The Woodlands / TX. (rbt) RiceBran Technologies, a global leader in the production and marketing of value-added products derived from rice bran and a producer of rice, rice co-product, and barley and oat products, announced the Company’s financial results for the second quarter ended June 30, 2020.
«The surge in demand for rice driven by Covid-19 that we saw at the end of the first quarter extended into the second quarter depleting rough rice supply and rapidly escalating prices. As a result of diminishing rice supply, production at Golden Ridge was severely impacted in the latter half of the quarter resulting in weaker than expected results for RiceBran as a whole,» said Brent Rystrom, President and CEO. «Rice prices have now fallen about 50 percent from peak levels, the harvest in Louisiana is about half complete and looks strong, and harvest in Arkansas should start in a few weeks on what also looks like a large, high-quality crop. This should help RiceBran Technologies return to a trajectory of improving financial performance.»
Second Quarter 2020 Operational Highlights
- Shortage of rough rice leads to significant slowdown at Golden Ridge: Revenues from our Golden Ridge Rice Mill decreased over 50 percent in the second quarter of 2020 from the first quarter as the mill was unable to acquire rough rice at economical prices in the latter half of the second quarter. Negative operating leverage from lower production was exacerbated by penalties paid on unfulfilled customer commitments.
- Demand for SRB remains resilient in a challenging environment: Revenues from the company’s core stabilized rice bran (SRB) business grew sequentially in the second quarter of 2020 as demand from animal feed end markets remained resilient. Nevertheless, profitability for the business declined from the first quarter due to a shift in mix away from higher margin derivative products for human consumption.
- Company is focused on maintaining a strong balance sheet: Capital resources and operating liquidity remain solid with over USD 3.3 million in cash on hand and an incremental USD 2.0 million in borrowing capacity added after the end of the second quarter. Overall liquidity was negatively impacted in the quarter by the slow down at Golden Ridge in as it drove a reduction in borrowing capacity and forced a reduction in commodities payables.
- Further cost cuts identified ahead of strategic advisor engagement: The successful implementation of cost cutting initiatives has resulted in a significant reduction in SG+A, and an incremental USD 2 million in annualized cuts have been identified and are expected to be put in place by year end. The company has retained BMO Capital Markets to undertake a strategic review of opportunities to transform the business in 2021.
- Peter Bradley appointed Executive Chairman: Effective August 14, 2020, Rystrom will be stepping down as CEO, President, and a member of the Board of Directors, and Peter G. Bradley, who joined RiceBran’s board in 2019, will be assuming Rystrom’s duties upon his departure as Executive Chairman. Current Chairman, Brent Rosenthal, has been appointed Lead Independent Director.
«On behalf of the Company, I want to thank Rystrom for his commitment and dedication to the Company during these challenging times» Bradley stated. «I believe we have built a valuable ingredients platform at RiceBran Technologies. I hope to bring my decades of experience as an executive in consumer foods, dietary supplements, food ingredients and specialty chemicals to work with the entire team to maximize that value through streamlining our operations and focusing on our core competencies. I also look forward to working with our strategic advisors to help us review opportunities to further improve profitability in 2021.»
Second Quarter 2020 Financial Highlights
- Revenue: Revenues of USD 5.9 million decreased 5 percent from USD 6.2 million in the second quarter of 2020. The year over year decrease in revenue was due primarily to lower revenues from RiceBran’s core stabilized rice bran business, and to a lesser extent from lower volumes from our Golden Ridge operations, partially offset by an increase in revenue from MGI Grain. Animal feed product revenues increased 4 percent from the prior year, while revenues from products intended for human consumption decreased by 9 percent. The latter decline reflected a shift in product mix at RiceBran combined with lower production volumes at Golden Ridge.
- Gross Losses: Gross losses were USD 1.2 million in the second quarter of 2020 compared to gross losses of USD 0.2 million in the second quarter of 2019. The increase in gross losses was primarily attributable to greater losses from Golden Ridge due to low production volumes and higher input commodity prices. Gross profits were also negatively impacted by a year-over-year decline in revenue from RiceBran operations as well as the shift in RiceBran’s sales mix away from more profitable products from human consumption. Gross loss for the quarter included USD 0.2 million in expenses incurred to settle penalties for unmet delivery commitments.
- SG+A: SG+A expenses decreased to USD 2.6 million from USD 3.4 million in the second quarter of 2019, a decrease of USD 0.8 million, primarily related to benefits from initiatives enacted in the first quarter of 2020 to reduce overall SG+A costs. SG+A in the second quarter of 2020 was also negatively impacted by approximately USD 300,000 in non-cash losses on the disposal of assets. Management remains confident in its ability to drive overall SG+A to USD 9-10 million for the full year before taking into account newly identified savings which should have a positive impact on reducing overall SG+A in the second half of 2020 and 2021.
- Net Loss, Ebitda, and Adj. Ebitda: Net loss for the second quarter of 2020 was USD 3.9 million compared to a net loss of USD 3.7 million in the second quarter of 2019. Ebitda (Non-GAAP) losses were USD 3.2 million in the second quarter of 2020, in line with Ebitda losses of USD 3.2 million in the second quarter of 2019. Ebitda losses were flat with a year ago as reductions in SG+A have been offset by higher gross losses from operations. Adjusted Ebitda (Non-GAAP) losses were USD 2.9 million in the second quarter of 2020, compared to Adjusted Ebitda losses of USD 2.8 million in the second quarter of 2019, after adding back USD 394,000 in stock comp and other expenses.
- Liquidity: Capital resources and operating liquidity remains adequate with over USD 3.3 million in cash on hand and an incremental USD 2.0 million in borrowing capacity added after the end of the second quarter. Overall liquidity was negatively impacted in the second quarter by the slow down at Golden Ridge in as it drove a reduction in borrowing capacity under the Company’s factoring facility, which was exacerbated by a reduction in commodities payable as Golden Ridge completed raw material sourcing contracts without the ability to enter into new agreements.