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RiceBran Technologies: Reports Q2 2018 Financial 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 second quarter ended June 30, 2018.

«We are making progress on many fronts positioning RiceBran Technologies for substantial growth,» said Brent Rystrom, Chief Operating Officer and Chief Financial Officer. «We are pleased with our new bran supply agreement with Golden Ridge Rice Mills, which will provide our first source of supply from Arkansas, the largest rice producing state in the country. This agreement also provides us the option to acquire Golden Ridge Rice Mills, which we believe could be a transformational event for RBT and our shareholders by enabling us to substantially improve our supply chain management capabilities through outright control of a major source of bran supply and could position us for many other product and growth opportunities. We are excited by the progress of our sales team and their development of our sales pipeline, and our efforts to improve and expand bran supply emboldens our confidence that we can deliver on growth.  And our balance sheet remains in strong position to fund our transition to growth.»

Business Highlights

  • Revenue in the second quarter totaled USD 3.2 million, better than our updated guidance but below our original expectations for the period. Net loss of USD (2.2) million and adjusted Ebitda of USD (1.8) million in the second quarter of 2018 compared to net loss of USD (1.2) million and adjusted Ebitda of USD (1.3) million in the same period in the prior year. Both revenue and margins were negatively impacted during the second quarter by the loss of production at our Mermentau, LA facility starting in mid-April, which limited our ability to grow the business and caused us to ship more from our California facilities at much higher freight costs. In addition, gross margin was negatively impacted by reduced production at our Dillon, MT facility due to a large Cap Ex project related to attaining plant certification and an increase of approximately 37.9 percent in raw bran prices.
  • Our balance sheet remains liquid and strong. We received USD 3.9 million of proceeds from warrant exercises during the quarter, which more than offset cash burn from operations and helped to increase shareholders’ equity.  We ended the quarter with cash and cash equivalents of USD 7.7 million, debt of USD 14,000, and shareholders’ equity of USD 16.8 million.
  • We entered into a new rice bran supply agreement with Golden Ridge Rice Mills.  Golden Ridge Rice Mills will provide us with stabilized rice bran (SRB) from its location in Wynne, AR. This agreement positions RBT to expand our sourcing capabilities into Arkansas, the largest rice producing state in the U.S.
  • We also secured an option to purchase Golden Ridge Rice Mills. We believe that owning and operating rice mills and the related rice bran production facilities will be an important part of our future supply of SRB, in addition to working with our current rice mill partners. It would also provide us substantial space to develop new products derived from SRB, an area of concentration for us where we see many growth opportunities.
  • We are excited by the anticipated growth in our sales pipeline and are working to add additional production capacity to our system to meet expected growth this year and next.
  • The Company now sees 2018 revenue of USD 14.0- USD 15.0 million. We expect modest revenue growth in the third quarter and more substantial growth in the fourth quarter.

«We made important progress during the quarter in both our system-wide certification efforts, and through the development of our relationship with Golden Ridge Rice Mills,» said Dr. Robert Smith, CEO and President.  «As our Mermentau operations resume production in the third quarter and we add production supplies from Golden Ridge Rice Mills, we believe we are well positioned to pursue accelerating growth.»

Highlights for the 2018 second quarter include

  • Revenue of USD 3.2 million increased 1.7 percent from USD 3.1 million, driven mainly from food products. Growth in animal feed product revenue was limited by the production issues we experienced in Mermentau.
  • Gross profit margin declined 470 basis points, primarily due to the idling of our Mermentau plant, reduced production at Dillon due to a large Cap Ex project related to certification, higher raw rice bran costs, and higher freight costs related to supplying Mermentau customers from California.
  • SG+A increased 6 percent mainly due to higher sales costs, additional headcount in quality assurance and operations to support our certification, and higher professional fees.
  • Our financial condition improved during the quarter as a result of cash received from warrant exercises more than offsetting our net losses. Our cash and cash equivalents and shareholders’ equity increased to USD 7.7 million and USD 16.8 million at June 30, 2018 compared to USD 5.1 million and USD 14.9 million, respectively, for those items at March 31, 2018.  We received USD 3.9 million of proceeds from warrant exercises during the quarter and Cap Ex totaled USD 1.1 million.

«We are excited about the sales pipeline we are developing and how we believe this will translate into substantial growth,» said Brent Rystrom, Chief Operating Officer and Chief Financial Officer. «We are confident that resumed production at Mermentau and our new supply starting from Golden Ridge Rice Mills positions us to pursue more substantial growth in the remainder of 2018 and beyond.  We expect revenue growth to accelerate sharply starting in the 2018 fourth quarter as we get the benefits of improved rice bran supplies catching up to our expanding sales pipeline.»

«Crop expectations are strong for California as well as near Mermentau, and favorable elsewhere. We are hopeful that the larger crop will drive down raw rice bran prices as harvesting takes place in August-September,» Rystrom continued. «Adding new supply from Arkansas – the state that produces about half of the U.S. rice crop – should also help. Raw rice bran prices in Arkansas have been considerably lower than our other operating locations.»

Guidance Updates

  •  RBT is lowering its 2018 annual revenue target to USD 14.0 million to USD 15.0 million from USD 16.0 million to reflect lower revenue in the second and third quarters due to the negative impact of the production losses we experienced in April-July at Mermentau leading to our decision to delay certain anticipated new customer additions until later in the year.
  • RBT expects adjusted Ebitda losses to improve in the third quarter from second quarter levels and expects a more considerable improvement in the fourth quarter as sequential revenue growth accelerates. We continue to target attaining positive adjusted Ebitda by mid-2019.
  • We continue to believe our balance sheet is sufficient to support our growth plan for 2018 and beyond.
  • Our guidance does not assume the financial impact that would result from exercising our option to purchase Golden Ridge Rice Mills.