TORONTO — SunOpta, Inc. will make changes in bars and re-sealable pouches after poor results in the first half of 2017.
|David Colo, c.e.o., president and director of SunOpta|
“Specifically, pouches and bars have been a $4 million drag on EBITDA year to date,” said David J. Colo, chief executive officer, president and director, in an Aug. 9 earnings call to discuss second-quarter results.
SunOpta in the quarter ended July 1 reported a loss from continuing operations of $408,000, which compared to a loss of $4,124,000 in the previous year’s second quarter. Revenues in the second quarter dropped 3.4% to $336,454,000 from $348,146,000.
SunOpta sales in healthy snacks increased 1% in the quarter.
“However, profit performance was poor, in particular at our pouch and bar operations, and we have taken action,” Mr. Colo said.
SunOpta on July 27 said it had agreed to sell equipment used in the production of flexible, re-sealable pouches at its Allentown, Pa., facility to Skjodt-Barrett for $2 million. The sale should close in the fourth quarter. SunOpta previously decided to discontinue flexible, re-sealable pouch products as part of a value creation plan. SunOpta will continue to produce aseptic beverages in the Allentown facility.
SunOpta has hope for bars. The company will work to improve profit performance at its nutrition bar facility in Carson, Nev.
“We have established a rapid recovery team, (which is) systematically identifying and correcting operational issues that are leading to inefficient production and gross margin losses at that facility,” Mr. Colo said.
SunOpta’s value creation plan seeks to implement $30 million of productivity-driven annualized enhancements of EBITDA over 2017 and 2018. SunOpta expects expenses associated with the plan will offset EBITDA benefits in 2017. The plan’s four pillars are portfolio optimization, operational excellence, go-to-market effectiveness and process sustainability.
The planned sale of the re-sealable pouches business is part of the portfolio optimization. SunOpta so far has implemented portfolio changes that are expected to yield $4.2 million of annualized EBITDA benefits. Another portfolio change was deciding to close a Moorhead, Minn., processing facility and consolidating certain soy and specialty grain volume into a Hope, Minn., facility. SunOpta also purchased the remaining 25% minority interest stake in the company’s frozen fruit operations in Jacona, Mexico.
In operational excellence, SunOpta has implemented process improvements and cost savings expected to yield $3.1 million of annualized EBITDA benefits.
Creating a new food service distribution network falls under go-to-market effectiveness.
“We are targeting additional food service opportunities with both existing and new customers, and as an example, we recently launched a new line of non-dairy products in a control brand format, specifically targeting food service operators,” Mr. Colo said. “
The company also has implemented go-to-market improvements through pricing actions that are expected to yield $2 million of annualized EBITDA benefits.
Improving SunOpta’s leadership team is a component to the process sustainability pillar. Mr. Colo, formerly executive vice-president and chief operating officer of Diamond Foods, Inc., became c.e.o and president of SunOpta in February.
In the second quarter, SunOpta’s Consumer Products segment generated revenue of $187,031,000, which was down 1.4% from the $189,648,000 in the previous year’s second quarter. Second-quarter revenue for the Global Ingredients segment declined 5.7% to $149,423,000 from $158,498,000.SunOpta companywide in the six-month period ended July 1 reported a loss of $11,806,000, which compared with a loss of $14,357,000 in the same time period of the previous year. Six-month revenues were $666,485,000, down 4.9% from $700,460,000.