Thousand Oaks, California, USA
November 21, 2013
Energy crop company Ceres, Inc. (Nasdaq: CERE) today announced financial results for the fiscal year ended August 31, 2013 and provided an update on its business in Brazil.
The company reported that plantings for the 2013-2014 sorghum growing season in Brazil have commenced and are expected to continue through December. With industrial processing of Ceres' sweet sorghum hybrids generally well established, these plantings consist primarily of smaller, multi-hybrid evaluations designed to determine yield potential, identify the best performing hybrids for specific regions and to demonstrate various crop management practices.
"Our goal this season is to clearly demonstrate the economic basis for sweet and high biomass sorghum cultivation and processing," said Richard Hamilton, President and Chief Executive Officer of Ceres. "We have made a number of adjustments to our product development process and go-to-market approach, with an emphasis on consistent execution of our crop management protocols."
Mr. Hamilton noted that field performance will largely determine the scale and pace at which the company's products will be adopted moving forward. "We have significantly increased yields of fermentable sugars since our first industrial evaluations in 2011 and we expect to continue to develop a stream of higher-performing hybrids that provide a greater buffer to variable growing conditions and crop management practices," he said.
Ceres Chief Financial Officer Paul Kuc indicated that the company is moving forward with previously reported plans to reduce expenses in fiscal year 2014. "The priority for our working capital will be product development and commercial activities related to sorghum and our near-term opportunity in Brazil. We will also continue to advance potentially high-value traits, like yield and drought resistance, in our pipeline for use in sorghum as well as in row crops," he said.
RECENT BUSINESS HIGHLIGHTS
- For the 2013-2014 season, Ceres expects to evaluate its sorghum hybrids at approximately 50 mills and mill suppliers. These evaluations include approximately 10 hybrids, including commercial and pre-commercial products. Plantings are expected to cover up to approximately 1,000 hectares compared to approximately 3,000 hectares the previous season due primarily to a greater focus among mills on field performance, which can be determined at a smaller scale than evaluations needed for confirming industrial performance. Approximately 30 mills evaluated the company's sorghum products last season.
- The company has expanded the number of locations and scope of field evaluations of pre-commercial products and advanced breeding materials in Brazil in order to better position its future products among various geographies, growing conditions and production practices. These breeding materials have demonstrated, among other characteristics, step increases in yields, greater yield stability, longer periods of industrial utilization and greater adaptation to various growing conditions and harvest times.
- Former Brazil Agricultural Minister Roberto Rodrigues has agreed to chair a sorghum advisory council established by the company's Brazilian subsidiary. The council will provide strategic advice and support for the introduction of the biofuel crop in Brazil. Members represent companies in industrial ethanol processing, agricultural production and bioenergy.
- In October, Ceres announced that the company extended a joint market development agreement with Syngenta in Brazil. Under the renewed agreement, Syngenta and Ceres will continue to collaborate on field evaluations with mills. Syngenta indicated that it plans to move forward with its evaluations aimed at registering additional crop protection products for sorghum.
- In China, field evaluations of several Ceres' biotech traits in corn have demonstrated significantly higher grain yields under drought conditions. The company intends to seek out-licensing opportunities for certain of these traits in corn once further evaluations allow their commercial value to be more definitively determined.
- In India, results from rice evaluations completed this month confirmed that genes developed by Ceres provided improved yield stability under drought and other stress conditions that routinely limit productivity. These genes are currently being introduced into breeding lines by the company's commercialization partner in India.
- In October, Ceres reported that it would further align expenditures with its near-term commercial opportunity in Brazil, relocate its Northern Hemisphere sorghum breeding activities, reduce research and development expenditures for U.S. cellulosic feedstocks, reduce overall costs and conserve cash. These changes are expected to deliver cash savings of up to approximately $5.0 million in fiscal year 2014 and up to approximately $8.0 to $10.0 million annually thereafter.
YEAR-END FINANCIAL RESULTS
Total revenues for the year ended August 31, 2013 were $5.2 million compared to $5.4 million for the previous fiscal year due primarily to a decrease in collaborative research revenue.
Cost of product sales was $6.2 million for the year ended August 31, 2013 compared to $2.4 million for the previous fiscal year. The increase was primarily due to write-down expenses of $2.2 million for obsolete seed inventory relating to the company's sweet sorghum products and $1.7 million for crop management services performed under certain sales incentive and performance-based promotional programs for the 2012-2013 growing season in Brazil.
Research and development expenses decreased by $2.8 million to $16.4 million for the year ended August 31, 2013 compared to the previous fiscal year due primarily to reduced personnel and related expenses in the U.S. as well as reduced external R&D expenses.
Selling, general and administrative expenses were $15.2 million for the year ended August 31, 2013 compared to $12.6 million for the previous fiscal year due primarily to increased personnel and related administrative expenses in Brazil.
For the fiscal year ended August 31, 2013, Ceres reported a net loss of $32.5 million, or $1.31 per share, compared to a net loss of $29.4 million, or $2.18 per share, for the fiscal year ended August 31, 2012.
At August 31, 2013, cash and cash equivalents and marketable securities totaled $30.5 million.
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