investor presentation february 2020...•cocoa products •coconut products •craft juices &...

SunOpta Inc.

Investor PresentationFebruary 2020

Forward Looking Statements

This presentation may include forward-looking statements and therefore is subject to important risks and uncertainties. Actual results could differ materially from the conclusions, forecasts and projections as certain material factors and assumptions were applied in drawing conclusions and in making the forecasts or projections upon which the forward-looking statements are premised.

Additional information about these material factors and assumptions, as well as other risks, uncertainties and/or relevant factors, are set forth under “Forward Looking Statements,” and “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2019 (available at www.sec.gov) as well as the Company’s press release issued February 27, 2020.

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http://www.sec.gov/

$361.4

$349.9

$468.4

Plant-Based Foods & Beverages

Fruit-Based Foods & Beverages

Global Ingredients

SunOpta is a Healthy Food & Beverage Company with Global Reach

3

$1.2 Billion Fiscal 2019 Revenues

We are a private label and contract manufacturing company with an ingredient

sourcing platform focused on a healthy products portfolio aligned with growing

consumer demand for high quality organic & non-GMO food and beverage.

Retail/Private Label

Foodservice

Co-manufacturing

Industrial & Other

We operate 3 Business Segments

We deliver innovation to our Multi-Channel

consumer products customer base

External Revenue in $ millions *

* Revenue for the years ended December 28, 2019. Excludes revenues from disposed businesses

SunOpta has a Clear Vision & Strategies for Growth

4

Our

Vision

Key

Strategies

• Be a leader in the plant-based beverage

and fruit categories

• Leverage our unique organic farm-to-table

capabilities to fuel innovation and value

• Build integrated efficient supply chains

Democratize healthy eating…

Make it easier and more affordable

3.2%

5.0%

1.9%

3.4%

10.2%11.1%

5.9%

2.3%

Aseptic Broth Non-Dairy Milk Frozen Fruit Fruit Snacks

Total Category Private Label

SunOpta Operates in Attractive On-Trend Markets

5

2016 2017

Organic Sales

US Food & Beverage(1)

($ Billions)

(1) Source: 2019 Organic Trade Association Survey.

2018

$42.5

5.9%YOY Growth

$45.2$47.9

(3) Source: Nielsen – TTL US XAOC – WE 1/25/2020 – Does not include Costco

Category Growth Trends(3)

Global Organic Food & Beverage MarketExpected growth nearly 15% over the next 5 years

6

SunOpta is well positioned

with the capabilities to serve

this growing market

$ b

illio

n

CAGR 14.6%(1)

(1) Source: https://storebrands.com/global-organic-market-grow-nearly-15-through-2024

SunOpta has a Diverse & Impressive Base of Customers and Partners

Representative Retail and Foodservice Customer Base

7

Representative Retail (P/L)

& Foodservice

Representative Co-manufacturing

& Ingredient

8

SunOpta has a Clear Set of Strategic Priorities

► Portfolio Prioritization

• Recognize and resource plant-based beverage as our top priority to

drive revenue and EBITDA growth

• Prioritize assets and capabilities that are structurally advantaged

and invest to build long-term points of differentiation

• Critically evaluate and exit lines of business that aren’t positioned

for long-term success

► Speed of Customer Centric Innovation

• Bring value to customers brands through innovative plant-based

and fruit-based solutions

• Leverage our R&D capabilities, multi-channel category insights,

and ability to bring the latest trends in organic ingredients to market

to bring value enhancing innovation to our customers

► Productivity and Pricing in Fruit

• Capital investment and process refinement to lower cost of

manufacturing and supply chain

• Pricing and value enhancing innovation to drive improved revenue

per pound sold

We are focused

on delivering

sustained

profitable growth

by creating a

culture that is:

• Faster and more

agile;

• Focused on the

biggest

priorities; and

• Fanatical about

the customer

and saying “yes”

to opportunities.

SunOpta is Driving Innovation in

Plant-Based Foods & Beverages

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Product Categories Financial Trend

Recent Developments

• Completed the addition of new filling &

processing capacity at Allentown, PA facility

• Transitioned all three plants to expanded

production schedules

• Continuing to add capacity and expand

capabilities via capex projects

• Aseptically Packaged:

• Plant-Based Beverages

(soy, almond, oat, etc.)

• Broths

• Teas

• Plant-Based Concentrated

Bases (extraction)

• Sunflower and Roasted

Snacks

Strategic Priorities

• Double our plant-based beverage business to

roughly $500M in revenue within 5 years

• Create and bring to market margin accretive

innovation to private label & co-man customers

• Continue to invest to fuel leadership position in

plant-based beverages

SunOpta is a Positioned to Win in

Fruit-Based Foods & Beverage

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• IQF Fruit for Retail

• Fruit Solutions for

Foodservice

• Custom Formulated

Fruit Preparations

• Fruit-Based Snacks

(bars, bits, strips,

twists)

Recent Developments

• 2019 crop shortfalls expected to negatively

impact gross profit until the 2020 harvest

• Working to create more flexible pricing

architectures with customers

• Working to meet customer demand in the

face of a significant shortfall in production

from 2019


• Deliver improved gross margin in 2020 via

automation, direct bagging and improved

plant efficiencies

• Bring to market margin accretive innovation

• Identify and leverage sales and margin

synergies by viewing our fruit business as

one synergistic operation


SunOpta is a Leader in Sourcing

Global Ingredients

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• Citrus

• Cocoa Products

• Coconut Products

• Craft Juices & Power Shots

• Dried Fruits & Nuts

• Flavors & Seasonings

• Frozen Fruit & Vegetables

• Grains, Rice, Pulses, Seeds

• Liquid & Alternative Sweeteners

• Oils & Fats

• Plant-Based Proteins

• Superfood Powders

Recent Developments

• Completed the expansion of cocoa

processing capacity

• Completed the acquisition and integration

of new organic oil business (Sanmark)

• Opened new Ethiopian organic avocado oil

facility


• Continue to identify and develop new

sources of organic ingredients

• Deploy a more robust lifecycle management

approach to operating the business

• Leverage new capabilities in end to end

vertical integration


SunOpta is Focused on DeliveringSustained Profitable Growth

12

Our Focus Areas for 2020

• Invest in Plant-Based Beverages

• 3 planned expansion projects to

increase capacity and capabilities

across our national footprint

• Improve Profitability in Fruit

• Recovery after market-wide 2019

crop shortfall

• Continue to execute on initiatives to

improve pricing and reduce costs

• Drive Higher Margins in Global

Ingredients

o Reduce exposure to low margin

categories and reinvest in high

margin categories

Appendix

Key Financial Metrics

New Segment ReportingEffective the fourth quarter of 2019, we changed our segment reporting to reflect changes to our organization

and leadership structure to align with the operational and strategic objectives established by our Chief

Executive Officer. As a result, we established two new segments – a Plant-Based Foods and Beverages

segment and a Fruit-Based Foods and Beverages segment – based on the synergistic nature of the underlying

principal product ingredients. In addition, we realigned the Global Ingredients segment to combine our

international organic ingredients operations and our premium juice program, based on shared raw material

sourcing.

Reconciliation of Non-GAAP MeasuresThis presentation includes certain measures not derived in accordance with generally accepted accounting

principles (“GAAP”). Such measures should not be considered substitutes for any measures derived in

accordance with GAAP and may also be inconsistent with similar measures presented by other companies.

Reconciliation of these non-GAAP financial measures to the most nearly comparable GAAP measures, if

applicable, is presented on the slides that follow. The Company believes that these non-GAAP financial

measures provide useful information to investors as the measures emphasize core on-going operations and

are helpful in comparing past and present operating results. The Company uses these measures to evaluate

past performance and prospects for future performance. The presentation of non-GAAP financial measures by

the Company should not be considered in isolation or as a substitute for the Company’s financial results

prepared in accordance with GAAP.

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Income Statement

($ millions, except per share amounts)

Fiscal

2019

Fiscal

2018

Revenues (1) $1,190.0 $1,260.9

Gross profit (2)

As % of Revenue

115.39.7%

116.29.8%

123.59.8%

135.610.8%

Operating income (loss) (3)

As % of Revenue

(2.8)(0.2%)

1.40.1%

3.90.3%

8.80.7%

Adjusted loss (4) (32.4) (24.5)

Adjusted EPS (4) $(0.37) $(0.28)

Adjusted EBITDA (4) 47.3 52.9

(1) Revenues for the year ended December 28, 2019 decreased by 5.6% to $1,190.0 million from $1,260.9 million for the year ended December 29, 2018. Excluding the impact on revenues of the sale of

the soy and corn business, the exit from flexible resealable pouch and nutrition bar product lines, and the acquisition of Sanmark (a net decrease in revenues of $91.0 million), a profit-neutral change to

a co-manufacturing agreement with a customer (a decrease in revenues of $9.8 million), and changes in foreign exchange rates (a decrease in revenues of $9.6 million) and commodity-related pricing

(a decrease in revenues of $6.5 million), revenues increased by 4.0% in 2019, compared with 2018.

(2) As a percentage of revenues, gross profit for the year ended December 28, 2019 was 9.7% compared to 9.8% for the year ended December 29, 2018, a decrease of 0.1%. The gross margin

percentage for 2019 would have been 9.8% excluding plant expansion and contract manufacturing transition costs of $0.9 million. For 2018, the gross profit percentage would have been 10.8%,

excluding equipment start-up and product introduction costs ($5.3 million), a non-cash foreign exchange loss on U.S. dollar-denominated raw material purchase contracts within our international organic

ingredients operations ($4.9 million), and inventory write-downs for certain frozen fruit inventory items ($3.1 million), partially offset by the recovery of $1.2 million of previously-incurred product

withdrawal costs from a third-party supplier.

(3) Operating loss for the year ended December 28, 2019, excluding the operating results of the soy and corn business and flexible resealable pouch and nutrition bar operations, as well as SG&A costs

incurred and expensed related to the Value Creation Plan, the segment operating loss would have been $1.4 million in 2019, compared with operating income of $8.8 million in 2018.

(4) Adjusted Earnings/Loss, Adjusted EPS and Adjusted EBITDA are non-GAAP measures. Refer to slides 20-21 for a reconciliation to the most comparable GAAP measure.

Note: Included in the balances presented above are the following amounts related to our specialty and organic soy and corn business that was sold on February 22, 2019:

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FY2019 FY2018

Revenue 10.3 104.4

Gross profit 0.2 8.3

Adjusted EBITDA (0.2) 4.6

Adjusted Adjusted

($ millions)

As at

Dec 28, 2019

Working Capital (1) $ 331.3

Total Assets 923.4

First Lien DebtSenior secured asset-based revolving credit facility maturing March 31, 2022 in the maximum aggregate

principal amount of $360.0 million, subject to borrowing base capacity.

241.7

Second Lien DebtSenior Secured Second Lien 9.50% Notes due October 9, 2022 in the amount of $223.5 million,

presented net of debt issuance costs of $5.1 million.

218.4

Other DebtSmaller credit facilities, lease and other financing arrangements.

30.6

Total Debt 490.7


Balance Sheet & Debt Capital

(1) Working capital is defined as current assets less current liabilities, excluding cash and cash equivalents, bank indebtedness, and current portion of long-term debt.

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New Segment Reporting

Quarterly Financial Information

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The following table presents re-casted quarterly historical financial results under our new financial reporting segments.

2018 2019

($ millions) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

ConsolidatedRevenues

Gross profit

Operating income (loss)

312.7

33.7

1.7

319.3

34.3

4.6

308.4

34.2

4.5

320.5

21.3

(6.9)

305.3

28.2

0.3

293.0

27.3

(2.5)

295.9

26.3

(3.5)

295.8

33.4

3.0

Plant-Based Foods & BeveragesRevenues

Gross profit

Operating income

81.2

10.2

3.1

76.4

12.1

4.7

71.3

8.8

2.0

85.1

9.4

0.9

81.3

10.5

2.5

81.9

12.1

4.5

91.8

16.3

8.7

106.4

19.9

13.7

Fruit-Based Foods & BeveragesRevenues

Gross profit

Operating loss

88.5

7.0

(2.3)

91.6

8.2

(1.0)

95.1

8.4

(1.5)

90.3

(1.8)

(11.2)

89.2

3.0

(5.6)

90.2

3.1

(6.0)

90.8

(2.0)

(10.6)

79.7

2.3

(4.7)

Global Ingredients (1)

Revenues

Gross profit

Operating income

143.0

16.5

5.7

151.3

14.1

4.1

142.0

17.0

8.2

145.1

13.7

5.3

134.8

14.7

6.5

120.9

12.1

3.7

113.4

12.0

3.4

109.7

11.2

2.4

Corporate ServicesOperating loss (4.8) (3.2) (4.2) (1.9) (3.1) (4.7) (5.0) (8.4)

(1) Included in the Global Ingredients balances presented above are amounts related to our specialty and organic soy and corn business that was sold on February 22, 2019.

Reconciliation of GAAP Results to Adjusted Loss and Adjusted EPS

17

(a) Reflects the gain on sale of the soy and corn business, net of transaction costs and post-closing adjustments, which was recorded in other income.

(b) For fiscal 2019, reflects employee retention and relocation costs of $2.2 million, and professional fees of $1.4 million recorded in SG&A expenses; and employee termination costs of $8.6 million (net of the reversal

of $4.1 million of previously recognized stock-based compensation related to forfeited awards previously granted to terminated employees), CEO and CFO recruitment costs of $1.3 million, and facility closure costs

of $0.3 million, all recorded in other expense. For 2018, reflects the write-down of inventories of $0.1 million recorded in cost of goods sold; professional and consulting fees, and employee recruitment and

relocation costs of $0.6 million recorded in SG&A expenses; and asset impairment, facility closure and employee termination costs of $1.7 million recorded in other expense, all related to the Value Creation Plan.

(c) Reflects costs related to the expansion of our Allentown, Pennsylvania, plant-based beverage facility and start-up of our new organic avocado oil facility in Ethiopia, which were recorded in cost of goods sold.

(d) Reflects costs to transition premium juice production activities to new contract manufacturers, which were recorded in cost of goods sold and other expense.

(e) Reflects product withdrawal and recall costs that were not eligible for reimbursement under insurance policies or exceeded the limits of those policies, including costs related to the recall of certain sunflower kernel

products initiated in 2016, which were recorded in other expense.

The following table presents a reconciliation of adjusted earnings/loss from net earnings/loss, which we consider to be the most directly comparable U.S. GAAP financial measure. In addition, in recognition of the

sale of the soy and corn business (as described above under the heading “Sale of Soy and Corn Business”), and our exit from flexible resealable pouch and nutrition bar product lines and operations (as described

above under the heading “Value Creation Plan”), we have prepared this table in a columnar format to present the effect of the disposal of these operations on our consolidated results for the current and comparative

periods. We believe this presentation assists investors in assessing the results of the operations we have disposed of and the effect of those operations on our financial performance.

Excluding

disposed

operations

Disposed

operations Consolidated

Excluding

disposed

operations

Disposed


$ (32.3) $ 31.7 $ (0.6) $ (111.5) $ 2.3 $ (109.1)

(0.2) - (0.2) (0.1) - (0.1)

(8.0) - (8.0) (7.9) - (7.9)

(40.4) 31.7 (8.8) (119.4) 2.3 (117.1) - -

Adjusted for:

Gain on sale of soy and corn business (a) - (44.0) (44.0) - - -

Costs related to Value Creation Plan (b) 9.6 - 9.6 1.7 0.7 2.4

Plant expansion costs(c) 0.6 - 0.6 - - -

Contract manufacturer transition costs (d) 0.4 - 0.4 - - -

Product withdrawal and recall costs(e) 0.3 - 0.3 1.5 - 1.5

Other(f ) (2.5) - (2.5) 0.3 - 0.3

Net income tax effect(g) (0.1) 12.1 12.0 0.7 (0.2) 0.5

Goodwill impairment(h) - - - 81.2 - 81.2

Inventory write-downs(i) - - - 3.1 - 3.1

Equipment start-up costs(j) - - - 2.9 - 2.9

New product commercialization costs (k) - - - 2.7 - 2.7

Reserve for notes receivable(l) - - - 2.2 - 2.2

Fair value adjustment on contingent consideration(m) - - - (2.8) - (2.8)

Recovery of product withdrawal costs(n) - - - (1.2) - (1.2)

Reversal of stock-based compensation(o) - - - (0.2) - (0.2)

(32.1) (0.3) (32.4) (27.3) 2.8 (24.5)

(0.37)$ (0.00)$ (0.37)$ (0.31)$ 0.03$ (0.28)$

($ millions, except per share amounts; totals may not sum due to rounding)

Net (earnings) loss

Add: loss attributable to non-controlling interests

Less: dividends and accretion on Series A Preferred Stock

Earnings (loss) attributable to common shareholders

Adjusted earnings (loss)

Adjusted earnings (loss) per diluted share

Fiscal 2019 Fiscal 2018

Reconciliation of GAAP Results to Adjusted Loss and Adjusted EPS (cont’d)

18

Continued from previous page.

(f) For 2019, other includes gains on the settlement of certain legal matters and a project cancellation, partially offset by losses on disposal of assets, insurance deductibles, and business development costs, which

were recorded in other income/expense. For 2018, other included the accretion of contingent consideration obligations, gain/loss on the sale of assets, severance costs unrelated to the Value Creation Plan, and

settlement of a legal matter, which were recorded in other expense/income.

(g) Reflects the tax effect of the preceding adjustments to earnings and reflects an overall estimated annual effective tax rate of approximately 27% for 2019 (2018 – 27%) on adjusted earnings/loss before tax.

(h) Reflects the impairment of goodwill that arose from the acquisition of Sunrise in 2015.

(i) Reflects the write-down of certain frozen fruit inventory items in the fourth quarter of 2018, due to a change in expected use of aged stocks, and reduced sales pricing and high production costs, which was

recorded in cost of goods sold.

(j) Reflects costs related to the start-up of new roasting equipment for grains, seeds and legumes at our Crookston, Minnesota, facility, as well as the start-up of a second processing line at our cocoa facility in the

Netherlands, which were recorded in cost of goods sold.

(k) Reflects costs for development, production trials and start-up costs, incremental freight charges, and employee training related to the commercialization of new consumer products, which were recorded in cost of

goods sold ($2.3 million) and SG&A expenses ($0.4 million).

(l) Reflects a bad debt reserve for notes receivable associated with a previously sold business, which was recorded in other expense.

(m) Reflects a fair value adjustment to reduce the contingent consideration obligation related to a prior business acquisition, based on the results for the business in fiscal 2018, which was recorded in other income.

(n) Reflects the recovery from a third-party supplier of $1.2 million of costs incurred relating to the withdrawal of certain consumer-packaged products due to quality-related issues, which was recorded in cost of

goods sold. Costs incurred related to this withdrawal were recognized in cost of goods sold in 2016.

(o) Reflects the reversal to SG&A expenses of previously recognized stock-based compensation related to performance share units granted to certain employees as the performance conditions were not achieved.

Reconciliation of GAAP Results to Operating Income/Loss and Adjusted EBITDA

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(a) For 2019, stock-based compensation of $11.6 million was recorded in SG&A expenses, and the reversal of $4.1 million of previously recognized stock-based compensation related to forfeited awards

previously granted to terminated employees was recognized in other income.

(b) For 2019, reflects employee retention and relocation costs of $2.2 million, and professional fees of $1.4 million recorded in SG&A expenses. For 2018, reflects the write-down of remaining flexible

resealable pouch and nutrition bar inventories of $0.1 million recorded in cost of goods sold; and professional and consulting fees, and employee recruitment and relocation costs of $0.6 million

recorded in SG&A expenses.

(c) Reflects costs related to the expansion of our Allentown, Pennsylvania, plant-based beverage facility and start-up of our new organic avocado oil facility in Ethiopia, which were recorded in cost of

goods sold.

(d) Reflects costs to transition premium juice production activities to new contract manufacturers, which were recorded in cost of goods sold.

(e) Reflects the write-down of certain frozen fruit inventory items in the fourth quarter of 2018, due to a change in expected use of aged stocks, and reduced sales pricing and high production costs,

which was recorded in cost of goods sold.

(f) Reflects costs related to the start-up of new roasting equipment for grains, seeds and legumes at our Crookston, Minnesota, facility, as well as the start-up of a second processing line at our cocoa

facility in the Netherlands, which were recorded in cost of goods sold.

(g) Reflects costs for development, production trials and start-up costs, incremental freight charges, and employee training related to the commercialization of new consumer products, which were

recorded in cost of goods sold ($2.3 million) and SG&A expenses ($0.4 million).

(h) Reflects the recovery from a third-party supplier of $1.2 million of costs incurred relating to the withdrawal of certain consumer-packaged products due to quality-related issues, which was recorded in

cost of goods sold. Costs incurred related to this withdrawal were recognized in cost of goods sold in 2016.

The following table presents a reconciliation of segment operating income/loss and adjusted EBITDA from net earnings/loss, which we consider to be the most directly comparable U.S. GAAP financial

measure. In addition, we have prepared this table in a columnar format to present the effect of the disposals of the soy and corn business, and flexible resealable pouch and nutrition bar operations on our

consolidated results for the periods presented. We believe this presentation assists investors in assessing the results of the operations we have disposed and the effect of those operations on our financial

performance.

Excluding

disposed

operations

Disposed


Excluding

disposed

operations

Disposed


$ (32.3) $ 31.7 $ (0.6) $ (111.5) $ 2.3 $ (109.1)

(8.7) 12.0 3.2 (6.3) 0.9 (5.4)

34.7 - 34.7 34.5 (0.1) 34.4

4.0 (44.0) (40.0) 2.1 0.8 2.8

- - - 81.2 - 81.2

(2.3) (0.4) (2.8) 0.0 3.9 3.9

33.8 0.1 34.0 31.9 0.8 32.8

11.6 - 11.6 7.9 - 7.9

3.6 - 3.6 0.7 - 0.7

0.6 - 0.6 - - -

0.3 - 0.3 - - -

- - - 3.1 - 3.1

- - - 2.9 - 2.9

- - - 2.7 - 2.7

- - - (1.2) - (1.2)

$ 47.5 $ (0.3) $ 47.3 $ 48.2 $ 4.7 $ 52.9

Other expense (income), net

Total segment operating income (loss)

Provision for (recovery of) income taxes

Adjusted EBITDA

Depreciation and amortization

Costs related to Value Creation Plan(b)

Stock-based compensation(a)

Interest expense, net

Plant expansion costs(c)

Contract manufacturer transition costs (d)

Goodwill Impairment

Inventory write-downs(e)

Equipment start-up costs(f )

New product commercialization costs (g)

Recovery of product withdrawal costs(h)

Fiscal 2018

Net (earnings) loss

Fiscal 2019

2233 Argentia Road

Suite 401, West Tower

Mississauga, Ontario L5N 2X7

www.sunopta.com

investor presentation february 2020...•cocoa products •coconut products •craft juices &...

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