By M. Marin
READ THE FULL SWP.TO RESEARCH REPORT
Pick up in customer orders contributes to 17% y/y increase in processed volumes in 2Q26
Swiss Water Decaffeinated Coffee Inc. (OTC: SWSSF, TSX: SWP.TO) reported 2Q26 results that we believe illustrate the underlying strength in the company’s business and compared to growth prospects as the price of coffee normalizes. Processed volumes increased 17% in 2Q26 vs. 2Q25 and 8% in 1H26 compared to 1H25.
Industry fundamentals appear to be normalizing. During 1Q26, the NY’C’ peaked at US$3.00/lb and subsequently pulled back to a low of $2.96/lb. By comparison, the NY’C’ averaged US$3.16/lb in 1Q26 and US$3.83/lb in 4Q25. The downward trend year-to-date reflects improving crop harvests and elimination of tariffs, among other factors. The coffee futures contract is the global benchmark for Arabica coffee. Spot availability of green coffees remained low, however, and the futures market remained inverted during the quarter.
The supply outlook for coffee has improved, with a strong crop expected in the 2026-2027 season. The National Supply Company (Conab) anticipates a significant increase in Brazilian supply, forecasting a 17+% increase in 2026 compared to 2025, with Arabica production up an anticipated 23+%.
Reflecting Swiss Water’s booking visibility into the back half of the year, the company is optimistic about volumes over the remainder of 2026, although coffee futures prices could fluctuate somewhat. In fact, many customers appear to be actively rebuilding their decaffeinated coffee inventories after pulling back amid a challenging 2025 when futures contract prices were at their highest levels since the early 1970s and volatile throughout the year. Customer ordering remained strong throughout 2Q26, with roasters restocking their pipelines. On the lower prices, revenue fell 6% year-over-year to C$66.0 million in 2Q26, but lower coffee prices also impact the company’s costs and margins, which can fluctuate from quarter to quarter. Partially on lower NY’C’, SWP’s 2Q26 gross margin was 15.4% compared to 7.8% in 2Q25, and gross profit was up 94% year-over-year to C$10.2 million. Although operating expenses were C$5.9 million versus C$3.9 million in 2Q25, on the significantly higher gross profit, operating income of C$4.3 million versus C$1.4 million in 2Q25 more than tripled (advanced 210% year-over-year). Net income was C$1.9 million, and EPS was C$0.20, compared to a loss of C$0.4 million and C$0.04 per share, respectively, in 2Q25. Importantly, adjusted EBITDA of C$5.3 million more than doubled (up 191%) compared to 2Q25.
Reflecting Swiss Water’s optimistic outlook, the company filed notice of intention to launch a Normal Course Issuer Bid (NCIB) to repurchase its shares. Yesterday, Swiss Water announced that the Toronto Stock Exchange (TSX) had approved the NCIB. Swiss Water intends to purchase up to roughly 650k shares depending on market conditions and the price of its share. This would represent about 9.7% of its outstanding public float as of August 7, 2026 (total issued and outstanding shares as of August 7, 2026 was 9.59 million, and the total public float was 6.68 million shares). The NCIB is expected to launch on August 20, 2026, and end on August 19, 2027. The NCIB reflects management’s view that the market price of its shares does not fully reflect the company’s prospects.
Management believes it has sufficient cash flow and liquidity to manage operations and maintain growth initiatives and to support share repurchases under the NCIB. While rising product demand is driving high production capacity utilization at Swiss Water’s plant in 2026, the company believes it has adequate production to support growth in the short-term and has identified targeted incremental investments to boost production in order to meet demand in the medium-term. SWP is focused on optimizing its financial flexibility and also made progress in strengthening its balance sheet. SWP’s operating credit facility maturity date was renewed on May 4, 2026, and extended by one year until June 2028. Moreover, SWP has repaid C$8.9 million of debt payment. Reflecting these measures, SWP has reduced quarterly interest expense by 17% year-over-year.
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