SunOpta (US:STKL)2019-02-26 20:59Financial Data and Key Metrics Changes - In Q4 2018, revenue was $320.5 million, a 9.6% increase as reported, but a 16% increase when excluding commodity-related pricing and foreign exchange impacts [43] - Adjusted EBITDA for Q4 2018 was $9.1 million, compared to $9.4 million in the prior year [54] - The company reported a loss attributable to common shareholders of $99 million or $1.13 per share, compared to a loss of $119.4 million or $1.38 per share in Q4 2017 [53] Business Line Data and Key Metrics Changes - Global Ingredients segment revenue grew 15.5%, with international organic ingredients sourcing up 17.1% and domestic raw material sourcing up 11.3% [16] - Consumer Products segment revenue increased by 16.3%, driven by 17.8% growth in Healthy Beverage and 17.3% growth in Healthy Fruit [16] - Healthy Snacks revenue grew 22.3% for the full year 2018, but was softer in Q4 due to seasonal factors [27] Market Data and Key Metrics Changes - Sales of frozen fruit into retail and food service channels were up 20% in dollars and 33% in volume compared to Q4 2017 [28] - The company experienced a significant increase in shipments for school lunch programs, contributing an estimated $7 million to $8 million in revenue in Q4 [78] Company Strategy and Development Direction - The company aims to be the most innovative provider of organic ingredients and Healthy Fruit solutions, aligning with consumer trends towards organic and non-GMO foods [5] - The top priority for 2019 is to drive long-term margin improvements through a fruit margin optimization plan [9] - The company is focused on operational efficiency and expansion, targeting $10 million in productivity-driven cost reductions in 2019 [40] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the performance of the Healthy Fruit business has not met expectations and emphasized the need for a change in leadership to accelerate sales and improve margins [68] - The company expects limited growth in adjusted EBITDA in the first three quarters of 2019, with improvements anticipated in the fourth quarter [62] - Management remains confident in the ability to generate sustainable growth and is focused on restoring profitability in the fruit business [20] Other Important Information - The company sold its North American specialty and organic soy and corn business for $66.5 million, allowing for a focus on areas with long-term growth potential [11] - The company recognized an $81.2 million noncash goodwill impairment related to frozen fruit operations in Q4 2018 [53] - Total debt at the end of Q4 2018 was $509.2 million, with expectations for cash interest expense of $30 million to $32 million in 2019 [57][58] Q&A Session Summary Question: Why was the former CEO David Colo let go? - Management indicated that overall results were the main factor, and the board believed it was time for a leadership change to better serve the company's goals [67] Question: Will operational metrics change with new leadership? - Management confirmed that while they are not as far along as desired, the focus remains on accelerating sales and generating increased gross margin and profit [68] Question: What are the headwinds affecting CPG margins? - Management noted that the biggest headwind is the fruit business, which has seen a significant decline in margins, impacting overall profitability [70] Question: Can you provide more detail on the fruit business performance? - Management highlighted that while revenue increased, volume growth outpaced revenue growth due to sales price reductions, with a significant seasonal program contributing to Q4 results [78] Question: What are the next steps for the fruit margin optimization plan? - Management outlined that the next steps include capital investments in automation and innovation to improve efficiency and restore profitability [82]