2013 proved a "perfect storm" for Omega Protein as record profit posted
The Texas headquartered group which targets the swine, poultry, beef and aquaculture feed segments with its animal nutrition portfolio, reported financial results for Q4 and the full year ended December 31, 2013 yesterday.
Revenues for the full year jumped 4% to $244.3 million compared to $235.6m for the previous year, while Q4 income saw a hike of 4% from $63.1m in the same period last year to $66m. Adjusted EBITDA for Q4 was $26.7m and $75.6m for the full year.
Perfect storm of profit supporting trends
Speaking to FeedNavigator.com, Imperial Capital analyst Mitchell Pinheiro said there has already been a shift in the underlying trends behind the record growth for the business in 2013.
“Omega is unlikely to repeat this performance in 2014. The ‘perfect storm’ combination of a excellent fish catch, high fish oil yields and prices at the top end of the scale is a once off. Prices have already slid in the first quarter of this year,” said the analyst.
Pinheiro said he would not characterize management as “overly optimistic” about 2014 saying they “provided little guidance” to support such a viewpoint.
But the New York-based analyst does not foresee too many threats on the animal nutrition side, apart from the normal fluctuations in pricing and fish catch.
“Any business dependent on fish catch and fish oil yields is always going to be volatile – it is unpredictable year to year. Omega is looking to find more sustainable areas of growth.
The animal nutrition side generates a lot of cash, which management is ploughing into human nutrition - a segment with more stable supply and demand,” said Pinheiro.
He added: “Imperial Capital likes the stock, we think the share price can go higher.”
Fish meal production this year
Omega Protein said production of fish meal and fish oil in 2014 will be determined by this year’s fish catch and oil yields, with its Gulf operation expected to start fishing on 21 April and its Atlantic operation in early June.
Revenue per ton for animal nutrition products will depend on the price received for products sold in 2014, said Omega Protein CEO, Bret Scholtes yesterday, as the company has sold or sold forward approximately 85,000 tons of product at prices “in line to modestly below” those realized in 2013.
“Most of the forward sales are expected to be recognized in the first two quarters of 2014.
The remaining sales will be at prices determined later in the year and are expected to be driven by global supply and demand. We expect strong global demand for our animal nutrition ingredients in 2014,” said the CEO.
Omega Protein CFO Andrew Johannesen, during a conference call on the 2013 financials, said:
“We reported an all-time record high gross profit of $83m, roughly doubling 2012 gross profit of $42m and handily beating our prior record of $55m.
Gross profit as a percentage of revenue also set a record, coming in at 33.9%. This compares to 17.8% in 2012, and it’s the first time since the 1990s, that we exceeded 30% for a full year.
The increase in gross profit as a percentage of revenue was due to an increase in animal nutrition segment gross profit as a percentage of revenues from 17.3% to 36.2%. Animal segment revenue per ton increased 30% during the year, from $1,043 in 2012 to $1,355 a ton in 2013."