Solazyme Inc (SZYM), Chevron Corporation (CVX): 3 Things to Become Profitable

Broaden Portfolio

As mentioned above, diesel is just the highest profile application of many possible applications of this technology.  Lately Solazyme has been making great progress in broadening their portfolio.

Algenist is a skin-care product that has been gaining in popularity.  Sales for 2012 were up 130% over 2011.

The company has also been focusing efforts on further developing high-myristic oil.  This type of oil is often used in personal care items, and is currently derived from sources like palm oil.  Traditional sources for this oil have about a 15% concentration of this high-myristic oil.  During 2012, Solazyme Inc (NASDAQ:SZYM) has been able to increase their algae from a 30% yield to a 50% yield.  At over 3x better yield than traditional sources, there is big potential for this oil.

They have also been developing oleic oil.  This kind of oil is used for frying.  They have been able to increase the content of this to 90%.  This has garnered attention from companies like Archer Daniels Midland Company (NYSE:ADM).  Archer Daniels has agreed to help manufacture and market this impressive oil.  Right now the agreement calls for 20,000 metric tons in 2014.  After that they will shoot at working up 100,000 metric tons.

Establish Path to Commercial Production

Commercial production doesn’t just happen.  You have to have an infrastructure in place.  And in Solazyme’s case, they need an infrastructure on three continents: North America, South America, and Europe.

In North America, they are benefiting from the agreement with Archer Daniels, as the manufacturing of this oil on a commercial scale is being done at an Archer Daniels facility in Clinton Iowa.  But in South America, Solazyme Inc (NASDAQ:SZYM) is constructing facilities in Brazil.  Things are progressing, and they recently secured a $120 million loan to build phase two of a facility in Lestrem.  This plant is expected to come online late this year.

Foolish Conclusion

It is rare to find a company with so much potential.  This year, as this company shifts from development to production, I expect shares to shift from hovering to climbing.  Sure, profits aren’t there right now, but I have every reason to believe that they are right around the corner.  Don’t wait too late to get in on this one.  Those who get in now will be rewarded the most.

The article 3 Things to Become Profitable originally appeared on Fool.com and is written by Jon Quast.

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