Staten Island / NY. (chc) Coffee Holding Company Inc. announced its operating results for the three months and nine months ended July 31, 2020:
Net sales: Net sales totaled USD 17,344,009 for the three months ended July 31, 2020, a decrease of USD 4,250,276, or 19.7 percent, from USD 21,594,285 for the three months ended July 31, 2019. Net sales totaled USD 56,725,386 for the nine months ended July 31, 2020, a decrease of USD 9,219,197, or 14 percent, from USD 65,944,583 for the nine months ended July 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 industry to either close or suspend their business operations during the period resulting in lost revenues from that segment of the Company’s customer base.
Cost of sales: Cost of sales for the three months ended July 31, 2020 was USD 13,517,482, or 77.9 percent of net sales, as compared to USD 17,465,685, or 80.9 percent of net sales, for the three months July 31, 2019. Cost of sales for the nine months ended July 31, 2020 was USD 45,287,198, or 79.8 percent of net sales, as compared to USD 53,705,272, or 81.4 percent of net sales, for the nine months July 31, 2019. The decrease in cost of sales was due to the Company’s decreased sales partially offset by its favorable green coffee position.
Gross profit: Gross profit for the three months ended July 31, 2020 amounted to USD 3,826,527, or 22.1 percent of net sales, as compared to USD 4,128,600, or 19.1 percent of net sales, for the three months ended July 31, 2019. Gross profit for the nine months ended July 31, 2020 amounted to USD 11,438,188, or 20.2 percent of net sales, as compared to USD 12,239,311, or 18.6 percent of net sales, for the nine months ended July 31, 2019. The increase in gross profits as a percentage of sales is attributable to a change in the Company’s product mix where it sold a higher percentage of branded and private label roasted coffee.
Total operating expenses: Total operating expenses decreased by USD 619,127 to USD 3,252,235 for the three months ended July 31, 2020 from USD 3,871,362 for the three months ended July 31, 2019. Total operating expenses decreased by USD 853,598 to USD 10,530,647 for the nine months ended July 31, 2020 from USD 11,384,245 for the nine months ended July 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.
The Company had a net income of USD 391,324, or USD 0.07 per share basic and diluted, for the three months ended July 31, 2020 compared to net income of USD 111,494, or USD 0.02 per share basic and diluted for the three months ended July 31, 2019. The Company had net income of USD 289,994, or USD 0.05 per share basic and diluted, for the nine months ended July 31, 2020 compared to net income of USD 187,741, or USD 0.03 per share basic and diluted for the nine months ended July 31, 2019. The increase in net income was due primarily to the reasons described above.
«I’m pleased to report our second consecutive profitable quarter, as we earned USD .07 per share despite a 19.7 percent decline in sales as the impact of the COVID-19 pandemic continues to negatively impact sales of green coffee. Unlike last quarter, sales of our roasted private label products were unable to offset the lower sales of green coffee. Unfortunately, the surge in overall industry supermarket sales of coffee seen from March through June of this year, which saw overall industry coffee sales throughout the market spike by 8.1 percent year over year, did not continue into the summer months,» stated Andrew Gordon, President and CEO of Coffee Holding Company. «However, heading into the September through November period, which have traditionally been our strongest months from a sales perspective, I expect to see a buying surge from our supermarket customers, for both private label and branded products, as our customers’ inventory stockpiles have likely been reduced to pre-pandemic levels.
«In addition, as most states begin to ease restrictions on commercial and recreational activities, I believe we may begin to see increases in sales of green coffee, as our customers begin to reopen their restaurants, cafes and food service operations,» stated Mr. Gordon.
«Also, during this quarter, coffee prices recovered from their bear market levels below USD 1.00 per pound, and have subsequently traded to one year highs. We expect this to be a tailwind for us once our sales of green coffee normalize at these higher market levels and we will be able to sell from the favorable inventory position we acquired during the first half of 2020. We have also paid down our bank line by almost 50 percent during the quarter ended July 31, 2020, as we reduced inventory and were able to generate free cash from our profits,» added Mr. Gordon. «Further, this quarter we continued to have the negative, but non-cash, impact on our profits resulting from our previously established employee option plan. The effect this quarter was USD 189,769, or an impact on earnings of USD .03 per share.
«Lastly, in keeping pace with the times, both myself and my brother, our VP of Operations, will be taking pay cuts of between 5 percent to 15 percent, to become effective at the start of our fiscal year 2021. These pay cuts will ensure and promote continued equality within our organization as well as act as a direct cost reduction strategy which will offset any additional sales slowdown due to COVID-19,» concluded Mr. Gordon.
About Coffee Holding
Coffee Holding Co. 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.