Infant formula omega-3 fortification increases, says Martek

By Lorraine Heller

- Last updated on GMT

Related tags Infant formula Docosahexaenoic acid

Omega-3 supplier Martek Biosciences has reported "record"
revenues and increased sales for its first quarter of 2008, boosted
by strong international demand for its ingredient in infant

Revenues for the quarter ended January 31 2008 were $82.9m, up 18 percent from $70.3m in the previous year.

Net income was $8.7m, compared to $2.8m in 2007.

"The results for the first quarter show a solid start to fiscal 2008 and reflect our continued execution of our business plan," said chief executive officer Steve Dubin.

The company said that product sales in the quarter increased 18 percent to $78.6m, reflecting continued strong demand from its US and international infant formula customers, as well as the launch of new products containing its flagship life'sDHA.

DHA, ARA Martek's branded DHA (docosahexaenoic acid), life'sDHA, is made from microalgae under tightly controlled manufacturing conditions.

Martek differentiates life'sDHA as being free from the contaminants that may be present in fish oils.

Both DHA and ARA (arachidonic acid) are found in human breast milk and are important to infant development.

The company's vegetarian source of omega-3 DHA is used in foods, beverages, infant formula and supplements, while omega-6 ARA is used only for infant formula.

Sales by market

The infant formula market continues to drive the majority of Martek's ingredient sales, accounting for $70.1m, or 89 percent of total sales.

However, the company said it also benefited in the first quarter from its increased penetration into other nutritional markets.

Sales in the pregnancy and nursing, nutritional supplements and animal feed markets reached $5.3m in the quarter, a 33 percent increase from the previous year.

Sales in the overall food and beverage market remained comparatively small at $2.1m, but were nevertheless a massive 191 percent increase on the previous year.

According to Dubin, several new customers launched products with life'sDHA in the quarter, and an existing customer included the firm's nutritional oils in an expanded number of their products.

"These new launches, customer launches to date in the second quarter and the success of a number of products that have been introduced by some of our largest customers should bode well for growth in the non-infant formula categories in coming quarters," he said in a statement.

Outlook For the second quarter of fiscal 2008, Martek said it expects total revenues to be between $83m and $88m, reflecting a significant increase from the first quarter in sales to infant formula customers.

The firm said that net income is projected to be between $8m and $8.7m. "Our high-end sales guidance for the second quarter is based on what we currently believe to be our customers' production schedules and related timing issues.

Should those levels be achieved, it would likely result in lower infant formula sales in the third quarter of fiscal 2008," said Martek.

Numico agreement Last month, Martek announced it had signed a major licensing agreement with Numico, effective as of the start of this year.

The firm has already been supplying the Danone subsidiary with DHA and ARA for infant formula products since 1994.

Martek said the move will simply extend the companies' existing supply agreement.

Under the new agreement, Martek will be Numico's exclusive supplier for all of its ARA and microbially-derived DHA for infant formula products.

Numico may continue to use alternative non-microbial DHA sources.

The agreement provides for a 15-year term, with Numico having the right to terminate the arrangement as of January 2012, said Martek in a statement.

"Along with other supply agreements entered into over the last two years, Martek now has sole source commitments through at least 2011 with customers that comprise more than 70 percent of current infant formula revenues," said the company yesterday.

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