Staten Island / NY. (chc) Coffee Holding Company Inc. announced its operating results for the three months and nine months ended July 31, 2021:
Net sales: Net sales totalled USD 13,634,313 for the three months ended July 31, 2021, a decrease of USD 3,709,696, or 21.3 percent, from USD 17,344,009 for the three months ended July 31, 2020. Net sales totalled 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 a 35 percent decline in cases shipped from the Company’s largest production facility in Colorado, USD 2,500,000 decrease in sales from the Company’s Generations/Steep N Brew subsidiary, a decline in sales of green coffee during the first half of the year as many customers remained closed or impaired by continued Covid-19 restrictions.
Cost of sales: Cost of sales for the three months ended July 31, 2021 was USD 10,708,461, or 78.5 percent of net sales, as compared to USD 13,517,482, or 77.9 percent of net sales, for the three months July 31, 2020. Cost of sales for the nine months ended July 31, 2021 was USD 35,061,947, or 75.8 percent of net sales, as compared to USD 45,287,198, or 79.8 percent of net sales, for the nine months July 31, 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 cans.
Gross profit: Gross profit for the three months ended July 31, 2021 amounted to USD 2,925,852 or 21.5 percent of net sales, as compared to USD 3,826,527 or 22.1 percent of net sales, for the three months ended July 31, 2020. Gross profit for the nine months ended July 31, 2021 amounted to USD 11,174,761 or 24.2 percent of net sales, as compared to USD 11,438,188 or 20.2 percent of net sales, for the nine months ended July 31, 2020. The decrease in gross profit percentage during the first three months was attributable to decreased margins on roasted and branded products due to higher packaging and green coffee costs. The increase in gross profit percentage during the first nine months was attributable to increased margins on roasted and branded products and green coffee sales in the last quarter.
Total operating expenses: Total operating expenses decreased by USD 12,918 to USD 3,239,317 for the three months ended July 31, 2021 from USD 3,252,235 for the three months ended July 31, 2020. Total operating expenses decreased by USD 662,947 to USD 9,867,700 for the nine months ended July 31, 2021 from USD 10,530,647 for the nine months ended July 31, 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 continued increase in freight costs as the cost of truckload and «LTL» (less than full truckloads) deliveries to the Company’s largest wholesale customers was up approximately 20 percent year over year.
Net Income: We had a net loss of USD 127,051 or USD 0.02 per share basic and diluted, for the three months ended July 31, 2021 compared to net income of USD 391,324, or USD 0.07 per share basic and diluted for the three months ended July 31, 2020. We had net income of USD 907,305 or USD 0.16 per share basic and diluted, for the nine months ended July 31, 2021 compared to net income of USD 289,994, or USD 0.05 per share basic and diluted for the nine months ended July 31, 2020. The increase in net income was due primarily to the reasons described above. The net loss for the three months was driven primarily by losses out of the Company’s Generations subsidiary along with the non-cash cost of its stock option program.
«Although we are disappointed with the results of the last three months, we believe we are extremely well positioned entering the fourth quarter to achieve stronger results. Our sales for the third quarter were consistent with other companies during this time-frame as supermarkets continued to wind down inventory levels which were ramped up over the last year due to Covid-19 and supply chain concerns,» stated Andrew Gordon, President and CEO of Coffee Holding Company. «Thus, over the last three months our largest production facility in Colorado operated at less than 50 percent of last year’s third quarter production levels. In addition, our Steep N Brew reorganization has now finally been completed, but sales for the quarter were USD 1.4 million below last year’s level. Our loss of USD 0.02 per share was primarily the result of increased costs associated with the Steep N Brew reorganization as well as the non-cash costs related to stock option expense of approximately USD 190,000 for the quarter. Ebitda for the quarter was approximately USD 144,000 and for the nine month period was USD 2,449,000,» continued Gordon.
«Looking forward into the fourth quarter of 2021, we believe the rally in the coffee market, which began at the end of the third quarter and too late to have a significant impact on our third quarter results, will be a major tailwind for our sales of green coffee in the fourth quarter as well as for sales in fiscal 2022. Coffee prices are currently trading at six year highs and could potentially face additional upside risk, especially if the upcoming rainy season in Brazil does not materialize in a normal fashion,» stated Gordon. «In addition, we expect the price increases which we initiated to our wholesale and retail customers will begin taking effect during this fourth quarter and should have a positive impact on our performance. In addition, we believe sales from our CBD coffee items may begin to have a positive impact in the fourth quarter as we have begun fulfilling orders online and have also begun presentations of these items to some of our largest wholesale and retail customers where state regulations allow these products to be sold,» continued Gordon.
«With the manufacturing transition at Steep N Brew now complete, along with the savings and depreciation benefits we expect to receive from the purchase of our factory in Colorado during the quarter, we believe the savings from these initiatives will have a positive impact on our operating results in the fourth quarter of 2021. We believe due to the above factors, we expect to be in position to dividend out 33 percent of our net profits to our existing shareholders. We believe we have turned the corner as a company and look forward to reporting positive results in the future,» concluded Gordon.
