Astec redefines its role in the pellet plant market

By Erin Voegele | July 26, 2018

On July 24, Astec Industries Inc. released second quarter financial results and provided an update on its wood pellet plant business, explaining that the company plans to serve as an equipment supplier to the pellet industry, but will no longer finance plants or act as an EPC contractor.

In previous investor calls, Astec discussed problems with the development pellet plants in Georgia and Arkansas. In its second quarter results, the company provided an update on its work in the pellet sector. Astec and Highland, its wood pellet plant customer in Arkansas, decided during the second quarter it was in both parties’ best interest to restructure the company’s obligations related to Highland’s pellet plant and exit its obligations regarding the plant. Astec said the decision was driven by unresolved issues, which inhibited the plant’s ability to meet contractual provisions by the date required by its sales contract with Highland. “Under the terms of the agreement to exit the contract, which was effective on July 20, 2018, the company agreed to pay $68 million in cash in the aggregate over the course of the next 120 days and forgive approximately $7 million in receivables,” said Astec in a statement. “In exchange, Highland agreed to release the company from all contractual obligations related to the Arkansas wood pellet plant. The company will remain available for onsite and telephonic technical advice.”

Astec also stressed it has redefined its wood pellet plant strategy to limit its participation in the wood pellet plant market to offering proven technology for sale as an equipment supplier, not as an engineer, procure, construct (EPC) organization or a participating lender on wood pellet plant projects. Astec said it will continue to offer for sale after-market parts and service support for wood pellet plants.

Astec reported net sales of $272.5 million for the second quarter, down from $301.9 million for the same period of last year. Net loss for the three-month period was $40.7 million, or $1.76 per share, compared to earnings of $14.4 billion, or 62 per diluted share, for the second quarter of last year.