AgroFresh Solutions Inc. remains heavily reliant on the global apple harvest and its core SmartFresh product, which keeps fruit fresh longer during storage and transportation, and that exposure has hurt the company in recent quarters. Its first-quarter 2016 results were disappointing, but management outlined steps to improve overall performance in the future.
Following a fourth quarter adversely affected by a weaker-than-expected Northern Hemisphere apple harvest, the first quarter was hit by adverse weather in the Southern Hemisphere. The result was a reduced apple crop size in the Southern Hemisphere, coupled with a delaying of the harvest in important agricultural countries such as Chile and New Zealand.
As such, net sales were $28.4 million, down 13.4% compared with the same period last year. It represents a decline of $4.4 million, and management expects its first-half sales to decline $2.5 million to $5.5 million compared with last year's first half.
It sounds terrible, but net income was affected by a number of factors, including extra costs associated with becoming a public company, increasing inventory to service growth, the timing of R&D expenditures, and certain nonrecurring expenses connected with "professional services as we transition to our own processes in internal staff."
All told, non-GAAP adjusted EBITDA is a better way to look at the quarter. It declined from $18.4 million to $8.5 million on a year-on-year basis -- still a bad number, but nowhere near as bad as the reported net-income figures.
Growth strategy
The company is maintaining full-year guidance of 5%-12% sales growth, and adjusted EBITDA of $90 million to $100 million.
The delayed harvests in certain countries will push some revenue into the second quarter.
Market share is "holding up nicely" in the Southern Hemisphere, with share gains reported in Argentina.
Future acquisition activity to spur growth is possible and management is accelerating new product launches.
