AppHarvest says it is on track with $150 million investment despite a $17 million loss
After AppHarvest’s dismal second quarter prompted stocks to dive, the mega greenhouse company reported to its investors Wednesday an optimistic start to the fourth quarter and announced it remains on track with expansion.
In August, the Morehead-based company’s leadership announced it had recorded a net loss of $32 million in its second quarter due to the price of tomatoes hitting a 10-year low and because the quality of the tomatoes was lacking. Soon after, AppHarvest stock, APPH, plummeted.
CEO and founder Jonathan Webb attributed AppHarvest’s problems to the inability to produce high quality tomatoes that have great value and scaling up the Morehead facility to 400 employees.
AppHarvest leadership implemented changes in its “summer refresh,” such as providing productivity bonuses for its employees and hiring Julie Nelson as the executive vice president of operations at the Morehead facility who previously worked at PepsiCo and McKinsey.
The company reported selling 1.5 million pounds of tomatoes in the third quarter amounting to $543,000 in net sales, which was higher than expected, according to the company.
AppHarvest recorded a net loss of $17.3 million in its third quarter. The company ended the quarter with $221.6 million in cash and cash equivalents, compared to $21.9 million at the end of 2020. It recorded a net loss of $32 million in its second quarter.
AppHarvest stock continued to decline following the previous earnings call, hitting a low at the end of October.
President David Lee said though the fourth quarter has just started, AppHarvest has produced a higher percentage of higher quality tomatoes, which are ranked as USDA No. 1. Historically, quarter three has lower tomato prices, but it improves in quarter four. A higher quality of tomato also lowers the distribution costs, Webb said.
AppHarvest replanted 700,000 beefsteak and tomato on the vine plants for its second growing season at its Morehead farm in September.
The facility opened in January.
“We’re entering into a second growing season with lessons learned and more experience under our belt,” Webb said. “We’re excited by the opportunity to raise the bar as we harvest this new season’s crop.”
The company plans to open three farms next year, which include a 15-acre leafy green facility in Berea, a 60-acre tomato facility in Richmond and a 30-acre berry facility in Somerset.
AppHarvest will delay development of the second Morehead facility, a 10-acre leafy green facility, to be able to adapt the design of the farm based on operation needs at the Berea facility and maintain financial flexibility. The Morehead North facility is expected to be completed now in 2023.
With these four facilities, AppHarvest is expected to invest $150 million in 2021, Loren Eggleton, chief financial officer, said.
AppHarvest is on track to finish nine indoor farms by the end of 2025.
Despite global supply chain issues, Webb said there are no delays expected in completing and operating the three farms. The company remains on time and on budget.
Webb also said the company has been able to hire employees without issue, and at one point, AppHarvest had 8,000 applicants.
“We’ve set out to go on a bold mission to pursue being one of the largest food and agriculture companies not only in this region, but in the US and world,” Webb said. “And we have people that want to help us hit those targets, daily and weekly.”
He expects AppHarvest will employ 2,000 people in a year.
This story was originally published November 11, 2021 at 12:46 PM.