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SunOpta | Approaching Q3

SunOpta Inc (TOR: SOY) is a multi-national food and mineral company headquartered in Eden Prairie, Minnesota and founded in 1973 in Canada. The company specialises in the sourcing, processing, and production of organic, natural and non-GMO plant and fruit-based food and beverage products, supplying to retailers and branded food companies.

(Source: SunOpta Inc)

The company's valuation is also up over 93% in the last six months, despite the majority of the market crashing around it due to growing economic, climate and geopolitical concerns around the world. It appears agricultural and food procurement companies are being seen as a safe haven for investors, but how exactly is SunOpta performing financially? On 21 October 2022, SunOpta was valued at C$1.48bn, with low short selling activity according to the Financial Times.

(Source: Google Finance)

Looking at the company's Q2 financial results released in August, revenue increased 20.6% to $243.5m compared to last year's quarter. Net Income also improved, having gone from a small loss in last year's quarter of ($0.92m) to a profit of $1.68m. The net margin (revenue/net income) was 1.68%, compared to (0.92%) the year before.

(Source: EcoShares Ltd)

SunOpta have improved in recent years from losses as wide as ($135m) in FY17, to hovering closely to the breakeven point, including a $78m net profit in FY20. Revenue has increased for the last three consecutive years, with strong revenue for the first-half of the current year with $484m at an average net profit margin of 1.2%

(Source: EcoShares Ltd)

Looking at SunOpta's current assets and current liabilities, we can measure their ability to pay short-term debt or obligations due within one year. Current assets increased 14.6% to $385m for Q2 compared to last year's quarter, however, current liabilities increased at a faster rate of 28.3% to $177m. Its short-term liquidity in Q2 was 46% (current liabilities/current assets) - which has worsened from 41% the year before. Investors should monitor this carefully, as surpassing 50% sounds the alarm for a company becoming out of control with its liabilities, especially worsened in recent times due to the continued hikes in interest rates to try and tame inflation.

(Source: EcoShares Ltd)

The company's short-term liquidity has been worse in previous years, with 82.9% in 2019. Despite a drop of 32.7% in current assets from 2019-21, a wider 64.8% drop in current liabilities took short-term liquidity to 43.3% at the end of 2021.

(Source: EcoShares Ltd)

Its total assets and total liabilities in Q2, on the other hand, saw its long-term liquidity rise from 54.2% to 59.4% compared to last year, despite both growing for the year. Total assets had increased 13.8% to $844m, while total liabilities increased 59.4% to $501m.

(Source: EcoShares Ltd)

Between 2019-21, total liabilities have decreased 40.8% to $422m, while total assets have decreased 18.2% to $755m - reducing its long-term liquidity from 77.3% to 55.9%. Total Cash has remained below $1m since 2019, being currently valued at $0.55m since the Q2. Investors will definitely want to see a wider gap between total assets and total liabilities in upcoming years, where recent net profits may provide optimism of an improving financial performance - if maintained.

(Source: EcoShares Ltd)

SunOpta reports its Q3 earnings on approximately 8 November 2022.


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