SodaStream's profits fizzle

by Rebekah Schouten
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SodaStream plans to release its new line of flavors and two new machines next quarter.

AIRPORT CITY, ISRAEL — SodaStream International’s plan to reposition itself as a sparkling water company is moving forward as the company launches its new line of flavors next quarter.

“Our whole new line of flavors is meant to help consumers drink more water and flavored water,” said Daniel Birnbaum, chief executive officer, during an Aug. 5 earnings call with financial analysts. “We believe we now have the right product, especially when it comes to taste and ingredients. The taste of every flavor is high-quality, while having a lower calorie impact than traditional sodas and juices, and in most cases is all-natural.”

In the midst of SodaStream’s brand transition, the company’s net income tumbled 90%. For the second quarter ended June 30, 2015, Sodastream had net income of $960,000, equal to 5c per share on the common stock, down from $9,243,000, or 44c per share, in the prior-year period. Excluding the costs associated with the company’s restructuring plan, discontinued products, and the transition to a new plant in Southern Israel, SodaStream had an adjusted net income of $3,500,000, which compared with adjusted net income of $9,200,000 in the same period a year ago.

Revenue for the quarter slipped 29% to $99,834,000 from $141,171,000, reflecting a decline in sales of sparkling water makers and flavors in the wake of the company’s restructuring. SodaStream’s sparkling water maker units declined 37% to 491,000, and its flavor units dipped 45% to 5.1 million. However, SodaStream’s gas refills climbed 7% to an all-time record high of 6.9 million.

Daniel Birnbaum, c.e.o. of SodaStream.

“Our second-quarter performance was in-line with our expectations,” Mr. Birnbaum said. “The first half of 2015 would be a challenging period due to implementation of our global restructuring and growth plan combined with changes in foreign currency exchange rates. That said, we are proud to have achieved an all-time record of CO2 refills, which is a testimony of our consumers’ loyalty. We are making tremendous progress toward repositioning as a ‘water brand’ behind a health and wellness positioning.”

The company also plans to introduce two new machines in the coming quarter to help boost sales: the Ultimate and the Mix. The Ultimate is an on-demand home beverage machine that serves single- and multi-serve hot and cold beverages. The Mix is an in-house machine that will carbonate any liquid. Both will be launched globally in the second half of 2016.

“Our No. 1 priority is getting our core business back on track globally to deliver sustained growth and increased profitability,” Mr. Birnbaum said. “We are determined to build and lead the home carbonation category by leveraging our momentum in growth markets, and capitalize on our new brand positioning and products to reinvigorate demand in other markets around the world. We firmly believe that we have the right formula in place; we are fully confident in our ability to successfully execute against our new strategy.”
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