Omega Protein revenues up 13 percent in Q2

Omega Protein revenues up 13 percent in Q2

Company is also experiencing the lowest oil yields in recent history, which is having an adverse impact on unit costs and gross profit margin.

Omega Protein Corporation (NYSE: OME), a nutritional ingredient company and the nation's leading vertically integrated producer of omega-3 fish oil and specialty fish meal products, today reported financial results for the second quarter ended June 30, 2012.

Second Quarter 2012 Highlights

  • Revenues: $45.0 million for the quarter, a 13 percent sequential increase compared to the first quarter of 2012
  • Gross profit margin: 15.2 percent for the quarter, compared to 22.4 percent in the first quarter of 2012
  • Gain on Disposal of Assets: $3.4 million, compared to $0.4 million in the first quarter of 2012
  • Net income: $2.5 million ($0.13 per diluted share) for the quarter, compared to $1.8 million ($0.09 per diluted share) in the first quarter of 2012
  • Adjusted EBITDA: $5.2 million for the quarter, compared to $7.0 million in the first quarter of 2012

"The 2012 fishing season is off to a good start with fish catch results exceeding the strong levels experienced in 2011, and the outlook for fish meal and fish oil pricing continues to improve," commented Bret Scholtes, Omega Protein's President and Chief Executive Officer. "Unfortunately, we are also experiencing the lowest oil yields in recent history, which is having an adverse impact on unit costs and gross profit margin."

Mr. Scholtes continued, "We continue to take steps to advance our manufacturing of concentrated fish oils and custom blends for dietary supplements to increasingly differentiate our product offerings to the end consumer. Although we expect the ramp-up to be gradual, we remain excited about the opportunities in our human nutrition business to build upon its strong first half sales results and gross margins."

Second Quarter 2012 Results
Omega Protein revenues increased 13 percent from the first quarter of 2012 to $45.0 million in the second quarter of 2012. The increase was due to increased fish meal and fish oil sales volumes, resulting from larger fish meal production and higher export sales. Increased volumes were partially offset by lower prices. Fish meal sales prices declined due to the roll-off of older, higher priced contracts and fish oil prices decreased due to a lower proportion of higher-priced refined oil sales. Cyvex, the Company's human nutritional ingredient subsidiary, contributed $4.2 million of revenues to the second quarter of 2012 compared to $6.0 million in the previous quarter.

Second quarter of 2012 revenues increased 2 percent from $44.2 million in the same period last year. The increase in revenues compared to the same period last year was primarily due to higher sales volumes of 2 percent for fish meal and 54 percent for fish oil, partially offset by lower sales prices of 18 percent and 4 percent for fish meal and fish oil, respectively. The increase in fish meal and fish oil sales volumes was primarily due to the higher export sales volumes. The decrease in fish meal sales prices is primarily due to sales made pursuant to contracts entered into during 2011 when fish meal prices were lower. The decrease in fish oil sales prices is due to a lower proportion of higher priced refined oil sales. The composition of revenue by nutritional product line was 55 percent fish meal, 31 percent fish oil, 9 percent specialty nutraceutical ingredients, and 5 percent fish solubles and other. Cyvex's revenues increased from $4.0 million in the same period last year.

The Company reported gross profit of $6.8 million, or 15.2 percent as a percentage of revenues, for the second quarter of 2012, versus gross profit of $8.9 million, or 22.4 percent as a percentage of revenues, for the first quarter of 2012. In addition to pricing and product mix, the decrease in gross profit was also attributable to a higher expected 2012 cost per unit of sales, which was the result of low fish oil yields. The Company's oil yields for the 2012 fishing season through June 30, 2012 were lower by 25 percent compared to those in the same period in the 2011 fishing season and were lower by 45 percent compared to the Company's five year oil yield average. The second quarter of 2012 also includes $1.7 million of gross profit from Cyvex, or 40.1 percent as a percentage of Cyvex's revenues, compared to $2.4 million of gross profit and 39.4 percent in the first quarter of 2012.

Compared to the same period a year ago, gross profit decreased from $14.7 million, or 33.3 percent as a percentage of revenues, due primarily to the decrease in fish meal sales prices as well as a 10 percent increase in cost per unit of sales. The increase in cost per unit of sales reflects changes in product mix and the expected increase in 2012 cost per unit of sales as a result of decreased fish oil yields. Cyvex's results declined slightly from a gross profit of $1.7 million, or 43.7 percent as a percentage of revenues, in the second quarter of 2011.

Selling, general and administrative expenses for the first and second quarters of 2012 were consistent at $5.5 million. Compared to the same period a year ago, selling, general and administrative expenses increased $0.7 million from $4.8 million, primarily due to increased severance expenses, increased other employee compensation related costs, including stock option and restricted stock compensation expense, and the addition of expenses related to InCon, an oil processing business we acquired in the third quarter of 2011.

The Company also recorded a net gain on disposal of assets of $3.4 million for the second quarter of 2012 primarily related to sale of its Morgan City, Louisiana facility, partially offset by the net loss on disposal of certain assets. This compares to a net gain on disposal of assets of $0.4 million in the first quarter of 2012 and a net loss on disposal of assets of $0.5 million in the second quarter of 2011.

The second quarter of 2012 effective tax rate was 34.0 percent compared to 32.1 percent in the first quarter of 2012 and 35.3 percent in the same period last year. The decrease in the effective tax rate compared to the same period last year is primarily a result of the impact of certain items that are deductible for tax purposes but not expensed in our financial statements.

Net income for the second quarter of 2012 was $2.5 million ($0.13 per diluted share) compared to $1.8 million ($0.09 per diluted share) for the first quarter of 2012 and $22.9 million ($1.14 per diluted share) for the same period last year. Excluding the impact of the net gain on disposal of assets, net income for the second quarter of 2012 would have been $0.3 million ($0.01 per diluted share). Excluding the impact of two settlements totaling $27.0 million, net income for the second quarter of 2011 would have been approximately $5.5 million ($0.27 per diluted share).

Adjusted EBITDA, which excludes the net gain of disposal of assets, totaled $5.2 million for the second quarter of 2012, a decrease from $7.0 million for the first quarter of 2012 and from $13.5 million for the same period a year ago.

Six Month 2012 Results
Revenue in the current period decreased 16 percent to $84.7 million compared to revenue of $100.6 million for the six months ended June 30, 2011. The decrease in revenues was primarily due to lower sales prices of 13 percent and lower sales volumes of 25 percent for the Company's fish meal partially offset by higher sales prices of 2 percent and higher sales volumes of 7 percent for the Company's fish oil. In addition, Cyvex contributed $10.3 million of revenue to the six months ended June 30, 2012 as compared to $7.0 million for the six months ended June 30, 2011.

The Company recorded gross profit of $15.7 million, 18.6 percent as a percentage of revenues, for the first six months of 2012, versus gross profit of $30.4 million, 30.2 percent as a percentage of revenues, for the first six months of 2011. The decreases were primarily due to a decrease in fish meal sales prices and an increase in cost per unit of sales.

Net income for the six months ended June 30, 2012 was $4.3 million ($0.22 per diluted share) compared to $28.9 million ($1.45 per diluted share) for the same period last year. Excluding the impact of net gain on disposal of assets, net income for the six months ended June 30, 2012 would have been $1.8 million ($0.09 per diluted share). Excluding the impact of the two settlements previously mentioned, the Company's net income for the six months ended June 30, 2011 would have been approximately $11.6 million ($0.58 per diluted share).

Adjusted EBITDA, which excludes the net gain of disposal of assets and settlements, totaled $12.1 million for six months ended June 30, 2012, a decrease from $27.7 million for the same period last year.

 

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