Pinnacle: Q4 impacted by rail strike, sawmill curtailments

By Erin Voegele | March 03, 2020

Canada-based pellet producer Pinnacle Renewable Energy released fourth quarter financial results on March 3. The company’s financial performance was negatively impacted by sawmill curtailments and a rail strike. Pinnacle, however, is continuing to implement expansion plans.

During an earnings call, Rob McCurdy, CEO of Pinnacle, said that the fourth quarter offered several challenges. Fourth quarter EBITDA and revenue was lower than expected due primarily to sawmill curtailments in British Columbia and an eight day strike by workers at the Canadian National Railway, he said. He estimated delays shipments caused by the strike and resulting rail congestion caused Pinnacle 20,000 metric tons of production loss.

McCurdy also discussed improvement and expansion projects that are underway at several of Pinnacle’s pellet plants. He said the dryer at the company’s Entwistle facility successfully restarted in early November. The destoner operation at the plant also began operations during the quarter on time and on budget. Commissioning on the destoner system is ongoing, McCurdy said, noting that initial results are encouraging.

The company is continuing to develop and evaluate further opportunities for incremental production capacity additions, McCurdy said. Most recently, Pinnacle entered an agreement with The Westervelt Co. and Two Rivers Lumber Co. LLC to build a new industrial wood pellet plant in Demopolis, Alabama. That facility will have a production capacity of 360,000 metric tons per year and is scheduled to begin commissioning in the second quarter of 2021.

McCurdy also provided an update of upgrades being completed at the company’s Williams Lake and Meadowbank pellet plants. Improvements being made to those facilities are expected to provide improved facility operational efficiencies, lower emissions, and provide a combined production capacity increase of approximately 80,000 metric tons per year. Upgrades to the Williams Lake plant are expected to be complete during the first quarter, with upgrades to the Meadowbank  plant scheduled to be complete during the second quarter.

Construction of Pinnacle’s pellet plant in High Level, Alberta, progressed in the fourth quarter. McCurdy said construction on the project is currently in a planned suspension due to winter weather conditions. Work on the facility is scheduled to restart this spring when warmer weather returns.

McCurdy also addressed the Feb. 6 announcement issued by the company regarding his intention to retire later this year. McCurdy stressed that he will remain in his current role until a successor is appointed. Pinnacle’s board of directors has commenced a formal search process to identify and appoint his successor.

Pinnacle reported revenue of $91.5 million for the fourth quarter of 2019, down from $103.7 million reported for the same period of the previous year. Adjusted EBITDA was $11.3 million, down from $13.8 million. The company reported a net loss of $3.2 million for the quarter, compared to a net profit of $7.4 million for the fourth quarter of 2018.

For the full year 2019, Pinnacle reported revenue of $377.8 million, up from $347.4 million for 2018. Pinnacle reported a net loss of $9.9 million for 2019, compared to a net profit of $2.7 million in 2018. Adjusted EBITDA was $47.2 million, down from $55.1 million.