Coffee Holding: Reports Q3 and 9M-2019 Financial Results

Staten Island / NY. (chc) Coffee Holding Company Inc. announced its operating results for the three months and nine months ended July 31, 2019.

Net Sales. Net sales totaled USD 21,594,285 for the three months ended July 31, 2019, a decrease of USD 1,845,618, or 7.8 percent, from USD 23,439,903 for the three months ended July 31, 2018. Net sales totaled USD 65,944,583 for the nine months ended July 31, 2019, a decrease of USD 1,772,436 from USD 67,717,019 for the nine months ended July 31, 2018. The decrease in net sales reflects the lower selling price of coffee during this period due to the continued depressed price of the green coffee market as well as a decrease in sales of approximately USD 7,400,000 to the Company’s former largest wholesale green coffee customer.

Cost of Sales. Cost of sales for the three months ended July 31, 2019 was USD 17,465,685, or 80.9 percent of net sales, as compared to USD 19,648,710, or 83.8 percent of net sales, for the three months July 31, 2018. Cost of sales for the nine months ended July 31, 2019 was USD 53,705,272, or 81.4 percent of net sales, as compared to USD 56,263,183, or 83.1 percent of net sales, for the nine months July 31, 2018. The decrease in cost of sales was due to the Company’s decreased sales offset by the increased cost of steel cans due to the increased tariffs, inbound trucking costs and the Company’s increased losses from its hedging of futures and option contracts.

Gross Profit. Gross profit for the three months ended July 31, 2019 was USD 4,128,600, an increase of USD 337,407 from USD 3,791,193 for the three months ended July 31, 2018. Gross profit for the nine months ended July 31, 2019 was USD 12,239,311, an increase of USD 785,475 from USD 11,453,836 for the nine months ended July 31, 2018. The increase in gross profits resulted from improved margins on the Company’s wholesale and roasted business, partially offset by higher steel and trucking costs and losses from the Company’s hedging of futures and options contracts for the nine months ended July 31, 2019.

Operating Expenses. Total operating expenses increased by USD 348,844 to USD 3,871,362 for the three months ended July 31, 2019 from USD 3,522,518 for the three months ended July 31, 2018. Total operating expenses increased by USD 1,967,665 to USD 11,384,245 for the nine months ended July 31, 2019 from USD 9,416,580 for the nine months ended July 31, 2018. The primary reasons for this increase were the acquisition of Steep + Brew and the increase in the Company’s outbound freight costs as it increased and expanded its product distribution.

Net Income. The Company had net income of USD 111,494 or USD 0.02 per share basic and diluted, for the three months ended July 31, 2019 compared to net income of USD 15,690, or USD 0.00 per share basic and diluted for the three months ended July 31, 2018. The Company had net income of USD 187,741 or USD 0.03 per share basic and diluted, for the nine months ended July 31, 2019 compared to net income of USD 957,926, or USD 0.17 per share basic and diluted for the nine months ended July 31, 2018. The decrease in net income was due primarily to the reasons described above.

«During our fiscal third quarter we were able to maintain our sales volumes and earn a small profit despite coffee prices trading to their lowest levels since 2005. The decrease in sales was almost entirely the result of a decline in sales to our former largest green coffee customer, which for the nine months ended July 31, 2019 were down USD 7.4 million. However, excluding sales to our former largest green coffee customer, sales to all of our other customers are up USD 5.7 million, an increase of 8.4 percent. Further, we earned USD 0.02 cents a share on both a basic and diluted basis, including a onetime non-cash charge of USD 0.04 per share on a basic and diluted basis relating to option grants under our option plan. Without this non-cash charge, we would have earned USD 0.06 cents a share,» stated Andrew Gordon, President and CEO of Coffee Holding Company. «We continue to operate in an extremely challenging environment. Historically low coffee prices, steel tariffs, as well as increased competitive pressure at the grocery store level due to the low coffee prices, continue to erode our earnings potential in the near term. However, I remain positive about our company’s long term outlook as we have weathered these industry forces before while managing to strengthen our core business of private label and green coffee sales and expand our distribution network for our brands. Despite these headwinds, we have seen a dramatic increase in the sales of our Café Caribe single serve during this period, partially offset by a modest decline in sales of our Harmony Bay brand bag and can lines which were acquired in February 2017 as part of our Comfort Foods acquisition. Although I am never pleased to see declines in sales of our brands, we recognize that the Harmony Bay brand is a very mature brand compared to Café Caribe. Café Caribe’s importance within our brand portfolio remains second to none. The sales of espresso in the Latin coffee category continues to outperform the sales of mainstream and private label coffees in supermarkets and we are extremely pleased to be participating in that growth as well,» stated Mr. Gordon.

«Lastly, we continue to closely monitor the regulatory environment as it relates to CBD products being sold in the mainstream market. We believe given our diverse portfolio of branded coffees, we will have the opportunity to service multiple demographics in consumer tastes and preference when the opportunity finally presents itself,» concluded Mr. 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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