NutraCea: 2007 Capacity Expansion Should Bode Well for Shareholders

Feb.22.07 | About: RiceBran Technologies (RIBT)

I didn’t really get a lot of new information in NutraCea's (NTRZ.OB) presentation, but I will highlight two of CEO Brad Edson’s comments which I found particularly interesting.

First, he noted that pricing is significantly higher than what he is putting on his slides. So, by using his numbers, we are probably underestimating revenues by about 10 percent.

Second, he also mentioned the possibility of “leveraging the $50 million” in order to expand more rapidly. I would be interested to see what he has in mind, but it sounds like they are looking to build out even more rapidly.

Finally, he noted that there are “much larger mills outside the United States,” and that bigger is better as far as building plants go. My sense is that, if they can get the deal done, NutraCea would like to use the $50 million to build a really big plant, in order to maximize the effect on cash flow as soon as possible.

Tuesday morning’s announcement of further expansion at the Montana plant is also interesting. I think it is a good exercise to go ahead and list the expectations for capacity and revenue in 2007, according to what we know. To translate capacity to revenues, I am using Brad’s admittedly low pricing numbers of $400 per ton of SRB, $2000 per ton for insoluble fiber, and $10,000 per ton of soluble fiber.

Q1 2007: Annual capacity of 10k tons of SRB, 900 tons insoluble fiber, 900 tons soluble fiber. The capacity run rate is about $3.7 million given Brad’s numbers. However, based on last quarter’s numbers (when capacity was the same), this should translate to revenues of about 6 million when some licensing and pricing difference is added.

Q2 2007:
LA facility comes online, increases total capacity to 40k tons of SRB, 900 tons insoluble, 900 tons soluble. Further Dillon expansion may have some impact as well, but that is not included here. LA expansion adds $4 million (at low prices) to capacity, so revenue will likely come in around $11 million, and very possibly higher depending on prices and the progress of the Montana expansion.

Q3 2007: Further Montana expansion comes online, increasing total capacity to 40k tons SRB, 1350 tons insoluble fiber, 1350 tons soluble fiber. Building of new Stage I and Stage II plant may be completed at some point in the quarter, but is not included here. The Montana expansion should add about $1.5 in revenue for the quarter (at low prices), bringing the Q3 revenue number up to about $13 million allowing for some further licensing.

Q4 2007: Stage I and Stage II plant comes online, bringing total capacity to 66,400 tons SRB, 3150 tons insoluble fiber, 3150 tons soluble fiber. This adds about $8 million in revenues to Q4, again assuming Brad’s low prices, and gives us $21 million for the quarter.

So, based on the known capacity expansion for 2007, and assuming that everything comes online later rather than earlier, and with low prices for the product, we already have revenues of about $51 million for the year. It looks to me like with higher prices factored in, the should be able to make $60 million in revenue for the year. That is solidly in the middle of my estimate range from yesterday, and that bodes well for shareholders.

Disclosure: Author is long NTRZ.OB.