Processing Volumes, Revenues, EBITDA and Adjusted Distributable Cash Up over 2009
TRADING SYMBOL: The Toronto Stock Exchange - SWS.UN
VANCOUVER, Aug. 5 /CNW/ - Swiss Water Decaffeinated Coffee Income Fund ("the Fund") today reported financial results for the three and six months ended June 30, 2010. The three-month period represents the second quarter of its 2010 fiscal year. The Fund holds all of the outstanding securities of Swiss Water Decaffeinated Coffee Company, Inc. ("SWDCC" or "the company") and its results are dependent on the operating results of SWDCC.
In $000's except per unit amounts 3 Months Ended 6 Months Ended
June 30 June 30
2010 2009 2010 2009
--------- --------- --------- ---------
Sales $ 8,004 $ 7,692 $ 15,780 $ 14,996
Gross profit 1,387 1,584 2,707 3,037
EBITDA(1) 1,176 994 2,426 1,572
Net (loss) income (717) 1,207 (52) 1,138
Adjusted distributable cash(1) 1,340 339 2,920 1,419
Distributions paid 601 1,502 1,202 3,004
Per unit amounts:
Net (loss) income per unit (0.107) 0.181 (0.008) 0.170
Adjusted distributable cash
generated per unit(1) 0.201 0.051 0.437 0.213
Distributions paid per unit 0.090 0.225 0.180 0.450
(1) EBITDA, adjusted distributable cash and adjusted distributable cash
per unit are non-GAAP financial measures that are defined in the
Management's Discussion and Analysis to be posted on SEDAR on or
before August 6, 2010.
During the second quarter of 2010, SWDCC's business continued to strengthen, due largely to the gradual recovery of the global economy. Gains were recorded in all areas of SWDCC's business, and across all geographic markets, with processing volumes for the three and six months ended June 30, 2010 increasing by 19% and 13%, respectively, and sales revenues up by 4% for the second quarter and 5% for the year-to-date. EBITDA and adjusted distributable cash for the second quarter and first half of 2010 also grew on a year-over-year basis, due in part to lower consumer promotion and advertising expenses.
Revenues did not grow at the same rate as processing volumes due to the relative strength of the Canadian dollar. During the first half of 2010, approximately 77% of the company's sales were generated in US dollars, up slightly from 75% in the same period last year. As the US dollar averaged $1.03 Canadian during the first six months of this year, compared to $1.21 for the same period last year, SWDCC's US sales were translated into Canadian dollars at a lower rate.
Second quarter gross profit totaled $1.4 million, compared to $1.6 million in Q2 2009. Gross profit for the year-to-date was $2.7 million, down from $3.0 million for the first half of 2009. In both periods, the decrease reflects higher cost of goods sold, which rose in tandem with the larger processing volumes. The increase in cost of goods sold also reflects the growth of SWDCC's "non-toll" business, whereby the company purchases green coffee beans, decaffeinates them and then sells them to its customers. Green coffee commodity prices have increased over the past year, pushing up SWDCC's cost of goods sold when compared to the second quarter and first six months of 2009.
Selling and administration expenses for the second quarter and first half of 2010 were down compared to the same periods last year, due mainly to a significant decrease in consumer promotion and advertising costs. During the first six months of 2009, SWDCC launched a consumer-oriented, multi-media marketing campaign to build awareness of the Swiss Water(R) Process and its benefits. During the first half of 2010, the company has focused its marketing resources on building industry awareness of its improved product quality, via less expensive "trade" advertising. As a result, consumer promotion and advertising expenses for the three and six months ended June 30, 2010 totaled $0.2 million and $0.3 million, respectively, compared to $0.6 million and $1.6 million for the same periods last year.
The decrease in selling and administration expenses helped boost SWDCC's 2010 second quarter and six-month EBITDA results, which rose by 18% and 54%, respectively, compared to the same periods in 2009. It also helped push up adjusted distributable cash generated.
During the second quarter of 2010, the Fund generated adjusted distributable cash of $1.3 million ($0.3 million in 2009) and paid $0.6 million to unitholders ($1.5 million in 2009), for a payout ratio of 45% (443% in 2009). During the first half of 2010, the Fund generated adjusted distributable cash of $2.9 million ($1.4 million in 2009) and paid unitholders $1.2 million ($3.0 million in 2009) for a payout ratio of 41% (212% in 2009).
The significantly lower payout ratios are due to SWDCC's improved cash generation, as well as a decision made by the Fund's Trustees to reduce monthly distributions to $0.03 per unit ($0.36 annually) from the previous level of $0.075 per unit ($0.90 annually) beginning with the June 2009 distribution. This decision was made in response to SWDCC's decreased production volumes and increased investment in consumer advertising in 2009, and in order to maintain a conservative capital structure.
Finally, during the second quarter of 2010, SWDCC recorded a net loss of $0.7 million, compared to net income of $1.2 million for the same period last year. For the year-to-date, the company realized a net loss of $0.1 million, compared to net income of $1.1 million in the first half of 2009. In both periods, earnings were negatively affected by unrealized (non-cash) losses on derivative financial instruments which SWDCC utilizes to manage the effect of changes in commodity coffee prices and US-Canadian exchange rates. Unrealized gains and losses impact reported net income in the relevant reporting period, and may change before the underlying financial instruments are actually liquidated.*
"We are encouraged by our second quarter results," said Frank Dennis, President and CEO of SWDCC and a Trustee of the Fund. "Virtually all of our key financial performance measures are up, compared to this time last year, with volume growth recorded in all of our markets. However, while we believe 2010 will be stronger than 2009, a number of macro-economic challenges continue to affect the coffee industry as a whole and may impact our ability to continue recording double-digit improvements in our quarterly processing volumes. As such, our outlook for the balance of 2010 is cautiously optimistic."
* A more detailed discussion of the Fund's financial performance,
including its use of derivative financial instruments, and the impact of
realized and unrealized gains and losses on its results, can be found in
its Management's Discussion and Analysis for the three and six months
ended June 30, 2010. This document will be posted with the Fund's
unaudited consolidated financial statements on SEDAR (www.sedar.com) on
or before August 6, 2010.
The Fund owns Swiss Water Decaffeinated Coffee Company Inc. (SWDCC), a premium green coffee decaffeinator located in Burnaby, British Columbia, Canada. SWDCC decaffeinates customer-owned coffees, including organically certified coffees, for a fee - its "toll" business; and also purchases high-quality green coffees, decaffeinates them and markets them to the green coffee trade - its "non-toll" business. The SWISS WATER(R) Process is a proprietary 100% chemical free decaffeination process that does not use methylene chloride or ethyl acetate. The SWISS WATER(R) Process is the world's only consumer branded decaffeination process and the company supports the brand through ongoing consumer research and focused consumer advertising.
Certain statements in this press release may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which 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" 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, supply of coffee, general industry conditions, commodity price risks, technology, competition, foreign exchange rates, 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, the Fund 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.
SOURCE SWISS WATER DECAFFEINATED COFFEE INCOME FUND
For further information: For further information: Sherry Tryssenaar, Chief Financial Officer, Swiss Water Decaffeinated Coffee Company Inc., Phone: 604.444.8780, Fax: 604.420.8711, Email: firstname.lastname@example.org, Website: www.swisswater.com