Higher Production and Shipments Contribute to Record Revenue and Improved Results
Dividend of
The increase in revenues in Q2 2020 results from an increase in production and shipment volumes at a number of the Company's facilities and improved logistics and port operations during the quarter.
The Company's Adjusted Gross Margin ("AGM") was
Adjusted EBITDA increased
STRATEGIC CONTEXT
The second quarter of 2020 was a significant step in the direction of achieving our key goals of growth, profitability and sustainability of our business. The recovery from the
Pinnacle has earned its position in the top tier of the global wood pellet industry through consistent attention to quality, reliability of supply and service to our customers. These priorities will continue to guide our business strategy into the future.
HIGHLIGHTS IN THE QUARTER
Record Production and Sales Volumes Contribute Positively to Results
Pellet sales set a new record in Q2 2020 at 620kMT, 21% above the previous mark of 510kMT set in Q1 2020 and 30% above Q2 2019. Included in the current quarter were 23kMT of externally-produced pellets purchased under annual contracts and 50kMT of spot purchases. Production in Q2 2020 set new records as well coming in at 518kMT, 14% above Q1 2020 when the previous record was set, and 15% above Q2 2019. The results in the current quarter were achieved in spite of operational disruptions at the Lavington, Meadowbank and
Pinnacle's mills at
Entwistle Insurance Proceeds Received; Settlement Discussions Ongoing
A total of
Adjustments in Procurement Activities Support Operations; Costs Stable
Despite widespread sawmill curtailments in both
PROGRESS ON GROWTH-RELATED PROJECTS
Capital expenditures net of non-controlling interests on growth-related projects amounted to
In terms of individual projects, construction continued during the quarter on the new 200kMT per year mill at
Construction also continued during the quarter on the 360kMT per year mill in
During the quarter, the dryer upgrade project at
The Company also commenced construction on the Phase 2 Project at its mill in
Completion of the growth-related capital projects will increase Pinnacle's overall production capacity by almost 20% to 2.9 million MT, and increase the portion located in jurisdictions outside of B.C. to approximately 44%.With a number of small projects currently on hold due to COVID-related concerns, Pinnacle's contribution to capital spending during the second half of 2020 is expected to be in the range of
CREDIT FACILTY AMENDED
On
OUTLOOK
Customer demand for wood pellets remains strong. Management expects production and shipment volumes to increase in Q3 2020 as the
That said, on-going uncertainties associated with COVID-19, including reports of higher positive test results in areas in which we operate or source fibre, have the potential to impact our operations and the availability and cost of feedstock.
Barring a deterioration in the business environment due to COVID-19 or other factors, the construction of the Company's growth-related projects will continue as planned.
DIVIDEND
The Company's Board of Directors today approved the payment of a dividend of
FINANCIAL AND OPERATING HIGHLIGHTS
Q2 2020 | Q2 2019 | Q2 2020 | Q2 2019 | ||
Unit | 13 weeks | 13 weeks | 26 weeks | 26 weeks | |
Revenue | 132,246 | 104,164 | 241,921 | 193,791 | |
Profit before finance costs and other income (expense) | 7,124 | 5,185 | 658 | 1,530 | |
Net income (loss) | 17 | 1,546 | (9,115) | (5,460) | |
Impact of Entwistle Incident | - | 532 | 1,782 | (1,034) | |
Net income (loss) (excluding above impact) | 17 | 1,014 | (10,897) | (4,426) | |
Net profit (loss) per share attributable to owners | |||||
Basic and diluted earnings/(loss) per share | $/share | (0.04) | 0.04 | (0.30) | (0.16) |
Adjusted Gross Margin (1) | 19,955 | 20,346 | 28,949 | 30,712 | |
Adjusted Gross Margin per MT (1) | $/MT | 32.19 | 42.56 | 25.62 | 34.90 |
Adjusted Gross Margin Percentage (1) | % | 15.1% | 19.5% | 12.0% | 15.8% |
Adjusted EBITDA (1) | 16,108 | 15,280 | 20,152 | 22,339 | |
Adjusted EBITDA per MT (1) | $/MT | 25.98 | 31.97 | 17.83 | 34.61 |
Adjusted EBITDA Percentage (1) | % | 12.2% | 14.7% | 8.3% | 11.5% |
Free Cash Flow (1) | 10,122 | 6,319 | 8,985 | 6,910 | |
Annualized Return on | % | 12.4% | 14.0% | 7.8% | 10.2% |
Annualized Cash Flow Return on Assets(1) | % | 13.6% | 7.6% | 10.0% | 10.0% |
2020 | December | ||||
Total Assets | 661,632 | 629,911 | |||
Total Debt | 357,440 | 309,588 | |||
Q2 2020 | Q2 2019 | Q2 2020 | Q2 2019 | ||
Operating Highlights | 13 weeks | 13 weeks | 26 weeks | 26 weeks | |
Industrial wood pellets produced (2) | MT('000) | 518 | 451 | 970 | 858 |
Industrial wood pellets purchased (3) | MT('000) | 73 | 21 | 97 | 45 |
Industrial wood pellets sold | MT('000) | 620 | 478 | 1,130 | 880 |
June 26, | December 27, | ||||
Contracted Backlog (4) | |||||
Fiscal 2020 (remainder of Fiscal year) | $ billions | 0.3 | 0.4 | ||
Fiscal 2021 | $ billions | 0.5 | 0.5 | ||
Fiscal 2022 and thereafter | $ billions | 6.0 | 6.0 | ||
Total product sales under Contracted Backlog | $ billions | 6.8 | 6.9 |
(1) | See "Non-IFRS Measures" for the definition of the items discussed below and as well as reconciliations of non-IFRS measures with the most directly comparable IFRS measure. |
(2) | Includes MT produced by all facilities managed by Pinnacle, including HPLP. |
(3) | Includes MT sold in the quarter that were purchased from third parties, excluding HPLP. |
(4) | We enter into long-term, take-or-pay off-take contracts with large and well capitalized counterparties or their affiliates. "Contracted Backlog" represents the revenue to be recognised under existing contracts assuming deliveries occur as specified in the contracts. As a result of customer preferences or logistics management, there can be movement in the timing of deliveries that may result in revenue being recognised in either a preceding or following interim fiscal period. |
LIQUIDITY AND CAPITAL RESOURCES
Net debt ended the quarter at
The following table summarizes the Company's credit facilities and availability as of
(in thousands $) | Revolver Loan | Term Loan | Delayed | Total | |||
Available line of credit and maximum borrowing available | 65,000 | 278,600 | 185,000 | 528,000 | |||
Less: | |||||||
Drawings | - | 278,600 | 82,300 | 360,900 | |||
Unused portion of facility | 65,000 | - | 102,700 | 167,700 | |||
Add: | |||||||
Cash and cash equivalents | - | - | - | 19,845 | |||
Available liquidity at | 65,000 | - | 102,700 | 187,945 |
The revolver loan, term loan and delayed draw loan have a maturity date of
NON-IFRS MEASURES
This release refers to certain non-IFRS measures. These measures are not recognized measures under IFRS, and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. These non-IFRS measures are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Our management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation.
The following measures are used by management as key performance indicators for our business: Adjusted Gross Margin Percentage, Adjusted EBITDA, Free Cash Flow, Annualized Return on
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE 13-WEEK AND 26 WEEK PERIODS ENDED
13-week periods ended | 26-week periods ended | |||||
|
|
|
| |||
Revenue | 132,246 | 104,164 | 241,921 | 193,791 | ||
Costs and expenses | ||||||
Production | 95,888 | 70,903 | 182,017 | 138,024 | ||
Distribution | 14,930 | 13,005 | 29,491 | 25,771 | ||
Selling, general and administration | 4,511 | 5,147 | 9,168 | 8,940 | ||
Amortization of equipment and intangible assets | 9,793 | 9,924 | 20,587 | 19,526 | ||
125,122 | 98,979 | 241,263 | 192,261 | |||
Operating income | 7,124 | 5,185 | 658 | 1,530 | ||
Other income/(expense) | ||||||
Equity earnings/(loss) in | (269) | 395 | (557) | 707 | ||
loss on disposal of property, plant and equipment | (855) | (67) | (876) | (97) | ||
Impairment of | - | - | - | (9,417) | ||
Impairment of Intangibles | - | - | - | (278) | ||
Insurance recovery for property loss at | - | 5,000 | 2,500 | 8,000 | ||
Finance costs | (6,247) | (7,753) | (14,593) | (14,526) | ||
Other income | 236 | (337) | 440 | 6,956 | ||
(7,135) | (2,762) | (13,086) | (8,655) | |||
Net profit/(loss) before income taxes | (11) | 2,423 | (12,428) | (7,125) | ||
Income tax recovery/(expense) | ||||||
Deferred | 28 | (877) | 3,313 | 1,665 | ||
28 | (877) | 3,313 | 1,665 | |||
Net profit/(loss) | 17 | 1,546 | (9,115) | (5,460) | ||
Net profit/(loss) attributable to: | ||||||
Owners of the Company | (1,187) | 1,241 | (10,022) | (5,451) | ||
Non-controlling interests | 1,204 | 305 | 907 | (9) | ||
17 | 1,546 | (9,115) | (5,460) | |||
Net loss per share attributable to owners (Basic and diluted): | (0.04) | 0.04 | (0.30) | (0.16) | ||
Weighted average of number of shares outstanding (thousands): | 33,359 | 33,300 | 33,357 | 33,170 |
13-week periods ended | 26-week periods ended | ||||
|
|
|
| ||
Net profit/(loss) | 17 | 1,546 | (9,115) | (5,460) | |
Other comprehensive income (loss) net of taxes: | |||||
Items that may be recycled through net income: | |||||
Foreign exchange translation of foreign operations, net of tax | (3,085) | (731) | 2,720 | (1,198) | |
Comprehensive income/(loss) for the period | (3,068) | 815 | (6,395) | (6,658) | |
Comprehensive income (loss) attributable to: | |||||
Owners of the Company | (3,346) | 191 | (8,118) | (6,968) | |
Non-controlling interests | 278 | 624 | 1,723 | 310 | |
(3,068) | 815 | (6,395) | (6,658) |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 13-WEEK AND 26 WEEK PERIODS ENDED
13-week periods ended | 26-week periods ended | |||
|
| June 26, |
| |
Cash provided by (used in) | ||||
Operating activities | ||||
Net profit/(loss) | 17 | 1,546 | (9,115) | (5,460) |
Financing costs, net | 6,247 | 7,753 | 14,593 | 14,526 |
Distributions from | - | - | - | 2,400 |
Insurance received for business interruption at | 3,500 | - | 6,400 | - |
Realized gain on derivatives and foreign exchange | 1,011 | 512 | 1,121 | 997 |
Items not involving cash: | ||||
Amortization of equipment and intangible assets | 9,793 | 9,924 | 20,587 | 19,526 |
Equity earnings/(loss) in | 269 | (395) | 557 | (707) |
Loss on disposal of equipment | 855 | 67 | 876 | 97 |
Stock-based compensation | 26 | 461 | 231 | 629 |
Inventory write down | 311 | 263 | 3,437 | 590 |
Impairment of | - | - | - | 9,417 |
Impairment of intangible assets | - | - | - | 278 |
Insurance recoverable recorded in income for | - | (6,500) | (3,500) | (9,500) |
Deferred income tax recovery | (28) | 952 | (3,313) | (1,665) |
Cash flow from operating activities | 22,001 | 14,583 | 31,874 | 31,128 |
Net change in non-cash operating working capital | 14,151 | (6,507) | 16,077 | (12,798) |
36,152 | 8,076 | 47,951 | 18,330 | |
Financing activities | ||||
Drawings on revolver loan | 68,800 | - | 123,000 | - |
Repayment of revolver loan | (79,800) | (16,500) | (142,200) | (18,450) |
Payment of finance leases | (2,578) | (2,385) | (5,039) | (4,715) |
Drawings on term debt | - | 277,973 | - | 277,973 |
Repayment of term debt | (1,400) | (192,000) | (1,400) | (194,000) |
Drawings on delayed draw loan | 28,200 | (49,760) | 62,300 | (49,760) |
Proceeds from exercise of stock options | - | - | 243 | 221 |
Dividends paid during the period | (1,250) | (4,995) | (6,254) | (9,946) |
Investment from non-controlling interest | 5,833 | - | 7,610 | 1,350 |
Distributions to non-controlling interest | - | (250) | (362) | (550) |
Finance costs paid | (4,179) | (4,945) | (8,900) | (8,589) |
13,626 | 7,138 | 28,998 | (6,466) | |
Investing activities | ||||
Insurance recovery for property loss at | 2,500 | - | 3,500 | - |
(Increase)/ decrease in restricted cash | 85 | - | (2,770) | - |
Purchase of property, plant and equipment | (35,453) | (13,942) | (69,095) | (20,236) |
Proceeds from sale of property, plant and equipment | - | 53 | 24 | 86 |
(32,868) | (13,889) | (68,341) | (20,150) | |
Foreign exchange gain on cash position held in foreign currency | (113) | (8) | (30) | 85 |
Increase (decrease) in cash and cash equivalents | 16,797 | 1,317 | 8,578 | (8,201) |
Cash and cash equivalents, beginning of the period | 3,048 | 8,510 | 11,267 | 18,028 |
Cash and cash equivalents, end of the period | 19,845 | 9,827 | 19,845 | 9,827 |
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at | ||
ASSETS | ||
Current assets | ||
Cash and cash equivalents | 19,845 | 11,267 |
Accounts receivable | 37,284 | 36,764 |
Inventory | 36,994 | 46,938 |
Receivable against NMTC debt | - | 12,774 |
Other current assets | 8,310 | 11,436 |
Total current assets | 102,433 | 119,179 |
Property, plant and equipment | 444,715 | 399,181 |
98,923 | 100,191 | |
Restricted cash | 2,770 | - |
Investment in | 6,991 | 7,548 |
Other long-term assets | 43 | 1,364 |
Deferred income taxes | 5,757 | 2,448 |
Total assets | 661,632 | 629,911 |
LIABILITIES AND EQUITY | ||
Current liabilities | ||
Revolver loan | - | 19,200 |
Accounts payable and accrued liabilities | 57,482 | 51,183 |
Current portion of long-term debt | 15,050 | 4,200 |
Current portion of NMTC debt | - | 12,774 |
Current portion of lease liabilities | 7,545 | 7,424 |
Other current liabilities | 822 | 1,786 |
Total current liabilities | 80,899 | 96,567 |
Long-term debt | 342,390 | 292,614 |
Other long-term liabilities | 6,521 | 2,462 |
Lease liabilities | 27,989 | 29,551 |
Total liabilities | 457,799 | 421,194 |
Equity | ||
Shareholders' Equity | ||
Common shares | 278,053 | 277,619 |
Contributed surplus | 4,228 | 4,145 |
Accumulated Other Comprehensive Income/(loss) | 584 | (1,320) |
Deficit | (133,467) | (117,191) |
Total equity attributable to owners of the Company | 149,398 | 163,253 |
Non-controlling interest | 54,435 | 45,464 |
Total equity | 203,833 | 208,717 |
Total liabilities and equity | 661,632 | 629,911 |
Pinnacle's unaudited interim consolidated financial statements and Management's Discussion & Analysis for Q1 2020 and its Annual Information Form for the Fiscal Year ended
ABOUT PINNACLE
Pinnacle is a growing industrial wood pellet manufacturer and distributor and the third largest producer in the world. The Company produces sustainable fuel for renewable electricity generation in the form of industrial wood pellets. This fuel is used by large-scale thermal power generators as a greener alternative to produce reliable baseload renewable power. Pinnacle is a trusted supplier to its customers, who require reliable, high-quality fuel supply to maximize utilization of their facilities. Pinnacle takes pride in its industry leading safety practices. The Company operates eight industrial wood pellet production facilities in western Canada and one in Alabama, with two additional facilities under construction in Alberta and Alabama. The Company also owns a port terminal in Prince Rupert, B.C. Pinnacle has entered into long-term take-or-pay contracts with utilities in the U.K., Europe and Asia that represent an average of 99% of its production capacity through 2026.
CONFERENCE CALL
To access a replay of the conference call dial 416-764-8677 or 1-888-390-0541, passcode: 298156#. The replay will be available until May 19, 2020. The webcast will be archived following conclusion of the call.
(1) NON-IFRS FINANCIAL MEASURES
This news release makes reference to certain non-IFRS measures. Please see page 13 of the Management's Discussion and Analysis for definition.
FORWARD-LOOKING INFORMATION
This news release includes "forward-looking information" within the meaning of applicable securities laws in
Many factors could cause our actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by forward-looking statements, including, without limitation, the factors discussed in the "Financial Risk Factors" section of the MD&A and in the "Risk Factors" section of our Annual Information Form ("AIF") dated
The forward-looking information contained in this news release represents our expectations as of the date of this press release (or as of the date they are otherwise stated to be made) and are subject to change after such date. We disclaim any intention or obligation or undertaking to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required under applicable securities laws in
FOFI contained in this document was made as of the date hereof and was provided for the purpose of providing shareholders with information on Pinnacle's financial outlook. Pinnacle disclaims any intention or obligation to update or revise any FOFI contained in this document, whether as a result of new information, future events or otherwise, unless required pursuant to applicable securities laws in
SOURCE
© Canada Newswire, source