Minneapolis / MN. (so) SunOpta Inc., a leading global company focused on plant-based foods and beverages and fruit-based foods and beverages, announced financial results for the third quarter ended September 30, 2023. Third quarter 2023 highlights:
- Revenues of USD 152.5 million increased 5.9 percent compared to USD 144.0 million in the year earlier period, driven by 5.5 percent volume growth.
- Gross profit margin was 13.3 percent on a reported basis. Excluding start-up costs, gross margin was 16.4 percent, down 140 basis points from 17.8 percent mainly due to the 150 basis point increase in depreciation related to new production equipment.
- Loss from continuing operations was USD 5.7 million compared to earnings of USD 2.4 million in the prior year period.
- Adjusted earnings from continuing operations attributable to common shareholders was USD 0.5 million or USD 0.00 per diluted common share, compared to adjusted earnings of USD 2.4 million or USD 0.02 per diluted common share in the prior year period.
- Adjusted Ebitda from continuing operations of USD 19.1 million, or 12.5 percent of revenues, compared to USD 17.7 million and 12.3 percent of revenues in the prior year period.
«We delivered strong volume-driven revenue growth in the third quarter from protein shakes, oat milk and snacks,» said Chief Executive Officer Joe Ennen. «In addition, the divestiture of our frozen fruit operations subsequent to the end of the quarter was a major strategic milestone that significantly optimizes our product portfolio for growth and profitability along with helping to reduce debt and strengthen our balance sheet, which creates opportunities for capital allocation beneficial to shareholders, including the potential adoption of a share repurchase program. Key growth initiatives continue to advance including market share gains with existing customers, new customers and total addressable market expansion. We are also in the process of replacing our existing asset-based lending arrangement, supplemented with third-party extended payable facilities and finance leases, with a term loan and revolver structure with limited finance leases, which we expect will be in place by the end of the year. With our strong foundation, leverageable platform and expanding capacity, we are confident in our direction and believe that we remain well positioned to deliver significant long-term sustainable growth and value for shareholders.»
Third Quarter 2023 Results
Revenues from continuing operations increased 5.9 percent to USD 152.5 million for the third quarter of 2023. The increase was driven by a favorable volume/mix which was up 5.5 percent and pricing which was up 0.4 percent. Volume/mix reflected volume growth from oat milks and creamers, 330-milliliter protein shakes and teas, as well as increased sales volumes for fruit snacks, partially offset by lower external sales of plant-based ingredients, due to increased internal demand for oat base and softer demand for almond beverages.
Gross profit was USD 20.3 million for the third quarter, compared to USD 25.1 million in the prior year period. As a percentage of revenues, gross profit margin was 13.3 percent compared to 17.4 percent in the third quarter of 2022, a decrease of 410 basis points, as reported. Excluding the impact of start-up costs related to the new plant in Midlothian, Texas, and new extrusion line at the fruit snacks facility in Omak, Washington, adjusted gross margin was 16.4 percent in the third quarter of 2023, compared to 17.8 percent in the third quarter of 2022. The 140-basis point decline in adjusted gross margin reflected the impact of incremental depreciation of new production equipment for capital expansion projects and higher manufacturing costs partially offset by a positive mix shift in plant-based ingredients with increased internal use.
Operating income was USD 1.5 million, or 1.0 percent of revenue in the third quarter of 2023, compared to operating income of USD 6.6 million, or 4.6 percent of revenues in the third quarter of 2022. The decrease in operating income was driven by lower gross profit, higher business development and employee severance costs in conjunction with the divestiture of Frozen Fruit and related consolidation of continuing operations, partially offset by lower employee incentive compensation accruals and variable stock-based compensation expenses.
Loss from continuing operations for the quarter ended September 30, 2023 was USD 5.7 million, compared with earnings of USD 2.4 million for the quarter ended October 01, 2022. Diluted loss per share from continuing operations attributable to common shareholders (after dividends and accretion on preferred stock) was USD 0.05 for the quarter ended September 30, 2023, compared with a diluted earnings per share of USD 0.01 for the quarter ended October 01, 2022.
Loss from discontinued operations was USD 140.1 million (diluted loss per share of USD 1.21) for the quarter ended September 30, 2023, compared with USD 14.3 million (diluted loss per share of USD 0.13) for the quarter ended October 01, 2022. The increase in the loss from discontinued operations reflected the estimated pre-tax loss on the divestiture of Frozen Fruit of USD 118.8 million recognized in the third quarter of 2023, compared with a pre-tax loss on the divestiture of Sunflower of USD 23.2 million recorded in the third quarter of 2022. In addition, the increase in the loss from discontinued operations reflected a period-over-period decrease in the gross profit of Frozen Fruit prior to the divestiture due to lower sales and production volumes as a result of softer retail consumption trends and lost foodservice distribution, together with inventory reserves recognized in connection with the divestiture.
Adjusted earnings in the third quarter of 2023 was USD 0.5 million or USD 0.00 per diluted common share, compared to adjusted earnings of USD 2.4 million or USD 0.02 per diluted common share in the third quarter of 2022.
Adjusted Ebitda from continuing operations was USD 19.1 million or 12.5 percent of revenue in the third quarter of 2023, compared to USD 17.7 million or 12.3 percent of revenue in the third quarter of 2022.