Solazyme's Q1 results focus on progress at Brazil algal oil plant

By Katie Fletcher | May 07, 2015

On May 6, Solazyme Inc. released its financial results for the first quarter of 2015, reporting updates on the year’s commercial activity and algal oil manufacturing facilities, with the company’s focus being on its Brazil Bunge Oils Moema facility.

Total revenue for the first quarter ended March 31, was $12.6 million, up slightly from $12.4 million in the comparable period of 2014. Reported product revenue of $8.8 million was up 20 percent from quarter one of 2014. GAAP net loss was $34.7 million for the first quarter, equivalent to the first quarter of the prior year. On a non-GAAP basis, the net loss was $29.5 million for the first quarter of 2015, compared with net loss of $30.5 million in the comparable period in 2014.

"We’ve been busy executing on our focused operating plan for 2015 and are pleased with the momentum we are seeing across the company and in our manufacturing and commercialization efforts specifically," said Jonathan Wolfson, CEO of Solazyme.

The momentum Wolfson first mentions on the investor call is progress at the Moema facility in Brazil. Contributing to the progress were enhanced downstream recovery rates and several multi-week periods in which the company had uninterrupted delivery of power and steam, which translated into periods of continuous and integrated operations, Wolfson said.

He added that they had some downtime mid-April and other abbreviated periods, but the frequency and severity of outages is diminishing, and they expect more improvement once redundancy projects are completed—scheduled for the end of June. The two key improvement projects include the deployment of back-up systems. “The second boiler tie-in is now complete and operating, though it has not yet been tested, and the electrical grid tie-in is now physically complete, though it is not yet operational,” Wolfson said. “These two projects are expected to provide significant, though not complete, redundancy of power and steam to the facility, and we’ll evaluate the need for any further projects once they are fully operational.”

Solazyme was questioned about the impact the time of these efforts has had on the economics of the project. Tyler Painter, CFO with the company, said the delays have had an impact, but reminded those listening that the power and steam is something their partners are providing, and the investments are being made to provide reliability, so the company’s concern is more with the delay than the investment. Painter said, “From an overall, when we look at the plant that we have in place today, we fully expect that our long-term ability with both average time prices of products we see in the marketplace as well as our cost structure that we’ll be able to be delivering that 30 percent plus gross margin out of the plant.”

Wolfson added that the main impact has been with the operating expense. “The biggest pain we’ve seen is with longer time lines, and longer time lines lead to greater operating expenses both at Solazyme and at the JV.”

The 2015 goal of reaching consistent, fully integrated operations and ramp-up production volumes remains, as stated in Solazyme’s end-of-year results reported by Biomass Magazine in March.

Regarding the facilities downstream processes, in the first 10 weeks of production more than four times the oil was produced than the entire 2014 output. The company also briefly mentioned its Clinton/Galva, Iowa, facilities. Wolfson said Solazyme expects its high-value products and higher value tailored oils will ramp up as the year progresses, with a moderate increase in the second quarter production from quarter one.

On the commercial side, Wolfson reported the company has experienced positive developments in both its Encapso and AlgaVia product lines as well as its Algenist skin care line. The company reached a strategic alliance agreement with Flotek, under which Floteck will market Encapso in certain Middle Eastern markets, expanding its geographic footprint. Additionally, Solazyme entered into a joint product development and marketing agreement for a new product called Flocapso, an advanced drilling fluid. “We’ve now been in multiple wells in Alaska and recently secured our first customer in South America where both Encapso and Flocapso are being incorporated into a multi-project in Columbia,” Wolfson said. “We also shipped product to a new distribution and expect well trials in the Middle East in the coming months.”