Viridis Energy reports revenue growth in Q3 earnings results

By Katie Fletcher | November 17, 2014

Viridis Energy Inc. reported another quarter of progressive revenue growth, according to Christopher Robertson, CEO of Viridis. Revenue for the quarter ended Sept. 30 was $7.6 million, an increase of $4.6 million from $3 million in last year’s comparative quarter. Total revenue for the nine-month period ended Sept. 30, is $19.9 million compared to $7.8 million for the same period in 2013.

This increase is primarily attributed to sales from the Scotia Atlantic facility, which only operated one month of the comparative periods last year. The revenue added from the facility totaled $8.4 million for the nine months this year.

Robertson said from a nine-month period perspective the company delivered approximately $20 million in sales and are on-track for the year. He also mentioned the demand for premium pellets is high, which allowed them to increase seasonal pricing. Scotia Atlantic negotiated higher prices for the fourth quarter.

The company reported positive cash flow from operations. As of Sept. 30 the company holds $1.4 million in cash and cash equivalents, an increase of 40 percent from quarter two balances. Michele Rebiere, chief financial officer and director at Viridis, said this cash increase is entirely from operations. Operating expenses were $1.7 million in quarter three, an increase from $1.2 million in the comparative quarter in 2013. This increase is attributed primarily to freight costs associated with Scotia Atlantic exports.

Viridis Merchants, the company’s alternative energy aggregation and trading service, experienced a $1.3 million revenue increase for the quarter, and for the nine-month period a $2.8 million increase. This was one of the positives Robertson highlighted on the quarter three earnings call. The ramped up sales of Virids Merchants and the Okanagan Pellet Co. accounted for 65 percent growth in quarter three compared to quarter two. This does not include a new British Columbia offtake agreement announced in October.

Last month, the company announced it secured an additional 45,000 tons of wood pellets per year over the next two years from a western Canadian manufacturer to augment its current production capacity. The agreement also provides for an additional 15,000 tons of EN Plus A1 quality wood pellets per year, this combined with the 45,000 ton extension could increase the potential revenue over the full term of the agreement to a total of $40 million.

Viridis Energy generated a gross profit during the nine-month period of $1.2 million, $20,000 during quarter three. Gross profit in 2013 was $1.4 million and $600,000 respectively. The company attributes the decrease in gross profit to an inventory adjustment of raw materials totaling $600,000 at Scotia Atlantic and considers the quarter an anomaly due to this one-time adjustment.

Viridis decided to limit certain raw materials that had been inhibiting the ability for the Scotia Atlantic plant to run consistently. The company said they have a plan in place to procure and manage the right fiber and are commencing a plan to construct and develop a new truck dumping facility. Over the summer, the company has been extensively winterizing the plant and implementing other enhancements in an effort to improve margins in the future. This extended maintenance period impeded production.

The company brought on Tim Knoop to address the inconsistent production levels at Scotia Atlantic. Knoop previously served as general manager with Pacific Bioenergy and has extensive experience in the industry.

Currently the plant is not running at full capacity. The company estimated it will be running at 85 percent or more between quarter one and quarter two of 2015. After that around 90 percent is expected in the following quarters of 2015. One of Knoop’s insights is the importance of having consistent levels of production before high levels of production, according to Rebiere.

Quarter three incurred a net loss attributable to the shareholders of Viridis of $1.6 million, or 11 cents per basic share. This is compared to a net loss of $700,000 or 6 cents per basic share for quarter three 2013. The totals for the nine-month period this year was $4.1 million, or 32 cents per basic share, compared to $2 million, or 21 cents, for the comparative period last year.

Overall inventory adjustments and a longer maintenance period at Scotia Atlantic negatively impacted quarter three. However, Viridis believes these changes will create positive results in subsequent quarters. Robertson said, he is confident the business is on track for a strong finish to the year despite the quarter-three set back. The company foresees a break-even EBITDA for the quarter, as well as a strong first half of quarter four leads the company to believe it will meet the $10 million quarterly revenue target and overall $30 million 2014 target.

Robertson said, October revenue was $3.2 million, which is the highest revenue month to date and November is expected to be strong. “The demand is there in all of our major markets, and not only do we have solid sales, but significant sale back log,” Robertson said. “The key to success for the quarter will be simple execution.”

This execution can be achieved by resuming production levels that they have filled in the past, filling current sale orders and managing costs at current levels, Robertson stated.