SWP:CC - Swiss Water Reports Strong 2022 First Quarter Volumes Revenue and Adjusted EBITDA
(TheNewswire)
VANCOUVER, BC / TheNewswire / May 5, 2022 / Swiss WaterDecaffeinated Coffee Inc. ( TSX:SWP ) (“Swiss Water” or “theCompany”), a leading specialty coffee company and premium greencoffee decaffeinator, today reported strong financial results for thethree months ended March 31, 2022.
2022 First QuarterFinancial and Operational Highlights
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First quarter revenue was $38.4 million, an increase of50% or $12.7 million when compared to the same period in2021.
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Quarterly processing volumes increased by 23% comparedto the same period last year, driven by a combination of new customeracquisition and organic growth with existing customers.
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North American business growth accelerated with volumesup by 18% compared to the first quarter of 2021. Internationalmarkets also grew strongly with volumes up by 37%.
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First quarter Adjusted EBITDA 1 was $3.9 million,an increase of 95% or $1.9 million when compared to the same period in2021. The improvement was driven by a combination of strong volumes,high capacity utilization of production assets and disciplined costcontrol.
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Net Income was $1.4 million, an increase of $1.5million compared to the first quarter of 2021.
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Construction of the Company’s second production linein Delta, BC continued throughout the three months ended March 31,2021. This strategic expansion project is currently on time and onbudget.
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Subsequent to the end of the quarter, an agreement wasreached with Mill Road Capital LLC (“MRC”) to increase theCompany’s senior debt covenant from $60.0 million to $65.0million.
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The Company is continuing to evaluate opportunities toraise new capital to support its long term strategic objectives,including enhancements to its hedging program, working capital andlong term debt facilities, and reviewing other functioningalternatives.
“We are very pleased to report that the strongperformance we achieved during the fourth quarter of 2021 strengthenedfurther during the first quarter of this year. Our volumes, revenuesand profitability have all exceeded our expectations, leading to astronger than expected start to the year. Total first quarter volumegrew by 23%, and our biggest market, North America, moved into strongdouble digit growth during this period. Our existing customers areexperiencing strong growth in demand for their chemical free decafofferings and additionally, we have started to ship products to anumber of new out-of-home customers in North America. We are seeingvery good evidence in the marketplace that our competitors’methylene chloride decaffeination is declining in preference byroasters and consumers in favour of chemical free processes like ours. Furthermore, we are excited to share that our capacity utilizationrates remain high and are continuing to drive improved profitability.This is helping us manage higher than expected inflationarypressure”, said Frank Dennis, Swiss Water’sPresident and CEO. “As we look forward throughthe balance of 2022, we are continuing to see a strong order book andare optimistic that, despite emerging macroeconomic risks, we willcontinue to see favourable trading conditions in our key markets. Ona more cautionary note, we are continuing to experience delays incoffee deliveries as supply chain bottleneckspersist. Furthermore, the continuation of very high coffee futuresprices has resulted in a significant increase in our working capitaland liquidity needs. We will pay close attention to these emergingrisks and increasing costs, and expect that further pricing actionsand other mitigation efforts will likely be required” , said Dennis.
The following table shows changes in volumes during thethree months ended March 31, 2022, compared to the same period in2021. It also shows volume changes for the full 2021 fiscal yearcompared to 2020.
| Volumes |
| 3 months ended March 31, 2022 |
| Year ended December 31, 2021 |
| Change in total volumes |
| +23% |
| +17% |
| By customer type |
| Roasters |
| -1% |
| +1% |
| Importers |
| +56% |
| +50% |
| Specialty |
| +27% |
| +26% |
| Commercial |
| +20% |
| +12% |
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Total processing volumes increased by 23% in the firstquarter when compared to the same period in 2021. Across allgeographical markets, many of Swiss Waters’ customers are seeingstrong consumer demand and, in most cases, are ordering ahead ofpre-pandemic levels. Furthermore, volume growth was enhanced duringthe quarter as the Company accelerated shipments to new out-of-homecustomers within North America. Encouragingly, volume growth of 18%in North America and 37% in international markets was achieved duringthe first quarter.
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Swiss Water’s largest geographical market by volumein Q1 was the United States, followed by international markets, andCanada. By dollar value, 43% of our sales were to customers in theUnited States, 33% were to international customers, and the remaining24% were to Canada. The Company’s international business continuesto expand, and it anticipates revenues from European and Asia-Pacificmarkets will continue to increase in both dollar value and percentagethrough the balance of 2022.
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Swiss Water initiated on-site construction of a secondproduction line in Delta, BC in July 2021. The above groundconstruction continued through the first quarter of 2022. Theproject is currently tracking on time and on budget.
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Inflationary pressure within the Company’s variablecost structure remains intense and the control of these expenses isbeing carefully managed in order to limit the impact on itsoperational effectiveness and trading partners.
| In $000s except per share amounts |
| 3 months ended March 31, |
| (unaudited) |
| 2022 |
| 2021 |
| Revenue |
| $ |
| 38,415 |
| $ |
| 25,692 |
| Gross profit |
| 5,763 |
| 3,552 |
| Operating income |
| 2,880 |
| 738 |
| Net income (loss) |
| 1,385 |
| (96) |
| Adjusted EBITDA 1 |
| 3,882 |
| 1,987 |
| Net income (loss) per share – basic 2 |
| $ |
| 0.15 |
| $ |
| (0.01) |
| Net income (loss) per share – diluted 2 |
| $ |
| 0.15 |
| $ |
| (0.01) |
1 Adjusted EBITDA is defined in the ‘Non-IFRS Measures’ section of theMD&A and is a “Non-GAAP Financial Measure” as defined by CSAStaff Notice 52-306.
2 Per-share calculations arebased on the weighted average number of shares outstanding during theperiods. Diluted earnings per share take into account shares that maybe issued upon conversion of convertible debenture (until July 20,2022), the exercise of warrants, and RSUs as well as the impact onearnings from changes in the fair market value of the embedded optionin the convertible debenture (until July 20, 2022) and conversion ofRSUs and the exercise of warrants.
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First quarter revenue was $38.4 million, an increase of50% over Q1 2021, as a result of increased volume growth in thequarter, and higher green coffee prices compared to the same period in2021.
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Gross profit was $5.8 million, an increase of $2.2million over Q1 2021. The significant increase in gross profit wasprimarily driven by higher trading volume, which in turn helpedgenerate capacity utilization efficiencies. In addition, gross profitbenefited from a higher green coffee differential margin.
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Operating income was $2.9 million, an increase of $2.1million over Q1 2021. Operating expenses of $2.8 million were in linewith Q1 2021. Non-operating expenses were higher mainly due to anincrease in finance expense associated with Swiss Waters’construction loans and working capital credit facility.
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Net income was $1.4 million, an increase of $1.5million over Q1 2021. This change reflects the combination ofimprovements in gross margin and operating income.
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First Quarter Adjusted EBITDA was $3.9million, representing an increase of $1.9 million or 95%, compared tothe same period in 2021. Operationally, the increase in AdjustedEBITDA was driven by volume growth, efficiency gains due to highercapacity utilization rates, and an increased financial contributionfrom Seaforth, the Company’s coffee handling and logisticssubsiduary. These gains were somewhat offset by an increase in greencoffee costs and incremental labour and production expenses associatedwith operating at two stand-alone facilities. The costs associatedwith running two plants will cease when the Company exits its Burnabyfacility, expected to occur at the end of June 2023.
Swiss Water defines Adjusted EBITDA as net incomebefore interest, depreciation, amortization, impairments, share-basedcompensation, gains/losses on foreign exchange, gains/losses ondisposal of property and capital equipment, fair value adjustments onembedded options, loss on extinguishment of debt, adjustment for theimpact of IFRS 16 - Leases, and provision for income taxes. TheCompany’s definition of Adjusted EBITDA also excludes unrealizedgains and losses on the undesignated portion of foreignexchange forward contracts.
To help readers better understand Swiss Waters’financial results, the following table provides a reconciliation ofnet income, an IFRS measure, to Adjusted EBITDA is as follows:
| In $000s |
| 3 months ended March 31, |
| (unaudited) |
| 2022 |
| 2021 |
| Net income (loss) for the period |
| $ |
| 1,385 |
| $ |
| (96) |
| Income tax expense (recovery) |
| 529 |
| (11) |
| Income (loss) before tax |
| $ |
| 1,914 |
| $ |
| (107) |
| Finance income |
| (71) |
| (115) |
| Finance expenses |
| 1,209 |
| 1,022 |
| Depreciation & amortization |
| 1,553 |
| 1,713 |
| Unrealized (gain) loss on foreign exchange forward contracts |
| (9) |
| 154 |
| Fair value loss (gain) on the embedded option |
| - |
| 33 |
| (Gain) loss on foreign exchange |
| (206) |
| (241) |
| Share-based compensation expense (recovery) |
| 189 |
| 230 |
| Impact of IFRS 16 leases |
| (697) |
| (702) |
| Adjusted EBITDA |
| $ |
| 3,882 |
| $ |
| 1,987 |
Swiss Water Decaffeinated Coffee Inc. is a leadingspecialty coffee company and a premium green coffee decaffeinator thatemploys the proprietary Swiss Water® Process to decaffeinate greencoffee without the use of solvents such as methylene chloride. It alsoowns Seaforth Supply Chain Solutions Inc., a green coffee handling andstorage business. Both businesses are located in the cities of Burnabyand Delta, British Columbia, Canada.
A conference call to discuss Swiss Water’s recentfinancial results will be held on May 6, 2022 at10:00 am Pacific Time (1:00 pm Eastern Time) . Toaccess the conference call, please dial 1-877-545-0523 (toll free) or1-973-528-0016 (international); passcode: 942919 . A replay will be availablethrough May 20, 2022 at 1-877-481-4010 (toll free) or 1-919-882-2331(international); passcode: 45485.
A more detailed discussion of Swiss Water DecaffeinatedCoffee Inc.’s recent financial results is provided in theCompany’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 Officer
Swiss Water Decaffeinated Coffee Inc.
Phone: 604.420.4050
Email: investor-relations@swisswater.com
Website: investor.swisswater.com
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 materiallydifferent from any future results, levels of activity, performance orachievements expressed or implied by such forward-looking statements.When used in this press release, such statements may include suchwords as “may”, “will”, “expect”, “believe”,“plan” and other similar terminology. These statements reflectmanagement’s current expectations regarding future events andoperating performance, as well as management’s current estimates,but which are based on numerous assumptions and may prove to beincorrect. These statements are neither promises nor guarantees, butinvolve known and unknown risks and uncertainties, including, but notlimited 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 andfinancing of capital projects, a potential impact of the COVID-19pandemic, and general economic conditions. The forward-lookingstatements and financial outlook information contained herein are madeas of the date of this press release and are expressly qualified intheir entirety by this cautionary statement. Except to the extentrequired by applicable securities law, Swiss Water undertakes noobligation to publicly update or revise any such statements to reflectany change in management’s expectations or in events, conditions, orcircumstances on which any such statements maybe based, or that may affect the likelihood that actual results willdiffer from those described herein.
1 Adjusted EBITDA isdefined in the ‘Non-IFRS Measures’ sectionof the MD&A and is a “Non-GAAP Financial Measure” as definedby CSA Staff Notice 52-306.
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