NutraCea Announces FY08 Q3 Financial Results

NutraCea, a world leader in stabilized rice bran (SRB) nutrient research and technology, today announced financial results for its third quarter ended September 30, 2008.

Net revenues for the 2008 third quarter increased to $11.2 million compared with net revenues of $1.5 million for the third quarter of 2007. Growth was driven by a $1.9 million increase in net revenues from the Company's NutraCea segment and $7.8 million from its Irgovel subsidiary which was acquired in 2008. Net revenues for the third quarter of 2007 were offset by $1.5 million of returned product.

Sequentially, net revenues for the third quarter of 2008 increased 8.6% over second quarter 2008 net revenues of $10.3 million. The Company's two business segments, NutraCea and Irgovel, recorded net revenues of $3.4 million and $7.8 million, respectively, for third quarter of 2008.
Net loss for the third quarter of 2008 decreased to $4.5 million, or ($0.03) per share, compared to a net loss of $4.8 million or ($0.03) per share, in the comparable period of 2007. The decreased net loss for the 2008 third quarter was primarily due to the increased gross margin of $2.6 million, offset by a net increase of $2.4 million in operating expenses, other expenses and income, and income taxes.

Sequentially, NutraCea realized a reduction in net loss from the $6.1 loss reported in the second quarter of 2008 compared with the $4.5 million net loss reported in the third quarter of 2008. Our NutraCea segment had a loss before income taxes of $5.0 million compared with a net loss before income taxes of $6.9 million in the second quarter of 2008. The Irgovel segment, which was acquired in February 2008, reported income before income taxes of $718,000 for third quarter of 2008.

Sales, General and Administrative (SG&A) expenses totaled $6.5 million for the third quarter of 2008, compared with SG&A expenses of $4.6 million for the third quarter of 2007. The $1.9 million increase was due to $1.2 million of SG&A costs from our Irgovel segment and a $726,000 increase from our NutraCea segment.

Brad Edson, President and CEO of NutraCea commented, "Driven by strong execution of our business model we realized continued improvement in our operations this quarter with results coming in-line with expectations. We are particularly pleased with our consistent sequential sales progress, and sequential improvement reflected in decreased operating costs, reflecting upward repricing, increasing utilization, as well as the improved bottom line performance quarter-over-quarter and sequentially. Results were marked by a strong performance from our recently acquired rice-bran oil manufacturing business unit, Irgovel, which remains on target to achieve the previously forecasted $30 million annualized revenue run rate. Additionally, in support of our expansion strategy, we are aggressively pursuing incremental sales opportunities for our NutraCea core SRB product line and achieved notable growth this period increasing sales by approximately $373,000 in addition to an intentional building of inventory for new customer orders anticipated in the fourth quarter 2008 and first quarter 2009.

Additionally, in a continued effort to enhance our financial position and balance sheet, we recently announced the signing of a proposal letter to obtain a $10.0 million credit facility through Wells Fargo Bank. We also issued $5.0 million of Series D Convertible Preferred Stock to two institutional investors. This financing is expected to provide the resources necessary to complete all projects that we currently have under construction including the planned capacity and technological enhancements at Irgovel".

Leo Gingras, COO, stated, "We remain focused on capitalizing on and extending our success within Irgovel. We are on track to add an additional 45,000 tons of annual capacity at Irgovel by the end of first quarter 2009 which would give us a total annual capacity of 115,000 tons. Based on existing results this would produce a corresponding increase in gross and net revenue of at least 60%. We also anticipate that our proprietary and new patent filed technology will have been installed and operating when this additional capacity comes on line. When fully operational, we believe this could additionally more than double the estimated level of profitability of Irgovel for each quarter going forward. Further, we are moving forward with another planned expansion which is currently estimated to increase the Irgovel annual capacity to over 200,000 tons by the first quarter 2010. "

Nine Month Results
For the first nine months of 2008 the Company's net revenues increased 60% to $26.5 million compared with revenues of $16.5 million for the first nine months of 2007. This $10.0 million increase is attributable to $16.2 million in sales contributed by our Irgovel segment, offset by a $2.7 million decline in product sales and a net decline of $5.0 million of license fee revenues by our NutraCea segment.

The Company's net loss for the first nine months of 2008 totaled $17.4 million, or ($0.12) per share, compared with a net loss of $3.0 million, or ($0.02) per share, in the same period of 2007. The $14.4 million net loss increase for the nine month period was primarily due to the $4.2 million decrease in gross profits, a $6.5 million increase in operating expenses and a $3.7 million net increase in other expenses and income taxes.

Sales, General and Administrative expenses for the first nine months of 2008 were $17.5 million, compared to SG&A expenses of $12.5 million for the first nine months of 2007. This increase is due to a $2.5 million, or 20%, increase in our NutraCea segment to expand investment in personnel, infrastructure, and sales and marketing activities to meet anticipated future demands and $2.5 million of SG&A from our Irgovel subsidiary. SG&A expenses for our Irgovel subsidiary consist of marketing, selling, and administrative expenses.

Brad Edson, President and CEO of NutraCea stated, "We are moving ahead with our China facility and it is anticipated to be over seven times the size of our existing facility in Brazil. This project will incorporate state of the art technology and because of scale is anticipated to generate results that are more than seven times greater than what we are currently achieving in Brazil. This project is progressing and we hope to obtain all the necessary permits and approvals shortly and break ground in the first quarter of 2009.

The Company is closing in on being able to realize some of the benefits of the tremendous amount of effort it has applied towards stabilizing Wheat Bran. We are moving closer to realizing the benefits of these efforts and we believe we are about a year ahead of schedule of deploying this technology into the marketplace. This offers tremendous upside to the company without requiring a corresponding burden of capital. Additionally the Company is finalizing details to further extract incremental value from our Stabilized Rice Bran within the United States with certain initiatives that are now underway. Both of these items will be more fully discussed on the conference call.

"We are proud of the results achieved during the past year and our ability to expand our presence and produce healthy revenue gains. We have built a stronger, more balanced company, and given our global position and recently enhanced financial condition are nicely positioned to leverage the capacity that we have now built. We believe the Company is now close to an inflection point, where our capacity and the ability to utilize it should allow sufficient revenue to be able to be produced to move it into sustained profitability. We continue to proceed into the fourth quarter with expectations for increased top line growth, and continued improvement in bottom line performance. We are optimistic of achieving our goals for the remainder of the year and delivering sequentially improving results, both top line and bottom line, throughout 2009 and beyond."
About NutraCea
NutraCea is a world leader in production and utilization of stabilized rice bran. They hold many patents for stabilized rice bran production technology and proprietary neutraceutical formulas ranging from arthritis, chronic bowel conditions, and effective diabetes control to cardiovascular disease treatment protocols. NutraCea's proprietary technology enables the creation of food and nutrition products to be unlocked from rice bran, normally a waste by-product of standard rice processing. Committed to helping the underfed, they're heavily involved in providing product and technology for developing countries through NutraCea's RiceAde feeding program. More information can be found in the Company's filings with the SEC, and you can visit the NutraCea Web site http://www.NutraCea.com.

Forward-Looking Statements
This release contains forward-looking statements, including statements regarding the likelihood that the bank will proceed with the completion of the credit facility as described in the proposal letter, or that it will proceed with any credit facility, the ability of NutraCea to comply with the conditions set forth in the loan proposal or that the bank will extend credit, even if such conditions are met, and the availability of any funds pursuant to that facility, due to the non-binding nature of the loan proposal, our expectations that the Series D Preferred Stock financing will provide the resources necessary to complete all projects currently under construction, the ability of Irgovel to remain on target to achieve forecasted revenue, the timing and cost of completion of projects under construction and the increased capacity resulting from the completion of those projects, the anticipated capacity and the progress and timing of receipt of permits and start of construction of the China facility, our belief regarding the deployment of our Stabilized Wheat Bran technology about one year ahead of schedule and the upside of our Stabilized Wheat Bran technology, our belief that we are close to an inflection point, where our capacity and the ability to utilize it should allow sufficient revenue to be able to be produced to move NutraCea into sustained profitability, and our expectations for increased top line growth and continued improvement in bottom line performance. Actual results may differ from those projected, due to a number of risks and uncertainties, including, but not limited to, the matters specified in the Company's filings with the Securities and Exchange Commission. These statements are made based upon current expectations that are subject to risk and uncertainty. The Company does not undertake to update forward-looking statements in this news release to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking information. Assumptions and other information that could cause results to differ from those set forth in the forward-looking information can be found in the Company's filings with the Securities and Exchange Commission, including the Company's most recent periodic report.

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