Subject: ERN
Pinnacle Renewable Holdings Reports Fiscal 2017 Fourth Quarter and Year-End Results
/NOT FOR DISTRIBUTION IN THE UNITED STATES/
VANCOUVER, March 15, 2018 /CNW/ - Pinnacle Renewable Holdings Inc. ("Pinnacle" or the "Company") (TSX: PL) today announced its financial results for the fourth quarter ("Q4 2017") and fiscal year ("Fiscal 2017") ended December 29, 2017. These results are for the period ended prior to the completion of the Company's initial public offering on February 6, 2018 (the "Offering"). Accordingly, these results will not be directly comparable to future results, primarily as a result of the change in the Company's capitalization related to the Offering.
The Q4 2017 period comprised 13 weeks, while the comparable period in 2016 ("Q4 2016") comprised the 14 weeks ended December 30, 2016. Fiscal 2017 comprised 52 weeks, while the comparable prior-year period ("Fiscal 2016") comprised 53 weeks.
Fiscal 2017 and Year-to-Date Highlights
- Q4 2017 revenue and Adjusted EBITDA¹ increased by 2.9% and 16.4%, respectively, relative to Q4 2016;
- Fiscal 2017 revenue and Adjusted EBITDA¹ increased 9.9% and 27.8%, respectively, compared to Fiscal 2016;
- Pinnacle sold a record 1.4 million metric tons ("MT") of industrial wood pellets in Fiscal 2017;
- Contracted backlog grew by 15.4% to approximately $3.0 billion as at December 29, 2017 relative to the contracted backlog of $2.6 billion as at December 30, 2016; and
- On March 8, 2018, Pinnacle commenced initial production of industrial wood pellets at its Entwistle Facility.
"2017 was a record year for Pinnacle on all our key metrics, reflecting growing demand from our customers in Europe and Asia, continued operating efficiencies, and the exceptional performance of our people," said Robert McCurdy, Chief Executive Officer. "We expect to meet increasing customer demand in the near term by gradually ramping up production at our new Entwistle production facility and completing construction of the Smithers production facility. We will also continue to evaluate strategic growth opportunities in western Canada and other targeted regions in the U.S. and Canada."
Q4 2017 Financial Results
Revenue for Q4 2017 totaled $73.0 million, an increase of 2.9% compared to $70.9 million for Q4 2016. The increase was primarily the result of a higher average sales price per MT, which reflects an improved sales mix due to higher-priced U.K. and European contracts in Q4 2017 compared to Q4 2016. Industrial wood pellet sales volumes were approximately 334,000 MT in Q4 2017, similar to sales volumes of approximately 335,000 MT in Q4 2016, which had one additional week of operations.
Adjusted Gross Margin¹ was $15.9 million, or 21.8% of revenue, in Q4 2017 compared to $13.5 million, or 19.1% of revenue, in Q4 2016. Margin increases in Q4 2017 reflect higher average sales prices and lower distribution costs, partially offset by increased production costs. Net profit and comprehensive income was $0.1 million, compared to $2.6 million in Q4 2016. The decline was primarily attributable to a gain in the revaluation of shareholders' debentures, offset by a loss from the revaluation of Class B common shares and Class D common shares.
Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA")¹ was $12.8 million, an increase of 16.5% from $11.0 million in Q4 2016. The increase in Adjusted EBITDA¹ in Q4 2017 reflects higher average sales prices and lower distribution costs, partially offset by higher production and selling, general and administration ("SG&A") costs.
Fiscal 2017 Financial Results
Revenue increased to $292.7 million in Fiscal 2017, up 9.9% from $266.3 million in Fiscal 2016. Revenue growth was primarily due to an additional 69,000 MT of industrial wood pellets sold in 2017, as well as a higher average sales price per MT. Industrial wood pellet sales volumes were approximately 1.4 million MT in Fiscal 2017, compared to 1.3 million MT in Fiscal 2016.
Adjusted Gross Margin¹ was $66.9 million, or 22.9% of revenue in Fiscal 2017 compared to $53.1 million, or 19.9% of revenue in Fiscal 2016. Margin increases in Fiscal 2017 reflect higher average sales prices and lower distribution costs, partially offset by increased production costs. Net loss and comprehensive loss was $4.9 million in Fiscal 2017, compared to net profit and comprehensive income of $5.3 million in Fiscal 2016. The variance was primarily due to a gain from the revaluation of shareholders' debentures, a non-recurring gain related to Pinnacle's share of the recovery from a legal settlement, offset by a decrease in revaluation loss on Class B common shares and Class D common shares.
Adjusted EBITDA¹ totaled $56.1 million in Fiscal 2017, an increase of 27.7% from $43.9 million in Fiscal 2016, reflecting higher sales prices, higher sales volume and lower distribution costs, partially offset by higher production and SG&A costs.
Recent Company Developments and Outlook
Pinnacle's wholly-owned production facility in Entwistle, Alberta (the "Entwistle Facility") commenced initial production with dry fibre on March 8, 2018. The Company expects to complete the commissioning phase of the Entwistle Facility in the second quarter of Fiscal 2018 and then gradually ramp up production using a broader range of fibre sources. Pinnacle expects to reach daily production reflective of the annual run-rate production of 400,000 MT in the second quarter of Fiscal 2019.
As previously announced, on March 12, 2018, Pinnacle commenced the redevelopment of an existing particle board facility in Smithers, B.C. to a wood pellet production facility (the "Smithers Facility") in partnership with West Fraser Timber Co. Ltd. ("West Fraser"). Under terms of the partnership, Pinnacle and West Fraser have 70% and 30% interests, respectively, in the Smithers Facility. The Smithers Facility will have an annual run-rate production capacity of 125,000 MT. Wood fibre supply and customer off-take agreements for the Smithers Facility's annual production have been secured under long-term contracts.
Pinnacle's operations have experienced rail disruptions during the first quarter of fiscal 2018 due to weather and capacity-related operational challenges facing its rail service provider. Pinnacle has been able to mitigate some of its exposure to this issue through active management of its operations. Pinnacle's estimate of $61 to $65 million in Adjusted EBITDA¹ for Fiscal 2018 contained in the prospectus prepared in connection with the Offering remains unchanged.
Market Update
- Hawkins Wright reported in its January 2018 Forest Energy Monitor that year-over-year demand growth for industrial wood pellets as at December 2017 was up 15% in Europe, 42% in South Korea, and 54% in Japan.
- The European Parliament voted to accept the Renewable Energy Directive, which calls for a renewable energy target of 35% for EU member countries. Pinnacle expects this will provide further impetus for growth in biomass-based fuel sources.
- Drax, one of the United Kingdom's largest power utilities, received subsidy support for its fourth generating unit at the Drax Power Station in the U.K. The effect of the subsidy support is expected to impact this generating unit in 2018/2019, allowing Drax to utilize wood pellets more continuously and at a slightly elevated overall level.
- The Engie plant at Rodenhuize, Belgium re-started in the first quarter of 2018, off-setting the effect of the delayed start of the Lynemouth power station in the U.K.
- Pinnacle is currently negotiating with various counterparties to secure long-term take-or-pay contracts in Asia to meet growing demand.
Selected Consolidated Financial Information
The following tables set forth selected historical financial information for Q4 2017, Q4 2016, Fiscal 2017, and Fiscal 2016. Such information has been derived from our audited consolidated financial statements and related notes, in each case prepared in accordance with IFRS. The selected consolidated financial information set out below for Q4 2017 and Q4 2016 is unaudited.
|
Q4 2017 |
Q4 2016 |
Fiscal 2017 |
Fiscal 2016 | |||||||
|
(In thousands of Canadian dollars, except per share | ||||||||||
|
Consolidated Statements of Operations Data |
||||||||||
|
Revenue |
72,958 |
70,935 |
292,727 |
266,338 | ||||||
|
Costs and expenses: |
||||||||||
|
Production |
47,377 |
46,278 |
188,414 |
173,693 | ||||||
|
Distribution |
9,925 |
11,079 |
38,421 |
39,474 | ||||||
|
Selling, general and administration |
4,347 |
4,116 |
15,268 |
12,331 | ||||||
|
Amortization of equipment and intangible assets |
5,280 |
5,557 |
21,819 |
21,211 | ||||||
|
Profit (loss) before finance costs and other (income) expense |
6,029 |
3,905 |
28,805 |
19,629 | ||||||
|
Finance cost (income) |
6,120 |
(15,004) |
24,251 |
1,000 | ||||||
|
Other (income) expense |
(358) |
11,595 |
8,912 |
7,796 | ||||||
|
Net profit (loss) before income taxes |
267 |
7,314 |
(4,358) |
10,833 | ||||||
|
Income tax (expense) recovery: |
||||||||||
|
Current |
- |
(12) |
- |
(2) | ||||||
|
Deferred |
(163) |
(4,716) |
(526) |
(5,569) | ||||||
|
Net profit (loss) and comprehensive income (loss) |
104 |
2,586 |
(4,884) |
5,262 | ||||||
|
Net profit (loss) per share attributable to owners |
||||||||||
|
Basic and diluted ? Class A |
$(0.01) |
$0.07 |
$0.22 |
$0.11 | ||||||
|
Basic and diluted ? Class B |
$(0.01) |
$0.07 |
$0.22 |
$0.11 | ||||||
|
Statement of Cash Flows Data |
||||||||||
|
Cash provided by (used in) |
||||||||||
|
Operating activities before net change in non-cash operating working capital |
11,305 |
8,457 |
51,128 |
44,742 | ||||||
|
Net change in non?cash operating working capital |
(15,302) |
(1,543) |
(20,183) |
(14,126) | ||||||
|
Financing activities |
41,165 |
(10,212) |
48,812 |
(20,958) | ||||||
|
Investing activities |
(29,786) |
(3,812) |
(72,682) |
(13,250) | ||||||
|
Foreign exchange gain (loss) on cash position held in foreign currency |
(69) |
63 |
(279) |
68 | ||||||
|
Q4 2017 |
Q4 2016 |
Fiscal 2017 |
Fiscal 2016 | |||||||
|
(In thousands of Canadian dollars, except Adjusted | ||||||||||
|
Other Financial Data |
||||||||||
|
Adjusted EBITDA(1) |
12,775 |
10,970 |
56,121 |
43,922 | ||||||
|
Adjusted EBITDA per Metric Ton(1) |
38.25 |
32.75 |
40.87 |
33.68 | ||||||
|
Adjusted Gross Margin per Metric Ton(1) |
47.70 |
40.43 |
48.74 |
40.72 | ||||||
|
Adjusted Gross Margin Percentage(1) |
21.8% |
19.1% |
22.9% |
19.9% | ||||||
|
Maintenance capital expenditures |
5,444 |
1,454 |
9,040 |
4,434 | ||||||
|
Growth capital expenditures |
23,691 |
2,358 |
63,016 |
8,916 | ||||||
|
Operating Data |
||||||||||
|
Metric tons of industrial wood pellets sold (000s) |
334 |
335 |
1,373 |
1,304 | ||||||
|
As at Dec 29, |
As at Dec 30, | |||
|
(In thousands of Canadian dollars) | ||||
|
Selected Consolidated Statement Financial Position Data(2) |
||||
|
Cash |
18,908 |
12,112 | ||
|
Property, plant and equipment |
238,196 |
175,849 | ||
|
Total assets |
433,645 |
353,511 | ||
|
Term debt and shareholders' debentures (including current portion) |
285,694 |
234,142 | ||
|
Total non-current liabilities |
318,811 |
263,600 | ||
|
Total equity |
35,204 |
37,951 | ||
Notes:
|
(1) |
See "Non-IFRS Measures". |
|
(2) |
The above table does not reflect the change in the Company's capitalization related to the Offering, including the repayment of the shareholders' debentures and cash proceeds received by the Company. |
Audited Financial Statements
Pinnacle's audited consolidated financial statements and Management's Discussion & Analysis for the fiscal year ended December 29, 2017 are available on the Company's website at pinnaclepellet.com or on SEDAR at www.sedar.com.
Conference Call
Robert McCurdy, CEO, Leroy Reitsma, President & COO, and Andrea Johnston, CFO, will host a conference call for investors and analysts on Friday, March 16, 2018 at 10:00 am (ET) / 7:00 am (PT). The dial-in numbers for the conference call are (647) 427-7450 or (888) 231-8191. A live webcast of the call will be accessible via Pinnacle's website at: http://pinnaclepellet.com/investors/presentations-events
To access a replay of the conference call, dial (416) 849-0833 or (855) 859-2056, passcode: 5893338. The replay will be available until April 13, 2018. The webcast will be archived following conclusion of the call.
About Pinnacle
Pinnacle is a rapidly growing industrial wood pellet manufacturer and distributor and the third largest producer in the world. The Company produces renewable fuel for electricity generation in the form of industrial wood pellets, which are used by global utilities and large-scale power generators to produce renewable and reliable baseload 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 seven industrial wood pellet production facilities in western Canada, a port terminal in Prince Rupert, B.C., and currently has a new production facility under construction in Smithers, B.C. Pinnacle has entered into long-term take-or-pay contracts with utilities in the U.K., Europe and Asia that represent 100% of its production capacity through 2021 and nearly 80% of its production capacity through 2026.
Forward-Looking Information
This news release may contain "forward-looking information" within the meaning of applicable securities laws in Canada. Forward-looking information may relate to Pinnacle's future financial outlook and anticipated events or results and may include information regarding its financial position, business strategy, growth strategies, budgets, operations, financial results, taxes, dividend policy, plans and objectives. Particularly, information regarding the Company's expectations of future results, performance, achievements, prospects or opportunities or the markets in which it operates is forward-looking information. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expects" or "does not expect", "is expected", "an opportunity exists", "budget", "scheduled", "estimates", "outlook", "forecasts", "projection", "prospects", "strategy", "intends", "anticipates", "does not anticipate", "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might", "will", "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events or circumstances. If any of the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those expressed in the forward-looking information. The Company has no 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 Canada. Actual results and the timing of events may differ materially from those anticipated in the forward-looking information as a result of various factors, including those described in "Risk Factors" which are described in the Company's final prospectus filed in connection with its initial public offering on January 30, 2018 (the "Prospectus").
We caution that the list of risk factors and uncertainties is not exhaustive and other factors could also adversely affect our results. Readers are urged to consider the risks, uncertainties and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such information. See "Forward-looking Information" and "Risk Factors" in the Prospectus for a discussion of the uncertainties, risks and assumptions associated with these statements.
(1) Non-IFRS Financial Measures
This news release makes reference 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. We use non-IFRS measures including "EBITDA", "Adjusted EBITDA", "Adjusted EBITDA per Metric Ton", "Adjusted Gross Margin", "Adjusted Gross Margin per Metric Ton", "Adjusted Gross Margin Percentage" and "Free Cash Flow". 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. As required by Canadian securities laws, we reconcile these non-IFRS measures to the most comparable IFRS measures in our Management Discussion & Analysis for the fiscal fourth quarter and year ended December 29, 2017.
SOURCE Pinnacle Renewable Holdings Inc.
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