Coffee Holding Co., Inc. Terminates Merger with Delta Corp Holdings Limited

Rhea-AI Summary

Coffee Holding Co. (NASDAQ: JVA) has terminated its merger agreement with Delta Corp Holdings , initially announced on September 30, 2022. The decision followed an unsuccessful shareholder vote in April. CEO Andrew Gordon emphasized that the company will focus on its independent growth strategy, aiming to boost shareholder value. Over the past few years, Coffee Holding has addressed debt and balance sheet issues, secured new business agreements, and shown revenue growth for four consecutive quarters, despite a loss of $8 million in annual revenue from the closure of its Generations/Steep subsidiary. The company expects recent price increases to offset rising costs of London Robusta coffee and improve profit margins in the upcoming quarters.

Positive

• Secured new production agreements with major U.S. retailers.
• Revenue growth for four consecutive quarters.
• Profits in three of the past four reporting periods.
• Initiated price increases to offset rising costs of London Robusta coffee.

Negative

• Terminated merger with Delta Corp Holdings after an unsuccessful shareholder vote.
• Recent quarterly loss of $0.02 per share due to a historic surge in London Robusta prices.
• Loss of $8 million in annual revenue from the closure of the Generations/Steep subsidiary.
• Price increases expected to have a lagging effect on financial results.

Insights

Financial Analyst

The termination of the merger between Coffee Holding Co., Inc. and Delta Corp Holdings Limited is a significant event for investors. After almost two years of efforts and an unsuccessful shareholder vote in April, Coffee Holding's board decided to remain independent. Investors should note that Coffee Holding has improved its financial health over the past few years by paying down debt and securing new business agreements. The decision to stay independent carries both short-term and long-term implications.

In the short term, the termination of the merger means that investors won't see the potential synergies and market expansion that the merger might have brought. However, the company's focus on cleaning up the balance sheet and reducing debt is a positive sign. They have shown consistent revenue growth and profitability in recent quarters, despite some setbacks. The impact of the London Robusta market surge and subsequent price increases needs to be monitored as it affects profit margins, but the company's ability to adapt is a positive indicator for the future.

In the long term, if Coffee Holding can execute its growth strategy effectively, the company could potentially create substantial shareholder value. Investors should keep an eye on the company's ability to maintain its revenue growth, manage production costs and adapt to market fluctuations.

Market Research Analyst

From a market research perspective, Coffee Holding Co., Inc.'s decision to terminate the merger with Delta Corp Holdings Limited suggests a important pivot in strategic direction. The company has secured new production agreements with major retailers, reflecting a focus on strengthening its market position within the U.S. retail sector. These agreements are notable as they have contributed to revenue growth for four consecutive quarters, despite significant losses from the closure of their Generations/Steep subsidiary.

Investors should understand that market dynamics such as the surge in the London Robusta market have impacted profitability. Coffee Holding's strategy to implement price increases is a common practice in the industry to mitigate rising costs. The lagging effect of these price increases means that financial results will reflect these changes in upcoming quarters, suggesting a potential improvement in margins.

The company's ability to acquire new branded and private label customers over the last 12-18 months indicates strong market confidence and effective sales strategies. These factors should be considered when evaluating the company's potential for long-term growth and market strength.

Staten Island, NY, June 24, 2024 (GLOBE NEWSWIRE) -- Coffee Holding Co., Inc. (NASDAQ: JVA) (“Coffee Holding”), a publicly traded integrated wholesale coffee roaster and dealer located in the United States announced today that Coffee Holding has terminated the previously announced Definitive Merger and Share Exchange Agreement, originally announced on September 30, 2022 (the “Merger Agreement”) with Delta Corp. Holdings Limited (“Delta”).

“After almost two years of attempting to get our previously announced merger with Delta over the finish line, and as the shareholder vote from April to approve the merger proved unsuccessful, the board of directors has elected to terminate the Merger Agreement and move forward as an independent company. It is the board’s belief that as an independent company, if we can execute our renewed growth strategy, we will be able to create the shareholder value that has eluded us recently,” said Andrew Gordon, Coffee Holding’s Chief Executive Officer.

“We have spent the past few years cleaning up our balance sheet and paying down debt which was incurred from the combined accumulated losses created by our former subsidiary Generations Coffee LLC and the purchase and relocation of several pieces of equipment for production that were required for our new manufacturing reorganization. We are extending our credit agreement with our lender, Webster Bank, which we believe will address our ability to continue as a going concern. We have secured several new pieces of business over the past year, including production agreements with the largest retailer by market share in the Northeast and a two year agreement with one of the larger U.S. national retail chains. These agreements have helped us grow our revenue for four consecutive quarters despite the loss of approximately $8.0 million in annual revenue resulting from the closure of our Generations/Steep subsidiary,” continued Mr. Gordon.

“We have also shown profits in three of the past four reporting periods, with $0.02 per share loss this past quarter, which was an improvement from Q2 of Fiscal 2023, our only recent quarterly loss. This loss was primarily due to a historic surge in the London Robusta market to all time contract highs over the past months, which dramatically impacted profit margins on both our branded and private label business for which London Robusta is a key ingredient in most commercial blends. We have since initiated a series of price increases to most of our major customers which we believe will offset the increase in the price of London Robusta coffee. However, we expect these price increases to have a lagging effect and do not expect them to be fully recognized in our results until after this month and for our fiscal fourth quarter 2024. We also believe that once the London Robusta market normalizes to its historical price range, we will be well positioned to earn additional profits compared to recent results due to the increased levels of branded and private label customers acquired over the last twelve to eighteen months,” concluded Mr. Gordon.

About Coffee Holding

Founded in 1971, Coffee Holding Co., Inc. (NASDAQ: JVA) is a leading integrated wholesale coffee roaster and dealer in the United States and one of the few coffee companies that offers a broad array of coffee products across the entire spectrum of consumer tastes, preferences and price points. Coffee Holding’s product offerings consist of eight proprietary brands, each targeting a different segment of the consumer coffee market as well as roasting and blending coffees for major wholesalers and retailers throughout the United States who want to have products under their own names to compete with national brands. In addition to selling roasted coffee, Coffee Holding Co., Inc. also imports green coffee beans from around the world which it resells to smaller regional roasters and coffee shops around the United States and Canada.

Forward-Looking Statements

Any statements that are not historical facts contained in this release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including the Company’s outlook on the revenue growth. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. We have based these forward-looking statements upon information available to management as of the date of this release and management’s expectations and projections about certain future events. It is possible that the assumptions made by management for purposes of such statements may not materialize. Such statements may involve risks and uncertainties, including but not limited to those relating to product demand, pricing, market acceptance, hedging activities, the effect of economic conditions, intellectual property rights, the outcome of competitive products, risks in product development, the results of financing efforts, the ability to complete transactions and other factors discussed from time to time in the Company’s Securities and Exchange Commission filings. The Company undertakes no obligation to update or revise any forward-looking statement for events or circumstances after the date on which such statement is made.

For further information, contact:

Coffee Holding Co., Inc.

Andrew Gordon
President & CEO
(718) 832-0800

FAQ

Why did Coffee Holding Co. terminate its merger with Delta Corp?

Coffee Holding Co. terminated its merger with Delta Corp. after an unsuccessful shareholder vote in April 2024.

What is the impact of the termination of the merger on Coffee Holding Co.?

The termination allows Coffee Holding Co. to focus on its independent growth strategy, aiming to create shareholder value.

How has Coffee Holding Co.'s revenue been affected recently?

Coffee Holding Co. has shown revenue growth for four consecutive quarters despite losing $8 million in annual revenue from closing its Generations/Steep subsidiary.

What financial challenges has Coffee Holding Co. faced?

Coffee Holding Co. faced a recent quarterly loss of $0.02 per share due to high London Robusta prices and the loss of $8 million in annual revenue from closing its subsidiary.

What measures is Coffee Holding Co. taking to improve profit margins?

Coffee Holding Co. has initiated a series of price increases to offset the rising costs of London Robusta coffee, expected to positively impact financial results by fiscal Q4 2024.