Crailar Technologies Inc., a sustainable textile startup with ties to Adidas Group, reported sales grew nearly fivefold in the fourth quarter ended Dec. 27, 2014, but losses also soared as its took a non-cash charge for moth-balling its plant in South Carolina.
Crailar reported sales reached $1.9 million comared with sales of $0.4 million in fiscal 2014. It's net loss reached $8.2 million, or $0.12 per share, including an $8.0 million or $0.12 per share non-cash impairment charge associated with its idled South Carolina facility. The company reported a net loss of $3.2 million, or $0.07 per share, for the fourth quarter ended Dec. 28, 2013, which included an inventory impairment charge of $1.2 million partially offset by a $0.4 million bargain purchase gain.
The company's Adjusted EBITDA for the quarter was a loss of $0.3 million, a reduction of $0.8 million from Q4 2013's Adjusted EBITDA loss of $1.1 million.
During the fourth quarter of 2014, the company continued to make progress optimizing its European production facility. Fiber output volume increased by 43 percent over Q3 2014. Drying capacity was doubled with installation and programming of a second dryer and a kier overhaul which increases loads per cycle. Improved quality and volumes increased customer confidence and products using branded Crailar fibers were launched.
Forecasted demand for Crailar Fibers now exceeds plant capacity. Two customers are investigating dedicated facilities and have scheduled validation trials for Q2 2015.
New equipment installation and overhaul this quarter led to some production disruptions, and some equipment failures limited output. A preventative maintenance regime is improving plant stability. An $8.0 million non-cash impairment charge was recorded in Q4 to write-down the value of our South Carolina plant, equipment and feedstock. This charge reflects the company's focus on European production and lack of near term plans to restart the plant. Decortication equipment from that location may be redeployed to support future direct-to-farmer feedstock sourcing initiatives in Western or Eastern Europe.
Full year results
For the year ended Dec. 27, 2014, the company reported sales of $4.2 million and a net loss of $14.2 million or $0.25 per share, compared with $0.6 million sales last year and a net loss of $15.2 million or $0.34 per share. This year's loss includes the aforementioned $8.0 million impairment charge associated with the South Carolina plant. Last year's loss included a $4.6 million write-down of feedstock and seed inventory.
The company's Adjusted EBITDA for the year was a loss of $3.4 million compared with an Adjusted EBITDA loss of $6.0 million last year.
Based in Vancouver, British Columbia, Crailar was founded in 1998 as a clothing company but since 2006 has focused on commercializing the process of making non-woven fabrics from bast fiber plants such as flax and hemp, which require far less chemicals during cultivation than cotton and other natural fibers. Hydra Ventures B.V., the venture capital arm of Adidas Group NA, is the second largest outside shareholder in the company with 9.99 percent.
Supply chain initiatives
Crailar is focused on two strategic initiatives: reducing feedstock costs and increasing production volume. To reduce feedstock costs Crailar is expanding supply sources and beginning the process of contracting directly with farmers. Our feedstock strategies will allow us to improve margin, influence farming techniques (expanding potential fiber markets), and create a more secure supply chain. An optimized supply chain will create substantial cost advantages over traditional and competing sustainable fibers.
To increase production volume and satisfy customer demand, Crailar is optimizing the existing European plant and supporting customer validation trials. Expanded feedstock supply chain, direct to farmer sourcing, optimized production at our current plant, and future customer supported plants are critical future steps for Crailar's natural and sustainable fibers to disrupt the fiber industry.
Crailar is focused on bringing cost-effective, sustainable, bast fiber-based products to market that are environmentally friendly natural fiber alternatives with equivalent or superior performance characteristics to cotton, wood or fossil-fuel based fibers. The company's business operations consist primarily of the production of its natural and proprietary Crailar Flax fibers targeted at the natural yarn and textile industries, as well as the deployment of its Crailar processing technologies in the cellulose pulp and composites industries.
