Blue Star Foods recorded higher revenue but much lower gross profits in the quarter ending 30 June, 2022, as it announced plans to open a recirculating aquaculture system focused on soft-shell crab production.
The Miami, Florida, U.S.A. -based supplier’s net revenue rose 39 percent to USD 3 million (EUR 3 million) due to higher market prices of its product and helped by its soft-shell crab operations, which contributed USD 500,000 (EUR 503,000) in revenue.
“We continued our positive momentum during the second quarter and we believe remain on track to nearly double revenue for all of 2022, as compared to the USD 10 million [EUR 10 million] revenue we generated in all of 2021,” Blue Star Chairman and CEO John Keeler said.
However, Blue Star’s gross profit for the quarter plummeted 41 percent to USD 300,000 (EUR 302,000).
“This decrease is attributable to higher market prices and higher cost of goods sold,” the company said. Its corresponding gross margin declined to 11.4 percent, compared to 26.8 percent for the same quarter of 2021.
Blue Star attributed the gross-margin decline to cost of goods inflation and freight fuel surcharges.
“Over the long-term, we hope to pass this on through higher wholesale prices,” Blue Star said.
Its net loss also soared 229 percent to USD 1.4 million (EUR 1.4 million).
Keeler said the company’s losses were belied by the beginning of its plan to build a soft-shell crab RAS operation in March 2022.
Blue Star also selected HTH Engineering and Equipment LLC as its the RAS technology provider for its planned expansion of its soft-shell Atlantic crab RAS farm in Jasper County, South Carolina, U.S.A. The company acquired the facility when it purchased Gault Seafood in December 2021. Construction on the new facility is expected to start by the end of September, and installation of the RAS will take place by the end of December.
Blue Star will begin operations on the farm in the second quarter of 2023, and expects the first commercial harvest in the third quarter of 2023. When it's fully built, the new facility will be able to "harvest over 220,000 dozen" soft-shell Atlantic blue crab annually, according to Keeler.
“In this second quarter, we ramped our investment in our RAS divisions to position us for expansion in the second half of the year and into 2023. Without such incremental investment and our non-cash expenses, our operating profitability would have been similar to previous quarters,” Keeler noted.
During the quarter, Nanaimo, British Columbia, Canada-based Taste of BC Aquafarms, which Blue Star acquired in June 2021, hatched its first batch of chinook salmon, “as part of its process to explore potential future species diversification within the Pacific Salmon family.”
"We believe that RAS is the future of our industry and win-win for all the stakeholders involved in a seafood supply chain that is sustainable over the long-term,” Keeler said at the time.
During the quarter, Blue Star made a significant investment to build up the raw material and biomass inventory at Taste of BC Aquafarms, which is expected to be sold over the remainder of 2022, the company said. At the end of the second quarter, the company had standing biomass of 40 metric tons (MT) in its facility, which was originally designed for 27 MT.
“This expansion was a major success without compromising water conditions or fish performance,” Blue Star said.
“We are very pleased with the early results and USD 500,000 million revenue contribution in the second quarter, as we look for its pending expansion to be a major differentiator for us and contributor to profitability,” Keeler said. “Initial response from our seafood distributors and customers has been favorable in validating our sustainable indoor fish-farming technology and processes.”
During the quarter, Blue Star appointed Miozotis Ponce as chief operating officer and appointed Silvia Alana and Juan Carlos Dalto to its board of directors.
Keeler said he has a positive outlook on the company’s performance over the remainder of 2022.
“We believe we remain on track to restore our legacy business to pre-pandemic levels of approximately USD 20 million [EUR 20 million] of annual revenue [achieved in 2020],” Keeler said.
Photo courtesy of Blue Star Foods
