SunOpta: Announces Second Quarter 2022 Financial Results

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 second quarter ended July 02, 2022. All amounts are expressed in U.S. Dollars and results are reported in accordance with U.S. GAAP, except where specifically noted.

Second quarter 2022 highlights:

• Revenues increased 20.4 percent to USD 243.5 million reflecting 31.0 percent growth in plant-based and 7.4 percent increase in fruit-based.
• Gross margin increased 130 basis points to 14.3 percent from 13.0 percent in the prior year, despite approximately 140 basis points of margin dilution from pricing to recover inflationary costs.
• Net earnings from continuing operations were USD 2.5 million compared to net loss of USD 0.9 million in the prior year.
• Adjusted earnings were USD 3.5 million or USD 0.03 per diluted common share in the second quarter of 2022, compared to adjusted earnings of USD 0.1 million or USD 0.00 per diluted common share in the second quarter of 2021.
• Adjusted Ebitda of USD 22.3 million, or 9.2 percent of revenues for the second quarter of 2022, was up 38.4 percent versus USD 16.1 million or 8.0 percent of revenues in the second quarter of 2021.

«Second quarter results were excellent, driven by strong revenue growth and our highest Adjusted Ebitda in company history. Revenues were up 20.4 percent, and Adjusted Ebitda increased 38.4 percent as we continued to leverage the power of our platform to accelerate growth and increase profitability,» said Joe Ennen, Chief Executive Officer. Plant-Based revenues surged 31.0 percent to USD 145.9 million, a new quarterly record reflecting the strength of our oat-based offering and double-digit increases in volume, mix and pricing. We saw growth in nearly every customer, every channel, every product type and in every go-to-market business, reflecting the strength of our SunOpta value proposition. In Fruit-Based, revenues increased 7.4 percent due to demand for fruit snacks and smoothie bowls along with higher price realization in frozen fruit. «While the macro environment remains challenging, we have been able to offset the majority of inflation with pricing and our productivity initiatives continue to gain traction. The actions we have taken over the past several years to optimize our product portfolio, streamline operations and aggressively expand capacity are driving significant and sustainable momentum across our business. With a leading share in the fastest growing categories and a strong pipeline of innovation, we are well positioned to realize our vision of Fueling the Future of Food. Our increased outlook for 2022 reflects the strength of recent results, and more importantly our confidence in our ability to continue delivering significant growth and increasing value for shareholders.»

Second Quarter 2022 Results

Revenues of USD 243.5 million for the second quarter of 2022 increased 20.4 percent compared to the second quarter of 2021 driven by 31.0 percent growth in Plant-Based Foods and Beverages and 7.4 percent growth in Fruit-Based Foods and Beverages. The increase in revenues reflected a 12.2 percent increase in pricing along with an 8.2 percent increase in volume/mix.

The Plant-Based Foods and Beverages segment generated revenues of USD 145.9 million, an increase of 31.0 percent compared to USD 111.4 million in the second quarter of 2021. Pricing increased 13.7 percent driven by actions to offset inflationary pressures, together with the pass-through effect of higher sunflower commodity pricing. Volume/mix was up 17.3 percent, reflecting growth in oat-based offerings, other plant-based beverages and teas.

The Fruit-Based Foods and Beverages segment generated revenues of USD 97.6 million, an increase of 7.4 percent compared to USD 90.9 million in the second quarter of 2021. Pricing increased 10.4 percent reflecting actions to offset inflationary pressures, while volume/mix declined 3.0 percent due to lower demand for frozen fruit and our portfolio rationalization efforts, offset by strong demand for fruit snacks and smoothie bowls.

Gross profit was USD 34.9 million for the second quarter, an increase of USD 8.6 million compared to USD 26.3 million in the prior year period. As a percentage of revenues, gross profit margin was 14.3 percent compared to 13.0 percent in the second quarter of 2021, an increase of 130 basis points. Gross profit in the Plant-Based Foods and Beverages segment increased USD 4.0 million to USD 23.9 million, while gross margin declined 150 basis points to 16.4 percent primarily due to the 215-basis point dilutive effect of pass-through pricing to recover cost inflation. Gross profit in the Fruit-Based Foods and Beverages segment increased by USD 4.5 million to USD 11.0 million and gross margin increased 410 basis points to 11.2 percent despite a 70-basis point impact from the dilutive effect of pass-through pricing to offset commodity cost inflation. Excluding the pricing effect, Fruit-Based gross margin benefited from portfolio rationalization and manufacturing consolidation.

Segment operating income was USD 8.1 million, or 3.3 percent of revenues in the second quarter of 2022, compared to segment operating income of USD 1.7 million, or 0.9 percent of revenues in the second quarter of 2021. The increase in segment operating income was due to higher gross profit, partially offset by a USD 1.6 million increase in SG+A expenses due to higher incentive accruals partially offset by employee compensation costs related to headcount reductions in frozen fruit operations, lower business development expenses and unfavorable foreign exchange impact related to Mexican operations.

Adjusted Ebitda was USD 22.3 million or 9.2 percent of revenues in the second quarter of 2022, compared to USD 16.1 million or 8.0 percent of revenues in the second quarter of 2021.

Earnings attributable to common shareholders for the second quarter of 2022 was USD 0.9 million, or USD 0.01 per diluted common share, compared to a loss of USD 1.7 million, or (USD 0.02) per diluted common share during the second quarter of 2021.

Adjusted earnings in the second quarter of 2022 was USD 3.5 million or USD 0.03 per common share, compared to adjusted earnings of USD 0.1 million or USD 0.00 per common share in the second quarter of 2021.

Balance Sheet and Cash Flow

As of July 2, 2022, SunOpta had total assets of USD 843.9 million and total debt of USD 296.5 million compared to total assets of USD 755.1 million and total debt of USD 224.6 million at year end fiscal 2021. During the second quarter of 2022, cash used in operating activities was USD 2.5 million compared to cash used in operating activities of USD 39.1 million during the second quarter of 2021. Investing activities of continuing operations consumed USD 34.1 million of cash during the second quarter of 2022 versus USD 32.4 million in the prior year, primarily driven by the new plant construction in Midlothian, Texas which is expected to come online in late 2022.

2022 Outlook

We are raising our previously provided outlook for fiscal 2022, including:

(USD in millions)		Prior Outlook			Revised Outlook
Revenue	USD	890 to 930		USD	930 to 960
Adjusted Ebitda		67 to 75			72 to 78
Revenue growth		10 percent to 14 percent			14 percent – 18 percent
Adjusted Ebitda growth		10 percent to 24 percent			19 percent to 28 percent