Enviva discusses Chesapeake fire, productivity improvements

By Erin Voegele | May 03, 2018

On May 3, Enviva Partners LP released first quarter 2018 financial results, providing an update of restoration work at the Chesapeake terminal following a recent fire and reporting year-over-year productivity improvements.

“While we continue the process of restoring the Chesapeake terminal from the recent fire incident and maintaining an extended logistics chain, we are proud of our operations team for keeping our plants running at rates that exceeded our performance in the first quarter of last year,” said John Keppler, chairman and CEO of Enviva. “With our stable and growing production performance, our sales forecast remains consistent with our expectations for the full year and reinforces our confidence in distributing at least $2.53 per unit for 2018.”

Enviva experienced a fire at its export terminal at the Port of Chesapeake, Virginia, on Feb. 27. The company said the fire was quickly controlled due to the efforts of onsite personnel and the terminal’s fire suppression and mitigation processes, with assistance from local fire departments and other first responders. The progress to restore the terminal is underway, and Enviva expects it to return to full operation by June 30.

The company said it expects to meet all of its contractual requirements for the balance of the year, but said specific quarterly timing of shipments may be affected.

During an investor call, Keppler said Enviva’s underlying operations continue to demonstrate the year-over-year productivity improvements that the company expects. He also said the company’s business continues to progress towards its growth and diversification goals, and stressed the overall market environment has never been better. According to Keppler, improvements in Enviva’s production profile have increased its facilities’ production by 4 percent when compared to the same period of last year.

Keppler also briefly discussed the recent acquisition of a pellet plant in Greenwood, South Carolina, from The Navigator Co. S.A. He said the acquisition closed during the first quarter. The plant was purchased by a new joint venture of Enviva and John Hancock. The joint venture is expected to ramp up production at the newly acquired plant to 600,000 metric tons per year in 2019, subject to the receipt of a necessary permit needed to expand production at the plant.

Enviva generated net revenue of $125.8 million during the first quarter, up 2.7 percent when compared to the same period of last year. Included in net revenues were product sales of $122.8 million on a volume of 648,000 metric tons of wood pellets, compared to $119 million on a volume of 623,000 metric tons of wood pellets during the first quarter of last year.

For the first quarter of this year, Enviva generated negative gross margin of $4.5 million, compared to $16.4 million during the same period of 2017, a decrease of 20.9 million. The decrease in gross margin is primarily attributed to $19.6 million of expenses, net of insurance recoveries received to date, related to the Chesapeake incident.

Adjusted gross margin per metric ton was $7.35. Excluding the full financial impact of the Chesapeake incident, the company would have earned adjusted gross margin per metric ton of $38.11. Adjusted gross margin per metric ton for the first quarter of last year was $41.29.

Net loss for the first quarter was $19.3 million, compared to a small net loss for the first quarter of last year, a decrease of $19.3 million.

Adjusted EBITDA for the first quarter was $17.6 million, down from $21.3 million for the same three-month period of 2017.