Rentech releases 2014 results, nears completion of pellet plants

By Katie Fletcher | March 17, 2015

On March 17, Rentech Inc. announced 2014 quarter four and year-end financial and operating results, reporting that several negative factors affected operating results and liquidity in the year. Keith Forman, president and CEO of Rentech for the past three months, said the year was disappointing on many levels, but the next nine months could be truly evolutionary. “The GPS in our car is set,” Forman said. “I’m the guy behind the wheel, I’ve got good co-pilots, and we’re ready to go on this road. We just need some fuel and gas money and to not get pulled over.”

The company owns and operates wood fiber processing, wood pellet production and nitrogen fertilizer manufacturing businesses. The results of Rentech and its subsidiaries include its wood fiber processing business, Rentech Nitrogen Partners LP, and Energy Technologies as a discontinued operation. Rentech Nitrogen’s results include two operating segments: the East Dubuque, Illinois facility and the Pasadena, Texas facility. The results for the wood fiber processing line of business are reported as three operating segments: Fulghum Fibers, New England Wood Pellet and Wood Pellets: Industrial, which includes the Canadian pellet plants, wood fiber processing business development activities and general and administrative expenses related to the operations.

Negative factors that contributed to the company’s operating results and liquidity include lower than expected volumes at Rentech Nitrogen, due to unplanned downtime at the East Dubuque facility, and a decision to restrict output and sales from the Pasadena facility to improve its profitability. Lower product prices led to lower gross profits at both facilities.

A loss of revenue and unplanned operating expenses followed a fire at a wood chip mill in Maine operated by Fulghum. The wood fiber subsidiary also experienced unplanned downtime at several of its customers' mills, and higher labor and maintenance expenses led to lower profits.

Further, Forman said that Rentech’s wood pellet projects in Canada, the Wawa and Atikokan facilities, are meaningfully over budget and behind schedule. Biomass Magazine reported last month that an additional term loan from GSO Capital Partners LP for up to $63 million was provided to Rentech, with  $45 million of the credit increase available to help overcome the liquidity challenge that cash flow of higher than expected capital expenditures created combined with a delay in expected cash flow from the projects.

The company is working its way through commissioning the 45,000-metric-ton-annual-capacity Atikokan, Ontario, facility and engaged in ramping up the plant. At the approximately 450,000-metric-ton-annual-capacity Wawa facility construction is winding down; all the equipment is in place, and early testing is occurring at the plant. “Our Canadian plants will run this year, and run profitability, they will not run profitability this year, however, but they will run profitability,” Forman said.

The company also sold its former energy technologies business, but since the sale closed six months later than expected, unexpected expenses were incurred. Corporate expenses also increased, primarily due to transaction fees related to the acquisition of NEWP, cost studies, settlements with shareholders and higher information technology costs and accounting fees. Biomass Magazine reported that NEWP acquired the assets of Allegheny Pellet Corp last month, expanding NEWP’s market position as a wood pellet producer in the U.S. heating market.

Consolidated revenues for the fourth quarter of 2014 were $122.6 million, compared to $79.1 million in the fourth quarter of 2013. These revenues were comprised of $28.2 million from Fulghum, up $3.7 million from the same period in the prior year. NEWP performed well, but is a smaller contributor to the business, comprising $12.5 million of the revenue. Wood Pellets: Industrial generated $1.4 million in quarter four, and $80.6 million was realized from Rentech Nitrogen, an increase of $26 million from the comparable period in the prior year. Consolidated revenues for the entire year were $472.7 million, compared to $374.3 million for 2013.

Gross profit for the quarter ending Dec. 31, was $17.4 million, compared to gross loss of $2.8 million in the prior year period. Quarter four gross profit was comprised of $2.9 million from Fulghum, a decrease of $2.4 million from the same period the prior year, $2.5 million from NEWP, $200,000 from Wood Pellets: Industrial, and $11.8 million from Rentech Nitrogen, an increase of $19.8 million from 2013 quarter four. Gross profit for the year was at $79.7 million, compared to $83. 4 million in the prior year.

Consolidated adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter of 2014 was $4.9 million, an improvement of $24.6 million in comparison to the prior year period. This is comprised of $2.8 million from Fulghum, $1.8 million lower than the same period in 2013; $2.7 million from NEWP; a $4.5 million loss from Wood Pellets: Industrial; and $13.4 million from Rentech Nitrogen, an increase of $22.1 million from the prior year period. Total year consolidated adjusted EBITDA was $37.2 million, up slightly from $35.9 million in 2013.

Net income attributable to Rentech common shareholders for the fourth quarter of 2014 was $3.5 million, or 1 cent per basic share, compared to a net loss of $14.5 million, or loss of 6 cents per basic share for the same period in the prior year. Net loss attributable to the company’s common shareholders for the year was $35.9 million, or a loss of 16 cents per basic share. This loss compares to a net loss of $1.5 million, or a loss of 1 cent per basic share in 2013.

In the coming year, Rentech expects to allocate $5 million of expenses to the Wood Pellets: Industrial business segment. Rentech also expects adjusted EBITDA for Fulghum to be $16 to $17 million in 2015. The company expects NEWP to generate EBITDA of $9 to $10 million in 2015, which includes contributions from the recently acquired Allegheny plant. However, Rentech does not expect the Canadian wood pellet plants to generate positive EBITDA or cash flow for 2015.