Pinnacle sets quarterly records for wood pellet production, sales

Pinnacle Renewable Energy Inc. released second quarter financial results on Aug. 10, reporting new quarterly records for wood pellet production and sales. The company also provided an update of ongoing capacity expansion projects.

Pinnacle sold a record 620,000 metric tons of wood pellets during the three-month period, up 21 percent when compared to the previous quarter and up 30 percent when compared to the second quarter of 2019. Included in the sales were 23,000 metric tons of externally produced pellets purchased under annual contracts and 50,000 metric tons of spot purchases.

Wood pellet production during the quarter also set a new record at 518,000 metric tons, up 14 percent when compared to the first quarter of this year and up 15 percent when compared to the same period of last year. Pinnacle said the record production was achieved in spite of operational disruptions at the Lavington, Meadowbank and Smithers facilities that negatively impacted production by 18,000 metric tons. According to the company, the gains in productivity achieved during the quarter contributed to an 8 percent reduction in unit production costs when compared to the first quarter of this year.

During an Aug. 11 earnings call, Pinnacle CEO Robert McCurdy said that in spite of the uncertainty the company experienced around biomass availability at the start of the second quarter, Pinnacle’s fiber team provided access to the volume and quality of fiber needed to operate its mills without disruption. He said sawmill residues accounted for 74 percent of Pinnacle’s feedstock during the quarter, down from 81 percent in the first quarter. The balance of the feedstock came from harvest residues. Overall, fiber costs were flat during the quarter, he added.

McCurdy said construction continued during the second quarter on Pinnacle’s 200,000-metric-ton facility in High Level, Alberta. That project is being developed in partnership with Tolko Industries Inc. Works began on the construction of the foundations during the second quarter as the ground thawed, McCurdy said. He also noted plans for rail infrastructure were finalized during the three-month period. The plant is expected to begin commissioning during the fourth quarter of 2020. A number of key positions for the facility have already been filled, McCurdy added, including the hiring of an experienced plant manager.

Construction also continued on the 360,000-metric-ton-per-year facility under development in Demopolis, Alabama. That project is being developed with The Westervelt Co. and Two Rivers Lumber Co. LLC. The Demopolis plant is expected to begin commissioning during the second quarter of next year.

McCurdy also noted the a dryer upgrade was successfully completed at Pinnacle’s Williams Lake facility during the quarter. The new dryer is currently in its commissioning phase and is expected to achieve run-rate production levels during the third quarter, boosting the plant’s production capacity by 60,000 metric tons per year.

Construction also commenced on phase two of the facility in Aliceville, Alabama, during the second quarter. The project will add a truck unloading system o the mill’s infrastructure and broaden access to additional supplies of sawmill residuals.

McCurdy said completion of these growth-related capital projects will increase Pinnacle’s overall production capacity by 20 percent, to 2.9 million metric tons per year. He also noted that some smaller projects are currently on hold due to COVID-19-related concerns.

Pinnacle reported record revenues of $132.2 million for the second quarter, up from $104.2 million during the same period of last year. The company’s adjusted gross margin was $20 million, 15.1 percent of revenue, compared to $20.3 million, or 19.5 percent of revenue, during the second quarter of 2019. Adjusted EBITDA was $16.1 million, compared to $15.3 million during the same period of last year. Net income was $20,000, compared to a net income of $1.5 million reported for the second quarter of 2019.