Cyanotech returns
to profit
It took 6 1/2 years, but Cyanotech Corp. finally is back in the black.
The Kona-based company, which makes human nutritional and animal feed products from microalgae, ended a drought of 22 straight losing quarters with a fiscal 2004 third-quarter profit of $109,000.
Cyanotech, which has been saying for the last year it was on the verge of profitability, came close in its fiscal second quarter when it lost $10,000. The latest earnings, covering the three months that ended Dec. 31, were achieved through a 22 percent increase in sales from a year ago and a 29 percent gain in gross profit margin. Gross profit margin is the percentage of sales left after subtracting production costs.
Cyanotech's last profitable quarter was the three months that ended June 30, 1997, when it earned $1.3 million.
"We are extremely pleased by our return to profitability this quarter," said Gerald Cysewski, chairman, president and chief executive officer. "Our focus on all-around improvement in our operations has been validated by demonstrating sequential growth in sales, improved gross profits margins, increasing cash balances and profitability."
Cyanotech's net income, which came to 1 cent a share, was a turnaround from a loss of $180,000, or 1 cent a share, a year ago.
Sales amounted to $3 million, compared with $2.5 million in the fiscal 2003 third quarter.
Cyanotech's fortunes soured in June 1997 when its largest customer was forced out of business.
"The customer, who was based in Hong Kong, was selling (nutritional supplement Spirulina) through a multilevel organization in mainland China and practically overnight the Chinese government outlawed multilevel marketing and we lost that one customer," Cysewski said. "It was about 30 percent of our business and it was a high-margin business, because it was finished consumer products."
Cysewski described Cyanotech's misfortune as a one-two punch because at the time the company was starting to get a lot of competition in the Spirulina market from production in mainland China."It certainly has been a difficult time period, but within the last year we have done everything we can to manage costs and increase revenues," he said.
In its 1997 fiscal year, which ended March 31 of that year, Cyanotech had record net income of $4.2 million and record sales of $11.4 million. The next year it lost $300,000 and sales plunged more than 33 percent to $7.6 million as the China syndrome began taking hold.
Cyanotech said in its most recent earnings report that its improved gross profit margin resulted from increased bulk sales of higher-margin natural astaxanthin products, NatuRose and BioAstin.
Cysewski said a little more than half of the company's sales are to 30 foreign countries, including Japan, Malaysia, the Netherlands, France and Italy. He said 85 percent of the company's sales are bulk raw material business-to-business sales.
NatuRose gives fish farmers the ability to grow salmon and other fish using the natural pinkish substance to color their flesh, rather than synthetic pigmentation that could create health concerns for people who eat fish.
BioAstin contains natural astaxanthin, an antioxidant that has been shown to have health benefits.
"Spirulina sales over the last couple quarters have been stable," Cysewski said. The growth in revenues came from NatuRose and BioAstin.
Cyanotech said its cash position entering the final quarter of this fiscal year was stronger than a year ago.
It said it had working capital of $3.1 million and a cash-and-cash-equivalent balance of $1.6 million compared with $2.4 million and $579,000, respectively, a year ago.