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EcoSynthetix Reports 2012 Third Quarter Results
November 6, 2012
BURLINGTON, ON, Nov. 6, 2012 /CNW/ – EcoSynthetix Inc. ("EcoSynthetix" or the "Company"), a renewable chemicals company that produces a family of commercially proven bio-based products, today announced its financial results for the three and nine months ended September 30, 2012. Financial references are in U.S. dollars unless otherwise indicated.
Third Quarter 2012 Highlights
- Net sales grew 12% and 58% to $5.9 million, compared to Q3 2011 and Q2 2012, respectively
- Won four new customers during the quarter and one new customer subsequent to the end of the period, bringing our total new customers won during 2012 to ten
- Five of the top 20 global paper and paperboard manufacturers are commercial with the Company's EcoSphere®biolatex® binders with an additional 10 of the top 20 manufacturers at the mill trial stage
"We are winning new customers and increasing sales to our existing customers. Net sales increased 12% in the quarter compared to the same period last year, and increased 58% on a sequential basis," said John van Leeuwen, Chief Executive Officer of EcoSynthetix. "The improvements we have made to our sales team and strategy, with a larger, more experienced team selling direct, is starting to have an impact. The benefits of our bio-based binder are clear and the team is able to bring a strong message to customers – comparable or better performance at a lower and less volatile price compared to petroleum-based alternatives."
Financial Summary
Net Sales
Net sales for the three months ended September 30, 2012 (Q3 2012) were $5.9 million compared to $5.3 million for the three months ended September 30, 2011 (Q3 2011), an increase of $0.6 million, or 12%. Higher volume contributed to the overall sales increase, including in Asia Pacific despite lower purchases from a major customer in this region compared to the prior year. Excluding sales to the major customer in Asia Pacific last year, net sales increased 20% in Q3 2012 compared to the same period last year.
Net sales for the year-to-date (YTD) period were $13.6 million compared to $17.1 million in the same period last year. The decrease was primarily due to lower sales in Asia Pacific, principally due to lower purchases from a major customer in this region. Excluding sales to the major customer in Asia Pacific last year, net sales increased 39% or $3.8 million during the YTD period compared to the same period last year.
We have commercialized four new customers during the third quarter and one new customer subsequent to the end of the quarter, bringing the total new customers during 2012 to ten. New customers accounted for 17% and 19% of revenues for the third quarter and on an YTD basis, respectively.
Gross Profit
Gross profit was $1.3 million or 21.6% of sales in Q3 2012 compared to $1.3 million or 25.2% of sales in the same period last year. Increases in gross profit due to higher sales volume and lower contract manufacturing costs were offset by higher manufacturing depreciation, lower sales price and increased raw material input costs related to corn starch.
For the YTD period, gross profit was $2.7 million or 19.6% of sales compared to $4.2 million or 24.5% in the same period last year. The decrease in gross profit YTD was principally due to lower sales volume, increased manufacturing depreciation and increased raw material input costs related to corn starch partially offset by lower contract manufacturing costs.
Manufacturing depreciation in Q3 2012 and on a YTD basis increased as a result of commissioning two 80 million pound production lines at the Tennessee and the Netherlands facilities. Gross profit as a percentage of sales, adjusted for manufacturing depreciation, was 26.2% and 24.7% for Q3 2012 and on a YTD basis, respectively, compared with 25.1% and 25.6% for the corresponding periods last year.
Selling, General and Administrative
(excludes share-based compensation, depreciation and amortization and foreign exchange loss or gain)
Selling, general and administrative (SG&A) costs were $2.6 million in Q3 2012 compared to $2.4 million in the same period last year. For the YTD period, SG&A costs were $7.3 million compared to $5.5 million for the same period last year. The change was principally due to higher salaries and benefits and overhead costs associated with increased headcount.
Research and Development
Research and development (R&D) costs were $0.8 million in Q3 2012 compared to $0.7 million for the same period last year. For the YTD period, R&D costs were $2.9 million compared to $1.4 million for the same period last year.
Product development is a key focus at EcoSynthetix as it pursues market expansion. R&D costs are expected to increase as the Company continues to displace petrochemical polymers by further penetrating the paper and paperboard industry and expanding into new markets with low cost, bio-based alternatives.
Adjusted EBITDA1
Adjusted EBITDA was ($1.8) million in Q3 2012, compared to $(2.0) million in the same period last year. For the YTD period, adjusted EBITDA was ($6.8) million compared to ($2.6) million in the same period last year. The change in adjusted EBITDA during the YTD period was primarily due to increased loss from operations.
Net Loss
Net loss in Q3 2012 was $2.3 million, or $0.04 per common share (basic and fully diluted), compared to a net loss of $2.3 million, or $0.07 per common share (basic and fully diluted), for same period last year. For the YTD period, net loss was $8.0 million, or $0.15 per share (basic and fully diluted) compared to $250.4 million or $20.50 per share (basic and fully diluted) in the prior period. The decrease in net loss is primarily due to a lower loss related to the change in fair value of warrants and redeemable preferred shares partly offset by an increased loss from operations.
The pro-forma (before fair value charges) net loss YTD was $8.0 million or $0.15 per share (basic and fully diluted) compared with a pro-forma net loss of $3.5million or $0.29 per share (basic and fully diluted) in the same period last year.
Liquidity
Working capital was $103.4 million at September 30, 2012 compared to working capital of $113.8 million at December 31, 2011. The decrease was principally due to cash utilized in operating and investing activities.
On August 17, 2012, the Company announced its intention to make a normal course issuer bid to repurchase a certain number of its outstanding common shares. The number of shares to be purchased during the period of the bid between August 20, 2012 to August 19, 2013 will not exceed 2.3 million shares. Since August 20, 2012, the Company has repurchased 145,800 shares for total consideration of of $0.5 million.
As at November 2, 2012, the Company had the equivalent of 55,255,585 common shares issued assuming the conversion of all rights pursuant to the put/call agreement. In addition, if all outstanding warrants and all outstanding share options are exercised, there would be the equivalent of 61,388,098 common shares issued and outstanding on a fully diluted basis as at November 2, 2012.
Notice of Conference Call
EcoSynthetix will host a conference call on Wednesday, November 7, 2012 at 8:30AM ET to discuss its financial results. John van Leeuwen, CEO, and Robert Haire, CFO, will co-chair the call. All interested parties can join the call by dialing (647) 427-7450 or (888) 231-8191. Please dial in 15 minutes prior to the call to secure a line. A live audio webcast of the conference call will also be available at www.ecosynthetix.com. The presentation will be accompanied by slides, which will be available via the Company's website and webcast. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.
1Non-IFRS Financial Measures
This press release makes reference to certain non-IFRS measures. These non-IFRS measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing a further understanding of results of operations of EcoSynthetix from management's perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of the financial information of EcoSynthetix reported under IFRS. The Company uses non-IFRS measures such as Adjusted EBITDA to provide investors with a supplemental measure of operating performance and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures. Management also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess the Company's ability to meet its capital expenditure and working capital requirements.
Adjusted EBITDA is not a measure recognized under IFRS and does not have a standardized meaning prescribed by IFRS. The Company presents Adjusted EBITDA because the Company believes it facilitates investors' use of operating performance comparisons from period to period and company to company by backing out potential differences caused by variations in capital structures (affecting relative interest expense), the book amortization of intangibles (affecting relative amortization expense) and the age and book value of property and equipment (affecting relative depreciation expense). The Company also presents Adjusted EBITDA because it believes it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance. Adjusted EBITDA as presented herein is not a recognized measure under IFRS and should not be considered as an alternative to operating income or net income as a measure of operating results or an alternative to cash flows as a measure of liquidity. Adjusted EBITDA is defined as consolidated net income (loss) before interest, income taxes, depreciation, amortization, other non-cash expenses and charges which include the movement in the unrealized gains and losses on the Company's redeemable preferred shares and warrants classified as financial liabilities prior to the initial public offering and share based compensation expense.
The following table reconciles net loss to Adjusted EBITDA for Q3 2012 and Q3 2011:
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September 30, |
September 30, |
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Net loss |
(2,324,278) |
(2,288,612) |
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|
Depreciation and amortization |
320,883 |
33,005 |
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|
Share-based compensation |
285,000 |
296,773 |
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|
Interest expense (income) |
(85,727) |
(61,863) |
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Adjusted EBITDA (1) |
(1,804,122) |
(2,020,697) |
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About EcoSynthetix Inc. (www.ecosynthetix.com)
EcoSynthetix Inc. is a renewable chemicals company specializing in bio-based products that can be used as inputs in industrial manufacturing for a wide range of consumer products. The Company's products offer a reduced carbon footprint and are marketed primarily on the basis of lower cost, stable pricing and equal or superior performance. EcoSynthetix's lead product, EcoSphere® biolatex® binders, is used commercially by a number of the global top 20 manufacturers in the coated paper and paperboard industry.
Forward Looking Statements
Certain statements in this Press Release constitute "forward looking" statements that involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, objectives or achievements of the Company, or industry results, to be materially different from any future results, performance, objectives or achievements expressed or implied by such forward looking statements. These statements reflect our current views regarding future events and operating performance and are based on information currently available to us, and speak only as of the date of this Press Release. These forward looking statements involve a number of risks, uncertainties and assumptions and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such performance or results will be achieved. Those assumptions and risks include, but are not limited to, the fact that our results of operations and business outlook are subject to significant risk, volatility and uncertainty. Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward looking statements, including the factors identified in the "Risk Factors" section of the Company's Annual Information Form dated March 30, 2012. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward looking statements prove incorrect, actual results may vary materially from those described in this Press Release as intended, planned, anticipated, believed, estimated or expected. Unless required by applicable securities law, we do not intend and do not assume any obligation to update these forward looking statements.
EcoSynthetix Inc.
Interim Consolidated Balance Sheets
(Expressed in U.S. dollars)
(Unaudited)
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As at |
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As at |
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Assets |
|
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|
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Current assets |
|
|
|
|
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Cash |
94,614,424 |
|
105,713,705 |
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Accounts receivable |
4,465,771 |
|
3,116,445 |
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Inventories |
7,598,983 |
|
10,243,410 |
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|
Government grants receivable |
438,217 |
|
639,685 |
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Prepaid expenses |
214,384 |
|
182,842 |
|
Total current assets |
107,331,779 |
|
119,896,087 |
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|
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Intangible assets |
149,012 |
|
– |
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|
Property, plant and equipment |
13,236,439 |
|
10,766,124 |
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Total assets |
120,717,230 |
|
130,662,211 |
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Liabilities and shareholders' equity |
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Current liabilities |
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Accounts payable and accrued liabilities |
3,687,883 |
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6,142,668 |
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Deferred government grant |
224,023 |
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– |
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Total current liabilities |
3,911,906 |
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6,142,668 |
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Shareholder's equity |
|
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Common shares |
492,059,706 |
|
492,353,321 |
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Contributed surplus |
6,688,854 |
|
6,073,080 |
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Accumulated deficit |
(381,943,236) |
|
(373,906,858) |
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Total shareholder's equity |
116,805,324 |
|
124,519,543 |
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Total liabilities and shareholders' equity |
120,717,230 |
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130,662,211 |
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EcoSynthetix Inc.
Interim Consolidated Statements of Operations and Loss
(Expressed in U.S. dollars)
(Unaudited)
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Nine months ended September 30, |
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Three months ended September 30, |
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2012 |
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2011 |
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2012 |
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2011 |
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Net sales |
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13,628,684 |
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17,050,722 |
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5,915,571 |
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5,282,495 |
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Cost of sales |
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10,963,579 |
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12,874,175 |
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4,635,044 |
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3,951,167 |
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Gross profit |
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2,665,105 |
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4,176,547 |
|
1,280,527 |
|
1,331,328 |
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Operating expenses |
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Selling, general and administrative |
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8,112,548 |
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6,389,458 |
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2,858,091 |
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2,987,573 |
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Research and development |
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2,863,938 |
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1,427,515 |
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832,441 |
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694,230 |
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Total operating expenses |
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10,976,486 |
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7,816,973 |
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3,690,532 |
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3,681,803 |
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Loss from operations |
|
(8,311,381) |
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(3,640,426) |
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(2,410,005) |
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(2,350,475) |
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Interest income |
|
275,003 |
|
107,752 |
|
85,727 |
|
61,863 |
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Loss related to warrants and preferred shares |
|
– |
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(246,829,537) |
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– |
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– |
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Net loss |
|
(8,036,378) |
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(250,362,211) |
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(2,324,278) |
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(2,288,612) |
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Basic and diluted loss per common share |
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(0.15) |
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(20.50) |
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(0.04) |
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(0.07) |
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Weighted average number of common |
|
55,273,916 |
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12,213,476 |
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55,324,997 |
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34,406,703 |
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EcoSynthetix Inc.
Interim Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
(Unaudited)
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Nine months ended September 30, |
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Three months ended September 30, |
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2012 |
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2011 |
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2012 |
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2011 |
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|
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Operating activities |
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Net loss |
(8,036,378) |
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(250,362,211) |
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(2,324,278) |
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(2,288,612) |
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Items not affecting cash |
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Depreciation and amortization |
822,815 |
|
325,039 |
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320,883 |
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33,005 |
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Share based compensation expense |
702,104 |
|
708,108 |
|
285,000 |
|
296,773 |
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Changes in fair value of warrants and redeemable |
– |
|
246,829,537 |
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– |
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– |
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Changes in non-cash working capital |
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|
|
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Accounts receivable |
(1,349,326) |
|
(1,756,077) |
|
(1,695,334) |
|
(1,414,768) |
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Inventories |
2,740,832 |
|
(6,107,057) |
|
899,309 |
|
(1,956,668) |
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Government assistance receivable |
201,468 |
|
71,598 |
|
188,579 |
|
261,795 |
|
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Prepaid expenses |
(31,542) |
|
(94,379) |
|
(32,577) |
|
4,026 |
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Accounts payable and accrued liabilities |
(648,533) |
|
883,702 |
|
474,414 |
|
(1,280,129) |
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|
Deferred government grant |
224,023 |
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(486,961) |
|
224,023 |
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– |
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Accrued compensation |
– |
|
(1,005,371) |
|
– |
|
– |
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Cash used in operating activities |
(5,374,537) |
|
(10,994,072) |
|
(1,659,981) |
|
(6,344,578) |
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Investing activities |
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Purchase of property, equipment and intangibles |
(5,344,799) |
|
(6,245,898) |
|
(626,805) |
|
(3,333,578) |
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Cash used in investing activities |
(5,344,799) |
|
(6,245,898) |
|
(626,805) |
|
(3,333,578) |
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Financing activities |
|
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Share issuance costs |
– |
|
(10,802,780) |
|
– |
|
(8,571,527) |
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|
Issuance of common shares |
– |
|
102,451,082 |
|
– |
|
102,451,082 |
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|
Repurchase of common shares |
(521,729) |
|
– |
|
(521,729) |
|
– |
|
|
Exercise of warrants |
– |
|
29,494 |
|
– |
|
29,494 |
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|
Exercise of common share options |
141,784 |
|
104,491 |
|
123,463 |
|
58,933 |
|
|
Increase in government grants |
– |
|
2,511,459 |
|
– |
|
208,555 |
|
|
Cash provided by (used in) financing activities |
(379,945) |
|
94,293,746 |
|
(398,266) |
|
94,176,537 |
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|
Net increase (decrease) in cash |
(11,099,281) |
|
77,053,776 |
|
(2,685,052) |
|
84,498,381 |
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|
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|
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|
Cash – beginning of period |
105,713,705 |
|
35,193,037 |
|
97,299,476 |
|
27,748,432 |
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|
Cash – end of period |
94,614,424 |
|
112,246,813 |
|
94,614,424 |
|
112,246,813 |
|
SOURCE: EcoSynthetix Inc.
EcoSynthetix Inc.
John van Leeuwen
Chief Executive Officer
Phone: (289) 288-5010
E-mail: jvanleeuwen@ecosynthetix.com
Investor Relations
Ross Marshall
TMX Equicom
Phone: (416) 815-0700 (Ext.238)
E-mail: rmarshall@tmxequicom.com
Source: Canada Newswire (November 6, 2012 – 6:15 PM EST)
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