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27/11/2015 08:30
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HALFYR: SEA: SEA completes Omega-3 factory, FY2016 forecast on track
NZX / MEDIA RELEASE 27 November 2015
SeaDragon completes Omega-3 factory and is on track to meet FY2016 forecasts
Fish oil refiner also announces results for 1H 2016, posting a doubling in
sales and a strong lift in operating cash flow following Omega-2 supply chain
improvements
Highlights:
- SeaDragon board gives the green light to commercial production at its new
Nelson refinery
- Sales for the six months to 30 September 2015 more than double to $5.3
million
- First half EBITDA loss narrows to $147,000 from $320,000 reflecting
operational improvements
- Net loss after tax rises to $688,000 from $574,000 in the prior year
reflecting interest payments on the new factory,
- On track to meet forecast FY 2016 earnings before interest, tax
depreciation and amortisation (EBITDA) of positive $144,000
New Zealand's leading refiner and blender of high-quality fish oils SeaDragon
today announces its new Omega-3 fish oil refinery in Nelson is ready to
commence its first commercial production run.
Releasing its results for the six months to 30 September 2015, SeaDragon also
announces it is on track to meet the forecasts given during its $10 million
capital raising earlier this year.
In July 2015, SeaDragon forecast sales for the year to 31 March 2016 would
rise to $10.1 million from $6.3 million a year earlier. It also forecast
EBITDA of $144,000, reversing the prior year's EBITDA loss of $2.2 million.
SeaDragon Chairman Colin Groves said: "The board's formal sign-off today of
our new Omega-3 factory for commercial production is the culmination of many
years of hard work and caps off a year of significant progress for the
company.
"Our Omega-2 fish oil operations have delivered a significantly better
half-year result than the prior year and we are on track to achieve the
forecasts we made when we launched our capital raising programme.
"Meanwhile, the success of the capital raising, which we completed in
October, has put the company on a strong footing.
"It is a great tribute to the SeaDragon team that we are able to report such
progress. The commitment our people have shown delivering the new factory, a
company defining project, while building momentum in the Omega-2 operations
has been brilliant and it reinforces my confidence in the future of the
company," Mr Groves said.
Financial results
Six months ended 30 September 2015 2014
Sales 5.3m 2.6m
EBITDA (147k) (320k)
Operating profit (loss) before interest and tax (433k) (598k)
Net profit (loss) after tax (688k) (574k)
Operating cash (out) flow 758k (2.1m)
Sales for the first half of the 2016 financial year more than doubled to $5.3
million from $2.6 million in the prior year as the company benefitted from
strong improvements in the supply of Omega-2 raw materials.
Operating losses (losses before interest and tax) narrowed to $433,000 from
$598,000 despite a significant investment in people and capabilities ahead of
the commissioning of the new refinery. Half year EBITDA losses narrowed to
$147,000 from $320,000, while net loss after tax for the period rose to
$688,000 from $574,000 in the prior year. This result included $255,000 of
interest costs and contrasts with the prior period, when the company was debt
free.
Half-year operating cash flow rose to a positive $758,000, reversing a $2.1
million cash outflow in the prior year. SeaDragon achieved higher average
sale prices on finished Omega-2 products and benefited from higher factory
throughput and refining process improvements. Gross profit margins expanded
to 32.2% from 28.9% in the same period in the prior year.
SeaDragon is meanwhile in a strong financial position following the company's
$10 million capital raising, which was largely completed on 2 October 2015.
Net debt as at 30 September 2015 stood at $5.8 million up from the prior
year's positive net cash position of $2.3 million.
Omega-3 refinery
SeaDragon will commence the new refinery's first commercial production run in
the next few days. The factory will first refine retained stocks of
Alkoxyglycerol (AKG) to extract residual Omega-2 fish oils before moving to
Omega-3 production later next month [December].
The AKG, which is a by-product of the Omega-2 production process, was
produced at SeaDragon's Nayland Road, Stoke Omega-2 facilities. The AKG was
retained in anticipation of the company being able to take immediate
advantage of the superior refining capability offered by the new plant.
SeaDragon's transition to the production of high-quality sustainably-sourced
Omega-3 fish oils is gaining momentum. The company is making good progress in
securing supplies for the new plant and building customer interest in the
plant's finished products, said Interim Chief Executive Richard Alderton.
"The company is putting in place the necessary raw material supply agreements
and customer interest in our Omega-3 products is gaining momentum.
"Commission testing of the plant proceeded without significant issue. Testing
of the services section of the new refinery was completed in October, while
testing of the fish oil handling and transport facilities was completed in
the last fortnight," Mr Alderton said.
"The investment to date remains in line with our $9.2 million budget. In the
six months to 30 September 2015 $4.04 million was invested in plant, property
and equipment, of which the majority was spent on the new factory.
"We have also begun detailed planning for the addition of the fractionation
plant and the upgrade to our existing Omega-2 facility. We expect these
projects to gain momentum in the New Year," Mr Alderton said.
Capital raising and special meeting
In a strong endorsement of SeaDragon's strategy to transition to the
production of Omega-3 oils, the company raised well in excess of the $7.5
million it originally sought.
The capital raising programme has given the company sufficient funds to
complete the next stage of the Omega-3 refinery, upgrade the existing Omega-2
facility and provide the company with capital to accelerate its growth plans.
As part of the capital raising, SeaDragon secured a strategic investment from
natural health and beauty products company Comvita. The investment agreement
provides for Comvita and SeaDragon to work with the wider New Zealand fishing
industry to maximise the value from sustainably harvested local seafood
resources. This is an initiative that will benefit the New Zealand economy as
a whole.
Comvita's investment is subject to approval at a special shareholder meeting
[to be held next month]. Details of the resolutions and an independent
appraisal of the investment will be released to the market early next month.
SeaDragon notes that during October the voluntary liquidation of MerSea
Holdings Limited, SeaDragon's former 42.3% shareholder took place.
As disclosed in substantial security holder notices released to the NZX on
24th November 2016 MerSea Holdings shares in SeaDragon have been distributed
pro-rata to the underlying MerSea Holdings shareholders, SDMO Trustee Limited
and Merinova Holdings Limited. Those entities have confirmed to the SeaDragon
board that they intend to support the capital raising.
Contact:
Colin Groves Richard Inder
SeaDragon Chairman Merlin Consulting
Tel +64 21 928 003 Tel: +64 21 645 643
Non GAAP profit measures
SeaDragon's standard profit measure prepared under New Zealand GAAP is net
profit after tax. However, it has used the non-GAAP measure of EBITDA when
discussing financial performance in this document as directors and management
believe it provides useful information since it is used internally to
evaluate performance, establish operational goals and allocate resources.
GAAP to Non-GAAP reconciliation
Six months to September 30 2015 2014
Reported net profit (loss) after tax (NPAT) (688k) (574k)
Add back:
Taxation 0 0
Net interest costs (income) 255k (24k)
Depreciation 287k 278k
EBITDA (EBITDA loss) (147k) (320k)
About SeaDragon:
SeaDragon (NZX:SEA) is New Zealand's largest refiner and blender of
high-quality, internationally-certified concentrated fish oils and fractions,
including Omega-3 oils. Our oils are sourced from fish caught in the clean
and pure waters around New Zealand, in the Southern Ocean, and elsewhere. We
have more than 20 years' experience processing fish oils and we are
recognised for the quality and purity of our products. We supply health
supplement manufacturers around the world to meet the burgeoning demand for
pure, high-quality fish oils, which are scientifically proven to deliver
significant human health benefits such as lowering the risk of heart disease,
improving brain function and joint health. The majority of our supply is
exported. For more information visit: www.seadragon.co.nz
End CA:00274179 For:SEA Type:HALFYR Time:2015-11-27 08:30:13
