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Village Farms swings to $9.2M net loss in Q4; major provision for income taxes

VANCOUVER - Village Farms International, Inc. (TSX:VFF) swung to a loss in the fourth quarter as the producer of greenhouse vegetables cited a big provision for income taxes as well as a decline in the value of biological assets amid alleged dumping in the U.S. by Mexican tomato growers.

Village Farms, with production facilities in British Columbia and Texas, said Monday that its net loss in the three months ended Dec. 31 was US$9.2 million or 23 cents per diluted share.

That compared with net income of US$973,000 or two cents per diluted share in the same quarter a year ago as sales revenue decline to US$30.6 million from US$34.7 million.

Income tax expense for the quarter was almost US$9.1 million compared with just US$228,000 in the 2011 period.

"The large income tax expense in the fourth quarter is due to the company not recognizing the book tax on insurance proceeds in prior quarters," Village Farms said in its earnings release.

"Although insurance property proceeds used to repair and rebuild damaged facilities are not taxable, it does create a difference in depreciable asset basis between book and tax, which the company did not take into account when determining its second- and third-quarter book tax expense."

Village Farms, with distribution centres in key markets in the United States and Canada, is a major North American producer, marketer and distributor of greenhouse-grown tomatoes, bell peppers and cucumbers.

For the full year, it reported a net profit of US$7.9 million or 20 cents per share on sales of US$133.9 million, compared with a net profit of US$5.8 million or 15 cents per share on sales of US$164.4 million in 2011.

Village Farms said the 19 per cent decrease in net sales was primarily due to a nine per cent decrease the net selling price of tomatoes, a 7.1 per cent decrease in the company's production and a 28 per cent decrease in supply partner revenue due to a 21 per cent decrease in pounds sold as well as the impact of lower average selling prices.

"The decrease in the average selling price was caused from dumping by Mexican growers in the U.S. market," it said.

Chief executive Michael DeGiglio said the dumping had "a negative impact on pricing in the entire fresh tomato industry in the U.S. and Canada, aiding in the demise of some long-standing growers."

He also cited start-up complications at a new facility in Texas, coupled with a devastating hail storm in Marfa, Texas, on May 31.

"The impact of this event on our financial institutions and the unresolved insurance claim, overshadowed favourable prior years of operating results," he said.

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