Five Ways Solazyme Beat 2011
Maxxwell A.R. is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Solzayme (NASDAQ: SZYM), the anointed champion of the sustainable chemicals industry, recently reported earnings for fiscal year 2011. The company demonstrated that making even incremental progress in the sustainable chemicals industry is enough to win the hearts and hard-earned dollars of investors. The company had an impressive 2011 and remains the bright-spot in a gloomy, beaten-down industry. Here are five ways Solazyme beat 2011:
- Total revenue for 2011 came in at $39 million dollars, which was just higher than the $38 million reported the previous year.
This isn't impressive, but it is better than no revenue. As with most budding sustainable chemical companies R&D funding provides a good chunk of revenue. For instance, Codexis (NASDAQ: CDXS) cited revenue of $123.9 million for fiscal year 2011 with only about $49 million coming from sale of product. Solazyme stated that of the $14.9 million generated in 4Q11 one-third came from a license payment from Roquette.
This is healthy and natural for players in the industry. For one, it means the company has partners who believe in them and are willing to stick out the long journey to profitability.
- Delivered 100 percent of commitment for algal oil for the Navy Green Strike Program ahead of schedule.
Deliver they did. Solazyme delivered a whopping 407,000 liters (107,518 gallons) of in-spec oil to the U.S. Navy. It isn’t uncommon for fermentation vessels to reach one-quarter of this volume, which would represent about four batches of oil. This is a start, but there is still a long way to go.
I understand that the company is in uncharted waters, so depending on your take on the situation this is either really impressive or generates a big yawn. Regardless, the positive news for the industry should still invoke a smile.
- Commenced operations at Peoria plant.
The first true commercial-scale facility will be the 100,000 MT renewable oil plant with partner Bunge (NYSE: BG) in Brazil and will represent 20% of the company’s 2015 production capacity. In order to work out some of the inevitable kinks in the scale-up process, Solazyme has been gradually upgrading their Peoria, IL plant. Once a pilot-scale facility, the company began operating it at semi-commercial scale. I bet Amyris (NASDAQ: AMRS), who recently pushed back production target dates after falling behind their own scale-up schedule, wish they had thought of this one.
- Commercial momentum for Algenist®
No matter how hard I try I fail to understand the enthusiasm people reveal about make-up. I don’t know why…
The Algenist® product line is now found in over 1,100 stores worldwide, which is very impressive. As one of the first sustainable beauty lines it will fuel revenue and growth for Solazyme for years to come. Think about it, there is a lot of market to capture.
- Commercial momentum for Solazyme Roquette Nutritionals.
The mad scientists from the joint-venture are still trying to make ice cream from algal oils. Ok, that’s not quite their focus in the $250 billion nutraceuticals market. As food suppliers and consumers become increasingly aware of what goes into their food and where their food comes from, Solazye Roquette Nutritionals has an opportunity to position itself as a market leader and innovator. That is never a bad thing.
Overall Solazyme continues to make progress on all fronts. The lack of embarrassing developments such as those at Amyris can certainly aid a company’s image, especially with the low investor morale in the sustainable chemicals industry. But does the company really warrant a $784 million market cap?
Solazyme ends 2011 with a $244 million cushion in cash and cash equivalents ($216 million from IPO). That can vanish quickly when hammering out 500,000 MT of commercial production capacity. I will make another rather obvious prediction by stating that the company will need to raise more money by 2015 in order to reach their goals. DOE grants and partner license payments will likely not be enough.
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