Martek profits hold as customers downsize omega-3 stocks
For the three-month period ended July 31, Martek maintained its net income at $8.8m compared to $9.3m the year previous – a four per cent decline compared to the 12 per cent sales drop from $88.4m to $77.8m.
But the company’s main market, infant formula, saw sales increase 41 per cent.
Customers reducing the size of their inventories added to the sales decline, although Martek spokesperson, Cassie France-Kelly, said the recessionary bounce back should reverse that trend.
“In the past companies may have held six months inventory whereas now they may cut that to three and so there has been a knock-on effect on sales from that but we expect that to correct itself as the recession eases,” she told NutraIngredients-USA.com.
Martek’s bottom line also benefitted from decreased ARA (arachidonic acid) costs after a renegotiation of its contract with longtime supplier, DSM.
Incremental DHA productivity gains in processes, omega-3 strains and yields, had helped to preserve margins, France-Kelly said.
Contract manufacturing sales decreased as Martek drew resources from the division to concentrate on its core activities.
“There is definitely less of a focus on contract manufacturing,” she said.
Chief executive officer, Steve Dubin, emphasized the effect of stock reductions by some customers but was buoyant looking forward.
“Despite some continuing effects of this customer de-stocking, I expect a strong fourth quarter for both revenues and earnings,” he said. “Looking forward to 2010, the de-stocking issue should be behind us and our growing non-infant formula business coupled with an expected resumption in growth in our infant formula business should lay a solid foundation for 2010."