16:49:46 EDT Tue 29 Sep 2020
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Swiss Water Decaffeinated Coffee Inc
Symbol SWP
Shares Issued 9,061,210
Close 2019-03-12 C$ 5.73
Recent Sedar Documents

Swiss Water earns $4.53-million in 2018

2019-03-12 18:50 ET - News Release

Mr. Frank Dennis reports


Swiss Water Decaffeinated Coffee Inc. has released financial results for the fourth quarter and year ended Dec. 31, 2018. Swiss Water is a leading specialty coffee company and premium green coffee decaffeinator, which employs the proprietary Swiss Water process to decaffeinate green coffee without the use of chemicals.

A conference call to discuss Swiss Water's recent financial results will be held March 13 at 9 a.m. Pacific Time (12 p.m. Eastern Time). To access the conference call, please dial 844-369-8770 (toll-free) or 862-298-0840 (international). A replay will be available through March 27, 2019, at 877-481-4010 (toll-free) or 919-882-2331 (international), passcode 45181.

During the fourth quarter of 2018, the company continued to gain market share against its competitors and improved operational efficiencies while remaining focused on producing high-quality premium decaffeinated coffee. To drive future growth, Swiss Water plans to expand its presence in Europe and target specific customer groups in North America. The company is aiming to increase brand awareness with both the coffee trade and consumers by employing a range of marketing activities. These include digital and print advertising, social media communications, participation in trade shows, and sponsorship at key coffee industry events.

"As anticipated, we achieved double-digit growth in processing volumes during 2018. Volumes shipped to roasters, importers, specialty and commercial accounts were all up over 2017 levels," said Frank Dennis, Swiss Water's president and chief executive officer. "This growth reflects our success in winning new business while continuing to build on our strong relationships with existing customers, who have grown their distribution, added to their locations or expanded their product offerings. It also reflects an accelerating movement away from chemical decaffeination in favour of chemical-free processes such as ours. Some of the new business came from roasters, who previously obtained their decaffeinated coffees from a decommissioned CO2 [carbon dioxide] plant in Europe, while other account wins are related to the closure of a CO2 plant in Houston, Tex.

"These closures have tightened the market by reducing the available chemical-free decaffeination capacity globally. We believe this will allow us to more rapidly utilize the additional production capacity we have coming on line in 2019."

Herein is a summary of Swiss Water's operational and financial results.

                                            FINANCIAL HIGHLIGHTS
                                   (in $000s except per-share amounts)

                               Three months ended    Three months ended       Year ended       Year ended
                                    Dec. 31, 2018         Dec. 31, 2017    Dec. 31, 2018    Dec. 31, 2017

Sales                                     $22,979               $20,662          $89,939          $83,755
Gross profit                                3,686                 3,178           14,921           12,590
Operating income                            1,618                   958            5,631            4,812
Net income                                    919                  (380)           4,531            4,160
EBITDA (1)                                  2,050                 1,334            7,745            6,923
Net income -- basic (2)                     $0.10                $(0.04)           $0.50            $0.46
Net income -- diluted (2)                   $0.03                $(0.04)           $0.35            $0.42

(1) EBITDA is calculated as net income before interest, depreciation, amortization, impairments, 
share-based compensation, gains/losses on foreign exchange, gains/losses on disposal of capital 
equipment, fair value adjustments on the embedded option and provision for income taxes. EBITDA 
also excludes unrealized gains and losses on the undesignated foreign exchange forward 
contracts. EBITDA is defined in the non-international financial reporting standard measures
section of management's discussion and analysis, and is a non-generally accepted accounting 
principle financial measure as defined by CSA Staff Notice 52-306.
(2) Per-share calculations are based on the weighted-average number of shares outstanding 
during the period.

  • Quarterly revenue increased by 11 per cent over fourth quarter 2017 to $23.0-million, and revenue for the year improved by 7 per cent to $89.9-million. The increases were due to growth in Swiss Water's processing volumes, partially offset by a lower coffee commodity price (NY'C') and fluctuations in the U.S.-dollar exchange rate.
  • Gross profit for fourth quarter 2018 was $3.7-million (or a margin of 16 per cent). This represents a gain of $400,000 and a 1-per-cent increase in margin over the same period in 2017. Full-year gross profit improved to $14.9-million (or a margin of 17 per cent), compared with $12.6-million (or a margin of 15 per cent) during 2017. The improved performance was due to the higher processing volumes, as well as the success of management's continuing efforts to enhance recovery of operating costs. These initiatives have helped offset the margin compression Swiss Water recorded during the first half of 2018. The company remains tightly focused on margins, and continues to seek ways to reduce variable and fixed costs without impacting product quality, which is paramount.
  • Operating expenses decreased by 7 per cent to $2.1-million in the fourth quarter and increased by 19 per cent to $9.3-million for the full year, when compared with the same periods in 2017. In both periods, there were increases due to higher staffing and staff-related expenses in both periods; however, in the fourth quarter, the increase was offset by income tax credit for research and development. The investments in staffing are designed to enhance Swiss Water's operational and marketing capabilities ahead of the new production capacity it has coming on line later this year.
  • Operating income increased by $700,000, or 69 per cent, to $1.6-million in the fourth quarter and by $800,000, or 17 per cent, to $5.6-million for the full 2018 year.
  • Fourth quarter net income increased to $900,000, compared with a loss of $400,000 in fourth quarter 2017. The improvement in net income resulted from increased gross profit and improved non-operating expenses related to the revaluation of an embedded derivative, as well as effective risk management activities. This was partially offset by higher income tax expenses. Full-year net income was $4.5-million, compared with $4.2-million 2017. The increase in annual net income resulted from the $2.3-million increase in annual gross profit, offset by increased operating expenses of $1.5-million, a loss on foreign exchange of $300,000 and an increase in income tax expense of $100,000.
  • EBITDA (net income before interest, depreciation, amortization, impairments, share-based compensation, gains/losses on foreign exchange, gains/losses on disposal of capital equipment, fair value adjustments on the embedded option and provision for income taxes) for fourth quarter was $2.0-million, up by $700,000, or 53 per cent, over the same period in 2017. EBITDA for the year was $7.7-million, up by $800,000, or 12 per cent, compared with $6.9-million in 2017. The increases in EBITDA resulted from higher processing volumes in addition to significant efforts across the company to enhance cost recovery. Swiss Water plans to continue investing in its production infrastructure and human resources in preparation for the significant business growth it anticipates going forward.


Looking ahead, Swiss Water expects the positive trends established in 2018 to continue with processing volumes showing strong year-over-year growth.

"Our primary focus for 2019 will be to position Swiss Water to maintain our current growth momentum and continue enhancing our operating margins, as we drive sales to the European Union and selective customer groups in North America," said Mr. Dennis. "As converting large customers to Swiss Water process coffees typically takes several quarters, we believe the steps we are taking to strengthen our sales capability are critical to our success in ramping up orders and winning new business as we add significant capacity with our new facility in 2019."

Construction of Swiss Water's new decaffeination facility, which is located in Delta, B.C., is progressing well. Initially, this facility will house one new production line, although the site is large enough for expansion well into the future. The new production line is expected to be commissioned in the fourth quarter of 2019.

Quarterly dividends

On Jan. 15, 2019, Swiss Water paid an eligible dividend in the amount of $600,000 (6.25 cents per share) to shareholders of record on Dec. 31, 2018.

In addition, the company has declared an eligible quarterly dividend for the first quarter of this year. Accordingly, a cash dividend of 6.25 cents per share will be paid on April 15, 2019, to shareholders of record on March 29, 2019.

About Swiss Water Decaffeinated Coffee Inc.

Swiss Water Decaffeinated Coffee is a leading specialty coffee company and a premium green coffee decaffeinator, which employ the proprietary Swiss Water process to decaffeinate green coffee without the use of chemicals. It also owns all interest in Seaforth Supply Chain Solutions, a green coffee handling and storage business. Both businesses are located in Burnaby, B.C.

Additional information

A more detailed discussion of Swiss Water Decaffeinated Coffee's recent financial results is provided in the company's management's discussion and analysis, filed on SEDAR and on the company's website on March 12, 2019.

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