The WhiteWave Foods Company (WWAV, Financial) is a leading consumer-packaged food and beverage company that manufactures, markets, distributes and sells branded plant-based foods and beverages, coffee creamers and beverages, premium dairy products and organic produce throughout North America and Europe. The company also holds a 49% ownership interest in a joint venture that manufactures, markets, distributes and sells branded plant-based beverages in China.
The company's widely recognized, leading brands distributed in North America include Silk, So Delicious and Vega plant-based foods and beverages; International Delight and Land O'Lakes coffee creamers and beverages; Horizon Organic and Wallaby Organic premium dairy products, and Earthbound Farm organic salads, fruits and vegetables. Its popular plant-based foods and beverages brands in Europe include Alpro and Provamel, and its plant-based beverages in China are sold under the Silk ZhiPuMoFang brand.
WhiteWave Foods reported record fourth-quarter results and strong growth momentum. The company’s market-leading brands and industry-leading innovation continue to drive strong organic growth across all businesses. The company continued to generate significant organic growth behind core brands It also continued to execute strategic initiatives by closing on Vega and Wallaby acquisitions, and strategically modified credit facility to support continued growth plans. The company delivered another quarter of double-digit top and bottom line growth resulting from strong sales across all platforms. It also strengthened the balance sheet by increasing and extending senior credit facilities.
The fourth quarter was a strong finish to an impressive year of both top- and bottom-line growth. The operating performance increased during the year as it continued to realize benefits from expanded scale, supply chain investments, cost initiatives and strategic acquisitions
Strong fourth quarter
WhiteWave reported fourth quarter 2015 adjusted diluted earnings per share of 36 cents, excluding operating costs associated with its China joint venture. Including joint venture costs, WhiteWave reported fourth quarter 2015 adjusted diluted earnings per share of 34 cents.
Full year 2015 adjusted diluted earnings per share increased by 19% and was $1.19, excluding investments associated with its China joint venture, compared with full year 2014. Including these investments, WhiteWave reported full year 2015 adjusted diluted earnings per share of $1.12.
Net sales for the fourth quarter 2015 were $1.02 billion, which marked a 13% increase from the prior-year quarter. For full year 2015, adjusted net sales were $3.87 billion, which was a 13% increase from the prior-year period.
On a constant currency basis, adjusted net sales increased by 15% in the fourth quarter and 15% in full year 2015 when compared to the fourth quarter and full year 2014. Excluding acquisitions, adjusted organic constant currency net sales increased 8% in the fourth quarter and 9.5% in full-year 2015, when compared to the fourth quarter and full-year 2014.
Adjusted operating income for fourth-quarter 2015 increased by 30% and was $114 million, which was $87 million in the prior-year quarter. For full-year 2015, adjusted operating income increased by 24% and was $375 million, which was $304 million in the prior year period. On a constant currency basis, adjusted operating income increased 34% in fourth-quarter 2015 from the prior-year quarter and increased 28% in full-year 2015 over the same period in 2014.
Americas Foods & Beverages segment
In fourth-quarter 2015, net sales for Americas Foods & Beverages were $765 million, which was an increase of 18% from the prior-year quarter. For full-year 2015, net sales for Americas Foods & Beverages were $2.8 billion, which was an increase of 18% from the prior year period. Adjusted operating income for Americas Foods & Beverages increased 36% and was $109 million for fourth-quarter 2015, and increased 26% and was $345 million for full-year 2015, compared to the same periods in 2014. Adjusted constant currency operating margins in the segment expanded over 220 basis points in fourth quarter and over 120 basis points in full-year 2015.
Plant-based foods and beverages
Net sales for this platform increased 26% in fourth-quarter 2015 from the prior-year quarter. For full-year 2015, net sales increased by 20% from the prior-year period.
Coffee creamers and beverages
Net sales for this platform increased 10% in fourth-quarter 2015 from the prior-year quarter. For full-year 2015, net sales increased by 10% from the prior-year period.
Premium dairy
Net sales for this platform increased 22% in fourth-quarter 2015. For full-year 2015, net sales increased 18% compared to full-year 2014.
Americas Fresh Foods segment
Net sales for the segment decreased 5% in fourth-quarter 2015 from the prior-year quarter. For full-year 2015, adjusted net sales decreased 2% from the prior-year period. Adjusted operating income for the segment, excluding higher costs caused by the SAP conversion, decreased 50% in fourth-quarter 2015 as a result of lower sales and related cost absorption, leading to adjusted operating income declining 11% in full-year 2015 compared to full-year 2014.
Europe Foods & Beverages segment
Net sales in the segment increased 17% on a constant currency basis and 6% on a reported basis in the fourth quarter, as compared to the prior-year quarter. Operating income increased 20% on an adjusted constant currency and reported basis for fourth quarter 2015.
Expectations for 2016
The company expects the following:
- Management expects first-quarter 2016 net sales growth to be 12% to 13% and full-year 2016 net sales growth to be 11% to 12% on a constant currency basis.
- On a reported basis, management expects net sales growth to be 11% to 12% for first-quarter 2016 and 10% to 11% for full-year 2016.
- The company expects mid-teens percentage net sales growth on constant currency basis for the Europe Foods & Beverages segment. Management expects organic net sales percentage growth in the high single-digits on a constant currency basis for full-year 2016.
- For full-year 2016, management expects adjusted operating income percentage growth in the high-teens to low-20s on a constant currency basis. Management is targeting at least 75 basis points of constant currency operating margin expansion for full-year 2016.
- Interest expense is expected to increase to approximately $70 million to $75 million in 2016. For first-quarter 2016, interest expense is estimated to range from $13 million to $15 million.
- Effective tax rate to be around 33% to 34% for full-year 2016, with variability by quarter. The company expects its first-quarter 2016 tax rate to be at the high end of the 33% to 34%.
- Management expects to continue to invest in its China joint venture to support the ongoing development of this business. The annual amount of the investment is forecast to be between $10 million and $12 million and to be approximately 6 cents dilutive to the company’s 2016 adjusted diluted earnings per share, with adjusted diluted earnings per share impact of approximately 2 cents in first-quarter 2016.
- Based on these factors, management expects to achieve from $1.38 to $1.42 in constant currency-adjusted diluted earnings per share for 2016, excluding investments in the China joint venture. On a U.S. dollar-reported basis, management expects adjusted diluted earnings per share of $1.33 to $1.37 for 2016, based on current foreign exchange rates, excluding investments in the China joint venture.
- Management expects to continue to invest in its China joint venture to support the ongoing development of this business. The annual amount of the investment is forecast to be between $10 million and $12 million and to be approximately 6 cents dilutive to the company’s 2016 adjusted diluted earnings per share, with an adjusted diluted earnings per share impact of approximately 2 cents in first quarter 2016. The timing and amount of actual investments made in 2016 may vary.
- Based upon these factors, management expects to achieve from $1.38 to $1.42 in constant currency adjusted diluted earnings per share for 2016, excluding investments in the China joint venture. On a U.S. dollar-reported basis, management expects adjusted diluted earnings per share of $1.33 to $1.37 for 2016, based on current foreign exchange rates, excluding investments in the China joint venture.
- For first-quarter 2016, management expects constant currency adjusted diluted earnings per share of 26 cents to 27 cents, excluding investments in the China joint venture. On a reported basis, management expects adjusted diluted earnings per share of between 25 cents and 26 cents for first-quarter 2016, based on current foreign exchange rates, excluding China joint venture investments.
- Capex to be around $325 million to $350 million for full-year 2016.
(Source: Company’s website)
Management
WhiteWave recently announced that it has appointed Anthony (Tony) J. Magro to its board of directors. Magro brings decades of leadership experience in the investment and corporate advisory services industry to WhiteWave’s board of directors. Magro is a senior adviser of Evercore, an independent investment banking advisory firm where he was senior managing director, Corporate Advisory, from 2011 to 2015.
Previously, he held various positions with Bank of America Merrill Lynch from 2001 to 2011, including vice chairman of Global Investment Banking from 2009 to 2011 and group head and managing director of Global Investment Banking for Bank of America Securities from 2001 to 2009.
(Source: Company’s website)
Strong attributes of the quarter
- Higher productivity levels.
- Cost curtailment.
- Increased levels of contributions from completed acquisitions.
- Double-digit top- and bottom-line growth.
- Strong sales across all platforms.
Acquisitions
WhiteWave completed the acquisition of Wallaby Yogurt Company Inc., on Aug. 31, 2015, for a purchase price of approximately $125 million in cash. Founded in 1994 and based in American Canyon, California, Wallaby is a leading manufacturer and distributor of organic dairy yogurt products that include Greek and Australian yogurts and Kefir beverages.
WhiteWave completed the acquisition of Vega on Aug. 1, 2015, for a purchase price of approximately $550 million in cash. Based in Vancouver, British Columbia, Vega is a pioneer and leader in plant-based nutritional products.
On a concluding note
WhiteWave is focused on providing consumers with innovative, great-tasting food and beverage choices that meet their increasing desires for nutritious, flavorful, convenient and responsibly produced products. Investors should consider adding this company to their portfolios. It is going to create shareholder returns.
Disclosure: I do not hold any position in the company.
