Cyanotech tries to diversify in face of falling sales
Cyanotech Corp. said yesterday that demand for its products continues to decline and the company is broadening its search for other uses, including the dog food market, to try to revive slumping sales.
The Big Island company, which produces human nutritional supplements and animal feed from microalgae, also said it is beginning a sales and marketing media campaign this quarter for one of its three main products, nutritional supplement BioAstin Natural Astaxanthin.
Cyanotech posted a fiscal third-quarter loss of $294,000, or 1 cent a share, in the period ended Dec. 31 as sales plunged 27 percent to $2.3 million. A year earlier, Cyanotech had net income of $326,000, or 2 cents a share, on revenue of $3.2 million.
Gerald Cysewski, chairman, president and chief executive of Cyanotech, blamed the shortfall on decreased order levels for Spirulina products and continued reduced demand for NatuRose in Japan aquaculture.
Spirulina is a general health supplement while NatuRose, an animal feed derived from natural astaxanthin, allows farmers to grow sea bream -- called tai in Japan -- with a pink flesh pigmentation.
Cysewski said at the end of the fiscal second quarter that the company was looking at marketing NatuRose as a way of giving tropical fish more vivid-colored skin. He said yesterday the company wants to diversify even more and that Cyanotech is looking into the feed market for pets, particularly dogs, where the health benefits of natural astaxanthin may warrant inclusion in premium products.
In addition, he said Cyanotech is conducting feeding trials for Spanish mackerel, another popular fish in Japan, and is investigating niche markets in the large salmon aquaculture arena where feed manufacturers and growers may adopt NatuRose rather than synthetic astaxanthin.
Cysewski said the company's Spirulina market, which is growing 5 percent to 7 percent a year, fluctuates with order levels and that orders should increase as customer inventories are consumed.
"NatuRose presents a more challenging prospect and we now know as a result of a fact-finding trip to Japan in November that the previously significant market for sea bream or tai aquaculture feed may remain lower for some time," Cysewski said. "This is due to reduced sales and pricing of sea bream, causing growers to use less natural astaxanthin in the feed."
Cysewski said slower sales of Spirulina and NatuRose have been somewhat offset by sales of BioAstin as well as sales of private-label sales of finished consumer products.
BioAstin has been shown in some company studies to be more than 500 times stronger than Vitamin E and is used as an anti-inflammatory. Clinical trials also have shown it to be effective in reducing symptoms of carpal tunnel syndrome, rheumatoid arthritis and other ailments.
Cysewski also visited China and Hong Kong in November and said yesterday that distribution agreements signed with a Chinese-American joint venture are expected to generate orders for BioAstin and NatuRose in 2006. Those products, he said, are being registered with the Chinese government for sale in China.
Cyanotech, which has losses in its last two quarters and three of its last four, said its cash and cash equivalents at the end of the December were just under $3 million and its working capital was $5.2 million.