Crailar Incurs Losses in Prelude to Production

Flax manufacturer began commerical operation in January.

Crailar Technologies Inc. incurred losses in the fourth quarter and year ended Dec. 31 as it geared up to begin commercial operations.

Crailar, which produces and markets its own branded flax fiber, reported a net loss for the fourth quarter of $3.1 million or 7 cents a share, compared with a net loss of $2.6 million or 5 cents a share a year earlier. This quarter’s loss included a $600,000 write-off of the company’s pilot scale decortication facility that was deemed not commercially viable. The company’s adjusted EBITDA for the quarter was a loss of $1.8 million, compared to a loss of $1.6 million in the year-ago period, resulting from increased compensation spending in preparation for commissioning the first large scale Crailar flax production facility.

In January, Crailar commenced running production grade fiber at its new Pamplico, S.C., manufacturing facility. The company, which has made an $8 million investment in the factory, said when it opened that it plans to tier the plant’s output beginning with an anticipated 150,000 pounds a week in January, increasing to 300,000 pounds a week in February and then to level off in the short-term at 450,000 pounds weekly. By the end of 2013, the company anticipates the commissioning of expanded production capacity at the facility of 600,000 pounds a week and to achieve a total production capacity of more than 1 million pounds of Crailar flax fiber a week by year-end 2013.

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For the year, the company reported a net loss of $9.3 million or 22 cents a share, compared with last year’s net loss of $7 million or 18 cents a share. The company’s adjusted EBITDA for the year was a loss of $5.9 million compared with an adjusted EBITDA loss of $4.3 million last year. The loss increase from the prior year was largely due to increased spending on salaries and benefits to additional hiring as the company prepared for commercialization. In addition, the company spent $800,000 on professional fees this year reflecting costs incurred in financing activities, applying for listing on a senior exchange, name change and reorganization costs.

“During 2012, we financed and built the first large scale production facility for Crailar flax fiber and expanded our partner relationships with many leading companies in the textile industry,” said chief executive officer Kenneth C. Barker. “We are now at an inflection point where we transform from a developmental company to an operating company in 2013 as we scale-up production of Crailar flax fiber.”

Crailar and Cone Denim unveiled a marketing and development agreement
for use of Crailar flax in Cone’s denim fabric line. In the agreement, which runs through December 2015, Crailar and Cone will jointly create and manage marketing materials, sales meetings, trade shows, press launches, trade and consumer marketing activities.