Westrock Coffee Co. (Nasdaq: WEST) of Little Rock plans to increase its investment in its Conway packaging plant by $90 million to meet anticipated demand, news that came with its third-quarter results Monday afternoon.
The extra cash will fund a state-of-the-art extraction technology system, a multi-serve bottling line, and bag-in-a-box packaging lines to the first phase of the project.
Previously, the first phase included a standard extraction system and high-speed glass bottle and canning lines.
Westrock said it now plans to spend $275 million over the next three years to complete the first two phases of the project. Renovations on the 524,000-SF facility began last week. Westrock purchased the former Kimberly-Clark plant last year.
The company on Monday also announced it had acquired Kohana Coffee LLC of Richmond, California, an extract and ready-to-drink company serving numerous retailers and coffee brands. Westrock said the acquisition allows it to accelerate the development, production and distribution of ready-to-drink products in cans and multi-serve bottles.
The owners of Kohana Coffee, Jonathan Reinemund and his father Steve Reinemund, have become shareholders of Westrock Coffee. Steve Reinemund is a former CEO of PepsiCo Inc.
"Their manufacturing facility on the West Coast not only adds to our RTD and multi-serve bottling capabilities, but also adds significant capacity to our extract manufacturing," Westrock CEO Scott Ford said in a statement. "Even more importantly, they have a fantastic stable of customers and a knowledgeable, experienced work force."
Westrock reported a net loss of $13 million in the third quarter, widening a loss of $3.9 million the same period a year ago. The loss includes $4 million in acquisition costs, $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.
On a per-share basis, the loss was 41 cents.
Sales were up in the period, rising 27% to $230.3 million on strong growth in single-serve cup volume and higher underlying green coffee prices. Gains were partially offset by a 9% decrease in roast and ground coffee volumes.
Ford said sales in the company's tea segment were also below expectations and were "obviously impacted by the negative effects of inflation," with customer demand and manufacturing costs reflecting higher prices for fuel, food, materials and labor.
"Fortunately," Ford said, "we were able to partially mitigate these impacts through operational efficiencies, and we expect to recapture many of these cost increases over the next several quarters as our cost pass-through contracts typically reset six months in arrears."
Westrock began trading on the Nasdaq in August through a merger with Riverview Acquisition Corp. of Memphis. Shares were up more than 2% Tuesday in pre-market trading.
