BURLINGTON, ON, March 5, 2019 /CNW/ - EcoSynthetix Inc. (TSX:
ECO) ("EcoSynthetix" or the "Company"), a renewable
chemicals company that produces a portfolio of commercially proven
bio-based products, today announced its financial and operational
results for the three months (Q4 2018) and twelve months ended (FY
2018) December 31, 2018. Financial
references are in U.S. dollars unless otherwise indicated.
Highlights
- Recorded net sales of $6.0
million, up 19%, and $22.8
million, up 27%, in Q4 2018 and FY 2018, respectively
compared to the corresponding periods in 2017
- Generated $0.1 million of
positive operating cash flow in Q4 2018, an improvement of
$1.0 million, and cash used in
operating activities was $1.9 million
in FY 2018, an improvement of 56%, compared to the respective
corresponding periods in 2017
- The SWISS KRONO GROUP launched a NAF (No-Added Formaldehyde)
Solution particleboard product using DuraBind™ technology
- Purchased and cancelled 2,045,500 common shares for total
consideration of $2.9 million under
the normal course issuer bid during 2018, including 1,316,500
shares acquired for $2.0 million
during the quarter
- Maintained a strong balance sheet with cash and term deposits
of $44.8 million as at December 31, 2018
"We continue to drive revenue and bottom-line improvements
through our growth in the paper & paperboard and the wood
composites markets. Our results reflect both higher volumes and
improved pricing," said Jeff
MacDonald, CEO of EcoSynthetix. "Our value proposition in
the wood composites market has improved significantly as pMDI
prices, the co-binder that works with DuraBind, have receded in
late 2018 and into 2019. Manufacturers are actively pursuing
No-Added Formaldehyde alternatives for their wood composites
products and DuraBind offers a solution that is competitive with
formaldehyde in both value and performance. The pricing dynamics in
paper & paperboard are more competitive for new accounts, but
we have demonstrated that the manufacturers that use EcoSphere®
recognize its benefits and view it as a core input to their
process. We are committed to running a profitable business in 2019
– driven by our growth in these two key markets, expanding our
platform to new product categories and continued disciplined cost
management."
Financial Summary
Net Sales
Net sales were $6.0 million and
$22.8 million for Q4 2018 and FY
2018, respectively, compared to $5.0
million and $17.9 million in
the corresponding periods in 2017. The 19% increase in the quarter
was primarily due to higher sales volume of $0.8 million, or 15%, and higher average selling
prices which improved sales $0.2
million, or 4%. The 27% increase in the annual period was
primarily due to higher sales volumes of $4.0 million, or 22%, and an increase in average
selling price which positively impacted sales by $0.9 million, or 5%. The increase in sales
volume and average selling prices in both periods was primarily due
to favourable market conditions.
Gross Profit
Gross profit was $1.2 million and
$4.5 million for Q4 2018 and FY 2018,
respectively, compared to $0.8
million and $3.7 million in
the corresponding periods in 2017. The increases were primarily due
to higher sales volumes and higher average selling prices, partly
offset in the annual period by an increase in manufacturing
costs. Depreciation expense included in gross profit was
$0.2 million and $0.8 million for Q4 2018 and FY 2018,
respectively, compared to $0.3
million and $0.8 million in
the corresponding periods in 2017.
Gross profit as a percentage of sales was 19.9% and 19.7% in Q4
2018 and FY 2018, respectively, compared to 16.7% and 20.5% in the
corresponding periods in 2017. Gross profit as a percentage of
sales adjusted for depreciation expense was 23.5% and 23.4% for Q4
2018 and FY 2018, respectively compared to 22.1% and 25.1% for the
corresponding periods in 2017. The increases in the quarterly
period were primarily due to higher average selling prices.
The decreases in the annual period were primarily due to higher
manufacturing costs partly offset by an increase in average selling
prices.
Selling, General and Administrative
Selling, general and administrative (SG&A) expenses were
$1.4 million and $5.5 million for Q4 2018 and FY 2018,
respectively, compared to $1.3
million and $6.0 million for
the corresponding periods in 2017. The $0.1
million or 4% increase in the quarterly period was primarily
due to $0.2 million of foreign
exchange losses partially offset by lower people related costs and
discretionary spending. The $0.5
million or 8% decrease in the annual period was primarily
due to lower people related costs and discretionary spending partly
offset by an increase in foreign exchange losses of $0.3 million. The change in foreign
exchange losses in both periods were primarily unrealized and due
to the translation of cash balances denominated in Canadian dollars
and foreign exchange rate fluctuations between the Canadian dollar
and U.S. dollar. The decrease in people related costs and
discretionary spending in both periods was primarily due to a cost
reduction plan which was implemented during the first quarter of
2018.
SG&A includes share-based compensation expense which was
$0.2 million and $0.8 million for Q4 2018 and FY 2018,
respectively, compared to $0.1
million and $1.0 million in
the corresponding periods in 2017. The changes in both
periods were primarily due to the achievement of certain vesting
conditions related to performance stock options and restricted
share units and the issuance of share-based awards in FY 2018.
SG&A excluding share-based compensation expense was
$1.2 million and $4.7 million for Q4 2018 and FY 2018,
respectively, compared to $1.2
million and $5.0 million in
the corresponding periods in 2017.
Research and Development
Research and development (R&D) expenses were $0.4 million and $2.2
million for Q4 2018 and FY 2018, respectively, compared to
$1.1 million and $4.7 million for the corresponding periods in
2017. The $0.7 million or 63%
decrease in the quarterly period was primarily due to lower people
related costs and discretionary spending and lower mill trial
related costs. The $2.5 million
or 53% decrease in the annual period was primarily due to lower
mill trial related costs, a decrease in people related costs and
discretionary spending and lower third party development costs.
Depreciation expense included in R&D was $0.1 million and $0.4
million for Q4 2018 and FY 2018, respectively, which was
flat compared to the corresponding periods in 2017. R&D
excluding depreciation expense was $0.3
million and $1.8 million for
Q4 2018 and FY 2018, respectively, compared to $1.0 million and $4.3
million in the corresponding periods in 2017
Termination benefits
Termination benefits were nil and $0.2
million for Q4 2018 and FY 2018, respectively, compared to
nil and $0.1 million in corresponding
periods in 2017. Termination benefits recorded in FY 2018
related to a cost reduction plan implemented in the first quarter
of FY 2018.
Adjusted EBITDA1
Adjusted EBITDA loss was $0.1
million and $1.4 million for
Q4 2018 and FY 2018, respectively, compared to a loss of
$1.1 million and $4.8 million for the corresponding periods in
2017. The 94% and 71% respective improvements were primarily due to
lower operating expenses and higher gross profit.
Net Loss
Net loss was $0.3 million, or
$0.01 per common share, and
$2.5 million, or $0.04 per common share, in Q4 2018 and FY 2018,
respectively, compared to $1.4
million, or $0.02 per common
share, and $6.4 million, or
$0.11 per common share, for the
corresponding periods in 2017. The improvements were principally
due to lower operating expenses and higher gross profit.
Liquidity
Cash on hand and term deposits were $44.8
million as at December 31,
2018, compared to $49.3
million as at December 31,
2017. Cash on hand at December 31,
2018, excluding the $30.6
million in term deposits, was $14.2
million. In FY 2018 the Company purchased and
cancelled 2,045,500 common shares for consideration of $2.9 million under the normal course issuer bid
announced in April 2018.
Notice of Conference Call
EcoSynthetix will host a conference call Wednesday, March 6, 2019 at 8:30 AM ET to discuss its financial
results. Jeff MacDonald, CEO,
and Robert Haire, CFO, will co-chair
the call. All interested parties can join the call by dialling
(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 webcast link and the Company's website. 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. See "IFRS and
Non-IFRS Measures." 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 are not recognized measures under IFRS and should not be
considered as an alternative to operating income or net income as
measures of operating results or an alternative to cash flows as
measures of liquidity. Adjusted EBITDA is defined as consolidated
net income (loss) before net interest expense, income taxes,
depreciation, amortization, other non-cash expenses and charges
deducted in determining consolidated net income (loss).
The following table reconciles net loss to Adjusted EBITDA loss
for the three months and twelve months ended December 31, 2018 and December 31, 2017:
|
Three months
ended
December 31,
2018
(Unaudited)
|
Three months
ended
December 31,
2017
(Unaudited)
|
Twelve months
ended
December 31,
2018
|
Twelve months
ended
December 31,
2017
|
Net
Loss
|
(348,951)
|
(1,434,280)
|
(2,530,758)
|
(6,442,284)
|
Depreciation
|
312,908
|
376,817
|
1,248,946
|
1,229,121
|
Share-based
Compensation
|
225,357
|
124,948
|
780,395
|
1,034,704
|
Interest
Income
|
(258,904)
|
(181,664)
|
(926,884)
|
(667,327)
|
Adjusted EBITDA
loss
|
(69,590)
|
(1,114,179)
|
(1,428,301)
|
(4,845,786)
|
About EcoSynthetix Inc. (www.ecosynthetix.com)
EcoSynthetix offers a range of sustainable engineered biopolymers
that allow customers to reduce their use of harmful materials, such
as formaldehyde and styrene-based chemicals. The Company's flagship
products, DuraBind™ and EcoSphere®, are used to manufacture wood
composites, paper and packaging, and enable performance
improvements, economic benefits and sustainability. The Company is
publicly traded on the Toronto Stock Exchange (T:ECO).
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. The forward-looking statements in
this Press Release include, but are not limited to, statements
regarding the Company's plans to execute its commercial strategy,
convert late-stage industrial trial prospects into customers and
expand the number of lines and the volumes at existing customers,
and other statements regarding the Company's plans and expectations
in 2019. 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 Company's ability to
successfully allocate capital as needed and to develop new
products, as well as 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 4,
2019. 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.
|
|
|
Consolidated
Balance Sheets
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
|
|
|
December 31,
2018
|
December 31,
2017
|
Assets
|
|
|
|
|
|
Current
assets
|
|
|
Cash
|
14,207,342
|
19,116,828
|
Term
deposits
|
30,635,400
|
30,171,121
|
Accounts
receivable
|
2,347,622
|
2,296,255
|
Inventory
|
2,722,742
|
2,535,234
|
Government grants
receivable
|
140,000
|
-
|
Prepaid
expenses
|
129,240
|
153,524
|
|
50,182,346
|
54,272,962
|
|
|
|
Non-current
assets
|
|
|
Property, plant and
equipment
|
6,174,898
|
7,115,672
|
Total
assets
|
56,357,244
|
61,388,634
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Current
liabilities
|
|
|
Trade accounts
payables and accrued liabilities
|
2,255,430
|
2,951,220
|
Accrued termination
benefits
|
-
|
39,830
|
Total
liabilities
|
2,255,430
|
2,991,050
|
|
|
|
Shareholders'
Equity
|
|
|
Common
shares
|
491,618,125
|
493,631,495
|
Contributed
surplus
|
9,798,803
|
9,550,445
|
Accumulated
deficit
|
(447,315,114)
|
(444,784,356)
|
Total
shareholders' equity
|
54,101,814
|
58,397,584
|
|
|
|
Total liabilities
and shareholders' equity
|
56,357,244
|
61,388,634
|
EcoSynthetix
Inc.
|
|
|
|
Consolidated
Statements of Operations and Comprehensive Loss
|
|
|
|
For the three and
twelve months ended December 31, 2018 and 2017
|
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
Three months
ended December 31,
|
|
Twelve
months ended December 31,
|
|
2018
|
2017
|
|
2018
|
2017
|
|
|
|
|
|
|
Net
sales
|
5,989,317
|
5,029,995
|
|
22,799,329
|
17,885,423
|
|
|
|
|
|
|
Cost of
sales
|
4,794,498
|
4,190,723
|
|
18,302,982
|
14,215,080
|
|
|
|
|
|
|
Gross profit on
sales
|
1,194,819
|
839,272
|
|
4,496,347
|
3,670,343
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Selling, general and
administrative
|
1,391,958
|
1,339,650
|
|
5,511,936
|
6,004,556
|
Research and
development
|
410,716
|
1,115,566
|
|
2,219,275
|
4,711,913
|
Termination
benefits
|
-
|
-
|
|
222,778
|
63,485
|
|
1,802,674
|
2,455,216
|
|
7,953,989
|
10,779,954
|
|
|
|
|
|
|
Loss from
operations
|
(607,855)
|
(1,615,944)
|
|
(3,457,642)
|
(7,109,611)
|
|
|
|
|
|
|
Interest
income
|
258,904
|
181,664
|
|
926,884
|
667,327
|
|
|
|
|
|
|
Net loss and
comprehensive loss
|
(348,951)
|
(1,434,280)
|
|
(2,530,758)
|
(6,442,284)
|
|
|
|
|
|
|
Basic and diluted
loss per common share
|
(0.01)
|
(0.02)
|
|
(0.04)
|
(0.11)
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding
|
59,032,951
|
59,573,558
|
|
59,498,498
|
59,551,885
|
EcoSynthetix
Inc.
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
For the three and
twelve months ended December 31, 2018 and 2017
|
|
|
|
(expressed in US
dollars)
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
Three months
ended December 31,
|
|
Twelve
months ended December 31,
|
|
2018
|
2017
|
|
2018
|
2017
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
Net loss and
comprehensive loss
|
(348,951)
|
(1,434,280)
|
|
(2,530,758)
|
(6,442,284)
|
Items not affecting
cash
|
|
|
|
|
|
Depreciation
|
312,908
|
376,817
|
|
1,248,946
|
1,229,121
|
Share-based
compensation
|
225,357
|
124,948
|
|
780,395
|
1,034,704
|
Unrealized foreign
exchange loss (gain)
|
184,582
|
(60,308)
|
|
199,154
|
(60,726)
|
Other
|
(221,691)
|
10,096
|
|
(435,619)
|
(234,891)
|
Changes in non-cash
working capital
|
|
|
|
|
|
Accounts
receivable
|
(513,133)
|
(738,943)
|
|
(51,367)
|
(96,966)
|
Inventory
|
117,790
|
541,021
|
|
(211,982)
|
629,813
|
Government grants
receivable
|
(140,000)
|
-
|
|
(140,000)
|
-
|
Prepaid
expenses
|
39,328
|
45,140
|
|
24,284
|
11,828
|
Trade accounts
payables and accrued liabilities
|
402,528
|
144,856
|
|
(774,477)
|
(118,983)
|
Accrued termination
benefits
|
-
|
22,683
|
|
(39,830)
|
(376,058)
|
|
58,718
|
(967,970)
|
|
(1,931,254)
|
(4,424,442)
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
(201,302)
|
(44,367)
|
|
(218,865)
|
(360,240)
|
Receipts on mature
term deposits
|
-
|
-
|
|
30,000,000
|
15,000,000
|
Purchase of term
deposits
|
-
|
-
|
|
(30,000,000)
|
(30,000,000)
|
|
(201,302)
|
(44,367)
|
|
(218,865)
|
(15,360,240)
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
Common shares
repurchased
|
(1,952,047)
|
-
|
|
(2,932,983)
|
-
|
Exercise of common
share options
|
853
|
-
|
|
387,576
|
47,617
|
Proceeds from
government grants
|
-
|
-
|
|
-
|
168,562
|
|
(1,951,194)
|
-
|
|
(2,545,407)
|
216,179
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
(124,190)
|
55,415
|
|
(213,960)
|
168,053
|
|
|
|
|
|
|
Decrease in cash
during the period
|
(2,217,968)
|
(956,922)
|
|
(4,909,486)
|
(19,400,450)
|
|
|
|
|
|
|
Cash - Beginning
of period
|
16,425,310
|
20,073,750
|
|
19,116,828
|
38,517,278
|
|
|
|
|
|
|
Cash - End of
period
|
14,207,342
|
19,116,828
|
|
14,207,342
|
19,116,828
|
SOURCE EcoSynthetix Inc.