Neptune Technologies could come back stronger than ever, says Byron Capital’s Loe

Byron Capital analyst Douglas Loe says Neptune Technologies (Neptune Technologies Stock Quote, Chart, News: TSX:NTB) is on the road to recovery from its Sherbrooke disaster. He says that after an upcoming year that will likely be soft, the company could return to form, and then some.

Last Wednesday, Neptune reported its Q4 and fiscal 2013 financial results. For the quarter, the company lost $1.14-million on revenue of $4.59-million, comparing unfavourably to a loss of $133,000 on revenue of $5.36-million in the same period last year.

Much of the downturn, of course, can be blamed on the events of last November 8th, when an explosion at its Sherbrooke facility killed three people and injured eighteen more.

CEO Henri Harland said Neptune has made real progress following the dark day.

“Our quick reaction to the incident has enabled us to effectively manage through a difficult period and put in motion key initiatives to ensure we are positioned for a strong recovery and continued market momentum,” he said. “As well, our strong sales and marketing focus has allowed us to maintain the Neptune name and brand equity in the marketplace. Despite the obvious production disruptions, we have maintained a significant portion of our preincident client base through solid customer relationships, creative supply management and margin concessions”.

Loe says that on a conference call following the results, management provided details on how it expects to expand so that its annual krill oil production can return to 150 metric tonnes. Loe says “dramatic improvement” to levels at or above the first half of fiscal 2013 should be achievable in fiscal 2015 and beyond. In a research update to clients this morning, Loe maintained his BUY rating and $4 target on Neptune Technologies.

Loe says he had found the details on the projected pace of Neptune’s capacity scale-up a bit vague, but he feels there is much more clarity now. It is his understanding that the company does not intend to reconstruct its legacy facility, but to regard the expansion of that facility as its main plant. He notes that that Neptune now has the necessary permits from the city of Sherbrooke to resume construction.

Shares of Neptune Technologies on the TSX closed today up 1.4% to $2.89.

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