INPUT CAPITAL CORP. ANNOUNCES RECORD CANOLA SALES INPUT CAPITAL CORP. ANNOUNCES RECORD CANOLA SALES IN FY2018 Q1 RESULTS
Input Capital Corp. has released its first quarter results for the 2018 fiscal year. All figures are presented in Canadian dollars.
"The first quarter of Input's 2018 fiscal year is remarkable for the rapid and smooth delivery of our canola grown in 2017," said President & CEO Doug Emsley. "This quarter marks a new record for canola sales by Input in a single quarter, at 51,097 MT, bringing in just under $25 million in quarterly streaming revenue. That's more than double the volume sold during the same quarter last year, and is due to a combination of hard work by our team and good weather for both harvest activity and transportation. This is the highest quarterly streaming sales figure in Input's history."
FY2018 Q1 HIGHLIGHTS
Adjusted streaming sales1 of $24.718 million on the delivery of 51,097 canola equivalent metric tonnes1 ("MT" or "tonnes") at an average price of $483.75 per MT. These figures represent increases of 111%, 105%, and 3% compared to the same quarter last year, respectively;
Generated an additional $3.142 million in sales from canola trading for total adjusted sales of $27.860 million;
Cash operating margin1 $12.604 million (an increase of 27% over Q1 last year), or $246.70 per MT (50.99% cash operating margin);
Adjusted operating cash flow1 of $10.579 million (an increase of 22% over Q1 last year) or $0.13 per share;
Adjusted EBITDA1 of $10.538 million (an increase of 21% over Q1 last year), or $0.13 per share;
Adjusted net income1 of $1.467 million (an increase of 39% over Q1 last year), or $0.02 per share;
Recorded total upfront payments of $2.425 million into 60 streaming contracts, adding 25 new producers to the portfolio and more than 43,000 MT to the Company's future canola sales. During the same quarter last year, total upfront payments made were $12.569 million (which included a single contract for $7.455 million) and 9 new producers were added to the portfolio;
On October 16, 2017, the Company paid a quarterly dividend of $0.01 per share to shareholders of record as of September 30, 2017;
On December 11, 2017, the Company announced and initiated a Normal Course Issuer Bid for up to 6,578,683 of its common shares. The Company bought back 118,200 shares during the quarter. These shares were subsequently cancelled;
Finished the quarter with:
Cash of $30.343 million;
Canola reserves of 392,000 MT;
Total canola interests (current portion and long-term portion) and other financial assets (liabilities) (herein referred to collectively as "canola interests") of $58.823 million;
Multi-year active streaming contracts with 325 farm operators, up from 121 a year ago;
Total shareholders' equity of $107.060 million;
$1.508 million drawn on its $25 million revolving credit facility; and
No long-term debt.
Subsequent to the Quarter End: On January 30, 2018, management announced the start of a pilot project to test a new type of stream called a mortgage stream, which provides a convenient way for farmers to make mortgage payments with canola;
Pursuant to its NCIB, the Company bought back 256,200 of its own shares in January 2018.
KEY PERFORMANCE INDICATORS FOR THE COMPARABLE PERIODS ARE SUMMARIZED BELOW:
Selected non-IFRS measures1 Three months ended Dec 31
CAD millions, unless otherwise noted 2017 2016
Adjusted streaming sales 24.718 11.724
Adjusted streaming volume (MT) 51,097 24,958
Average selling price from streaming contracts$483.75 $469.75
Cash operating margin 12.604 9.918
Cash operating margin per tonne $246.67 $397.39
Cash margin 3.854 2.697
Cash margin per tonne $75.43 $108.06
Adjusted EBITDA 10.538 8.701
Adjusted EBITDA per share (basic) $0.13 $0.11
Adjusted operating cash flow 10.579 8.641
Adjusted operating cash flow per share (basic)$0.13 $0.11
Adjusted net income 1.467 1.053
Adjusted net income per share (basic) $0.02 $0.01
Upfront payment per tonne2 $55.50* $190.24
*Upfront payment per tonne reflects upfront payments made into both capital streams and marketing streams. For more information about marketing streams, refer to discussion on marketing streams beginning on page 14 of the MD&A.
SALES
For the quarter ended December 31, 2017, Input generated adjusted sales from streaming contracts of $24.718 million on adjusted streaming volume of 51,097 MT for an average price of $483.75 per MT.
The sales from streaming tonnes plus net settlements from streaming tonnes for the quarter represent a 105% increase in quarterly volume over the comparable quarter one year ago, when the Company sold 24,958 MT of canola equivalent for revenue of $11.724 million for an average price of $469.75 per MT. This is a result of an early harvest accompanied by good harvest weather, which allowed for timely and smooth canola transportation and sale throughout the quarter.
STREAMING CONTRACT ORIGINATION AND PORTFOLIO UPDATE
The quarter ended December 31 is a slower period of the year for new contract origination while farmers finish harvesting crops and selling grain. For the three months ended December 31, 2017, Input recorded total upfront payments of $2.425 million into 60 streaming contracts for the right to purchase over 43,000 MT of canola over the life of the streaming contracts.
During the quarter, Input added 25 new producers to its streaming contract portfolio; 22 producers in Saskatchewan and 3 in Alberta. The remaining contracts were renewals, expansions and restructures of existing contracts.
During the same quarter last year, total upfront payments made were $12.569 million (which included a single contract for $7.455 million) and 9 new producers were added to the portfolio.
During the quarter, Input's average upfront payment per tonne was $55.50 compared to $190.24 in the comparable quarter last year. The upfront payment per tonne reflects upfront payments made into marketing streams which are lower than capital streams, bringing the upfront payment per tonne down substantially. For more information about marketing streams, refer to discussion on marketing streams beginning on page 14.
NORMAL COURSE ISSUER BID
The Company bought back 118,200 shares during the quarter at prices ranging from $1.53 to $1.59 per share. These shares were subsequently cancelled.
Management of Input believes that the Company's shares have been trading in a price range which does not adequately reflect their value and that the purchase of shares under the Bid will enhance shareholder value in general.
INSIDER PURCHASES
Since April 2017, management, employees and directors of the Company have increased their ownership by 6.85 million shares, spending over $10 million of their own capital to do so. Insiders now own about 28% of Input on a fully diluted basis.
OUTLOOK
Historically, the Company has found the October to December quarter to be unpredictable in terms of new client acquisition. A long, drawn-out harvest can distract farmers from their future planning because they are still busy in the field trying to get last year's crop harvested, but it can also constrain farm cash flow and create a more urgent need for the farmer to consider a capital stream to enhance his/her working capital position. Conversely, a smooth and easy harvest or strong grain movement can free farmers to think about plans for potential expansion, but strong grain movement also tends to enhance farm cash flows and remove the year-end pressure of bills coming due.
These timing issues, which are inherent to agriculture, also affect the Company. Like farmers, Input also benefits from smooth and early grain movement, which enhances its cash flow position, but the timing of demand for its capital and marketing streams can also be affected, although management expects these issues to sort themselves out over the course of an annual cycle.
Western Canadian farmers generally had a good growing season in 2017 featuring a combination of good yields and crop quality, strong prices, and smooth harvest weather conditions. In addition, the grain handling system has been working smoothly and export demand has been high for the crops that farmers produce. In particular, industry data shows that cash flows from spring wheat are over $400 million higher this year over last year to date. These factors have contributed to good near-term liquidity for farmers and has the potential to contribute to lower near-term demand for the Company's capital streams. On the other hand, confident farmers tend to expand, and management has previously found farmers who are expanding to represent a good market for capital streams. It remains too soon to predict which will be the dominant outcome this year.
Industry forecasts currently project near record acres of canola to be seeded in 2018 as farmers shift crop rotations to compensate for low prices for pulse crops such as peas and lentils which are a result of new tariffs on pulse imports into India. With little demand pull for pulses, strong canola prices are creating high farmer interest in adding canola acres this season. This may contribute to farmer demand for the Company's capital and marketing streams.