Cyanotech plans $5.5M expansion

Microalgae producer Cyanotech Corp. announced a major expansion Thursday that includes a $5.5 million upgrade to its production and storage facility in Kailua-Kona that will allow the company to take advantage of growing worldwide demand for its nutritional supplements.

Cyanotech’s annual revenue has more than doubled since 2008 when it undertook a strategic shift away from processing and distributing microalgae products to a more marketing-oriented approach for enhancing the value of the company’s core products, Pure Hawaiian Spirulina Pacifica and BioAstin Natural Astaxanthin. Revenue totaled $24.6 million for the fiscal year ending March 31.

Honolulu-based Pacific Rim Bank is providing Cyanotech a $5.5 million loan backed by the U.S. Department of Agriculture through its Rural Development Guarantee program, according to a regulatory filing.

The loan proceeds will be used to finance capital improvements, which include new equipment to be used in the processing of Cyanotech’s natural astaxanthin and the addition of new administration and warehouse buildings at its Kona facility. The improvements include $3.2 million worth of "supercritical carbon dioxide extraction equipment" that will allow Cyanotech to complete the processing of astaxanthin at its 90-acre facility in the Natural Energy Laboratory of Hawaii in Kona. The extraction process currently is done on the mainland.

"Bringing this capability in-house will make us a vertically integrated natural astaxanthin supplier and is expected to reduce processing time and lower costs," Cyanotech President and CEO Brent Bailey said in a news release. "While these are long-term projects with components being built out over the next 18-24 months, they will significantly strengthen our operational foundation and competitive position."

"Cyanotech is focused on its branded consumer products and the international bulk market," Bailey said. "We have strengthened our sales, marketing and product fulfillment capabilities."

The USDA has conditionally guaranteed 80 percent of the $5.5 million loan. The 20-year loan carries a variable rate equal to the prime rate published in the Wall Street Journal plus 1 percent. The rate is adjusted quarterly and at no time will be less than 5.5 percent, according to terms of the loan.

Cyanotech, founded in 1983, distributes its products to nutritional supplement, nutraceutical and cosmetic manufacturers and marketers in more than 54 countries worldwide.

The company’s shares closed up 22 cents, or 3.8 percent, Thursday at $6.08 on the Nasdaq Capital Market.