Apple juice maker sees potential red ink ahead

Lower sales of its branded goods and higher costs for apples and other inputs have fruit processor Sun-Rype Products booking a second-quarter loss, with a chance of second-half losses to follow.

The Kelowna, B.C.-based fruit juice and fruit snack maker on Thursday reported a net loss of $1.44 million on $35.94 million in sales for its quarter ending June 25, down from a $1.6 million profit on $32.09 million in sales in the year-earlier period.

Sun-Rype reported growth in its “non-branded” sales, such as private-label products for retail chains, was offset only partly by a slip in branded product sales during the first half of the year, making for higher net sales overall.

The sales picture also improved from last year’s Q2 partly on an extra $4.3 million in sales from Yakama Juice, a northwestern U.S. processor Sun-Rype bought last fall.

However, “higher cost of goods sold due to rising commodity prices, including apples and fruit concentrates, led to reduced gross profit and earnings in the first two quarters of 2011 compared to the same periods of 2010,” Sun-Rype CEO Dave McAnerney said in a release.

Gross profit percentages on non-branded sales are lower than on sales of Sun-Rype branded products, resulting in a lower overall gross profit percentage, the company said.

“Strong competitive pressures” seen in 2010 and 2011 are expected to continue for the rest of the fiscal year, the company said.

“No certainty”

The company last week pointed to a number of factors it said “may result in net losses in the second half of 2011.”

For one, to help deal with the impact of commodity price increases, Sun-Rype said it plans to adjust its selling prices on “selected products” but added it’s “unclear what effect, if any, this will have on sales volumes in 2011.”

The company also launched new products this year, but stressed there’s “no certainty” that the related revenue will cover the product and launch costs incurred.

Sun-Rype also bought one of its juice concentrate suppliers, Naumes Concentrates of Wapato, Wash., in June for an undisclosed sum.

The acquisition is expected to help Sun-Rype “optimize our manufacturing costs and partially mitigate the impact of global fruit concentrate fluctuations,” McAnerney said at the time.

However, the company added Thursday, the Naumes deal “is not anticipated to materially affect reported results” in the final 2011 ledger.

Related stories:

Sun-Rype buys Washington fruit processor, Oct. 2, 2010

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