Transformation plans laid out (STKL)
SunOpta reported adjusted continuing operations loss per share of $.03 compared to -$.08 in the prior year. Adjusted EBITDA from continuing operations was $20.6M compared to $11.2M in the prior year. Consensus estimates were not comparable as they included the Global Ingredients business that was sold. Our estimates were a little higher for the Plant-based segment and lowered for the Fruit-based segment, but overall in line.
Sales grew 10.4% in the quarter, accelerating 400bps sequentially. The Fruit-based segment sales grew 3.9%, while Plant-based grew 6.6%. That is an acceleration for Fruit-based from +1% in Q3 and flat sequentially for Plant-based. Gross margins expanded 70bps in Q4, driven by higher volumes and productivity gains. The Plant-based segment gross margins expanded 70bs while the Fruit-based segment gross margins expanded 720bps. Management’s focus on margins over the top-line for the Fruit-based segment provides visibility in 2021. For the Plant-based business, margins remain steady with the underlying commodity costs largely passed on to the customers, providing fantastic visibility.
Management expects the Plant-based revenue growth to be close to 10% in Q1 despite the difficult +30% comparison in the prior year. For the remainder of the year, management expects Plant-based revenue to be low to mid-teens%. The new capacity entirely drives the growth in Plant-based. For the Fruit-based segment, management expects an HSD% decline in Q1 followed by a low to mid-single digits decline for the remainder of the year. Management is passing on low-margin Fruit-based revenues to raise profitability in 2021. Investors now have increased visibility into the company’s top-line growth and margins. SunOpta now has the combination of an HSD% organic growth rate and steady margins. We see 100% upside in the shares from current levels as management executes on their plan and the market recognizes the transformation.
For more details, please see our separate note.
A turnaround for soymilk (DANOY)
According to SPINS data, in the year ended Jan. 24, 2021, US retail sales of almond milk sales were up 16.9% to $1.59B. Oat milk sales were up 219.3% to $264.1M. Coconut milk sales were up 25.9% to $134.6M. US retail sales of soymilk declined 0.9% to $201.4M. A decade ago, sales were above $1B. Danone’s North America CEO Shane Grant said soymilk sales have started to grow again in a recent interview. Soymilk sales have been on a decade-long slide after concerns about estrogen levels in soy dampened the dairy alternative's popularity. In the 12-week period ended Jan. 24, 2021, soymilk sales rose 2.1%. Danone’s Silk soymilk sales had a 16 point turnaround compared to 2019. Shane Grant said, “We have a strong conviction that we can grow that [soymilk] segment where we have clear leadership, and over the last 18 months, we have put a lot of emphasis on re-accelerating that segment.” Danone said an important part of turning around the sales trajectory has been emphasizing the performance and functionality – that soymilk has similar protein to dairy milk and 50% more calcium.
Shane Grant added that Silk’s oat milk offering (Oat Yeah!) would be followed by additional oat-based launches in other categories. “Oatmilk is clearly a leading growth platform within plant-based beverages with triple-digit growth last year, and a growth space for us as a business, and we plan to be assertive in this space, so there’s more to come in; oat under the Silk brand.” The Silk brand overall grew 10% over the past 12 months. Danone targets its total plant-based sales to reach €5B by 2025 from €2.2B in 2020. SunOpta is a plant-based milk supplier for Danone.
TX on-premise alcohol tax receipts decelerate in February (BUD)
Texas reports its alcoholic beverages sales tax receipts monthly. In February, alcoholic beverage tax revenue declined 36% YOY. (Last February had a Leap Day.) This is a deceleration from -27% in January and -29% in December, as seen in the chart below. In Texas, bars were shut down in mid-March then allowed to re-open on May 22 with capacity limits. In late June, bars were shut down again, then allowed to re-open once again in October by county. Bars were also allowed to reclassify as restaurants since June as long as food sales exceeded alcohol sales. This week the Texas Governor announced the end of mask mandates and capacity limits on businesses of any type. That includes sporting events and concerts. Currently, most businesses are permitted to operate at 75% capacity. The change will go into effect on March 10.
