VANCOUVER, British Columbia, Canada – Swiss Water Decaffeinated Coffee Inc. (“Swiss Water” or “the Company”), a leading specialty coffee company and premium green coffee decaffeinator, today reported financial results for the three and nine months ended September 30, 2023.
During the third quarter, commercial decaffeination on Swiss Water’s second production line in Delta, BC, started for the first time. This marked the completion of the consolidation of production at one site, and the end of the transition from the Company’s legacy production facility in Burnaby, BC.
Swiss Water operated with a capacity constraint during the third quarter, and as expected, volumes shipped to customers decreased by 31% in Q3 and by 14% for the nine months, when compared to the same periods in 2022. The drop in volumes was the result of a temporary reduction in production capacity between April and August of this year.
This was the transition period between the retirement of Swiss Water’s old Burnaby facility and the final commissioning of its second new decaffeination line at its Delta, BC location. The impact on year-to-date volumes was partially offset by customers front loading orders during the first quarter to ensure they had sufficient inventory on hand to bridge the transition.
Revenue for the third quarter and nine months ended September 30, 2023, was $32.6 million and $125.0 million respectively, representing a decrease of $13.5 million for the quarter and $7.9 million for the year-to-date, when compared to the same periods in 2022.
The drop in revenue resulted from a material decline in the NY‘C’ coffee commodity price and the temporary reduction in production capacity during the transition from Burnaby to Delta. The impact of these factors on nine-month revenues was partially offset by the increased volumes shipped in Q1, and a higher US dollar exchange rate this year.
Swiss Water recorded a net loss of $0.4 million for the third quarter and of $1.5 million for the year-to-date representing a decline in profitability of $0.2 million and $4.1 million respectively, when compared to the 2022 result.
The decrease was due to the lower sales volume, a reduced green coffee differential margin, and higher finance expenses associated with borrowings. The Company’s nine-month performance was primarily impacted by one-time depreciation expenses associated with retired assets located at its vacated facility in Burnaby, BC.
Adjusted EBITDA was $1.5 million for Q3 and $8.3 million for the year-to-date, representing a decrease of $2.8 million and $5.2 million respectively, from the 2022 result. The decrease was driven mainly by the lower sales volume due to the expected capacity constraints during the transition period, as well as a reduced green coffee differential margin.
“We are pleased to report that, during the third quarter, we successfully began high-quality decaffeination on our new second line in Delta, BC. This marked the consolidation of Swiss Water’s production activities onto one site, and the final transition away from our legacy production assets in Burnaby, BC. Our sales and logistics teams performed admirably during the quarter and year-to-date as they managed the temporary reduction in capacity and the allocation of available production.
The team successfully front-end loaded significant customer demand into Q1, before our Burnaby shutdown, enabling balanced customer service through Q3”, said Frank Dennis, Swiss Water’s President and CEO.
“As we look forward into the fourth quarter of 2023, we expect to see a strong recovery of volumes with the additional capacity back on line within the third quarter. Initial performance of our new line has been very good and we are optimistic that we can increase the production rate of this line over the coming months.
Moving forward, this extra capacity will help enable more roasters to respond to consumer demand by accelerating their migration to chemical free decaffeinated coffee,” Dennis added.