Martek releases funds for expansion

Related tags Omega-3 fatty acid Docosahexaenoic acid Fatty acid

Martek Biosciences has been preparing for future expansion of its
nutritional oil production facilities by raising $81.4 million in
its common stock sell-off.

Last year the company​ announced that production at its Kingstree facility would increase throughout 2005 but director of finance Kevin Connelly told​ that contracts with several new customers mean the company needs to have capital to hand so it can continue to increase capacity as and when required.

"We have the advantage of time to scale up production and increase supply as demand goes up,"​ he said.

The current growth in the nutritional oils market is engendered by food companies adding omega-3 fatty acid docosahexaenoic acid (DHA) to more of their products, such as yogurts, cereals, cheese and nutritional beverages.

Fifty years ago Americans ate more of the foods which naturally contain DHA and arachidonic acid (ARA), such as oily fish and organ meat, but they are a lot less common in the modern diet. There is therefore a growing need to provide an alternative source of these oils, to ward off future health problems.

Media reports have helped make consumers more aware of the need to include the right kinds of fats in the diet and the message is also reinforced by the FDA, which is tightening legislation that will make it compulsory for potentially cholesterol-raising trans-fatty acids to be listed on nutritional labels by 2006.

Infant forumlas are also an important part of the picture, with 90 percent of Martek's nutritional product sales in 4Q 2004 generated from sales of DHA and ARA to four of its infant formula licensees: Mead Johnson, Wyeth, Abbott Laboratories and Nestle.

In just three years Martek has gone from 0 to 75 percent share of the infant formula market and aims to be in the upper-90s by the end of 2005, said Connelly.

The company's ambitious revenue guidance for 2005 is between $290 and $310 million - up from revenue of $184 million in 2004.

Innovations in infant formulation are expected to help Martek on its way to achieving this goal - in particular the development of a next-stage formula for toddlers containing nutrients including DHA that are not present in cow's milk in the recommended quantities.

In spite of the positive results for 2004​, some of Martek's newly released wealth will be kept back for "working capital and general corporate purposes".

"Our cash from operations was positive in 2004 and will be positive again this year,"​ said Connelly. "But as your revenues grow, so do your inventory and your receivables. We are making sure that all our bases are covered."

Related topics Omega-3s & Nutritional oils

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