AppHarvest stock dives after Kentucky greenhouse company posts $32 million loss
AppHarvest has sold 13.4 million pounds of tomatoes since its inaugural harvest in January, but in an earnings call Wednesday, the mega-greenhouse company announced it recorded a net loss of $32 million in its second quarter.
AppHarvest stock plummeted afterward. The Kentucky-based company went public in February, joining Nasdaq at APPH.
Company leadership on the call said the profits from selling tomatoes from the flagship Morehead greenhouse were lower because the prices of tomatoes hit a 10-year low in May and the quality of the tomatoes was lacking.
Founder and CEO Jonathan Webb said AppHarvest aimed to grow high quality tomatoes that have great value, but were only able to produce high amounts of lower quality tomatoes that have “little to no value,” which directly affects their bottom line.
Webb attributed the quality problems to scaling up the Morehead facility to 400 employees.
“Yes, we had a challenge of hiring 400 people and training them and hitting the yield, not only the yield, but the quality,” Webb said.
Net sales from 8.6 million pounds of tomatoes were $3.1 million, an increase of $800,000 from this year’s first quarter. AppHarvest expected to sell $20 million to $25 million this year but have scaled back their targets to $7 million to $9 million.
AppHarvest projects $350 million to $400 million in net sales in 2025.
The leadership remained optimistic about the long-term operations of the company. The problems are fixable, AppHarvest President David Lee said.
“We’re disappointed with these results, but the good news is that prevailing market prices for tomatoes have already rebounded from the lows we experienced in the second quarter,” Lee said. “Additionally, the speed bumps associated with our initial harvest are fixable and we’ve already deployed solutions against these problems in advance for our next harvest.”
The company announced more conservative goals on the call. Webb said they are still on track to open 12 mega-greenhouse facilities by 2025. Two greenhouses in Berea and Richmond are more than 30 percent constructed. Those are set to be completed by mid-2022. The company also broke ground on another facility in Morehead and a first facility in Somerset, which will be operational by the end of 2022.
Webb said the company has ample funds for the construction of future farms.
AppHarvest announced it has hired Julie Nelson, with experience at PepsiCo and McKinsey, to help support operational growth, and Adam Reel, who has worked at Apple and other controlled-environment agriculture start-ups.
AppHarvest said it is partnering with Mastronardi Produce to form FarmCom, which will build, buy and operate new high-tech greenhouses and expand production throughout the U.S. AppHarvest will contribute $10 million in cash.
AppHarvest also invested $5 million in Red Sea Farms, an AgTech company based in the Middle East for sustainable farming in water-scarce areas by using saltwater for both growing and cooling.
AppHarvest acquired Root AI, an agricultural robotics and artificial intelligence company that helps manage high-tech indoor farms, in April to collect data while harvesting.
“While we more than doubled production from our first quarter, we have a ‘moment in time’ opportunity to create more long-term shareholder value by doubling down on investments that help us reduce risk going forward by developing and deploying our leading technology, and operational best practices for CEA, and enhancing our brand power by launching value-added products next year,” Lee said.
Webb also announced plans for selling tomato-based products like salsa and Bloody Mary mix next year.
This story was originally published August 12, 2021 at 2:46 PM.