Primo Water Corp. (NYSE: PRMW), a leading provider of sustainable drinking water solutions in North America and Europe, reported a 6% revenue increase during its 2021 third quarter, ended Oct. 2. The company simultaneously announced its plan to exit the North American single-use retail bottled water category – primarily 1 gal., 2.5 gal. and case-pack water containers – as part of its overall strategy to increase profitability and further reduce its carbon footprint.
"Our pure-play water model continues to drive higher demand for our products and services," said chief executive Tom Harrington. "Third-quarter operating results were negatively affected by the increase in the number of associates impacted by COVID resulting in route inefficiencies and higher overtime and temporary worker wages.
"This was partially offset by higher revenue and fixed cost leverage as our North America Water Direct business experienced a substantial increase in demand," Harrington continued. "We have seen operational improvement at the end of Q3 and continuing into October, supporting our belief this has been a short-term impact of the virus.
"As we continue to the next phase of our transformation as a pure-play water company and leader in ESG [environmental, social and governance], we are planning to exit the single-use plastic retail bottled water business in North America. Although it is a relatively small part of our overall business, exiting this category will result in a higher margin and more sustainable business. The increasing effect of one-way, single-use plastic bottles in our landfills and waterways has driven us to focus on our more environmentally friendly 3-gal. and 5-gal. returnable bottle business," he summed up.
Primo's single-use bottle exit plan does not affect its large format exchange, refill and dispenser business, not its Mountain Valley brand, which sells products primarily in glass bottles.
Primo Water Q3 highlights
- Total revenue increased 6% to $551 million, compared with $518 million in Q3 2020, as North America Water Direct experienced a substantial increase in demand.
- Net income and net income per diluted share were $18 million and $0.11, respectively, compared with reported net income and net income per diluted share of $22 million and $0.14, respectively.
- Adjusted net income and adjusted net income per diluted share were $36 million and $0.22, respectively, compared with adjusted net income and adjusted net income per diluted share of $38 million and $0.24, respectively.
- Total adjusted EBITDA decreased 4% to $106 million, compared with $111 million and Adjusted EBITDA margin decreased to 19.2% due to the impact of the delta variant on the route delivery labor force primarily in July and August, which caused route inefficiencies resulting in short term higher operating costs.
- Repurchased approximately 1.8 million outstanding common shares for $29 million.
- Expects about 6% organic revenue growth in 2021, plus growth from tuck-in merger and acquisitions, and maintained its full-year outlook for adjusted EBITDA between $390 million and $400 million.