It looks like 2012 may be quite the year for Natunola Health Biosciences Inc.
The Winchester-based manufacturer of specialty flaxseed and natural cosmetic ingredients became a wholly-owned subsidiary of Botaneco Corp. after an early October merger.
Doreen VandenTillaart, Natunola’s VP operations, says the merger is a game changer for the company.
Botaneco is a Quebec City-based health sciences and technology company that develops a natural ingredient called oleosomes, a cosmetic substance that is extracted from plant seeds and used in skin and healthcare products.
“It’s a very good tie in for our company, there’s a lot of synergies there,” says VandenTillaart, reflecting on the merger. “There are customers that we share. Botaneco also has customer markets we’re not in.”
A GROWING INTERNATIONAL CLIENT BASE
Expanding its customer base is just one way Natunola stands to benefit from the merger.
“What we’re attempting to build is a personal care and health food ingredient supplier to multinationals and other companies,” says Michael Stangel, the president and CEO of Botaneco.
There are distribution channels that the two companies are going to be able to help each other with.”
Currently, Natunola’s primary market for flaxseed is Canada. Its cosmetic ingredient, vegelatum, is a canola-based substitute for fossil fuel-based petroleum jelly. The latter has a wider market, with sales to international retailers in the United States, Korea and Italy.
There’s room for expansion, both companies say.
“There are distribution channels that the two companies are going to be able to help each other with,” says VandenTillaart, noting that Botaneco’s new retailer in Brazil will help Natunola reach valuable South American markets.
Botaneco also has independent distributors in Australia, New Zealand and Taiwan.
Botaneco’s selling process is different too, says Stangel. The company has a chief scientist who calls on customers, a director of sales and marketing and an operations director – in addition to its team of international distributors.
“Natunola uses sale agents, we use our own people plus distributors. We have a fairly robust sales and marketing effort and I believe that much of that will also occur with Natunola,” Stangel says.
BOTANECO SALES ON THE RISE
Financially, the merger is a step in the right direction for a company that was previously unsure of how to expand and was facing a decline in revenue. The co-operation between Natunola and Botaneco is exactly what it needs to be successful, VandenTillaart says.
Investors should start seeing positive financial changes in the first quarter of 2012, says VandenTillaart
“We’ve got some excellent help now with our Botaneco executives. They bring a lot of experience,” she says. “Since the merger we have really rebounded quickly. That was definitely an incentive for the merger.”
Natunola has been losing money with flaxseed sales since 2007.
The company’s most recent quarterly report for the period ending June 30, 2011 reported a net loss of $176,811, more than an $80,000 difference from last June 2010’s quarterly report that listed a loss of $94,425.
Botaneco weathered the quarter better, and reported revenue of $339,107, an 80 per cent increase from the same period in 2010.
Investors should start seeing positive financial changes in the first quarter of 2012, says VandenTillaart. Natunola’s fourth quarter of 2011 lasted only seven days prior to the merger. All future Natunola financial results will be incorporated within Botaneco’s quarterly statements.
VandenTillaart says she expects to see Natunola’s product value go up as Botaneco continues to grow.
As a result of the merger, Natunola has been delisted from the TSX and now sells under the Botaneco stock symbol (BOT).
The company’s stock currently sits at $0.090. In the days immediately following the merger, that price was as high as $0.16.
PRODUCT DEVELOPMENT CONTINUES
October’s merger is not the first for Natunola. The company experienced a similar amalgamation with Sentex Systems Ltd. in June 2002.
The company’s Health Delight flaxseed line is sold in bulk and at the retail level in Ottawa health food stores and drug stores and health clinics in western Canada.
As a result of the merger, Natunola’s team of 10 will join forces with Botaneco’s 18 other employees. Dr. Nam Fong Han, the president and CEO of Natunola, will stay involved as chief operating officer of Botaneco. The company will also have a say on the combined board of directors, with two Natunola representatives – Dr. Han and David Edwards, a former member of the Natunola’s board – serving on the seven-member board.
Outside of merger activity, Natunola continues research and develop work on new health-conscious products. The most recent is a low glycemic maple product, ideal for consumers with diabetes or those who prefer artificial sweeteners. The mock syrup will be released to consumers sometime within the next year, says VandenTillaart.
The company will also continue selling its dehulled flaxseed, a product that is high in omega-3 fatty acids, which can reduce cholesterol and limit the risk of heart disease and stroke. The company’s Health Delight flaxseed line is sold in bulk and at the retail level in Ottawa health food stores and drug stores and health clinics in western Canada.
Natunola also hopes to expand its current base of retailers. One of the short-term goals is for Botaneco to help the company co-ordinate a U.S. launch of the Health Delight brand, VandenTillaart says.
UNIQUE BUSINESS AREA
Natunola continues to operate in a unique sector. It has developed an exclusive flax dehulling process which is one-of-a-kind in Canada, says Dr. Steve Cui, a research scientist with Agriculture and Agri-Food Canada. Cui helped design that machinery.
When it comes to flaxseed research, Cui says Natunola is an early bloomer in a growing industry.
“There’s a lot of new research going on to try and unveil the potential of this kind of material,” he says. “The older companies like Kellogg’s and General Mills are investing a lot of money to develop new products in this area.”
It’s a sector that Natunola has been established in for more than a decade.
“The company (Natunola) is not big, but they’re willing to work with new ideas and technologies,” Cui adds. “They’re very smart for doing that. Many Canadian industry companies should follow.”