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The Sacramento Bee

By Jim Downing, The Sacramento Bee, Calif.

May 17--NutraCea reported another quarterly loss Tuesday, but Chief Executive Brad Edson predicted he would be celebrating profitability three months from now.

After a run of TV infomercials and a string of new distribution deals, Edson said the El Dorado Hills-based rice bran maker couldn't keep up with the demand for stabilized rice bran, the key ingredient to its nutritional products.

"All we need to do is ramp up production to meet demand, which is a great situation for us," he said in an interview Tuesday after the company announced its quarterly financial results.

NutraCea can make about 9,900 tons of stabilized rice bran annually at plants in West Sacramento and Dillon, Mont. Expansion plans call for that capacity to increase significantly by late June, growing more than eight times that by mid-2007, Edson said.

With more rice bran to sell, he expects NutraCea to post a profit by next quarter, something it has never done in its six-year history.

Tuesday, the company reported a net loss of $233,570 on revenue of $3.78 million for the first quarter of 2006. In the previous quarter, NutraCea had revenue of $4.5 million and a net loss of $153,000, its first report since it merged last year with RiceX, an El Dorado Hills company that made rice bran products for animals and humans.

Jerry LaKarnafeaux, an analyst with El Dorado Hills-based Dutton Associates, said that a second- quarter profit is possible but that large gains from the company's investments in production capacity probably won't show up until next year.

"It's a 2007 story," he said. LaKarnafeaux rates the stock as a "strong buy," two steps above the "speculative buy" he gave in January 2005.

NutraCea controls the patent on a process to "stabilize" rice bran, the nutrient-rich outer layer of the rice grain removed during processing. Unstabilized rice bran spoils quickly and is generally treated as a waste product.

In the 17 months since Edson joined NutraCea, the company's focus has broadened.

Much of NutraCea's revenue still comes from its base of U.S. sales of rice bran-based dietary supplements, including a digestive aid, an anti-arthritis formulation and a nutritional drink mix.

The company sells these products on its Web site, as well as through half-hour TV infomercials that air nationally on several cable channels, including Lifetime and Discovery.

But the company sees its future in supplying rice bran to major food companies in the United States and abroad.

"(Edson's) idea is to get (the company) involved in joint ventures and be a supplier (of rice bran) without trying to develop its own brand," LaKarnafeaux said.

Last month, NutraCea announced a horse-feed partnership with Purina Mills LLC. It also has been talking with food giants Nestle S.A., Kellogg Co. and General Mills Inc.

In addition, NutraCea has announced plans for joint ventures with food companies in Jamaica, the Dominican Republic, Ecuador and Colombia. The company hopes to provide nutritional drinks through government-sponsored food programs.

To fund its expansion plans, NutraCea on Friday raised $16.2 million through a private stock sale, according to documents filed with the Securities and Exchange Commission.

The transaction brought the company's market capitalization to more than $82 million. It also increases pressure on the company to deliver earnings, LaKarnafeaux said.

"That's a huge capitalization. To justify it, they've got to be fairly profitable," he said. Tuesday, NutraCea's stock fell 15 cents, or 11 percent, to $1.20. The company is listed on the Over the Counter Bulletin Board.

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Copyright (c) 2006, The Sacramento Bee, Calif.

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