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Rentech announces Q1 2016 results

May 11, 2016 - Rentech, Inc. recently announced financial and operating results for the first quarter of 2016. 


May 11, 2016
By Businesswire

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“We are pleased to have completed Rentech Nitrogen’s merger with CVR Partners and the partial retirement and amendment of our obligations with GSO Capital on improved terms on April 1,” said Keith Forman, president and CEO of Rentech. “The transactions have transformed Rentech into a pure play fibre business with a significantly improved balance sheet.

“Focusing on the quarter, results for the period were mixed. Fulghum generated improved EBITDA for the first quarter, primarily driven by strong South American sales. We expect to continue to see strong demand in the region and to benefit from cost reductions implemented at Fulghum’s U.S. mills during the course of last year. On the other hand, NEWP is feeling the effects of the warm winter in the U.S. Northeast, with first quarter results significantly below historical levels. We have temporarily scaled back production in response to current market conditions, and we expect NEWP’s results for 2016 to be lower than last year’s record results. In Canada, the Atikokan pellet facility is producing at 80 to 90 per cent of capacity. At Wawa, we are pushing hard to achieve desired uptime on a sustained basis before we implement phase II of the conveyor replacements at the plant.”

Summary of results
The consolidated results consist of Fulghum Fibres (Fulghum), New England Wood Pellet (NEWP), Industrial Wood Pellets, which includes our Canadian pellet plants, and unallocated corporate expenses. The former Rentech Nitrogen Pasadena and East Dubuque facilities are classified as discontinued operations due to the disposition of those businesses in March and April 2016. Rentech’s energy technologies business is also classified as discontinued operations due to its sale in October 2014. Allegheny’s operations are included in our operating results from January 23, 2015, the closing date of the acquisition.

Consolidated revenues for the first quarter of 2016 were $39.9 million, compared to $36.4 million in the prior year period. Gross profit for the first quarter of 2016 was $0.1 million, compared to $5.5 million in the prior year period.

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Consolidated Adjusted EBITDA loss, excluding discontinued operations, for the first quarter of 2016 was $(3.9) million, compared to a loss of $(2.2) million in the prior year period. Further explanation of Adjusted EBITDA, a non-GAAP financial measure, as used here and throughout this press release, appears below.

Net loss attributable to Rentech common shareholders for the first quarter of 2016 was $(10.2) million, or a loss of $(0.44) per basic share, of which $0.10 per basic share was generated by discontinued operations. This compared to a net loss of $(4.9) million, or a loss of $(0.22) per basic share, of which $0.10 per basic share was generated by discontinued operations, for the same period last year. The increase in net loss between periods is primarily attributable to higher depreciation and interest expense and significantly lower results at NEWP.

Fulghum Fibres
Revenues were $27.4 million for first quarter of 2016, compared to $22.7 million for the same period last year. Revenues from operations in the United States were $13.7 million for the first quarter of 2016, as compared to $13.6 million in the prior year period. Revenues from operations in South America were $13.7 million for the first quarter of 2016, as compared to $9.1 million in the prior year period. The increase in South America revenues was primarily due to higher biomass product sales in South America and chip sales to Asia in the first quarter of 2016 as compared to 2015.

Our mills in the United States and South America processed 3.2 and 0.9 million green metric tons, respectively, of logs into wood chips and residual fuels for each of the first quarters of 2016 and 2015.

Gross profit was $4.7 million for the first quarter of 2016, compared to $3.7 million for the prior year period. Gross profit margin for the first quarter of 2016 was 17%, compared to gross profit margin of 16% for the prior year period. The increases in gross profit and gross margin were primarily due to higher product sales volumes by our South American business.

Adjusted EBITDA for the first quarter of 2016 was $5.4 million. This compares to Adjusted EBITDA of $4.0 million for the same period in 2015.

Net income was $1.7 million for the first quarter of 2016. This compares to a net loss of $(1.1) million for the same period last year.

New England Wood Pellet
Revenues were $2.6 million for the first quarter of 2016 on deliveries of approximately 13,000 short tons of wood pellets. This compared to revenues of $12.1 million for the first quarter of 2015 on deliveries of approximately 63,000 short tons of wood pellets.

The Northeast wood pellet market experienced a significant slowdown as abnormally warm temperatures during November and December 2015 and February 2016 stalled consumer purchases. The warm temperatures, along with depressed prices for competitive heating fuels such as heating oil and propane, resulted in lower sales volumes in 2016 as NEWP’s customers are still carrying inventory purchased in 2015 due to slow buying by retail customers. In response to market conditions, NEWP has temporarily scaled back production at its facilities since February 2016.

Gross profit for the first quarter of 2016 was $0.4 million, compared to $2.2 million for the same period last year. Gross profit margin was 16% for the first quarter of 2016, compared to 18% for the prior year period. Gross profit and gross profit margin were lower because of lower sales volumes during the first quarter of 2016.

Adjusted EBITDA for the first quarter of 2016 was $0.0 million. This compares to Adjusted EBITDA of $2.3 million for the same period in 2015.

Net loss was $(0.6) million for the first quarter of 2016, compared to net income of $1.1 million for the same period last year.

Wood pellets: Industrial
Revenues for the first quarter of 2016 were $9.9 million, earned by delivering approximately 64,000 metric tons of wood pellets produced at the Atikokan and Wawa Facilities. Out of the approximately 64,000 metric tons, approximately 49,000 metric tons were shipped to Drax and approximately 15,000 metric tons were sold to OPG. Revenues were $1.7 million for the first quarter of 2015, earned by delivering to OPG approximately 9,100 metric tons of wood pellets, a significant majority of which were produced at the Atikokan Facility.

Gross loss for the first quarter of 2016 was $(5.0) million, compared to gross loss of $(0.4) million for prior year period. Gross loss margin was (50%) for the first quarter of 2016, compared to gross loss margin of (24%) for the prior year period. The increase in gross loss and gross loss margin during the first quarter of 2016 was due to high operating costs relative to revenues during ramp-up of the Atikokan and Wawa Facilities, a related write down of inventory by $5.1 million, and considerably higher depreciation expense in the first quarter of 2016 than in the first quarter of 2015. During the first quarter of 2015, the Atikokan Facility began commissioning and producing wood pellets. The Wawa Facility was in the process of commissioning, but not producing wood pellets during the first quarter of 2015.

Adjusted EBITDA loss for the first quarter of 2016 was $(3.3) million. This compares to Adjusted EBITDA loss of $(3.9) million for the same period last year.

Net loss was $(6.7) million for the first quarter of 2016, compared to net loss of $(4.7) million for the same period last year.

Corporate and unallocated expenses
Corporate and unallocated expenses, which include selling, general and administrative expenses, were $6.2 million for the first quarter of 2016, compared to $4.8 million in the corresponding period in 2015. The increase was primarily due to increases in severance costs of $0.6 million, transaction costs of $0.4 million, and consulting expenses of $0.2 million, partially offset by a decrease in non-cash equity-based compensation of $0.3 million. Non-cash equity-based compensation expense was $0.5 million for the first quarter of 2016, compared to $0.8 million for the same period in the prior year.

About Rentech, Inc.
Rentech, Inc. (NASDAQ: RTK) owns and operates wood fibre processing and wood pellet production businesses. Rentech offers a full range of integrated wood fibre services for commercial and industrial customers around the world, including wood chipping services, operations, marketing, trading and vessel loading, through its subsidiary, Fulghum Fibres. The Company’s New England Wood Pellet subsidiary is a leading producer of bagged wood pellets for the U.S. heating market. Rentech’s industrial wood pellet facilities supply wood pellets used as fuel for power generation in Canada and the United Kingdom. Please visit www.rentechinc.com for more information.

Safe Harbor Statement
This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 about matters such as: expectations for Fulghum Fibres, NEWP, our Canadian wood pellet facilities and our liquidity outlook. These statements are based on management’s current expectations and actual results may differ materially as a result of various risks and uncertainties. Other factors that could cause actual results to differ from those reflected in the forward-looking statements are set forth in the Company’s prior press releases and periodic public filings with the Securities and Exchange Commission, which are available via Rentech’s website at www.rentechinc.com. The forward-looking statements in this press release are made as of the date of this press release and Rentech does not undertake to revise or update these forward-looking statements, except to the extent that it is required to do so under applicable law.


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