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Seadragon shares gain on improved earnings outlook, capital needs

Wednesday 7th February 2018

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Seadragon shares swam against the market today, rising on the company's forecast for earnings to improve in the current financial year with solid demand for its fish oil products. 

The shares rose 20 percent, or 0.1 cents, to 0.6 cents on a day when the global rout caught up with New Zealand after yesterday's holiday and driving a 1.3 percent decline in the S&P/NZX All Index, with 79 of the 113 stocks down in early trading. Seadragon was one of the 29 to gain after saying it shipped more than 100 tonnes of tuna oil to multiple customers in December and January and had solid demand in the pipeline for the year ahead. 

"The minimum volume we have firm orders for is close to 400 tonnes of semi-refined tuna oil, with strong signals from these customers that their combined demand over the next year will increase further," chair Colin Groves said in a statement. "Our forecast ebitda (earnings before interest, tax, depreciation and amortisation) for year-end 2018 continues to be an improvement on the last full year."

Nelson-based Seadragon reported a normalised ebitda loss of $2.2 million in the six months ended Sept. 30 and said the full-year result would be linked to securing new customers, vaguer guidance than at the annual meeting when it was predicting a smaller ebitda loss than the $4.4 million posted the year earlier. 

In November, the company drew down on the last $1 million of its convertible loan facility with shareholder Comvita and said it had enough funds to grow provided it met sales targets. However, today Groves said Seadragon will need more cash to boost sales. 

"The board is currently exploring options for funding this working capital requirement and has strong support from its cornerstone shareholders," he said. 

Seadragon has previously linked a breakeven position to when it sells 600-to-700 tonnes of fully refined tuna oil in a 12-month period. 


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