Westrock Coffee (WEST) 8 Aug 24 2024 Q2 Earnings call transcript

Westrock Coffee Company recently held its second quarter 2024 earnings call, where executives discussed the company's financial performance and future outlook. The call, led by Co-Founder and CEO Scott Ford and Chief Financial Officer Chris Pledger, provided valuable insights into the company's operations, financials, and strategic plans.

Operational Highlights and Challenges

The call began with an update on Westrock's operations, with the commencement of commercial operations at their Conway, Arkansas extract and ready-to-drink facility. The company reported that they are in full production and sales mode on their multi-serve bottle line, with plans to start commercial sales from their RTD canning line in the second half of the year. The glass bottle line is expected to be completed later this year, and the company has already secured several new commitments for the RTD canning line that will fill it over the next 18 months.

However, the company did face challenges in their single-serve cup segment, with lower sales due to consumers opting for smaller pack sizes to stretch their disposable income amidst rising interest rates and fuel prices. This trend has impacted the company's adjusted EBITDA, which would have been significantly higher had retail customers acted normally in the quarter.

Financial Performance

Financially, Westrock reported a 21% increase in consolidated adjusted EBITDA for the second quarter, driven by a 13% gross profit growth in their Beverage Solutions segment. The company's consolidated net sales for the quarter were $208.4 million, down 7.3% from the previous year, but gross profit increased by 16% due to operational and procurement improvements in their core coffee business and the continued strength of their flavors, extracts, and ingredients platform.

Future Outlook

Looking ahead, Westrock is optimistic about its future prospects. The company expects its annualized adjusted EBITDA run rate to be between $125 million and $150 million as they exit 2025 and enter 2026. This growth is attributed to the commercialization of their Conway facility, the expected completion of their Select Milk Producers joint venture, and the optimization of their manufacturing footprint through facility consolidations.

Key Takeaways

The earnings call highlighted Westrock's operational and financial progress, with a focus on the successful start of their Conway facility and the company's strategic initiatives to expand its product offerings and optimize its operations. However, challenges in the single-serve cup segment underscore the impact of broader economic factors on consumer behavior and the coffee industry as a whole.

Investors and analysts will closely watch Westrock's ability to navigate these challenges and capitalize on growth opportunities, particularly the ramp-up of their Conway facility and the expected completion of the Select Milk Producers joint venture. The company's financial performance and strategic plans provide a solid foundation for continued growth, but the operational and market dynamics will remain critical factors in Westrock's success.