Cyanotech, which started as a supplier of algae-based ingredients, continues its transformation into more of a consumer products company. Total net sales grew 6% in the first quarter of fiscal 2014, but Nutrex, the consumer products division, grew by 44% and now accounts for more than half of the company’s overall sales.
In first quarter, which ended June 30, 2013, net sales were $6.9 million compared to $6.5 million in the same period a year earlier, an increase of 6%. Gross profit was $2.9 million, with gross profit margin of 41.3%, compared to gross profit of $2.6 million and gross profit margin of 39.6%. Net income was $30,000 or $0.01 per diluted share, compared to net income of $493,000 or $0.08 per diluted share.
“First quarter results keep us on track to achieve our full year objectives,” said Brent Bailey, Cyanotech CEO.
Bailey said Nutrex sales now account for 55% of overall sales. The division's sales grew 64% in mainland markets, 34% in Hawaii and 45% in online sales. In addition, the division’s international sales grew by 22%, he said.
Dr Oz glow continues
Cyanotech, based on Hawaii’s Kona coast, produces spirulina and astaxanthin. The company continues to benefit from the astaxanthin boost provided by a Dr Oz Show segment on the ingredient. Prior to that TV spot about two years ago, Cyanotech was a $17 million company. Shortly after the spot the company had grown to $24 million, Bailey said.
“Retail sales growth of our astaxanthin products in the U.S. natural products channel was +84% with market share of 52.8% (+21.8 pts.),” Bailey said.
“Our spirulina retail dollar growth for the quarter was +39% with a market share of 48.8% (+7.3 pts.). Continuing the focus on building our consumer packaged business, we recently began a test of our Hawaii marketing plan in a West Coast market. Initial results have been very encouraging, with growth more than 40% greater than the remainder of the country after the first two months.
“Operating income for the first quarter met our expectations and was impacted by the cost of the West Coast test market, as well as the costs associated with the people and infrastructure investments that were begun in fiscal 2013 and which are driving the strong topline growth we are seeing in our consumer business,” Bailey said.
Increased legal fees continued to drag on overall results. Cyanotech has been locked in a legal battle with Valensa International and its parent company, Parry Nutraceuticals, over astaxanthin production and intellectual property.
Trailing 12 Months
For the trailing 12 months ended June 30, 2013 compared to the trailing 12 months ended June 30, 2012, Cyanotech reported net sales of $28 million compared to $25.3 million, an increase of 11.1%. Gross profit was $11.2 million with gross profit margin of 40.2%, compared to gross profit of $10.2 million and gross profit margin of 40.7%. Net income was $3.7 million or $0.67 per diluted share, compared to net income of $3.6 million or $0.65 per diluted share.