Single-Serve Segment Drives Westrock's Q3 Revenue Growth
Third quarter net sales at Westrock Coffee were up double-digits driven in large part by increased volume in the single-serve segment.
Consolidated net sales for the three month period ended Sept. 30 were $230.3 million, an increase of $49 million or 27% compared to the third quarter of 2021. Net loss for the period was $13 million compared to a net loss of $3.9 million for the same period in 2021. Adjusted EBITDA was $17.9 million for the third quarter of 2022, an increase of $4.4 million, or 33% compared to the third quarter of 2021.
Net loss for the quarter included $4 million of acquisition, restructuring and integration expense, $5.2 million of non-cash expense from the change in fair value of warrant liabilities, and $5.9 million of interest expense related to the early extinguishment of debt.
“Our third quarter results again highlight the product mix shift we are seeing across our business,” said Scott T. Ford, Westrock CEO and co-founder. “The year-over-year growth in our single serve cup volumes drove Adjusted EBITDA growth of 33% in the third quarter. We held higher expectations for our core coffee and tea business but that was obviously impacted by the negative effects of inflation as both our customer volume demand and our manufacturing costs reflected the rapid acceleration of price increases in fuel, food, materials, and labor.”
Ford added the company was able to partially mitigate the impact of higher costs through operational efficiencies, and expects to recapture many of these cost increases over the next several quarters as the company’s cost pass-through contracts typically reset six months in arrears.”
Westrock’s Beverage Solutions segment contributed $173.5 million of net sales and $15.9 million of Adjusted EBITDA for the third quarter of 2022, compared to $138.8 million and $11.5 million, respectively, for the third quarter of 2021. This represents year-over-year net sales growth of 25%, primarily driven by a 59% increase in single serve cup volumes and an increase in underlying green coffee prices, partially offset by a 9% decrease in roast and ground coffee volumes, driven in part by higher inflation impacting end-customer demand.
Additionally, the company said it is accelerating capital spending related to its new Conway, Ark., extract and RTD facility. Westrock will now be adding a state-of-the-art extraction technology system, a multi-serve bottling line, and bag-in-a-box packaging lines to its Phase I projects that previously included a standard extraction system and high-speed glass bottle and canning lines.
Renovation of the facility has started with the company making initial deposits on equipment and the commencement of work by the general contractor in the 524,000 square foot facility. The official ground-breaking ceremony took place on November 9, 2022. The plant is scheduled to enter commercial production in the first half of 2024.
Westrock officials also said the company completed the acquisition of Kohana Coffee, LLC, an extract and RTD focused business in Richmond, Calif., serving numerous retailers and CPG coffee brands. The acquisition allows Westrock to accelerate the development, production, and distribution of RTD products in cans and multi-serve bottles to customers of both Kohana Coffee and Westrock Coffee.