Can this Ag play recover?
This is a small company creating products from rice and grain. $40-50M in revenue this year and about a $50M market cap. Not currently profitable but growing and shifting its mix of business into higher-margin products.
The reason to be interested in is that if the company can get back to the gross margins of ~20% from 2018 and earlier they have 40c a share in earnings power with the stock currently trading around 65c. They are currently reporting small losses with 2% gross margins but are cash flow positive.
Two new board members, Jean M. Heggie and Will T. Black have the experience and connections needed to help the company get into higher-margin business with potential customers like DuPont $DD. These two people are also notable due to their background and experience relative to a company this diminutive in size.
There is a large visible seller of the stock (Continental Grain) that bought $12M of stock years ago at $3/share. This is chump change for them as they are also divesting about $240M of Bunge $BG where they easily doubled their money. The board member from CG has resigned so this appears to be a very price-insensitive seller.
Strategy and Positioning
Higher value products from the milling process are soluble powers and related products that can go into organic and gluten-free foods for pets and humans.
Unfortunately, the company is not breaking out its revenues by segment. That would be a big help if it’s indeed going in the right direction. Management did say that their distribution partner in the higher-margin segment, AIDP, “was meaningful in the quarter” during their recent earnings call.
The company would like to position itself alone in the rice and grains segment as shown in its investor deck but it’s not really an IP-intensive business. Cargill makes rice-based products too that appear to compete with those of RiceBran.
RiceBran may have an edge though in terms of their more natural and organic production methods versus the big players.
Developments to Watch
Additional distribution agreements in the higher-value product categories would be a big plus. It could accelerate their transition to a better product mix with higher margins.
They announced capacity additions recently which should translate into sales growth but we don’t know the timing and size yet.
Although they don’t appear to need additional capital management has done some “at the market” ATM financing in the past with their sole banker Lake Street Capital. That turned into a registered direct offering. It also included warrants.
Can they upgrade their banking and research coverage from what they have now?
Management will be presenting at the LD Micro conference in a couple of weeks so we will be in a position to learn more about these future developments then.