Omega-3 firm SeaDragon warns of $4.5m annual loss after fish oil supply struggles
The New Zealand firm, which last year reported an annual loss of $400,000 and recently secured a further $11m of investment through a shares issue, says that the transition is “now substantially complete”, with 95% of legacy product inventory now sold.
The company also told investors it’s growth plans had been hit by problems securing crude tuna oil.
“To enable future sales, a key focus for the last year has been establishing on-going supply arrangements for crude tuna oil (CTO) for processing through our new refinery. It has taken until the final quarter of this financial year to receive ongoing supply of CTO in commercially relevant quantities,” said SeaDragon.
“This has taken longer than originally expected and was also impacted by the seasonal nature of CTO supply, whereby we have had to wait until key supply partners have exited alternative customer contracts.”
The company added it had now signed a supply agreement for 500,000 to 750,000kg of CTO from the Indian Ocean over the next 12 months, along with 500,000 to 1,000,000kg from the South Pacific, South East Asia and South America.
“This gives us a good mix of CTO going forward for refining for key existing and potential customers in Europe, South East Asia, Japan, Australia and New Zealand,” it added.
Investors were also advised the company does not expect to fully utilise refinery capacity in the next financial year.
“Several of our existing and potential customers are currently evaluating samples of refined tuna oil. Although no large volume sales contracts have been entered into yet we believe our samples meet their specifications and are hopeful we will soon receive orders. When we have these orders confirmed we will have sufficient volume throughput whereby overhead allocation across our production facility is covered leading to a more profitable result for our shareholders,” it said.
The company officially opened its new refinery in Nelson last year, claiming it has potential to generate NZ$50m annual sales.
Chairman Colin Groves said its target customers were varied, ranging from large multinational Omega-3 oil refiners, through to fortified food and beverage manufacturers, as well as branded Omega-3 supplement suppliers.
“We are well supported by our shareholders, who recently advanced the company $11m through a rights issue. This has allowed us to significantly reduce debt and build working capital, enabling us to quickly respond to customer demand,” he said.