Cyanotech claims to be getting handle on production issues

By Hank Schultz

- Last updated on GMT

Cyanotech claims to be getting handle on production issues

Related tags Generally accepted accounting principles

Algae products producer Cyanotech has made progress in nearing reliable profitability by focusing on cost cutting and more consistent cultivation.

Cyanotech reported first quarter fiscal 2018 results recently in which the company showed a rise in overall sales, which reached $8.8 million, up from $7.3 million in the same period a year previously. Operating income in the quarter was $620,000, which compared to a loss of almost identical size in the same period in fiscal 2017. The company reported net income of $501,000, compared to a loss of $691,000 year-over-year.

“We are seeing positive results from the many changes we put in place during the last fiscal year. Our results this quarter reflected our continuing strategic focus on marketing our Nutrex Hawaii branded products at retail, as well as improved production practices and reduction in our cost structure,​ said founder and CEO Gerry Cysewski, PhD.

The company said sales of the packaged astaxanthin rose 51% in the quarter, primarily as a result of greater sales in Costco stores. Spirulina products also did well on Amazon during the quarter, Cysewski said.

Getting a handle on production problems

Cyanotech, which was founded in the early 1980s,  was a pioneer of astaxanthin production at its open pond facility along the Kona Coast of Hawaii’s Big Island.  The company grows Haematococcus pluvialis​—an astaxanthin-producing organism—there, as well as spirulina. The company has struggled for time to time with production interruptions caused by contamination or weather-related issues at the facility. Production of spirulina, for example, did not meet expectations in the most recent quarter meaning the company was unable to keep up with demand.  But Cysewski said the company finally seems to be getting a handle on these issues, especially as it relates to astaxanthin,

“Our gross profit margin increased by 2.4 percentage points compared to the same period last year due to improved customer and product mix and lower astaxanthin costs from prior quarters production. Additionally, astaxanthin production for the quarter increased by over 20% compared to the same period last year as a result of new cultivation techniques and farm management practices that have been integrated over the last two years. We are pleased to see the results of these changes; specifically, stabilized open pond cultivation and improved consistency of our production over recent quarters,​he said.

 And the growth of annual sales has been affected by the company’s shift in strategic direction, which saw a move away from being a straight ingredient supplier toward manufacturing its own finished goods.  Even with those major bumps in the road, Cyanotech has shown reliable, if modest, sales growth.  Sales have risen about 2.4% per quarter on a long average over the past decade.

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