SeaDragon sinks into the red as rising factory cost offsets surge in sales

SeaDragon [NZX: SEA], which manufactures fish oil for health supplements, sank into the red in the latest financial year as ballooning costs for its Omega-3 fish oil refinery offset sales that more than doubled.

The Nelson-based company reported a loss of $2.8 million, or 0.19c a share, in the 12 months ended March 31, from a profit of $431,000 of 0.04cps, a year earlier, it said in a statement. The company had already signalled it would likely be in the red this year, reflecting a $3.2 million increase in the cost of building the refinery. SeaDragon also wrote down the value of its Squalene by-product Alkoxyglycerol by $905,000, which it's retaining to try and squeeze residual fish oil in 2016.

Sales soared to $6.3 million from $3.1 million a year earlier and SeaDragon said it had secured more Squalene raw material supplies, which should ensure revenue in 2016 will improve.

"SeaDragon is on the verge of realising its long-held ambition to diversify into Omega 3 fish oil markets and is looking to an improved financial performance for the 2016 financial year," chief executive Ross Keeley said. "The commission on the new fish oil refinery positions the group for a new phase of growth and the new raw material supply agreements should underpin the financial performance of the Squalene business."

Earlier this month, Mr Keeley and chairman Doug Wilson announced their pending departure from the company, and it has since appointed former Tetra Laval executive Colin Groves to head up the board from June.

SeaDragon is still reviewing its capital structure and funding alternatives, including its cashflows, debt and raising new equity. The company has the support of its lender Heartland Bank, which extended the manufacturer's working capital facility, and it drew down $3 million in borrowings through the year.

The company had cash and equivalents of $500,000 as at March 31, burning through $4.7 million in the year, of which $3.3 million went into the purchase of property, plant and equipment. On an operational basis, SeaDragon's cash outflow accelerated to $4.3 million from $1.6 million in 2014.

The shares climbed two-tenths of a cent, 11%, to 2c, having dropped 18% this year. That values SeaDragon at $37.5 million.

(BusinessDesk)