Q4 2020 Revenue of
SUMMARY OF FOURTH QUARTER 2020 FINANCIAL PERFORMANCE:
- Revenue in Q4 2020 was
$116.9 million ,$25.4 million or 27.8% higher than Q4 2019 revenue of$91.5 million ; the net loss was$2.5 million in Q4 2020 versus$3.1 million in Q4 2019. - The net loss for Q4 2020 includes
$0.1 million for expenses related to the proposed acquisition of Pinnacle by Drax Group PLC (LSE:DRX) ("Drax") and$0.2 million of net insurance benefits compared with$3.0 million in Q4 2019. Excluding these expenses and benefits, the net loss would have been$2.6 million in Q4 2020 compared with$6.1 million in Q4 2019. - Adjusted Gross Margin(1) ("AGM") in Q4 2020 was
$19.8 million or 17.0% of revenue compared to$16.4 million or 17.9% of revenue in Q4 2019. Adjusted EBITDA(1) was$15.4 million , or 13.2% of revenue compared to$11.3 million or 12.3% of revenue in Q4 2019. Excluding the insurance benefits reported above, AGM in Q4 2020 would have been$19.5 million compared to$13.0 million in Q4 2019 and Adjusted EBITDA would have been$14.9 million and$8.1 million in Q4 2020 and Q4 2019 respectively. - Capital expenditures net of non-controlling interests totaled
$32.1 million in Q4 2020, including$28.1 million on growth-related projects, compared with$12.9 million in the same quarter last year. - Net debt at the end of the quarter was
$411.2 million resulting in available liquidity of$153.3 million . Net debt includes$84.7 million associated with growth-related projects still under construction, as well as$34.7 million associated with the recently completedHigh Level mill.
SUMMARY OF FISCAL 2020 FINANCIAL PERFORMANCE:
- Revenue for Fiscal 2020 totaled
$490.5 million ;$112.7 million or 29.8% higher than Fiscal 2019 revenue of$377.8 million ; the net loss in Fiscal 2020 was$3.9 million compared to a net loss of$10.0 million in Fiscal 2019. - The net loss for Fiscal 2020 includes
$0.2 million for expenses related to the proposed acquisition of Pinnacle by Drax and$4.8 million of net insurance benefits compared with$2.5 million in Fiscal 2019. Excluding these expenses and benefits, the net loss would have been$8.5 million in Fiscal 2020 versus$12.5 in million in Fiscal 2019. - The Company's AGM for Fiscal 2020 was
$80.5 million or 16.4% of revenue compared to$65.0 million or 17.2% of revenue in Fiscal 2019. Adjusted EBITDA for Fiscal 2020 was$61.6 million versus$47.2 million in Fiscal 2019. Excluding the insurance benefits reported above, AGM would have been$77.1 million in Fiscal 2020 versus$59.3 million in Fiscal 2019 and Adjusted EBITDA would have been$58.6 million in Fiscal 2020 compared with$43.3 million in Fiscal 2019. - Capital expenditures net of non-controlling interests totaled
$109.3 million in Fiscal 2020, including$100.3 million on growth-related projects, compared with$53.8 million in Fiscal 2019.
FACTORS IMPACTING FOURTH QUARTER, 2020
- Production in Q4 2020 was 489,000 MT, 11% higher than the same quarter last year but 17% below Q3 2020. Shipments totaled 526,000 MT, 24% more than Q4 2019 but 12% below the prior quarter. A total of 39,000 MT of third-party pellets were purchased in Q4 2020 compared with 16,000 MT in Q4 2019 and 15,000 MT in Q3 2020.
Houston Incident and Other Issues Impact Production Volumes
- Production at the
Houston plant was suspended onNovember 25th as a result of a fire-related incident in the dryer area of that mill. Production resumed onDecember 10th on a reduced basis. A plan to repair the dryer and the other equipment damaged in the incident at a cost of$5.5 to$6.0 million has been developed and will be covered by the Company's insurance policies, subject to standard deductibles. The production impact atHouston during the quarter has been estimated at 16,000 MT. - Operating and reliability issues at the Company's
Aliceville plant resulted in the loss of 20,000 MT during Q4. There were several unplanned shuts related to mechanical and electrical failures and to the reinforcement of safety standards. - Operating disruptions at the Lavington and
Armstrong plants in the B.C. Interior stemming from congestion at the Fibreco terminal inNorth Vancouver resulted in the loss of approximately 5,000 MT of production during Q4 2020. The impact on service levels at the terminal as a result of the Fibreco grain silo collapse in October has been more extensive and will take longer to resolve than initially expected. In addition to the impact on production, Pinnacle incurred approximately$0.5 million in additional inland transportation costs and demurrage associated with the Fibreco matter in Q4 2020. - Approximately 9,000 MT of production was lost in Q4 2020 due to CN service disruptions unrelated to the Fibreco matter.
Lower Production and Inclement Weather Impact Shipments
- The combination of lower production volumes and inclement weather in both B.C. and
Alabama , which impacted the pace of ship loading, had a negative impact of shipment volumes and revenues during the quarter.
Reduced Supply of Sawmill Residuals Impacts Fibre Costs
- Sawmill residuals dropped from 84% of the Company's feedstock in Q3 2020 to 77% in Q4 2020 due to reduced sawmill operating rates in the last two weeks of the quarter and a decision by the Company to utilize a higher level of fibre inventory as feedstock during the quarter. Overall, fibre costs were up 3% quarter-over-quarter.
Commencement of Production at
- A total of 8,000 MT of pellets were produced at the newly commissioned plant at
High Level, Alberta in the quarter. While production levels were ahead of the Company's commissioning plan, the Company's Adjusted EBITDA was negatively impacted by$0.7 million in Q4 2020 as operating costs at the plant were amortized over a relatively small volume of production.
PROGRESS ON GROWTH-RELATED CAPITAL PROJECTS
High Level Construction Completed
- As indicated above, construction of the new 200,000 MT mill at
High Level, Alberta was completed during Q4 2020. The new mill is 50% owned by Pinnacle and 50% owned byTolko Industries Inc. ("Tolko"). - Pinnacle contributed
$10.1 million to the project in Q4 2020, bringing the Company's total expenditures to$33.9 million or approximately 99% of its share of estimated total project costs.
Demopolis Construction Proceeds as Planned
- Construction continued during the quarter on the 360,000 MT per year mill in
Demopolis, Alabama , in which Pinnacle has a 70% interest. - Initial production at
Demopolis is expected in the second quarter of 2021. - Additional costs incurred to advance the electrical scope of the project and the barge loading area will add an additional
$4.5 million to the cost of the project, bringing the total capital investment atDemopolis to$133.2 million (Pinnacle's share$93.2 million ). - Pinnacle contributed
$15.7 million to the project in Q4 2020, bringing expenditures to-date to$55.9 million or approximately 60% of budgeted costs.
Other Growth Capital Projects
- The Phase 2 Project at
Aliceville, Alabama was completed in early October. This project added a truck unloading system to the mill's infrastructure, broadening access to sawmill residuals in the region and supporting the Company's goal of boosting production volumes at the mill. - The Meadowbank WESP upgrade was completed during the quarter. The upgrade will enhance the operating flexibility of the facility and allow Pinnacle to continue to adapt to structural changes in fibre supply in the B.C. Interior. The upgrade is expected to increase the mill's production capacity by 40,000 MT per year.
ARRANGEMENT AGREEMENT
- On
February 8, 2021 , the Company announced that it has entered into an arrangement agreement with Drax to acquire all of the issued and outstanding common shares of Pinnacle. The Company's shareholders are entitled to receive$11.30 per share in cash with all future dividends suspended starting in the first quarter of 2021. The transaction is anticipated to close in the second or third quarter of 2021 and is subject to approval by two-thirds of the votes cast by holders at a special meeting of the Company's shareholders, approval by a majority of the votes cast by holders of Drax shares at a meeting of Drax shareholders, and other governmental and regulatory approvals.
OUTLOOK
- The demand for wood pellets remains strong. Year-over-year production increases are expected as the
Entwistle plant operates at full capacity, benefits are realized from the upgrades atWilliams Lake , Meadowbank, andAliceville andHigh Level continues its commissioning process. - Cold weather is expected to impact production at the Company's Canadian mills and increase drying costs, which is typical in the winter months. In addition, the Fibreco grain silo incident will continue to impact loading operations at the port throughout Q1 2021 and possibly longer, with additional impacts on rail service and production.
- Pinnacle's order backlog remains strong at
$6.7 billion . - On-going uncertainties associated with the COVID-19 pandemic including reports of higher positive test results in areas where the Company operates, have the potential to impact operations and the availability and cost of feedstock for the mills. 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.
FINANCIAL AND OPERATING HIGHLIGHTS
Q4 2020 | Q4 2019 | Q4 2020 | Q4 2019 | ||
Unit | 13 weeks | 13 weeks | 52 weeks | 52 weeks | |
Revenue | 116,911 | 91,465 | 490,505 | 377,808 | |
Income before finance costs and other income | 3,070 | 2,187 | 19,137 | 6,748 | |
Net loss(1) | (2,497) | (3,055) | (3,876) | (9,974) | |
Net loss attributable to owners | (1,965) | (3,661) | (5,041) | (10,807) | |
Basic and diluted loss per share | $/share | (0.06) | (0.09) | (0.15) | (0.30) |
Adjusted Gross Margin (2)(3) | 19,826 | 16,417 | 80,521 | 64,980 | |
Adjusted Gross Margin per MT (2)(3) | $/MT | 37.69 | 38.54 | 35.60 | 37.34 |
Adjusted Gross Margin Percentage (2)(3) | % | 17.0% | 17.9% | 16.4% | 17.2% |
Adjusted EBITDA (4)(2) | 15,441 | 11,282 | 61,646 | 47,173 | |
Adjusted EBITDA per MT (4)(2) | $/MT | 29.35 | 26.48 | 27.25 | 27.11 |
Adjusted EBITDA Percentage (4)(2) | % | 13.2% | 12.3% | 12.6% | 12.5% |
Free Cash Flow (2) | 6,117 | 2,951 | 30,837 | 17,170 | |
Annualized Return on | % | 11.2% | 8.8% | 11.6% | 10.1% |
Annualized Cash Flow Return on Assets (2) | % | 11.5% | 10.6% | 11.0% | 9.9% |
|
| ||||
Total assets | 766,922 | 629,391 | |||
Total debt | 379,770 | 316,014 | |||
Q4 2020 | Q4 2019 | Q4 2020 | Q4 2019 | ||
Operating Highlights | 13 weeks | 13 weeks | 52 weeks | 52 weeks | |
Industrial wood pellets produced (5) | MT ('000) | 489 | 442 | 2,046 | 1,741 |
Industrial wood pellets purchased (6) | MT ('000) | 39 | 16 | 160 | 91 |
Industrial wood pellets sold | MT ('000) | 526 | 426 | 2,262 | 1,740 |
Contracted Backlog (7) |
|
| |||
Fiscal 2021 | $ billions | 0.6 | 0.4 | ||
Fiscal 2022 | $ billions | 0.7 | 0.5 | ||
Fiscal 2023 and thereafter | $ billions | 5.4 | 6.0 | ||
Total product sales under Contracted Backlog | $ billions | 6.7 | 6.9 |
Notes | |
(1) | For the 13-week and 52-week period ended |
(2) | See "Non-IFRS Measures" for definition of the items discussed below and as well as reconciliations of non-IFRS measure with the most directly comparable IFRS measures. |
(3) | For the 13-week and 52-week period ended |
(4) | For the 13-week and 52-week period ended |
(5) | Includes MT produced by all facilities managed by Pinnacle, including |
(6) | Includes MT sold that were purchased from third parties, excluding HPLP. |
(7) | We enter into long-term, take-or-pay offtake contracts with large and well capitalized counterparties or their affiliates. "Contracted Backlog" represents the revenue to be recognized 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 recognized in either a preceding or following interim period. |
LIQUIDITY AND CAPITAL RESOURCES
Net debt (current and long term debt, current and long term lease liabilities (excluding charter vessel), offset by cash and cash equivalents) at
The following table summarizes the Company's credit facilities and availability as of
Revolver | Term loan | Delayed | Total | |
Available line of credit and maximum borrowing available | 65,000 | 280,000 | 185,000 | 530,000 |
Mandatory amortization | - | 5,600 | - | 5,600 |
Drawings | 6,000 | 280,000 | 102,200 | 388,200 |
Unused portion of facility | 59,000 | - | 82,800 | 141,800 |
Add: | ||||
Cash and cash equivalents | - | - | - | 11,510 |
Available liquidity at | 59,000 | - | 82,800 | 153,310 |
The revolver loan, term loan and delayed draw loan each 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, Net Debt to
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE FISCAL 2020 YEAR ENDED
Fiscal year ended | Note | ||
Revenue | 23 | 490,505 | 377,808 |
Costs and expenses | |||
Production | 346,266 | 258,547 | |
Distribution | 62,223 | 54,021 | |
Selling, general and administration | 13 | 20,049 | 18,495 |
Amortization of equipment and intangible assets | 42,830 | 39,997 | |
471,368 | 371,060 | ||
Operating income | 19,137 | 6,748 | |
Other income/(expense) | |||
Equity earnings in | 8 | (330) | 573 |
Loss on disposal of property, plant and equipment | (1,058) | (1,103) | |
Impairment of | - | (9,417) | |
Impairment of intangibles | - | (278) | |
Insurance recovery for property loss at | 3,643 | 9,000 | |
Finance costs | 14 | (26,534) | (24,178) |
Other income | 157 | 6,376 | |
(24,122) | (19,027) | ||
Net loss before income taxes | (4,985) | (12,279) | |
Income tax recovery | |||
Deferred | 15 | 1,109 | 2,305 |
1,109 | 2,305 | ||
Net loss | (3,876) | (9,974) | |
Net (loss)/income attributable to: | |||
Owners of the Company | (5,041) | (10,807) | |
Non-controlling interests | 12 | 1,165 | 833 |
(3,876) | (9,974) | ||
Net loss per share attributable to owners (basic and diluted): | 16 | (0.15) | (0.33) |
Weighted average of number of shares outstanding (thousands): | 16 | 33,359 | 33,238 |
Fiscal year ended | |||
Net loss | (3,876) | (9,974) | |
Items that may be recycled through net income: | |||
Foreign exchange translation of foreign operations, net of tax | (4,506) | (940) | |
Comprehensive loss for the period | (8,382) | (10,914) | |
Comprehensive (loss)/income attributable to: | |||
Owners of the Company | (8,195) | (12,127) | |
Non-controlling interests | (187) | 1,213 | |
(8,382) | (10,914) |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL 2020 YEAR ENDED
Fiscal year ended | Note | ||
Cash provided by (used in) | |||
Operating activities | |||
Net loss | (3,876) | (9,974) | |
Financing costs, net | 14 | 26,534 | 24,178 |
Distributions from | - | 2,400 | |
Insurance received for business interruption at | 22 | 9,516 | 7,100 |
Realized gain on derivatives and foreign exchange | 14 | 2,095 | 2,189 |
Items not involving cash: | |||
Amortization of equipment and intangible assets | 42,830 | 39,997 | |
Equity loss/(earnings) in | 8 | 330 | (573) |
Loss on disposal of equipment | 1,058 | 1,103 | |
Stock-based compensation | 11 | 642 | 1,020 |
Inventory write down | 5 | 688 | 181 |
Impairment of | - | 9,417 | |
Impairment of intangible assets | - | 278 | |
Insurance recoverable recorded in income related to | 22 | (7,259) | (22,000) |
Business interruption insurance recorded in income related to | 22 | (490) | - |
Deferred income tax recovery | 15 | (1,109) | (2,305) |
Cash flow from operating activities | 70,959 | 53,011 | |
Net change in non-cash operating working capital | 17 | 15,317 | (20,049) |
86,276 | 32,962 | ||
Financing activities | |||
Drawings on revolver loan | 9 | 278,200 | 199,600 |
Repayment of revolver loan | 9 | (291,400) | (198,850) |
Drawings on term debt | 9 | - | 277,944 |
Repayment of term debt | 9 | (5,600) | (194,000) |
Drawings on delayed draw loan | 9 | 82,200 | 20,000 |
Repayment of delayed draw loan | 9 | - | (49,760) |
Principal payment of leases | 25 | (9,253) | (7,550) |
Proceeds from exercise of stock options | 11 | 243 | 332 |
Dividends paid during the period | 11 | (8,757) | (19,939) |
Investment from non-controlling interest | 18,689 | 5,652 | |
Distributions to non-controlling interest | (487) | (1,100) | |
Finance costs paid | 14 | (19,817) | (19,215) |
44,018 | 13,115 | ||
Investing activities | |||
Insurance recovery for property loss at | 22 | 4,643 | 8,000 |
Increase in restricted cash | (1,325) | - | |
Purchase of intangible assets | 7 | (71) | - |
Purchase of property, plant and equipment | 17 | (133,361) | (61,032) |
Proceeds from sale of property, plant and equipment | 400 | 157 | |
(129,714) | (52,875) | ||
Foreign exchange gain on cash position held in foreign currency | (337) | 37 | |
Increase/(decrease) in cash and cash equivalents | 243 | (6,761) | |
Cash and cash equivalents, beginning of the period | 11,267 | 18,028 | |
Cash and cash equivalents, end of the period | 11,510 | 11,267 |
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at | Note | ||
ASSETS | |||
Current assets | |||
Cash and cash equivalents | 11,510 | 11,267 | |
Restricted cash | 1,325 | - | |
Accounts receivable | 4 | 30,941 | 36,764 |
Inventory | 5 | 42,679 | 46,938 |
Receivable against NMTC debt | 26 | - | 12,774 |
Other current assets | 4,308 | 10,916 | |
Total current assets | 90,763 | 118,659 | |
Property, plant and equipment | 6 | 565,442 | 399,181 |
7 | 98,795 | 100,191 | |
Investment in | 8 | 7,217 | 7,548 |
Deferred income tax assets | 15 | 4,468 | 2,448 |
Other long-term assets | 17 | 1,364 | |
Total assets | 766,922 | 629,391 | |
LIABILITIES AND EQUITY | |||
Current liabilities | |||
Accounts payable and accrued liabilities | 64,737 | 50,663 | |
Revolver loan | 9 | 6,000 | 19,200 |
Current portion of long-term debt | 9 | 21,700 | 3,128 |
Current portion of NMTC debt | 26 | - | 12,774 |
Current portion of lease liabilities | 25 | 10,879 | 7,424 |
Other current liabilities | 315 | 1,786 | |
Total current liabilities | 103,631 | 94,975 | |
Long-term debt | 9 | 352,070 | 293,686 |
Lease liabilities | 25 | 92,765 | 29,551 |
Other long-term liabilities | 10 | 6,857 | 2,462 |
Deferred income tax liabilities | 15 | 1,130 | - |
Total liabilities | 556,453 | 420,674 | |
EQUITY | |||
Shareholders' equity | |||
Common shares | 11 | 278,076 | 277,619 |
Contributed surplus | 4,377 | 4,145 | |
Accumulated other comprehensive loss | (4,474) | (1,320) | |
Deficit | (130,989) | (117,191) | |
Total equity attributable to owners of the Company | 146,990 | 163,253 | |
Non-controlling interest | 12 | 63,479 | 45,464 |
Total equity | 210,469 | 208,717 | |
Total liabilities and equity | 766,922 | 629,391 |
Pinnacle's audited consolidated financial statements and Management's Discussion & Analysis for Fiscal Year ended
ABOUT PINNACLE
Pinnacle is the second largest producer of industrial wood pellets in the world. The Company's products are used to displace fossil fuels in the production of baseload electrical power in key markets around the world. The Company operates nine production facilities in
(1) NON-IFRS FINANCIAL MEASURES
This news release makes reference to certain non-IFRS measures. Please see page 14 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
Future-oriented financial information ("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