GFI Unveils Impressive Fourth Quarter and Full Year Fiscal 2023 Results, Achieving Unprecedented Gross Profit!

 

Gross profit grew 71% year over year backed by the Company’s successful shift to higher-margin categories

HIGHLIGHTS OF FISCAL 2023

  • Generated strong volume in the last six months of the year to reach sales of $123.3 million, comparable to the previous fiscal year.
  • Positioned our product mix to higher product margin categories, with the share of such product categories growing to 25.8% and 24.6% of revenue, respectively, during the three and twelve months ended March 31, 2023.
  • Gross profit increased by 71.4% to $6.8 million and adjusted gross profit increased by 19.9% to $9.2 million for fiscal 2023 compared to the fiscal year ended March 31, 2022. Adjusted gross profit as a percentage of revenue increased from 6.1% to 7.4% in the period.
  • Cash generated from operating activities of $5.0 million in fiscal 2023, an improvement of $17.5 million from $12.5 million of cash used by operating activities in fiscal 2022.
  • Commissioned 60,000 MT, state-of-the-art, environmentally-friendly pea splitting facility in Zealandia, Saskatchewan, and retail bagging lines in Clayton, North Carolina, providing further platforms for growth in higher margin categories.

TORONTOJuly 31, 2023 /CNW/ – Global Food and Ingredients Ltd. (TSXV: PEAS) (OTCQX: PEASF) (“GFI” or the “Company“), is pleased to announce the fourth quarter results for the three months and fiscal year ended March 31, 2023.

“GFI is pleased to report its year-end results, showing our continued improvement in gross profit margin driven by our shift in focus to higher margin products and services”, commented David Hanna, GFI’s CEO. “We continue to navigate our business through a tough economic environment to strategically position our focus and extensive capabilities to further value-added, downstream categories, which will drive our growth, long-term success, and ultimately shareholder value.”

Mr. Hanna continued, “Over the past twelve months, GFI completed our reverse takeover transaction, commissioned our state-of-the-art pea splitting facility, solidified our position as a premium supplier to the pet food industry, and opened our first US distribution center. The hard work and market positioning in these new categories over the last twelve months positions the Company to capitalize on significant growth opportunities in the global plant-based food and ingredients markets with new crops in the coming year.”

“Our plant-based ingredients segment grew EBITDA over 125%, year-over-year, backed by our strategic positioning in higher margin product categories, despite the pea splitter going through its ramp-up phase”, added Mr. Hanna. “We have made the strategic decision to focus on growing this division in the upcoming fiscal year while reducing costs and overhead associated with our consumer-packaged goods division (including the divestiture of Yofiit) and our corporate and public company-related costs.”

Mr. Hanna concluded, “We are ideally positioned to realize the tailwinds of our investments over the past two years and focus on expanding our core plant-based ingredients business to unlock value for our shareholders.”

Fourth Quarter Results

Financial Highlights – Three Months Ended March 31, 2023

  • The Company recorded revenue of $29.9 million in the three months ended March 31, 2023, a 14.2% decrease in comparison to the prior comparable period, predominantly attributable to one large sale in the previous period and the Company’s shift to more premium, value-added ingredients.
  • Despite the decline in sales, gross profit was $0.7 million in the three months ended March 31, 2023, consistent with the prior comparable period, resulting in an increase in gross profit margin to 2.2% in the three months ended March 31, 2023, in comparison to 2.0% in the three months ended March 31, 2022.
  • Adjusted gross profit1 was $1.4 million or 4.9% of revenue in the three months ended March 31, 2023, compared to $1.5 million or 4.4% of revenue in the prior comparable period, predominantly attributable to the Company’s successful shift to higher margin, value-added products.

Financial Highlights – Fiscal Year ended March 31, 2023

  • Revenues were $123.3 million, a slight decrease of 0.9% or $1.2 million compared to $124.4 million in the fiscal year ended March 31, 2022. During the period, the Company focused its sales efforts on driving higher margin categories rather than volume.
  • Gross profit increased by 71.4% or $2.8 million to $6.8 million in the fiscal year ended March 31, 2023, compared to $4.0 million in the fiscal year ended March 31, 2022. The Company’s increased focus on higher-margin product categories drove a 2.3% increase in gross profit margin to 5.5% of revenue, compared to 3.2% in the prior comparable period.
  • Adjusted gross profit1 was $9.1 million or 7.4% of revenue in the fiscal year ended March 31, 2023, compared to $7.6 million or 6.1% of revenue in the prior comparable period. The $1.5 million increase is attributable to the Company’s shift to higher margin product categories, including a year of pet food operations (2023 – 19.3% of plant-based ingredient sales, 2022 – 6.3%) and commissioning of the pea splitting line (2023 – 5.4% of plant-based ingredient sales, 2022 – 1.8%), despite the increased overhead costs, one-time branding and market development expenses from the consumer products segment, and $2.3 million negative realized foreign exchange gains/losses.

Highlights – After the fiscal year ended March 31, 2023

  • Completed the installation of the retail packaging capabilities at the Company’s US distribution center in Clayton, North Carolina. The retail packaging lines are capable of packaging products in pouches and pillow bags, including 1lb, 2lb, and 4lb formats. The capabilities were built within the Company’s existing distribution center, providing highly efficient operation with retail packaging and order fulfillment in the same location. The initial focus for the facility will be packaging GFI’s branded North Lily and North Lily Organics ingredients into pillow bags and then distributing them throughout North America. GFI will also be providing private label bagging services to third-party customers at gross margins higher than fiscal 2023 consolidated gross margins.
  • Completed the divestiture of the Yofiit business to the founders, resulting in GFI receiving a vendor-take-back note of $2.7 million and the cancellation of one million outstanding shares of GFI. Yofiit recorded a loss for the fiscal year ended March 31, 2023, of $2.0 million and incurred a decrease in cash from discontinued operations of $2.6 million. As part of the transaction, the Company retained ownership of the working capital associated with the business and entered into an inventory purchase sales agreement with the purchasers to be executed over six months following the closing of the transaction.
  • Refocused the Company’s consumer packaged goods (CPG) segment resulting in a significant decrease in overhead and marketing expenses associated with the division. The CPG segment recorded a loss during the fiscal year ended March 31, 2023, of $0.9 million and used cash from operations of $2.7 million. The Company shifted and increased focus back to its core ingredients and value-added business segment for the immediate future. Management believes that the CPG segment still aligns with our long-term farm-to-fork strategy and will focus primarily on consumer products that connect directly to our core ingredients procurement and value-added processing capabilities and can be distributed effectively with low marketing costs.

Income Statement Summary

 Three months ended March 31,

The fiscal year ended on March 31,

2023

2022

change

2023

2022

change

Revenue

$

29,862,358

34,817,520

(14.2)

%

$

123,260,182

124,420,186

(0.9)

%

Cost of sales

29,199,446

34,113,841

(14.4)

116,441,751

120,443,228

(3.3)

Gross profit (loss)

662,912

703,679

(5.8)

6,818,431

3,976,958

71.4

Expenses:

General and administration 

2,314,873

1,414,899

63.6

8,336,827

5,889,046

41.6

Depreciation and amortization

174,826

94,209

85.6

645,524

259,847

148.4

Loss before the undernoted

(1,826,787)

(805,429)

(126.8)

(2,163,920)

(2,171,935)

0.4

Other expenses

694,349

1,635,270

(57.5)

8,329,716

4,198,773

98.4

Loss before income taxes

(2,521,136)

(2,440,699)

(3.3)

(10,493,636)

(6,370,708)

(64.7)

Income tax recovery

(187,240)

(149,942)

(24.0)

(1,864,622)

(114,403)

(1,529.9)

Loss for the period from continuing operations

$

(2,333,896)

(2,290,757)

(1.9)

%

$

(8,629,014)

(6,256,305)

(37.9)

%

Non-IFRS Measures Summary1

 Three months ended March 31,

The fiscal year ended on March 31,

2023

2022

change

2023

2022

change

Gross profit margin

2.2 %

2.0 %

5.5 %

3.2 %

Adjusted gross profit

$

1,450,579

1,535,972

(5.6)

%

$

9,159,590

7,640,689

19.9

%

Adjusted gross profit margin

4.9 %

4.4 %

7.4 %

6.1 %

EBITDA

$

(1,313,068)

(1,324,578)

0.9

%

$

(6,414,550)

(3,230,366)

(98.6)

%

EBITDA margin

(4.4) %

(3.8) %

(5.2) %

(2.6) %

Adjusted EBITDA

$

(1,724,242)

(559,459)

(208.2)

%

$

(1,979,615)

(627,615)

(215.4)

%

Adjusted EBITDA margin

(5.8) %

(1.6) %

(1.6) %

(0.5) %

1 Gross profit margin, adjusted gross profit, adjusted gross profit margin, EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are non-IFRS performance measures. Refer to “Cautionary Statements – Non-IFRS Measures” in this release for further details.


The audited financial statements for the fiscal year ended March 31, 2023 (“Financial Statements“) and related Management’s Discussion & Analysis (“MD&A“) for the three and twelve months ended March 31, 2023, are available under the Company’s profile at www.sedarplus.ca.

About GFI

GFI is a fast-growing Canadian plant-based food and ingredients company, that connects the local farm to the global supply chain for peas, beans, lentils, chickpeas, and other high-protein specialty crops. GFI’s vision is to become a vertically integrated farm-to-fork plant-based company providing traceable, locally sourced, healthy, and sustainable food and ingredients. GFI is organized into four primary business lines: Core Ingredients, Value-Added Ingredients, Plant-Based Pet Food Ingredients, and Downstream Products. Headquartered in Toronto, GFI buys directly from its extensive network of farmers, processes its products locally at its four wholly-owned processing facilities in Western Canada, and ships to 37 countries across the world.

Disclaimer

Neither the TSXV nor its Regulation Service Provider (as defined policies of the TSXV) accepts responsibility for the adequacy or accuracy of this press release.

Cautionary Statements

Non-IFRS Measures

This news release contains the financial performance metric of gross profit margin, adjusted gross profit, adjusted gross profit margin, EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin, all of which are measures that are not recognized or defined under IFRS (collectively the “Non-IFRS Measures”). As a result, this data may not be comparable to data presented by other food and ingredient companies. The Company believes that the Non-IFRS Measures are useful indicators of operational performance and are specifically used by management to assess the financial and operational performance of the Company.

Changes to Prior Period Presentation

In the current reporting period, management undertook a review of the historical adjusting items as part of an effort to reduce the number of non-IFRS items it adjusts for in its financial reporting. Management concluded that to present adjusting items in a manner more consistent with current and future fiscal year operating results, the Company will no longer adjust for net insurance proceeds associated with the take-or-pay toll processing agreement (“TPA”) canceled in Q4 of the year ended March 31, 2021.

Starting in the first quarter of the current reporting period, net insurance proceeds will not be considered as an adjusting item. The rationale for the adjustment to the allocation of net insurance proceeds in the quarters and year ended March 31, 2022 presentation is that in comparing the period over-period performance, quarters and year ended March 31, 2022, to quarters and year fiscal year ended March 31, 2021, the net insurance proceeds were relevant given the nature of the operation at that time. The same is not the case in comparing the quarters and year ended March 31, 2023, to the quarters and year fiscal year ended March 31, 2022. Toll processing services totaled $3.7 million or approximately 6% of the revenue in the fiscal year ended March 31, 2021, in comparison to $0.2 million or less than 1% of revenue in the fiscal year ended March 31, 2022. Therefore, to accurately compare the relevant performance of the periods, management allocated a portion of the proceeds recorded in the fiscal year ended March 31, 2021, to the relevant quarters in the fiscal year ended March 31, 2022, to show a quantitative comparison as if the toll processing services continued in that year. Given the toll processing-related services were canceled before the fiscal year ended March 31, 2022 (with minor residual contracts being executed in the period) and are not part of the operating business in the current reporting period, management has assessed that it is more relevant to compare the current fiscal year ended March 31, 2023, operating results without the inclusion or allocation of any insurance proceeds in the comparable period, fiscal year ended March 31, 2022.

Non-IFRS Measures Definitions
Gross profit margin is defined as gross profit divided by revenue.

Adjusted gross profit is calculated by adding or deducting, as applicable from gross profit, certain costs, charges, or benefits incurred in such period which in management’s view are either not indicative or are directly correlated to the Company’s process to sell its products, including: (a) realized foreign exchange loss (gain) and (b) overhead costs attributable to bringing inventory to a saleable condition that has been recorded as cost of sales under IFRS. Adjusted gross profit margin represents adjusted gross profit divided by revenue.

EBITDA calculates, for the applicable period, earnings before interest, taxes and depreciation and amortization. Interest includes all finance costs net of interest income and depreciation and amortization include the depreciation of property, plant, and equipment, amortization of right-of-use assets, amortization of intangible assets, and amortization of deferred financing fees. Management does not use EBITDA as a financial performance metric. EBITDA margin represents EBITDA divided by revenue.

Adjusted EBITDA is calculated by adding and deducting, as applicable from EBITDA, certain expenses, costs, charges, or benefits incurred in such period which in management’s view are either not indicative of underlying business performance, impact the ability to assess the operating performance of our business or are deemed non-cash, non-recurring or one-time in nature. Adjusted EBITDA margin represents adjusted EBITDA divided by revenue.

The following tables provide a reconciliation of the Non-IFRS Measures to the most directly comparable financial measures disclosed in the Financial Statements.

The following table provides a reconciliation of segment and consolidated gross profit to adjusted gross profit for the periods presented:

 Three months ended March 31,

Fiscal year ended on March 31,

2023

2022

change

2023

2022

change

Gross profit

$

662,912

703,679

(5.8)

%

$

6,818,431

3,976,958

71.4

%

Less:

Realized foreign exchange loss (gain(1)

509,541

135,969

274.7

2,323,159

(406,597)

(671.4)

Plus: Total costs attributable to bringing inventory to a saleable condition(2)

Overhead

1,019,829

801,812

27.2

3,707,647

2,602,477

42.5

Amortization of property plant and equipment

277,379

166,450

66.6

956,671

654,657

46.1

Adjusted gross profit

$

1,450,579

1,535,972

(5.6)

%

$

9,159,590

7,640,689

19.9

%

Adjusted gross profit margin

4.9 %

4.4 %

7.4 %

6.1 %

(1)       

Consists of realized gains and losses on foreign exchange rates for executed transactions. The Company does not participate in hedge accounting practices, but books forward contracts at the time the Company enters into a new contract with a foreign currency-denominated vendor. The gain or loss realized at the time of sale is directly related to each of the executed contracts and as a result, is indicative of the margin realized on said contract.

(2)       

This is an IFRS adjustment to allocate applicable overhead costs, including compensation and benefits and other general and administration costs, and amortization of property, plant, and equipment specifically related to the Company’s operating facilities to cost of sales. Management views these costs as fixed in nature and does not assess them as being indicative of the variable cost of selling its products.


The following table provides a reconciliation of consolidated loss for the period to EBITDA and adjusted EBITDA for the periods presented:

 Three months ended March 31,

Fiscal year ended on March 31,

2023

2022

change

2023

2022

change

Loss for the period

$

(2,333,896)

(2,290,757)