Fluctuating orders impact on Cyanotech's 2Q

By Staff Reporter

- Last updated on GMT

Related tags Marketing Revenue

Cyanotech slipped into the red in 2Q 2006 as a result of
fluctuating spirulina sales and ongoing issues with the Japanese
aquaculture market; meanwhile astaxanthin picked up some of the

For the three months ended September 30, the Hawaiian company reported an operating loss of $298,000, compared to profit of $173,000 for the prior year period. Sales fell 16 percent to $2.5 million.

Still, the Hawaiian company was able to be upbeat about the performance of its astaxantin ingredients for human nutritional supplements.

"Despite lower order levels from our two largest BioAstin customers, sales of BioAstin increased overall reflecting our new wholesale, business-to-business marketing focus,"​ said chairman, president and CEO Gerald Cysewski.

The ingredient is now contained in formulations by almost 40 manufacturers and Cyanotech has put considerable marketing effort into this area, including launching a new corporate website. Overall sales and marketing expenses were up slightly to $304,000 compared to $297,000 in 2Q 2005.

But the per unit cost of astaxanthin also went up as a result of a decision taken earlier in the year to reduce production in response to lower customer orders. Cost of product sales (for all products) for the quarter fell disproportionately from $1,944 to $1,936 - that is, 0.4 percent compared to the 16 percent sales decline.

Since completing renovations of its ponds last year, the company can switch relatively easily between astaxanthin and spirulina production depending on demand. But it seems there is a balancing act between the two, since order levels of Spirulina Pacifica went down in the most recent quarter.

As for NatuRose for the Sea Bream market in Japan, orders were also down, but studies are underway to investigate the product's ability to decrease mortality and increase food absorption by young fish. It is hoped that the results of these will give the ingredient added value, beyond pigment enhancement.

The present state of the Japanese aquaculture market, which suffered considerably as a result of inclement weather last year, has also led Cyanotech to start expanding into other areas such as tropical fish.

When the company reported its full fiscal 2005 results back in May, Cysewski said: "Our results may vary from quarter to quarter but our goal is to achieve annual revenue growth and increase profitability"​.

To achieve this, it will be playing catch-up in the second half of the year. The first six months of the year show an operating loss of $90,000, compared to profit of $334,000 last year.

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