Record Production Volumes Contribute to Best Quarterly Performance
$24 million Contributed to Growth-Related Projects
Dividend of $0.0375 Per Share Declared
VANCOUVER, BC, Nov. 9, 2020 /CNW/ - Pinnacle Renewable Energy ("Pinnacle" or the "Company") (TSX: PL) today reported revenues of $131.7 million in Q3 2020, $39.1 million or 42% higher than Q3 2019 revenues of $92.6 million.
The increase in revenues in Q3 2020 versus the comparable quarter in 2019 results from higher production volumes at a number of the Company's facilities during the quarter.
The Company's Adjusted Gross Margin(1)("AGM") increased by $13.8 million to $31.7 million in Q3 2020 compared to Q3 2019 or 24.1% of revenue in Q3 2020 (19.3% of revenue in Q3 2019). AGM was $20.0 million or 15.1% of revenue in Q2 2020 and $17.9 million or 19.3% of revenue in Q3 2019. Excluding the net insurance benefits relating to the Entwistle incident, AGM in Q3 2020 was $29.1 million or 22.1% of revenue versus $15.8 million or 17.1% of revenue in Q3 2019.
Adjusted EBITDA(1) was $10.0 millionhigher in Q3 2020, coming in at $26.1 million, versus $16.1 million in Q2 2020 and $13.6 million in Q3 2019, while net income was $7.7 million compared with net income of $0.02 million in Q2 2020 and a net loss of $1.5 million in Q3 2019. Excluding the net insurance benefits of the Entwistle incident, Adjusted EBITDA was $23.4 million or 17.8% of revenue compared with $11.5 million or 12.4% in Q3 2019. Excluding the net insurance benefits related to the Entwistle incident net income would have been $5.0 million in Q3 2020 compared to a net loss of $3.0 million in Q3 2019.
STRATEGIC CONTEXT
The positive momentum we experienced in the second quarter of 2020 ("Q2 2020") continued into Q3 2020 in spite of the many challenges associated with the on-going COVID-19 pandemic, resulting in the best quarterly performance in the Company's history. Pinnacle's strategy of investing in both new capacity and production efficiency has delivered strong gains in productivity and cost reductions while setting the stage for the Company to grow its revenue base and profitability.
Pinnacle has earned its position in the top tier of the global wood pellet industry through consistent attention to quality, reliability of supply and service to our customers. These priorities, along with the goals of delivering outstanding returns to our shareholders, safe and rewarding careers for our employees, and economic and environmental benefits for the communities in which we operate, will continue to guide our business strategy into the future. We also gain comfort knowing that our products play a role in addressing the challenges of global climate change.
Warmer Weather, Lower Fibre Costs and Returns From Capital Investments Drive Record Production and Profitability
The combination of warmer and drier weather, lower fibre costs and the returns associated with the Company's capital investment activities contributed to record production and profitability in Q3 2020. Pellet production in Q3 2020 was 587 kMT, 69 kMT or 13% above our previous record of 518 kMT in Q2 2020, and 145 kMT or 33% higher than Q3 2019. Viewed on a per day basis, production in Q3 2020 was 6,449 MT versus 5,694 MT in Q2 2020 and 4,852 MT in Q3 2019.
Strong performance gains were recorded at a number of plants in Q3 2020 led by Williams Lake which benefited from the completion of its dryer upgrade project in the prior quarter, increasing production by more than 47% quarter over quarter. The Entwistle mill continued its ramp up process during the quarter, increasing production by more than 6% quarter-over-quarter.
Sawmill residuals increased to 84% of the Company's feedstock in Q3 2020 compared with 74% in Q2 2020 as the strong lumber market resulted in higher operating rates in that sector. Overall, our fibre costs were down 2% quarter-over-quarter. During the quarter, we reduced our fibre inventories by 10% due to our increased confidence regarding the availability of sawmill residuals.
The combination of lower fibre costs, higher mill-level productivity and the benefits of warmer and drier weather contributed to a 7% reduction in our unit production costs quarter-over-quarter. This reduction in production costs contributed to a 46% increase in AGM in Q3 2020, net of the influences of insurance proceeds, versus Q2 2020 and a similar increase in Adjusted EBITDA, the highest recorded by the Company.