In the second quarter of 2012, Aker BioMarine achieved the highest quarterly sales of Superba™ Krill to date: 74 metric tons, of which a significant proportion was sold to customers in the Asia/Pacific region. Aker BioMarine is experiencing strong demand growth for both its dietary supplement Superba Krill and the feed ingredient Qrill™ and thus is upwardly adjusting the company’s 2012 sales guidance. Further, the company is considering alternatives for significantly increasing production capacity for Superba Krill oil.
Operating revenues of the Aker BioMarine Group in the second quarter of 2012 amounted to NOK 107 million, up from NOK 87 million in the second quarter of 2011. Operating revenue growth is mainly attributable to an increase in Superba Krill sales. Operating profit before depreciation and amortization (EBITDA) was NOK 26 million in the second quarter of 2012, compared with NOK 24 million in the year‐earlier reporting period. The quarter’s gross margin was NOK 13 million higher compared with the corresponding second‐quarter 2011 figure.
However, the effect of lower harvesting volumes and production value combined with costs associated with two harvesting vessels in operation, resulted in only a marginal EBITDA improvement in the second quarter of 2012 compared with the year‐earlier figure.
Harvesting and production
Rebuilding of the krill harvesting vessel Antarctic Sea was completed in May. Following aperiod of gearing up, the krill harvester has been in full service as of June. Antarctic Seaproduced a total of 973 metric tons (MT) of Qrill meal in the second quarter of 2012; averagedaily production was 31 MT. Antarctic Sea recorded an up‐time of 71 percent in the quarteronce harvesting began. The vessel received Marine Stewardship Council (MSC) certification atthe same time as the company’s second krill vessel, Saga Sea, renewed its MSC certificate.
MSC is the world’s leading certification and environmental labeling program for sustainable fisheries, and Aker BioMarine is the only krill participant worldwide to be awarded such certification. The company achieved a higher certification score this time around due to improved documentation of krill biomass sustainability.
Saga Sea produced 2 929 MT of krill in the second quarter of 2012, of which some 2 750 MT will be further processed into Superba Krill oil. In the second quarter of 2011, Saga Sea’s production volume was 4,263 MT. Harvesting generally proved demanding in the quarter due to weather and ice conditions. On average, Saga Sea produced 39 MT per production day in the second quarter of 2012, compared with 52 MT in the second quarter of 2011. Affecting year‐on‐year comparisons was the inspection during the reporting period of Saga Sea damage repairs completed in the first quarter of 2012. Up‐time in the quarter was 83 percent, compared with 90 percent in the second quarter of 2011.
In the second quarter of 2012, Aker BioMarine produced some 118 MT of Superba Krill oil. Aker BioMarine’s contractual production manufacturer at present has an annual production capacity of 500 MT Superba Krill. Due to strong demand growth for Superba Krill, Aker BioMarine is considering further capacity increases; either through increased capacity with contractual production manufacturers, or by building an own production facility plant with a capacity of at least 1 000 metric tons.
In the second quarter of 2012, Aker BioMarine sold 74 MT of Superba Krill oil, up from 61 MT in the second quarter of 2011. As discussed in the first‐quarter 2012report to shareholders, there is high acticity in the Asia and Pacific region. As a result,a significant proportion of second‐quarter 2012 sales is attributable to customers inthat region.
Progress continues toward achieving regulatory approval for sale of Superba Krill in the Chinese market, so‐called New Resource Food status. The company has completed the demanding safety studies and thus will have met all documentation requirements to enable Chinese regulatory authorities to issue the necessary approval.
Feedback from Chinese authorities is expected in the third quarter. Aker BioMarine had entered into a distribution agreement in the first quarter of 2011 with a Chinese distributor who has committed to purchasing a minimum volume of 230 MT over a five‐year period. Aker BioMarine expects the customer to fulfill its purchasing commitment once regulatory approval is completed. Further, Aker BioMarine may enter into sales agreements with additional customers in the Chinese market as of September 2012. Consequently, the company participated in its first dietary supplement trade show in China this June, Natural and Nutracutical Products China 2012 (NPC 2012). Aker BioMarine’s exhibit at the three‐day event attracted visitors from more than 160 companies, 25 of which were from countries outside of China.
Aker BioMarine has sales commitments covering its entire production for the current harvesting season at good contract prices. In the reporting period, the company signed contracts featuring prices up to USD 2 200 per MT with aquaculture‐market customers for third‐quarter 2012 delivery.
As discussed in the first‐quarter 2012 report to shareholders, Aker BioMarine has entered intoa distribution agreement with the Diane Group, a leading European supplier of animal feedingredients, for sales of the new high‐value feed ingredient Qrill Pet. In the second quarter ofthe year, Aker BioMarine shipped an initial 26 MT of the product to the customer.
Royalty revenues from licensed CLA/Tonalin® production amounted to NOK 6 million in thesecond quarter of 2012, compared with NOK 4 million in the second quarter of 2011.
Epax Group joint venture (50 percent share with Lindsay Goldberg)
Epax continued to improve and expand production capacity at the company’s Ålesund,Norway, and Seal Sands, UK, facilities in the second quarter of 2012. Production capacity isnow 50 percent greater than at year‐end 2011. Epax reached their third milestone relating tothe company’s development products in the second quarter 2012. This resulted in a paymentof NOK 20 million from Lindsay Goldberg to Aker BioMarine according to the agreementbetween the companies signed the last quarter of 2010. The two last milestones (four and five)of together NOK 70 million are expected to be reached towards the end of 2013. AkerBioMarine has currently received NOK 210 million for the sale of 50 percent of the shares in the EpaxGroup to Lindsay Goldberg in 2010.
Joint venture partners Lindsay Goldberg and Aker BioMarine decided in June to conduct another Epax Group share issue. Each partner is to subscribe to NOK 82.5 million of the issue, with settlement paid in July. NOK 50 million of the funds will be applied to Epax Group general financing purposes, and NOK 32.5 million will be invested in a new joint venture company, IDT.
The business idea driving IDT is the development of a product that will inhibit abuse of strong narcotic pharmaceuticals.
IDT’s technology addresses some of the tampering methods with the abuse of prescription products particularly opioids. Opioid analgesics are a cornerstone in the treatment of moderately‐severe to severe pain. As such, they are the most widely‐prescribed pharmaceutical products in the United States. However, they are associated with unprecedented levels of misuse and abuse. In 2009, an estimated 12 million Americans non-medically used prescription pain relievers, with 13 percent of them being under the age of 18. IDT’s technology has an issued patent in the U.S.
As a consequence of the strong demand growth Aker BioMarine is experiencing from both existing and new customers, the company is upwardly adjusting its 2012 sales guidance for Superba Krill. Harvesting and production in the second half of 2012 will affect full‐year 2012 Qrill sales.