Coffee Holding Co., Inc. 2024 Annual Report Review

Introduction

Coffee Holding Co., Inc. (NASDAQ: JVA) is a prominent player in the coffee industry, offering a wide range of coffee products, including wholesale green coffee, private label coffee, and branded coffee. The company has a strong presence in the United States and certain international markets, with a focus on quality and customer satisfaction. This review delves into the company's 2024 annual report, highlighting key financial metrics, business strategies, and potential risks.

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Business Overview

Coffee Holding Co., Inc. operates as an integrated wholesale coffee roaster and dealer. The company divides its core products into three categories:

1. Wholesale Green Coffee: Unroasted raw beans sold to roasters and coffee shop operators.
2. Private Label Coffee: Roasted and packaged coffee sold under other brands.
3. Branded Coffee: Coffee sold under the company's proprietary and licensed brand names.

The company has a diverse portfolio of brands, including Café Caribe, Don Manuel, S&W, and Café Supremo, catering to various consumer tastes and preferences.

Financial Performance

Revenue and Profitability

For the fiscal year ended October 31, 2024, Coffee Holding reported net sales of $78.6 million, a 15% increase from the previous year. This growth was driven by increased sales to legacy customers and new customer acquisitions. The company's gross profit also improved, reaching $16 million, up from $10.9 million in 2023.

Cost Management

The cost of sales for 2024 was $62.5 million, representing 80% of net sales, compared to 84% in 2023. This improvement was partly due to successful hedging activities, which resulted in a gain of approximately $1.6 million.

Net Income

Coffee Holding achieved a net income of $2.2 million in 2024, a significant turnaround from a net loss of $835,576 in 2023. This positive outcome reflects the company's effective cost management and increased sales volume.

Cash Flow and Liquidity

The company generated $5.4 million in net cash from operating activities in 2024, compared to a cash usage of $652,083 in 2023. This improvement was primarily due to increased net income and effective working capital management.

Strategic Developments

In November 2024, Coffee Holding acquired the assets of Empire Coffee Company for $825,000. This acquisition is expected to enhance the company's roasting and packing capabilities, serving both existing and new customers.

Risk Factors

Commodity Price Volatility

As a coffee company, Coffee Holding is exposed to fluctuations in coffee bean prices. The company uses hedging strategies to mitigate this risk, but significant price changes can still impact profitability.

Customer Concentration

The company relies on a few key customers, with one customer accounting for over 10% of net sales in 2024. This concentration poses a risk if any major customer reduces or ceases purchases.

Operational Risks

The company faces operational risks, including supply chain disruptions and competition from larger coffee brands. Maintaining quality and brand reputation is crucial for sustaining growth.

Conclusion

Coffee Holding Co., Inc. demonstrated strong financial performance in 2024, with significant improvements in sales, profitability, and cash flow. The company's strategic acquisition of Empire Coffee and its diverse product offerings position it well for future growth. However, potential risks related to commodity prices and customer concentration should be carefully monitored.

Overall, Coffee Holding Co., Inc. presents a promising investment opportunity with a balanced approach to growth and risk management.