23rd April 2021 By Bridget O'Connell | firstname.lastname@example.org | @foodtickernz
Christchurch biotechnology company PharmaZen has suffered a difficult first quarter dogged by delays to its $8m capital investment programme and resultant capacity constraints.
In its annual report the company, which traded as Waitaki Biosciences and has a portfolio of nutraceutical ingredients that covered joint, bone, muscle and digestive health, along with marine and bovine collagen and animal nutrition, said the disruption was taking a toll on sales.
At the centre of the delays were two new freeze dryers that were set to play a critical role in an expansion of production in Q1, but their delivery and installation had been knocked back by various lockdowns, shipping constraints and the restricted movement of commissioning staff.
“The first quarter of 2021 has been a difficult one with continued delays to the delivery and installation of the first new freeze dryer challenging our ability to service demand,” chair Ken Fergus said.
“Orders received for the quarter were significantly up on first quarter 2020 sales, however, our capacity constraints have seen us around four weeks behind schedule resulting in actual sales being lower in Q1 2021, than Q1 2020.”
He added that shipping logistics resulting in containers being off-loaded on multiple occasions had compounded the capacity challenges.
As a result, PharmaZen “has been forced to absorb higher costs from increased use of air freight – on top of the already increased prices across other forms of transport,” Fergus said.
At the year end in December PharmaZen had more than $8m of capital installations underway, with approximately 40% of these projects originally anticipated to be operational in 2020.
The company had embarked on the investment programme after last year selling a 13.8% stake to ADM Capital Europe’s Cibus Fund for US$14m as demand for its nutraceutical ingredients including marine and bovine collagen, fruit extracts and protein ingredients skyrocketed.
These ingredients included greenshell mussell powder, shark cartilage powder and blackcurrant extracts, to support areas such as joint, bone, muscle and digestive health.
The Q1 update came after a bumper year for the group when it posted a 30% increase in net profit to $5.2m, on the back of a 24% hike in sales which rose from $17.3m in 2019 to $21.5m in the year to December 2020.