Omega Protein Corporation is seeing increased benefits from its acquisiton of whey producer Wisconsin Specialty Protein. Revenues from the new division helped the company achieve record profits as the company continues to execute on its plan of moving away from being so heavily dependent on fishing and marine ingredients, said CEO Bret Scholtes.
In a statement detailing the company’s fourth quarter 2013 earnings, Scholtes said, "We are pleased with the progress made on our strategic objectives in 2013, as we continued to build a more balanced nutrition company focused on value-added products. Our strong financial performance during the year included increased revenues, as well as record gross profit and gross margin. In the quarter, our financial results benefited from record human nutrition revenue.”
Omega Protein is the largest refiner of fish oil for human nutrition based in the United States. It sources the raw material for its OmegaActive fish oil omega 3 ingredient from menhaden caught both in and near Cheasapeake Bay and in the Gulf of Mexico. Variations in those stocks has impacted Omega Protein’s business in the past.
Strategy continues to unfold
The company has pursued a strategy of moving away from relying solely on selling fish oil and fish meal into the animal nutriiton markets. The company’s first move to diversify in this area was to purchase nutraceutical ingredient supplier Cyvex Nutrition in 2010. Then early last year the company acquired whey producer Wisconsin Specialty Protein.
Sales of animal nutrition products—fish meal and fish oil—have made up the lion’s share of the business and one that has been generally profitable for the company over the years. It’s a segment in which the company as at the mercy of external factors as far as price and supply is concerned, and that has been part of the reason the company has increasingly turned to the human nutrition segment. While animal nutrition still makes up the lion’s share of the company’s revenues, the human nutrition segment is growing fast, posting a record quarter for the company.
“We established another quarterly revenue record of $9.4 million. This 88% increase from the same period a year ago, reflects contributions from our first quarter dairy protein acquisition as well as higher sales of omega-3 fish oils and other nutraceuticals. More recently, human nutrition sales increased 20% from the third quarter of 2013, as our OmegaActiv fish oil had its first $1 million sales quarter and sales of other nutraceuticals also increased,” said Andrew Johansen, Omega Protein’s CFO, in an earnings call with analysts.
The Company's revenues increased 4% from $63.1 million in the same period last year to $66.0 million. This increase was due to a $4.4 million increase in human nutrition revenue, partially offset by a $1.6 million decrease in animal nutrition revenues. The increase in human nutrition revenues was primarily due to sales of protein products from Wisconsin Specialty Protein ("WSP"), a business acquired by the Company in the first quarter of 2013. The decrease in animal nutrition revenues was primarily due to a 33% decrease in the Company's fish meal sales volumes, partially offset by a 109% increase in fish oil sales volumes and increased sales prices of 19% and 15% for the Company's fish meal and fish oil, respectively. The composition of revenue by nutritional product line for the fourth quarter of 2013 was 59% fish meal, 26% fish oil, 14% specialty nutraceutical and food ingredients and products, and 1% fish solubles and other. For the year, Omega Protein posted $244.3 million in revenues.