More gloom is in the pipeline for Beyond Meat as the alternative-protein business warned of an upcoming “material” impairment charge.
The warning came in the form of a filing with the US Securities and Exchange Commission (SEC) on Friday (24 October) ahead of California-based Beyond Meat’s final third-quarter results announcement on 4 November.
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“Although the impairment charge is expected to be material, the company is not yet able to reasonably quantify the amount at this time”, the filing read, adding that the non-cash impairment “related to certain of its long-lived assets”.
Nasdaq-listed Beyond Meat, which has seen a significant dilution of its share price since the September announcement, and then completion of, a debt-for-equity swap, explained: “The company’s recoverability test, conducted in accordance with ASC 360, preliminarily indicated that the carrying amount of certain of its long-lived assets was not recoverable from the projected undiscounted future cash flows of the relevant asset group.”
Beyond Meats’ shares were down 23% at $2.185 as of the end of US trading on Friday, ending a rally that was reportedly sparked by the closing of bets on further declines in the stock price, so-called short-covering.
The shares had fallen below $1.00 earlier in October, flouting Nasdaq listing rules if levels below that level were to be maintained. Despite the short-lived rally, the shares are still down around 42% this year.
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By GlobalDataMeanwhile, Beyond Meat is projecting third-quarter sales revenue of around $70m, within the $68-$73m range forecast at the second-quarter results stage in August.
However, the figure for the three months to 27 September, which is preliminary, would represent a decrease from the $81m posted for the same quarter of last year, when group sales rose 7.6%.
Gross margins are also set for another decline, projected by Beyond Meat on Friday to be about 10-11% for the third quarter. The margin was 17.7% in the corresponding period, a recovery from the minus 9.6% in 2023.
An impairment would be another stumbling block for Beyond Meat.
John Boken at consultancy AlixPartners was hired in August as an external advisor, described as an executive with “corporate turnaround and restructuring experience”.
Beyond Meat has not reported a net profit since the business went public in 2019, although no estimates were provided on Friday for that metric.
Along with the repeated losses and falling revenues, the company has previously announced an exit from China, job cuts and external financing.
Earlier this year, the company revealed it had secured a $100m financing package from Unprocessed Foods, a unit of the non-profit Ahimsa Foundation, with an option to take a minority stake in Beyond Meat.
Volumes dropped across all the group’s sales channels in the first six months of fiscal 2025, most notably in US retail, while Beyond Meat reported yet another bottom-line net loss – $82.2m in the first half.
On Friday, Beyond Meat said the expected gross margin figures would include around $1.7m of expenses connected with its exit from China. Otherwise, the margin will likely be about 12-13%.
Responding to Friday’s SEC filing, John Baumgartner, a managing director at Mizuho Securities, wrote: “Fundamentals will likely remain pressured as animal meat consumption is increasingly on-trend; demand is proving resilient despite record prices.
“Cost savings are likely to support EBITDA but absent a sales inflection, we expect continued FCF [free cash flow] burn and absence of catalysts to own shares.”
Baumgartner continued in his research note: “In addition, today’s disclosure of an unquantified but ‘material’ forthcoming impairment charge reflects more subdued internal expectations for the out years.”
