SunOpta Inc.(STKL)2019年第一季度收益电话会议记录

小丑帽的标志与思想泡泡与它下面的单词'傻瓜成绩单'

图片来源:Motley Fool。

SunOpta,Inc。(纳斯达克股票代码:STKL)
2019年第一季度收益电话会议
2019年5月8日,美国东部时间上午7点

内容:

  • 准备好的备注
  • 问题和解答
  • 致电参与者

准备备注:

操作者

早上好,欢迎参加SunOpta第一季度财政2019财年电话会议。到目前为止,每个人都应该可以访问今天早上发布的盈利新闻稿,可以在SunOpta网站www.sunopta.com上的“投资者关系”页面上找到。此电话正在进行网络直播,其转录也将在公司网站上公布。

提醒一下,请注意,随后准备的备注包含前瞻性陈述,管理层可能会根据您的问题提出更多前瞻性陈述。这些陈述并不保证未来的表现,因此不应过分依赖它们。我们将向您介绍SunOpta今天上午发布的新闻稿中包含的所有风险因素。该公司的年度报告,以10K表格和其他文件提交给美国证券交易委员会,以便更详细地讨论可能导致实际结果与这些预测产生重大差异的因素,以及任何其他前瞻性陈述。除非适用的安全法律要求,否则公司不承担公开更正或更新演示期间所做的前瞻性陈述以反映未来事件或情况的义务。

最后,我们想提醒听众,公司可以在电话会议期间参考某些非GAAP财务指标。这些非GAAP财务指标的调整包含在公司今天上午的新闻稿中。另请注意,除非另有说明,否则今天以美元讨论的所有数字有时会四舍五入到最接近的百万。现在,我想将会议转交给SunOpta的首席执行官Joe Ennen。

Joseph D Ennen – 首席执行官

早上好;谢谢你今天加入我们。随我而来的是我们的首席财务官Rob McKeracher。首先,让我说我加入SunOpta作为新CEO是多么激动。虽然距离我开始只有一个多月的时间,但我对所见过的人,我见过的操作以及我从客户那里收到的反馈都印象深刻。

当我有机会领导SunOpta时,我立即被公司作为健康和保健食品领域的领导者的强势地位所吸引。我们专注于采购有机和非转基因成分,在我们的无菌设施中生产创新的植物饮料,并通过我们的水果平台实现健康饮食,我看到一家公司与我对健康和健康的热情相吻合。凭借在品牌和自有品牌方面30年的食品行业经验,我作为Safeway自有品牌组织的前任领导者的独特经验,我很高兴与我们的客户和我们的团队合作,加快创新步伐,并为股东提供更持久的改善结果。

鉴于我们与CPG行业的主要宏观趋势保持一致,我决定加入SunOpta实在是一个明智的选择。我想花几分钟为你解开这些理由,这样你就可以理解我在公司看到的东西,以及为什么我对未来充满信心。这些趋势是:第1,自有品牌的快速增长。随着零售商希望通过自己的品牌提升价值和建立忠诚度,私人品牌继续在整个零售业中赢得胜利。 SunOpta是美国许多领先零售商的合作伙伴。我相信自有品牌将继续从大型全国CPG品牌中获取份额,我们有能力与这些零售合作伙伴共赢。

第二,有机产品的持续增长,以及我们在该市场的强势地位。优质有机产品也继续占据全国大型CPG品牌的市场份额。 SunOpta的功能非常适合这些健康的食品和饮料趋势。我预计这些产品将继续占据市场份额,我们有望成为合约制造商和配料供应商。

第三,转向以植物为基础的饮料。由于消费者因品味,健康和可持续性原因而远离传统乳制品,植物饮料一直处于长期上涨轨道。我们的全国生产设施网络和产品组合,包括燕麦,杏仁,椰子,大麻和豆奶 – 我们在这项业务中获胜。我们计划继续进行投资,以巩固我们作为植物饮料的领先供应商的地位。

第四,吃零食的盛行。仅在美国,消费者现在花费近750亿美元购买休闲食品,我们拥有一系列更健康的产品,这些产品采用传统和有机水果以及其他植物成分制成。再一次,在小吃方面,我们在不断增长的市场中拥有时尚产品。我们最近的结果非常强劲,但更重要的是,我认为有很大机会扩展这项业务。

第五,水果是健康饮食的基础。我们的冷冻水果业务与消费者希望在他们的饮食中获得更多水果的愿望保持一致。冷冻水果为消费者提供了更高的便利性,更高的价虽然我们显然有工作要做,以改善我们冷冻水果业务的表现,但该类别已恢复增长。

最后,认证有机成分的持续增长是SunOpta为未来做好准备的原因。几十年来,SunOpta的全资子公司Tradin Organic一直在世界各地建立关系并建立计划来采购经过认证的有机成分。今天的消费者提出的问题是,“我的食物来自哪里?它是真实的,是否可持续种植?农民是否得到公平对待?”

Tradin一直是解决这些重要问题的先驱。从我们在塞拉利昂与有机可可种植者合作,到印度尼西亚,我们与农民合作建立有机椰子产品供应,到埃塞俄比亚,我们现在开创了有机鳄梨油的生产,Tradin建造了一个独特的,绝缘的商业模式始终处于全球有机诚信和质量的最前沿。自2008年SunOpta收购后,Tradin的收入增长了五倍,我们将继续建立并利用这些专业知识创造新的有机供应来源,并推动增长。

SunOpta在这六个宏观趋势中的一致性和能力使我有信心加入公司,成为下一任CEO。根据我对该角色六周的观察,我更有信心我们有能力取胜。当然,当我说公司没有利用这些平台的优势和定位来推动一致的结果时,股东也不会感到惊讶。在扭转局面中发展一致性可能很困难,但我们必须发展一种努力实现一致,有利可图的增长的文化。为实现这一目标,我们需要更专注,更灵活,更具创新性,同时保持对食品安全和客户服务的强烈关注。

如您所知,在2016年第四季度,该公司推出了其价值创造计划,作为一项基础广泛的计划,旨在通过对公司人员和资产的战略投资来增加股东价值。价值创造计划,投资组合优化,卓越运营,市场有效性和流程可持续性四大支柱继续为我们改善运营绩效和推动长期可持续增长的努力提供框架。

公司在过去两年中为扭亏为盈的努力在几个方面都很明显,特别是在食品安全和质量,员工安全和客户服务等基本要求方面。在投资组合优化支柱下,SunOpta已经出售,合并和退出了几项未能推动长期价值的业务。 SunOpta还对其无菌工厂业务和我们的有机原料采购业务进行了战略投资。我们将继续评估我们的投资组合,以确保我们做出能够带来股东价值的最佳投资决策。

在卓越运营支柱方面,我们对生产力和持续改进的关注已经融入到组织中,现在已成为员工每天工作的心态的一部分。

关于上市效率支柱,在过去两年中,我们重建了销售和营销组织,并使公司恢复了收入增长。我打算利用迄今为止在价值创造计划下完成的所有基础工作,为所有利益相关者带来持续的,有利可图的增长,但赢得的不仅仅是计划。它也是关于文化的,我们需要正确的文化属性来赢得业务,在这方面,我们将建立一个更快,更敏捷,第二的组织,专注于最重要的优先事项和第3号一样,对客户狂热,并对机遇说“是的”。

展望未来,我们有三个战略重点:第一,投资组合优先排序;第二,以客户为中心的创新速度;第三,冷冻水果的生产力和价格实现。在投资组合优先排序中,关键是我们将公司定位在可以出类拔萃的类别中。我们计划采取更有针对性的方法来评估我们想要的业务,更重要的是,为我们将如何取得成功制定明确的长期差异点。

正如您在过去看到的那样,根据价值创造计划,我们将投资于公司拥有结构性权利的部分业务,并退出不具备的结构权利。我们打算以更快的速度和决断力来行动这些机会,同时优先考虑资本和人力资源,专注于提供最佳回报的机会。

到2019年第三季度,我们的Allentown饮料工厂增加了新的灌装和工艺能力和能力,这是优先投资的一个很好的例子,旨在利用SunOpta在植物饮料领域的定位。这项投资使我们的燕麦奶业务得以进一步发展,我们正积极制定下一步饮料领域的投资策略。

Tradin最近收购了一家小型有机石油公司,扩大了其业务两端的业务范围:新的有机供应来源以及更广泛的高端专业市场准入。此次收购也是对我们定位于长期成功的业务领域进行优先投资的一个很好的例子。

虽然我只是在公司的第六周,但我很清楚,SunOpta还没有充分利用Tradin所支持的独特的字段到表格功能。 Tradin还没有完全融入到我们如何采购,构建和商业化新产品的过程中,而且必须改变。

关于以客户为中心的创新速度,正如我已经评测过的那样,零售商,食品服务运营商和快速增长的敏捷品牌食品公司是当今食品和饮料的主要增长引擎。 SunOpta具有独特的优势,可为这些公司提供广泛的解决方案。我们的创新能力,以及客户所需的价值,以发展自己的品牌,结合我们的不可知的渠道导向,包括餐饮服务,使我们获胜。特别是,我们处于以植物为基础的食品趋势的最前沿,例如燕麦饮料,我们将其视为非乳制品的下一个重要因素。综合起来,我们的研发能力,多渠道类别见解以及Tradin对有机产品最新趋势的远见卓识为SunOpta提供了一个坚实的平台,为我们的客户带来增值创新。

我们的第三个优先事项是水果定价的生产力,主要中心化在增加冷冻水果的毛利,这是公司今天推动EBITDA表现改善的最大机会。正如我们所讨论的那样,由于业务的季节性和正在进行的资本项目将加速我们降低成本的努力,将健康水果业务恢复到历史边缘仍然是一个为期两年的旅程。然而,由于我们已经评估了当前的业务状况,很明显公司需要更好地管理冷冻水果市场的定价动态。这意味着平衡供应链的复杂性,制造成本和竞争压力,同时执行既满足客户需求又满足SunOpta需求的合约。重要的是,创新还需要成为我们整体水果战略的重要组成部分,因为我们正在寻求为我们加工的水果增加价值的方法。我想向您保证,我们将继续致力于这项业务,我们正在建立能力,成为冷冻水果业务的成功长期参与者。

在我继续评估SunOpta的业务和投资组合时,我计划在未来分享更多关于我们战略重点的想法。现在,让我讨论消费产品和全球成分细分市场的第一季度商业亮点,然后再将电话交给Rob来完成剩下的财务。

在2019年第一季度,我们产生了3.05亿美元的收入,在调整后的基础上,同比增长率为6.2%。这一增长主要得益于我们的消费品和全球成分细分市场。在消费品方面,我们在健康饮料平台上实现了持续增长,反映了整个企业的销量增长。在调整后的基础上,反映与我们的一个客户的共同制造协议中的利润中性变化,健康饮料的收入在本季度增长了6%。展望未来,我们仍有望在2019年第三季度初期在阿伦敦增加产能,并开始发货。

健康零食平台也取得了强劲的成果,因为本季度客户促销活动已经恢复。根据去年袋子和营养棒运营的退出调整,健康零食平台的收入增长了13.6%。正如我之前所说,我们相信我们的零食平台有进一步创新的大量机会,优质的有机水果和蔬菜零食产品可满足外出和午餐盒零食的需求。

健康水果平台的收入在调整后基本持平,反映零售量增加,部分被墨西哥收获后期草莓短缺的影响所抵消,以及水果基地和浇头的销售额下跌,主要服务于成分食品服务顾客。正如该公司上个季度提到的那样,由于寒冷潮湿的天气,墨西哥中部的冷冻浆果出现延迟。该地区的一些农民经历了作物损失,原材料接收的总体延迟导致采购价格上涨,生产水平降低,因此供应链在满足客户需求方面面临挑战。我们一直在积极采取措施弥补墨西哥的不足,并尽量减少2019年的财务影响。

作为加州冷冻包季节的最新消息,天气也因天气而延迟;然而,在这一点上,现场定价仍然符合预期,我们希望充分利用我们的种植者关系,以确保按计划盘点季节。虽然没有人想谈论天气如何对他们的业务产生负面影响,但在这项业务中却是如此。然而,我们控制的有两个动态没有得到很好的管理:首先,我们在2018年的定价非常积极,因此,我们有一些客户的定价不可持续。其次,我们没有在生产力方面进行足够快速的投资来提高工厂的效率。解决这些问题,并将冷冻水果恢复到健康的利润率仍然是该组织的首要任务。

通过自动化项目降低成本的第一阶段正在按计划进行,所有新设备都已在加州工厂安装和测试。如前所述,我们预计这种生产力的好处将在第四季度开始流入损益表。在定价方面,我们与客户积极对话,建立强化灵活的定价机制,使我们能够更好地管理商品的波动性。

转向全球成分,销售额增长近两位数,达到9.7%,调整商品和货币变化,以及大豆和玉米业务的销售。这种增长主要得益于有机水果和蔬菜,有机可可和有机油的持续强劲表现。最近收购Sanmark进一步增强了我们在有机油方面的采购能力,并为我们在化妆品行业创造了新的销售渠道。它还与我们正在埃塞俄比亚建立有机鳄梨油业务的项目相辅相成。鳄梨项目正在按计划进行;该设施的建设正在进行中,加工设备在该国,我们的种植者团队正在努力为供应链布线。

在国内,向日葵和烘焙原料业务的收入在调整后下跌了9.8%,主要反映了对壳内和向日葵产品的需求下跌,部分被烘焙零食量增加所抵消。

现在,让我把电话转到Rob,提供财务细节。抢?

Robert McKeracher – 副总裁兼首席财务官

谢谢,乔。考虑到乔在本季度对商业活动和收入的讨论,让我走过毛利和剩余的损益表。我还将介绍我们的资产负债表和现金流量结果。

第一季度的毛利润为2820万美元,比截至2018年3月31日的季度的3370万美元减少了550万美元。打扰一下。消费品占毛利减少370万美元,反映了墨西哥中部与天气有关的延迟对水果季节的影响。延迟导致商品价格上涨,原因是来自墨西哥的冷冻水果供应短缺,由于产量下跌导致的产量差异,与作物质量有关,大宗股票的返工以及替代成本较高的美国种植产品,以及墨西哥冷冻水果设施的工厂利用率。

2019年第一季度与天气相关的延迟对毛利的负面影响估计为160万美元。此外,由于需求减少,毛利减少反映出水果成分的工厂利用量下跌。这些因素部分抵消了健康饮料和零食平台对提高工厂利用率的有利影响,因为更高的产量以满足销售需求和生产率驱动的成本节约。

全球成分占毛利减少的180万美元,主要是由于大豆和玉米业务的出售以及向日葵毛利率的温和下跌,这大大抵消了国际有机成分的改善利润,商品期货合约用于对冲公司的有机可可位置,以及更高的销量。

占收入的百分比,第一季度毛利率为9.2%,而去年为10.8%。除去处置业务的备考效应外,毛利率约为9.5%,而去年同期备考基准调整后毛利率为10.7%。第一季度冷冻水果利润率下跌570个基点,这主要是由于我刚才讨论的与天气有关的墨西哥供应短缺的影响,以及较低的平均销售影响价格。

展望第二季度,考虑到处置业务的影响,我们预计收入将继续增长2018年的水平。从EBITDA的角度来看,我们预计第二季度与第一季度相似。由于季节末期,我们预计水果的利润率将继续受到影响,相关的供应和成本压力以及国内向日葵的持续需求压力将影响销售和产量。预计这种压力将部分抵消我们无菌饮料业务的持续销量增长和生产效率,不包括第二季度在阿伦敦调试新设备的成本。

营业收入为30万美元,占第一季度收入的0.1%,而去年为170万美元,占收入的0.5%。营业收入同比减少反映出毛利减少550万美元,部分抵消了由于大豆和玉米业务的销售以及合理化的管理费用,较低的福利成本,专业费用和其他成本导致的SG&A减少200万美元减少措施,减少外汇损失210万美元。剔除处置业务的经营业绩,以及与员工保留和过渡成本相关的SG&A,2019年第一季度的分部营业收入为100万美元,而2018年第一季度为90万美元。

第一季度归属于普通股股东的收入为2370万美元,或每股稀释普通股0.26美元,相比之下,2018年第一季度的亏损为630万美元或每股稀释后普通股0.07美元。2019年第一季度的净收入包括:出售有机大豆和玉米业务专利的税前收益为4560万美元。经调整后,净亏损为790万美元,即每普通股0.09美元,而2018年第一季度为每股普通股640万美元或0.07美元。

2019年第一季度,不包括处置业务的调整后EBITDA为1110万美元,而去年同期为1100万美元。我想提醒听众,调整后的EBITDA和调整后的收益是非GAAP指标,这些措施与GAAP的对账可以在今天早些时候发布的新闻稿背面找到。

截至第一季度末,总债务为4.542亿美元,较2018年12月29日减少5500万美元,主要原因是出售大豆和玉米业务产生的净收益。 2019年3月30日的债务总额反映了发行成本净额2.174亿美元,即2022年到期的9.5%高级担保第二留置权票据,我们的第一个留置权全球资产信贷额度为2.220亿美元,余额代表较小的信贷额度,租赁,和其他融资安排。全球资产信贷融资是一项银团贷款协议,于2021年2月到期,总承诺额高达3.7亿美元。

从现金流的角度来看,在第一季度,经营活动产生的现金为100万美元,而去年为750万美元。运营现金较低反映了季度经营业绩较低,部分原因是2018年第一季度收到退税,以及大豆和玉米业务的销售,该业务在2018年有一个强劲的开端。

我们在2019年第一季度的资本支出为800万美元,而去年为670万美元,而2019年我们预计资本支出约为2500万美元。有了这个,我想请运营商打开电话问题。

问题和解答:

操作者

谢谢你,先生。女士们,先生们,如果您现在有疑问,请按*,然后按下您的按键式电话号码1。如果您的问题已得到解答,或者您希望将自己从队列中删除,请按#键。我们的第一个问题来自BMO Capital Markets的Amit Sharma;你的线是开放的。

Amit Sharma – BMO资本市场 – 副总裁

嗨,大家早上好。

Joseph D Ennen – 首席执行官

嗨,阿米特。

Amit Sharma – BMO资本市场 – 副总裁

恭喜Joe加入SunOpta。期待和你一起工作。

Joseph D Ennen – 首席执行官

谢谢。

Amit Sharma – BMO资本市场 – 副总裁

让我从这开始吧;真的,你在Safeway的日子里给桌子带来了非常独特的体验,你在开场评测中确实触及了一点,但你可以,或许多一点,潜入它吗?比如,您在Safeway上的体验如何翻译,因为您希望将SunOpta与私人品牌结合起来?

Joseph D Ennen – 首席执行官

我会说真正了解客户如何看待合作伙伴,他们重视的是我可以为这个组织带来的巨大价值。真正帮助组织了解速度对客户的重要性,并帮助他们了解如何按照客户的方式查看类别,客户是否在尝试推动该类别的创新,尝试实现该类别的定位优质的产品,或者只是专注于成本。这是三个广泛的过滤器,任何客户都可以从私人标签的角度看待一个类别,因此真正帮助组织了解与客户合作的速度要求,以及如何理解和阅读他们的平衡,“它是关于创新吗?是关于质量,还是关于成本?“

Amit Sharma – BMO资本市场 – 副总裁

然后,在SunOpta,对你来说,这是你的早期日期,但作为你希望接受这份工作的一部分,从那时起,你是否认为有任何理由相信,或者警告我们不要有针对性的保证金这些业务的水平,无论是饮料业务,零食业务还是配料业务,目前都是?

Joseph D Ennen – 首席执行官

从历史上看,我们已经明确表示10%的EBITDA利润率作为我们的目标,虽然我们今天不在,但我当然相信,如果你看一下竞争对手的情况,以及过去的一些业务,我没有有理由相信,如果有正确的努力,战略和计划,我们就无法达到这个水平。

Amit Sharma – BMO资本市场 – 副总裁

然后在冷冻,显然,他们现在是麻烦的孩子,对吧?在新闻稿中看到你确实看到第四季度开始出现利润率改善,这真是令人鼓舞。你能谈一点吗?比如,保证金改善背后的假设是什么?在墨西哥作物延迟的背景下谈论它,你提到加利福尼亚也可能有点延迟;你能谈谈那个吗?

Robert McKeracher – 副总裁兼首席财务官

是啊,阿米特,这是罗布。也许我会尝试那个,然后看看乔是否有任何补充,但我们显然很难处理我们的水果边际优化计划的第一阶段。在2019年盘点计划之前必须进入的资产已经到位,经过测试和运行;我们正处于赛季的最前沿,真正在加利福尼亚州认真开始,所以我们对那里的努力感到非常满意,而且很简单,这将导致更低的劳动力成本,就转换,并可能提高产量。这将被纳入2019年我们打包的股票中,然后开始在P&L上展示自己作为较低的整体平均水果成本,即第四季度。

因此,我们仍然致力于并且对我们实现这一目标的能力充满信心,这主要是因为我们正在增加自动化,我们可以确认劳动力确实减少了。就墨西哥和我们在第一季度遇到的供应短缺而言,它在某种程度上肯定会给我们的系统带来压力。值得庆幸的是,我们确实拥有广泛的网络和规模,能够为客户提供水果股票,但是当您面临更大的供应短缺,真正受天气影响时,它不仅仅是SunOpta。当然,这是该地区的每个人;你不可避免地要为产品支付更多的费用和/或在我们的情况下,以更昂贵的方式补偿它,因为我们打包出加州以保持生产水平,并让客户留在股票中。

尽管如此,我们仍然预计水果的第四季度利润将超过去年,并且总体上比去年增加,所以这仍然存在。

Joseph D Ennen – 首席执行官

Amit,我想补充一下,有点反思你之前关于Safeway体验的问题,因为它涉及冷冻水果,我可以为这次谈话带来的一件事,在Safeway的800个不同类别工作,我看到了每个定价可以想象的机制,特别是在一些更加商品驱动的类别上,以及这些定价机制如何帮助客户保持竞争力,并帮助制造商隔离一些市场波动。

Amit Sharma – BMO资本市场 – 副总裁

然后,最后对我来说,乔,你也谈到了我们非常清楚地看到你的Tradin业务不足的一个机会,显然它一直做得很好,所以在这里抱怨并不多,但我认为可以做的比现在做的更多。你能谈一点吗?很明显,您是如何思考它的,以及可以采取哪些措施来更好地利用SunOpta拥有的这一独特资产?

Joseph D Ennen – 首席执行官

是的,我想如果你考虑一下Tradin正在做什么,就真正与农民一起在基层工作,在供应链的初始阶段建立价值,并且当你真正想到从农场到餐桌时,他们在供应链的前端做了很多繁重的工作,我对组织的挑战,以及我们的战略重点之一是我们如何通过供应链认识到更多的价值,而不仅仅是出售对其他人进一步处理这种成分?

Amit Sharma – BMO资本市场 – 副总裁

得到它了。欣赏这些想法,非常感谢。

Joseph D Ennen – 首席执行官

谢谢。

操作者

谢谢;接下来的问题来自William Blair的Jon Andersen。你的线是开放的。

Jon Andersen — William Blair & Co. — Partner, Equity Research

Thanks, good morning, and congratulations, Joe. Look forward to working with you going forward.

Joseph D Ennen — Chief Executive Officer

谢谢。

Jon Andersen — William Blair & Co. — Partner, Equity Research

Amit asked all the good questions, as usual, so I will try and do my best here. I guess, Joe, having said what you said about your experience with Safeway, I'm just kind of wondering if you have kind of an external perspective on how SunOpta is viewed as a private label supplier, either now, or historically? And how much work, and what kind of work needs to be done at SunOpta to move further up the private label customer lists, and where you see kinda the biggest white spaces, when you think about the private label business at SunOpta — where you maybe are most underpenetrated, and have the most upside potential?谢谢。

Joseph D Ennen — Chief Executive Officer

Yeah, so just in terms of how SunOpta was viewed — and I might just draw a bit more on what I've heard from our current customers, versus my experience working with SunOpta several years ago. I've received really positive feedback from our customers about our efforts around food safety, product quality, and customer service. Just in terms of the type of work that we need to do, and how do we move up in that preferred vendor status, again, it comes back to speed of responsiveness, customer service, making sure that we have bulletproof food safety, and bringing them innovation, and bringing them ideas on how to grow their business, and how to help them win market share versus their retail competitors, and I think that putting that lens on the business every day is gonna make us a more valued partner.

Just in terms of the white spaces, I mean I think you heard us reference a lot around plant-based beverages; there is certainly a lot of innovation and enthusiasm in that space as you look across both dairy and shelf-stable, and I think that is a key white space for us. And then, in the fruit space, we have to view innovation as a lever to achieving pricing realization in fruit. IQF needs to be viewed as just a part of the business, and our ability to get revenue realization for that fruit stream is very, very focused on driving innovation, and creating ideas that add value to the fruit that we're procuring.

Jon Andersen — William Blair & Co. — Partner, Equity Research

I suppose that would help on the pricing front, if there's a solid innovation in fruit as well. Sticking with beverages for a minute, I'm kind of intrigued by what you said about oat milk. Obviously, oat milk is everywhere now, and it's getting this huge buzz; I'm not sure you participated in oat milk historically. Can you just talk about this new capacity that's coming online, and maybe your ability to repurpose existing lines to participate in that oat milk segment? How big do you think this opportunity is? And kinda weave that into the discussion of kind of the capacity of expansion that you're doing in Allentown, and how soon you can kinda be out there with an oat milk offering?谢谢。

Robert McKeracher — Vice President and Chief Financial Officer

Yeah, sure, why don't I take that, Jon, and then if Joe wants to jump on. Our expansion, $22 million in Allentown; it does a number of things. Think of our network across — the national network of aseptic plants is one where — when you add capacity like we are in Allentown, it enables more capacity to free up in other places, because of course, we kind of adjust appropriately the where-made, and in some cases, the format that we're packing out for our customers.

So Allentown is as much about Allentown as it is about creating some more capacity in Alexandria and Modesto, and that additional capacity just further enables our ability to grow in oat today. Today, speaking of oat, we're in everything from the ingredient side of that — so extracting a creative base — right through to packaging into a retail format. So we're there today, and some of the things that we're looking at, in terms of where to invest next would certainly be hinged on what we see as a really strong market demand, and trend for oat.

So we're there today; the Allentown does enable it, and I think there's future room for growth. I think if you wanna think about the potential for oat, relative to other plant-based or non-dairy offerings, just look back to some of our bigger coffee chains that a number of years ago didn't have almond in, and now almond is a leader there, in terms of consumers' demand for dairy alternatives, so I think that when we look at the profile of oat, and how the label reads, it could be just as big as the big guys in non-dairy.

Jon Andersen — William Blair & Co. — Partner, Equity Research

Okay, that's helpful. On fruit itself, the frozen fruit business, what role does pricing play in the fruit margin optimization program? I mean, you've kind of committed, or talked about good margin progress in fruit during the course of the next two seasons; I know a lot of that is driven by automation, and I think the Santa Maria, the collocation of the facility in Santa Maria next year — how much does pricing play a role, and do you think that that's something that you're gonna be able to — that's a lever that you're going to be able to pull in the near term, if needed? And it sounds like it is needed, given some of the weather-related delays, and cost issues in that business.

Robert McKeracher — Vice President and Chief Financial Officer

Yeah, sure, I'll take that one as well, Jon. As we've modeled out the return, and again, it is a two-crop season, or two-year return, just simply due to the magnitude of what we need to do, pricing and/or top line enhancement — revenue enhancement — we've modeled that to be about 30% of the way back to historic margins, so in terms of specifically pricing, to answer your question — that is an important part of it. We need to both do a better job managing it to make sure that we're not in a position where we're not adequately passing along commodity prices in the volatility — whether it be price or availability of fruit — but part of that pricing realization, as well, as Joe already commented, is also on — and I might refer to it as a value-enhancing mix.

So it could come by way of innovation, where the more value we're adding to the product enables us to price at a higher per-pound — if you will — level, or potentially in streams that aren't necessarily direct to retail, so innovation that helps enhance that profitability mix, because we're making better use of other streams of the berries that we're bringing in here to other channels — be it foodservice, be it K-12, what have you.

Jon Andersen — William Blair & Co. — Partner, Equity Research

Is there, as you look at the next two seasons, and we expect a margin improvement this year, Q4 or coming out of Q4; we expect another one next year with the 2020 harvest. Is there a bigger leap this year, a bigger leap next year? Is it comparable in each year, or is that just too hard to predict at this point?

Robert McKeracher — Vice President and Chief Financial Officer

It's not hard to predict. I mean, at the end of the day, we've modeled it, and we came into the year expecting to kinda be two halves, if you will — so first presenting itself in the fourth quarter of this year, and then again in the fourth quarter of 2020. I think with the dynamic at the grower level we're seeing this year, which is — I think it was in prepared remarks — obviously, we've talked about Mexico, but even a slower or slightly delayed start to the California season, what we're gonna caution against is just that a higher cost of fruit and/or inefficiency that we've experienced thus far — keeping customers in stock — some of that does get associated with, or tied up to the inventory we have today, and will be a partial counter to the benefit we're seeing come through in the fourth quarter, but I think structurally about the business. The fact that the assets are in, the labor is being reduced — we know that the efforts we're taking will yield the benefit designed. At a gross basis, it's how does that get netted against some of the pressures we're seeing earlier?

So I'd suggest, at this point, probably more of the benefit comes in 2020, but we're certainly gonna see it starting in the fourth quarter this year.

Jon Andersen — William Blair & Co. — Partner, Equity Research

Okay, and last one, I guess, for me, is: Joe mentioned portfolio prioritization as one of the three key priorities, and I guess I was trying to understand if that meant maybe there hadn't been enough, or enough either reinvestments in core businesses, or consolidation and/or divestiture of non-core businesses. Is that the right way to read that, and how much change do you think we could see, going forward, to the portfolio, relative to some of the changes that have already been made?

Joseph D Ennen — Chief Executive Officer

I think the way to think about that is a real simple focus around where to play, and how to win. I think we're in a lot of businesses, we have a lot of priorities, and the ultimate growth drivers for us are gonna be making the right strategic choices about what businesses to really pour our investment and our energy — be it people, capital — into, so I think you should think about it in that regard. That answer your question?

Jon Andersen — William Blair & Co. — Partner, Equity Research

Yeah, it does. That's helpful. And then I guess the last one for me will be: the look at the second quarter, Rob, relative to what we heard from you last quarter, I think the message last quarter was that it would be reasonable to expect fairly level EBITDA year over year in the first three quarters of the year, and then a step up in the fourth quarter, with the fruit margin optimization. It sounds like, based on your comments today, that Q2 at least may not be up to that same level as Q2 a year ago; is that a fair point, and obviously, I guess if that's the case, it's related to the weather-related issues on the fruit business, and some of the higher costs you're dealing with there?

Robert McKeracher — Vice President and Chief Financial Officer

Yeah, no, that's exactly how I'd interpret that, Jon. You said it well.

Jon Andersen — William Blair & Co. — Partner, Equity Research

Okay, thanks, everybody. Congrats, Joe, and good luck going forward, and I'll look forward to seeing you soon.

Joseph D Ennen — Chief Executive Officer

Thanks, you, too.

操作者

谢谢。 The next question is from Chris Krueger from Lake Street Capital; your line is open.

Chris Krueger — Lake Street Capital Markets — Senior Research Analyst

早上好。

Joseph D Ennen — Chief Executive Officer

Hey, Chris.

Robert McKeracher — Vice President and Chief Financial Officer

Morning, Chris.

Chris Krueger — Lake Street Capital Markets — Senior Research Analyst

Hi, most of my questions have already been asked and answered, but Joe, can you talk about what you see in the broth market? I don't think you guys commented too much on that. What do you think the potential is there? Are there new customers in the pipeline, stuff like that?

Joseph D Ennen — Chief Executive Officer

Yeah, I think relative to our opportunities, if you think about our expansion in the aseptic space, and our ability to go out and sell against that expanded capacity, we feel very good about our ability to drive against that. If we look at the frozen fruit space, the team is working on some really interesting innovations in that space, and so we're excited about that, as well.

So certainly, there's more work to do in dialing up the innovation pipeline, and pushing the revenue, but I think that there's — I have not heard any big warnings from the team around, "The customer pipeline's dry," if anything, quite the opposite.

Chris Krueger — Lake Street Capital Markets — Senior Research Analyst

Okay, and in Allentown, after that's open and running, will all three of the facilities — Modesto, Alexandria, and Allentown — be capable of producing all the plant-based stuff and the broth?

Robert McKeracher — Vice President and Chief Financial Officer

Yeah, I'll take that one, Chris. There are certain differences between the facilities. Allentown, being the newest, doesn't have the full suite of capabilities that Alex or Modesto does, but by and large, there's going to be a lot of interchangeability in terms of what we can do across the three, in terms of both format and what we pack out. Of course, the benefit of that is having that national network, and being in a position to be cost-advantaged, when it comes to our position to deliver to customers is obviously a key competitive differentiator for us.

Chris Krueger — Lake Street Capital Markets — Senior Research Analyst

All right, that's all I got.谢谢。

Robert McKeracher — Vice President and Chief Financial Officer

谢谢。

操作者

Thank you, we have another question from Amit Sharma from BMO Capital Markets. Your line is open.

Amit Sharma — BMO Capital Markets — Vice President

Hi, thank you so much for taking the follow-up. Just a quick one from me: Rob, I know you mentioned the pipeline build in aseptic and CTU; is that related to the broth business — the increased capacity? And how much of a build could it be?

Robert McKeracher — Vice President and Chief Financial Officer

Yeah, that's a good question. Sorry — on broth specifically, I think folks probably remember we got into that category, I think, quite quickly last year. A very small amount of shift in the third quarter, but then it came in the fourth, which of course — broth's seasonality is really third and especially fourth quarter centric, so what we're able to do this year — and helped and aided by the additional capacity at Allentown — is start our pack-out, or our planning in terms of the broth ahead of time, so we'll be actively in production here in the third quarter, building up supply to meet the demand for the fourth quarter, and because of that ability to manage our supply chain in that regard, I think we'll see a lot more efficient production planning.

Amit Sharma — BMO Capital Markets — Vice President

Can you help us understand like, how big is that broth business from a top line perspective, so that we can model things accordingly?

Robert McKeracher — Vice President and Chief Financial Officer

Yeah, I mean, I would say we've commercialized, last year, roughly $50 million in new business in broth, and a little less than $20 million shift last year, so if you put that in the context of our overall beverage platform — all things equally — your wrap-around effect, if you will, of that revenue sets about a 10% growth on the overall beverage platform.

Amit Sharma — BMO Capital Markets — Vice President

And then the rest of the portfolio, besides broth, is still growing at mid-single digits?

Robert McKeracher — Vice President and Chief Financial Officer

Yeah, we're seeing good growth and demand for plant-based, certainly. I think this past quarter, juice wasn't growing for us; it was down single digits a little bit, but that's partly seasonality, so yeah. We're certainly not seeing a reversion in any of the other categories we're serving, especially on the non-dairy side.

Amit Sharma — BMO Capital Markets — Vice President

And broth is a good margin business, as comparable to the rest of the beverage businesses?

Robert McKeracher — Vice President and Chief Financial Officer

Yes, no, we're certainly — as we look at our portfolio of what we serve out of our aseptic capabilities, especially given that we've been tight in capacity; the market, to a certain extent, is tight on capacity — yeah, we're definitely ensuring that what we fill the capacity with is margin accretive.

Amit Sharma — BMO Capital Markets — Vice President

Got it.非常感谢。

Robert McKeracher — Vice President and Chief Financial Officer

Thanks, Amit.

操作者

Thank you; I am showing no further questions at this time. I would like to turn the conference back to Mr. John Ennen.

Joseph D Ennen — Chief Executive Officer

Thank you, operator, and thank you all for participating in our first quarter conference call. I look forward to speaking to you in the future, and updating you on our strategic initiatives over the coming months. Have a great day.

操作者

This concludes today's conference call. Thank you for your participation, and have a wonderful day.

Duration: 50 minutes

Joseph D Ennen — Chief Executive Officer

Robert McKeracher — Vice President and Chief Financial Officer

Amit Sharma — BMO Capital Markets — Vice President

Jon Andersen — William Blair & Co. — Partner, Equity Research

Chris Krueger — Lake Street Capital Markets — Senior Research Analyst

More STKL analysis

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