Cyanotech sales down during strategic refocus
February 12, 2016
ailua Kona-based Cyanotech Corporation announced financial results for the third quarter and first nine months of fiscal year 2016, ended December 31, 2015. For the third quarter of fiscal 2016 compared to the third quarter of fiscal 2015, net sales were $7,534,000 compared to $9,691,000, a decrease of 22%. Gross profit was $3,084,000, with gross profit margin of 41%, compared to gross profit of $4,798,000 and gross profit margin of 50%. Operating income was $296,000 compared to operating income of $1,228,000. Net loss was ($250,000) or ($0.04) per diluted share, compared to net income of $463,000 or $0.08 per diluted share.
Commenting on the third quarter 2016 results vs. third quarter 2015, Brent Bailey, Cyanotech President and CEO, said, “The third quarter of 2016 showed the effects of our strategic refocus from a bulk ingredients business to a higher-margin consumer-focused branded business. While these efforts have negatively impacted our short-term profits, we expect them to increase our margins and profitability in the future.”
“The 22% decrease in net sales in the third quarter of fiscal 2016 does not accurately reflect the health of our business,” he said. “Timing of revenue recognition inflated third quarter fiscal 2015 by $849,000 while reducing third quarter fiscal 2016 by $39,000. The remaining decline was primarily driven by our bulk business, due to lack of Astaxanthin supply.”
“The areas where we have strategically focused are healthy and growing,” Mr. Bailey added:
- BioAstin expanded into an additional 43 Los Angeles Costco warehouses in November bringing our total Costco distribution to 110 warehouses, roughly 23% of their domestic total.
- Our market shares in the natural products channel continued to grow in the 12-week period ending 12/27/15:
- Astaxanthin market share was 58.7% (+0.7 pts.)
- The 12 mg, 50 ct. BioAstin is the #1 selling item in the Astaxanthin category as well as the broader single-ingredient Antioxidant/Carotenoid category.
- BioAstin now has four of the top seven items in the single-ingredient Antioxidant/Carotenoid category.
- Spirulina market share was 50.2% (+1.1 pts.).
“Gross profit in the third quarter also was negatively impacted by:
- An increase in production costs due to the declines in Astaxanthin production in the second and third quarters. We are addressing this issue with an Astaxanthin capacity expansion project, the first phase of which was completed and online at the end of November 2015;
- An increase in extraction costs as we make progress toward operating our new extraction plant at full capacity.”
For the first nine months ended December 31, 2015 compared to the first nine months ended December 31, 2014, net sales were $23,644,000 compared to $25,261,000, a decrease of 6.4%. Gross profit was $9,108,000, with gross profit margin of 38.5%, compared to gross profit of $11,792,000 and gross profit margin of 46.7%. Operating loss was ($38,000) compared to operating income of $375,000, and net loss was ($341,000) or ($0.06) per diluted share, compared to net income of $147,000 or $0.03 per diluted share.
For the trailing 12 months ended December 31, 2015 compared to the trailing 12 months ended December 31, 2014, net sales were $32,192,000 compared to $32,280,000 a decrease of 0.3%. Gross profit was $11,782,000, with gross profit margin of 36.6%, compared to gross profit of $14,258,000 and gross profit margin of 44.2%. Pretax loss was ($276,000) compared to a pretax loss of ($521,000), and net loss was ($511,000) or ($0.09) per diluted share, compared to a net loss of ($374,000) or ($0.7) per diluted share.