Swiss Water Reports Strong Second Quarter and First Half Volumes, Revenue, Net Income, and Adjusted EBITDA
August 04 2022 - 6:50PM
Swiss Water Decaffeinated Coffee Inc.
(TSX: SWP)
(“Swiss Water” or “the Company”), a leading specialty coffee
company and premium green coffee decaffeinator, today reported
strong financial results for the three and six months ended June
30, 2022.
Three and Six Months ended June 30, 2022
Financial and Operational Highlights
-
Second quarter revenue was $48.4 million, an increase of 68% or
$19.6 million when compared to the same period in 2021.
Year-to-date revenue also grew strongly and was $86.8 million, an
increase of 59% or $32.3 million.
-
Quarterly and year-to-date processing volumes increased by 40% and
32% respectively, compared to the same periods last year, driven by
a combination of new customer acquisition and organic growth with
existing customers.
-
North American business growth accelerated with second quarter
volumes up by 34% compared to Q2 of 2021 and up by 27%
year-to-date, compared to the same period in 2021. International
markets also grew strongly with volumes up by 68% and 51% for the
three and six months respectively.
-
Net income for the three and six months ended June 30, 2022 was
$1.5 million and $2.8 million, an increase of $1.2 and $2.7 million
respectively, compared to the same periods in 2021. The improvement
was driven by a combination of strong volume growth, increased
green coffee differential margin, high capacity utilization of
production assets and disciplined management of inflationary
pressure.
-
Second quarter and year-to-date Adjusted EBITDA¹ was $5.3
million and $9.2 million, an increase of 117% or $2.9 million and
107% or $4.8 million respectively when compared to the same periods
in 2021.
-
During the second quarter, Swiss Water continued the on-site
construction of a second production line in Delta, BC. Over the
quarter, the impacts of global macroeconomic pressures, including
inflation, trades disruptions, and supply chain issues, became more
acute in terms of project budget and schedule. The Company now
considers 10% of the preliminary cost estimate to be an appropriate
risk factor and is actively working to mitigate cost and schedule
impacts.
-
During the second quarter, an agreement was reached with Mill Road
Capital LLC (“MRC”) to increase Swiss Water’s senior debt covenant
from $65.0 million to $68.0 million. The Company remains engaged in
discussion with MRC to increase this limit further, should this be
required to support future financing solutions.
-
The Company is continuing to evaluate opportunities to raise new
capital to support its long term strategic objectives, including
enhancements to its hedging program, working capital and long term
debt facilities, and is reviewing other financing
alternatives.
“We are very pleased to report that the strong
performance we achieved during the first quarter of 2022
strengthened further during the second quarter of this year. Our
volumes, revenues and profitability have all exceeded our
expectations, leading to a stronger than expected first half of the
year. Total second quarter volume grew by 40%, and our biggest
market, North America, maintained strong double digit growth during
this period. Our existing customers are experiencing strong growth
in demand for their chemical free decaf offerings and additionally,
we have benefited from increased shipments to a number of new
out-of-home customers in North America. We are seeing very good
evidence in the marketplace that our competitors’ methylene
chloride decaffeination is declining in preference by roasters and
consumers in favour of chemical free processes like ours.
Furthermore, we are excited to share that our capacity utilization
rates remain high and are continuing to drive improved
profitability. This is helping us manage higher than expected and
persistent inflationary pressure”, said Frank Dennis, Swiss Water’s
President and CEO. “As we look forward into the second half of
2022, we are continuing to see a strong order book and are
optimistic that, despite emerging macroeconomic risks, we will
continue to see favourable trading conditions in our key markets.
On a more cautionary note, we are continuing to experience delays
in coffee deliveries as supply chain bottlenecks persist.
Furthermore, the continuation of very high coffee futures prices
has resulted in a significant increase in our working capital and
liquidity needs. We will pay close attention to these emerging
risks and increasing costs, and expect that further pricing actions
and other mitigation efforts will likely be required”, said
Dennis.
Operational Highlights
The following table shows changes in volumes
during the three and six months ended June 30, 2022, compared to
the same period in 2021.
Volumes |
3 months endedJune 30, 2022 |
6 months endedJune 30, 2022 |
Change in total volumes |
+40% |
+32% |
By customer type |
|
|
Roasters |
+15% |
+8% |
Importers |
+80% |
+68% |
Specialty |
+56% |
+42% |
Commercial |
+29% |
+25% |
|
|
|
-
Total processing volumes increased by 40% in the second quarter and
by 32% for the year-to-date when compared to the same periods last
year. Across all geographical markets, many of Swiss Waters’
customers are seeing strong consumer demand and, in most cases, are
ordering ahead of pre-pandemic levels. Furthermore, volume growth
was enhanced during the second quarter as the Company accelerated
shipments to new out-of-home customers within North America.
Encouragingly, Swiss Water recorded 27% and 51% volume growth in
its North America and international regions, respectively, during
the first half of 2022.
-
Swiss Water’s largest geographical market by volume in the first
half of the year was the United States, followed by international
markets, and Canada. By dollar value, 45% of the Company’s sales
were to customers in the United States, 32% were to international
customers, and the remaining 23% were to Canada. Swiss Water’s
international business continues to expand, and anticipated
revenues from European and Asia-Pacific markets are expected to
continue to increase in both dollar value and percentage during the
second half of 2022.
-
During the second quarter, the Company continued the on-site
construction of a second production line in Delta, BC. The
preliminary cost estimate of this project was approximately $45.0
million, plus commissioning costs of approximately $2.0 million. In
the second quarter, the impacts of global macroeconomic pressures,
including inflation, trades disruptions, and supply chain issues,
became more acute in terms of project budget and schedule. The
Company now considers 10% of the preliminary cost estimate to be an
appropriate risk factor and is actively working to mitigate cost
and schedule impacts.
-
Inflationary pressure within Swiss Water’s variable cost structure
remains intense and the control of these expenses is being
carefully managed in order to limit the impact on the Company’s
operational effectiveness and its trading partners.
Financial Highlights
In $000s except per share amounts |
|
3 months ended June 30 |
6 months ended June 30 |
(unaudited) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Revenue |
$ |
48,368 |
|
$ |
28,759 |
|
$ |
86,783 |
|
$ |
54,451 |
|
Gross profit |
|
7,952 |
|
|
3,652 |
|
|
13,715 |
|
|
7,204 |
|
Operating income |
|
4,416 |
|
|
1,106 |
|
|
7,296 |
|
|
1,844 |
|
Net income |
|
1,460 |
|
|
216 |
|
|
2,845 |
|
|
120 |
|
Adjusted EBITDA¹ |
|
5,335 |
|
|
2,461 |
|
|
9,226 |
|
|
4,448 |
|
Net income per share – basic² |
$ |
0.16 |
|
$ |
0.02 |
|
$ |
0.31 |
|
$ |
0.01 |
|
Net income per share – diluted² |
$ |
0.16 |
|
$ |
0.02 |
|
$ |
0.31 |
|
$ |
0.01 |
|
¹ Adjusted EBITDA is defined in the ‘Non-IFRS Measures’ section of
the MD&A and is a “Non-GAAP Financial Measure” as defined by
CSA Staff Notice 52-306. |
² Per-share calculations are based on the weighted average number
of shares outstanding during the periods. Diluted earnings per
share take into account shares that may be issued upon conversion
of the convertible debenture, the exercise of warrants, and RSUs as
well as the impact on earnings from changes in the fair market
value of the embedded option in the convertible debenture (until
July 20, 2021) and conversion of RSUs and the exercise of
warrants. |
|
-
Second quarter revenue was $48.4 million, an increase of 68% over
Q2 2021, and year-to-date revenue was $86.8 million, an increase of
59%. The growth rates were driven by a combination of volume
growth, and higher green coffee prices compared to the same periods
in 2021.
-
Gross profit was $8.0 million during the quarter, an increase of
$4.3 million over Q2 2021 and was $13.7 million during the first
half, an increase of $6.5 million over the first six months of last
year. The significant increase in gross profit was primarily driven
by higher trading volume, which in turn helped generate capacity
utilization efficiencies. In addition, gross profit benefited from
a material increase in green coffee differential margin.
-
Operating income was $4.4 million for the quarter, an increase of
$3.3 million over Q2 2021 and was $7.3 million for the first half,
an increase of $5.5 million over the same period in 2021. Operating
expenses of $3.5 million and $6.4 million for the three and six
months ended June 30, 2022 respectively represent an increase of
$1.0 million compared with the same periods in 2021. Non-operating
expenses were higher, mainly due to an increase in finance expense
associated with Swiss Waters’ construction loans and working
capital credit facility.
-
Net income was $1.5 million for the quarter, an increase of $1.2
million over Q2 2021 and was $2.8 million for the first half, an
increase of $2.7 million over the first six months of 2021. This
change reflects the combination of improvements in gross margin and
operating income.
-
Second quarter Adjusted EBITDA was $5.3 million, representing
an increase of $2.9 million or 117% over Q2 2021. Year-to-date
Adjusted EBITDA was $9.2 million, representing an increase of $4.8
million or 107% compared to first half of 2021. Operationally, the
increase in Adjusted EBITDA in both periods was driven by volume
growth, efficiency gains due to higher capacity utilization rates,
and an increased financial contribution from Seaforth, the
Company’s coffee handling and logistics subsidiary. These gains
were somewhat offset by an increase in green coffee costs and
incremental labour and production expenses associated with
operating at two stand-alone facilities. The costs associated with
running two plants will cease when the Company exits its Burnaby
facility, expected to occur at the end of June 2023.
NON-IFRS MEASURES
Adjusted EBITDA
Swiss Water defines Adjusted EBITDA as net
income before interest, depreciation, amortization, impairments,
share-based compensation, gains/losses on foreign exchange,
gains/losses on disposal of property and capital equipment, fair
value adjustments on embedded options, loss on extinguishment of
debt, adjustment for the impact of IFRS 16 - Leases, and provision
for income taxes. The Company’s definition of Adjusted EBITDA also
excludes unrealized gains and losses on the undesignated portion of
foreign exchange forward contracts.
To help readers better understand Swiss Waters’
financial results, the following table provides a reconciliation of
net income, an IFRS measure, to Adjusted EBITDA as follows:
In $000s |
3 months ended June 30, |
6 months ended June 30, |
(unaudited) |
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Net income for the period |
$ |
1,460 |
|
$ |
216 |
|
$ |
2,845 |
|
$ |
120 |
|
Income tax expense |
|
472 |
|
|
440 |
|
|
1,001 |
|
|
429 |
|
Income before tax |
$ |
1,932 |
|
$ |
656 |
|
$ |
3,846 |
|
$ |
549 |
|
Finance income |
|
(140 |
) |
|
(153 |
) |
|
(211 |
) |
|
(268 |
) |
Finance expenses |
|
1,460 |
|
|
1,028 |
|
|
2,669 |
|
|
2,050 |
|
Depreciation & amortization |
|
1,940 |
|
|
1,703 |
|
|
3,492 |
|
|
3,416 |
|
Unrealized loss on foreign exchange forward contracts |
|
150 |
|
|
156 |
|
|
141 |
|
|
309 |
|
Fair value gain on the embedded option |
|
- |
|
|
(41 |
) |
|
- |
|
|
(8 |
) |
Loss (gain) on foreign exchange |
|
659 |
|
|
(330 |
) |
|
453 |
|
|
(571 |
) |
Share-based compensation expense |
|
20 |
|
|
144 |
|
|
209 |
|
|
374 |
|
Impact of IFRS 16 - Leases |
|
(686 |
) |
|
(702 |
) |
|
(1,373 |
) |
|
(1,403 |
) |
Adjusted EBITDA |
$ |
5,335 |
|
$ |
2,461 |
|
$ |
9,226 |
|
$ |
4,448 |
|
|
|
|
|
|
Company Profile
Swiss Water Decaffeinated Coffee Inc. is a
leading specialty coffee company and a premium green coffee
decaffeinator that employs the proprietary Swiss Water® Process to
decaffeinate green coffee without the use of solvents such as
methylene chloride. It also owns Seaforth Supply Chain Solutions
Inc., a green coffee handling and storage business. Both businesses
are located in the cities of Burnaby and Delta, British Columbia,
Canada.
Additional Information
A conference call to discuss Swiss Water’s
recent financial results will be held on August 5, 2022, at
10:00 am Pacific (1:00 pm Eastern). To access the
conference call, please dial 1-877-545-0320 (toll
free) or 1-973-528-0002 (international); passcode:
198947. A replay will be available through August
19, 2022 at 1-877-481-4010 (toll free) or 1-919-882-2331
(international); passcode: 46327.
A more detailed discussion of Swiss Water
Decaffeinated Coffee Inc.’s recent financial results is provided in
the Company’s Management Discussion and Analysis filed on SEDAR
(www.sedar.com) and the Company’s website
(investor.swisswater.com).
For more information, please
contact:
Iain Carswell, Chief Financial OfficerSwiss
Water Decaffeinated Coffee Inc.Phone: 604.420.4050Email:
investor-relations@swisswater.comWebsite:
investor.swisswater.com
Forward-Looking Statements
Certain statements in this press release may
constitute “forward-looking” statements that involve known and
unknown risks, uncertainties and other factors which may cause the
actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. When used in this press release, such
statements may include such words as “may”, “will”, “expect”,
“believe”, “plan” and other similar terminology. These statements
reflect management’s current expectations regarding future events
and operating performance, as well as management’s current
estimates, but which are based on numerous assumptions and may
prove to be incorrect. These statements are neither promises nor
guarantees, but involve known and unknown risks and uncertainties,
including, but not limited to, risks related to processing volumes
and sales growth, operating results, the supply of utilities, the
supply of coffee, general industry conditions, commodity price
risks, technology, competition, foreign exchange rates,
construction timing, costs and financing of capital projects, a
potential impact of the COVID-19 pandemic, and general economic
conditions. The forward-looking statements and financial outlook
information contained herein are made as of the date of this press
release and are expressly qualified in their entirety by this
cautionary statement. Except to the extent required by applicable
securities law, Swiss Water undertakes no obligation to publicly
update or revise any such statements to reflect any change in
management’s expectations or in events, conditions, or
circumstances on which any such statements may be based, or that
may affect the likelihood that actual results will differ from
those described herein.
_______________________________¹ Adjusted EBITDA
is defined in the ‘Non-IFRS Measures’ section of the MD&A and
is a “Non-GAAP Financial Measure” as defined by CSA Staff Notice
52-306.
Swiss Water Decaffeinate... (TSX:SWP)
Historical Stock Chart
From Dec 2024 to Jan 2025
Swiss Water Decaffeinate... (TSX:SWP)
Historical Stock Chart
From Jan 2024 to Jan 2025