Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SunOpta Inc (STKL, Financial) reported a 21% volume-driven revenue growth, exceeding their guidance and marking the fourth consecutive quarter of such growth.
- The company achieved double-digit revenue growth from each of its top three customers, with the top five customers posting a 23% average year-over-year revenue growth.
- SunOpta Inc (STKL) increased unit output in its aseptic facilities by over 24% and in its fruit snacks facilities by more than 33% compared to the previous year.
- The company is benefiting from its Total Addressable Market (TAM) expansion into protein shakes and other plant-based beverage innovations, with the US shelf-stable plant-based milks market growing in the mid-single digits.
- SunOpta Inc (STKL) raised its 2024 revenue outlook for the second time this year, now expecting revenue in the range of $710 million to $730 million, representing growth of 13% to 16%.
Negative Points
- Despite strong volume growth, SunOpta Inc (STKL) experienced some gross margin degradation year over year due to short-term discretionary investments and manufacturing inefficiencies.
- The company faced challenges in its supply chain, which were highlighted by the rapid volume growth, necessitating short-term investments to address these inefficiencies.
- SunOpta Inc (STKL) reported a loss from continuing operations of $3.8 million, although this was an improvement from the previous year's loss of $11.7 million.
- The company is maintaining its outlook for adjusted EBITDA of $88 million to $92 million, despite the strong revenue growth, due to ongoing supply chain investments.
- SunOpta Inc (STKL) has a net leverage of 3.5 times and is focused on deleveraging to under 3 times EBITDA by the end of the year, which may limit immediate capital allocation flexibility.
Q & A Highlights
Q: Can you elaborate on the factors driving the strong sales performance this quarter?
A: Brian Kocher, CEO: The sales exceeded expectations due to a combination of factors, including successful new product launches, TAM expansion initiatives like protein shakes, and overall category growth. Importantly, the brands we support are outperforming their categories, which contributed to the broad-based volume growth.
Q: How is SunOpta managing to maintain strong performance in foodservice despite broader industry challenges?
A: Brian Kocher, CEO: Our diverse channel presence, including foodservice, club, and retail, helps mitigate broader industry challenges. Our top customers are experiencing double-digit growth, and our involvement in innovation and co-development with customers allows us to participate in high-growth areas like limited-time offers.
Q: What are the short-term investments impacting gross margins, and how confident are you in margin improvement by Q4?
A: Brian Kocher, CEO: The short-term investments are focused on improving supply chain efficiencies, such as downline efficiencies, equipment maintenance, and labor management. Despite some inefficiencies, we are confident in achieving margin improvements by Q4 due to these targeted investments and our ability to produce and deliver high volumes.
Q: How sustainable are the market share gains among your customers, and will this strength translate to tracked channels?
A: Brian Kocher, CEO: Our growth is driven by strong performance in untracked channels like foodservice and club, which are more significant for us. While tracked channels are important, our focus is on supporting winning brands and leveraging innovation to drive growth across all channels.
Q: With the current leverage target, how will SunOpta prioritize new CapEx investments versus returning capital to shareholders?
A: Brian Kocher, CEO: Our immediate focus is on executing growth, solving customer problems, and achieving our leverage target of under 3 times by year-end. Once achieved, we will evaluate opportunities, including returning capital to shareholders and making strategic investments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
