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Seadragon draws down remaining $1M of Comvita loan, narrows first-half loss

Wednesday 29th November 2017

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Seadragon is drawing down the remaining $1 million of its convertible loan facility from shareholder Comvita to boost working capital, saying it has enough funds to grow provided it meets sales targets.

The fish oil refiner reported a loss of $2.7 million in the six months ended Sept. 30, down from a loss of $3.5 million a year earlier, the Nelson-based company said in a statement. Sales halved to $1.5 million, which the company said reflected its transition to Omega-3 fish oils from its "legacy" Omega-2 products.

Losses on a normalised earnings before interest, tax, depreciation and amortisation basis were $2.2 million, beating the guidance given at the annual meeting in September of  $2.4 million to $2.7 million, and down from $2.3 million a year earlier. However, the latest ebitda loss included inventory impairments, which were now treated as a normal part of the ongoing business. If excluded, ebitda would have been little changed.

"Operating costs continue to exceed sales, but SeaDragon continues to work hard to achieve a breakeven position, which will be achieved when the company sells 600 to 700 tonnes of fully refined tuna oil (at current market prices, exchange rates and costs) in a single 12-month period," according to the statement from chair Colin Groves.

It sold 82 tonnes of that oil in the first half of the year and Groves said the company was "working hard to secure additional orders in the near future."

He said sales momentum "is obviously not as strong as the board or shareholders would like, but we are confident the steps we are taking will set up SeaDragon for the long term.”

The company had sufficient capital to achieve its growth plans if it met sales targets, with $2.29 million cash on hand as at Sept. 30. Drawing down the remaining $1 million of the $3 million convertible loan facility from Comvita "gives us the flexibility to build sufficient inventory ahead of anticipated large orders and gives our customers greater assurance over order fulfillment," Groves said.

Commenting on the outlook, he said the full-year result  "is obviously linked to securing new customers and making further sales to existing customers."  That's less specific than the outlook given at the AGM in September when Groves said Seadragon expected "a lower loss than last year - assuming we are able to meet our current sales expectations."

The company posted a loss of $6.7 million last year.

The shares fell 17 percent to 0.5 of a cent, valuing the company at $22.6 million, and have dropped 25 percent this year.


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