Ocean Harvest Technology Group [LON:OHT], the Berkshire-based animal-feeds-from-seaweed company published its end-of-year results to December 2023 today (25th March).
Ocean Harvest was one of The Armchair Trader’s ‘One to Watch’ stocks last year and since we covered the company last, which operates in Vietnam, it has had encouraging progress, increasing its gross margin from 31% to 38% and increasing gross sales by 28%.
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However, on a revenue basis the company’s total reported revenue did undershoot its guidance reported in September of not less than EUR3.4m, hitting reported revenue of EUR3.37m, which in the grand scheme of things was close enough.
Ocean Harvest Technology trial pipeline
The important strides Ocean Harvest had made is in the trials it is running – aiming for a trial pipeline of at least EUR10m. The animal feeds company has initiated multi-species trials of its food supplement including poultry, swine, and aquaculture which in total (should the trials proceed with success) should represent annual product revenue of around EUR15m, a EUR10m increase since the start of the year.
The AIM-listed company saw for the first-time sales into Taiwan, South Korea and India and the region is a growing market for Ocean Harvest with 20% of the company’s revenue from the Asia Pacific, but is still primarily focussed on the Americas, with 50% of revenue derived from this region.
As previously reported Ocean Harvest’s product isn’t just dried, pelletised kelp, as kelp isn’t exactly a scarce resource, but a fortified seaweed with dietary supplements added in a special blend. The company manged to secure two patents for its formulas for the year.
The company also improved its financial position, securing a EUR2m receivables financing facility to add to a cash balance of EUR2.6m.
The majority of Ocean Harvest’s customers are existing animal feeds producers and use Ocean Harvest’s products as a supplement to their own feeds and these are then on-sold primarily to poultry and swine producers. The blend of supplements is tailored to different end-species but the company also manufactures seaweed-only blends.
Sustainability is a key part of the offering
Sustainability is a key part of Ocean Harvest’s offering. Although not a finite resource, seaweed is plentiful and easy to cultivate, moreover the carbon emissions of one tonne of seaweed compared to cereals and soybeans when cultivation, transportation and processing is taken into account, is significantly lower than other animal feeds, and when in vivo the target species, produces less greenhouse gas emissions than the alternatives, making seaweed a much less carbon-intensive food source for agriculture.
The seaweed species that Ocean Harvest utilises contain compounds called bromoform and iodoform, which are thought to be responsible for a methane-reducing effect in animals. Moreover, the species it harvests from the wild are invasive, caused by run-off from land-based pollution, and are growing quickly in the areas it gathers from – so is a bit of a problem to the local flora and fauna, as well as the people who live nearby. Wild collection is also in dollar terms cheaper per tonne than cultivated seaweed.
As previously reported Ocean Harvest primarily collects seaweed in South-East Asia, specifically Vietnam, but in last year returned to harvest in the Philippines, a market that it had not sourced from since the Coronavirus pandemic. The company collects a range of seaweeds and has found new supplies in Indonesia, started collecting in East Africa and harvesting brown seaweed in the Republic of Ireland. Ocean Harvest also increased its processing facilities in Vietnam, having installed a new grinder in 2022 which started contributing in 2023 and helped increase margins.
As previously reported Ocean Harvest is quite a new addition to the Alternative Investment Market, having joined the index in April 2023. The company was established in 2005. The company is still some way off being profitable, with losses increasing 19% year-on-year to EUR3.5m and it will be a while until it swings to profitability.
The share price has also disappointed, opening the week at 12.515p, down 26% over one-year but up 32% year-to-date. The company’s shares have ranged between 8.5p and 27p over a 52-week period. The company has a market capitalization of GBP15.7m.
The company is trending in the right direction, with increased revenues and if some of its trials proceed to commercialisation a reasonable sales outlook. Ocean Harvest could be one to buy and file away for the future.
