The Q2 ’22 report was disappointing. I was actually thinking I might have to consider selling at a big loss. The main issue I saw the disappointing utilization rate of the digital can printer at 30%. Also the other issue was the cash burn and selling of access inventory to raise cash.
In the conference call the CEO talked about the challenges and learning how to use the printer. They made some changes and the results would follow. I had to wait and see if those results would come, so I decided not to sell my EAST position.
The company recently put out an update on digital can printing. The signs are really encouraging. The company reached a 2M digital cans printed milestone in August ’22.
We know the following run rate:
Q2 ’22 – 750k cans printed
July ’22 – 650k cans printed
Aug ’22 – 600k cans printed (2M – 750k – 650k)
We don’t know when the 2M cans printed milestone was achieved. I don’t think it was at the end of August. I would think based on the run-rate it was early of mid August.
The company now has 2 shifts working at the can production site. The company is still hiring for the 3rd shift. The staffing has been a challenge for the company. Now that 2 shifts are on-boarded we are seeing these numbers improve. I would expect September to be even better. If the 3rd shift is hired and working by end of September then I would think we will be in for an excellent Q4.
Now we have to wait on the gross margin numbers and how the cash burn is looking. It will take a few months before the quarterly numbers are reported. I’m excited and eager to see the progress.
2 responses to “Eastside Distilling: Things starting to turn”
Dont you think that the great business proffits will be used in the ugly business side? I think is inevitable.
The spirits is not really an ugly biz. It is a good biz that just was run really bad in the past. The brands are award winning and have brand value. The problem is until the company can get to certain volume of sales the spirit biz is cash burning. The company is fixing the historical problems (pricing, distribution, branding) and we are seeing some traction. Although it really needs lot of capital to get to really high volume. So it is really all about getting these brands to a point where they are sustainable and not eating up cash.
Once the company gets the 2nd printer running (in early ’23) the company will be generating huge amounts of cash. At that point the company will have the capital to invest in spirits. The return on capital on the spirits side should be really good, if done correctly.