Surging anti-viral sales drove fine chemical growth at Ampac in Q3, but the unit posted a loss after missing efficiency and throughput targets.
Revenue at Ampac Fine Chemicals (AFC) rose 55 per cent year-on-year as a recently renewed anti-viral supply deal ramped up. However, volumes are yet to reach the level needed to meet AFC’s major near term focus of a return to typical profitability levels.
“We are somewhat disappointed that profits in our fine chemicals segment are lagging behind our expectations”, Joe Carleone, CEO of American Pacific, AFC’s parent company, told investors in a call. AFC posted a $0.5m (€0.4m) quarterly operating loss, down from a $2.5m deficit a year ago.
Losses are underpinned by volumes and capacity utilisation. Costs at AFC production plants stay high even when they are doing relatively little manufacturing, as was the case early in fiscal 2011.
Another issue is pricing, particularly for a ‘significant core product’. Pricing of the product is based on throughput and efficiency targets which AFC is yet to meet. Dana Kelly, chief financial officer at American Pacific, told investors it will take at least a quarter for the situation to improve.
Getting throughput and efficiencies to target levels will help AFC hit full year guidance, which it kept the same despite a disappointing third quarter. “Reaffirmation of guidance clearly implies that [the next three months] will be a major quarter”, Carleone said.
Placing emphasis on the fourth quarter creates the risk work could be pushed back into the next year. “As with any plan that is so concentrated at the end of the fiscal year, a small timing change could move some sales between 2011 and 2012 in either direction”, Carleone said.
High security API work
On the same day as its financial results AFC said it is validating an active pharmaceutical ingredient (API) manufacturing process for Chimerix. The API is being developed for prevention and treatment of smallpox and as such is being produced at a high security site.
Security-alarmed fencing, cameras and controlled personnel access all secure the perimeter of the AFC plant, which is on a US Department of Defence-regulated site in California.
"AFC is committed to maintaining the domestic assets and services needed by our customers to provide materials of critical importance to health and safety", Aslam Malik, president of AFC, said.