Neptune talks resuming operations, IP

Neptune talks resuming operations, IP

Company announces financials and plan to get operations back on track.

Neptune Technologies & Bioressources Inc. announces its consolidated financial results for the fourth quarter and fiscal year ended February 28, 2013 and provides update on action plan to resume operations.

Financial results: fiscal year ended February 28, 2013

Nutraceutical business results

  • Nutraceutical revenues increased 32 percent to a record $25,181,000, for the fiscal year ended February 28, 2013,up from $19,113,000 in the corresponding period ended February 29, 2012.
  • Adjusted EBITDA was negative ($965,000) for the fiscal year ended February 28, 2013, compared toAdjusted EBITDA of $2,690,000 in the prior year.
  • Net loss totalled ($12,779,000) for the fiscal year ended February 28, 2013, compared to net profit of $2,384,000 for the corresponding period ended February 29, 2012.

The year over year increase in revenues is largely due to aggressive penetration of the American, European and Australian markets prior to the explosion, which destroyed the Corporation’s production plant on November 8, 2012 (the “incident”). The net loss for fiscal year 2013 is mainly attributable to the incident related write-offs, required under International Financial Reporting Standards, along with margin concessions made to maintain Neptune’s customer base while production is being re-established. The write-offs, which include losses and costs related to the explosion, were partially offset by insurance recoveries received during the fourth quarter.

Additional details are available in Neptune’s Consolidated Financial Statements for the year ended February 28, 2013 and accompanying Management’s Discussion and Analysis, available on SEDAR at sedar.com.

Consolidated results

  • Consolidated revenues grew 35 percent to $25,864,000 for the fiscal year ended February 28, 2013, up from $19,124,000 for the corresponding period ended February 29, 2012.
  • Adjusted EBITDA was negative ($5,797,000) for the fiscal year ended February 28, 2013, compared to negative ($2,593,000) in the prior year.
  • Net loss was ($19,962,000) for the year ended February 28, 2013, versus a net loss of ($4,593,000) in the prior year.

The year over year increase in revenues and higher net loss is largely due to the factors listed above for the Nutraceutical business. The consolidated net loss for fiscal year 2013 also includes $7.2 million of losses associated with Neptune’s subsidiaries.

Financial results: fourth quarter ended February 28, 2013

Nutraceutical business results

  • Nutraceutical revenues decreased 14 percent to $4,583,000 for the three-month period ended February 28, 2013, down from $5,357,000 for the three-month period ended February 29, 2012.
  • Adjusted EBITDA was negative ($3,190,000) for the quarter ended February 28, 2013, versus $185,000 for the prior-year quarter.
  • Net profit was $854,000 for the quarter ended February 28, 2013, compared to net profit of $1,379,000 for the quarter ended February 29, 2012.

The year over year decrease in revenues is largely due to the incident. Neptune’s net profit of $0.9 million for the fourth quarter ended February 28, 2013 includes $6.0 million of insurance recoveries, partially offset by losses and costs related to the incident as well as margin concessions.

Consolidated results

  • Consolidated revenues totalled $4,591,000 for the three-month period ended February 28, 2013, compared to $5,367,000 for the quarter ended February 29, 2012.
  • Adjusted EBITDA was negative ($4,607,000) for the quarter ended February 28, 2013, versus negative ($775,000) for the quarter ended February 29, 2012.
  • Net loss was ($1,147,000) for the quarter ended February 28, 2013, versus a net loss of ($133,000) in the prior-year quarter.

The year over year decrease in revenues and higher net loss is largely due to the factors listed above for the Nutraceutical business. The consolidated net loss for the fourth quarter ended February 28, 2013, also includes $2.0 million of losses associated with Neptune’s subsidiaries.

Update on action plan to resume operations
Neptune’s rapid response to mitigate the negative consequences of the November 8, 2012 incident has resulted ingood progress to date. The Corporation has three key priorities for restoring and ramping up its long-term supplychain, including rebuilding its plant, establishing third party manufacturing partnerships and securing the supplyof raw materials.

The necessary permits to begin rebuilding Neptune’s production plant were recently received. Neptune intends to reconstruct an operational plant using the adjacent expansion facility that was underway at the time of the incident and which suffered limited damage. Construction is expected to commence during the Corporation’s second quarter and once completed, the facility is expected to have the capacity to produce more than 150,000 metric tons of krill oil per year.

As the initial intended use of the expansion facility has changed, modifications and additional purchases to replace equipment lost in the incident will be required to bring the facility to an operational state. The initial $21 million cost of the expansion project has now been revised to approximately $30 million. The increased cost is expected to be funded predominantly by insurance recoveries associated with the incident, including approximately $6.7 million received to date and by project financing.

In conjunction with the rebuild, Neptune is also taking positive steps to secure and increase its long term supply chain through third party manufacturing agreements, thereby broadening, strengthening and safeguarding future operations. Three confirmed options are now being evaluated and a choice should be made by the end of the second quarter of this fiscal year. The Corporation is working hard to bring its overall production capacity back online before the end of this fiscal year. In the meantime, Neptune is also exploring and undertaking partnerships to allow it to ensure ongoing supply to customers.

“Our quick reaction to the incident has enabled us to effectively manage through a difficult period and put in motion key initiatives to ensure we are positioned for a strong recovery and continued market momentum,” said Mr. Henri Harland, president and CEO of Neptune. “As well, our strong sales and marketing focus has allowed us to maintain the Neptune name and brand equity in the marketplace. Despite the obvious production disruptions, we have maintained a significant portion of our pre-incident client base through solid customer relationships, creative supply management and margin concessions. We are making good progress, and we will continue to execute our action plan to strengthen Neptune’s foundation and reaffirm its market leadership as the premier krill oil manufacturer,” concluded Mr. Harland.

Insurance coverage
Neptune has insurance in place covering, among other things, property damage, business interruption and generalliability up to specified amounts and subject to limited deductibles and certain exclusions. Following the destruction of the Corporation’s production facility, Neptune received insurance recoveries totaling $6.7 million,representing only part of the total potential compensation. This amount includes $700,000 received after the endof fiscal year 2013. Neptune is pursuing the balance of its insurance claim and will record any additional recoveryif and when received.

Class action lawsuit against Neptune dismissed
The previously announced class action lawsuit filed against Neptune and certain of its officers on December 19,2012 by Robbins Geller Rudman & Dowd LLP in the United States District Court for the Southern District ofNew York was voluntarily dismissed by the plaintiffs, without prejudice. No payments were made by Neptune orits officers in connection with the dismissal.

ITC sets target date for completing investigation
Further to the U.S. International Trade Commission’s decision to institute a patent infringementsinvestigation based on a Neptune and Acasti Pharma Inc. complaint, the ITC has recentlyindicated that the evidentiary hearing will commence on December 10, 2013. The initial determination on allegedviolation will be rendered on March 17, 2014 and will be immediately enforced, even if there is an appeal.

 

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