Seadragon, the fish oil refiner, more than quadrupled its first-half loss with revenue falling as the company continued its transition to higher value Omega-3 fish oil products from Omega-2.
The company posted a loss of $3.4 million in the six months ended September 30, from $688,000 in the same period a year earlier. Revenue dropped 34.6 per cent to $3.1m, with negative normalised earnings before interest, tax, depreciation and amortisation of $2m, from negative ebitda of $146,000 in 2015's first half.
"The negative normalised ebitda reflects the ongoing impact of exiting Omega-2, including sales of Omega-2 inventories previously impaired, and the transition and start-up nature of the Omega-3 business," the Nelson-based company said in a statement to the NZX.
The company has been processing smaller quantities of oil through its new Omega-3 refinery to produce samples for prospective customers, meaning the fixed refinery costs have been spread over smaller quantities of oil, which is reflected in the first-half results, it said.
Seadragon said it is capable of processing Omega-3 oil to supply to Europe, the US, China, Japan and Australia and is in discussion with multinational "key potential customers" but there's no guarantee of a contract at this stage.
The company didn't give full year guidance due to uncertainty about its sales in the second half, but expects a negative ebitda result in 2017 "with a view to working towards positive ebitda in FY18."
Seadragon missed its 2015 annual earnings guidance of $144,000 in ebitda, with negative ebitda of $390,000, and a net loss of $4.9m. The auditors tagged the company's accounts, saying there were uncertainties that cast doubt on its ability to continue as a going concern. They were worried it may not have sufficient cash reserves to meet its obligations if it didn't receive continued support from investors and its bank, as well as achieving forecast cash flow.
Between September and October the company undertook a $10.9m rights issue at 0.8 cents a share. It wanted to raise up to $12.5m. Today, Seadragon said the raise has "provided us with additional capital to allow us to procure the supply of unrefined oil to be able to process and respond to customer demand rapidly once we have completed supply negotiations with key customers."
Some of the money raised will be used to reduce its external debt facilities, the company said, while $2m will be spent on repurposing its Omega-2 refinery as a "boutique" premium Omega-3 refinery, meaning the company has postponed adding further capacity to its Omega-3 facility which would have cost about $5m.
The shares last traded at 0.9 cents, and have declined 28 per cent this year.