Delays building a factory extension have held up Christchurch-based nutraceutical company PharmaZen commissioning a new freeze drying plant.
The extra dryer will be ready for use in August, doubling capacity and freeing up existing facilities for new products beyond greenshell mussel oil and blackcurrant extract later this year, chief executive Craig McIntosh said.
He said he would not recommend businesses try and set up new premises in parts of Christchurch after his unfriendly experience with planning authorities.
The company had initially faced new floor level flood rules which would have required the extended part of the factory to be built 27 centimetres higher than the older part, McIntosh said.
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The new rules were introduced after the 2011 Canterbury earthquakes which exacerbated flooding.
A new council plan showed the property at 320 Port Hills Drive was subject to flooding but the PharmaZen building had never been affected, McIntosh said.
The matter was eventually resolved and contracts struck for $2.7 million of work on the factory, but the costs and delays affected the 2016 profit result.
The five-year project from planning to commissioning leaves PharmaZen with the largest purpose-built botanical freeze drying plant in Australasia.
McIntosh said it had capability to generate as much as $30m in sales and the company focus was now on accelerating the time to market.
PharmaZen recently reported a 2016 profit after tax of $426,335 on turnover of $7,663,959, which compares with the 2015 result of $632,471 on turnover of $7,083,991.
The net surplus was affected by occupancy costs for the new warehouse and dryer, relocation and increased depreciation, adding $230,000 of expenses.
There were other costs from marketing and research, administration and consultant expenses relating to trademark and patent applications.
However, sales increased by 8 per cent and the gross margin was maintained at 41 per cent.
Shares in PharmaZen are traded through the Unlisted securities trading platform and McIntosh said the company was constantly assessing listing on the New Zealand Stock Exchange.
“We’d like to generate profits of around $2m first, and to make it worthwhile you would also have to do a capital raising.
“We have relatively few shareholders so just moving to a new trading platform in itself wouldn’t increase liquidity,” McIntosh said.
PharmaZen was established in 2001 by the late Dunedin entrepreneur Howard Paterson who was dubbed at the time the “man with the Midas touch” and reportedly one of the wealthiest southern millionaires.
Paterson estate interests still hold approximately 13 per cent and another 30 per cent is owned by other Dunedin shareholders.
PharmaZen recently obtained support from New Zealand Trade and Enterprise, through its International Growth Fund scheme grant of $600,000.
PharmaZen’s trading division is called Waitaki Biosciences, a company it took over during the early commercialisation phase.