SunOpta Inc’s Earnings Call Highlights Growth and Challenges

SunOpta Inc ((STKL)) has held its Q1 earnings call. Read on for the main highlights of the call.

SunOpta Inc’s recent earnings call struck a positive tone, highlighting impressive revenue and EBITDA figures that surpassed expectations. The company showcased strong category growth and operational improvements, although concerns were raised about gross margin pressures and challenges at the Midlothian facility. Despite these issues, SunOpta’s proactive strategies and solid financial metrics instill confidence in its continued growth trajectory.

Revenue Growth Exceeds Expectations

SunOpta reported a remarkable 9% increase in Q1 revenue, driven by a 12% surge in volume growth. The company’s adjusted EBITDA reached $22.4 million, surpassing expectations and prompting an upward revision in the lower end of its fiscal year 2025 guidance.

Strong Category and Customer Performance

All of SunOpta’s categories are experiencing growth, with plant-based beverages anticipated to grow in the high-single-digits. Meanwhile, better-for-you fruit snacks and protein shakes are exceeding 15% growth. The company’s top five customers also delivered year-over-year growth in Q1 2025.

Increased Production Capacity

SunOpta’s aseptic network increased Q1 volume production by over 6% from Q4 2024, while the fruit snacks network produced 7% more units in Q1 2025 compared to the same period in 2024, using the same equipment.

Improved Financial Metrics

The company reported a $4 million reduction in debt, bringing it down to $261 million, with leverage reduced to 2.9 times. Strong cash generation was evident with $22 million provided by operating activities.

Gross Margin Decrease

SunOpta experienced a decrease in adjusted gross margin by 170 basis points to 15.3%. This was attributed to investments in talent and infrastructure, inefficiencies at the Midlothian facility, and incremental depreciation.

Midlothian Facility Challenges

The Midlothian facility is facing challenges due to a more restrictive regulatory environment and a subscale wastewater management system, creating a bottleneck. This is expected to incur $500,000 per quarter in excess wastewater haul-off fees until mid-2026.

Forward-Looking Guidance

SunOpta has raised the lower end of its fiscal year 2025 revenue guidance to a range of $788 million to $805 million, reflecting growth of 9% to 11%. The adjusted EBITDA guidance is set between $99 million and $103 million, representing a 12% to 16% increase. The company aims to improve gross margins to 18% to 19% by Q4 2025, with a full-year target of 20% plus by 2027. Additionally, SunOpta announced a $25 million share repurchase program, emphasizing its commitment to shareholder value and reducing leverage to 2.5 times by the end of 2025.

In summary, SunOpta’s earnings call conveyed a generally positive sentiment, with robust revenue and EBITDA figures exceeding expectations. While challenges at the Midlothian facility and gross margin pressures were noted, the company’s proactive measures and strong financial performance suggest a promising outlook for continued growth.