Mega Brands Inc. capped a strong year by posting its best fourth-quarter since the toymaker’s 2010 recapitalization, as soaring North American sales contributed to a 20-fold growth in net income.
The Montreal-based toy maker earned $4-million (U.S.) for the period ended Dec. 31, up from $234,000 a year earlier.
It earned 24 cents per basic share and one cent per share on a diluted basis, compared to one cent basic and a loss of 21 cents per share on a diluted basis a year earlier.
The big difference between basic and diluted earnings per share reflects the impact of the recapitalization, which potentially will increase the number of shares outstanding, thus reducing the amount of profit attributed to each share.
Mega Brands’ net sales jumped 18 per cent to $127.5-million from $108-million.
“This strong finish capped a great year for Mega in which we significantly strengthened our brands and our financial position,” CEO Marc Bertrand said Friday during a conference call.
Mega Brands was expected to earn 15 cents per basic share on $117-million of revenues, according to two analysts polled by Thomson Reuters.
Pre-tax operating earnings (EBITDA) increased 33 per cent to $13.9-million, the strongest improvement in two and a half years and substantially ahead of analyst expectations of $12.6-million.
For the full year, the company’s profits doubled to $16.6-million or $1.01 per basic share as revenues grew 11.5 per cent to $420.3-million from $376.8-million in 2011.
Toy sales grew by 21 per cent in the fourth quarter, while stationery and activities sales were up one per cent.
North American sales rose 22 per cent, a fourth consecutive quarter of double-digit growth, while international sales were up seven per cent.
Bertrand said the company expects a strong performance in 2013 as its new Barbie line of construction toys gains traction around the world and it adds other toys, including Skylanders and Hot Wheels.
Martin Landry of GMP Securities said Mega Brands had solid fourth-quarter results and “impressive” balance sheet improvement as it reduced debt by $30-million.
He said the company’s strongest performance since before the recapitalization highlights the strength of its product offering which is resulting in significant traction at retail.
“With the success of the initial Barbie product line launch, we would expect this momentum to continue as Barbie launches globally beginning mid-year and combined with the launch of Hot Wheels construction sets in the fall and new product introductions in Skylanders, in our view this bodes quite well for Mega Brands’ future,” he wrote in a report.
Landry said Mega Brands’ North American sales again outperformed larger competitors Mattel and Hasbro for the fifth consecutive quarter, suggesting Mega Brands continued to gain market share during the quarter.
Mega Brands manufactures more than half of its toys in Montreal, at least double what it did a few years ago, and said it has begun to explore opportunities to further expand its Canadian manufacturing base.
It is seeking up to $50-million in financial support from the Quebec government to build a new production facility, according to a filing with the province’s lobbyist registry.