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Pinnacle Renewable Holdings Inc.

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Pinnacle Renewable Holdings Reports Fiscal 2018 First Quarter Results and Additional New Off-take Contracts in Japan
Pinnacle Renewable Holdings Reports Fiscal 2018 First Quarter Results and Additional New Off-take Contracts in Japan

Canada NewsWire

/NOT FOR DISTRIBUTION IN THE UNITED STATES/

– Company also declares first quarterly shareholder dividend –

VANCOUVER, May 2, 2018 /CNW/ - Pinnacle Renewable Holdings Inc. ("Pinnacle" or the "Company") (TSX: PL) today announced its financial results for its fiscal 2018 first quarter ("Q1 2018") and that it has entered into new long-term, take-or-pay off-take contracts with new customers in Japan.

Q1 2018 Highlights

  • Increased first quarter revenue by 4.7% relative to Q1 2017;
  • Generated Adjusted EBITDA¹ of $12.0 million, a decrease of 1.6% relative to Q1 2017;
  • Commenced initial production of industrial wood pellets at the Entwistle Facility on March 8, 2018;
  • Commenced construction of the Smithers Facility on March 12, 2018; and
  • Secured a long-term, take-or-pay contract with Ube Industries Ltd. ("Ube"), a new customer in Japan, to supply 70,000 metric tons per annum ("MTPA") of industrial wood pellets commencing in late Fiscal 2019.

"We have made strong progress in business development in Japan, with the new Ube contract secured in the first quarter and two additional, new customer off-take contracts secured subsequent to quarter end. These three contracts demonstrate the growing commitment in Japan towards generating renewable and reliable baseload power from industrial wood pellets," said Robert McCurdy, Chief Executive Officer. "In addition, our operations performed well in the quarter, as we largely offset the impact of rail service disruptions. We remain on track to meet our target of between $61 to $65 million in Adjusted EBITDA for Fiscal 2018."

Q1 2018 Financial Results

Revenue for Q1 2018 totaled $71.0 million, an increase of 4.7% compared to $67.8 million for Q1 2017. 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 Q1 2018 compared to Q1 2017, higher sales volume, and a one-time sale through of wood pellets from a third-party supplier. Industrial wood pellet sales volumes were approximately 328,000 MT in Q1 2018, compared to sales volumes of approximately 320,000 MT in Q1 2017.

Adjusted Gross Margin¹ was $14.9 million, or 21.0% of revenue, in Q1 2018 compared to $14.6 million, or 21.5% of revenue, in Q1 2017. The decline in Adjusted Gross Margin Percentage¹ was primarily due to the lower margin on the previously mentioned one-time sale through of wood pellets from a third-party supplier and higher production costs, partially offset by higher average sales prices and lower distribution costs.

Net loss and comprehensive loss was $12.8 million in Q1 2018, compared to $0.3 million in Q1 2017. The increased net loss and comprehensive loss was primarily attributable to a $21.9 million (pre-tax) loss, and associated $5.8 million deferred income tax recovery, recognized on conversion of shareholders' debentures upon closing of Pinnacle's initial public offering (the "Offering") on February 6, 2018. This was partially offset by a gain of $3.6 million (pre-tax) that was recognized on conversion of Class B and Class D common shares.

Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA")¹ was $12.0 million in Q1 2018, compared to $12.2 million in Q1 2017. The decrease in Adjusted EBITDA1 was due to higher operating and selling, general and administrative ("SG&A") costs, partially offset by higher revenue.

Recent Company Developments and Outlook

In addition to the Ube off-take contract concluded in Q1 2018, Pinnacle entered into a long-term, take-or-pay contract on April 23, 2018 with another new customer in Japan, Toyota Tsusho Corporation ("Toyota Tsusho"), a large trading and investing company and a group member of Toyota. Under the terms of the contract, Pinnacle will supply 30,000 MTPA of industrial wood pellets to Toyota Tsusho commencing in late Fiscal 2021. The industrial wood pellets will be used by a Japanese biomass power generation plant.

On the same date, Pinnacle also entered into a new long-term, take-or-pay off-take contract with Sumitomo Corporation ("Sumitomo").  Under the terms of the contract, Pinnacle will supply 75,000 MTPA of industrial wood pellets to Sumitomo commencing in late 2022. The industrial wood pellets will be used in a thermal power generation plant in Japan converted to run on biomass.

The three new long-term supply agreements contracted year-to-date total $575 million, bringing the Company's contracted backlog as at May 2, 2018 up to $3.5 billion and setting the stage for Pinnacle to make further additions to its industrial wood pellet production capacity. Pinnacle expects to increase capacity at its existing facilities through its continuous improvement programs. The Company also now expects to expand its production capacity by advancing development of greenfield and brownfield production facilities. Pinnacle may also partially fulfill new contracted volumes through facility acquisition.

Market Update

Efforts to convert existing power generating units in the Netherlands to utilize wood pellets by Uniper SE, and RWE AG, two of Europe's largest power generators and energy traders, remain on schedule. Both units are expected to commission during 2018.

Pinnacle continues to undertake negotiations with various current and new counterparties to secure long-term take-or-pay contracts in Asia to meet growing demand in the region.

Dividend

The Board of Directors today approved the payment of the Company's Q1 2018 dividend of $0.09 per Common Share. Payment will be made on May 22, 2018 to shareholders of record as at May 11, 2018. The Q1 2018 dividend is for the period beginning on February 6, 2018 (the closing date of the Offering) and ending on March 30, 2018. Subsequent quarterly dividend payments are expected to be $0.15 per share, reflecting full quarterly periods of operations as a public company.  

Selected Consolidated Financial Information

The following tables set forth selected financial information for Q1 2018 and Q1 2017. Such information has been derived from Pinnacle's unaudited interim condensed consolidated financial statements and accompanying notes.



Q1 2018



Q1 2017

(In thousands except per share amounts)


13 weeks



13 weeks







Consolidated Statements of Profit (Loss) and Comprehensive Income (Loss) Data


Revenue

$

71,022


$

67,847


Costs and expenses:








Production


48,520



44,546



Distribution


8,030



9,060



Selling, general and administration


9,217



3,206



Amortization of equipment and intangible assets


5,358



5,604


Profit (loss) before finance costs and other (income) expense

$

(103)


$

5,431



Finance cost


382



5,827



Other (income) expense


17,983



(7)


Net loss before income taxes

$

(18,468)


$

(389)


Income tax (expense) recovery:








Current


-



-



Deferred


5,694



104


Net loss and comprehensive loss

$

(12,774)


$

(285)


Net loss per share attributable to owners








Basic and diluted

$

(0.58)


$

(0.08)







Consolidated Statements of Cash Flows







Cash provided by (used in)








Operating activities before net change in non-cash operating working capital

$

9,490


$

10,954


Net change in noncash operating working capital

$

17,899


$

809


Financing activities

$

13,564


$

(9,770)


Investing activities

$

(27,437)


$

(3,753)









Q1 2018



Q1 2017

(In thousands except per MT amounts)


13 weeks



13 weeks







Other Financial Data







Adjusted EBITDA(1)

$

11,957


$

12,156


Adjusted EBITDA per MT(1)

$

36.45


$

37.99


Adjusted Gross Margin per MT(1)

$

45.45


$

45.68


Adjusted Gross Margin Percentage(1)


21.0%



21.5%


Maintenance capital expenditures

$

1,038


$

1,000


Growth capital expenditures

$

26,454


$

2,753







Operating Data







MT of industrial wood pellets sold


328



320















March 30,



December 29,

(In thousands)


2018



2017







Selected Consolidated Statements of Financial Position Data






Cash

$

32,525


$

18,908


Property, plant and equipment

$

255,849


$

238,196


Total assets

$

450,255


$

433,645


Term debt and shareholders' debentures (including current portion)

$

196,950


$

285,694


Total non-current liabilities

$

192,886


$

318,811


Total equity

$

202,545


$

35,204


Notes:


(1) See "Non-IFRS Measures".

 

Financial Statements
Pinnacle's unaudited interim condensed consolidated financial statements and Management's Discussion & Analysis for Q1 2018 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 Thursday, May 3, 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: 4179729. The replay will be available until May 10, 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 102% of its production capacity through 2021 and nearly 83% 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 Annual Information Form ("AIF") filed March 27, 2018 on SEDAR.

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 Company's most recent AIF and its Management's Discussion & Analysis for the fiscal first quarter ended March 30, 2018 available on SEDAR (www.sedar.com) 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 first quarter ended March 30, 2018.

SOURCE Pinnacle Renewable Holdings Inc.

View original content: http://www.newswire.ca/en/releases/archive/May2018/02/c7569.html

Investor Relations, Pinnacle Renewable Energy, Tel: 1-877-737-4344, Email: investors@pinnaclepellet.com, Web: www.pinnaclepellet.comCopyright CNW Group 2018

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