Swiss Water Decaffeinated Coffee Income Fund Reports Second Quarter Results

Swiss Water Decaffeinated Coffee Income Fund will hold a conference call and webcast to discuss 2007 second quarter and first half results on August 9, 2007 at 8:00 am Pacific Time (11:00 am Eastern). The call can be accessed by dialing: 1-866-249-2157 or 416-644-3427. A replay will be available through August 23, 2007 at: 1-877-289-8525 or 416-640-1917 (Passcode: 21230900#.) The live and archived webcast can be accessed at: http://www.vcall.com/IC/CEPage.asp?ID=116584 or on the Fund’s website at www.swisswater.com

VANCOUVER, BC, August 8, 2007/CNW/ Swiss Water Decaffeinated Coffee Income Fund (“the Fund”) today reported financial results for the three and six months ended June 30, 2007. The three-month period represents the second quarter of its 2007 fiscal year. The Fund holds all of the outstanding securities of Swiss Water Decaffeinated Coffee Company, Inc. (“SWDCC” or “the company”) and its results are dependent on the operating results of SWDCC.

Operating Results

(Unaudited)

(1) EBITDA, adjusted distributable cash and adjusted distributable cash per unit are non-GAAP financial measures that are defined in the second quarter Management’s Discussion and Analysis to be posted on SEDAR on or before August 8, 2007.

In the second quarter and first half of 2007, SWDCC’s sales were down by 5.1% and 15.4% respectively over the same periods of 2006. The lower sales levels are due to several factors:

- The company entered 2006 with a substantial order backlog from the fourth quarter of 2005, when its new production line was not yet in full operation. This backlog was processed in the first half of 2006 and did not recur in 2007.

- In the first quarter of 2006, SWDCC received significant initial stocking orders for new business from two large customers, which did not recur to the same extent in 2007 as these customers have normalized their order pattern based on consumption.

- Due to delays in the arrival of green coffee beans from origin, primarily Colombia and Brazil, toll orders anticipated from some larger customers in the second quarter of 2007 were moved to the third quarter.
 
- Finally, a major customer elected this year not to repeat a significant in-store promotion it had in the first half of 2006.

SWDCC’s sales performance was also affected by the continued strengthening of the Canadian dollar relative to the US dollar. Absolute dollar sales revenues generated in US dollars represented approximately 83% of total revenues in the second quarter and 82% in the first half of 2007. While SWDCC enters into foreign exchange contracts to reduce its estimated net exposure to currency fluctuations on a 12-month rolling basis, these contracts only managed to dampen but not eliminate the negative effect of a continually strengthening Canadian dollar on its primarily US dollar revenues.

Due to its decreased sales levels, SWDCC’s processing volumes declined year-over-year by 7.5% in the second quarter and by 15.3% in the first half of 2007.Processing rates, expressed in Canadian dollars, also declined in the first half of 2007 compared to the first half of 2006 as a result of the stronger Canadian dollar.

The lower sales volumes, coupled with higher costs for green coffee and other inputs due to foreign exchange, reduced SWDCC’s gross profit for the second quarter and first half of 2007 by 11.3% and 20.8%, respectively, compared to 2006. Second quarter EBITDA was down by 19.6% year-over-year, while six-month EBITDA declined by 26.9%. 

The company’s net income in the second quarter increased by 21.7% over the same period in 2006, due mainly to the impact of recording realized and unrealized gains on derivative financial instruments used to manage US dollar exposure and coffee futures. For the first half of 2007, net income decreased by 9.7% over the prior year.

Distributions to unitholders in the second quarter were maintained at the level set in March 2007, when the per-unit monthly distribution was increased by 5.9% to $0.075. On an annualized basis, the new level of monthly distributions equals $0.90 per unit. During the second quarter, the Fund generated distributable cash of $1.4 million, and paid $1.5million in distributions to unitholders. In the first six months of 2007, distributable cash of $3.2 million was generated and $2.9 million was paid to unitholders.

“We remain well positioned to increase our business with both new and existing customers. Despite softer than expected volumes in the first half of this year, the outlook for our business remains positive and we continue to expect that our annual processing volume will grow modestly above our 2006 level,” said Frank Dennis, President and CEO of SWDCC and a Trustee of the Fund.

Dennis noted that the company has ample capacity for growth with its plant expansion now completed and also stands to benefit from the relatively stable New York ‘C’ market for coffee as well as from continuing growth in demand for chemical free decaffeinated coffee. “Looking ahead to the third quarter, based on current customer order patterns, we anticipate that our volumes will be somewhat ahead of the same period of 2006,” Dennis concluded.

A more detailed discussion of the Fund’s financial results can be found in its first quarter Management’s Discussion and Analysis, which is to be posted with the financial statements on SEDAR (www.sedar.com) on or before August 8, 2007.

Company Profile

SWDCC is the world’s only consumer branded chemical-free coffee decaffeinator, and is certified organic by both the OCIA (Organic Crop Improvement Association) and Aurora Certified Organic.

SWDCC decaffeinates customer-owned coffees, including organically certified coffees, for a toll fee. The company also purchases high-quality green coffees from more than 10 different countries, decaffeinates them and markets them to the green coffee trade. These two revenue streams are known as the company’s “toll” and “non-toll” businesses, respectively.

Approximately 65% of SWDCC’s revenue comes from the US, about 25% from Canada and the balance from international markets, including the United Kingdom, Japan and Australia.

For more information, contact:

Stan Thompson, Chief Financial Officer
Swiss Water Decaffeinated Coffee Company Inc.,
Phone: 604.444.8780    Fax: 604.420.8711
Email: sthompson@swisswater.com
Website: www.swisswater.com