VANCOUVER, British Columbia, Canada – Swiss Water Decaffeinated Coffee Inc. reported strong financial results for the three months ended March 31, 2019 – the first quarter of the company’s 2019 fiscal year. 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.
First quarter revenue was $24.2 million, an increase of 14% over Q1 2018. The increase was due to growth in processing volumes, partially offset by a lower coffee commodity price (“NY’C’”) and lower average US dollar (“US$”) exchange rate.
Quarterly gross profit of $3.5 million was up by $0.7 million, or 25% over Q1 2018. This resulted in a margin of 15%, an increase of 1.2% over the 2018 result. The improved results were primarily due to the increase in processing volumes, as well as successful revenue management initiatives and ongoing measures to control operating costs. These factors have helped enhance operating margins, following a period of inflationary pressure on Swiss Water’s cost base.
During the quarter, the company increased prices charged to customers of its Seaforth Supply Chain Solutions coffee handling and distribution subsidiary. This, along with efficiency improvements, enabled Seaforth to make a positive contribution to Q1 results. Across all of its operations, Swiss Water continues to seek ways to reduce variable and fixed costs, without impacting product quality.
First quarter operating expenses of $2.6 million were up by 12%, compared to the same period last year. The increase was due to higher staffing and staff-related expenses, in addition to increased spending on advertising and consumer marketing initiatives. For the past several quarters, Swiss Water has been investing in enhancing its operational capabilities and sales activities to prepare the ground for the new production capacity it has coming online later this year.
Operating income increased by $0.4 million, or 76%, to $1.0 million in the first quarter.
For the first quarter of 2019, Swiss Water reported a net loss of $0.01 million, compared to net income of $0.5 million in Q1 2018. Improved quarterly operating income this year was offset by higher non-cash expenses and by the adoption of the new IFRS 16 standard related to leases. The quarterly net loss was primarily due to the revaluation of an embedded derivative on the company’s convertible debenture. Higher finance expenses related to interest expense on leases as a result of the adoption of IFRS 16, and interest on a construction loan.
Quarterly EBITDA of $2.3 million, was up by $1.2 million, or 109%, over the same period last year. The significant improvement in EBITDA was due to new accounting standards related to leases as well as strong growth in Swiss Water’s processing volumes, ongoing efforts across the company to enhance cost recovery, increased financial contribution from Seaforth, its supply chain subsidiary.