Stock in Focus: SunOpta Inc. (NASDAQ: STKL)

On Monday, Shares of SunOpta Inc. (NASDAQ: STKL) rose 1.80% to $3.40. The stock traded total volume of 296,850 shares lower than the average volume of 694.47K shares.

SunOpta Inc. (STKL) (SOY.TO), a leading global company focused on organic, non-genetically modified and specialty foods, recently declared financial results for the fourth quarter ended December 29, 2018.

Fourth Quarter 2018 Highlights:

  • Revenues of $320.50M for the fourth quarter of 2018, contrast to $292.40M in the fourth quarter of 2017, a boost of 9.6%. Adjusted for changes in foreign exchange, commodity prices, and the discontinuation of flexible resalable pouch and nutrition bar products, revenues grew 16.0% during the fourth quarter.
  • Loss attributable to common shareholders of $99.00M or $1.13 per common share in the fourth quarter of 2018, contrast to a loss attributable to common shareholders of $119.40M or $1.38 per common share in the fourth quarter of 2017. The losses in the fourth quarter of 2018 and 2017 included non-cash goodwill impairment charges of $81.20M and $115.00M respectively associated with the healthy fruit platform.
  • Adjusted loss of $9.30M or $0.11 per common share during the fourth quarter of 2018, contrast to adjusted loss of $8.80M or $0.10 per common share during the fourth quarter of 2017.
  • Adjusted EBITDA of $9.10M or 2.8% of revenues for the fourth quarter of 2018, as compared to $9.40M or 3.2% of revenues in the fourth quarter of 2017.
  • Loss attributable to common shareholders, Adjusted loss and Adjusted EBITDA for the fourth quarter of 2018 included a timing-related, pre-tax gain of $0.30M recognized in cost of goods sold, regarding the net impact of foreign exchange and commodity price movements in the quarter, on certain contracts within the European-based operations of the Global Ingredients segment, contrast to a pre-tax gain of $0.80M in the fourth quarter of 2017.

Fourth Quarter 2018 Results:

Revenues for the fourth quarter of 2018 were $320.50M, a boost of 9.6% contrast to $292.40M in the fourth quarter of 2017. Excluding the impact on revenues for the fourth quarter of 2018 of changes in commodity-related pricing, foreign exchange rates and the impact of suspended flexible resealable pouch and nutrition bar products, revenues in the fourth quarter of 2018 increased by 16.0% contrast with the fourth quarter of 2017.

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The Global Ingredients segment generated revenues from external customers of $139.90M, a boost of 10.3% contrast to $126.90M in the fourth quarter of 2017. Excluding the impact on revenues of changes in commodity-related pricing and foreign exchange rates, Global Ingredients revenue in the fourth quarter increased 15.5%. Excluding the effect of commodity prices and foreign exchange, sales of internationally-sourced organic ingredients grew 17.1% during the quarter, mainly driven by increased demand for cocoa, fruits, oils and coffee and sales of domestically-sourced ingredients grew 11.3% during the quarter, reflecting increased sales of organic feed, and specialty corn and soy, offset by continued soft market conditions for sunflower.

The Consumer Products segment generated revenues of $180.60M during the fourth quarter of 2018, a boost of 9.1% contrast to $165.50M in the fourth quarter of 2017. Excluding the impact of commodity-related pricing and sales of resealable pouch and nutrition bar products, Consumer Products revenue in the fourth quarter increased by 16.3%. The growth mainly reflects a 17.8% increase in the Healthy Beverage platform consisting of higher sales of aseptic non-dairy products and the expansion of broth products, combined with a 17.3% revenue increase in the Healthy Fruit platform because of distribution gains with key retail customers and timing of deliveries to a large food service customer.

Gross profit was $21.30M for the quarter ended December 29, 2018, a decrease of $7.00M contrast to $28.30M for the quarter ended December 30, 2017. Consumer Products accounted for $5.00M of the decrease in gross profit, mainly as a result of planned price reductions and unfavorable product mix for frozen fruit, combined with $3.10M of inventory write-downs due in part to a change in expected use of aged stock, and $2.00M of costs related to the commercialization of new beverage products. These factors were partially offset by increased sales volume and productivity-driven cost savings for aseptic beverages, and operational savings from the discontinuance of flexible resealable pouch and nutrition bar products. Global Ingredients accounted for $1.90M of the decrease in gross profit, which was mostly because of $0.70M of start-up costs associated with new roasting equipment and second organic cocoa processing line, a $0.50M net reduction in commodity and foreign exchange gains related to organic cocoa hedging activities and marked-to-market measurements on certain contracts within the European-based operations of the international organic ingredient platform, and reduced pricing spreads and higher storage costs for certain internationally sourced organic ingredients.

Segment operating loss was $6.90M, or 2.2% of revenues in the fourth quarter of 2018, contrast to $3.90M, or 1.3% of revenues in the fourth quarter of 2017. The increase in operating loss year-over-year was mainly attributable to $7.00M lower gross profit, partially offset by a $2.30M reduction in SG&A because of a reduction in consulting and employee related costs, as well as a $1.60M decrease in foreign exchange losses. Operating loss would have been $0.90M, or 0.3% of revenues, excluding the same items impacting gross margin as well as $0.40M of SG&A costs associated with new product commercialization and a $0.20M gain from the reversal of formerly recognized stock-based compensation for cancelled performance share units. Operating loss would have been $1.10M in the fourth quarter of 2017 excluding the item impacting gross margin as well as $2.10M of SG&A costs associated with consulting fees, temporary labor, recruitment, relocation and retention costs all related to the Value Creation Plan and a $0.50M gain from the reversal of formerly recognized stock-based compensation for cancelled performance share units.

Adjusted EBITDA was $9.10M or 2.8% of revenues in the fourth quarter of 2018, contrast to $9.40M or 3.2% of revenues in the fourth quarter of 2017. Excluding flexible resealable pouch and nutrition bar operations, adjusted EBITDA for the quarter ended December 29, 2018 was $9.10M, contrast with $10.10M for the quarter ended December 30, 2017.

During the fourth quarter of 2018, the Company recognized non-cash goodwill impairment charge of $81.20M to write-off the remaining goodwill balance related to the healthy fruit platform, contrast to a $115.00M non-cash goodwill impairment charge recognized in the fourth quarter of 2017, as a result of lower than expected sales and operating performance in frozen fruit.

The Company stated a loss attributable to common shareholders for the fourth quarter of 2018 of $99.00M, or $1.13 per common share, contrast to $119.40M, or $1.38 per common share during the fourth quarter of 2017. Adjusted loss in the fourth quarter of 2018 was $9.30M or $0.11 per common share, contrast to $8.80M or $0.10 per common share in the fourth quarter of 2017.

Balance Sheet and Cash Flow:

At December 29, 2018, SunOpta’s balance sheet reflected total assets of $896.70M and total debt of $509.20M. During the fourth quarter of 2018, cash offered by operating activities was $5.10M, contrast to $48.90M during the fourth quarter of 2017. The $43.80M decrease in cash offered by operating activities reflects a boost in accounts receivable as a result of higher sales, higher inventory levels, mainly of organic ingredients to support expected 2019 sales volume and a decrease in operating performance. Cash used in investing activities during the fourth quarter of 2018 was $6.70M, contrast to $16.80M in the prior year period. The decrease in cash used reflected a lower net level of capital expenditures as the fourth quarter 2017 spend included cash used to buyout leases associated with exited lines of business.

STKL has the market capitalization of $301.65M and its EPS growth ratio for the past five years was -59.90%. The return on assets ratio of the Company was -12.00% while its return on investment ratio stands at -11.40%. Price to sales ratio was 0.24 while 62.50% of the stock was owned by institutional investors.

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