SunOpta Announces Fourth Quarter and Fiscal 2021 Financial Results
February 24, 2022 at 07:30 AM EST
Plant-based Q4 revenue increased 9.2%, excluding the extra week in the year-earlier period
Fiscal year 2021 Plant-based revenue increased 13.4% over prior year
Strong sequential revenue and gross profit growth expected in Q1, 2022
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 fourth quarter and fiscal year ended January 1, 2022.
All amounts are expressed in U.S. dollars and results are reported in accordance with U.S. GAAP, except where specifically noted.
Fourth quarter 2021 highlights:
“Fourth quarter results were hampered by issues stemming from challenges in the macro environment. We had unexpected and therefore unrecovered inflation, yield related losses in fruit and higher costs in our plants without a corresponding increase in production. While staffing levels recovered in the fourth quarter, we were focused on training 90+ new employees, incurring all the costs but lacking the corresponding production volume. The good news is that we are seeing production quickly returning to more normal levels in the first quarter of 2022. In addition to labor productivity initiatives, pricing actions and our capacity expansion in Allentown all point to a solid recovery in profitability from our fourth quarter of 2021 levels, starting in the first quarter of 2022. Plant-based revenue rose 9.2%, excluding the extra week in the year-earlier period. Consumer demand remains brisk, and we continued to prioritize servicing our customers, incurring unplanned overtime and additional freight to fulfill orders, which negatively impacted Q4 profitability,” said Joe Ennen, Chief Executive Officer. “We also continued to gain from significant tailwinds stemming from our strong innovation pipeline especially in oat-based offerings where we realized $80 million of revenue in 2021. While we are disappointed with our fourth quarter results, we remain incredibly confident in our long-term value proposition. We are making great strides standing up our 4th aseptic plant in Midlothian, TX and early conversations with customers give us confidence in the acceleration in both revenue and profit growth it will enable in 2023. Strategically and competitively, we are well positioned to double our plant-based revenue and profits in the coming years.”
Fourth Quarter 2021 Results
Revenues of $204.2 million for the fourth quarter of 2021 were down 0.6% compared to the fourth quarter of 2020 as 5.8% growth in Plant-Based Foods and Beverages was offset by a 9.4% decrease in Fruit-Based Foods and Beverages.
The Plant-Based Foods and Beverages segment generated revenues of $125.1 million during the fourth quarter of 2021, an increase of 5.8% compared to $118.2 million in the fourth quarter of 2020. Oat-based offerings remained a primary growth driver along with revenue from Dream and WestSoy, which were acquired in April, 2021. We also experienced increased demand from foodservice customers and higher sunflower volumes. Partially offsetting these factors was softer volume for certain other non-dairy beverages and everyday broths. Due to supply chain disruptions, we were unable to meet some customer demand for our plant-based products in the quarter, and transport shortages prevented certain customers from picking up their orders prior to year-end.
The Fruit-Based Foods and Beverages segment generated revenues of $79.2 million during the fourth quarter of 2021, a decrease of 9.4% compared to $87.4 million in the fourth quarter of 2020. The decline was driven by lower volumes of retail frozen fruit due to planned rationalization of SKUs and customers, and the impact of supply constraints for certain fruit varieties on blended frozen fruit offerings. Pass-through pricing actions provided a partial offset along with volume gains in fruit snacks and increased foodservice demand.
Gross profit was $18.4 million for the fourth quarter, a decrease of $13.4 million compared to $31.8 million in the prior year period. As a percentage of revenues, gross profit margin was 9.0% in the fourth quarter of 2021 compared to 15.5% in the fourth quarter of 2020, a decrease of 650 basis points. The Plant-Based Foods and Beverages segment accounted for $8.4 million of the decrease in gross profit, reflecting the impact of labor factors stemming from turnover and wage incentives to retain employees, inflationary increases in transportation and utility rates, higher depreciation and lower production volumes. Gross profit in the Fruit-Based Foods and Beverages segment decreased by $5.0 million due to decreased revenue and higher fruit inventory yield losses due to excess spoilage during handling.
Segment operating loss¹ was $1.6 million, or 0.8% of revenues in the fourth quarter of 2021, compared to segment operating income of $6.8 million, or 3.3% of revenues in the fourth quarter of 2020. The decrease in segment operating income was due to lower gross profit, year-over-year unfavorable foreign exchange impact related to the remeasurement of our Mexican operations into U.S. dollars and lower gains on Mexican peso hedging activities, and incremental amortization expense related to Dream and WestSoy, partially offset by lower SG&A expense.
Adjusted EBITDA¹ was $10.7 million or 5.2% of revenues in the fourth quarter of 2021, compared to $20.6 million or 10.0% of revenues in the fourth quarter of 2020.
Loss from continuing operations attributable to common shareholders for the fourth quarter of 2021 was $2.6 million, or $0.02 per diluted common share, compared to a loss of $37.2 million, or $0.41 per diluted common share during the fourth quarter of 2020.
Adjusted loss¹ in the fourth quarter of 2021 was $1.0 million or $0.01 per common share, compared to an adjusted loss of $2.5 million or $0.03 per common share in the fourth quarter of 2020.
Please refer to the discussion and table below under “Non-GAAP Measures”.
Balance Sheet and Cash Flow
As of January 1, 2022, SunOpta had total assets of $755.1 million and total debt of $224.6 million compared to total assets of $585.6 million and total debt of $69.7 million a year earlier reflecting investments to accelerate strong growth in Plant-Based Foods and Beverages and an increase in inventory as we rebuilt our fruit inventory from the COVID depleted levels of 2020. During the fourth quarter of 2021, cash provided by operating activities was $19.7 million from continuing operations compared to cash provided by operating activities of $19.8 million during the fourth quarter of 2020. Investing activities from continuing operations consumed $23.3 million of cash during the fourth quarter of 2021 versus $11.2 million in the prior year, primarily due to capacity expansion initiatives.
Consolidated revenue range: $890 million - $930 million
Consolidated adjusted EBITDA1 range: $67 million -$75 million
SunOpta plans to host a conference call at 8:30 A.M. Eastern time on Thursday, February 24, 2022, to discuss the fourth quarter financial results. After opening remarks, there will be a question and answer period. Investors interested in listening 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. This call may be accessed with the toll free dial-in number dial (888) 440-4182 or International dial-in number (646) 960-0653 using Conference ID: 8338433.
1 See discussion of non-GAAP measures
2 The Company has included certain forward-looking statements about the future financial performance that include non-GAAP financial measures, including Adjusted EBITDA. These non–GAAP financial measures are derived by excluding certain amounts, expenses or income, from the corresponding financial measures determined in accordance with GAAP. The determination of the amounts that are excluded from these non-GAAP financial measures is a matter of management judgment and depends upon, among other factors, the nature of the underlying expense or income amounts recognized in a given period. We are unable to present a quantitative reconciliation of the aforementioned forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures because management cannot reliably predict all of the necessary components of such GAAP measures. Historically, management has excluded the following items from certain of these non-GAAP measures, and such items may also be excluded in future periods and could be significant amounts.
About SunOpta Inc.
SunOpta Inc. is a leading company focused on the development and manufacture of plant-based and fruit-based food and beverage products.
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 profitability will recover starting in Q1 2022, our 4th aseptic plant will enable accelerated revenue and profit growth in 2023 and plant-based revenue and profits will double in the coming years, as well as our anticipated consolidated revenue and adjusted EBITDA ranges for fiscal 2022. Generally, forward-looking statements do not relate strictly to historical or current facts and are typically accompanied by words such as “expected”, “point to”, “continued”, “well-positioned”, “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; the factors identified in footnote 2 above, uninterrupted operations and service levels to our customers during COVID-19; current customer demand for the Company’s products, particularly our plant-based products; 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 COVID-19; unexpected issues or delays with completion of our 4th aseptic plant or 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.
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 management believes 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.
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.