Cyanotech grows its algae products at its an open pond facility on the Kona Coast of Hawaii’s Big Island. The company in the past several years has pursued a strategy of moving more toward becoming a vertically integrated manufacturer of finished dietary supplements and has stepped back from its bulk ingredients supply business.
The company reported a 0.9% rise in net sales in its third quarter that ended on Dec. 31, 2016. Net sales for the period were $7.6 million, compared to $7.5 million for the same period a year earlier. Gross profit margin was down, though; the company reported $2.9 million in gross profit compared to $3 million for the same period in 2015.
“Our results continue to reflect the strategic focus on our own branded, packaged products sold through retail and online channels, and improving our margins,” said Gerry Cysewski, Ph.D., Cyanotech’s president and CEO “Net sales were driven by a 4.3% increase in sales of our packaged products offset by a 15.5% decrease in sales of our bulk products. Sales of our BioAstin packaged products were up 10%, driven by our Costco expansion and higher demand from international customers. Packaged Hawaiian Spirulina Pacifica sales were down 7% due to lower volume resulting from a reduction in the level of discounts we offer as we transition to higher margin channels.”
Costs continue to drag on results
Cyanotech continues to struggle with high costs leading to losses. For the first three quarters of the company’s fiscal 2016, the company lost almost $1 million, or 17 cents per diluted share. That compared to a loss of $341,000, or six cents a share, for the same period a year earlier. For the trailing 12 months, or 2016 taken as a whole, the company lost $5 million on $33 million in sales. That compared to a loss of $511,000 on $32.2 million in sales in calendar 2014.
The increase in reported costs was attributed to higher issues connected to spirulina and astaxanthin production. The company did not break down exactly what led to those higher costs, other than to say the spirulina issue was a “non-inventoriable” cost. And it did say that lower astaxanthin production in the first two months of the year boosted costs per kilo. While Cyanotech declined to be more specific about its production issues, other open pond algae producers have had to interrupt production from time to time for unscheduled cleaning and sanitation of ponds.
Investment firm Meridian OHC Partners now owns almost 13% of the stock of Cyanotech, and has been pushing the company to speed up the process of bringing additional astaxanthin supply capacity online.