Neogen sees strong growth, acquisitions and speaks out on China

By Rory Harrington

- Last updated on GMT

Related tags: Food safety

Neogen Corporation said its food safety investments in China have yet to yield a strong return but that a new test for food contaminants was soon to go into operation that may change the situation.

Company chairman and CEO James Herbert also said he expected China to develop its food safety systems in order to secure its position as a leading global exporter of foods.

The remarks were made as Neogen president Lon Bohannon confirmed a “stellar”​ performance in its food safety division had helped the company deliver record quarterly net income and revenues figures.

Net income for the period ending August 31 jumped 18 per cent year-on-year to $4.3m. Revenues for Q1 2010 also rose 12 per cent to $33.2m.

China food safety

Referring to its Chinese operations, Herbert said: “We’ve been asked several times recently about the food safety announcements from China and what these are up to mean to Neogen. I think we’re doing the right things there, but I am still not hearing the cash register ring that often.”

However, he suggested that might be about to change as he confirmed his belief that economic pressures would ensure China upped its food safety game.

“China I think, clearly understands that they must establish more active programs, if they’re going to continue to be a world exporter of food products,” ​he said in a conference call.

“We’re working on new diagnostic test now to more rapidly monitor food adulteration, and some of these will be introduced in the next few months. They’ll find a place either in China or in the ports where China products are being exported.”

Acquisition strategy

Thanks to its strong results, the company said it now had $23m to pursue “a wide variety of growth strategies”. ​Herbert confirmed there would be “more acquisition opportunities” ​and that the company had several possibilities on its radar.

Research and development

The Neogen CEO said it had increased it R&D spending by 50 per cent year-on-year as part of its development strategy to double the number of staff in the department.

While the return on this won’t show up “for another few quarters”​ , he added that that the company had 66 projects either currently in progress or one that would be started by the end of 2009.

“As an example, our food safety R&D group has now completed seven new or improved product releases,” ​he said. “This group alone has about 19 such projects that should yield new or improved products before the end of the fiscal year.”

Quarterly performance

Announcing its financial results, Neogen said its safety divisions – for food and animal safety- had both posted near identical 12 per cent year-on-year revenue increases. The food safety growth was “entirely organic”. ​This was lead by a more than 30 per cent rise in sales of its dairy antibiotic diagnostics.

Sales of its rapid food allergen tests continued their strong growth – posting a 25 per cent increase compared to the same time last year.

“This performance was the result of significant increases in sales of diagnostic tests to detect milk, egg, almond, and gluten residues,”​ said a company statement. The trend of food processors continuing to expand routine testing procedures to help prevent inadvertent contamination from reaching food allergic consumers was a further factor, it added. Sales of the company’s tests for natural toxins increased by 10% year-on-year, led by increases in sales of test kits to detect deoxynivalenol (DON) and histamine.

Related topics: Food Safety & Quality

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