SWISS WATER DECAFFEINATED COFFEE INC. Financial and Operational Highlights for 2023
- During late Q3, commercial decaffeination on Swiss Water’s second production line in
Delta, BC started for the first time. This marked the completion of the consolidation of all production activities into one site, and the end of the transition away from the Company’s legacy production facility inBurnaby, BC . Production volumes and quality metrics on the new line steadily increased during the final three months of the year and enabled the delivery of a very strong fourth quarter.
- Total sales volume for the fourth quarter increased by 17%, when compared to Q4 2022. For the full year, volume decreased by 7%, primarily due to production constraints realized during the second and third quarters of 2023. This temporary limitation of capacity occurred as the Company vacated its old
Burnaby site due to the lease expiry there and before the full commissioning of its second line inDelta .
- Revenue for the quarter and year ended
December 31, 2023 , was$41.2 million and$166.3 million respectively. This represents a$2.8 million decrease in Q4 and a$10.7 million decrease for the full year when compared to the 2022 result. Volume decline and a drop in the NY ‘C’ contributed to the year-over-year drop in revenue.
- Swiss Water recorded a net income of
$1.0 million for the fourth quarter, up by$1.2 million from 2022. For the full year, a net loss of$0.5 million was generated, down by$2.9 million from net income of$2.4 million in 2022. The fourth quarter increase in net income was primarily due to higher volumes and efficiencies of scale. The drop in annual gross profit was due to the lower volume, as well as materially lower green coffee differential margins and a one-time incremental depreciation expense of$2.5 million related to the closure of the oldBurnaby facility. In addition, Swiss Water experienced a material increase in finance expenses due to higher borrowings. These negative factors were partially offset by gains on risk management activities, higher finance income, reduced losses on foreign exchange, and lower income tax expense.
- Fourth quarter adjusted EBITDA1 was
$5.0 million , an increase of$1.9 million over Q4 of 2022. For the full year, adjusted EBITDA was$13.4 million down by$3.3 million , when compared to 2022.
- The commissioning of Swiss Water’s second production line in
Delta led to an acceleration in raw materials usage and increased shipments of finished goods during the third and fourth quarters of the year. As a result, inventories closed 2023 at their lowest levels since Q1 of 2022 generating a material release of working capital back into the business. By the end of the fourth quarter, the value of inventory on hand had dropped to$30.3 million from$60.2 million atDecember 31, 2022 . This provided an opportunity for the Company to pay down some debt while leaving adequate inventory on hand to support operations and near-term growth.
- Swiss Water finished the year in a strong liquidity position with over
$11.0 million cash on hand in anticipation of the maturity of the$15.0 million debenture inOctober 2024 .
“During the third quarter of 2023, we launched our new second decaffeination line at our facility in
Operational Highlights
The following table shows changes in trading volumes during the three months and year ended
| Volumes | 3 months ended | Year ended |
| Change in total volumes | 17% | -7% |
| By customer type | ||
| Roasters | 15% | 2% |
| Importers | 20% | -17% |
| Specialty | 8% | -15% |
| Commercial | 26% | -1% |
- Total fourth quarter sales volume increased by 17% compared to the same period in 2022. The consolidation of production in
Delta was completed during the third quarter and, as a result, Swiss Water is no longer capacity constrained. This enabled the Company to maximize organic growth opportunities and clear a small backlog of orders with existing customers during the fourth quarter. For the full year, volume decreased by 7%, primarily due to the anticipated capacity limitations during the second and third quarters of 2023.
- During 2023 Swiss Water’s largest geographical market by volume was
the United States , followed byCanada and international markets. By dollar value, 50% of sales were to customers inthe United States , 29% were to Canadian customers, and the remaining 21% were to international customers. Overall, Swiss Water recorded sales of$166.3 million for the year which represents a$10.7 million , or 6%, decrease from the 2022 result. - Inventory levels fell during the second half of 2023 due to the consumption of the coffee inventories built up to bridge the production constraints Swiss Water experienced during the transition from
Burnaby and the consolidation of all processing inDelta . The Company remained focused on optimizing inventory levels and year-end volumes on hand were rebalanced at levels not recorded since the first quarter of 2021. Moving forward, Swiss Water is well positioned with green coffee inventory and can react to short-term demand increases in most coffee origins. Although the Company saw a marked reduction in the disruption to green coffee deliveries and supply chain bottlenecks during the year, some shipping delays and increased freight rates persist. As a recent example, the port strike inJuly 2023 affected more than 30 ports across BC, including thePort of Vancouver . Swiss Water is cautiously optimistic that any current and future disruptions will not have a material impact on its operations in 2024.
Financial Highlights
| In $000s except per share amounts | 3 months ended | Year ended | |||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||
| Revenue | $ | 41,237 | $ | 43,998 | $ | 166,277 | $ | 176,935 | |||||
| Gross profit | 6,916 | 5,759 | 18,798 | 26,088 | |||||||||
| Operating income | 3,372 | 2,792 | 5,630 | 13,381 | |||||||||
| Net (loss) income | 961 | (254 | ) | (528 | ) | 2,387 | |||||||
| Adjusted EBITDA1 | 5,008 | 3,087 | 13,354 | 16,659 | |||||||||
| Net (loss) income per share – basic2 | $ | 0.10 | $ | (0.03 | ) | $ | (0.06 | ) | $ | 0.26 | |||
| Net (loss) income per share – diluted2 | $ | 0.10 | $ | (0.03 | ) | $ | (0.06 | ) | $ | 0.26 | |||
1 Adjusted EBITDA is defined in the ‘Non-IFRS Measures’ section of the MD&A and is a “Non-GAAP Financial Measure” as defined by CSA Staff Notice 52-306.
2 Per-share calculations are based on the weighted average number of shares outstanding during the periods. Diluted earnings per share take into account shares that may be issued upon the exercise of warrants and RSUs.
- Revenue for the quarter and year ended
December 31, 2023 , was$41.2 million and$166.3 million respectively. This represents a$2.8 million decrease in Q4 and a$10.7 million decrease for the full year, when compared to the 2022 results. The drop in full-year revenue was an expected result of the temporary reduction in capacity Swiss Water experienced during the second and third quarters as it transitioned production out ofBurnaby . Higher than normal volumes shipped in the first and fourth quarters helped mitigate the impact of the temporary capacity constraint. A decline in the NY ‘C’ also contributed to the year-over-year drop in revenue.
- Gross profit for the fourth quarter was
$6.9 million , an increase of$1.2 million from Q4 of 2022. For the full year, gross profit of$18.8 million was down by$7.3 million from the 2022 level. The fourth quarter increase in gross profit was primarily due to higher volumes and efficiencies of scale leveraged from within Swiss Water’s production process. During Q4, the consolidation of all production into a single facility also started to generate savings from reduced building maintenance, utilities consumption, staffing, and transportation between locations. As anticipated, the year-over-year drop in gross profit was due to the temporary production constraint described above, as well as materially lower green coffee differential margins and the one-time incremental depreciation expense of$2.5 million . In addition, Swiss Water experienced inflationary pressures on variable production costs, including natural gas, carbon and labour, as well as on freight and storage costs.
- Net income of
$1.0 million for the fourth quarter was up by$1.2 million from 2022. For the full year, Swiss Water recorded a net loss of$0.5 million , down by$2.9 million from net income of$2.4 million in 2022. The differences in net income for both periods were driven by the same factors influencing gross profit, as described above, as well as a material increase in finance expenses due to higher borrowings. These negative factors were partially offset by gains on risk management activities, higher finance income, reduced losses on foreign exchange, and lower income tax expense.
- Fourth quarter adjusted EBITDA2 was
$5.0 million , an increase of$1.9 million over Q4 of 2022. For the full year, adjusted EBITDA was$13.4 million down by$3.3 million , when compared to 2022. The fourth quarter increase is reflective of high production volumes and scale efficiencies, while the decrease in annual adjusted EBITDA was primarily driven by lower volume due to the capacity constraint during the third quarter transition fromBurnaby , as well as reduced green coffee differential margins.
Adjusted EBITDA
Swiss Water defines Adjusted EBITDA as net income before interest, depreciation, amortization, impairments, share-based compensation, gains/losses on foreign exchange, gains/losses on disposal of property and capital equipment, fair value adjustments on embedded options, loss on extinguishment of debt, adjustment for the impact of IFRS 16 - Leases, and provision for income taxes and other non-cash gains related to a remeasurement of asset retirement obligation. The Company’s definition of Adjusted EBITDA also excludes unrealized gains and losses on the undesignated portion of foreign exchange forward contracts.
To help readers better understand Swiss Water’s financial results, the following table provides a reconciliation of net income, an IFRS measure, to Adjusted EBITDA as follows:
| In $000s | 3 months ended | Year ended | ||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||
| Net income (loss) | $ | 961 | $ | (254 | ) | $ | (528 | ) | $ | 2,387 | ||
| Income tax expense (recovery) | 430 | (130 | ) | (4 | ) | 819 | ||||||
| Income (loss) before tax | $ | 1,391 | $ | (384 | ) | $ | (532 | ) | $ | 3,206 | ||
| Loss (gain) on the embedded option | 126 | (513 | ) | (76 | ) | (513 | ) | |||||
| Gain on the extinguishment of debt | - | (583 | ) | - | (583 | ) | ||||||
| Finance income | (492 | ) | (174 | ) | (1,629 | ) | (509 | ) | ||||
| Finance expense | 2,326 | 1,577 | 8,265 | 5,567 | ||||||||
| Impairment of plant and equipment | - | 2,470 | - | 2,470 | ||||||||
| Loss on foreign exchange | 377 | 334 | 234 | 2,183 | ||||||||
| Depreciation and amortization | 1,752 | 1,686 | 9,188 | 7,018 | ||||||||
| Share-based compensation | 130 | 173 | 597 | 552 | ||||||||
| Other gains | - | - | (175 | ) | - | |||||||
| Unrealized loss (gain) on foreign exchange forwards | 38 | (796 | ) | 127 | 44 | |||||||
| Impact of IFRS 16 - Leases | (640 | ) | (703 | ) | (2,645 | ) | (2,776 | ) | ||||
| Adjusted EBITDA | $ | 5,008 | $ | 3,087 | $ | 13,354 | $ | 16,659 | ||||
Company Profile
Additional Information
A conference call to discuss Swiss Water’s recent financial results will be held on
- 1-888-506-0062 (toll-free) or
- 1-973-528-0011 (international);
- participant access code: 200437
A replay will be available through
- 1-877-481-4010 (toll-free) or
- 1-919-882-2331 (international);
- replay passcode: 50035
A more detailed discussion of Swiss Water Decaffeinated Coffee Inc.’s recent financial results is provided in the Company’s Management Discussion and Analysis filed on SEDAR+ and Swiss Water’s website (investor.swisswater.com).
For more information, please contact:
Phone: 604.420.4050
Email: investor-relations@swisswater.com
Website: investor.swisswater.com
Forward-Looking Statements
Certain statements in this press release may constitute “forward-looking” statements that involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. When used in this press release, such statements may include such words as “may”, “will”, “expect”, “believe”, “plan”, “anticipate” and other similar terminology. These statements reflect management’s current expectations regarding future events and operating performance, as well as management’s current estimates, but which are based on numerous assumptions and may prove to be incorrect. These statements are neither promises nor guarantees, but involve known and unknown risks and uncertainties, including, but not limited to, risks related to processing volumes and sales growth, operating results, the supply of utilities, the supply of coffee and packaging materials, supply of labour force, general industry conditions, commodity price risks, technology, competition, foreign exchange rates, construction timing, costs and financing of capital projects, a potential impact of the COVID-19 and/or other pandemics, global and local climate changes, changes in interest rates, inflation, transportation availability, and general economic conditions. The forward-looking statements and financial outlook information contained herein are made as of the date of this press release and are expressly qualified in their entirety by this cautionary statement. Except to the extent required by applicable securities law, Swiss Water undertakes no obligation to publicly update or revise any such statements to reflect any change in management’s expectations or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those described herein.
1 Adjusted EBITDA is defined in the ‘Non-IFRS Measures’ section of the MD&A and is a “Non-IFRS Financial Measure” as defined by CSA Staff Notice 52-306.
2 Adjusted EBITDA is defined in the ‘Non-IFRS Measures’ section of the MD&A and is a “Non-IFRS Financial Measure” as defined by CSA Staff Notice 52-306.
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