Q4 2020 Sunopta Inc Earnings Call
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Net.
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Thank you.
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Good morning, and welcome to Synopsys fourth quarter fiscal 2020 earnings conference call by now everyone should have access to the earnings press release that was issued this morning and is available on the Investor Relations page.
On <unk> website at Www Dot <unk> dot com.
Call is being webcast and its transcription will be available on the company's website.
As a reminder, please note that the prepared remarks, which will follow contain forward looking statements and management may make additional forward looking statements in response to your questions. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them.
We refer you to.
All risk factors contained in <unk> press release issued this morning, the company's annual report filed on form 10-K, and other filings with the Securities and Exchange Commission for more detailed discussion of the factors that could cause actual results to differ materially from those projections and any forward looking statements.
Company undertakes no obligation to publicly correct or update the forward looking statements made during the presentation to reflect future events.
Or circumstances, except as may be required under applicable securities laws.
Finally, we would like to remind listeners that the company may refer to certain non-GAAP financial.
Measures during this teleconference. A reconciliation of these non-GAAP financial measures was included with the company's press release issued earlier today also please note that unless otherwise stated all figures discussed today are in U S dollars and are occasionally rounded to the nearest million.
I would now like to turn the conference call over to set up the CEO Joe Ennen.
Good morning, and thank you for joining us today with me on the call is Scott Huckins, our Chief Financial Officer.
Before we begin on packing the results, let me offer three key takeaways from the quarter and the full year results.
Number one.
Strong Q4 results were fueled by strong execution from continuing operation.
Both are plant based and fruit based segment had a great quarter and year.
Number two very strong margin performance in Q4 with 15, 5% gross profit margin and 10% EBITDA margin reflects all our business optimization efforts and strong execution across both operating segments.
Third solid progress in our new business development effort as we seek to add $100 million of plant based revenue in the next two years.
With this call being our full year 2020 results before we unpack the details of Q4 I would like to summarize for shareholders. Just how much progress we have made in 2020.
As it relates to the balance sheet. We entered 2000 2010 times Levered, we enter 2020 112 times Levered.
In 2020, we had an annual interest expense of over $30 million.
In 2021, we have an expected annual interest expense of approximately $10 million in.
In 2020, we had limited remaining term on our debt instruments. We now have five years on our debt instruments we.
We entered 2020 with approximately $40 million of aged inventory, we enter 2021 with $5 million of aged inventory. We entered 2020 with a triple C credit rating, we enter 2021 with a b or b minus rating and we are trending up.
When reflecting on our fruit business, we began 2020.
With a gross margin of one 9% too much capacity too many non strategic customers on Mexico operation that was not firing on all cylinders and a very new management team across the board.
By the end of 2020, we.
We have delivered our goal of a 10% growth margin in the fourth quarter.
We grew year over year gross profit by $22 million compared to 2019.
We enter 2021 looking to build on this momentum with positive overlaps expected in each quarter.
We streamlined our operations in California to improve our cost structure and we have made material progress in streamlining our customer base, which will in the short term mute sales growth, but will allow us to deliver better quality better service and more profitability.
We have stood up a new team in Mexico, and we are projecting that Mexico will become our largest fruit operation in the not too distant future.
Importantly, we enter 2021 with a more experienced team committed to driving improved profitability.
In our plant based segment, we certainly had momentum coming into 2020, but it was a capacity constrained network. This constraint also limited our business development effort.
We enter 2021 with capacity and plant based beverages with a whole new capability and oat milk that is creating partnerships with new customers from ice cream tea yogurt to refrigerated plant based milk manufacturers.
We enter 2021 with more customer diversity, a very strong customer pipeline and optimism that as COVID-19 concerns decline a foodservice business recovery will deliver significant upside in the second half of 2021.
Perhaps it is most important to note that we entered 2020, managing two very different businesses, one being a global organic ingredient company headquartered in Amsterdam. The other are predominantly north American based consumer packaged goods business.
We divested the global ingredients segment in December for approximately $330 million euros per.
Proceeds of the sale provided additional funds to invest strategically in our competitively advantaged.
Food and beverage platform reduced our exposure to a commodity trading business de levered, our balance sheet and significantly reduced our working capital needs.
We also signed a long term supply agreement with Docomo, the new owner to ensure continuity of supply of organic raw materials for the foreseeable future.
As we enter 2021, we have clarity of focus and clarity of purpose as we seek to help fuel the future of food.
For the sake of completeness I will comment briefly on the combined results of ongoing and discontinued operation in terms of revenue and EBITDA for the year in the quarter.
Revenue for the full year 2020 was $1 9 billion, a $102 million or eight 6% increase versus 2019.
Revenue for the quarter with $330 million, a $35 million or 11, 7% increase versus prior year.
EBITDA for the full year was $94 1 million, a $47 million or nearly 100% increase.
For the quarter EBITDA was $26 5 million.
$10 million or 62% increase versus prior year.
Of the $102 million of revenue growth and $47 million improvement in EBITDA.
75 per cent of the revenue growth and 84% of the EBITDA growth came from continuing plant based and fruit operation.
With the divestiture of global ingredients in December unless otherwise noted all of the results referenced from here forward will be for continuing operations, meaning the aggregation of our plant based and free based operating segment.
Fourth quarter results were better than expected, reflecting solid execution by the entire organization and a continuation on the strong underlying demand for our products the.
Fourth quarter also marked an important inflection point for the company as we completed a major multi year operational turnaround and portfolio optimization.
Entering 2021, the entirety of our efforts will now be focused on driving growth and profitability in businesses, where we have a demonstrable competitive advantage.
Total revenue from continuing operations increased 10, 4% on an as reported basis in the fourth quarter.
Adjusting for commodity price variances and the impact of a 50 <unk> week total revenue was up five 4% driven by six 6% growth in plant based and three 9% growth in the fruit segment.
After four consecutive quarters of doubling EBITDA versus prior year adjusted EBITDA in Q4 increased a mere 84, 3% on a year over year basis to $20 6 million.
We are pleased with this result, as this is 84% growth on a year ago number that was more than six ex the 2018 result.
As a percentage of revenue adjusted EBITDA improved by 400 basis points to 10%, which had been our previously communicated long term financial target for EBITDA margin.
It was helped by higher growth margin in both segments, including a sharp recovery in the fruit business, reflecting productivity and pricing initiatives.
Turning to our segment results, let me begin with our plant based segment, where we continued to experience strong trend throughout the year.
Full year revenue was $415 million, an increase of $54 million or 14, 9%.
Gross profit for the year was 80 million growing 22 million or <unk> 37 per cent.
For perspective, our plant based segment is now approximately 75% of the company's total gross profit.
For the fourth quarter revenue increased 11, 1% or six 6% on an adjusted basis as we cycled a 25% increase from last year's fourth quarter.
Our capacity additions helped deliver this increase as we were effectively at capacity in Q4 of 2019 and without our added capacity, we would not have achieved material growth in the quarter.
Our foodservice sales channel remained challenged due to COVID-19, especially as portions of the country moved back into heightened locked down in the fourth quarter.
Gross margin improved 310 basis points for the year and 70 basis points in Q4, driven by higher volume as well as continued productivity gains.
Our new business pipeline remains encouraging as our recognized expertise in expanding capacity makes them out the desired partner for leading CPG companies focus on plant based foods and beverages.
To that end during the fourth quarter, we completed expansion of our extraction capability as well as new beverage production and packaging capability.
Additionally, last month, we announced another capacity expansion at our Allentown, Pennsylvania facility, all of which provides ample runway to support our plant based growth plan through 2022.
As previously communicated we want that surgically use on the after owned brands as a vehicle to bring innovation to market faster as an example of this thinking we saw GAAP in the market for an organic oat milk coffee creamer and so we launched our first branded offering and plant based beverages.
On there a synoptic created brand called zone.
Feel free to log on to zone Dot com for additional information on this exciting new growth initiative soon.
So on organic bulk milk coffee creamer as currently available nationally and whole foods sprouts and Amazon.
On with other regionally relevant customers as we look to grow distribution throughout 2021.
As we have been saying for the past several quarters. We plan to have an agnostic go to market strategy quickly, bringing innovation to market through a combination of branded co manufactured and private label offerings.
We see brands as augmenting our current customer focus and we remain committed and focused on co manufacturing and private label as our primary business.
As proof point of our agnostic orientation. We are also launching oat milk creamers with a CPG customer as well as with our leading retailers on private label brand.
And the fruit segment, we have repeatedly communicated our key area of focus has been improving profitability and margin and results in the fourth quarter demonstrated significant progress against this goal.
Revenue grew six 9% for the full year and nine 6% or three 9% on an adjusted basis in the fourth quarter versus last year.
Importantly, gross margin increased an impressive 720 basis points in Q4 to 10, 1% helping to drive positive segment level operating income for the first time in over three years.
Gross margin benefited from volume pricing and mix factors as well as the previously discussed successful automation and productivity initiatives.
Over the near term, we expect to continue focusing on improving profit and margin in the fruit based segment.
As we've discussed in the past not all customers are equal in terms of profitability.
Such we have endeavored to rationalize our customer portfolio in the fruit segment and while we recognize that we may be compromising some near term revenue. We believe this will allow us to build a much stronger foundation for the future. We strongly believe that a tighter more focused more cost efficient business will give us the opportunity to.
Continued strength in margin and growth strategically and profitably.
In conclusion, the fourth quarter and full year results were exceptionally strong and continued to show solid progress in executing on our key initiatives, including expanding margin and significant growth in adjusted EBITDA.
We have successfully transformed the company to be in an optimal position to capitalize on the number one global food trend plant based foods and beverages.
Our goal is to double our plant based business over the next five years.
<unk> technical expertise across the full process spectrum from formulation to production is widely recognized by leading CPG companies.
In turn this has helped us develop very strong relationships with our customers as they view us as an essential partner in operating and growing their plant based businesses.
Finally, the geographic diversity of our supply chain provides cost efficiency, while also mitigating risk through operational redundancies.
Im optimistic about our future and believe 2021 will be another strong year for <unk> as we execute our plan continue ramping up growth and leveraging the power of our platform.
Now I will turn the call over to Scott to take us through the rest of the financials Scott.
Thank you very much Joe and good morning, everyone.
We're excited to report another solid quarter as Joe discussed we saw a 10, 4% revenue growth in continuing operations and nearly doubled EBITDA with 84 three percentage growth.
Gross profit from continuing operations was $31 8 million for the fourth quarter of 2020, an increase of $9 6 million or 43% compared to $22 2 million during the fourth quarter of 2019.
The fruit based segment was responsible for $6 5 million of the gross profit.
But improvement.
Selecting revenue growth pricing efforts and a favorable mix of higher margin retail versus foodservice sales as well as ongoing productivity improvements and our plans.
The plant based segment accounted for $3 1 million of the increase in gross profit primarily as a result of revenue growth increased production volumes of plant based beverages and plant based ingredients along with improved plant productivity.
On a full year basis, the plant based segment generated $85 million of gross profit.
$21 7 million or 37% from 2019.
The fruit based segment generated $28 6 million of gross profit up $22 1 million or 340% from 2019.
During the quarter, we continued to make progress with gross margin expansion.
As a percentage of revenues fourth quarter gross margin was 15, 5% compared to 11, 9% last year, a 360 basis point increase.
On a full year basis gross margin was 13, 8% up 470 basis points with both segments contributing to the improvement.
In the fourth quarter gross margin expanded 720 basis points in the food segment and 70 basis points from the plant based segment.
Operating income was $6 8 million or three three percentage of revenues in the fourth quarter compared to a loss of a half a million dollars.
Last year.
SG&A increased to $25 6 million compared with $26 million in the fourth quarter last year.
The savings initiatives previously implemented are being offset primarily by variable compensation expense, resulting from the significant improvements made in operating results.
Earnings attributable to common shareholders for the fourth quarter was $72 million or 78 per diluted share compared to a loss of $7 6 million or <unk> <unk> per diluted share during the fourth quarter of 2019.
These results include discontinued operations or global ingredients, which produced a $112 million pre tax gain on sale.
Given the global ingredients divestiture broad refinance of the balance sheet and the closure of a large food plant.
Let me unpack the impact these activities had on earnings from continuing operations for the fourth quarter.
The reported loss from continuing operations was $34 3 million driven.
Driven by nonrecurring items, including a $12 7 million foreign currency hedging loss on the global ingredient sales.
11, $2 million of exit costs impairment charges and severance primarily associated with the exit of our Santa Maria free plant.
And on $8 9 million charge associated with the retirement of the second lien notes.
The loss also reflects a full year of interest expense on the old capital structure or an approximately $440 million debt load in existence before year end.
On an adjusted basis consolidated earnings were $1 2 million or one cent per diluted share.
The adjusted loss from continuing operations was $2 5 million per <unk> per diluted share compared to a loss of $7 1 million or <unk> <unk> per common share in the prior year.
As Joe mentioned earlier for the fourth quarter of 2020, adjusted EBITDA from continuing operations was $20 6 million compared to $11 2 million in the prior year.
On a consolidated basis, adjusted EBITDA was $26 5 million up 62% versus prior year.
I'd like to remind listeners that adjusted EBITDA and adjusted earnings are non-GAAP measures and a reconciliation of these measures to GAAP can be found towards the back of the press release issued earlier this morning.
Turning to the balance sheet and cash flow.
At January two 2021 total debt was $69 7 million down approximately $410 million from December 28, 2019.
Total debt reflects 47 3 million drawn on our asset based credit facility with the balance representing smaller credit facilities lease and other financing arrangements.
Leverage has improved to well under two times from 10 times as we entered 2020.
As a reminder, we refinanced our previous ABL with a new five year ABL and delayed draw term loans at lower interest rates.
The new facility is not due until December of 2025.
We do expect the debt balance to grow as we recognize lease obligations on the balance sheet associated with capital projects and the use of the revolver for our customary seasonal build of inventories.
From a cash flow perspective during the quarter cash.
Cash generated from operating activities of continuing operations was $19 8 million compared to cash generated of $33 2 million during the fourth quarter of 2019.
As a reminder, we drove down working capital last year, nearly $30 million and therefore entered 2020 on a much leaner basis.
Cash generated from investing activities was $352 3 million compared with a use of $9 2 million in the fourth quarter of 2019.
The increased cash flow was driven by the sale of our global ingredients business.
Let me close by offering some perspective on what we are seeing in terms of Q1 and full year 2021 results.
From a top line perspective, our current view is growth in plant based will approach double digits in Q1, noting that we have a strong comp hurdle of plus 30% from the prior year quarter for.
For perspective, we are forecasting the largest quarter in our history in Q1 on plant based.
Beyond Q1, our current outlook suggests low to mid teens growth for the balance of the year.
In fruit as a reminder, we closed the facility and share that we would be rationalizing customers and skus and therefore forecast high single digit revenue declines in Q1 as a result.
In addition, we are rebuilding inventories following late fruit supply due to COVID-19.
And hurdle, a strong comp of plus 14% from the prior year quarter.
Beyond Q1, we currently forecast low to mid single digit revenue decline, while producing improved year over year margins.
From a margin perspective, we would expect plant based to remain in the high teens area and fruit based to make year over year improvements each quarter from a more efficient portfolio of plants and customers.
Finally from an adjusted EBITDA perspective, we expect solid double digit growth in 2021.
With that I'd ask the operator to please open up the call to questions.
Thank you and at this time I would like to advise everyone. If you would like to ask a question. Please press star one on your telephone keypad.
Cost for just one moment to compile the Q&A roster.
Your first question comes from the line of Brian hauling from da Davidson <unk> Company. Your line is open.
Yes, thanks, good morning, gentlemen.
So I give a lot to dig into.
So just on the plant based growth side I appreciate the guidance here, obviously tough comps on the home side, but I think FERC customer demand currently outstrips your supply.
The math basically for 2021 that you take the 2020 base plus the pace at which you can onboard capacity expansion.
Good morning, Brian It's Scott, Yes, I think if you reflect on the comments about the outlook I think we've given a fairly decent view of the call. It the pacing of the development of that realization of revenue toward our $100 million target.
Yes.
Perfect.
<unk> and consideration set for further capacity expansion in plant based obviously, there is a $75 million delayed draw at your disposal.
Can you can you just kind of talk about how you are thinking about.
Adding to that base and maybe what's going to play into that.
Yes, Brian Good morning, it's Joe.
We've.
Stated, many many times, our aspiration and ambition to double this business.
Clearly at some point in that five year journey, we're going to need to add additional.
Capacity, but as I indicated.
On the call here.
We have sufficient capacity to.
On.
Drive through 2022.
And wood ex.
Back some time in call it 2023.
We would need to onboard additional capacity.
And then just.
No.
Just I guess wanted to clarify that.
That 75 million delayed draw lapses after 18 months and typically.
12 to 18 month timeframe would probably be reasonable for green fielding new facility is that are those reasonable parameters from a time perspective.
Yes.
Okay.
And then anything to read from the closing of the Santa Maria facility and further customer.
<unk> nation.
As it pertains to whether you might ultimately consider divesting versus holding on to the food business.
Our view I mean, we're happy with the performance of the fruit business this year.
Route.
Gross profit $22 million.
Really solid year, we're confident in our ability to continue to add value and growth profitability in that business and we're looking forward to knock on wood.
Solid.
Robbery season in California, and Mexico and.
Putting continuing to put really solid numbers on the board.
I appreciate the kind of last one from me and I'll get out of the way.
Obviously, a lot of commentary around new customer wins.
On the no kremers side also launching the are running with the zone brand.
Can you just I know we've talked about this before but just a little context I understand.
The ability to kind of manage both the private label customer pipeline with introducing your own products.
But always seemed a little blips on the sensitivities higher with you're launching your own brands versus.
Other CPG brand customers. So can you just kind of talk about how you how you walk that balance share.
Sure.
It is really oriented around innovation, Brian we would not be foolish enough to launch products directly on top of our existing customers products that we're manufacturing for them.
This is an opportunity for us to continue to drive the business through innovation access innovation opportunities.
More quickly.
And so this is really about expanding the portfolio of products not launching products on top of our customers.
Appreciate all the color best of luck.
Thank you thanks, Brian.
Your next question comes from the line of Alex Fuhrman from Craig Hallum Capital. Your line is open.
Good morning, Thanks, very much for taking my question, yes, Likewise good morning.
Congratulations on a really transformative year in 2020. Thank you.
Wanted to ask more about the the brands I mean, it seems like a huge opportunity I was lucky enough.
Get to pick up some of your film product that at whole foods in my neighborhood.
How can you tell us a little bit about the pipeline of what we could expect to see.
From zone and from perhaps other brands that you could launch I mean is that considering.
Considering that your business has been capacity constrained in the past I mean is it.
Area, you'd like to GAAP kind of as much product into your own cartons. If you can I'd love to hear more about that and obviously I would imagine at much higher margin.
What should we be expecting in terms of the investment in sales and marketing and whatever else. It takes to get our brand off the ground.
So again, our focus here is really creating a platform for us to pursue innovation.
Our addition of brands as a growth lever for us really emanate from the desire to be able to quickly and surgically attack market opportunities that we see so for example.
On the plant based Creamers category is $335 million segment at retail growing over 30%.
And there was not an organic offering.
And we saw that as a key opportunity, we don't make a product like that for any of our existing customers.
And so we thought it was a great opportunity for us to capitalize on that market opportunity that we saw and launch our own brands.
Our approach to building these will be really starts with one core principle, which is to build unique differentiated products in the marketplace. We don't want to be the seventh to eighth ninth offering in the category. This is really an opportunity for us to drive innovation and if and when.
We can see those market opportunities where.
No one else is playing in it.
Use either our brand or a combination of our brand along with a CPG come on to really go on development market and develop.
Category.
Great Thats really helpful.
Then if I could also just ask about the mix of your business on the plant based side and obviously your foodservice customers were under a lot of pressure in 2020, and it sounds like you're looking for there to be a pretty strong recovery there beginning in the second half of this year.
What are the margin and growth implications.
The business, presumably hit a little bit more into foodservice.
Kind of enter the post COVID-19 recovery.
Is that somewhere that you see as being a big kind of long term growth engine over the next couple of years.
Yes, so we.
We don't break out margin by sales channel, but as it relates to broadly our plant based business is call. It 50, 50 split between foodservice and retail and so we are.
No what has happened within the overall foodservice landscape related to Covid and so.
Would expect strong recovery as consumers slashed shoppers return to those.
<unk> and <unk>.
One only has to look at some of the publicly reported same store comps to see where we see the upside.
In kind of Q2 Q3 forward.
Okay. That's really helpful. Thank you very much.
Thanks.
Your next question comes from the line of Jon Andersen from William Blair. Your line is open.
Good morning, everybody Hey, good morning, John.
Hi.
Congrats on the.
A fun dynamic and fluid year.
Sure.
The I guess on some of the different things could ask.
Starting on I guess, the plant based food and beverage business.
As you.
Look at the pipeline the new capacity plus the new the new business activity on the pipeline.
Driving you towards incremental $100 million over the next couple of years.
Is there a way to characterize the.
The likely composition of that new business.
How much do you anticipate being your own brand.
On branded business versus maybe co pack for other CPG firms versus retail private label.
Yes, we would expect the lion's share of that growth to come from co manufacturing.
CPG brands.
And then probably private label growth and then our own brand I mean again we're.
We're managing our ambitions with brands relative to.
Our capabilities and our focus on being a great co manufacturer for our branded partners.
As I mentioned to Alex I mean, our intent is really.
Do this surgically, where we can really bring true innovation in the market. So.
I would see it as a very similar go forward model supplemented by us.
Really using brands as an innovation accelerator.
Hi.
Okay. That's helpful.
Does that.
Would that mean that let's take zone for instance.
Inc.
Clearly you've found.
White space and inorganic creamer.
The lack thereof.
And a great opportunity for you to.
To kind of pursue that I mean should we think about.
Longer term soon becoming a brand that could play in a more traditional mill.
Or is it do you think it will be more kind of surgical.
On targeted to these these areas where.
You can bring something.
That's novel.
To the space and maybe you can bring something double too.
<unk> to open up more broadly because of the very high.
All these kind of capabilities that you've developed.
Yeah. So.
We see this as having a very strong innovation orientation as opposed to <unk>.
<unk> launched the ninth almond milk into the store 20 years. After the first almond milk was launched I mean, thats not how we see the opportunity here so.
And I think it's really important to understand where knock on our launch products on top of our customers, where we're currently manufacturing and identical or similar product to what we're doing for them today.
That certainly would not be a partner like move and we're very clear about the boundaries on the guardrail.
I could certainly see the brand going outside of some of our traditional capabilities in helping us expand into cash.
Adjacency categories, just like this being the creamer space is a bit of an adjacency expansion for us.
That makes sense that kind of leads into my next question you mentioned that.
It was interesting you mentioned ice cream in yogurt specifically.
I think with respect to the pipeline.
Can you tell us a little bit more about that how meaningful.
Those products could be.
In terms of allocating some of your new capacity to them. Those are areas. I don't think you play in today I may be wrong on that day.
And correct me if I may.
But ice cream yogurt would be kind of new categories.
Correct and just to clarify we're supplying milk to manufacturers in those categories as opposed to us being a manufacturer, we're not manufacturing ice cream or manufacturing yogurt, where manufacturing oat milk or selling that oat milk to yogurt manufacturers or ice cream manufacturers, who are turning it into a finished.
Product.
Clarify we haven't stood up.
Yogurt plant since we've last talked John.
That's.
The core the core focus there and the thing that's exciting for US is our extraction capability and the unique way in which we're packaging. It allows us to really work with a much more expansive customer base and again referenced.
Kind of yogurt and ice cream.
The type of customers, who we wouldn't have been able to work with in the past, but for this new capability. So it's exciting.
And I think if you if you.
To reflect on the projected 2021 growth rate that Scott outlined.
Youll see the progress, we're projecting against that $100 million target pretty clearly in the numbers and.
On a lot of these new open up products.
Our exciting and they're growing fast and we're hopeful and optimistic that the consumer in those respective categories.
On the Optum and love them as much as we do because we think they're fantastic.
Absolutely.
The capacity and plant base.
Food and beverages.
You have a new program for 2021.
I can't recall have you talked at all about.
On the timing of that new capacity in the <unk>.
But we know that the capacity you brought on at the end of 2020 is about $100 million or or more of incremental sales capacity.
Any any.
Boundaries, you can put around the new program in Allentown and then.
If I can throw a follow on to that.
Can you continue to add lines and capacity.
Three facilities you have now California.
In Pennsylvania or at some point do you need.
A new location or new footprint, new plant and what might that be.
So we did not break out a granular forecast for the Allentown edition, we were comfortable when we we're executing three projects to kind of lump those together and give some line of sight to what that might mean in terms of incremental capacity, but we don't want to get into kind of individual projects.
And individual.
Kind of rates of return on that.
It's a bit too granular.
But.
It will represent.
On a significant chunk of business for us I mean, it's meaningful or we would not have shared the news.
Your second question about kind of what's our expansion potential within existing facilities versus the new facility, we have a little bit of a wriggle room.
Legal room too.
Add a little bit more into the existing network, but I would say, yes at some point.
In the in the near to mid term future, we will need to consider.
Handing up a new facility and obviously, we would love to do that as soon as possible because that gives us indication on line of sight that.
We're developing our pipeline and we need to stay ahead of that so deep on some.
A good problem to have so to speak.
Absolutely absolutely and then I guess my last question will shift gears over to fruit.
You talked about customer rationalization in that.
Helping you get to.
On a more profitable business near term.
Have some implications on revenue as you outlined.
Can you talk about.
<unk>.
You talk about rationalization or are we talking about the mix of business, meaning.
More retail less.
Foodservice or.
Away from home or are we talking.
Customer rationalization within each of those segments, how where are we taking the business I guess from a customer standpoint.
If theres a little bit more characterization of that it would be it would be helpful.
Yes, and remember.
Fruit is comprised of fruit ingredients.
Frozen fruit and fruit snacks. So there is some swing on delta within that mix of kind of fruit specifics. So some of it was related to the closing of Santa Maria Some of it was just us continuing to look for optimization opportunities in the other.
Two segments of the FERC business.
But not a wholesale shift and kind of any channel strategy.
We're really just trying to work to optimize the footprint of the business on the customers that we're serving.
So that we're positioned to deliver great cost to them, great service and great quality and I think the moves we're making in Mexico and diversifying our network, we've talked about that extensively kind of almost going back to the middle of 2019 about diversification as a core strategy we're doing.
A much better job of sourcing fruit out of South America.
Mexico will become as I mentioned, a very significant business for us in California, who will always be a significant part as well, but again not.
What youre seeing from us on fruit is very consistent with what we outlined as a core strategic driver which was diversification.
Makes sense actually as you were talking I have to squeeze one more in.
I can so the base I just want to be sure I got this right. So the base EBITDA for 2020.
Continued ops is about $59 million.
Dollars ex.
<unk>.
Ah trial.
And then we're thinking we can grow that.
On.
Double digits in 2021 fair statement.
Correct.
Okay terrific. Thanks, so much and congrats on a.
Really a wonderful year, so talk to me. Thanks.
Thanks, John Thanks, John.
Your next question comes from the line of Mark Smith from Lake Street. Your line is open Hey, good morning, guys.
Just wanted to talk Big picture about the competitive landscape in plant based beverage can you talk about how strong your position is today or do you really view this as a rising tide that lifts all ships or what is your opportunity to really take share.
We say we identified three core competitive advantages within the client base, which in combination we think gives us.
A really strong position.
Is the strength of on.
Our operational and R&D technical capabilities that is an absolute differentiator.
The plant based co manufacturing space.
Second is the strength of our strategic partnerships with our customers. We have many many multi year long term contractual partner oriented agreement.
And then the third is relative.
Relative to many of the people that we compete with.
Have a diverse manufacturing network that.
Is east coast West Coast, and Midwest and in combination that affords us the opportunity to work coast to coast with national customers, who prioritize product consistency product quality.
And the simplicity of working with one partner so those three things in combination.
Really afford us what we view as a strong competitive moat.
Okay, and then back to the branded products can you quantify at all or give us some idea on what the mix is today.
Plant and fruit on branded products.
Well it'd be virtually 100%.
Private label and co manufacturing, so and again the.
Branded push for US is is really oriented to.
Being the tip of the spear for driving innovation and as I indicated.
We.
Went out to the market with this organic kremer.
And quickly on the basis of the product is already developed and all the work was done we quickly signed up a co manufacturing national brand.
Wanted to launch a similar product as well as a retailers private label product who wanted to launch a very similar product. So I think you can sense. It really gives us speed the market because we know we're going to launch it under our own brand, but we are committed to being agnostic, which means we will share that product innovation with.
Our private label customers on our co manufacturing partners and if we think the best opportunity to bring an individual product innovation to market.
Is through one of those vehicles are a combination of them, that's how we're going to pursue it.
Okay, and then last one from me just looking at Foodservice you guys. It sounds like a pretty optimistic as you look at foodservice, primarily in second half of the year.
Just update us on what Youre seeing today and foodservice versus maybe.
Three months ago.
Pretty similar.
I reflect on the on the fourth quarter. It was it was pretty similar to the third quarter just in terms of how that overall channel foodservice performed.
Early days here in Q1, we're seeing some uptick but.
I think I think of that channel won't really just my personal opinion.
I don't expect that channel to fully recover until you've got a lot of commuters driving past their favorite coffee shop, and picking up their soy milk lock on the way into the office every day.
Okay, great. Thank you.
Your next question is a follow up from Brian Holland from D. A Davidson and company. Your line is going on open.
Joe and Scott Thanks for taking the follow up.
Just one question as we think about building out this plant based business going forward.
I don't know if you characterize it this way but.
Looks like within the mix of your business extraction, you might be sort of underweight towards extraction looking backwards, if we think about.
Capacity going forward would you would that be increasingly weighted towards extraction, which again expand the categories. It sounds like you could theoretically serve and customers you can serve.
But I also think carries a higher margin profile than the quote unquote packaging side of the business. So could you maybe talk through that.
Yes.
I think quite a while ago, we articulated that the extraction facility that we built in Alexandria, Minnesota allows us a four ex increase in the amount of basically kind of.
Milk or sorry amount that we can we can make out of that so yes.
So the first part of your question, yes, the mix.
Should benefit you should get the extraction side will grow certainly as a percentage of the mix relative to say 2020.
Just in terms of the margin profile, we don't breakout the margin component between the individual lines of business.
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Okay fair enough. Thanks, Thanks for clarifying.
There are no further questions at this time I'll turn the call back to presenters for closing remarks.
Hey.
Thank you operator, and thank you everyone for participating in our fourth quarter conference call look forward to speaking to you on the future on I appreciate your interest and support and have a great day.
Ladies and gentlemen, thank you for your participation. This concludes today's conference call on you may now disconnect.
Okay.
Yes.
Yeah.