Rentech provides fiber, pellet update in Q1 investor call
While revenues attributed to its wood fiber business represented just one-third of Rentech’s first quarter revenues, CEO Hunt Ramsbottom opened the Q1 2014 investor call with a point-by-point update of the company’s rapidly expanding wood fiber business.
“We’ve made tremendous progress since unveiling our wood fiber strategy just one year ago,” said Rentech president and CEO Hunt Ramsbottom, reminding listeners that Rentech’s first investment in the wood fiber sector was the acquisition of Fulghum Fibres last May.
Rentech’s total revenues for the first quarter ending March 31 were $84.8 million, with $28.6 million coming from the Fulghum Fibre business unit.
Rentech’s wood fiber strategy also includes an aggressive entry into the wood pellet market, and Ramsbottom provided an update of the company’s two pellet facilities currently under construction in eastern Canada. The Wawa and Atikokan facilities have planned capacities of 450,000 and 100,000 tons, respectively, and are expected to come on line and begin production this year. “The experienced team we have assembled in Canada did a great job through a very tough winter to keep these projects moving for our customers and our shareholders,” said Ramsbottom. He continued by saying the company expected the Atikokan pellet facility to deliver its first shipments of pellets to the Ontario Power Generation this summer. The Wawa facility is expected to make its first delivery to Drax Power in Yorkshire in the fourth quarter of 2014, with pellets passing through a storage and handling facility being built at the Port of Quebec that will be operated by Quebec Stevedoring Company Limited . The investment QSL is making in the facility is an estimated $20 million.
Rentech’s aggressive push into the wood fiber and pellet business has been fueled by a significant investment by Blackstone’s GSO. “We secured a $150 million investment from Blackstone’s GSO. This investment is a vote of confidence in our business platform,”said Ramsbottom. Most recently, Rentech used some of this capital to acquire New England Wood Pellet, the largest consolidated manufacturer of wood pellets for the home heating market in the U.S.. “NEWP broadens our product offerings, increases our customer base, and opens up new geographic markets,” noted Ramsbottom.
Rentech’s investment in New England Wood Pellet gives the company a 15 percent market share of the Northeast pellet market, by far the largest regional user of wood pellets. Ramsbottom reported that the residential pellet market is expected to grow 7 percent through 2018, and the company is excited by the growth embedded in that business unit. For the remainder of the year, Rentech expects the New England Wood Pellet unit to generate $31 million in revenue, $3 million in operating income and EBITDA of $5 million.
Once construction of its two Canadian pellet mills is complete, including the New England Wood Pellet acquisition, Rentech will own and operate five pellet facilities with a total production capacity of approximately 800,000 tons per year, serving both the power generation and home heating markets.
Ramsbottom concluded the call with an update on the company’s nitrogen production business, reporting that revenues for the segment in the quarter were $56.3 million, down slightly from $59.6 million during the same period in 2013. The company experienced compressed margins when compared to the same period last year, however, slipping from 38 percent to 24 percent.