Omega Protein posts earnings hike on the back of pet, pork and aquaculture sector growth
The Texas headquartered company, which yesterday posted a 72% jump in Q2 revenues from $41.8 million to $71.9m on the same period last year, cited higher sales volumes for its fish meal and fish oil, in tandem with a 1% hike in its fish meal prices.
“The total volume increase was between 80% and 90% year-over-year,” said Omega Protein today.
But it reported a 37% drop in sales prices for its fish oil product.
“It had more inventory to sell at prices that remain similar to 2013 levels and at lower embedded cost per ton,” said Mitchell Pinheiro, who covers the financial performance of health and wellness companies for Imperial Capital.
Earnings on the back of pet, pork and aquaculture sector growth
CEO, Bret Scholtes, said the protein and lipid supplier had a solid performance in the second quarter, with “positive supply and demand fundamentals” in its livestock and pet food nutrition segment fueling the hike in earnings.
“We continue to see solid demand for our animal nutrition ingredients, driven by the aquaculture, pet and pork industries. All three of these industries are doing well,” said the CEO in an earnings call this morning.
The growth of the aquaculture sector and the salmon industry, in particular, is at record levels, added Scholtes.
In March, the New York based Pinheiro said Omega Protein had experienced “the perfect storm combination of an excellent fish catch, high fish oil yields and prices at the top end of the scale” - a trio of events that were unlikely to be duplicated in 2014.
And he told this publication today that the company will face very stiff comparisons to last year in the coming quarters as the fish catch is currently down about 15%, yields are average but lower, and cost per ton likely higher.
“Though the good news is that demand remains strong and prices for fish meal are better than expected, hovering near the average for 2013. We had been forecasting a 5 to 10% decline.
All in, we believe Omega’s animal segment should have an ‘average’ year and average is a good performance in this business,” said the New York-based analyst.
Fish catch fluctuations
Scholtes told investors today that the company had processed, by the beginning of this month, approximately 198,000 short tons of fish, which was an 8% decrease on the same period last year.
The 2014 fishing season is at the halfway point for Omega Protein. Through to last Friday, the CEO said the total [fish] yield was 34%, which is “close to our five-year average of 36%, while lower than the 40% recorded at this point last year.”
It is normal for fish catch and fish oil yield to fluctuate from year-to-year, said Scholtes.
“While one season’s results are key drivers for our financial performance for the next few quarters, these seasonal fluctuations should not be misinterpreted as changes in long-term trends,” he added.
