Rentech highlights Canadian pellet plant production in Q1 results

By Katie Fletcher | May 11, 2015

On May 11, Rentech Inc. released its 2015 first quarter financial results, reporting both its Canadian industrial facilities are producing pellets; Atikokan production rates exceeding the external forecast and Wawa commissioning better than expected.

The consolidated results of the company include its wood fiber processing business and Rentech Nitrogen Partners. Rentech Nitrogen’s operating segments are the East Dubuque, Illinois, facility and the Pasadena, Texas, facility. The wood fiber processing business consists of Fulghum Fibers, New England Wood Pellets, which includes the recently purchased mill from Allegheny Pellet Corp. and Wood Pellets: Industrial, composed of Rentech’s Canadian pellet plants.

Consolidated revenues for the first quarter of 2015 were $105.6 million, compared to $82.3 million in the first quarter of 2014. These revenues were comprised of $22.7 million from Fulghum, $12.1 million from NEWP, $1.7 million from Wood Pellets: Industrial and $69.2 million from Rentech Nitrogen. Gross profit for quarter one was $24.3 million, compared to $17.9 million the prior year period. Consolidated adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter was $17.6 million, an increase of $11.6 million compared to the prior year period. Net loss attributable to Rentech’s common shareholders for the first quarter of 2015 was $4.9 million, or a loss of 2 cents per basic share, compared to a net loss of $7 million for the first quarter of 2014, or a net loss of 3 cents per basic share.

Keith Forman, president and CEO of Rentech, stated on the call that the Atikokan, Ontario, plant is still in its commissioning phase, but that it’s been meeting the contractual obligations to Ontario Power Group since February. Additionally, the company has not had to purchase any third party pellets this year to help meet that demand. Since February through the end of last week, Atikokan has produced about 12,000 metric tons of pellets, with 11,000 metric tons delivered to OPG.

Forman adds that for this stage of commissioning, production rates have exceeded the external forecast. He said that the plant is producing about 4,000 metric tons per month, which equates to 44 percent of the plant’s 110,000 metric ton annual nameplate capacity. The plant is expected to reach capacity by next February.

The company’s Wawa facility is anticipated to produce at full capacity by mid-2016. The plant began commissioning in April, producing its first pellets on April 20. “Although it be early in the commissioning phase, we like what we see thus far,” Forman said. “We have run all 12 pellet mills successfully—not all at the same time—we have loaded our first rail cars and they await shipment to our storage facility at the Port of Quebec for ultimate transportation to Drax.”

Forman said on the call that the amending contract with Drax Biomass calls for Rentech to ship five vessels this year to the company. He stated the port facility is ready to receive railcars any week and the ship loader is fully operational.

In regards to capital cost, Forman said that Rentech believes it will stay within its financial guidance of $131 million to $140 million in construction and working capital costs. Cash spent on both plants in aggregate at the end of the first quarter is $114 million.

News of the company’s pellet plants in Canada follows Rentech’s end-of-year results in March, when the company reported the facilities were over budget and behind schedule. The company received a term loan from GSO Capital Partners, and reported in this quarter’s results that in April an additional $7.5 million under the Tranche B term loan from GSO Capital to fund the Canadian operations was borrowed.

In the U.S., Rentech Nitrogen’s first quarter results aligned with expectations and are showing year-to-year improvement. “Rentech Nitrogen, our largest operating entity, had a good quarter, experiencing better margins at both plants from a year ago,” Forman said. “Ammonium levels were strong at East Dubuque and our Pasadena plant posted positive EBITDA during the quarter, reaffirming the validity of the 2014 restructuring implemented at the plant.”

The company’s Fulghum Fibers business, which strayed some last year, is showing signs of getting back on track. Currently, Forman said it's tracking towards full-year guidance at $16 million to $17 million EBIDTA, in spite of slightly lower volumes during the quarter and slightly lower revenues in both the U.S. and South America. U.S. volumes were down due to the harshness of the past winter, which was wetter than usual in the production area, Forman stated. He added that in South America volumes of revenues were down for a laundry list of reasons, including decreased volumes as the company started up its pack mill and made fewer shipments to Asia.

On the earnings call, Forman said New England Wood Pellets had another solid quarter and remains on track toward the company’s guidance of $9 million to $10 million full-year EBIDTA. “We continue to see strong demand in the Northeast for pellets to heat residential properties,” he said.

The slightly higher sales prices experienced in comparison to last year indicated this strong demand, Forman said. During the call, Rentech also announced Allegheny Wood Pellets is fully subsumed by NEWP, which is in the process of preparing Allegheny to produce seven days a week in comparison to the current four-day week production it is processing at now.