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Coffee Holdings' return to profit sends shares jumping 30%

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With commodity coffee markets bouncing along the bottom, a focus on traceability, branding, and speciality products has borne fruit for the wholesale coffee dealer and roaster Coffee Holdings.

Shares in Coffee Holdings soared over 30% to a two-year high, as the company reported rising profits as it shifts its focus from commodity coffee beans.

Coffee Holdings reported profits of $830,801 in the three months to April 30, compared to a loss of $2.1m over the same period a year ago.

"The increase in gross profits was due to improved margins on our wholesale and roasted business as well as a decrease in our losses quarter to quarter on our hedging operations," said Coffee Holdings.

Falling sales

The rise in profits came despite a sharp fall in sales, which were down 29% to $21.4m.

"The decrease in cost of sales reflects lower commodity prices during the quarter and our reduced wholesale transactions with our largest wholesale green coffee customer," Coffee Holdings said.

But despite the bottoming green coffee bean price, the company benefited from wider margins, as it shifts its attention to more valuable products.

Speciality products

An increased focus on speciality coffees helped the company "sustain and improve our margins during a period of historically low green coffee prices," said Coffee Holding's chief executive Andrew Gordon.

"We have increased our efforts in moving away from a focus on commodity-type sales of wholesale green coffee" said Mr Gordon.

Instead, the company is focusing on "branding, farm identification, traceability and sales of specialty gourmet micro-lots of arabica coffees," he went on.

The company also increased sales of its flagship brand, Café Caribe, including a roll-out in Walmart.

Coffee Holding shares were up 33%, at $5.14 in afternoon deals in New York.

By Agrimoney.com

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