Crailar Technologies Inc. commenced commercial production and shipped small quantities of high quality flax fiber in the first quarter, but only after outsourcing production while it worked to bring a recently acquired factory online in Europe.
“The first quarter was an exciting period for Crailar as we began filling customer orders with the best fiber we have ever produced,” Crailar Technologies CEO Kenneth C. Barker. “Customer feedback continues to be very positive; our customers are increasing the blend levels of Crailar in their products; and we are receiving 2015 order forecasts in excess of our current capacity. We are also excited by the hemp opportunity, a great fiber for denim and durable fabric applications.”
The Canadian company, which raised millions of dollars in capital from Adidas and Swedish retailer IKEA last year, makes natural fibers from flax, hemp and other plants that can be used to make a garment that is as soft and durable as cotton, but requires much less water and pesticides to cultivate.
Crailar reported its sales reached $400,000 for the first quarter ended March 29, compared with zero in the first quarter of 2013. Net loss reached $2.6 million, or 5 cents per share, , compared with no sales and a net loss of $3.2 million, or 8 cents per share, in the year earlier quarter.
The company had to outsource production during the quarter but expects to install equipment needed to bring the production in-house by the end of the current quarter. Once installed and ramped up, the equipment is expected to eliminate outsourcing costs. Additional equipment to provide energy, chemical and labor savings is scheduled to be installed and operational by the end of the third quarter.
“While we are pleased with the fiber we are producing, we are anxious to complete commissioning our plant in order to achieve production efficiencies and develop feedstock sources to expand margin,” said Barker. “Assuming the elimination of commissioning costs and excluding fixed plant expenses, our variable contribution margin for the first quarter was 17 percent despite the production inefficiencies experienced while construction was underway, We have a logical path to expand variable contribution margin and we look forward to updating investors in future quarters.”
Crailar ended the quarter with cash and cash equivalents and investments of $3.9 million, up from $1.2 million on Dec. 28, 2013. The increase in cash equivalents of $2.7 million resulted from $2.2 million of cash used in operations and $600,000 of cash invested property and equipment offset by $5.2 million of cash from financing activities from a private placement of equity of $3.1 million and $2.1 million from the IKEA working capital and equipment financing loan. Hydra Ventures B.V., the in-house venture capital fund of Adidas Group, announced in December, 2013 that it had agreed to invest CAD$2.0 million in Crailar.
Crailar expects second quarter 2014 sales in excess of $1.0 million; more than double sales for the first quarter 2014. Capacity will be limited during the second quarter as equipment installation requires the interruption of production while the plant is being configured to optimize Crailar production. The company expects those modifications to be completed in the second quarter.
