SunOpta Inc ((STKL)) has held its Q4 earnings call. Read on for the main highlights of the call.
SunOpta Inc’s recent earnings call presented a balanced sentiment, reflecting both positive growth momentum and operational challenges. The company reported strong revenue and volume growth, improved adjusted EBITDA, and successful completion of the Midlothian startup. However, challenges such as a decline in gross profit margin, operational downtime at Midlothian, and a reported loss from continuing operations were also highlighted.
Strong Revenue and Volume Growth
SunOpta Inc experienced a significant increase in revenue, which rose by 9% in Q4 2024, driven by a 13% volume growth. For the entire year of 2024, the company saw a 21% increase in volume, indicating substantial growth across various segments and customers.
Adjusted EBITDA Improvement
The company reported a 20% increase in adjusted EBITDA for Q4 2024. The EBITDA margin improved by 130 basis points to 13.4%, supported by robust revenue growth and operational efficiencies, marking a positive financial performance.
Successful Midlothian Startup Completion
SunOpta successfully completed the startup phase at its Midlothian facility, with upgrades to electrical distribution equipment enhancing operational capacity. This completion marks a significant milestone in the company’s operational strategy.
Debt Reduction and Cash Flow Generation
The company achieved a reduction in debt by $25 million, reaching a net leverage target of 3 times. Additionally, cash provided by operating activities increased significantly to $52 million from $4 million in 2023, demonstrating strong cash flow generation.
Future Growth and Efficiency Plans
SunOpta outlined plans to increase aseptic processing capacity by 20% by the end of 2026 and aims to achieve a $125 million adjusted EBITDA annual run rate by the end of 2025. These plans are part of the company’s strategy to drive future growth and efficiency.
Gross Profit Margin Decline
Despite positive revenue growth, the company faced a decline in gross profit, which decreased by $3.9 million in Q4 2024. The adjusted gross margin dropped from 17.2% to 16.1%, attributed to increased depreciation and temporary investments.
Operational Downtime at Midlothian
The electrical equipment upgrade at the Midlothian facility resulted in over 10 days of downtime, causing inefficiencies and some waste, which impacted production capacity.
Loss from Continuing Operations
SunOpta reported a loss from continuing operations of $4.6 million in Q4 2024, compared to a loss of $3 million in the prior year period, highlighting ongoing challenges in certain operational areas.
Forward-Looking Guidance
For fiscal year 2025, SunOpta provided guidance with a revenue growth expectation of 7% to 11%, translating to $775 million to $805 million. Adjusted EBITDA is projected to grow by 9% to 16%, reaching $97 million to $103 million. The company aims to exit 2025 with an annual adjusted EBITDA run rate of $125 million, focusing on operational efficiencies and reducing leverage to 2.5 times by year-end. Capital expenditures are forecasted between $30 million to $35 million, primarily for maintenance and productivity improvements.
In summary, SunOpta Inc’s earnings call reflected a balanced sentiment, with strong growth in revenue and volume, alongside challenges such as gross profit margin decline and operational downtime. The company’s forward-looking guidance indicates a strategic focus on growth and efficiency, aiming to enhance shareholder value through sustainable cash flow generation.