It may not be a caffeine high, but Swiss Water Decaffeinated Coffee Income Fund (TSX:SWS.UN) is getting a buzz from its first quarter results.
The Burnaby-based company, which specializes in a chemical-free decaffeination process, posted a 7% increase to $7.8 million in first quarter revenue compared with the same period last year.
Swiss also saw its coffee processing volumes increase 6%, and its net income total $665,000 compared with a $69,000 loss for the same period a year before.
"For the first time in more than a year we recorded volume growth in all our markets,” said Swiss CEO Frank Dennis. “While we believe this is largely related to improving economic conditions, we also think our strategic investments in building consumer awareness … are making a positive contribution to our bottom line."
In 2008, the company launched a regional multi-media campaign to get the word out about its specialized process and then tripled the size of the campaign in the first quarter of 2009. Swiss axed the campaign in 2010 to reduce consumer advertising and promotion expenses.
Despite the gains, the loonie’s near-parity with the U.S. dollar has a negative impact on the company’s revenue, of which 79% of total sales are generated in U.S. dollars.
But CFO Sherry Tryssenaar said it wouldn’t have a big impact on the company’s bottom line.
"We have hedged the U.S. currency up to 24 months in advance,” said Tryssenaar. “What it really does is it really allows us to plan at least 12 months out. We know exactly how many Canadian dollars we’re going to receive for U.S. dollars 12 months in advance.”
Swiss also said a shortage of high-quality coffee beans due to lower crop sizes in Colombia increased commodity prices. It expects consumer demand to decrease in the months ahead.
Tryssenaar said: “If coffee is delayed or in short supply, [or] if you don’t receive it, you can’t decaffeinate it. When there’s a shortage of supply, [the] price goes up and people hesitate to stock up on coffee."
Swiss Water’s share price during the last week: between $3.98 and $3.95; 52-week high: $4.39; 52-week low: $2.80.