Cyanotech expands astaxanthin market share, moves toward fully integrated production

By Hank Schultz

- Last updated on GMT

Cyanotech expands astaxanthin market share, moves toward fully integrated production

Related tags Gross profit Generally accepted accounting principles

Cyanotech Corporation has broadened distribution of its finished goods brand Nutrex, helping the company achieve record sales.  Streamlined operations have helped the company approach gross profit margins of 50% and in the red-hot astaxanthin sector the company said it has now captured more than half the market.

Cyanotech manufactures a line of nutrition and health finished products based on algae harvested at its open pond growing facility on Hawaii’s Big Island. In its third quarter earnings statement release recently, the company announced a new sales record, recording $8.9 million in revenue, an increase of 19% over the same period a year earlier. Of that revenue figure, $4.4 million was recorded as gross profit, a margin of 49%.

Cyanotech said sales were up across its entire brand portfolio.  The Nutrex Hawaii brand, sold within the state, was up 35%, while sales of the Nutrex Mainland brand soared 65%.  Online sales were up 25% and international sales rose 27%.

Cyanotech continues to expand the mainland distribution footprint of its Nutrex brand as it completes its transition into a vertically integrated finished goods manufacturer.  The company was already being distributed though 15 Costco warehouses in the San Diego area.  During the quarter an additional 45 Costco locations were added in Los Angeles and in Arizona, Colorado, New Mexico and Utah.

Astaxanthin penetration

Cyanotech red-astaxanthin
Cyanotech obtains its natural astaxanthin from Haematococcus pluvialis microalgae, which it grows in open ponds

One of Cyanotech’s key products is BioAstin-brand astaxanthin. Astaxanthin demand has soared after the ingredient was touted by Dr Joseph Mercola on the Dr Oz Show. Indeed, the ingredient has been one of the most enduring examples of the so-called Dr Oz Effect;  demand spiked by as much as tenfold after the segment and continues to be very strong.  Supplying that demand caused strains within the sector and gave rise to a long-running legal dispute with Florida-based Valensa International​, which alleged that Cyanotech had reneged on an arrangement to supply it with raw material for astaxanthin extraction. That dispute was settled in November of last year and now BioAstin can go to market without legal clouds hovering over the supply end of the picture. Cyanotech claims that in the past quarter the brand achieved a 57% market share, an increase of 5%.

The improving astaxanthin picture has led Cyanotech toward full integration of every aspect of BioAstin production. In November the company took delivery of a supercritical CO2 unit that was installed at its facility in Kona for the purpose of doing in-house astaxanthin extraction. The company said it expects the unit to be in full production by the first quarter of its fiscal year 2016.

Earnings details

For the third quarter of fiscal 2015 compared to the third quarter of fiscal 2014, net sales were $8.9 million compared to $7.4 million an increase of 19%. Gross profit was $4.4 million, with gross profit margin of 49%, compared to gross profit of $3.1 million and gross profit margin of 42%. Net income was $304,000 or $0.05 per diluted share, compared to net income of $36,000 or $0.01 per diluted share.

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