Enviva reports strong Q1 despite COVID-19 pandemic
Enviva Partners LP held an earnings call on April 30 to discuss first quarter 2020 financial results. Despite the COVID-19 pandemic, the company reported significant increases in net income and adjusted EBITDA.
“Despite the COVID-19 pandemic and in what is typically our most seasonally challenging quarter, we reported strong first quarter 2020 results representing a significant improvement over the first quarter of 2019,” said John Keppler, chairman and CEO of Enviva. “Thanks to the hard work as well as good, safe decisions and work practices of our teams, our operations continue largely unaffected. While uncertainty remains in the COVID-19 environment, we believe we are well-positioned to continue to maintain stable, growing cash flows that enable us to increase distributions sustainably over time.”
Keppler opened the earnings call by thanking his colleagues at Enviva for maintaining a focus on safety. “As the spread of COVID-19 increased, we have adopted new ways of working,” he said. “We’ve enhanced our plans and procedures, and taken measures to mitigate the risk of exposure to COVID-19 and to make our work environment as safe as possible for our continued operations.”
“Following guidance by the CDC, we’ve implemented rigorous cleaning and safety protocols, changed work schedules and meeting formats to de-densify our workspaces and maintain appropriate social distancing,” Keppler continued. “We’ve eliminated travel for all but essential functions, and encouraged telework to the extent feasible and staggered work where not. We’re restricting access at our plants and terminals, we’re checking the health of anyone who crosses our gates, and we’re changing the way people interact and work together onsite to keep our people healthy.”
“The people at Enviva are proving a remarkably resilient bunch, giving it our all every day, and I’m proud to say it has been working,” Keppler added.
“While the COVID-19 pandemic has caused broad economic impact and major disruptions across the globe, at Enviva, thanks to the hard work of our teams and the good, safe professional and personal decisions they are making, we have again demonstrated the durability of our business and reported strong results,” he said.
Enviva generated net revenue of $204.5 million for the first quarter, up 29.1 percent when compared to the same period of last year. Net revenue included product sales of $197.9 million on 1.004 million metric tons of wood pellets, as compared to $156.6 million on 843,000 metric tons sold during the first quarter of 2019. Enviva primarily attributed the $41.3 million increase in product sales to a 19.1 percent increase in sales volumes.
Gross margin was $27.3 million, up from $9.9 million during the same period of last year. Adjusted gross margin was $33.3 million, up from $27.6 million. Adjusted gross margin per metric ton was $33.15, compared to $32.73. The increase in adjusted gross margin per metric ton was primarily attributed to grater fixed cost absorption resulting in lower average costs per metric ton due to the partnership’s higher sales volumes.
Net income for the first quarter was $7.6 million, compared to a net loss of $8.9 million reported for the same period of 2019. Adjusted net income was $9.1 million, compared to an adjusted net loss of $8.1 million. Adjusted EBITDA was $29.2 million, compared to $21.6 million. The increase was primarily due to higher sales volumes.
Enviva expects full-year 2020 net income to be in the range of $52.5 million to $62.5 million. Adjusted EBITDA is expected to be in the range of $165 million to $175 million.
The company said its wood pellet production plant in Hamlet, North Carolina, continues to ramp up production. The facility is expected to reach its full nameplate production capacity of approximately 600,000 metric tons per year by the end of 2020.
Enviva said previously announced projects to increase the aggregate production capacity of its wood pellet plants in Northampton, North Carolina, and Southampton, Virginia, by approximately 400,000 metric tons per year are progressing. The partnership continues to expect to commence the expanded production ramp for the Northampton plant and the Southampton plant in the second and third quarters of 2020, respectively.
The partnership’s sponsor and sponsor joint venture (JV) continue to progress the development of new pellet plants and marine terminals. This includes working to increase the capacity of the Greenwood, South Carolina, plant to 600,000 metric tons per year and constructing a pellet plant in Lucedale, Mississippi. Enviva said major equipment is on order and initial foundations are being completed at the Lucedale plant. A deep-water terminal is also being developed in Pascagoula, Mississippi. Enviva said the first of two large concrete wood pellet storage domes is being constructed and the foundation for the second storage dome is currently being prepared. In addition, a potential wood pellet plant is being developed in Epes, Alabama. A final investment decision on that project is expected to be made over the next few months. The partnership’s sponsor and sponsor JV are also evaluating additional sites for wood pellet plants in Alabama and Mississippi. Production from those plans would be exported through the Pascagoula terminal.