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RW Packaging-2005, 1st Quarter Results.

WINNIPEG, Manitoba -- RW Packaging Ltd. (TSX VENTURE:RWP)

(FOR THE THREE MONTHS ENDED MARCH 31, 2005)

The Board of Directors announced today the Company's unaudited financial results for the three (3) months ended March 31, 2005.

OVERALL PERFORMANCE

2005 first quarter results showed an improvement in sales, margins and earnings compared to the preceding fourth quarter of 2004 as compensating price increases announced at year-end in response to higher freight and material costs took effect near the end of the period, although results were lower than the record first quarter earnings posted in 2004. With higher selling prices now in effect, an expected increase in production volumes resulting from new business, and material costs stabilizing, management expects an improvement in sales, margins and earnings through the balance of the year. In particular, management expects a continued gradual improvement in gross margins in the second and subsequent quarters of 2005 from the current period being reported on, as well as, expecting gross margins on a percentage point basis to be higher for the remainder of the year than the comparative quarters in 2004. 2005-second quarter results in particular, should see a significant improvement over comparative last year results at which time the Company's existing Alberta operation ceased production on April 15, to relocate to the Company's new St. Albert location, resulting in a loss of production for more than six weeks. Following the first quarter of 2005 being reported on, the Company's April results saw a 24.0 per cent increase in sales over the comparative month last year and net earnings improved by $46,640. Barring any future unforeseen change, management is maintaining its 2005 forecast for an increase in year-over-year sales of more than 10 per cent, an increase of more than one million dollars, as well as, an improvement in net earnings for the year.

RESULTS OF OPERATIONS

The Company reported net earnings for the three (3) months ended March 31, 2005 of $29,067 (or 0.4 cents per share) on sales of $2,712,508 compared to net earnings of $110,355 (or 1.6 cents per share) on sales of $2,780,235 for the same period in 2004. A 6.0 per cent increase in comparative sales ($1,389,284 versus $1,310,114) from the Company's Winnipeg pharmaceutical facility and a 21.5 per cent comparative decline in sales ($933,090 versus $1,188,966) at its St. Albert location resulted in domestic sales for the period declining 7.1 per cent. The decline in comparative first quarter sales at the Company's St. Albert facility was the result of customers purchasing larger orders during March last year to increase their inventories in advance of the Company's planned closure and relocation of operations during April and May. Accordingly, management expects the decline in first quarter revenues at its St. Albert location will be reversed during the second quarter with revenue growth expected through the remainder of 2005 at both of the Company's operations. U.S. sales for the first quarter increased 38.8 per cent ($390,135 versus $281,155) fueled by higher selling prices and an increase in case sales. As a result, overall sales for the quarter were 2.4 per cent lower than the same period a year ago.

Gross profit for the three (3) months ended March 31, 2005 was $555,280 (or 20.5%) compared to $448,619 (or 18.5%) during the preceding fourth quarter, an improvement of 2.0 percentage points, and compared to $704,737 (or 25.3%) for the three months ended March 31, 2004. The 4.8 percentage point decrease in comparative gross margin during the first quarter was the result of; an increase in raw material costs, customer rebates, and freight and delivery expenses. In response to the rise in material and freight costs, compensating price increases were initiated to the wholesale and retail trade prior to the 2004 year-end most of which took effect late in the first quarter of this year. Gross profit margins are expected to improve further during the second quarter and remainder of 2005.

Warehouse, Selling and Administrative expenses were $381,837 (2004 - $425,141) for the three (3) months ended March 31, 2005, a decline of 10.2 per cent. The decrease in comparable Warehouse, Selling and Administrative expenses is attributed to the elimination of occupancy costs resulting from the closure of the Company's leased facility in Edmonton, Alberta last year. Warehouse, Selling and Administrative expenses for the first quarter were 14.1 per cent of sales compared to 15.3 per cent the year prior.

The aforementioned reduction in operating expenses reduced the effect of the decline in comparative sales and gross margin for the period. As a result, Earnings before Interest, Taxes and Amortization (EBITA) were $173,443 compared to $279,596 in the first quarter of 2004. A 24.7 per cent increase in amortization expense ($71,608 versus $57,404) in addition to an 18.5 per cent increase in interest expense ($59,268 versus $50,013), caused a decline in comparative first quarter earnings before tax of $127,888, to $42,567 from the record $170,455 first quarter in 2004. As previously reported, amortization expense for 2005 is expected to increase approximately $46,425 or 19.2 per cent as a result of the additional property, plant and equipment purchased in 2004. The higher reported interest expense for the period reflects the additional long-term debt obligations arranged to finance and construct the Company's new St. Albert facility. Interest expense for the full year is expected to increase approximately $34,261 or 16.1 per cent over 2004 as a result of the additional debt used to finance property, plant and equipment. An expense to the Company's future income tax benefit of $13,500 (2004 - $60,100) was recorded during the period. As a result, net earnings for the first quarter were $29,067 or 0.4 cents per share compared to $110,355 or 1.6 cents per share the year prior.
RW Packaging Ltd.
 Statement of Operations and Retained Earnings
 ---------------------------------------------

 Three (3) months ended
 Mar. 31, 2005 Mar. 31, 2004

Revenue $ 2,712,508 $ 2,780,235
Manufacturing & Operating Costs $ 2,539,065 $ 2,500,639
 ----------- ------------
EBITA $ 173,443 $ 279,596
Amortization $ 71,608 $ 57,404
 ----------- ------------
EBIT $ 101,835 $ 222,192
Bank Charges and Interest $ 59,268 $ 50,013
 ----------- ------------
Earnings Before Other Items $ 42,567 $ 172,179
Relocation & Disposition Costs $ 0 $ 1,724
 ----------- ------------
Earnings Before Tax $ 42,567 $ 170,455
Current Income Tax $ 0 $ 59,000
Future Income Tax Benefit $ 13,500 $ 1,100
 ----------- ------------
Net Earnings for the Period $ 29,067 $ 110,355
Retained Earnings,
Beginning of Period $ 1,806,177 $ 1,647,847
Retained Earnings,
End of Period $ 1,835,244 $ 1,758,202

Net Earnings per Share -
Basic and Fully diluted $ 0.004 / share $ 0.016 / share

Cash Flow from Operating
 Activities $ 12,159 ($ 396,171)

Shareholders Equity per Share $ 0.451 / share $ 0.440 / share

Issued and Outstanding Common
 Shares 6,934,398 6,934,398



RW is GMP and ISO 9001 & 9002 registered. The Company blends and packages liquid and powder private brand consumer products for major retailers and national brand marketers across North America.

Additional information relating to the Company is available online at www.sedar.com or the Company's website at www.rwpackaging.com.

Shares Issued 6,934,398

2005-05-18 Close $0.23

The TSX Venture Exchange (TSX Venture) has not reviewed, and does not accept responsibility for, the adequacy or accuracy of this release.

RW Packaging Ltd. (TSX VENTURE:RWP)
COPYRIGHT 2005 Business Wire
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2005, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Publication:Business Wire
Date:May 19, 2005
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