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SunOpta Inflates Performance With New, Non-Standard Add-Back

Beverage maker’s new methodology inflates cash flow and raises earnings quality concerns.

November 7, 2024

Though SunOpta (STKL), a maker of plant based and fruit based foods and beverages, has been selling its accounts receivables for at least two years, the company characterizes doing so in its latest quarterly filing as an “unusual item”.

The classification, according to SunOpta, gives it cover to add back the loss or discount provided the receivables purchaser to the company’s preferred adjusted profit metric.

In its latest quarterly filing, SunOpta inserted new language regarding its Adjusted EBITDA calculation detailing that it excludes:

“...the discount taken on trade receivables sold to a third-party factor, which is a strategic means for us to improve working capital efficiency, while reducing our indebtedness and interest expense…”

The cost to sell the receivables in the latest quarter was approximately $236,000, inflating Adjusted EBITDA 1.1%.

Though by definition a recurring expense that inflates adjusted profit, SunOpta’s receivables sale also distorts the company’s cash flow statement.

In the latest quarter, SunOpta reported Operating Cash flow of $16.9 million.

Without the receivables sale— the company sold $20 million in receivables in the quarter— the company would have reported negative operating cash flow of $3.1 million.

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