Bri-Chem Announces 2018 Fourth Quarter Financial Results
April 01 2019 - 10:18PM
NOT FOR DISTRIBUTION TO U.S. NEWSWIRE
SERVICES OR FOR DISSEMINATION IN THE U.S.
Bri-Chem Corp. (“Bri-Chem” or “Company”) (TSX:
BRY), a leading North American oilfield chemical
distribution and blending company, is pleased to announce its 2018
fourth quarter financial results.
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Three months ended |
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Twelve months ended |
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December 31 |
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Change |
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December 31 |
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Change |
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(in '000s except per share amounts) |
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2018 |
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2017 |
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$ |
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|
% |
|
2018 |
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2017 |
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$ |
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% |
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Financial Performance |
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Sales |
$ |
27,705 |
|
$ |
27,917 |
|
$ |
(212 |
) |
(1 |
%) |
$ |
121,436 |
|
$ |
116,210 |
|
$ |
5,226 |
|
4 |
% |
|
Adjusted EBITDA(1) |
|
580 |
|
|
1,433 |
|
|
(853 |
) |
(60 |
%) |
|
3,512 |
|
|
6,878 |
|
|
(3,366 |
) |
(49 |
%) |
|
As a % of revenue |
|
2.1 |
% |
|
5.1 |
% |
|
|
|
2.9 |
% |
|
5.9 |
% |
|
|
|
Adjusted operating income (1) |
|
1,840 |
|
|
1,102 |
|
|
738 |
|
67 |
% |
|
4,213 |
|
|
5,616 |
|
|
(1,403 |
) |
(25 |
%) |
|
Adjusted (loss) net earnings (1) |
|
(657 |
) |
|
483 |
|
|
(1,140 |
) |
(236 |
%) |
|
(515 |
) |
|
2,122 |
|
|
(2,637 |
) |
(124 |
%) |
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Net (loss) / earnings |
$ |
(5,570 |
) |
$ |
356 |
|
$ |
(5,926 |
) |
(1665 |
%) |
$ |
(9,355 |
) |
$ |
1,708 |
|
$ |
(11,063 |
) |
(648 |
%) |
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Diluted per share |
|
|
|
|
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|
|
Adjusted EBITDA |
$ |
0.02 |
|
$ |
0.06 |
|
$ |
(0.04 |
) |
60 |
% |
$ |
0.15 |
|
$ |
0.29 |
|
$ |
(0.14 |
) |
49 |
% |
|
Adjusted (loss) / net earnings |
$ |
(0.03 |
) |
$ |
0.02 |
|
$ |
(0.05 |
) |
235 |
% |
$ |
(0.02 |
) |
$ |
0.09 |
|
$ |
(0.11 |
) |
124 |
% |
|
Net loss |
$ |
(0.23 |
) |
$ |
0.02 |
|
$ |
(0.25 |
) |
1651 |
% |
$ |
(0.39 |
) |
$ |
0.07 |
|
$ |
(0.46 |
) |
643 |
% |
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Financial Position |
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Total assets |
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|
$ |
71,616 |
|
$ |
81,232 |
|
$ |
(9,616 |
) |
(12 |
%) |
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Working capital |
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|
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17,977 |
|
|
24,336 |
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|
(6,359 |
) |
(26 |
%) |
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Long-term debt |
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|
|
|
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8,777 |
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9,625 |
|
|
(848 |
) |
(9 |
%) |
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Shareholders equity |
|
|
|
|
$ |
20,153 |
|
$ |
28,756 |
|
$ |
(8,603 |
) |
(30 |
%) |
|
- Refer to the “Non-IFRS Measures” section for a definition of
non-GAAP terms as well as reconciliations for Adjusted EBITDA,
Adjusted Operating Income, and Adjusted (Loss) / Net Earnings.
Key Q4 2018 & year end highlights
include:
- Consolidated sales for the three months ended December 31, 2018
were 1% lower as compared to the same quarter last year.
Sales for the twelve months ended December 31, 2018 were $5.2
million higher than the same period last year mainly due to
stronger US Fluids Distribution sales. Bri-Chem’s
geographically diversified business model helped offset sales
declines in its Canadian operations which continued to face
headwinds from persistently lower oil and gas drilling
activity.
- Adjusted EBITDA for the fourth quarter was $0.58 million versus
$1.4 million in the comparable period in 2017. This decline is
mainly due to weak performance in both the Canadian Fluids
Distribution and Canadian Blending & Packaging divisions.
Adjusted EBITDA for the twelve months ended December 31, 2018
declined by $3.4 million.
- Bri-Chem reported adjusted net loss of $(0.7) million or
$(0.03) adjusted loss per share diluted compared to net earnings of
$0.5 million or $0.02 adjusted earnings per share diluted for the
three months ended in 2018. Adjusted net loss for the twelve months
ended December 31, 2018 was $(0.5) million.
- Working capital, as at December 31, 2018, was $18.0 million
compared to $24.3 million at December 31, 2017. The Company’s
current ratio (defined as current assets divided by current
liabilities) was 1.42 to 1 compared to 1.56 to 1 as at December 31,
2017. Management is actively reducing inventory to align working
capital with sales levels.
- The Company recognized one-time non-cash asset impairments and
restructuring charges of $4.9 million in the fourth quarter of 2018
due to more uncertainty related to political, regulatory and market
access issues in the Canadian oil and natural gas industry. This
uncertainty has negatively impacted the operating and financial
outlook for the Canadian oilfield industry and, as a result,
Bri-Chem reduced its cash flow expectations and the fair value
carrying amount of certain business assets.
Summary for the three and twelve months
ended December 31, 2018:
Bri-Chem reported $27.7 million and $121.4
million in revenue and adjusted EBITDA of $0.58 million and $3.5
million respectively during the three and twelve months ended
December 31, 2018. The Company incurred an adjusted net loss of
$(0.7) million and $(0.5) million for the three and twelve months
ended December 31, 2018. In 2018, the Company recognized $8.8
million of one-time asset impairment and restructuring charges,
consisting of the revaluation of inventory, deferred taxes and
capital assets and costs related to the closure of USA warehouses
and blending facilities. As a result of these one-time
charges, Bri-Chem incurred an annual net loss of $(9.4)
million.
Demand for Bri-Chem’s products and services is
largely driven by current and future North American oil and gas
prices which impact the capital drilling programs and corresponding
rig activity of Bri-Chem’s customers. During 2018,
persistently weak Canadian oil and gas prices negatively impacted
Bri-Chem’s Canadian divisions as energy producers lowered drilling
activity to align with weak cash flows. At the end of 2018,
WCS prices experienced a significant decline dropping from US$29.80
per barrel at the beginning of October to a low of US$6.42 per
barrel in late November, before recovering to end the year at
US$24.66 per barrel. During the three months ended December
31, 2018, the WCS index only averaged US$19.35 per barrel which is
well below its historical range. Consequently, performance
for the Canadian Fluids Distribution and Blending and Packaging
divisions during the three months ended December 31, 2018 was
negatively impacted as sales and gross margin fell 35% and 53%,
respectively, compared to the same quarter last year.
Bri-Chem partially mitigated the Canadian sales
declines due to the increase in sales from its USA
operations. West Texas Intermediate (“WTI”) steadily
increased during 2018, before falling in the fourth quarter of
2018, however, USA customer demand remained relatively stable
during Q4 2018. USA Fluids Blending and Packaging sales
increased 55% and 54%, respectively, for the three and twelve
months ended December 31, 2018 while gross margin increased 26% and
32%, respectively, during the same periods. US Fluids
Distribution sales was for the three and twelve months ended
December 31, 2018 were $3.0 million and $17.7 million higher,
respectively, compared to the same periods last year mainly due to
a higher average US rig count.
Outlook
The Canadian oil and gas industry continues to
be confronted by political, regulatory and market access issues.
These issues, along with the Alberta government’s mandated
production curtailments, have resulted in reduced 2019 Canadian
customer capital spending budgets compared to last year. In
January 2019, the Petroleum Services Association of Canada revised
their 2019 WCSB drilling forecast to reflect a 25% decrease in the
number of wells drilled compared to 2018 and estimated an average
of 180-190 drilling rigs will operate in Canada which is well below
the historical range. With lower industry activity, it remains a
challenge for Bri-Chem to balance its Canadian infrastructure with
erratic activity.
Management is cautiously optimistic in its
outlook for Bri-Chem’s US operations for 2019. While WTI
pricing is expected to be fluctuating at US$52-$60 per barrel, the
US rig counts so far in 2019 has been lower compared to Q4
2018. These mixed signals suggest US sales and gross margin
could be flat compared to 2018.
To date, Bri-Chem has experienced lower overall
activity in the first quarter of 2019 and, as a result, revenue is
below the same period in 2018 last year. Activity for Canadian
spring break-up is expected to be slow and forecasting drilling
activity levels beyond the first half of 2019 is difficult given
the current industry headwinds. Bri-Chem will be focused on
cost management and allocating free cash flow to reduce debt. Since
the fourth quarter of 2018, Bri-Chem has initiated several
right-sizing measures to reduce inventory levels, restructure
overhead expenses and prudently manage its working capital until
more favourable North American industry activity levels return.
About Bri-Chem
Bri-Chem has established itself, through a
combination of strategic acquisitions and organic growth, as the
North American industry leader for wholesale distribution and
blending of oilfield drilling, completion, stimulation and
production chemical fluids. We sell, blend, package and distribute
a full range of drilling fluid products from 26 strategically
located warehouses throughout Canada and the United States.
Additional information about Bri-Chem is available at www.sedar.com
or at Bri-Chem's website at www.brichem.com.
To receive Bri-Chem news updates send your email to
ir@brichem.com.
For further information, please contact:
Jason
TheissBri-Chem Corp.CFOT: (780)
571-8587E: jtheiss@brichem.com |
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release.
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