Swiss Water Decaffeinated Coffee (TSE:SWP) reported higher third-quarter profit and processing volumes as customers placed more orders, prompting the company to plan a capacity expansion at its Delta facility.
Processing volumes rose 16% from a year earlier, while gross profit climbed 55% to $10 million. Adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, increased 50% to $4.9 million. All financial figures are in Canadian dollars unless otherwise noted.
President and CEO Frank Dennis said demand has pushed the facility near capacity, with customers booking orders into the first half of 2027. The company plans to invest approximately $6.2 million within its existing building to increase capacity by roughly 15%, with the additional capacity expected online in mid-2027.
Swiss Water expects to fund the expansion primarily through internally generated cash flow, Dennis said, while continuing to reduce debt.
Higher volumes offset lower coffee prices
Third-quarter revenue rose 5% to $65.9 million from $62.7 million a year earlier. CFO Iain Carswell attributed the increase to higher volumes and improved recovery of costs associated with an inverted coffee futures market, partly offset by lower coffee futures prices.
The NY “C” coffee futures price averaged $3.09 per pound during the quarter, down 8% from $3.37 a year earlier. Swiss Water said green coffee costs largely pass through revenue and cost of sales, making revenue changes less useful on their own as a measure of performance.
Shipments to importers increased 34%, while shipments to roasters rose 3%. By customer channel, specialty volumes increased 8% and commercial volumes grew 24%.
Gross profit benefited from higher volumes, improved recovery of inversion expenses, higher green coffee differential margins, operating efficiencies and favorable foreign exchange compared with the year-earlier quarter, Carswell said. Cost of sales slipped to $55.9 million from $56.3 million.
Operating expenses rose 34% to $5.7 million. Carswell said administrative costs increased primarily because of higher non-cash share-based compensation associated with a rise in the company’s share price. Net income was $900,000, compared with $200,000 a year earlier.
For the first nine months of 2026, revenue fell 2% to $189.3 million, while gross profit rose 48% to $28.1 million. Net income increased to $4.2 million from $400,000, and adjusted EBITDA more than doubled to $14.5 million. Trailing 12-month adjusted EBITDA reached a company high of $18.7 million, according to management.
Expansion and debt repayment
Dennis said the planned expansion largely involves connecting equipment that was installed but not fully hooked up when the first Delta production line was built. He expects one line to shut down for about two weeks, essentially within a normal maintenance window, and does not anticipate a broader disruption to production.
Swiss Water used $3.6 million in cash in operating activities during the third quarter, compared with $12.6 million generated a year earlier. For the first nine months, operating activities generated $12.6 million, up from $3.1 million in the prior-year period. Carswell said the changes reflected higher net income and working capital movements.
During the nine-month period, the company repaid $9 million on its operating credit facility, $4.2 million of construction debt and $1 million on its Export Development Canada credit facility. The operating facility’s outstanding balance was $31 million at September 30, down from $38.4 million at the end of 2025. Cash stood at $2.1 million, compared with $6.6 million at year-end.
Order visibility extends into 2027
In response to an analyst’s question, Dennis said Swiss Water typically does not have order visibility as far out as it does now. Much of the strong ordering is coming from existing customers seeking production slots, while newer customers are also increasing volumes, he said.
Dennis said roasters had added some inventory coverage as coffee prices eased, but Swiss Water was not forecasting another significant round of inventory building. Instead, he attributed demand in part to tight capacity for chemical-free decaffeination.
Although the futures market was less inverted than a year earlier, Dennis said the company is pricing for continued inversion into 2027. Carswell noted that the timing of recognizing those costs can differ from when they are recovered from customers.
About Swiss Water Decaffeinated Coffee (TSE:SWP)
Swiss Water Decaffeinated Coffee Inc is a specialty coffee company, that offers green coffee decaffeination and Seaforth Supply Chain Solutions Inc providing green coffee handling and storage services. It is a premium green coffee decaffeinator located in the Canadian state of British Columbia. It employs the proprietary Swiss Water Process to decaffeinate green coffee without the use of chemicals, leveraging science-based systems and controls to produce coffee. The company’s sales are primarily generated in a single segment of decaffeination of green coffee.
