WestBond Enterprises : Annual Report – 2023

WESTBOND ENTERPRISES

CORPORATION

2023 Annual Report

WestBond Enterprises Corporation

7403 Progress Way, Unit 101

Delta, British Columbia

Canada V4G 1E7

Telephone: [phone]

Fax:[phone]

e-mail: [e-mail]

www.westbond.ca

WestBond Enterprises Corporation

Management Discussion and Analysis

dated June 29, 2023, to accompany the consolidated financial statements for the year ended March 31, 2023

Caution Regarding Forward Looking Statements - There are many risk factors and uncertainties that may affect the company's actual results, performance, achievements, or developments. Consequently, all forward-looking statements in this report are qualified by this cautionary statement and the company cannot assure investors that actual results, performance, achievements, or developments that the company anticipates will be realized. Forward-looking statements are based on the beliefs of management and reflect management's current plans, expectations, estimates, projections, beliefs and opinions and the company does not undertake any obligation to update forward-looking statements should the assumptions related to these expectations, plans, estimates, projections, beliefs, and opinions change, except as required by law. The forward-looking statements contained in this MD&A speak only as of the date of this MD&A.

Description of Our Business

We, WestBond Enterprises Corporation ("WestBond" or the "company"), are a paper manufacturer and converter that manufactures disposable paper products for many market segments. We initially grew to become one of Canada's leading manufacturers of medical disposables and later expanded our product offering to take advantage of high-volume opportunities in personal hygiene products for away-from-home markets. We sell mainly to major medical and industrial distributors in Canada and the United States and we also sell to larger end-users on a direct basis.

Our product lines include clinical products such as examination table paper, sheets, pillowcases and gowns. The personal hygiene product line consists of hand towels and bathroom tissue in jumbo roll format as well as conventional formats. Our third major product line is patient wipes and underlays for long-term care facilities (nursing homes). We are expanding into a fourth product line, table top products, which include high quality air-laid paper napkins.

Our goal for the personal hygiene line is to increase sales by supplying a comprehensive paper product line directly to medium sized janitorial contractors providing public washroom maintenance services and to small and medium sized distributors who sell to the janitorial market. Our most significant competitors in the personal hygiene product line use wholesale master distributors who sell to smaller distributors that sell to smaller contractors. By selling direct to the smaller distributors, we eliminate the "middle-man" and are able to offer more competitive pricing. Also, unlike our most significant competitors, we will configure our products to customers' specifications. Our current focus for expansion in this market is Canada and western USA. We will also pursue opportunities to supply these products directly to smaller hotel, motel and restaurant chains.

Our goal for the clinical and long-term care lines is to increase sales by continuing to provide quality products at competitive prices. Our focus for the clinical line is Canada. Long-term care products are sold in Canada and the USA and its territories.

We sell a full range of air-laid napkins (table top) to major food service distributors in Canada and the United States. Sales of these high-qualityair-laid products are expanding quickly, though temporarily interrupted by the covid-19 pandemic shut-downs.

Our plant equipment enables us to provide a comprehensive range of products for each of our product lines and allows us to utilize a wide variety of paper supplies, enabling us to take advantage of good raw material pricing opportunities.

We started production on our binder bonded air-laid paper making machine in August 2015. The machine can produce air-laid paper at a significantly lower cost than current purchase prices. We use 25% - 30% of the production capacity of the machine for our own finished products and are selling production from surplus capacity to other paper converters.

We started up a wet-wipe production line in August 2020 and commenced sales of disinfectant wipes to government distribution centres, nursing home suppliers and janitorial supply distributors.

Personal Hygiene Products - We started this product line during 2002. Our decision to expand into personal disposables such as hand towels and bathroom tissue was based on demands by existing distributors who wanted to increase their purchasing ability with us. We evaluated this potential and determined that there was a high demand for these types of products. In addition, we soon learned that small to medium size distributors who sell to the janitorial market were not being serviced well by other paper converters.

The personal hygiene paper products include roll towels, jumbo roll bathroom tissue, conventional high- sheet-count bathroom tissue and a specialty line of roll towels and bathroom tissue. This specialty line provides us with high margin products that few converters are able to produce. We manufacture our products in 1 and 2 ply formats. In 2015, we introduced a premium line of air-laid roll towels to the market. We sell these products to Canadian and US distributors and janitorial contractors in large order quantities.

Clinical Products - Historically, this product line represented the company's core business. Basically, all paper products that are used by clinics, physicians, chiropractors and physiotherapists form this product category. The equipment that was originally installed to manufacture these paper products is very flexible, reliable and high speed. This allows us to develop new products that could be in demand in the future.

Products in this group are sheets, examination table paper, pillowcases, gowns, and drapes. The equipment is able to convert roll format as well as sheet format products in many case pack and roll length configurations.

Wipe Products - The products that comprise this category were originally part of the Clinical Product Line. Sales in this area have increased to the point that we now dedicate four entire production lines to these items. The products include patient wipes and underlays, primarily for use in nursing homes. All dry wipes are made with high quality air-laid paper which results in soft absorbent wipes which are used as disposable wash cloths and perineal wipes.

Products are available in 1/4-fold,1/8-fold, and roll formats in a variety of widths and perforation lengths. The long-term care market is growing and we continue to develop new products for major Canadian and US distributors.

Our disinfectant wet-wipes, marketed under the brand name "ViroBan Plus" are also included in this category.

Non-Wipe Air-laidProducts- This product line includes bulk air-laid parent rolls sold to other paper converters and our own line of high-qualityair-laid napkins for use in restaurants. These napkins replace costly linen napkins and also out-perform conventional paper napkins, reducing operating costs of many restaurants. These products are sold through major food service distributors. We are now supplying air laid napkins to a major, high profile national restaurant chain with a customized product. The addition of our own air-laid paper making machine is allowing us to grow this business substantially.

These four product groups represent WestBond's ability to adapt to market demands and develop product lines to satisfy these markets.

The following chart shows the portion of total sales that each of the product categories contributed during the years ended March 31, 2019 through 2023.

100%															Other
80%															Non-wipe air
60%															laid products
														Wipes
40%
														Clinical
20%
0%

2023 2022 2021 2020 2019	Personal
hygiene

Discussion of Operations and Financial Condition

You should refer to our consolidated financial statements for the year ended March 31, 2023 while you read this discussion. Those financial statements provide significant, material information that is not meant to be, nor is it included in this discussion. This discussion is meant to provide information not included in the financial statements and an explanation of some of the financial statement information.

We realized a profit of $574,550 during the year ended March 31, 2023, compared to $693,220 for the year ended March 31, 2022. Our gross profit margin realized during 2023 was 24.8% compared to 25.3% for 2022. Our gross profit margins were lower in 2023 than in 2022 due to higher cost of sales in comparison to the sales revenue.

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1000	10,000
9,000
8,000
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$ x
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	0
	2017	2018	2019	2020	2021	2022	2023

Sales

Cost of Sales

Gross Profit

Fiscal Years ended March 31

Selected Annual Information (Unaudited)

We have summarized selected financial information from the company's consolidated financial statements, which are prepared in Canadian dollars and in accordance with International Financial Reporting Standards (IFRS).

Operating Results					Years ended March 31
2023		of	2022		of	2021		of
					$		%		$		%		$	%
							sales				sales			sales
Sales	11,089,793		100.0	11,378,650		100.0		13,979,808	100.0
Cost of sales	8,344,232		75.2	8,495,751		74.7		8,651,691	61.9
Gross profit	2,745,561		24.8	2,882,899		25.3		5,328,117	38.1
Selling and distribution expenses	954,149		8.6	926,463		8.1		828,144	5.9
General and administrative expenses	859,977		7.8	855,885		7.5		864,985	6.2
Other expenses and (income)	95,337		0.9	141,452		1.3		(16,667) -0.1
Profit before tax	836,098		8.0	959,099		8.4		3,651,655	26.1
Income tax expense	261,548		2.2	265,879		2.3		1,008,658	7.2
Profit and comprehensive income	574,550		5.8	693,220		6.1		2,642,997	18.9
Earnings per share, basic	0.016				0.019					0.074
Earnings per share, fully diluted	0.016				0.019					0.074
Cash dividends paid per common share		0.015				0.025					0.02
Financial Position									March 31
	2023				2022					2021
				$				$						$
Non-Current Assets	10,060,501			10,725,450		11,419,763
Current Assets		3,360,205			3,537,346		4,129,973
Total assets	13,420,706			14,262,796		15,549,736
Non-Current Liabilities	3,835,984			4,525,979		5,324,736
Current liabilities		1,753,386			1,945,644		2,236,402
Shareholders' equity		7,831,336			7,791,173		7,988,598

Sales

Sales were $11,089,793 for the year ended March 31, 2023, a 2.54% decrease over the year ended March 31, 2022. The table below summarizes the sales of the company for the last five fiscal years.

	2023	2022	2021	2020	2019
	$	$	$	$	$
Personal hygiene products	2,193,970	2,394,594	2,250,890	3,570,404	4,046,919
Clinical products	1,208,190	1,880,769	1,574,748	2,061,075	1,823,461
Wipe products	1,933,302	1,815,722	8,276,885	1,868,135	1,992,870
Non-clinicalair-laid products	5,734,615	5,201,305	1,827,960	4,118,076	3,419,296
Other products	19,716	86,260	49,325	50,202	80,616
Total sales	11,089,793	11,378,650	13,979,808	11,667,892	11,363,162
Change over previous year	-2.5%	-18.6%	19.8%	2.7%	15.6%

Sales were exceptional for the year ended March 31, 2021 due to a government supply contract for wet- wipe products that was not renewed. As a supplier of clinical and personal hygiene products, essential services, we have remained in operation during the covid-19 pandemic shut-downs, which started in March