Viridis sees solid Q2 with ramped production, expanding markets

By Anna Simet | August 20, 2014

Despite external obstacles that impacted Q1, Viridis Energy reported a progressive Q2 during its Aug. 20 financial earnings call. “What a difference a quarter makes,” CEO Chris Robertson said, attributing the strong period to the company’s Scotia Atlantic Biomass pellet plant performance. “Scotia operations increased revenues in Q2 by 62 percent over the first quarter, and 72 percent over Q4 of 2013, and continues to move to full capacity,” Robertson said.

Viridis’s other pellet plant, Okanagan Pellet Company Ltd., generated revenue of $2.1 million, which was lower than the prior year Q2 and first quarter 2014, due to an unprecedented trucking strike in Vancouver, British Columbia, that ended late April. “It prevented OPC from shipping product to Europe at scheduled times, but customers were very supportive during this interruption,” Robertson said, adding that the plant resumed shipments in Q2 and expects to be fully caught up in Q3.

Viridis has reduced its dependence on the European market with additional domestic sales and sales to South Korea, Robertson continued, adding that during Q2, Viridis invested in equipment that allows bulk container loading on site for shipment to South Korean customers.

Scotia Atlantic continues to increase production levels and is on track to reach full capacity, Robertson said, contributing to what looks to be another solid period in Q3.

Chief Financial Officer Michelle Rebiere reported Viridis generated $6.6 million in revenue during its second quarter 2014, an increase of 169 percent when compared to Q2 2013 revenue of $2.5 million, and an 18 percent sequential increase from Q1 2014 revenue of $5.6 million. Rebiere said the revenue reflects the ramp-up of production from the Scotia plant, which, after beginning operations last September, generated revenue of $3.5 million, up from $2.2 million from Q1 2014.

Both Robertson and Rebiere reiterated that Viridis expects a stronger second half in 2014. “An encouraging development during this quarter was that both operating facilities delivered positive EBIDA results at the end of this period, on a run-rate basis, and we expect this to continue,” Rebiere said.

Rebiere emphasized that inventory levels built during the trucking disruption are beginning to work down to normal operating levels, as they are delivered to the storage facility at the Port of Halifax on a daily basis. European and domestic shipments are occurring on a weekly basis, she said, as markets gear up for the winter season. “We’re forecasting an oversold position for OPC product for the heating market by the end of September,” she added.

Following Rebiere’s discussion of Viridis’s balance sheets, Robertson provided insight on additional company developments, recognizing Halifax Grain Elevators as a new minority investor in the business. “In the pellet export business, having preferred or dedicated storage at a key port is highly strategic,” he said.

Moving forward, Viridis will begin to competing for larger contracts to expand its growing base of buyers worldwide, Robertson said, highlighting the company’s expanded footprint in the New England home heating market, European residential heating and power markets, and the power market in South Korea, which is working to comply with government-mandated renewable portfolio standard requirements.  “Demand is building in South Korea, which has completed its fifth, and will soon complete its sixth, 170-MW power plant,” he said. “Cofiring with biomass is increasing, and according to a recent report, Korean wood pellet imports grew by almost 300 percent in Q4 2013.”

Robertson ended the call by discussing Viridis’s growth strategy, which he said is three-fold—expansion, aggregation and acquisition.