Westrock Coffee (WEST) Q2 Revenue Up 35%

Westrock Coffee (WEST -4.72%), a company specializing in integrated coffee, tea, and beverage solutions for commercial customers, reported its earnings for the second quarter of fiscal 2025 on August 7, 2025. The company delivered record revenue (GAAP) of $280.9 million, a 34.8% increase over the prior year and well above the analyst estimate of $238.3 million (GAAP). Despite this revenue outperformance, Westrock reported a net loss of $0.23 per share (GAAP), which was deeper than the expected GAAP loss of $0.15 per share, as higher facility scale-up costs and rising interest expense continued to weigh on profitability. Overall, the quarter showed strong sales momentum and segment-level performance, but increases in costs and capital intensity resulted in margin pressure and a growing net loss (GAAP).

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Westrock Coffee’s Business and Strategic Focus

Westrock Coffee delivers integrated beverage solutions to large commercial clients, including roasted coffee, tea, liquid extracts, and ready-to-drink formats. Its customer base spans hospitality, retail, food service, convenience, and other branded businesses. A key part of the business is acting as a “brand-behind-the-brand,” supplying custom beverage products for major partners.

In recent years, Westrock has focused on targeting high-growth beverage formats such as liquid coffee extracts and ready-to-drink coffees, expanding its vertically integrated supply chain, and developing proprietary technology to support sustainable sourcing and traceability. The success of these strategies relies on innovation, geographic expansion, supply chain efficiency, and ongoing investment in new production capacity.

Quarterly Highlights: Sales Growth and Expansion Meet Higher Costs

Revenue (GAAP) surged, surpassing the consensus Wall Street estimate. The company achieved record performance in both its Beverage Solutions and Sustainable Sourcing & Traceability segments. Beverage Solutions, which includes roasted coffee, single-serve cups, ready-to-drink beverages, and liquid extracts, saw revenue grow 27.9% and its segment-level profit (Segment Adjusted EBITDA) jumped 48.5%. Sustainable Sourcing & Traceability, which manages ethically sourced coffee and tea and uses digital platforms for supply chain verification, increased sales 59.6% and segment Adjusted EBITDA was $3.3 million, up from $0.4 million in Q2 2024.

Key to this growth was the ramp-up of two major facilities in Conway, Arkansas—a ready-to-drink and liquid extract plant, and a new single-serve cup plant. These facilities reached high production utilization, with management stating they are operating near 85% capacity, and have enough built-in space to quickly add more production lines if customer demand continues. New private label and major brand customer wins supported volume growth in both traditional and innovative beverage products.

Despite the impressive sales figures, profitability lagged. The net loss (GAAP) widened to $21.6 million, with EPS (GAAP) moved further negative to $(0.23) per share. Two factors drove this result: first, scale-up costs related to the new Conway facilities rose sharply, totaling $7.6 million versus $1.2 million in Q2 2024. Interest expense (GAAP) increased significantly, rising from $7.5 million in Q2 2024 to $13.1 million.

Gross profit (GAAP) remained flat. The company explained that both elevated coffee prices and new U.S. tariffs on coffee imports affected working capital, but noted these costs are ultimately passed through to customers. Inventory (GAAP) climbed to $194.2 million at June 30, 2025, from $163.3 million at December 31, 2024.

On cash flow and the balance sheet, Westrock used $29.1 million in operating cash (GAAP) in the first half of 2025, substantially higher than the $15.7 million used in the first half of 2024. The company’s capital expenditures were $61.8 million in the first half of 2025, reflecting ongoing investments in plant and equipment, but trending lower than in the heavy build-out phase of 2024. Cash and equivalents (GAAP) were $43.96 million, up from $26.15 million at December 31, 2024. Debt rose to $469.2 million (GAAP) when combining current maturities of long-term debt, long-term debt, and short-term debt balances, and utilization of supply chain finance grew as well. Shareholders’ equity (GAAP) dropped to $18.2 million as of June 30, 2025, from $97.5 million as of December 31, 2024.

Leadership highlighted a series of operational wins: “We are pleased to report record quarterly segment performance as we celebrate the successful launch of our new single-serve cup plant and the production ramp-up at the extract and ready-to-drink (RTD) facility, both located in Conway, Arkansas.” Management noted that Westrock continues to win large branded and private label accounts.

Looking Ahead: Guidance and Key Watchpoints

Management reaffirmed its guidance for fiscal 2025 and fiscal 2026, stating that the company is tracking at the higher end of expectations for key metrics like consolidated adjusted EBITDA (non-GAAP) and leverage ratios. The company reported an actual consolidated adjusted EBITDA (non-GAAP) of $23.6 million, matching the upper end of its guidance range. Beverage Solutions adjusted EBITDA of $29.3 million and Sustainable Sourcing & Traceability adjusted EBITDA of $5.2 million also exceeded internal targets. The secured net leverage ratio for the Beverage Solutions segment stood at 4.75x, below the maximum allowed under terms of the credit agreement.

Margin recovery remains crucial, as gross margins continue to face pressure from production ramp costs and shifting product mix. The company warned that U.S. coffee tariffs would begin to impact results in Q3 2025, although these costs are expected to be passed on to customers for most, but not all, accounts. No specific changes were made to forward earnings or revenue guidance, and no new dividends were announced or discussed for the upcoming periods.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.