Coffee Holding: Reports Q2 and H1-2021 Financial Results

Staten Island / NY. (chc) Coffee Holding Company Inc. announced its operating results for the three months and six months ended April 30, 2021:

Net Sales. Net sales totaled USD 14,468,558 for the three months ended April 30, 2021, a decrease of USD 5,627,318, or 28 percent, from USD 20,095,876 for the three months ended April 30, 2020. Net sales totaled USD 32,602,395 for the six months ended April 30, 2021, a decrease of USD 6,778,982, or 17.2 percent, from USD 39,381,377 for the six months ended April 30, 2020. The decrease in net sales was due to multiple factors, including the continued loss of sales of packed coffee to the Company’s customers who have not fully re-opened due to Covid-19 restrictions. The decreases in net sales were slightly offset by gains in sales to new private label accounts as well as an increase in sales of the Company’s flagship Café Caribe brand.

Cost of Sales. Cost of sales for the three months ended April 30, 2021 was USD 10,699,090, or 74 percent of net sales, as compared to USD 15,589,450, or 77.6 percent of net sales, for the three months April 30, 2020. Cost of sales for the six months ended April 30, 2021 was USD 24,353,356, or 74.7 percent of net sales, as compared to USD 31,760,285, or 80.6 percent of net sales, for the six months April 30, 2020. The decrease in cost of sales was due to the Company’s decreased sales partially offset by higher packaging costs due to increases in materials, most notably steel for the Company’s cans.

Gross Profit. Gross profit for the three months ended April 30, 2021 amounted to USD 3,769,468 or 26 percent of net sales, as compared to USD 4,506,426 or 22.4 percent of net sales, for the three months ended April 30, 2020. Gross profit for the six months ended April 30, 2021 amounted to USD 8,249,039 or 25.3 percent of net sales, as compared to USD 7,621,092 or 19.4 percent of net sales, for the six months ended April 30, 2020. The increase in gross profit percentage was attributable to increased margins on the Company’s roasted and branded products partially due to the movement of lower cost green coffee inventory built up in previous quarters, partially offset by higher packaging costs due to increases in materials, most notably steel for the Company’s cans.

Operating Expenses. Total operating expenses decreased by USD 297,553 to USD 3,315,324 for the three months ended April 30, 2021 from USD 3,612,877 for the three months ended April 30, 2020. Total operating expenses decreased by USD 659,328 to USD 6,628,514 for the six months ended April 30, 2021 from USD 7,287,842 for the six months ended April 30, 2020. 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. These efforts were partially offset by the increase in the Company’s freight costs as the cost of truckload deliveries to our largest wholesale customers was up approximately 20 percent year over year.

Net (Loss) Income. The Company had net income of USD 357,044 or USD 0.06 per share basic and diluted, for the three months ended April 30, 2021 compared to net income of USD 498,518, or USD 0.09 per share basic and diluted for the three months ended April 30, 2020. The Company had net income of USD 1,034,355 or USD 0.18 per share basic and diluted, for the six months ended April 30, 2021 compared to net loss of USD 101,330, or USD 0.02 per share basic and diluted for the six months ended April 30, 2020. The increase in net income was due primarily to the reasons described above.

«Despite a 28 percent decline in sales for the three months ended April 30, 2021 compared to the same period last year, we still earned USD 0.06 a share, as our gross margins continue to improve through a combination of higher selling prices on green coffee sales and lower operating costs,» stated Andrew Gordon, Chief Executive Officer of Coffee Holding Co. «Sales were negatively impacted by a USD 5.2 million decline in sales of packed coffee beans compared to last year to customers who have not fully reopened due to continued Covid-19 restrictions in many states where a large percentage of our business is concentrated. In addition, we were not the beneficiary of the same boost in supermarket sales witnessed last year during the March and April months of the pandemic. Because there was no inventory buildup by supermarkets during 2021 as there was in 2020, production at our largest roasting facility in Colorado was down by 50 percent compared to last year,» continued Gordon. «We did see increased volumes from our new private label customers and our flagship brand Café Caribe Latin espresso, which helped mitigate the revenue decline predominately due to decreased sales in our packed coffee division.

«However, we now believe that with most states fully reopening, we should begin to see an increase in sales volumes compared to last year, as we have acquired new customers during the last twelve months along with our long term customers normalizing their buying activities,» said Gordon.

«Adjusted Ebitda for the quarter was USD 861,900, or USD 0.15 cents per share for the three months ended April 30, 2021. Our interest expenses for the quarter was USD 16,839, as we have essentially paid down our entire line of credit for the first time in company history as operations continue to generate positive free cash flow.

«I believe our results for the quarter were positive despite a few headwinds,» continued Gordon. «Sales of green coffee beans remained under pressure for the reasons previously mentioned. Also, freight rates have increased by as much as 58 percent to several of our largest accounts and cannot yet be offset by price increases (to these accounts) having the net effect of negatively impacting operating results. In addition, inflationary pressures have impacted our packing costs, and we have seen an increase in both the costs of our steel for our cans and fiber for our corrugated. At the moment, we have had to absorb these cost increases, but we believe as other major players in the coffee industry begin to increase prices to supermarkets, we will be able to do so as well, offsetting these increased costs. Finally, our Generations LLC subsidiary continues to be a drag on our profitability as they have been slow to convert the Steep N Brew operations in Madison, Wisconsin and consolidate all the production in Cleveland, Ohio, which has resulted in an increase in costs for the quarter resulting in a loss in this division.

«Lastly, at the end of the quarter, our CBD partnership with The Jorde Well LLC began shipping complimentary pilot run samples of CBD infused single serve cups of both our Harmony Bay and Café Caribe brands to prospective customers. The feedback on these samples has been positive with most customers commenting on the incredibly smooth taste of the coffee without any aftertaste or noticeable change in the flavor profile due to the infusion of the CBD oil. Subsequently, we launched our direct to consumer (DTC) E-commerce website, thejordewell.com, to begin selling our products online. We are currently planning our official initial launch of our CBD infused brands during our third fiscal quarter of 2021. We have identified at least 27 states, that subject to certain restrictions, will allow sales of CBD beverage products as we prepare our go-to-market strategy for our CBD infused brands,» concluded Gordon.

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.