WhiteWave Foods Co. (WWAV) reported first-quarter financial results on May 10, announcing another record quarter, and continued its double-digit growth pace. And WhiteWave didn't just buy itself into growth, or rely on overseas expansion to drive sales higher, reporting increased revenues in its existing operations as well as from acquisitions.
Here's a closer look at WhiteWave's earnings release.
|Metric||Q1 2016||Q1 2015||Change|
|Earnings per share||$0.24||$0.19||26%|
As a comparison, Dean Foods Co. (DF), one of the largest dairy producers in the U.S., saw its revenue decline 8% to $1.88 billion, though its profits soared 90% on an adjusted basis, and its GAAP profits were strong after reporting a loss one year ago, because of a significant non-cash asset impairment.
Dean also reported that it expects its revenues to decline again in the second quarter, as milk volumes and costs are likely to fall. This is very different from what WhiteWave is seeing, as demand for the company's premium dairy and dairy alternative products continues to grow.
What happened in the quarter
- Americas food and beverages segment revenue increased 15%.
- Segment constant currency organic sales, i.e., sales excluding acquisitions and adjusted for foreign exchange, increased 7%.
- Europe food and beverages segment revenue increased 11%.
- Excluding currency impact, revenue increased 14%.
- Fresh foods segment revenue was flat, as the impact of a messy SAP rollout hurt the results over much of the past few quarters.
- Management said things are improving, that SAP will be a benefit for that business once it's fully rolled out, and expanded warehousing and distribution are in place.
- Plant-based foods and beverages continued to drive growth, up 29% in the Americas. Management said they were key drivers in Europe as well, particularly nut-based beverages and plant-based yogurts.
- Vega, a large acquisition from 2015, reported a 50% increase in sales.
- Increased distribution from WhiteWave's broader scale is helping drive revenue for Vega.
- Wallaby, another significant 2015 acquisition, also continues to deliver strong growth.
- The coffee creamers and beverages platform grew 10% and generated more than $1 billion in revenue.
What management said
CFO Greg Christenson said the following when going over the company's raised guidance for the full fiscal year:
Based on our first-quarter results and our continued growth expectations for 2016, we are increasing our guidance. On the top line, we now anticipate our constant currency net sales growth of between 11% to 12% for the full year, with 12% to 13% growth in the second quarter. Based on current foreign exchange rates, we expect this top-line growth to translate on a U.S. dollar-reported basis to 10.5% to 11.5% growth for the full year and 11.5% to 12.5% in the second quarter. Our guidance reflects continued expectations for high-single-digit organic constant currency growth for the year.
Here's CEO Gregg Engles on the prospects for expansion in Latin and South America, starting with Mexico:
It's our hope and intent at this point in time to build our business with our North American brands of Silk -- and International Delight is also doing quite well -- as we move into Mexico. So I think you'll see us be cautious. I think you'll see us, nonetheless, determined to build our brands in these marketplaces as we're finding outstanding reception for both our product forms and our brands in Mexico and in the rest of Latin America where we have started to gently push into those territories. I don't think you should expect to see any sort of big-bang moves in Latin America in terms of M&A in order to jump-start what we're doing down there because I think we've got a good plot. ... But we see Latin America as a very interesting opportunity for us, and one that we're intent on capitalizing on.
COO Blaine McPeak commented on the company's expectations for Earthbound Farms -- the company's fresh fruits and vegetables business -- to bounce back to growth in the near term:
[I]t's going to take a little bit of time to continue to work through some of the SAP challenges we spoke about and continue to build some distribution.So I'd expect kind of in that flattish territory in the second quarter, very similar to what we've seen here in the first quarter. And as we -- I expect steady progress as we move throughout the second half, as it takes a little bit of time to rebuild some of that incremental distribution that we lost.
WhiteWave continues to execute strong growth both from timely acquisitions, but also from increased demand for its core products. As Engles pointed out, the increased demand for products such as the company's coffee creamers isn't a new phenomenon, as those categories have been growing at nearly double-digit rates for the better part of 20 years.
Furthermore, while megamilk competitor Dean Foods continues to feel the impact of flat and even weakening demand for traditional dairy foods, WhiteWave is growing sales of its dairy alternatives as more consumers shift away from milk-based beverages, yogurts, and ice creams. Eventually the company's days of double-digit growth will come to an end, but it looks as if there's a lot of room to grow before that day arrives, while traditional dairy businesses such as Dean Foods could continue to see a steadily shrinking market for "real" dairy products.