Westrock Reports Losses for Q4, Full Year

Westrock Reports Losses for Q4, Full Year
A rendering of the 530,000-SF Westrock Coffee Co. distribution center planned for Conway. The 72-dock building is expected to be complete later this year. (Tempus Realty Partners/Lewis Architects Engineers)

Westrock Coffee Co. (Nasdaq: WESTof Little Rock reported widening losses in the fourth quarter of 2022 and the full year as inflation drove up labor and production costs.

The coffee, tea and extracts company posted a fourth-quarter loss of $31.9 million, higher than the $5.2 million loss it saw in the same period the previous year.

For the full year, Westrock reported a loss of $55.5 million, more than doubling the loss of $21.3 million it posted in 2021.

Net sales for the fourth quarter increased 20% to $227.7 million and net sales for the year for the publicly traded coffee, tea and extracts company increased 26% to $867.9 million.

But rising revenue was offset by “staggering challenges” that company faced in 2022, including record gas prices and delayed equipment orders, Scott T. Ford, CEO and co-founder of Westrock, said during a conference call on Tuesday.

“Our year ended with the late arrival of significant production equipment for our single-serve and extract units, which created customer delivery issues and negatively impacted our costs and margins,” Ford said. “Our team had to fight for every inch of progress in every season of what could have otherwise been a fairly impressive and reasonably easy year.”

In an earnings call with investors, CFO Chris Pledger said the omicron variant of COVID-19 had a "significant negative impact" on consumer spending in early 2022. It contributed to lower sales in restaurants and convenience stores.

This year, the company is “focused on continuing to scale our existing capabilities in service to our customers,” Ford said in a news release on Tuesday. One of its top priorities is opening its $275 million Conway extracts and ready-to-drink facility. 

Ford said the project is 30-60 days ahead of schedule and slightly ahead of budget. Production is expected to begin in 2024. 

Westrock said it expects in 2023 that adjusted earnings before interest, taxes, depreciation, and amortization will grow 10% to 25%, which represents a range of $66 million to $75 million.

The company has already had some major announcements this year. In January, it said it will build a $70 million, 530,000-SF distribution center in Conway, a little more than two miles away from its new manufacturing facility there.

Also, it announced in February that it bought Bixby Roasting Co. of Los Angeles, a specialty-grade roaster that Westrock called a leader in the "emerging influencer-led brand space." The terms of the deal, which includes Bixby's roasting facility in Los Angeles, were not disclosed.

Westrock reported $13.2 million in acquisition, restructuring and integration expenses in 2022. During the year, it acquired Kohana Coffee LLC of Richmond, California, an extract and ready-to-drink company serving numerous retailers and coffee brands. 

Westrock’s stock closed at $11.60 Tuesday and was trading at $11.10 Wednesday morning. Year to date, shares are down about 17%.

The company finished 2022 with $192 million in consolidated unrestricted cash and undrawn revolving credit commitments. 

Westrock went public last year through a merger with a special purpose acquisition company. It has offices in 10 countries and sources coffee and tea from 35 countries.

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