SunOpta (STKL) Tops Q3 EPS by 1c, Revenue Light; CEO, Chairman to Step Down
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SunOpta (NASDAQ: STKL) reported Q3 EPS of $0.07, $0.01 better than the analyst estimate of $0.06. Revenue for the quarter came in at $348.7 million versus the consensus estimate of $360.5 million.
President and Chief Executive Officer Rik Jacobs and Chair of the Board Alan Murray will be stepping down from their respective positions, Mr. Jacobs effective November 11, 2016 and Mr. Murray effective today. Current SunOpta Director Katrina L. Houde will serve as interim CEO and Director Dean Hollis has been appointed Chair of SunOpta’s Board of Directors. The Board has initiated a search process for a CEO.
“On behalf of the Board, I would like to thank Rik and Alan for their years of service and wish them well in their future endeavors,” said Dean Hollis, Chairman of SunOpta. “The Company has gone through a significant amount of change in a relatively short period of time and they were tireless in their efforts to provide a strategic vision, keep the Company on track to meet its stated mid-term targets, while also playing key roles in a review process to produce an outcome that could benefit all of the Company’s stakeholders.”
Added Hollis, “The Board would also like to thank Kathy for taking on the role of interim CEO. Her significant operating experience as well as her deep contacts with the SunOpta management from her 15 years on the Board of SunOpta provides a strong foundation for this interim role. She will be supported by the Operations Transformation Committee of the Board and the substantial resources that Oaktree has committed to SunOpta as it progresses a plan to help the Company realize its potential and create value for all shareholders.”
Value Creation Plan Update
As announced on October 7, 2016, SunOpta, with the assistance of Oaktree, is conducting a thorough review of the Company's operations, management and governance, with the objective of maximizing the Company's ability to deliver long-term value to its shareholders. Through this review, management and the Board have developed a value creation strategy built on four pillars: portfolio optimization, operational excellence, go-to-market effectiveness and process sustainability.
The Company continues to believe it has the ability to achieve its mid-term targets, in the timeframe provided, as furnished in April 2016. These targets were established based on a fulsome review of the Company’s platforms and, on a consolidated basis, targeted EBITDA margin of between 8.5% and 10.5% of sales.
In order to support our efforts to meet or exceed the mid-term targets, the Company, together with Oaktree, has continued to make progress on its value creation plan. Key updates include:
SunOpta continues to review its product offerings and is focused on simplifying the portfolio. The Company will invest in areas where it has a structural advantage and will assess the impact of exiting product lines where SunOpta is not effectively positioned.
The Company has announced the intention to close its juice processing and packaging facility in San Bernardino, CA. The closure is expected to generate at least $4.0 million of EBITDA improvement annually, which should start to be realized in the first quarter of 2017.
SunOpta is committed to ensure quality performance and improve operational excellence and has also identified significant savings opportunities in procurement and logistics.
The Company plans to engage third party support in manufacturing, procurement and logistics to enhance quality and capture savings.
The Company is working to optimize the customer and product mix in existing channels and is also exploring opportunities across new channels to identify unmet market demand.
The foodservice channel offers a substantial opportunity for the Company and additional resources will be deployed to develop this area.
SunOpta’s sales efforts will be reorganized by channel, rather than geography.
The Company is focused on simplifying and strengthening the organization, improving plant operating levers, augmenting asset flexibility and capacities, investing in systems that can provide detailed data on supply chain and manufacturing processes to support commercial strategies and optimize working capital.
SunOpta will develop and incentivize a culture rooted in accountability, results and continuous improvement.
SunOpta has created a Project Management Office to manage all critical activities and work streams.
“The strategic investment by Oaktree was a first step in the positive changes this Board and management intend to bring to SunOpta,” said Katrina L. Houde, interim-CEO. “The due diligence that Oaktree undertook was extensive and allowed them to immediately bring forward recommendations for a value creation framework that will drive more reliable results, reshape our operating platform to focus our product portfolio and marketing support resources, and allow us to truly instill a system and culture of operational excellence that is achievable and sustainable over the long-term.”
Added Houde, “There is broad recognition that SunOpta is a unique company with quality products and a number of competitive advantages that can be fully developed. While we have known that focus and execution were paramount to success, working with Oaktree has allowed the Company to immediately address several legacy issues, identify opportunities to drive margin expansion, invest in ways that augment revenue growth, all while continuing to innovate and pursue the highest of quality control standards.”
For earnings history and earnings-related data on SunOpta (STKL) click here.
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