Pinnacle reports record revenue, major project updates in Q2
The firm reported record revenues of $132.2 million (€84.4 million) in Q2, compared to $104.2 million (€66.5 million) in Q2 2019. The results were also 19% above the company’s previous record of $110.7 million (€70.7 million), set in the first quarter of this year.
According to Pinnacle, the increase in revenues is due to a boost in production and shipment volumes at several of its facilities and improved logistics and port operations during the quarter.
Pellet sales and production
The company set a new pellet sales record in Q2 with 620,000 tonnes, 21% above the previous mark of 510,000 tonnes set in Q1, and 30% above Q2 2019. Included in the Q2 results were 23,000 tonnes of externally-produced pellets purchased under annual contracts, and 50,000 tonnes of spot purchases.
In terms of production, Pinnacle’s Q2 results set new records, with 518,000 tonnes of pellets produced, 14% above its Q1 results, when the previous record was set, and 15% above the same period in 2019. The results in this quarter were achieved despite operational disruptions at the firm’s Lavington, Meadowbank and Smithers mills, that negatively impacted production by 18,000 tonnes.
Pinnacle’s mills at Entwistle, Alberta and Aliceville, Alabama made “significant contributions” to its production and shipment volumes in Q2, and the firm’s financial performance. At Entwistle, fibre quality improvements associated with the recent destoner project, along with several other initiatives, helped boost pelleter efficiency, building on the gains achieved in Q1.
Production at Entwistle was 33% higher than in Q1 and 235% higher than the same period in 2019. Aliceville also performed “significantly better” in Q1, after efforts to improve machine centre reliability. Production at the Aliceville mill increased by 14% compared to Q1 and by 37% compared to Q2 2019.
Despite sawmill curtailments in western Canada and the US south at the start of Q2, Pinnacle adjusted its procurement activities to access the volume and quality of fibre needed to operate without disruption. The company’s sawmill residuals accounted for 74% of its feedstock in Q2, compared with 81% in Q1 and harvest residuals and biologs accounted for 26% versus 19%.
In a statement, the firm said: “The second quarter of 2020 was a significant step in the direction of achieving our key goals of growth, profitability, and sustainability of our business.
“The recovery from the Entwistle incident is now complete. Investments are being made in both production efficiency and flexibility to enhance our resilience to supply disruptions.
“Investments in new capacity will enable Pinnacle to capture the growth opportunities that are promised in our substantial contract backlog.
“We continue to diversify both our production base and our international market reach. We fully expect continued growth in revenues and improvement in profit margins, based on both expanded capacity and continued attention to costs.”
Construction continued in Q2 on Pinnacle’s new 200,000 tonnes-per-year mill at High Level, Alberta, which is being developed in partnership with Tolko Industries (Pinnacle will own 50% of the mill). The firm contributed $5.5 million (€3.5 million) to the project in Q2, bringing the project spend to around 50% completion. Plans for the associated rail infrastructure at High Level were recently finalised at a projected net cost of $3.3 million (€2.1 million), which will be divided between the partners. The project is on schedule for commissioning in Q4.
Construction also continued on the 360,000 tonnes-per-year mill in Demopolis, Alabama, which is being developed with The Westervelt Company and Two Rivers Lumber Company (Pinnacle will own 70%) of the mill. Pinnacle contributed $14.2 million (€9.07 million) to the Demopolis project in Q2, bringing project spend to around 30% completion. The project is scheduled for commissioning in Q2 2021.
During Q2, the dryer upgrade project at the Williams Lake facility was completed, representing a total investment of $2.6 million (€1.6 million) in the quarter. The new dryer is in its commissioning phase and expected to achieve run-rate production levels in Q3, adding more than 60,000 tonnes to the mill’s capacity annually.
Pinnacle started construction on the phase 2 project at its Aliceville facility in Q2. This project will add a truck unloading system to the mill’s infrastructure and broaden access to additional supplies of sawmill residues on a go-forward basis, supporting the firm’s goal of boosting production volumes at the mill. The company contributed $700,000 (€447,000) to the Aliceville project in Q2, with project spend around 21% complete at the end of the quarter.
Completion of Pinnacle’s growth-related capital projects will increase its production capacity by almost 20% to 2.9 million tonnes, and increase the portion located in jurisdictions outside British Columbia to around 44%. With several projects on hold due to COVID-19, the firm’s contribution to capital spending during the second half of 2020 is expected to be in the range of $70-75 million (€44.7-47.9 million).