Marrone Bio Innovations (NASDAQ:MBII) reported revenue below our expectations but gross margins reached a new fourth quarter record. As Marrone gains more experience in biologics production gross margins could continue to increase.
The company expects an increase in the growth rate in 2020 and possibly in 2021. The seed treatment segment has grown exponentially and is now about one third of revenue. BioUnite has proved to be a very viable concept and mixing Marrone’s bio products with conventional chemical products has shown that there is a synergistic effect with crop yield improvements that exceed those from either treatment alone.
Both of the acquisitions made last year are making a positive impact. Pro Farm had a small positive impact on profits in the 4Q19 and this should also increase gross margins.
Hemp continues to be a crop of significant interest. However some states seem to be determined to kill the goose before it has a chance to lay any golden eggs. Some experts postulate that hemp could become a major crop as important as cotton and wheat.
Due to the very wet planting season in the corn belt in 2019 acres planted declined for corn and soy beans. This year the acres planted should recover leading to an increase in demand for pesticides. Given that Marrone Bio Innovations’ products are becoming more main stream and are accepted in more areas we expect the combination of new products and increased cultivation to drive revenue higher.
We have increased our revenue estimates for 2020 and beyond, with improving gross margins and this should drive the company closer to profitability.
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