SunOpta: Announces Q2 Fiscal 2021 Financial Results

Minneapolis / MN. (so) SunOpta Inc., a leading global company focused on plant-based foods and beverages, fruit-based foods and beverages, and organic ingredient sourcing and production, announced financial results for the second quarter ended July 03, 2021. All amounts are expressed in U.S. dollars and results are reported in accordance with U.S. GAAP, except where specifically noted.

Second Quarter 2021 Highlights:

  • Revenues of USD 202.3 million for the second quarter of 2021 increased 9.7 percent, reflecting 21.4 percent growth in plant-based partially offset by an anticipated decline in fruit-based, of 1.9 percent in the second quarter.
  • Gross margin increased 40 basis points to 13.0 percent from 12.6 percent in the prior year.
  • Loss from continuing operations was USD 0.9 million compared to a loss from continuing operations of USD 5.1 million in the prior year. Loss from continuing operations included USD 4.1 million of other expenses in the second quarter related to the previously announced exit from the Company’s South Gate, California fruit ingredient processing facility.
  • Adjusted earnings attributable to common shareholders was USD 0.1 million or USD 0.00 per diluted common share in the second quarter of 2021, compared to an adjusted loss of (USD 7.9) million or (USD 0.09) per diluted common share in the second quarter of 2020.
  • Adjusted Ebitda of USD 16.1 million, or 8.0 percent of revenues for the second quarter of 2021, up 60.8 percent versus USD 10.0 million or 5.4 percent of revenues in the second quarter of 2020.

«We delivered another strong performance; with second quarter Adjusted Ebitda increasing over 60 percent fueled by 21 percent revenue growth in plant-based. Strong execution of our strategies has resulted in Ebitda growth of over 50 percent in five of the last six quarters. Volume gains, mix, insulated contract pricing and our continued focus on productivity initiatives helped to drive a 40 basis point improvement in gross margin. This improvement overcame a volatile commodity environment, while also absorbing around 110 basis points of additional depreciation expense from capacity expansions and supply chain cost inflation. We continue to see strong flow-through with a 260 basis point increase in the Adjusted Ebitda margin,» said Joe Ennen, Chief Executive Officer. «In our plant-based business unit our three-pronged go-to-market strategy is amplifying our growth rate as we saw solid gains in each of co-manufacturing and own brand portfolio, more than offsetting retail private label declines from the Covid-19 rebalancing of demand. While plant-based remains our primary growth driver, we are encouraged by recent activity in our fruit snacks business, where demand has been very strong. We continue to be optimistic about the long-term momentum in plant-based as the strength of our platform continues to produce growth for existing customers as well as attracting new customers.» Ennen continued, «I am pleased to announce that we are in the final stages of negotiating a lease for the construction of a new mega facility in the Dallas-Fort Worth area. At 275,000 square feet in size, this greenfield facility is by far the largest capex project we have undertaken and will support significant long-term growth in our plant-based business. We expect the facility to be operational by late 2022.»

Second Quarter 2021 Results

Revenues of USD 202.3 million for the second quarter of 2021 were up 9.7 percent compared to the second quarter of 2020 as the 21.4 percent growth in Plant-Based Foods and Beverages was partially offset by a 1.9 percent decrease in Fruit-Based Foods and Beverages.

The Plant-Based Foods and Beverages segment generated revenues of USD 111.4 million during the second quarter of 2021, an increase of 21.4 percent compared to USD 91.7 million in the second quarter of 2020. Strong demand for our oat-based product offerings remained a key growth driver and we realized gains in foodservice reflecting the lifting of restrictions related to Covid-19. In addition, revenues from the recent acquisition of the Dream and WestSoy brands contributed USD 4.7 million to the second quarter. Partially offsetting these factors was normalization of at-home consumption, which resulted in anticipated softer retail volumes for plant-based beverages and everyday broth offerings.

The Fruit-Based Foods and Beverages segment generated revenues of USD 90.9 million during the second quarter of 2021, a decrease of 1.9 percent compared to USD 92.7 million in the second quarter of 2020. The decline was attributable to lower retail volumes in frozen fruit stemming from normalization of at-home consumption compared to elevated Covid-19 driven levels in the prior year, the planned rationalization of lower-margin SKUs and customers, and industry-wide raspberry and blackberry supply constraints. Rebounding demand and new customers drove strong volume growth in fruit snacks, which, along with rising foodservice demand, partially mitigated the declines in retail frozen fruit.

Gross profit was USD 26.3 million for the second quarter, an increase of USD 3.1 million compared to USD 23.3 million in the prior year period. As a percentage of revenues, gross profit margin was 13.0 percent in the second quarter of 2021 compared to 12.6 percent in the second quarter of 2020, an increase of 40 basis points. The Plant-Based Foods and Beverages segment accounted for USD 3.2 million of the increase in gross profit, reflecting higher volumes in plant-based beverages and ingredients plus contributions from Dream and WestSoy, partially offset by higher depreciation and transportation expenses. Gross profit in the Fruit-Based Foods and Beverages segment decreased by USD 0.1 million in the quarter as lower volumes of retail frozen fruit, higher strawberry prices, foreign exchange impacts and increased transportation costs were largely offset by fruit snack volume growth and corresponding plant utilization increases, volume growth of fruit-based toppings in advance of our Southgate processing facility closure, and productivity improvements.

Segment operating income was USD 1.7 million, or 0.9 percent of revenues in the second quarter of 2021, compared to segment operating loss of (USD 0.4) million, or (0.2 percent) of revenues in the second quarter of 2020. The increase in operating income year-over-year was primarily attributable to higher gross profit partially offset by an increase in SG+A stemming from transition and integration costs related to the acquisition of Dream and WestSoy.

Adjusted Ebitda was USD 16.1 million or 8.0 percent of revenues in the second quarter of 2021, compared to USD 10.0 million or 5.4 percent of revenues in the second quarter of 2020.

Loss from continuing operations attributable to common shareholders for the second quarter of 2021 was USD 1.7 million, or USD 0.02 per diluted common share, compared to a loss of USD 7.7 million, or USD 0.09 per diluted common share during the second quarter of 2020. The loss from continuing operations in the second quarter included other expenses of USD 4.1 million related to the Company’s decision to exit its fruit ingredient processing facility and transition certain production to other facilities.

Adjusted earnings in the second quarter of 2021 was USD 0.1 million or USD 0.00 per common share, compared to an adjusted loss of (USD 7.9) million or (USD 0.09) per common share in the second quarter of 2020.

Balance Sheet and Cash Flow

At July 03, 2021, SunOpta had total assets of USD 742.2 million and total debt of USD 206.2 million compared to total assets of USD 909.4 million and total debt of USD 448.9 million a year earlier, primarily reflecting the sale of the Global Ingredients business and improved operating performance. During the second quarter of 2021, cash used in operating activities was USD 39.1 million from continuing operations compared to cash provided by operating activities of USD 0.5 million during the second quarter of 2020, primarily reflecting increased inventories due to seasonal fruit purchases, replenishing a shortfall in frozen strawberry supply in 2020 related to Covid-19-driven demand for fresh fruit, together with the impacts of higher commodity prices and lower retail sales demand for frozen fruit in 2021. Investing activities from continuing operations utilized USD 32.4 million of cash during the second quarter of 2021 versus USD 5.9 million in the prior year, primarily due to the acquisition of Dream and WestSoy and significant investments to support continued strong growth in Plant-Based Foods and Beverages.