SunOpta Inc. (STKL, Financial) filed Quarterly Report for the period ended 2009-09-30.
SunOpta Inc. is an operator of high-growth ethical businesses focusing on integrated business models in the natural and organic food supplements and health and beauty markets. The Company has three business units: the SunOpta Food Group which specializes in sourcing processing and distribution of natural and organic food products integrated from seed through packaged products; the Opta Minerals Group a producer distributor and recycler of environmentally friendly industrial materials; and the SunOpta BioProcess Group which engineers and markets proprietary steam explosion technology systems for the pulp bio-fuel and food processing industries. Each of these business units has proprietary products and services that give it a solid competitive advantage in its sector. Sunopta Inc. has a market cap of $240.5 million; its shares were traded at around $3.71 with a P/E ratio of 33.8 and P/S ratio of 0.2. Sunopta Inc. had an annual average earning growth of 0.6% over the past 5 years.
SG&A including intangible asset amortization decreased $1,930,000 to $29,001,000 for the quarter ended September 30, 2009 compared to the same period in 2008. The weaker Canadian dollar in the third quarter of 2009 versus 2008 led to a $701,000 decrease in SG&A on Canadian and Euro borne costs, while legal and other expenses related to SunOpta BioProcess as well as the internal investigation and class action lawsuits were lower by $1,059,000. Severance costs associated with headcount reductions and closing costs related to the rationalization of various plants, and the reversal of severance accruals related to the transition of certain members of senior management in the third quarter of 2008 increased SG&A by $1,727,000. Marketing, listing fees and other costs associated with the re-launch of certain branded health products increased 2009 SG&A by $904,000. The remaining SG&A decrease in 2009 of $2,882,000 is due to overall cost saving initiatives throughout the Company. SG&A as a percentage of sales was 10.8% in 2009 compared to 10.2% in 2008. The rate difference is primarily due to the reduction in revenue versus 2008.
The SunOpta Food Group contributed $237,067,000, or 93.4% of consolidated revenue in the third quarter of 2009, compared to $257,833,000, or 89.6%, of consolidated revenues in the comparable period in 2008, a decrease of $20,766,000 or 8.1%. The third quarter of 2009 contains no acquisition growth over the same quarter in 2008. The internal revenue decline includes unfavourable movements related to foreign exchange and commodity costs. Excluding the negative impact of currency translation and reduced commodity costs, revenues in the SunOpta Food Group for the three months ended September 30, 2009 decreased approximately 4.0% compared to the same period in 2008. The SunOpta Grains and Foods Group realized $1,903,000 in lower revenues in the third quarter of 2009 due to lower commodity prices related to non-GMO and organic foods. The SunOpta Fruit Group experienced a $3,413,000 decline in revenues due to decreased demand for industrial and retail product offerings. The SunOpta International Sourcing and Trading Group and the SunOpta Distribution Group had revenue declines of $11,600,000 and $4,682,000 respectively, primarily due to lower commodity prices and the impact of a weaker Euro and Canadian dollar when translating to U.S. currency. These Food Group revenue declines were slightly offset by increased revenue in the SunOpta Ingredients Group of $832,000 due to higher volumes of oat and soy fiber.
Gross profit in the Food Group decreased $1,506,000 in the third quarter of 2009 to $34,005,000, or 14.3% of revenues, compared to $35,511,000, or 13.8% of revenues in the third quarter of 2009. The SunOpta Grains and Foods Group contributed $2,591,000 higher gross margin due to increased volumes of soymilk and aseptic packaged beverages. Lower raw material, chemical and utility costs in fiber manufacturing in the SunOpta Ingredients Group led to $2,117,000 in improved margins. These positive margins were offset by volume declines and rationalization charges recorded in an effort to streamline product offerings and operations in the SunOpta Fruit Group which negatively impacted gross margin by $1,849,000 compared to the third quarter of 2008. Margins in the SunOpta Distribution declined $3,290,000 due to costs related to the re-launch of certain branded health products, increased spoilage of grocery products and the impact of a weakened Canadian dollar on translation to U.S. currency. Lower demand for organic ingredients, a shift in sales mix to lower margin product, and a weaker Euro relative to the U.S. dollar contributed to a $1,075,000 decrease in gross margin in the SunOpta International Sourcing and Trading Group.
Segment operating income in the SunOpta Food Group increased by 6.4% to $5,957,000 in the three months ended September, 2009 from $5,598,000 in the comparable period in 2008. This growth was driven by improved operating margins at the SunOpta Grains and Foods Group and the SunOpta Ingredients Group of $2,086,000 and $2,159,000, respectively due to increased volumes and input cost reductions while SG&A costs remained relatively stable in comparison to the same period in 2008. These operating income improvements were offset by a $2,409,000 decrease in the SunOpta Distribution Group primarily due to costs related to the branding initiative in our Natural Health Product operations, and $779,000 and $698,000 decreases at the SunOpta International Sourcing and Trading and SunOpta Fruit Groups respectively. Details of these movements will be provided in the following sections.
Gross margin in the SunOpta Grains and Foods Group increased by $2,591,000 during the third quarter of 2009 compared to the same quarter in 2008, a 35.5% increase. Increased volumes of soymilk and aseptically packed beverages improved margins by $1,267,000 compared to prior year. Favorable pricing and ownership positions in our IP soybean products and other grain products, offset by pricing pressure brought on by a market oversupply in the specialty oil and corn markets produced a net increase in margins of $264,000. Sunflower margins increased by $872,000 compared to the third quarter of 2008 mainly due to the recovery of an insurance settlement of $577,000 from a business interruption claim relating to a fire that occurred in 2008, combined with positive seed quality yields. The remaining gross margin variance of $188,000 relates to favorable pricing on bulk product sales contracts within our roasted grain operations.
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SunOpta Inc. is an operator of high-growth ethical businesses focusing on integrated business models in the natural and organic food supplements and health and beauty markets. The Company has three business units: the SunOpta Food Group which specializes in sourcing processing and distribution of natural and organic food products integrated from seed through packaged products; the Opta Minerals Group a producer distributor and recycler of environmentally friendly industrial materials; and the SunOpta BioProcess Group which engineers and markets proprietary steam explosion technology systems for the pulp bio-fuel and food processing industries. Each of these business units has proprietary products and services that give it a solid competitive advantage in its sector. Sunopta Inc. has a market cap of $240.5 million; its shares were traded at around $3.71 with a P/E ratio of 33.8 and P/S ratio of 0.2. Sunopta Inc. had an annual average earning growth of 0.6% over the past 5 years.
Highlight of Business Operations:
Gross margins decreased $3,106,000, or 7.5%, in the three months ended September 30, 2009 to $38,202,000 from $41,308,000 in the same period in 2008. As a percentage of revenues, the consolidated gross margin rate increased 0.7% to 15.1%. Gross margin was affected by lower volumes due to a decline in steel and foundry markets which impacted Opta Minerals in the third quarter of 2009 over prior year of $2,192,000 and the SunOpta Food Group of $1,506,000 driven by increases in margins in the SunOpta Grains and Foods and SunOpta Ingredients Groups offset by declines in margins in the SunOpta Fruit, SunOpta International Sourcing and Trading and SunOpta Distribution Groups.SG&A including intangible asset amortization decreased $1,930,000 to $29,001,000 for the quarter ended September 30, 2009 compared to the same period in 2008. The weaker Canadian dollar in the third quarter of 2009 versus 2008 led to a $701,000 decrease in SG&A on Canadian and Euro borne costs, while legal and other expenses related to SunOpta BioProcess as well as the internal investigation and class action lawsuits were lower by $1,059,000. Severance costs associated with headcount reductions and closing costs related to the rationalization of various plants, and the reversal of severance accruals related to the transition of certain members of senior management in the third quarter of 2008 increased SG&A by $1,727,000. Marketing, listing fees and other costs associated with the re-launch of certain branded health products increased 2009 SG&A by $904,000. The remaining SG&A decrease in 2009 of $2,882,000 is due to overall cost saving initiatives throughout the Company. SG&A as a percentage of sales was 10.8% in 2009 compared to 10.2% in 2008. The rate difference is primarily due to the reduction in revenue versus 2008.
The SunOpta Food Group contributed $237,067,000, or 93.4% of consolidated revenue in the third quarter of 2009, compared to $257,833,000, or 89.6%, of consolidated revenues in the comparable period in 2008, a decrease of $20,766,000 or 8.1%. The third quarter of 2009 contains no acquisition growth over the same quarter in 2008. The internal revenue decline includes unfavourable movements related to foreign exchange and commodity costs. Excluding the negative impact of currency translation and reduced commodity costs, revenues in the SunOpta Food Group for the three months ended September 30, 2009 decreased approximately 4.0% compared to the same period in 2008. The SunOpta Grains and Foods Group realized $1,903,000 in lower revenues in the third quarter of 2009 due to lower commodity prices related to non-GMO and organic foods. The SunOpta Fruit Group experienced a $3,413,000 decline in revenues due to decreased demand for industrial and retail product offerings. The SunOpta International Sourcing and Trading Group and the SunOpta Distribution Group had revenue declines of $11,600,000 and $4,682,000 respectively, primarily due to lower commodity prices and the impact of a weaker Euro and Canadian dollar when translating to U.S. currency. These Food Group revenue declines were slightly offset by increased revenue in the SunOpta Ingredients Group of $832,000 due to higher volumes of oat and soy fiber.
Gross profit in the Food Group decreased $1,506,000 in the third quarter of 2009 to $34,005,000, or 14.3% of revenues, compared to $35,511,000, or 13.8% of revenues in the third quarter of 2009. The SunOpta Grains and Foods Group contributed $2,591,000 higher gross margin due to increased volumes of soymilk and aseptic packaged beverages. Lower raw material, chemical and utility costs in fiber manufacturing in the SunOpta Ingredients Group led to $2,117,000 in improved margins. These positive margins were offset by volume declines and rationalization charges recorded in an effort to streamline product offerings and operations in the SunOpta Fruit Group which negatively impacted gross margin by $1,849,000 compared to the third quarter of 2008. Margins in the SunOpta Distribution declined $3,290,000 due to costs related to the re-launch of certain branded health products, increased spoilage of grocery products and the impact of a weakened Canadian dollar on translation to U.S. currency. Lower demand for organic ingredients, a shift in sales mix to lower margin product, and a weaker Euro relative to the U.S. dollar contributed to a $1,075,000 decrease in gross margin in the SunOpta International Sourcing and Trading Group.
Segment operating income in the SunOpta Food Group increased by 6.4% to $5,957,000 in the three months ended September, 2009 from $5,598,000 in the comparable period in 2008. This growth was driven by improved operating margins at the SunOpta Grains and Foods Group and the SunOpta Ingredients Group of $2,086,000 and $2,159,000, respectively due to increased volumes and input cost reductions while SG&A costs remained relatively stable in comparison to the same period in 2008. These operating income improvements were offset by a $2,409,000 decrease in the SunOpta Distribution Group primarily due to costs related to the branding initiative in our Natural Health Product operations, and $779,000 and $698,000 decreases at the SunOpta International Sourcing and Trading and SunOpta Fruit Groups respectively. Details of these movements will be provided in the following sections.
Gross margin in the SunOpta Grains and Foods Group increased by $2,591,000 during the third quarter of 2009 compared to the same quarter in 2008, a 35.5% increase. Increased volumes of soymilk and aseptically packed beverages improved margins by $1,267,000 compared to prior year. Favorable pricing and ownership positions in our IP soybean products and other grain products, offset by pricing pressure brought on by a market oversupply in the specialty oil and corn markets produced a net increase in margins of $264,000. Sunflower margins increased by $872,000 compared to the third quarter of 2008 mainly due to the recovery of an insurance settlement of $577,000 from a business interruption claim relating to a fire that occurred in 2008, combined with positive seed quality yields. The remaining gross margin variance of $188,000 relates to favorable pricing on bulk product sales contracts within our roasted grain operations.
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