VFF - Village Farms Revenues Rise As Tomato Prices Fall
Village Farms International, Inc. (NASDAQ: VFF) (TSX: VFF) announced its financial results for the second quarter ended June 30 , 2021. Total sales grew 166% to $34 million in the quarter versus last year’s $14.1 million for the same time period. Village Farms net income grew 270% from $800,000 in 2020 to $3.2 million in the second quarter of 2021.
“We are so proud to report another record quarter for Pure Sunfarms’ retail branded sales, which grew 22% sequentially – the fourth consecutive quarter of 20%-plus growth – which contributed to total net sales growth of 38% sequentially, once again outpacing the broader retail cannabis market as we continue to gain national market share,” said Michael DeGiglio , CEO, Village Farms. “Importantly, we are also reporting a 192% sequential increase in adjusted EBITDA for Pure Sunfarms this quarter to C$9.1 million , a record since our Retail Branded Sales launch, and further evidence of the importance of our large-scale, low-cost cultivation capabilities combined with an exceptional management team and the right brand and product strategy.”
Produce Takes A Beating
The company reported that produce sales decreased (4%) with higher production volumes offset by lower pricing as the tomato industry experienced one of the lowest pricing environments for tomatoes-on-the-vine and beefsteak varieties in the past ten years versus strong pricing due to elevated demand amidst pandemic-related restrictions in the second quarter of 2020. Village Farms said there were indications that pricing is moving back to historical levels, however, year-over-year comparisons remain challenging.
The produce adjusted EBITDA was a loss of ($3.9) million , which excluded a $1.4 million incremental electricity expense in Texas due to temporarily elevated pricing for a five-day period in February (more than 100- times higher than the prices observed in early 2021 and historical February pricing). Texas experienced an unprecedented winter storm which resulted in power supply constraints.
DeGiglio added, “We expect our Produce business to normalize toward the end of this year with indications that prices are trending back to historical levels, as production volumes have improved throughout 2021. Our Texas produce greenhouse operations, with a replacement value in excess of $300 million , and located in one of the best growing environments for cannabis in the continental United States , represent one of our potential pathways to participate in the U.S. high-THC cannabis market. We continue to operate and manage these facilities for this optionality.”
Cannabis
Village farms said its cannabis was the top-selling brand* of dried flower products with the Ontario Cannabis Store (by kilograms sold and dollars sold) for the quarter ended June 30, 2021, and remained the top-selling brand of dried flower products with the OCS (by kilograms sold and dollars sold) for the 21-month period since its retail branded sales launch in October 2019. The company also claimed it was the top-selling Licensed Producer of dried flower products with the OCS (by kilograms sold and dollars sold) for the quarter ended June 30, 2021, and w as the top-selling brand of dried flower products in Alberta for the quarter ended June 30, 2021, and monthly since October 2020 (by dollars sold). Market share performance data cited has been calculated by Pure Sunfarms from sales information provided by Buddi retail store data from over 300 retailers across Alberta and British Columbia as of June 30, 2021.
Consolidated Results
The consolidated results include all three of the company’s operating segments, which include produce, cannabis and clean energy, along with all public company expenses. The remaining 41.3% interest in Pure Sunfarms was acquired by Village Farms on November 2, 2020 ; for the three and six months ended June 30, 2021 , the operating results of Pure Sunfarms are consolidated in the Consolidated Statements of Income (Loss), and for the three and six months ended June 30, 2020 , Pure Sunfarms’ results are included in equity earnings from unconsolidated entities in our Consolidated Statements of Income (Loss).
Sales for the three months ending June 30, 2021, were $70 million as compared to $47 million for the three months ended June 30, 2020 . The increase in sales was primarily due to the inclusion of Pure Sunfarms’ Q2 2021 revenues of $24 million and an increase in produce supply partner sales of $1.8 million , partially offset by a decrease in our own produce sales of ($3,676) and VFCE power sales of ($151) . The produce supply partner sales increase was due to higher volumes of pounds sold of tomatoes, peppers, cucumbers and mini-cucumbers.
Net loss for the three months ended June 30, 2021 was ($4.5 million) as compared to ($119 million) for the three months ended June 30, 2020 . The increase in net loss was primarily due to a lower gross margin from the produce operations and higher corporate share-based compensation, partially offset by an improved operating profit for Pure Sunfarms in the three months ended June 30, 2021 as compared to June 30, 2020 .