Coffee Holding: Reports FY-2020 Financial Results

Staten Island / NY. (chc) Coffee Holding Company Inc. announced its operating results for the fiscal year ended October 31, 2020:

Net (Loss) Income. The Company had a net loss of USD 94,301 or USD 0.02 per share basic and diluted, for the fiscal year ended October 31, 2020, compared to a net loss of USD 94,598, or USD 0.02 per share basic and diluted for the fiscal year ended October 31, 2019. The decrease in net income was due to numerous factors which had to be dealt with during the Company’s fiscal fourth quarter. For example, for the fiscal year ended October 31, 2020, the Company had a loss before its non-controlling interest in its subsidiary of USD 336,044, versus net income of USD 264,006 for the fiscal year ended October 31, 2019. The Company’s non-controlling interest for the fiscal year ended October 31, 2020 reduced the Company’s loss by USD 366,044, bringing the net loss attributable to Coffee Holding Co. to USD 94,301, whereas the non-controlling interest for the fiscal year ended October 31, 2019 reduced profit by USD 358,604, bringing the net loss attributable to Coffee Holding Co. to a loss of USD 94,598. The Company’s consolidated subsidiary, in which it has a 60 percent interest, had write downs on both inventories and accounts receivable due to Covid-19, including an approximately USD 85,000 write down of receivables and an approximately USD 217,000 write down of inventories.

Net Sales. Net sales totaled USD 74,335,815 for the fiscal year ended October 31, 2020, a decrease of USD 12,131,617, or 14 percent, from USD 86,467,432 for the fiscal year ended October 31, 2019. The decrease in net sales was due to the Covid-19 pandemic which caused many of the Company’s green coffee customers, who service the restaurant and food service industries, as well as the Company’s customers in the food service space, to either close or suspend their business operations during the period resulting in lost revenues.

Cost of Sales. Cost of sales for the fiscal year ended October 31, 2020 was USD 61,256,926, or 82.4 percent of net sales, as compared to USD 70,708,100, or 81.8 percent of net sales, for the fiscal year ended October 31, 2019. Cost of sales consists primarily of the cost of green coffee and packaging materials and realized and unrealized gains or losses on hedging activity. The decrease in cost of sales was due to the Company’s decreased sales and the rising cost of coffee.

Gross Profit. Gross profit for the fiscal year ended October 31, 2020 was USD 13,078,889, a decrease of USD 2,680,443 from USD 15,759,332 for the fiscal year ended October 31, 2019. Gross profit as a percentage of net sales decreased to 17.6 percent for the fiscal year ended October 31, 2020 from 18.2 percent for the fiscal year ended October 31, 2019. The decrease in gross profits resulted from a decrease in sales due to the Covid-19 pandemic and inventory adjustments resulting from such decreased sales, lost customers and outdated inventory during the year.

Operating Expenses. Total operating expenses decreased by USD 1,314,596 to USD 13,904,207 for the fiscal year ended October 31, 2020 from USD 15,218,803 for the fiscal year ended October 31, 2019. Selling and administrative expenses decreased USD 1,281,500, or 8.8 percent, to USD 13,223,207 for the fiscal year ended October 31, 2020 from USD 14,504,707 for the fiscal year ended October 31, 2019. The Company’s efforts to control costs through the elimination of redundancy in its operations and the elimination of certain unnecessary variable costs were the primary reasons for this decrease.

«In a year which most people would choose to forget, we too were not immune to the effects of extended lockdowns and consumer belt tightening due to the pandemic caused by Covid-19. Our sales declined by approximately USD 12.0 million, or 14 percent, as shutdowns closed bars, restaurants and most non-essential retail establishments. However, the decline in sales were isolated in two areas, while the balance of our business remained relatively strong in what proved to be a very negative business environment for most companies. The first area of our business that was negatively impacted by the shutdowns was the sales of green unroasted coffee beans to our small and medium sized roaster clientele. Sales of green coffee to these roasters who service the retail and foodservice industries declined by approximately USD 5.9 million as businesses remained closed for multiple months throughout the fiscal year.

«The second area of our business negatively impacted by the shutdowns was our Steep N Brew subsidiary, which experienced a decline of approximately USD 4.5 million. This decline was primarily due to Steep N Brew’s largest customer converting its existing relationship from a direct customer buying basis to a brokerage basis. Thus, we were unable to recognize 100 percent of the revenues, as we have done in the past,» stated Andrew Gordon, Chief Executive Officer of Coffee Holding.

«We had a similar net loss as in the prior year, as we lost approximately USD 95,000, or USD 0.02 per share. However, considering that our revenues were lower by approximately USD 12.0 million, and our gross profit and operating margins remained relatively steady, we believe that if the revenues of green coffee sales were not negatively impacted by the pandemic, we would have been profitable in the year as this area of the business has historically experienced margins between 15 percent to 22 percent and is highly scalable with minimal variable costs needed to increase sales. In addition, other one-time or non-cash items which negatively affected our bottom line included a non-cash cost of approximately USD 0.9 million for our stock option plan, approximately USD 0.7 million in depreciation and amortization, and approximately USD 0.2 million in interest expenses which offset our income from revenues. Other factors negatively impacting income were approximately USD 85,000 write down of receivables and approximately USD 217,000 write down of inventory. We believe these year-end write downs, which were greater than in past years, were due to the impact of the pandemic caused by Covid-19, which slowed sales to existing customers causing inventory to become outdated in addition to forcing many of our smaller customers to permanently close their doors. All of these factors negatively impacted our ability to turn inventories at historical and forecasted levels.

«Despite the significant headwinds we endured during this turbulent year, I believe our company successfully navigated the Covid-19 economy, and did the work necessary to position our company and business for future success. Although most supermarket chains and customers were curtailing operations, delaying category reviews and postponing purchases of new items, we were able to expand sales of Cafe Caribe in new and existing markets, including sales to the United States military commissaries. We also added a new 150-store supermarket chain in Florida to which we plan on commencing shipping product in the second fiscal quarter of 2021. We also increased sales of our S+W coffee brand to a major wholesaler in the Midwest and were awarded the private label coffee business for two new major supermarket chains, also to begin shipping in 2021.

«Lastly, in October 2020, we acquired a 49 percent stake in The Jordre Well LLC, a hemp and Cannabidiol (CBD) beverage company based in Columbus, Ohio. The Jordre Well is a functional brand incubator focused on creating innovative, sustainably sourced, CBD infused beverages for health and wellness conscious consumers. Our plan is to begin infusing our brands, Cafe Caribe Latin Espresso and Harmony Bay Gourmet coffee, with CBD as soon as we are comfortable with our formulations. We believe CBD coffee will be a fast growing and profitable market for us and if the legislative environment surrounding CBD products continue to improve, our plan is to offer all our customers the opportunity to infuses their products with CBD. I remain confident that our business is extraordinarily resilient, and despite a year that proved to be unpredictable and challenging, we still had many successes which we believe will lead to positive results for our company and our shareholders as early as the first quarter of 2021 and beyond,» concluded Gordon.

About Coffee Holding

Coffee Holding Company Inc. is a leading integrated wholesale coffee roaster and dealer in the United States and one of the few coffee companies that offers a broad array of coffee products across the entire spectrum of consumer tastes, preferences and price points. Coffee Holding has been a family-operated business for three generations and has remained profitable through varying cycles in the coffee industry and the economy. The Company’s private label and branded coffee products are sold throughout the United States, Canada and abroad to supermarkets, wholesalers, and individually owned and multi-unit retail customers.

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