Omega Protein's Q3 revenues plunge on low oil yield from menhaden harvest
Omega Protein finds itself in a tight spot brought on by cash outlays for investment in the human nutrition sector and volatility in the quality of its menhaden harvest. The company’s cash reserves were mostly depleted by the acquisition of Bioriginal Food & Science Corp. during the quarter, which CEO Brett Scholtes said is a key part of the company’s long term plans for its human nutrition segment.
“We remain focused on executing our strategic initiatives to drive long-term growth. These initiatives include leveraging our recently strengthened human nutrition product portfolio with the acquisition of Bioriginal Food & Science Corp., as we further diversify and balance our business to take advantage of global health and wellness trends," he said.
Human nutrition revenues increased by $7.9 million in the quarter, Scholtes said. Offsetting that were investments made in the company’s Wisconsin Specialty Protein production facility in Reedsburg, WI. Coupled with the outlay for Bioriginal and lower sales in the company’s other nutrition ingredients that were part of the Cyvex Nutrition acquisition in 2010, the division has yet to show a profit, but that day is on the horizon, Scholtes said.
“In 2015, we will focus our efforts on growing our current business while completing the integration of Bioriginal and leveraging a single platform. We expect financial performance to improve as we realize the full impact of our Bioriginal acquisition, increase capacity utilization of our Chicago area oil concentration facility, work through the startup phase at our Wisconsin diary protein facility and further integrate our entire human nutrition platform,” Scholtes said in an earnings call with analysts that was transcripted by the site seekingalpha.com.
Earnings details
Scholtes said animal nutrition sales fell primarily because of the lower oil yield from the fish harvested by the company. The health of the menhaden schools varies from year to year, and this year oil yields were slightly off the five year average and were significantly lower than in the same period for 2013.
Revenues for the quarter were $70.8 million, compared to $87.6 million for the same period a year previously. Earnings per share were $0.03, or $0.08 excluding plant closure charges and loss on disposal of assets for the quarter, compared to $0.66 in the same period a year ago.
Scholtes said the volatility in the menhaden harvest, and the immediate and potentially drastic effect on the company’s bottom line, has driven Omega Protein plan to become a diversified animal and human nutrition company.
“For 101 years, we have produced specialty proteins and oils and those came from menhaden. That's a great business but a difficult business to grow and it's financially volatile. So the way that you address that is one path which was to give more value for the menhaden. And we did two acquisitions to get the oil ready for the supplement industry and then we looked for opportunities to continue to do what we do well, which is produce specialty oils and specialty proteins but with other products,” he said.
