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News Release - February 24, 2021Pinnacle Renewable Energy Reports 2020 Fourth Quarter Results

Q4 2020 Revenue of $116.9 million; Adjusted EBITDA of $15.4 million

$28 million Contributed to Growth-Related Projects

VANCOUVER, BC, Feb. 24, 2021 /CNW/ - Pinnacle Renewable Energy ("Pinnacle" or the "Company") (TSX: PL) today announced its financial results for the 13-week ("Q4 2020") and 52-week ("Fiscal 2020") periods ended December 25, 2020.

SUMMARY OF FOURTH QUARTER 2020 FINANCIAL PERFORMANCE:

SUMMARY OF FISCAL 2020 FINANCIAL PERFORMANCE:

FACTORS IMPACTING FOURTH QUARTER, 2020

Houston Incident and Other Issues Impact Production Volumes

Lower Production and Inclement Weather Impact Shipments

Reduced Supply of Sawmill Residuals Impacts Fibre Costs

Commencement of Production at High Level

PROGRESS ON GROWTH-RELATED CAPITAL PROJECTS

High Level Construction Completed

Demopolis Construction Proceeds as Planned

Other Growth Capital Projects

ARRANGEMENT AGREEMENT

OUTLOOK

FINANCIAL AND OPERATING HIGHLIGHTS



Q4 2020

Q4 2019

Q4 2020

Q4 2019


Unit

13 weeks

13 weeks

52 weeks

52 weeks

Revenue

$000's

116,911

91,465

490,505

377,808

Income before finance costs and other income

$000's

3,070

2,187

19,137

6,748

Net loss(1)

$000's

(2,497)

(3,055)

(3,876)

(9,974)

Net loss attributable to owners

$000's

(1,965)

(3,661)

(5,041)

(10,807)

Basic and diluted loss per share

$/share

(0.06)

(0.09)

(0.15)

(0.30)

Adjusted Gross Margin (2)(3)

$000's

19,826

16,417

80,521

64,980

Adjusted Gross Margin per MT (2)(3)

$/MT

37.69

38.54

35.60

37.34

Adjusted Gross Margin Percentage (2)(3)

%

17.0%

17.9%

16.4%

17.2%

Adjusted EBITDA (4)(2)

$000's

15,441

11,282

61,646

47,173

Adjusted EBITDA per MT (4)(2)

$/MT

29.35

26.48

27.25

27.11

Adjusted EBITDA Percentage (4)(2)

%

13.2%

12.3%

12.6%

12.5%

Free Cash Flow (2)

$000's

6,117

2,951

30,837

17,170

Annualized Return on Invested Capital (2)

%

11.2%

8.8%

11.6%

10.1%

Annualized Cash Flow Return on Assets (2)

%

11.5%

10.6%

11.0%

9.9%











 

December 25,
2020

December 27,
2019

Total assets

$000's



766,922

629,391

Total debt

$000's



379,770

316,014









Q4 2020

Q4 2019

Q4 2020

Q4 2019

Operating Highlights


13 weeks

13 weeks

52 weeks

52 weeks

Industrial wood pellets produced (5)

MT ('000)

489

442

2,046

1,741

Industrial wood pellets purchased (6)

MT ('000)

39

16

160

91

Industrial wood pellets sold

MT ('000)

526

426

2,262

1,740







Contracted Backlog (7)




 

December 25,
2020

December 27,
2019

Fiscal 2021

$ billions



0.6

0.4

Fiscal 2022

$ billions



0.7

0.5

Fiscal 2023 and thereafter

$ billions



5.4

6.0

Total product sales under Contracted Backlog

$ billions



6.7

6.9

 

Notes

(1)

For the 13-week and 52-week period ended December 25, 2020, net loss included $nil million and $4.5 million respectively of net insurance recoverable related to the Entwistle incident (13-week and 52-week periods ended December 27, 2019 - $3.0 million and $2.5 million). For the 13-week and 52-week period ended December 25, 2020, net loss included $0.2 million of net insurance recoverable related to the Houston incident ($nil for 2019).

(2)

See "Non-IFRS Measures" for definition of the items discussed below and as well as reconciliations of non-IFRS measure with the most directly comparable IFRS measures.

(3)

For the 13-week and 52-week period ended December 25, 2020, AGM included $nil million and $3.1 million respectively of net insurance recoverable related to the Entwistle incident (13-week and 52-week periods ended December 27, 2019 - $3.4 million and $5.7 million). For the 13-week and 52-week period ended December 25, 2020, AGM included $0.3 million of net insurance recoverable related to the Houston incident ($nil for 2019).

(4)

For the 13-week and 52-week period ended December 25, 2020, Adjusted EBITDA included $nil million and $2.6 million respectively of net insurance recoverable related to the Entwistle incident (13-week and 52-week periods ended December 27, 2019 - $3.2 million and $3.9 million). For the 13-week and 52-week period ended December 25, 2020, Adjusted EBITDA included $0.5 million of net insurance recoverable related to the Houston incident ($nil for 2019).

(5)

Includes MT produced by all facilities managed by Pinnacle, including Houston Pellet LP ("HPLP") and Northern Pellet LP ("NPLP").

(6)

Includes MT sold that were purchased from third parties, excluding HPLP.

(7)

We enter into long-term, take-or-pay offtake contracts with large and well capitalized counterparties or their affiliates. "Contracted Backlog" represents the revenue to be recognized under existing contracts assuming deliveries occur as specified in the contracts. As a result of customer preferences or logistics management, there can be movement in the timing of deliveries that may result in revenue being recognized in either a preceding or following interim period.

LIQUIDITY AND CAPITAL RESOURCES

Net debt (current and long term debt, current and long term lease liabilities (excluding charter vessel), offset by cash and cash equivalents) at December 25, 2020 was $411.2 million, while available liquidity (cash and cash equivalents and unused credit capacity) was $153.3 million. This compares with net debt of $389.4 million and liquidity of $169.6 on September 25, 2020. Net debt includes $84.7 million relating to capital expenditures on growth-related projects not yet commissioned, as well as $34.7 million associated with the recently completed High Level mill. As at December 25, 2020 the Company had sufficient liquidity and was in compliance with all debt covenants.

The following table summarizes the Company's credit facilities and availability as of December 25, 2020:


Revolver
loan

Term loan

Delayed
draw loan

Total

Available line of credit and maximum borrowing available

65,000

280,000

185,000

530,000

Mandatory amortization

-

5,600

-

5,600

Drawings

6,000

280,000

102,200

388,200

Unused portion of facility

59,000

-

82,800

141,800

Add:





Cash and cash equivalents

-

-

-

11,510

Available liquidity at December 25, 2020

59,000

-

82,800

153,310

The revolver loan, term loan and delayed draw loan each have a maturity date of June 14, 2024.

NON-IFRS MEASURES

This release refers to certain non-IFRS measures. These measures are not recognized measures under IFRS, and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. These non-IFRS measures are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Our management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation.

The following measures are used by management as key performance indicators for our business: Adjusted Gross Margin Percentage, Adjusted EBITDA, Free Cash Flow, Net Debt to Invested Capital, Annualized Return on Invested Capital and Annualized Cash Flow Return on Assets. Please refer to Management's Discussion and Analysis for the thirteen and fifty-two week periods ended December 25, 2020.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

FOR THE FISCAL 2020 YEAR ENDED DECEMBER 25, 2020





Fiscal year ended

Note

December 25, 2020

December 27, 2019





Revenue

23

490,505

377,808





Costs and expenses




Production


346,266

258,547

Distribution


62,223

54,021

Selling, general and administration

13

20,049

18,495

Amortization of equipment and intangible assets


42,830

39,997



471,368

371,060





Operating income


19,137

6,748

Other income/(expense)




Equity earnings in Houston Pellet Limited Partnership

8

(330)

573

Loss on disposal of property, plant and equipment


(1,058)

(1,103)

Impairment of Entwistle


-

(9,417)

Impairment of intangibles


-

(278)

Insurance recovery for property loss at Entwistle


3,643

9,000

Finance costs

14

(26,534)

(24,178)

Other income


157

6,376



(24,122)

(19,027)





Net loss before income taxes


(4,985)

(12,279)





Income tax recovery




Deferred

15

1,109

2,305



1,109

2,305





Net loss


(3,876)

(9,974)





Net (loss)/income attributable to:




Owners of the Company


(5,041)

(10,807)

Non-controlling interests

12

1,165

833



(3,876)

(9,974)

 

Net loss per share attributable to owners (basic and diluted):

16

(0.15)

(0.33)

Weighted average of number of shares outstanding (thousands):

16

33,359

33,238





Fiscal year ended


December 25, 2020

December 27, 2019

Net loss


(3,876)

(9,974)

Items that may be recycled through net income:




Foreign exchange translation of foreign operations, net of tax


(4,506)

(940)

Comprehensive loss for the period


(8,382)

(10,914)





Comprehensive (loss)/income attributable to:




Owners of the Company


(8,195)

(12,127)

Non-controlling interests


(187)

1,213



(8,382)

(10,914)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE FISCAL 2020 YEAR ENDED DECEMBER 25, 2020





Fiscal year ended

Note

December 25, 2020

December 27, 2019

Cash provided by (used in)








Operating activities




Net loss


(3,876)

(9,974)

Financing costs, net

14

26,534

24,178

Distributions from Houston Pellet Limited Partnership


-

2,400

Insurance received for business interruption at Entwistle

22

9,516

7,100

Realized gain on derivatives and foreign exchange

14

2,095

2,189

Items not involving cash:




Amortization of equipment and intangible assets


42,830

39,997

Equity loss/(earnings) in Houston Pellet Limited Partnership

8

330

(573)

Loss on disposal of equipment


1,058

1,103

Stock-based compensation

11

642

1,020

Inventory write down

5

688

181

Impairment of Entwistle plant


-

9,417

Impairment of intangible assets


-

278

Insurance recoverable recorded in income related to Entwistle

22

(7,259)

(22,000)

Business interruption insurance recorded in income related to Houston

22

(490)

-

Deferred income tax recovery

15

(1,109)

(2,305)

Cash flow from operating activities


70,959

53,011

Net change in non-cash operating working capital

17

15,317

(20,049)



86,276

32,962

Financing activities




Drawings on revolver loan

9

278,200

199,600

Repayment of revolver loan

9

(291,400)

(198,850)

Drawings on term debt

9

-

277,944

Repayment of term debt

9

(5,600)

(194,000)

Drawings on delayed draw loan

9

82,200

20,000

Repayment of delayed draw loan

9

-

(49,760)

Principal payment of leases

25

(9,253)

(7,550)

Proceeds from exercise of stock options

11

243

332

Dividends paid during the period

11

(8,757)

(19,939)

Investment from non-controlling interest


18,689

5,652

Distributions to non-controlling interest


(487)

(1,100)

Finance costs paid

14

(19,817)

(19,215)



44,018

13,115

Investing activities




Insurance recovery for property loss at Entwistle

22

4,643

8,000

Increase in restricted cash


(1,325)

-

Purchase of intangible assets

7

(71)

-

Purchase of property, plant and equipment

17

(133,361)

(61,032)

Proceeds from sale of property, plant and equipment


400

157



(129,714)

(52,875)





Foreign exchange gain on cash position held in foreign currency


(337)

37

Increase/(decrease) in cash and cash equivalents


243

(6,761)

Cash and cash equivalents, beginning of the period


11,267

18,028

Cash and cash equivalents, end of the period


11,510

11,267

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION





As at

Note

December 25, 2020

December 27, 2019

ASSETS




Current assets




Cash and cash equivalents


11,510

11,267

Restricted cash


1,325

-

Accounts receivable

4

30,941

36,764

Inventory

5

42,679

46,938

Receivable against NMTC debt

26

-

12,774

Other current assets


4,308

10,916

Total current assets


90,763

118,659





Property, plant and equipment

6

565,442

399,181

Goodwill and intangible assets

7

98,795

100,191

Investment in Houston Pellet Limited Partnership

8

7,217

7,548

Deferred income tax assets

15

4,468

2,448

Other long-term assets


17

1,364

Total assets


766,922

629,391





LIABILITIES AND EQUITY




Current liabilities




Accounts payable and accrued liabilities


64,737

50,663

Revolver loan

9

6,000

19,200

Current portion of long-term debt

9

21,700

3,128

Current portion of NMTC debt

26

-

12,774

Current portion of lease liabilities

25

10,879

7,424

Other current liabilities


315

1,786

Total current liabilities


103,631

94,975





Long-term debt

9

352,070

293,686

Lease liabilities

25

92,765

29,551

Other long-term liabilities

10

6,857

2,462

Deferred income tax liabilities

15

1,130

-

Total liabilities


556,453

420,674





EQUITY




Shareholders' equity




Common shares

11

278,076

277,619

Contributed surplus


4,377

4,145

Accumulated other comprehensive loss


(4,474)

(1,320)

Deficit


(130,989)

(117,191)

Total equity attributable to owners of the Company


146,990

163,253

Non-controlling interest

12

63,479

45,464

Total equity


210,469

208,717

Total liabilities and equity


766,922

629,391

Pinnacle's audited consolidated financial statements and Management's Discussion & Analysis for Fiscal Year ended December 25, 2020 and its Annual Information Form for the Fiscal Year ended December 27, 2019 are available on the Company's website at pinnaclepellet.com or on SEDAR at www.sedar.com.

ABOUT PINNACLE

Pinnacle is the second largest producer of industrial wood pellets in the world. The Company's products are used to displace fossil fuels in the production of baseload electrical power in key markets around the world. The Company operates nine production facilities in Western Canada and one in Alabama, with one additional facility under construction in Alabama and more in development. The Company also owns a port terminal in Prince Rupert, B.C. Pinnacle has entered into long-term, take-or-pay contracts with utilities in the U.K., Europe and Asia that represent an average of 99% of its production capacity through 2026.

(1) NON-IFRS FINANCIAL MEASURES

This news release makes reference to certain non-IFRS measures. Please see page 14 of the Management's Discussion and Analysis for definition.

FORWARD-LOOKING INFORMATION

This news release includes "forward-looking information" within the meaning of applicable securities laws in Canada. Forward-looking information may relate to our future financial outlook and anticipated events or results and may include information regarding our financial position, business strategy, growth strategies, budgets, operations, financial results, taxes, dividend policy, plans and objectives. Particularly, information regarding our expectations of future results, performance, achievements, prospects or opportunities or the markets in which we operate is forward-looking information. Some of the specific forward-looking information contained herein include, but are not limited to, statements with respect to: our expectations regarding growth in biomass-based fuel sources within the European and Asian power generating portfolio; growth in global demand for wood pellets; anticipated supply delivery times under our off-take contracts; anticipated capital cost and maintenance capital expenditures required by our facilities; COVID-19 and anticipated production from our facilities.

Many factors could cause our actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by forward-looking statements, including, without limitation, the factors discussed in the "Financial Risk Factors" section of the MD&A and in the "Risk Factors" section of our Annual Information Form ("AIF") dated March 31, 2020, which can be accessed under the Company's profile on SEDAR at www.sedar.com. The Company cautions that the list of risk factors and uncertainties described herein and in the AIF are not intended to represent a complete list of the factors that could affect us. Readers are urged to consider such risks, uncertainties and factors carefully in evaluating the forward-looking information, and are cautioned to not place undue reliance on such information.

The forward-looking information contained in this news release represents our expectations as of the date of this press release (or as of the date they are otherwise stated to be made) and are subject to change after such date. We disclaim any intention or obligation or undertaking to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required under applicable securities laws in Canada.

Future-oriented financial information ("FOFI") contained in this document was made as of the date hereof and was provided for the purpose of providing shareholders with information on Pinnacle's financial outlook. Pinnacle disclaims any intention or obligation to update or revise any FOFI contained in this document, whether as a result of new information, future events or otherwise, unless required pursuant to applicable securities laws in Canada. Readers are cautioned that the FOFI contained in this document should not be used for purposes other than for which it is disclosed herein.

SOURCE Pinnacle Renewable Energy Inc.

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