RiceBran Technologies: Reports Full Year 2018 Results

The Woodlands / TX. (rbt) RiceBran Technologies, a global leader in the production and marketing of value added products derived from rice bran, announced the Company’s financial results for the year ended December 31, 2018.

«We made progress on many fronts in 2018 – the acquisition of Golden Ridge Rice Mills in Arkansas, keeping our customers supplied during major production issues at one of our facilities in the second and third quarters, achieving a substantial increase in our shareholders’ equity, receiving all of our planned facility certifications, and, in the 2018 fourth quarter, accelerating sales of our rice bran products by more than 15 percent,» said Brent Rystrom, President and Chief Executive Officer. «We now have a portfolio of assets that each have an ability to deliver substantial sales and Ebitda growth at the plant level, and we are planning a major expansion of our rice milling and stabilized rice bran operations in Arkansas. Scaling production and sales at these facilities are a major focus that will help in our drive to achieve positive adjusted Ebitda.»

«We are also excited to announce the agreement to acquire MGI Grain,» added Rystrom. «MGI Grain, based in East Grand Forks, MN, will bring us new barley and oat ingredients that complement our rice and rice bran product offerings. We believe our sales team can drive substantial sales growth of MGI Grain’s product offering and expand already meaningful Ebitda.»

2018 Key Accomplishments

  • Driving 2018 fourth quarter sales growth in excess of 15 percent for our stabilized rice bran and derivative products, our first meaningful overall growth in sales for these products in many years.
  • Completing the acquisition of Golden Ridge Rice Mills of Wynne, AR on November 28, 2018, giving RBT a meaningful, scalable, and controlled source of stabilized rice bran in the dominant rice producing state and providing us a lowest cost scenario for rice bran supply, adding new product extensions to our product offering, and providing us enough Greenfield space to significantly expand milling operations and add new products. We believe this new strategic direction will be a major factor in our growth and attaining meaningful adjusted Ebitda over the next several years.
  • Successfully certifying our facilities in West Sacramento, CA, Dillon, MT, and Mermentau, LA during the third and fourth quarters, and this was a critical step in positioning RBT as a high-value ingredient supplier.
  • Increasing our shareholders’ equity to USD 23.7 million from USD 14.7 million, mainly as a result of cash received from the exercise of warrants into common stock and also equity added through the acquisition of Golden Ridge Rice Mills.
  • Relocating the corporate headquarters to Houston, TX on June 1, positioning us nearer to Arkansas, Louisiana, and Texas, collectively the largest rice growing region in the United States.

2018 Business Highlights

  • Revenues of USD 14.8 million were up from USD 13.4 million, inclusive of USD 0.9 million in revenue from Golden Ridge Rice Mills realized after its acquisition in late November, 2018. Revenue in our bran business grew over 4 percent for the year, with the growth concentrated in the fourth quarter.
  • Our gross profit margin of 20.2 percent in 2018 was down from 28.4 percent for three primary reasons. First, raw bran prices were above year-earlier levels in the first three quarters of 2018 and have been flat since November. Second, we experienced a difficult supply issue at our Louisiana facility in the second and third quarters, and decided to support customers from our California facilities despite massively higher transportation and production costs. This production issue also limited our ability to grow our business during this period. Third, lower margin sales from Golden Ridge Rice Mills were added to the overall sales mixes.
  • SG+A expenses expanded to USD 11.2 million from USD 9.9 million, with an expanded sales team, increased staffing to meet our certification needs, and the costs of our relocation and costlier offices in Houston being major causes for the increase.
  • Our loss from operations was USD (8.2) million compared to USD (6.1) million last year, and adjusted Ebitda was USD (6.4) million versus USD (4.1) million.
  • Cash and equivalents of USD 7.0 million increased from USD 6.2 million last year.
  • Total assets increased to USD 30.7 million from USD 17.4 million, mainly driven by the acquisition of Golden Ridge Rice Mills.
  • Debt increased to USD 0.8 million from USD 16,000 as a result of the Golden Ridge Rice Mills acquisition.
  • Shareholders’ equity increased to USD 23.7 million from USD 14.7 million.

2018 Fourth Quarter Business Highlights

  • RBT delivered its first meaningful growth in its rice bran sales in many years during the 2018 fourth quarter, with revenue growth in excess of 15 percent.
  • Our revenue growth was driven by new customer demand and growth from several of our most important customers.
  • Golden Ridge Rice Mills contributed USD 0.9 million to our fourth quarter sales.

2019 Subsequent Events

  • Liquidity continued to improve in 1Q:19 with the proceeds from a USD 12.1 million share offering in March and USD 2.0 million from the exercise of warrants, more than offsetting negative cash flows from operations and ongoing Cap Ex.
  • We are in the planning and engineering stages for a large expansion of our rice milling and rice bran production facilities at Golden Ridge Rice Mills in Wynne, Arkansas. As part of this expansion we are planning for the production of a transformational new stabilized rice bran product that we believe could constitute the largest available market opportunity so far in our rice bran product history, with an identifiable market opportunity of 100 million or more pounds per year.
  • Today we are announcing an agreement to acquire MGI Grain in East Grand Forks, MN for USD 3.5 million. MGI Grain is an ingredient company focused on barley and oat products, areas that fit well with our rice and rice bran products. We see major opportunities for our sales team to sell these products and drive higher capacity utilization of MGI Grain’s facility, which is presently near 35 percent. MGI Grain presently has annually sales near USD 3 million and has meaningful positive adjusted Ebitda.

2019 Guidance Updates

  • RBT sees annual revenue of approximately USD 37 million to USD 40 million in 2019 from our previous guidance of USD 40 million. We see strong growth from our rice bran products, a full year of Golden Ridge Rice Mills’ results, and approximately nine months of MGI Grain’s results. We are adjusting our revenue assumptions lower for Golden Ridge Rice Mills to reflect a heavier mix of toll milling than we previously assumed. This should have no negative impact on Ebitda as the profitability per pound processed is generally at least similar when toll milling compared to traditional milling.
  • RBT remains focused on attaining positive adjusted Ebitda, which we now target to occur in the third or fourth quarter of 2019 versus our previous target of the second or third quarter of 2019.

«We continue to execute on our strategic and financial plans to position RBT for sustainable revenue and Ebitda growth,» said Dennis Dykes, Chief Financial Officer. «Our balance sheet has strengthened considerably in 2018 through warrant exercises and our Golden Ridge acquisition. This has enabled us to increase cash while making significant investments in the business, and significantly improve shareholders’ equity. With the additional capital received subsequent to the year’s end, we are in a strong position to grow the business and build value for stockholders throughout 2019 and in the years to come.»

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