“Much of the rice protein that is in beverages that we see on the shows in the US is coming from Asia and that protein has its challenges from the point of view of compliance, certain things that some people are concerned about with stuff coming out of the Asian supply chains,” said John Short, president and CEO of RBT in an earnings call with analysts.
“One of the advantages we will have as we bring our protein products to market is that they're coming out of California which is proceed to be the highest quality rice, the highest quality brand that is subject to the most stringent regulation from the point of view of quality control and compliance,” he added.
Short said RIBT had partnered with DSM on the technology upgrade to its plant in Dillon, MT to allow the production of the new Proryza protein line there. Prior to the upgrade and expansion of the plant, the facilities full capacity of rice bran derivatives for foods, beverages and dietary supplements was already sold out, he said. RIBT bases its product line on its unique technology that allows for the stabilization of the oil-rice rice bran, a raw material stream that up to that point had a tendency to quickly become rancid and was consigned to low value uses such as a bulk feed additive.
Specter of drought
Rice is of course a water intensive crop (there is a dry, upland version of the grain that is not farmed commercially). The rice fields around Sacramento, CA, is one of RIBT’s main sources of raw material, and this has been greatly affected by the unprecedented level of drought in that state. A recent, widely circulated piece written by a scientist at NASA’s Jet Propulsion Laboratory in Pasadena speculated that California was months away from running out of water and has cast a cloud over the future in the state of thirsty crops such as rice and almonds.
“Looking back on our performance in 2014 by segment while the demand picture for our USA segment remains strong, we experience supply chain disruptions in the second half of the year largely related to California’s now a 1000-year drought, where rice plantings in the region were down 25%. Reduced rice for milling meant less raw bran availability and higher raw bran prices that resulted in delayed shipments and some cancelled orders in the second half of 2014,” Short said.
The company said it plans to respond by expanding its base of raw material suppliers in both California and Louisiana (which, along with Arkansas, are the three main rice growing states in the US) and building more warehouse space.
The company is also in the midst of retrofitting its plant in Pelotas, Brazil, in the county’s far south, to bring it up to human nutrition ingredient standards and to bring the process there more in line with that used in Montana. Drought affected the rice crop in the region in the previous year, but Short said recent heavy rains have made for a bumper harvest that is being brought in at the moment. Sourcing materials in both hemispheres gives the company year-round supply, he said.
Earnings details
In 2014, consolidated revenues grew to $40.1 million, a 14.4% increase over 2013, when full year revenues were $35.1 million. RBT recorded an operating loss of $12.8 million for the year, or $3.96 per share. That compared to an operating loss of $10 million in 2013.