SunOpta Announces Third Quarter Fiscal 2021 Financial ResultsNovember 10, 2021 at 07:30 AM EST
Plant-Based revenue growth of 16.0%, driving 3.6% total Revenue growth Loss from continuing operations was $3.0 million vs. loss of $3.9 million in Q3 2020 Adjusted EBITDA increased 8.4% to $15.6 million SunOpta Inc. (“SunOpta” or the “Company”) (Nasdaq:STKL) (TSX:SOY), a leading healthy food and beverage company focused on plant-based foods and beverages and fruit-based foods and beverages, today announced financial results for the third quarter ended October 2, 2021. All amounts are expressed in U.S. dollars and results are reported in accordance with U.S. GAAP, except where specifically noted. Third quarter 2021 highlights:
“Despite recent global supply chain issues, our plant-based business produced another solid quarter of growth, delivering a record setting third quarter, more than offsetting declines in our fruit-based business. Plant-based revenues were up 16%, reflecting our sustained competitive advantages and incredibly strong consumer demand. On a two-year stack basis, plant-based revenue was up 23.9%. Moreover, our oat platform was a significant contributor to growth in the quarter. We delivered Adjusted EBITDA growth of 8.4%, as revenue growth and SG&A savings more than offset gross margin compression,” said Joe Ennen, Chief Executive Officer. “Gross margins were impacted by incremental depreciation, along with challenges surrounding raw material and labor availability, which is temporarily impacting the efficiency of our manufacturing plants. We continue to execute well against our strategic priorities. Demand from existing and new customers remains at unprecedented levels across our plant-based portfolio. Gross margins in fruit-based were largely impacted by raw material price inflation, which we expect to be fully passed on by the end of the fourth quarter. Capacity expansions in our plant-based segment are firmly on track; however, as is the case across the broader economy, supply chain issues are creating transitory headwinds over the near term that the team is working hard to mitigate. Nevertheless, our long-term outlook for double-digit plant-based revenue growth and continuing to improve returns on invested capital remains unchanged.” Third Quarter 2021 Results Revenues of $198.5 million for the third quarter of 2021 were up 3.6% compared to the third quarter of 2020 as 16.0% growth in Plant-Based Foods and Beverages was partially offset by a 9.7% decrease in Fruit-Based Foods and Beverages. The Plant-Based Foods and Beverages segment generated revenues of $114.9 million during the third quarter of 2021, an increase of 16.0% compared to $99.0 million in the third quarter of 2020. Growth continued to be driven by strong demand for our oat-based product offerings as well as incremental revenue from our Dream and WestSoy acquisitions, which contributed $5.9 million to the third quarter, together with higher sunflower volumes and pricing. Partially offsetting these factors was softer volumes for certain other non-dairy beverages and everyday broths along with lower volumes of ready-to-eat snacks and roasted ingredients. The Fruit-Based Foods and Beverages segment generated revenues of $83.6 million during the third quarter of 2021, a decrease of 9.7% compared to $92.6 million in the third quarter of 2020. Lower retail volumes in frozen fruit remained the primary factor accounting for the revenue decline, with planned rationalization of SKUs and customers, and supply constraints for certain fruit varieties. Partially offsetting these factors were the effects of pass-through pricing actions for frozen fruit, together with volume growth in fruit snacks, and rising foodservice demand. Gross profit was $23.4 million for the third quarter, a decrease of $3.5 million compared to $26.8 million in the prior year period. As a percentage of revenues, gross profit margin was 11.8% in the third quarter of 2021 compared to 14.0% in the third quarter of 2020, a decrease of 220 basis points. The Plant-Based Foods and Beverages segment accounted for $1.0 million of the decrease in gross profit, reflecting lower plant utilization, largely driven by labor and certain raw material shortages in our plant-based beverage and ingredient operations along with higher depreciation and transportation expenses, partially offset by improved utilization, cost reductions and higher pricing in our sunflower operations. Gross profit in the Fruit-Based Foods and Beverages segment decreased by $2.5 million due to higher strawberry commodity prices, foreign exchange, higher transportation costs and higher production costs in our fruit snack operations stemming from raw materials constraints, partially offset by pricing actions, rationalization of marginally profitable business, and productivity improvements in our frozen fruit operations including footprint optimization. Segment operating income¹ was $3.9 million, or 2.0% of revenues in the third quarter of 2021, compared to segment operating income of $3.1 million, or 1.6% of revenues in the third quarter of 2020. The increase in segment operating income year-over-year was primarily attributable to a reduction in incentive compensation, which more than offset lower gross profit, as well as incremental amortization related to the acquisition of Dream and WestSoy. Adjusted EBITDA¹ was $15.6 million or 7.9% of revenues in the third quarter of 2021, compared to $14.4 million or 7.5% of revenues in the third quarter of 2020. Loss from continuing operations attributable to common shareholders for the third quarter of 2021 was $3.8 million, or $0.04 per diluted common share, compared to a loss of $6.7 million, or $0.07 per diluted common share during the third quarter of 2020. Adjusted earnings¹ in the third quarter of 2021 was $1.1 million or $0.01 per common share, compared to an adjusted loss of $5.8 million or ($0.06) per common share in the third quarter of 2020. Please refer to the discussion and table below under “Non-GAAP Measures”. Balance Sheet and Cash Flow As of October 2, 2021, SunOpta had total assets of $749.1 million and total debt of $220.3 million compared to total assets of $921.4 million and total debt of $443.8 million a year earlier, primarily reflecting the sale of the Global Ingredients business and improved operating performance, partially offset by investments to support continued strong growth in Plant-Based Foods and Beverages. During the third quarter of 2021, cash provided by operating activities was $5.1 million from continuing operations compared to cash provided by operating activities of $8.7 million during the third quarter of 2020. The decline in cash generation was primarily due to increased working capital in 2021. Investing activities from continuing operations consumed $17.4 million of cash during the third quarter of 2021 versus $11.3 million in the prior year, primarily due to capacity expansion initiatives. Conference Call SunOpta plans to host a conference call at 9:00 A.M. Eastern time on Wednesday, November 10, 2021, to discuss the third quarter financial results. After opening remarks, there will be a question and answer period. Investors interested in listening to the live webcast can access a link on SunOpta's website at www.sunopta.com under the "Investor Relations" section or directly here. A replay of the webcast will be archived and can be accessed for approximately 90 days on the Company's website. Investors interested in listening to the live call over the telephone can join by calling US: 833-513-0545, or International: 1-778-560-2569 conference ID: 2496984. ¹ See discussion of non-GAAP measures About SunOpta Inc. SunOpta Inc. is a leading company specializing in the sourcing, processing and production of organic, natural and non-GMO plant- and fruit-based food and beverage products. Forward-Looking Statements Certain statements included in this press release may be considered "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation, which are based on information available to us on the date of this release. These forward-looking statements include, but are not limited to, our belief that investment in plant-based foods and beverages will continue to be a significant driver of revenue and margin growth, and our ability to drive further year-over-year adjusted EBITDA improvement. Generally, forward-looking statements do not relate strictly to historical or current facts and are typically accompanied by words such as “continue”, “expect”, “believe”, “anticipate”, “estimates”, “can”, “will”, “target”, "should", "would", "plans", "becoming", "intend", "confident", "may", "project", "potential", "intention", "might", "predict", “budget”, “forecast” or other similar terms and phrases intended to identify these forward-looking statements. Forward-looking statements are based on information available to the Company on the date of this release and are based on estimates and assumptions made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments including, but not limited to, the Company’s actual financial results; uninterrupted operations and service levels to our customers during the COVID-19 pandemic; current customer demand for the Company’s products and the additional anticipated demand due to the COVID-19 pandemic; general economic conditions; continued consumer interest in health and wellness; the Company’s ability to maintain product pricing levels; planned facility and operational expansions, closures and divestitures; cost rationalization and product development initiatives; alternative potential uses for the Company’s capital resources; portfolio optimization and productivity efforts; the sustainability of the Company’s sales pipeline; the Company’s expectations regarding commodity pricing, margins and hedging results; improved availability and field prices for fruit; procurement and logistics savings; freight lane cost reductions; yield and throughput enhancements; and labor cost reductions. Whether actual timing and results will agree with expectations and predictions of the Company is subject to many risks and uncertainties including, but not limited to, potential loss of suppliers and customers as well as supply chain, logistics and other disruptions resulting from or related to the COVID-19 pandemic; unexpected issues or delays with the Company’s structural improvements and automation investments; failure or inability to implement portfolio changes, process improvements, go-to-market improvements and process sustainability strategies in a timely manner; changes in the level of capital investment; local and global political and economic conditions; consumer spending patterns and changes in market trends; decreases in customer demand; delayed or unsuccessful product development efforts; potential product recalls; working capital management; availability and pricing of raw materials and supplies; potential covenant breaches under the Company’s credit facilities; and other risks described from time to time under "Risk Factors" in the Company's Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q (available at www.sec.gov). Consequently, all forward-looking statements made herein are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized. The Company undertakes no obligation to publicly correct or update the forward-looking statements in this document, in other documents, or on its website to reflect future events or circumstances, except as may be required under applicable securities laws.
Non-GAAP Measures In addition to reporting financial results in accordance with U.S. GAAP, the Company provides additional information about its operating results regarding segment operating income, adjusted earnings and adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), which are not measures in accordance with U.S. GAAP. The Company believes that segment operating income, adjusted earnings and adjusted EBITDA assist investors in comparing performance across reporting periods on a consistent basis by excluding items that are not indicative of its operating performance. The non-GAAP measures of segment operating income, adjusted earnings and adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with U.S. GAAP. In order to evaluate its results of operations, the Company uses certain other non-GAAP measures that it believes enhance an investor’s ability to derive meaningful period-over-period comparisons and trends from the results of operations. In particular, the Company evaluates its revenues on a basis that excludes the effects of fluctuations in commodity pricing and the impacts of acquisitions and divestitures. In addition, the Company excludes specific items from its reported results that due to their nature or size, it does not expect to occur as part of its normal business on a regular basis. These items are identified in the tables below. These non-GAAP measures are presented solely to allow investors to more fully assess the Company’s results of operations and should not be considered in isolation of, or as substitutes for an analysis of the Company’s results as reported under U.S. GAAP. Adjusted Earnings/Loss When assessing its financial performance, the Company uses an internal measure that excludes charges and gains that it believes are not reflective of normal operations. This information is provided to allow investors to make meaningful comparisons of the Company’s operating performance between periods and to view the Company’s business from the same perspective as the Company’s management. Adjusted earnings/loss and adjusted earnings/loss per diluted share should not be considered in isolation or as a substitute for performance measures calculated in accordance with U.S. GAAP. The following is a tabular presentation of adjusted earnings/loss and adjusted earnings/loss per diluted share, including a reconciliation from earnings/loss from continuing operations, which the Company believes to be the most directly comparable U.S. GAAP financial measure.
Segment Operating Income/Loss and Adjusted EBITDA The Company defines segment operating income/loss as net earnings/loss before income taxes, interest expense and other income/expense items, and adjusted EBITDA as segment operating income/loss plus depreciation, amortization, non-cash stock-based compensation, and other unusual items that affect the comparability of operating performance as identified above in the determination of adjusted earnings/loss. The following is a tabular presentation of segment operating income/loss and adjusted EBITDA, including a reconciliation to earnings/loss from continuing operations, which the Company believes to be the most directly comparable U.S. GAAP financial measure.
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