Cyanotech posts strong earnings despite water, production problems

By Hank Schultz contact

- Last updated on GMT

Cyanotech posts strong earnings despite water, production problems

Related tags: Algae

Despite water supply and contamination problems, algae grower Cyanotech Corporation reported strong year end earnings, reversing a loss the company notched last year.

In its fiscal year 2018, which ended on March 31, Cyanotech reported net sales of $34.1 million, compared to $32 million in 2017. Net income moved to $1 million, or 18 cents per diluted share, compared to a loss of $1.2 million a year previously.

Cyanotech is one of the pioneers of large scale commercial spirulina and astaxanthin production. The company located its open air production facility on the Kona Coast of Hawaii, and has touted the pristine nature of the area in its marketing.

Water crisis

That environment has presented challenges too, however. The Kona area is located on the arid west coast of the Big Island.  Water problems have plagued the area recently.

There appears to be a combination of factors, one being outdated infrastructure, with several county-operated wells going out of service simultaneously. But there are also indications that development in the area is overtaxing the limited groundwater resources. State senators representing the island have called for the governor to declare a state of emergency​.

To grow algae in open ponds, it’s necessary to have ample water but also plenty of sunshine and little rainfall. To much rain upends the delicate chemical balance growers are trying to maintain.

To deal with the crisis, Cyanotech CEO Mawae Morton said the company has identified new groundwater sources that the company can tap into. And he said the company is also working to find ways to more efficiently use the water resources it already has. 

Spirulina production halted

Cyanotech has experienced production problems in the past, and the recent strong earnings report would seem to indicate the company is coming to grips with dealing with these while at the same time posting positive earnings.

“Our unique and intricate agricultural systems, in which we grow microalgae year-round in open ponds, require favorable weather conditions and proper control and balance of nutrients to achieve optimum production,” ​said company founder and current chief scientific officer Gerald R. Cysewski, PhD.

"Our fourth quarter was significantly impacted by a variety of unexpected events, which occurred in concert to have an adverse effect on our production of spirulina. These events included fresh water supply restriction which lasted several months, and an unusually cool, cloudy and rainy winter, which lead to the growth of small and difficult to harvest spirulina,” ​he said.

"In response to these production challenges, at the beginning of April 2018 we undertook a re-inoculation of our spirulina ponds which we believe will allow us to correct the nutrient levels and stabilize production. There was no spirulina production during the re-inoculation process, which was completed in mid-May 2018,”​ Cysewski added.

Cyanotech has in recent years moved from being an astaxanthin and spirulina supplier to marketing its own finished products under the Nutrex Hawaii brand name. The strategy seems to be bearing fruit. Morton said sales at Costco stores and via Amazon now make up 48% of the company’s revenues.

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