Tuesday 04 October 2022

Coffee Holding reports quarter profits despite challenging market conditions due to Covid

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STATEN ISLAND, New York, U.S. — Coffee Holding Co., Inc. announced Monday its operating results for the three months and six months ended April 30, 2020. Net sales totaled $20,095,876 for the three months ended April 30, 2020, a decrease of $620,615, or 3.0%, from $20,716,491 for the three months ended April 30, 2019. Net sales totaled $39,381,377 for the six months ended April 30, 2020, a decrease of $4,968,922, or 11.2%, from $44,350,299 for the six months ended April 30, 2019.

The decrease in net sales was due to lower sales of green coffee during the six months as customers slowed purchases due to the volatility in the green coffee market. Additionally, the COVID-19 pandemic caused many of the Company’s café, restaurant and food service customers to either close or suspend their business operations during the period resulting in lost revenues from that segment of its customer base.

Cost of sales for the three months ended April 30, 2020 was $15,589,450, or 77.6% of net sales, as compared to $17,174,825, or 82.9% of net sales, for the three months April 30, 2019. Cost of sales for the six months ended April 30, 2020 was $31,760,285, or 80.6% of net sales, as compared to $36,239,592, or 81.7% of net sales, for the six months April 30, 2019. The decrease in cost of sales was due to the Company’s decreased sales partially offset by the unrealized losses on its options and futures hedges.

Gross profit for the three months ended April 30, 2020 amounted to $4,506,426 or 22.4% of net sales, as compared to $3,541,666 or 17.1% of net sales, for the three months ended April 30, 2019. Gross profit for the six months ended April 30, 2020 amounted to $7,621,092 or 19.4% of net sales, as compared to $8,110,707 or 18.3% of net sales, for the six months ended April 30, 2019. The increase in gross profits as a percentage of sales is attributable to a change in Coffee Holding ‘s product mix where it sold a higher percentage of branded and private label roasted coffee for the six months combined with an improvement in the Company’s hedging operations as compared to 2019.

Total operating expenses decreased by $21,531 to $3,612,877 for the three months ended April 30, 2020 from $3,634,408 for the three months ended April 30, 2019. Selling and administrative expenses decreased by $21,531 and officers’ salaries remained constant. Total operating expenses decreased by $225,573 to $7,287,842 for the six months ended April 30, 2020 from $7,513,415 for the six months ended April 30, 2019. The Company’s efforts to control costs through the elimination of redundancy in its operations and the elimination of certain unnecessary variable costs were the primary reasons for this decrease.

Coffee Holding Co. had a net income of $498,518 or $0.09 per share basic and diluted, for the three months ended April 30, 2020 compared to a net loss of $238,468, or $0.04 per share basic and diluted for the three months ended April 30, 2019. The Company had a net loss of $101,330 or $0.02 per share basic and diluted, for the six months ended April 30, 2020 compared to net income of $76,247, or $0.01 per share basic and diluted for the six months ended April 30, 2019. The decrease in net income was due primarily to the reasons described above.

“Despite the significant turmoil in the markets and economy as a whole, we are pleased to report a profit of $0.09 a share for the quarter ended April 30, 2020. We were able to maintain sales volumes despite the impact of nation-wide shutdowns and stay-at-home orders due to the COVID-19 pandemic. Many of our customers who purchase green coffee from us for their food service, café and restaurant roasting, were forced to significantly curtail, or close altogether, their operations at various times during the quarter. These closures forced our customers to cease all purchases from us. However, the revenue we lost from our food service, café and restaurant customers was offset by increased sales of our branded and private label products to large wholesalers and retailers across the U.S. Because of this offsetting increase, sales were only down by 3% compared to the second quarter of 2019, even as green coffee prices were 10% lower this quarter. We continue to be negatively impacted by the change in the relationship of Steep & Brew’s largest customer from a vendor relationship to a brokerage relationship, which accounted for a decline of $1.3 million in revenue during the first quarter of 2020 and $1.1 million in revenue during the current quarter. The effect of this change in relationship resulted in a change of the characterization of these transactions on our income statement from sales to a brokerage transaction, which ultimately had no net effect on our profits during the quarter,” stated Andrew Gordon, President and CEO of Coffee Holding Co., Inc.

“I thought it was a positive quarter overall,” continued Mr. Gordon. “The COVID-19 pandemic did hurt our overall sales, but as part of an essential industry, our factories continued to operate. Fortunately, we did not have to terminate employees during this period and I am proud to say all of our employees received full pay throughout this period. I believe it is a testament to our business model that we did not have to rely on any government funded programs to do so,” stated Mr. Gordon. “In addition, our profitability was once again negatively impacted on a non-cash basis by $241,000 or $0.04 a share due to the cost of our employee stock option plan which is still being amortized, but only for one more additional quarter.

“Lastly, this was the first quarter in over two years that all of our subsidiary companies contributed to the overall profitability of the parent company and I am confident that the changes we implemented over the past year will now keep this trend intact into future quarters,” concluded Mr. Gordon.

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