Production problems in the 4th quarter of 2014 raised expenses in the first-quarter of 2015, but Astaxanthin production in that first quarter of 2015 rose 103% above the 4th quarter, moreover, production improved as each month passed. It was common in 2014 for the company to say current production problems could impact future quarters, but the first-quarter 2015 report has no such warning. This is not to say that production problems won't be a factor for all we know, but if so, they likely won't be quite as bad, or play nearly as large a roll as they did in 2014.
I don't have the same unfounded faith or certainty in it that you do, if that is what you mean.
Among other things, last year's second quarter's results were negatively impacted by their West Coast test market promotion, the development of a 30-minute infomercial, "poor yields from a major extraction supplier" (who had switched from batch to continuous processing, but then had to switch back again), and "environmental factors." That doesn't mean that this year's results for the second quarter couldn't be equally unfavorable for other reasons, just that the bar is set pretty low this time.
Higher retail inventory can also come about in a quarter when a company is building up supplies to support a large promotion coming in the subsequent quarter. Inventory accumulation for just that kind of reason happens quite frequently in the retail nutraceutical business. Other build-ups can happen when a supplier gets a contract with a new retail chain, and must produce additional bottles to supply its new customer, or when an existing customer, like Costco, starts selling your product in more of its stores, as is happening now.
So, in the retail nutraceutical business, carrying a higher absolute level of inventory than in recent past years, especially for a company who's net sales have jumped 72% over the last three years, doesn't necessarily mean a slowing of demand, on the contrary. [I note that at the end of 2011, inventory was 21.5% of net sales of $16,827,000, while at the end of fiscal 2014, it was 16.8% of net sales of $28,905,000.]
I don't think that Cyanotech has much bulk inventory on hand right now, given its past production problems in that area, but as the company moves ever more massively into the retail side of the business, expanding its sales and demand in that space, we can expect retail inventory levels to rise to keep up with the reserve requirements, because in retail one never knows when there might be a sudden spike in demand, caused by a news item or a TV program, as happened back in 2012, and then you had better have enough product available to stock the shelves. Nothing can turn a retailer off to a supplier quicker, as well as open up highly competitive shelf-space to possible rivals easier, than not having the bottles of product available when the customers come in asking for them. The company was quite fortunate, later saying, "We were very lucky" in 2012, when just by accident it happened to have a large amount of inventory on hand, so that when sales nearly doubled overnight and stayed there, the company could meet all the demand.
Since the patent infringement case hinges in part on whether Cyanotech willfully infringed on Valensa's patent, which is what Valensa is asserting, the legal opinion of Attorney-at-Law Robert A. Rowan in 2011 to the effect that Cyanotech had not infringed on Valensa's patent is perhaps crucial. Willfulness has to do with the accused infringer's state of mind (Cyanotech's), but if they were advised that they were not infringing on the patent back in 2011, then the infringement if it occurred would probably not be deemed willful. Rowan's testimony is part of Cyanotech's defense in the lawsuit, which was first filed against them on June 29, 2012.
Lots of amnesia about Director Davis' 50,000 share insider purchase on February, 2014 at $5.34. Exactly the same thing happened after his first large insider purchase. That is, the stock declined for months afterwards, but when the good news finally hit, and the stock soared. He seems to be anticipating a good 2015 at some point.
Obviously the company is forgoing earnings by investing in growth, brand-building, and dominant market share for its retail products. This is the thing to do in the early years of a great expansion. It's what Amazon has been doing since 1995, an extreme example, although after 19 years, it might consider slowing down. I was at a Vitamin Shoppe the other day, and the clerk said that Hawaiian Astaxanthin was selling about one bottle every other day, whereas other astaxanthin companies COMBINED (almost a whole shelf of their bottles) were only selling one bottle about once a WEEK.
This SA article seems highly questionable. For example, it says that "Aemetis now has over $90 million in short-term debts coming due," but doesn't define what it means by "short-term." The AMTX quarterly report says that it has $79 million in total debt, $77 million net of discounts. Furthermore, it says that scheduled payments are $12,148 million in 2015, and $63,089 million in 2016.
I can't remember exactly but it has something to do with the fact that last month, Jupiter, giver of gifts and good luck, moved into Leo, a bright, happy, gregarious sign.
I understand that there weren't any problems at Kona because of the storm yesterday. The other storm is predicted to pass to the north of the big island. The forecasts for this week are already back to normal. By the way, it normally rains more in the summer at Kona than it does in the winter.
We are likely to see earnings reported Monday or Tuesday, unless storm preparations have postponed that. Year-over-year comparisons could possibly turn out OK (but perhaps not, nonetheless) because bulk sales declined 20% last year. I've been buying all through this period for the long term. For reasons that the company explained in its 10-Q last year, stockholders should adopt a long-term outlook because, as is typical of companies in this business, and due to many factors, there can be inconsistencies in results from quarter to quarter; thus predictability for any one quarter is quite iffy.
Perhaps the Indian disappointment may be a somewhat overdone. The company said that it had made one shipment of refined biodiesel to the EU "already," so there should have been no expectation of more than one in that first quarter, since they specifically said one. Also, the company already said that it is going to concentrate on growing the Indian business in the remaining quarters of this fiscal year, so we'll see how that goes in those quarters. It was just too early to expect more from India at this point, after all, they just announced the refined biodiesel capability last month. Also, the results in different quarters naturally vary greatly depending on the timing of contracts, and so forth.
His bio says, "Meiko is a CPA and Equity Analyst based in Manila with diverse experience in various industries and sectors. He is an ardent follower of the value investing principles of Warren Buffett and Ben Graham, seeking small companies with high growth potential but which have not been discovered by the market."
Don't know much about annual meetings, but Cyanotech has been in the Hawaii Islands Costco stores right along. I'd go in a heartbeat if I lived there.
At "emerging growth" dote calm, there was an article by Meiko Acebo today, with this title: "Cyanotech: A High Biotech Growth Company Discounted by the Market." Among other things, he says that the market has "clearly discounted that it grew its business from $17 million to $28 over the last few years."
Cyanotech seems to have a nice cozy relationship with its immediate neighbor, Blue Ocean Mariculture LLC, which is seeking approval to expand its fish-farming operations off the Kona Coast from a maximum growing volume of 24,000 cubic meters to 64,000 cubic meters:
"The farm has been in operation since 2005, and the company has demonstrated the ability to raise a great fish while maintaining the pristine environment," said Gerald Cysewski [July 09], Chief Science Officer for Cyanotech, which has a facility just onshore from Blue Ocean at the Natural Energy Laboratory of Hawaii Authority. "Based on Blue Ocean's assessment of their projected production and the environment surrounding their farm site, it seems that the quality of waters off of Kona will be maintained, even after increasing their production."