STATEN ISLAND, New York, U.S. — Coffee Holding Co., Inc. (the “Company” or “Coffee Holding Company”) announced its operating results for the three months and nine months ended July 31, 2019.
Net Sales. Net sales totaled $21,594,285 for the three months ended July 31, 2019, a decrease of $1,845,618, or 7.8%, from $23,439,903 for the three months ended July 31, 2018. Net sales totaled $65,944,583 for the nine months ended July 31, 2019, a decrease of $1,772,436 from $67,717,019 for the nine months ended July 31, 2018. The decrease in net sales reflects the lower selling price of coffee during this period due to the continued depressed price of the green coffee market as well as a decrease in sales of approximately $7,400,000 to the Company’s former largest wholesale green coffee customer.
Cost of Sales. Cost of sales for the three months ended July 31, 2019 was $17,465,685, or 80.9% of net sales, as compared to $19,648,710, or 83.8% of net sales, for the three months July 31, 2018. Cost of sales for the nine months ended July 31, 2019 was $53,705,272, or 81.4% of net sales, as compared to $56,263,183, or 83.1% of net sales, for the nine months July 31, 2018. The decrease in cost of sales was due to the Company’s decreased sales offset by the increased cost of steel cans due to the increased tariffs, inbound trucking costs and the Company’s increased losses from its hedging of futures and option contracts.
Gross Profit. Gross profit for the three months ended July 31, 2019 was $4,128,600, an increase of $337,407 from $3,791,193 for the three months ended July 31, 2018. Gross profit for the nine months ended July 31, 2019 was $12,239,311, an increase of $785,475 from $11,453,836 for the nine months ended July 31, 2018. The increase in gross profits resulted from improved margins on the Company’s wholesale and roasted business, partially offset by higher steel and trucking costs and losses from the Company’s hedging of futures and options contracts for the nine months ended July 31, 2019.
Operating Expenses. Total operating expenses increased by $348,844 to $3,871,362 for the three months ended July 31, 2019 from $3,522,518 for the three months ended July 31, 2018. Total operating expenses increased by $1,967,665 to $11,384,245 for the nine months ended July 31, 2019 from $9,416,580 for the nine months ended July 31, 2018. The primary reasons for this increase were the acquisition of Steep & Brew and the increase in the Company’s outbound freight costs as it increased and expanded its product distribution.
Net Income. Coffee Holding had net income of $111,494 or $0.02 per share basic and diluted, for the three months ended July 31, 2019 compared to net income of $15,690, or $0.00 per share basic and diluted for the three months ended July 31, 2018. The Company had net income of $187,741 or $0.03 per share basic and diluted, for the nine months ended July 31, 2019 compared to net income of $957,926, or $0.17 per share basic and diluted for the nine months ended July 31, 2018. The decrease in net income was due primarily to the reasons described above.
“During our fiscal third quarter we were able to maintain our sales volumes and earn a small profit despite coffee prices trading to their lowest levels since 2005. The decrease in sales was almost entirely the result of a decline in sales to our former largest green coffee customer, which for the nine months ended July 31, 2019 were down $7.4 million. However, excluding sales to our former largest green coffee customer, sales to all of our other customers are up $5.7 million, an increase of 8.4%. Further, we earned $0.02 cents a share on both a basic and diluted basis, including a onetime non-cash charge of $0.04 per share on a basic and diluted basis relating to option grants under our option plan. Without this non-cash charge, we would have earned $0.06 cents a share,” stated Andrew Gordon, President and CEO of Coffee Holding Company. “We continue to operate in an extremely challenging environment. Historically low coffee prices, steel tariffs, as well as increased competitive pressure at the grocery store level due to the low coffee prices, continue to erode our earnings potential in the near term. However, I remain positive about our company’s long term outlook as we have weathered these industry forces before while managing to strengthen our core business of private label and green coffee sales and expand our distribution network for our brands. Despite these headwinds, we have seen a dramatic increase in the sales of our Café Caribe single serve during this period, partially offset by a modest decline in sales of our Harmony Bay brand bag and can lines which were acquired in February 2017 as part of our Comfort Foods acquisition. Although I am never pleased to see declines in sales of our brands, we recognize that the Harmony Bay brand is a very mature brand compared to Café Caribe. Café Caribe’s importance within our brand portfolio remains second to none. The sales of espresso in the Latin coffee category continues to outperform the sales of mainstream and private label coffees in supermarkets and we are extremely pleased to be participating in that growth as well,” stated Mr. Gordon.
“Lastly, we continue to closely monitor the regulatory environment as it relates to CBD products being sold in the mainstream market. We believe given our diverse portfolio of branded coffees, we will have the opportunity to service multiple demographics in consumer tastes and preference when the opportunity finally presents itself,” concluded Mr. Gordon.
