Industry News

SICO Achieves Net Earnings of $6.3 Million or $0.46 per Share for 2005 and Raises Its Dividend by 14%

Published on 2006-03-03. Author : SpecialChem

LONGUEUIL, Quebec -- For the year ended December 30, 2005, SICO INC. ("SICO" or "the Company")(TSX:SIC - News) achieved record sales of $312.1 million, up 2.9% over the previous year. Despite higher manufacturing and distribution costs largely attributable to soaring oil prices, the Company's EBITDA (operating earnings before financial expenses, impairment loss on goodwill, loss on disposal of the joint venture, income taxes, depreciation and amortization) slightly increased to stand at $32.6 million, compared with $32.5 million the previous year. As announced that, SICO recorded a non-cash charge of $10.4 million before taxes, which is associated with the impairment loss on goodwill included in the assets of the Industrial Sector on account of the difficult competitive conditions prevailing in this market, especially the relative strength of the Canadian dollar. While it affected net earnings, this impairment loss had no impact on the Company's liquidities and financial position. In addition, SICO recorded a non-cash loss of $0.6 million (before and after taxes) on a property revaluation. Due to these two non-recurring items, SICO posted net earnings of $6.3 million or $0.46 per common share ($0.45 diluted) during the year 2005, compared with $15.5 million or $1.14 per share ($1.12 diluted) in 2004.

For information purposes, excluding non-recurring items (net of related taxes) for 2005 and 2004, i.e. the impairment loss on goodwill and the loss on a property revaluation in 2005, and the reversal of a provision for restructuring costs, impairment loss on goodwill and loss on disposal of the joint venture in 2004, net earnings would have amounted to $16.1 million or $1.18 per common share ($1.16 diluted) in 2005, compared with $16.4 million or $1.21 per share ($1.19 diluted) in 2004.

Commenting on SICO's 2005 performance, Pierre Dufresne, President and Chief Executive Officer, pointed out that the Company continued to stand out in the Canadian architectural paint industry for its leading position in technological development, dynamic marketing and the sustained development of its distribution networks, although its financial growth was impeded due to a more challenging business environment than in previous years. "Drawing on our ability to adapt to less favourable economic conditions, we initiated a number of changes to improve our performance and competitiveness in the coming years, particularly in the Industrial Sector."

Architectural Sector: Consolidation of SICO's leading position in Canada

The Architectural Sector's sales grew by 5.2% to $277.1 million. While this growth is partly attributable to selling price increases introduced during the year, in order to partially counter the rising costs of raw materials, and to the acquisition of Mills Paint Sales Ltd. ("Mills Paint") in Western Canada on October 1, 2005, it also reflects organic growth in the volume of paint sold by SICO. "This is particularly satisfactory as the overall Canadian demand for architectural paint declined in 2005. SICO thereby surpassed the industry's average performance, which resulted in an increase in our share of the Canadian market," indicated Pierre Dufresne.

In this regard, one of the highlights of the past year consisted in the signing of a distribution agreement with Kent Building Supplies, the largest home improvement product retailer in Atlantic Canada where it operates 29 stores, including seven superstores. This development will fully contribute to the Company's sales as of 2006. Incidentally, Betonel continued to expand its store network in Eastern Canada and undertook the integration of Mills Paint's eleven corporate stores in British Columbia and Alberta, in order to initiate in 2006 a controlled expansion leveraging on Western Canada's dynamic economy. The Architectural Sector's EBITDA rose by 1.9% to $47.6 million in 2005. Despite the rising costs of raw materials and transportation resulting primarily from higher oil prices and the geographic expansion of the Company's distribution networks, this sector maintained a solid performance thanks notably to selling price increases and the relatively strong growth in premium paint and specialty product sales.

Industrial Sector: Development and renewal for increased profitability

Faced with a difficult competitive environment and an unfavourable exchange rate, SICO's Industrial Sector sustained a 12.5% decrease in its revenues, which amounted to $35 million in 2005. The sector's EBITDA improved from $0.7 million in 2004 (excluding the provision reversal) to $0.8 million in 2005 due mainly to the disposal of the Sico-Becker S.A.S. joint venture in the fourth quarter of 2004. "This sector's operating profitability, although stable, did not meet our expectations," said Pierre Dufresne. "A number of initiatives were taken during the second half of 2005 and at the beginning of 2006 to maintain its customer base despite increased competition from U.S. manufacturers, to recruit new customers and, above all, to rapidly improve this business unit's profitability and return on capital invested. We view this sector's future with renewed confidence as such initiatives will contribute to significantly reduce operating costs as of 2006."

2006 Outlook and objectives

In 2006, SICO foresees its business context to be similar to that of 2005, marked by a softer real estate market, high energy costs, higher raw material prices, a relatively strong Canadian dollar and intense competition in the industrial coatings market. However, the Company expects that sales will increase, primarily in the Architectural Sector, which will benefit from the progress made in 2005, particularly in Atlantic and Western Canada. Furthermore, selling price increases were implemented in the first quarter of 2006 to offset higher raw material and distribution costs. SICO's primary goal is to continue growing organically by introducing its products in new points of sale, while fostering sales growth through creative merchandising strategies. "Among others, we will also seek out business acquisitions that will favourably position SICO in the North American growing professional painters segment."

Concurrently, while continuing to develop its business, the Industrial Sector will strive to improve quality in customer service, operational flexibility and time-to-market, in addition to introduce further innovations to the market. However, this sector's priority for 2006 remains profitability improvement, which will be achieved through a series of measures, including a reduction of personnel which was implemented in the last quarter of 2005 additional price increases, more focused market development efforts, and the rationalization of some product lines to reduce formulation and inventory costs. SICO is also currently studying various alternatives to lower manufacturing costs.

"To ensure that SICO remains the leader in the industry and continues to provide shareholders with a good return on their investment, our priority will be to improve overall internal efficiencies and organizational agility, while continuing to be recognized for the quality of our products and services and for our innovation in technological development, marketing and merchandising," concluded Pierre Dufresne.

SICO raises its dividend on common shares by 14%

In light of SICO's solid financial position, the Board of Directors has decided to increase the dividend paid to common shareholders for a seventh consecutive year. Therefore, the Board has declared a quarterly dividend of $0.08 per common share, up 14% over last year, and a dividend of $0.01822 per Class B preferred share. These dividends will be paid on March 24, 2006 to the Company's registered shareholders as at March 10, 2006.


In business since 1937, SICO is the largest company in Canada specializing in the development, manufacture and marketing of paints, coatings and related products. In the architectural market, its core business, SICO stands out for its innovative, high-quality products, strong brand recognition and the scope of its distribution network, which includes some 2,500 points of sale from coast to coast. In North America, SICO also markets industrial coatings primarily for metal, and mostly intended for the transportation equipment industry, the heavy machinery industry and other specialized applications.

SICO employs more than 1,000 people in Canada, the United States and Mexico. The Company is listed on the Toronto Stock Exchange under the ticker symbol SIC/TSX.

Source: SICO Inc.

Sustainnovation is not a buzzword
Back to Top