Galaxy Nutritional Foods, the producer of plant-based products as an alternative to dairy products, said that $15 million of write downs and exceptional charges had pushed it into the red for fiscal 2002, although it remained confident of a major turnaround in fortunes in 2003, helped by cost-cutting measures and new investments.
Net losses for the year reached $19.1 million, compared to losses of $6.5 million as year earlier. The losses were not only caused by the one-off charges - there was also a decline in net sales from $45.4 million in 2001 to $43.6 million in 2002, a 4 per cent drop.
Angelo S. Morini, chairman of Galaxy Nutritional Foods, said: "During fiscal 2001, with demand for our product soaring, we decided to implement a strategic capital investment programme. During that fiscal year and fiscal 2002, we ordered and installed approximately $10 million in new production equipment. Unexpected delays in equipment delivery from several manufacturers along with longer than expected equipment installation time, severely restrained our ability to fulfil customer orders and operate efficiently.
"Had all new equipment been delivered and installed in the projected time frame, we believe Galaxy would now be reporting a significant increase in sales and profits."
Morini emphasised the fact that prior to the capital investment period, Galaxy had reported steadily increasing profits and growth for several years, in turn leading to the need for further investment in new production equipment to boost capacity. The new equipment has increased Galaxy's production capacity ten-fold, he said, and further investments in new machinery would be unlikely in the long term.
"In the past several months, Galaxy has taken several important steps to effect a turnaround," Morini continued. "We have streamlined operations, re-engineered our go-to-market business model, strengthened internal controls, increased our efficiencies, and rationalised our product line to focus on higher margin products by reducing our retail and foodservice product lines from 400 to 200 core products, which represents 98 per cent of our business.
"These inventory reductions and product optimisation measures will enable us to operate much more efficiently resulting in higher profit margins for Galaxy. We have also significantly strengthened our management team with the addition of several highly motivated and experienced professionals with very successful track records."
He added that results from the first quarter of fiscal 2003 - the three months to 30 June 2002 - were an indication of the turnaround expected for the year as a whole. "We are in the middle of completing a financial restructuring, which will further secure our turnaround and return to profitable growth. The market for our products continues to skyrocket and Galaxy, despite its hurdles this past fiscal year, remains the undisputed leader in its category with a 91 per cent share of market."
Galaxy produces phytonutrient-enriched products from soy, rice and oats, which are cholesterol and lactose free and which are enriched with calcium, vitamins and other minerals. They are all marketed as alternatives to dairy-based products.