Canada: Big Rock Brewery Income Trust net income increased 62% in the 2Q 2006

Big Rock Brewery Income Trust (the "Trust") reported August 10 to Unitholders its unaudited consolidated financial results for the three and six month periods ended June 30, 2006. These results reflect the consolidated operations of the Trust, Big Rock Brewery Ltd. and its wholly owned subsidiary Pine Creek Brewing Company Ltd.

Financial Highlights for the three and six month periods ended June 30, 2006 compared with the same periods for 2005 are as follows (figures in CA$ unless stated):

Net income for the quarter ending June 30, 2006 was $2,746,934 compared to $1,695,494 for the quarter ended June 30, 2005, a 62% increase due primarily to the reduction in selling expenses and a one-time future income tax recovery of approximately $500,000. Year-to-date net income was $3,810,804 a 41% increase over the same period last year.

Net income per unit increased by 59% to $0.46 for the quarter ended June 30, 2006 compared to $0.29 in the same quarter last year. Units outstanding increased by 7,700 to 6,018,724 during the quarter from the exercise of options. Year-to-date net income per unit was $0.63 up 37% from $0.46 for the same period last year.

Cash distributions declared to unitholders for the quarter ended June 30, 2006 were $1,984,947 or $0.33 per unit (2005 - $1,953,624 or $0.33 per unit). Year-to-date distributions were $3,967,914 or $0.66 per unit (2005 - $3,715,141 or $0.63 per unit).

During the quarter ended June 30, 2006, Big Rock continued to focus on overall corporate profitability. Strategic brand and category growth combined with selling expense control resulted in a substantial increase in net income for the period.

Big Rock's premium brand strategy encompasses an increase in brand education and sampling while decreasing dependence on promotional aids. In the short term, premium sales volumes will decrease slightly as consumers look for other free offers in the marketplace but will rebound in the medium to long term as these new consumers establish loyalty to these brands.

These results are on plan as Management executes its strategy of repositioning Big Rock premium brands by reducing the use of "in-pack, on-pack, and near-pack" promotional items as an incentive to retail purchasers and by substituting education and assistance to retailers in the positioning and promotion of Big Rock beers. This will improve retailer profitability, build loyalty for premium brands and increase market share over the medium term.

Conversely, Big Rock's value category strategy has been to increase both volume and price, while minimizing the selling expenses in order to maximize the overall profitability of the category. We expect to see continued volume growth in our value brands until we reach the optimization point of price and volume.

Big Rock's value brands have continued impressive growth rates this year despite two price increases in the market place. Commensurate with this shift, selling costs for the quarter have decreased significantly compared to the same quarter last year.

These brand strategies are enhanced by the company’s focus as a regional brewery as it continues to see both transportation and distribution costs spiral upwards.

For the three months ended June 30, 2006 sales volume was 55,977 HL, relatively flat compared to sales volume of 56,257 for the same quarter last year. As anticipated, the price increase implemented at the end of the 1st quarter of 2006 impacted 2nd quarter sales volume. For the six months ended June 30, 2006 sales volume was 101,055 HL, up 3% from 98,081 HL during the same period last year.

Big Rock’s BC volumes continue to be affected by the sale of the Kamloops Brewery in October 2005 and a competitive local industry. Last year Kamloops contributed 1,925 HL to the company’s 2nd quarter volume. Also, BC's competitive small breweries have had great success with the help of reduced local markup rates while Big Rock contends with higher markups and a cost of service charged to all out of province brewers. All of this adds up to lower profits per hectoliter in BC. Management is working to have cost of service fees reduced or removed.

For the quarter ended June 30, 2006, sales revenue decreased $276,287 (3%) to $10,555,007 from $10,831,294 for the same period of 2005. Year-to-date revenue increased $94,874 (1%) to $18,874,709 from $18,779,834 for the same period last year commensurate with the year-to-date increase in sales volume and the increase in sales of lower margin value and private label brands.

Cost of sales decreased to $3,946,256 this quarter from $3,995,800 in the same quarter last year primarily due to the decrease in sales volume. Production cost is consistent year-over-year at $71/HL. Year-to-date cost of sales increased by $85,082 to $7,245,597 ($72/HL) from $7,160,515 ($73/HL). An increase in the volume of lower cost of production canned beer offset the overall increase in production costs, particularly energy.

Gross profit for the quarter was down $226,743 (3%) to $6,608,751 from $6,835,494 in the same quarter last year commensurate with the sales decrease. Year-to-date gross profit is flat at $11,629,112 (2005 -$11,619,319).

Selling expenses for the quarter ended June 30, 2006 decreased by $660,213 (20%) to $2,657,848 compared to $3,318,061 in the same quarter last year. Year-to-date selling expenses decreased by $491,387 (9%) to $5,102,026 from $5,593,413. Marketing expenses were significantly lower this quarter compared to last year as the "local import" campaign was charged to this quarter last year. The curtailing of promotional materials and point of sale giveaways also contributed to the reduction in sales and marketing expense.

General and administrative expenses decreased during the quarter ending June 30, 2006 by $192,005 to $895,903 from $1,087,908 in the same quarter last year. Lower stock based compensation expense recorded during the quarter as well as a reduction in computer system support and professional fees contributed to the decrease. Year-to-date general and administrative expenses decreased by $182,345 to $1,718,160 from $1,900,505 in the same period last year.

The income tax provision for the quarter was a recovery of $(200,243) compared to an expense of $210,795 in the same period last year, and is comprised of $332,330 in current income tax expense and $(532,573) in future income tax recovery. The future income tax recovery relates to a reduction in future federal and provincial income tax rates substantively enacted during the quarter.

Big Rock's balance sheet gained strength during the quarter as total assets increased by $662,895 and Unitholders equity improved by $902,247, compared to March 31, 2006, after paying out cash distributions of $1,984,011. Big Rock's liquidity is strong with $5,635,215 in cash and cash equivalents at quarter-end (December 31, 2005 - $5,722,465) and no long-term or operating debt.

Cash provided by operating activities increased by $90,851 (4%) to $2,349,042 for the quarter ended June 30, 2006 from $2,258,191 in the same quarter last year. Year-to-date cash flow from operations increased by $1,903,762 from $5,143,389 from $3,239,627 in the same period last year.

Big Rock is a regional producer and marketer of premium quality beers, headquartered in Calgary, Alberta, Canada. Big Rock's products are available in draught, bottles and cans. The Company also produces or distributes cider and cooler products. Big Rock products are marketed in seven provinces and three territories in Canada.

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