Neptune notches loss as it strives to maintain market share

By Hank Schultz

- Last updated on GMT

Related tags: Krill oil, Stock market

Neptune notches loss as it strives to maintain market share
Neptune Technologies and Bioressources, the pioneer in the krill oil sector, has reported a second quarter loss as it recovers from the destruction of its sole production facility.  The company will have some work to do to regain market share once it can restart its own production, said CFO Andre Godin.

Neptune suffered steep revenue declines as it struggled to maintain market share with generic krill oil purchased from other suppliers.  The company recorded $5 million in revenues in the nutraceutical side of the business for the three-month period ended August 31, 2013, compared to $7.9 million for the three-month period ended August 31, 2012. The adjusted EBITDA was negative ($4 million) for the current quarter, versus $504,000 for the corresponding prior-year quarter. The company recorded a net loss of $1.8 million in the quarter, which was actually less than it has lost in the past.  The figure for the comparable period in 2012 was a loss of $2.8 million.

Insurance payments, loan

The loss was offset by $5 million in insurance payments related to the explosion and fire that destroyed the Sherbrooke plant in November, 2012.  The company is reconstruction the plant, partly aided by a $12 million loan from the government of Quebec, according to Andre Godin, Neptune’s CFO.  It’s all part of Neptune’s previously-announced “action plan” to rebuild and diversify its production capacity.

Godin said Neptune will regain market share once it is able to restart production of its premium grade of krill oil—called NKO—at the Sherbrooke plant which is expected to come online in early 2014.  In the interim, the company recently announced a licensing and supply agreement with Norwegian company Rimfrost​, which will supply the company’s lower-spec EKO brand of krill oil.

“There are big players in the market and there is a large demand and we want to regain our position in the market as the No. 1 player and we will work on that over the next few years,”​ Godin said in a conference call with investors.

Regaining major customers

Among the major expense drivers were the company’s ongoing need to make margin concessions in order to maintain as much market share as possible, Godin said.  Still, some customers have been forced to go with other suppliers, he admitted.

Neptune is negotiating with a major customer, Jamieson Laboratories, to return to NKO for its krill oil supplements once it again becomes available, Godin said. In the present interregnum Jameison lists “super red krill oil” as an ingredient on its labels.  Jamieson is currently purchasing that krill oil from another source, Godin said.

One part of the company’s strategy will remain the same, Godin said, and that is the staunch defense fo the company’s IP position.  The company is locked in patent and trade disputes with Norway-based Aker BioMarine and Enzymotec of Israel, and no settlement of those cases is yet in view, Godin said.  The agreement with Rimfrost included that company’s portion of the patent disputes.

 “We remain focused on the solid execution of our action plan,​” Godin said. “At the same time we will remain steadfast in the defense of our IP as it is a strong and valuable asset and part of our shareholder value.”

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