AgroFresh Solutions sales up 4% in Q2 2016

Date:09-07-2016

AgroFresh Solutions sales for the second quarter of 2016 were $18.4 million, up 4 percent from $17.7 million in the prior year period. The increase was attributed to sales shifts between the first quarter and the second quarter due to the late harvest in the southern hemisphere, partially offset by unfavorable weather conditions in Brazil and Argentina. The Company held or improved market share in all key southern hemisphere markets.

Cost of sales for the second quarter of 2016 was $15.8 million, or $3.8 million excluding the amortization of a non-cash inventory step-up adjustment of $11.9 million and stock compensation expense included in cost of sales of $0.1 million, resulting in a gross profit margin of approximately 14 percent and an adjusted gross profit margin of approximately 79 percent. Gross profit margin was 71 percent for the second quarter of 2015.

Research and development expenses for the second quarter of 2016 were $3.8 million, reflecting continued investments in growth initiatives. Selling, general and administrative expenses for the second quarter of 2016 were $14.5 million, which include $3.3 million of non-recurring expenses, including but not limited to professional service costs to establish corporate governance and back office infrastructure.

Net loss for the second quarter of 2016 was $25.2 million compared to net loss of $14.0 million in the same quarter of 2015. The increase in net loss is attributable to increased costs to support the Company's stand-alone infrastructure associated with being an independent public company, as well as additional amortization and interest expenses. Adjusted EBITDA was $0.7 million for the second quarter of 2016 compared to Adjusted EBITDA loss of $0.4 million in the same quarter of 2015. The period-over-period change in Adjusted EBITDA reflects increased sales and higher adjusted gross margin, which were partially offset by increased costs to support the Company's stand-alone infrastructure associated with being an independent public company.

Sales for H1 2016

Sales for the first six months of 2016 were $46.8 million, down 7 percent from $50.5 million in the prior year period. The decrease was primarily attributable to lower sales volume due to unfavorable weather conditions in Brazil and Argentina, which was partially offset by holding or improving market share in all key southern hemisphere markets. The Company successfully launched Harvista™ pre-harvest technology in Argentina, which also helped to mitigate the decline in sales.

Cost of sales for the first six months of 2016 was $39.7 million, or $8.9 million excluding the amortization of a non-cash inventory step-up adjustment of $30.4 million, stock compensation costs included in cost of sales of $0.3 million and severance costs included in cost of sales of $0.1 million, resulting in a gross profit margin of 15 percent and an adjusted gross profit margin of 81 percent. Gross profit margin was 80 percent for the first six months of 2015.

Research and development expenses for the first six months of 2016 were $8.2 million, reflecting continued investment in growth initiatives. Selling, general and administrative expenses for the first six months of 2016 were $34.2 million, which include $2.3 million of severance and related costs primarily for the separation of former executives and $9.7 million of non-recurring expenses, including but not limited to professional service costs to establish corporate governance and back office infrastructure.  

Net loss for the first six months of 2016 was $50.3 million compared to net loss of $11.5 million for the first six months of 2015. The increase in net loss is attributable to increased costs to support the Company's stand-alone infrastructure associated with being an independent public company, as well as additional amortization and interest expenses. Adjusted EBITDA was $9.7 million for the first six months of 2016 compared to Adjusted EBITDA of $18.0 million in the same period of the prior year. The period-over-period decline in Adjusted EBITDA is attributable to lower sales and increased costs to support the Company's stand-alone infrastructure associated with being an independent public company.

Dr. Nance Dicciani, Chair of AgroFresh's Board and acting co-CEO commented, "Sales and Adjusted EBITDA for the second quarter and first half of 2016 came in within guidance. We've accelerated the launch of our new product offerings, taken steps to defend and strengthen our market share, and made progress on our external development strategy. We are doing well with our SmartFresh™ and Harvista™ technologies against competition and we expect growth in the Northern Hemisphere with respect to both products. We expect our new product offerings to bring much-needed diversification to our portfolio."

In conclusion, Dr. Dicciani stated, "We feel good about our position, and our prospects of having a strong second half on the back of a good Northern Hemisphere apple crop, and we confirm our full year Adjusted EBITDA guidance of $90 million to $100 million. We continue to place a high emphasis on operating and financial discipline, and are excited about the next chapter of AgroFresh under our new CEO, Jordi Ferre."

Outlook

The Company continues to expect full year 2016 Sales to increase 5 percent to 12 percent year-over-year and expects full year Adjusted EBITDA to range from $90 million to $100 million.