Neptune on the road to recovery from Sherbrooke tragedy, says Byron

After the tragic events at its Sherbrooke facility on November 8th of last year, Neptune Technologies says it will rebuild, beginning this March. On Tuesday, Neptune Technologies (TSX:NTB) reported its Q3, 2012 results. The company lost $12.43-million on revenue of $7.02-million, which was up 37% from $5.12-million it reported in the same period last year.

Of course, the larger story here is the company’s heavy-hearted recovery from the November 8th explosion at its Sherbrooke facility that killed three people and injured eighteen more.

Neptune CFO Andre Godin was plaintive about the company’s progress. “We welcome the first interim payment from our insurer, given the importance of our insurance recovery in pursuing our action plan to resume production.” he said.

Byron Capital analyst Douglas Loe says Neptune’s Q3 was “surprisingly strong”. Yesterday, the healthcare and biotech analyst participated in a conference call the company held to update shareholders, and came away with the impression that Neptune’s prospects, excepting a few soft quarters he expects to follow this most recent one, are solid. In a research update to clients today, Loe maintained his BUY rating and $4 target on Neptune.

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Loe says Neptune’s insurance is, as expected, providing a buffer and reducing financial risk. The company, he says, expects to shortly receive $6 million in property insurance related to the facility explosion, and could be eligible for as much as $14 million in additional capital from property and business interruption insurance. He says Neptune’s plans are to rebuild, beginning in March of this year. The new facility should be operational by the third quarter of fiscal 2015.

In the meantime, Neptune will likely source krill oil from other suppliers, although no such arrangements have been announced yet. Because of this, Loe says he must assume that Q4’s revenue will come from Neptune’s own “substantially depleted” supply. He believes the company’s sales will total just $2.1 million for this quarter, and it will lose $2.3 million, with the caveat that those numbers could change if a supply agreement is quickly reached.

Shares of Neptune Technologies on the TSX today closed up 3.3% to $2.50.

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