Westrock Coffee Company, an Arkansas-based integrated coffee, tea and extract services provider, has reported its financial results for the third quarter that ended on 30 September 2022. Sales increased 27% to a total of $230.3 million.
Growth in single-serve coffee volumes and green coffee price increases were the main drivers of the improvement. However, a 9% decline in Westrock Coffee’s roast and ground coffee volumes partially offset the increase in revenue.
The coffee roaster also reported a 7% increase in gross profits during the period to $41.1m, but the net loss grew to $13m from $3.9m in the same three months of 2021. However, that headline figure is not as bad as it looks when you dig into the details. Westrock booked the cost of an acquisition and took the decision to pay an interest penalty to reduce debt. Given the market conditions, this could be a smart move.
The company claimed that growing inflation had reduced consumer demand for its essential coffee and tea products while driving up manufacturing costs.
Our third quarter results again highlight the product mix shift we are seeing across our business.
Scott T. Ford, CEO and Co-founder, Westrock Coffee Company
The year-over-year growth in our single-serve cup volumes drove Adjusted EBITDA growth of 33% in the third quarter.
We held higher expectations for our core coffee and tea business but that was obviously impacted by the negative effects of inflation as both our customer volume demand and our manufacturing costs reflected the rapid acceleration of price increases in fuel, food, materials, and labour.
Fortunately, we were able to partially mitigate these impacts through operational efficiencies, and we expect to recapture many of these cost increases over the next several quarters as our cost pass-through contracts typically reset six months in arrears.
Highlights
- Consolidated net sales for the third quarter of 2022 increased 27% to $230.3 million.
- Consolidated gross profit grew 7% to $41.1 million.
- Net loss for the third quarter of 2022 was $13.0 million.
- Westrock Coffee’s Beverage Solutions segment contributed $173.5 million in net sales and $15.9 million of Adjusted EBITDA for the third quarter of 2022.
- This represents year-over-year net sales growth of 25%.
- Net sales in the Company’s Sustainable Sourcing & Traceability segment, net of intersegment revenues, grew to $56.8 million in the third quarter of 2022, compared to $42.4 million in the third quarter of 2021.
- Westrock Coffee’s SS&T segment contributed $2.0 million of Adjusted EBITDA in both the third quarter of 2022 and 2021.
- For the nine months ended September 30, 2022, the Company has generated $640.1 million in net sales, a net loss of $23.5 million, and $42.6 million of Adjusted EBITDA.
- That represents year-over-year growth of 26% in net sales and 29% in Adjusted EBITDA.
Conway Phase II Acceleration
- The Company announced that given the strong customer demand for the originally planned and announced Phase I capacity of its new Conway, Arkansas extract and RTD facility, the Company is accelerating capital spending.
- The plant is scheduled to enter commercial production in the first half of 2024.
Kohana Acquisition Highlights
- The acquisition of Kohana Coffee allows Westrock Coffee to accelerate the development, production, and distribution of RTD products in cans and multi-serve bottles to customers of both Kohana Coffee and Westrock Coffee.
- The owners of Kohana Coffee, Jonathan Reinemund and his father, Steve Reinemund, have become shareholders of Westrock Coffee. Steve Reinemund is the former CEO of PepsiCo, Inc.