Organic produce firm expects rewards from ‘asset-light’ model

(Organto.com)

Vancouver organic fruit and vegetable supply firm Organto Foods expects a major boost in its quarterly revenue as it gets set to clear its decks of production assets it directly owned elsewhere.

The company, in a release Wednesday offering guidance for its upcoming third quarter ending Sept. 30, said it expects a “significant improvement” in its revenue at $1.3 million to $1.5 million, which would be a quarterly record for Organto.

Known as Guatemalan produce grower Agricola Nuova Terra until that firm’s reverse takeover of a Canadian company in 2015, Organto said Wednesday it has made “important progress” in the past year in “shifting from an asset-heavy, single revenue stream business model, to an asset-light, multi-stream business model.”

The company noted it has a deal to sell its processing facilities at Patzun in southern Guatemala for consideration of $935,450, and has shut down its packaging operations in the Netherlands.

Organto said it has moved instead to “strategic sourcing arrangements” with grower partners in Peru, Argentina, Mexico, Zimbabwe and elsewhere, plus “third-party processing and packaging arrangements with globally positioned strategic partners.”

The Guatemala plant sale still requires approval from the company’s shareholders as well as the TSX Venture Exchange, where Organto’s shares trade.

Organto said it has also expanded its product offering from high-value organic vegetables such as green beans, sugar snaps and snow peas to include other “value-added” organic vegetables and fruits such as asparagus, avocado, blueberries, ginger and mango.

For the upcoming third quarter, Organto said, its sales of organic vegetables and fruit including fresh asparagus, avocado and mango “have gained momentum” and are growing in the U.K., the Netherlands, Spain, Russia, Sweden and Denmark.

As it brings on “seasonal” products such as organic blueberries in late August, Organto said it “expects revenues to continue to accelerate.”

Revenues for its first half of 2019 grew from the year-earlier period, Organto said, but were “well below expectation,” due mainly to the company’s repositioning but also to “quality and supply challenges” in its organic avocado program.

Those challenges, Organito said, led to “limited avocado revenues” in these quarters while the company worked to re-establish supply and diverted resources to deal with the avocado program issues.

The company said it also noted “lower demand on certain products” in the first half of the year because of “local seasonal supply being available in key markets.”

Organto said its third-quarter forecast is based on shipping both organic and conventional products including avocados, berries, asparagus and others, with an average sales price ranging from $4 to $11 per kg of sold product.

The company, which since last November has owned 100 per cent of Colombian medical marijuana producer Medicannabis S.A.S., noted it also reached a deal in June to sell those shares to a Vancouver cannabis company, Xebra Brands, in exchange for a combination of cash, Xebra stock and debt forgiveness.

Organto said it expects to use proceeds from that deal — which still also requires shareholder and TSX-V approval — to expand its organic food business while it “continue(s) to have an investment in the rapidly growing cannabis sector.”

“We believe the opportunity in organic vegetables and fruits is greater today than at any other period of time as the global trend towards healthy eating and wellness continues to drive strong demand on a global basis,” Organto’s interim CEO Steve Bromley said in the company’s release Wednesday.

“A great deal of effort has gone into repositioning our business, and with much of the heavy lifting now behind us, we are excited with the growth in our business and look forward to that continuing.”