficiency from the superbly integrated engineering of this new equipment with our previously existing lines, along with a significant reduction in selling expenses were the primary reasons why we are able to report an operating profit this quarter,"
He continued: "As we continue to improve cash flow from operations with the help of increased efficiencies, we anticipate sales growth will also steadily improve. Now, all that remains is to complete our financial restructuring, which we expect to finish within the current fiscal year. This restructuring should enable Galaxy to return to its rapid sales growth patterns of the past by shipping all orders in full, growing our existing core business and introducing new products and concepts."