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Mrinalini Chaudhuri
Mrinalini Chaudhuri
Articles (517) 

This Sparkling Water Maker Rallies Forward

Company poised to grow after reporting strong 1st quarter

June 24, 2016 | About:

Headquartered in Israel, Soda Stream (NASDAQ:SODA) is the world's largest manufacturer, distributor and marketer of home carbonation systems with its machines being sold in over 60,000 retail stores in 45 countries worldwide.

Today, it is leading a revolution against bottled and canned beverages, providing consumers with a better-for-you-and-better-for-the-planet alternative to store-bought soda. It enables consumers to easily transform ordinary tap water into sparkling water and flavored sparkling water in seconds. By making ordinary water more exciting and fun to drink, SodaStream helps consumers drink more water.

It offers a highly differentiated and innovative solution to consumers of bottled and canned carbonated soft drinks. The products promote health and wellness, are environmentally friendly and cost effective and are customizable and fun to use. Products are available at more than 70,000 retail stores across 45 countries, including approximately 13,000 retail stores in the U.S.

The company recently reported first-quarter results with sales exceeding expectations. It also benefited from strong gains in Europe. It experienced continued growth in Germany, Austria and Switzerland, and it had a good operating performance.

First-quarter results

Revenue increased by $9.6 million or 10.4% and was $100.9 million from adjusted revenue of $91.3 million in the prior-year quarter.

Gross margin decreased and was 50.7% (adjusted gross margin was 52.3% in the prior-year quarter).

Sales and marketing expenses were $32.7 million, or 32.4% of revenue, which was $32.5 million, or 35.5% of the adjusted revenue, in the prior-year quarter).

General and administrative expenses for the first quarter were $10.6 million, or 10.5% of revenue, which was $11.6 million, or 12.7% of adjusted revenue, in the prior-year quarter.

Operating income increased by 116.3% and was $7.9 million, or 7.9% of revenue, which was an adjusted operating profit of $3.7 million, or 4.0% of adjusted revenue, in the prior-year quarter.

Net financial expense was $900,000.

Tax expense was $900,000 reflecting an effective tax rate of 13.1%, which was $1.0 million or an effective tax rate of 13.8%, in the prior-year quarter.

Cash and cash equivalents were $34.4 million.

Cash flow from operating activities less cash flow for investment activities (free cash flow) was $4.6 million compared to negative free cash flow of $11.5 million in the same period last year.

Bank debt decreased by 11.7% and was $32.5 million ($36.8 million as of Dec. 31, 2015).

Working capital during the quarter was $141.6 million.

Inventories increased by 2.0% and were $115.2 million ($112.9 million as of Dec. 31, 2015).

Focus

  • Growing business by repositioning its brand around health and wellness.
  • It plans to develop and introduce new products and to rebrand certain of its current products.
  • It plans to increase its installed base in the markets.
  • Generate demand.
  • Marketing techniques for expansion into new markets.
  • Increasing the number of stores in each region.
  • The company plans to enter into collaboration arrangements with third parties, including strategic co-branding arrangements.

New launch

It announced the release of its new home beer system, the Beer Bar. The brand is an exciting concept, making quality home-crafted beer using sparkling water and a unique beer concentrate brewed to perfection. The Beer Bar is unveiled with a light beer called Blondie that has a smooth authentic taste and a hop-filled aroma. The Beer Bar enables consumers to concoct crafted beer in seconds by adding Blondie concentrate to Sparkling Water. SodaStream chose to first launch the Beer Bar in some of Europe's beer capitals. The product is available in SodaStream Germany's online store www.sodastream.de and at leading retailers in Switzerland. Other markets are expected to launch the Beer Bar in late 2016 and 2017.

(Source: Company’s Website)

On a concluding note

As part of its growth plan, it continues to invest in its new positioning around health and wellness. To create and maintain product and brand awareness, it is engaging in extensive advertising and promotional campaigns in certain key markets that have significant growth potential, such as the U.S. The company is focused on continuing to execute growth plan including in the U.S. and enhancing our in-store presence. It is going to create greater shareholder value over the long term, and investors should consider adding this company to their portfolios.

Disclosure: I do not hold any position in the company.

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