Mac-nut firm hit hard by operating expenses, meager yield

Royal Hawaiian Orchards LP increased sales for a recently launched retail snack product line, but costs for the new endeavor and a poor nut harvest widened a first-quarter financial loss for Hawaii’s largest mac-nut grower.

The Hilo-based company formerly known as ML Macadamia Orchards LP said it lost $628,000 during the January-March period on revenue of $2 million compared with a loss of $8,000 on revenue of $3.5 million in the same period last year.

Royal Hawaiian benefited from $206,000 in sales from its new line of packaged macadamia snacks during the quarter, but expenses to produce, market and sell the snacks created an operating loss of $522,000 for the venture.

The company said in a report filed Tuesday with the Securities and Exchange Commission that its expanding retail endeavor, if successful, isn’t projected to be profitable until at least 2014. The company previously said that it expects to have its retail line in about 5,000 stores in Hawaii and western states by the end of this year.

Royal Hawaiian launched its line of packaged foods in the third quarter of last year in an effort to generate higher profit margins from retail sales as opposed to selling all of its nuts raw in the wholesale trade.

Raw nut sales in the first quarter amounted to 2.1 million pounds for $1.4 million, a drop from 5.2 million pounds for $3.2 million a year earlier. Royal Hawaiian said the decline was mostly due to reduced nut production that stemmed from drought conditions in Kau last year that affected the development of nuts on trees.

Royal Hawaiian said it intends to file a crop insurance claim to recoup a significant portion of the drought-related losses, and that future harvests should rebound if favorable current weather conditions persist through the summer.

Shares of Royal Hawaiian stock, or partnership units, closed at $3.69 on Wednesday on an over-the-counter stock exchange. That price was unchanged from Tuesday after the earnings report was released.