Friday, September 5, 2014

Bio-based Chemical Companies Financial Performances

The financial performance of six companies (Amyris; Bioamber; Gevo; Kior; Metabolix; and Solazyme) that focus on developing chemical products and fuels from renewable raw materials were analyzed using their annual reports.   Here are some conclusions:

Over the last three years (2011 to 2013), only Solazyme has consistently been able to price their products high enough to cover the cost of products sold.  The other five companies more often than not had negative gross profits (cost of sales exceeded revenues from the products sold).  This suggests an inability of these five companies to compete in the market with low-enough pricing, but at prices high enough to cover the costs of the products sold.

The total research and development (R&D) expenses ($679,024,935) reported by the six companies over the last three years are twice the total revenues reported by these companies ($339,280,858).  In addition, the capital expenses (e.g., expenses for equipment and construction) of $512,916,197 are one and a half times the revenues.

These large R&D and capital expenses, compared to revenues, account for a significant part of the total net losses ($1,726,733,148) reported by the companies over the last three years.  These high R&D and capital expenses will more likely than not result in some success at generating new, useful, and profitable products.  However, unfortunately, some of these companies will likely not survive, and a difficulty is in predicting which products and companies will.  The six companies’ financial results over the last three years do not give much help with this difficulty. .  For example, although Solazyme and Bioamber revenues have had compound annual growth rates of 41% and 68%, respectively, from 2011 to 2013, both companies have also had huge net losses for each year.

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