Polaris Anticipates Strong Second Half of Year

Polaris Materials Corp. reported financial results for its second quarter ending June 30, 2017. Gross profit year to date of $2 million is more than double the $0.7 million gross profit achieved in the prior year period; Q2 2017 gross profit of $1.3 million was 0.3 million or 26 percent higher than Q2 2016.

On a per-ton basis, gross profit year to date tripled to $1.63/ton versus $0.50/ton last year; Q2 2017 gross profit per ton was $2.02/ton versus $1.10/ton in Q2 2016.

Reduced net loss of $1.8 million year to date versus a loss of $2.9 million in 2016; Q2 2017 net loss of $0.6 million higher than same period in 2016 due to unrealized FX and higher SG&A.

The company’s Q2 2017 financial results reflect significantly improved unit margins versus 2016, offset in part by the impact of unfavorable movements in foreign exchange as well as higher SG&A costs attributable to professional fees. 

“We are particularly pleased that we were able to achieve these results against the as-expected lower first half volumes,” the company stated. “That said, we note that volumes in the first half increased by 4 percent compared with 2016 after adjusting for the impact of the ex-quarry contract, which ended on Dec. 31, 2016, and this in spite of the exceptionally heavy rainfall which impacted customer activity throughout the first half.”

Favorable changes in mix, the start of fine sand sales, as well as year-over-year price improvements all contributed to improved average pricing. Cost of Goods Sold per ton increased due to a higher proportion of delivered sales, but the increase was smaller than the increase prices due to lower underlying costs at the Orca Quarry and in the terminal and logistics business. 

At the quarry, reduced costs of production were partially offset by costs related to the commissioning of equipment for Fine Sand product sales. 

In its terminal operations, the company achieved significantly higher throughputs, while reducing unit variable costs, and it achieved savings through a coordinated logistics strategy with its customers which helped to reduce third-party barge utilization and minimized demurrage and deadfreight.

The second half of 2017 is expected to be significantly more active than the first half, and as a result expectation for full-year sales volumes has increased to 3.0 to 3.2 million tons; 5 to 10 percent higher than original guidance and 0 to 5 percent up from 2016. 

“In July 2017, we shipped 366,000 tons, which supports our view of a strong second half. Improved market share in the east and south San Francisco Bay Area, as well as higher domestic barge sales and growth in Long Beach are expected to more than make up for lower ex-quarry sales,” the company said. “This will occur at what we believe will be significantly improved margins reflecting the premium value of our products as well as favorable market conditions in the Bay Area and Los Angeles. On July 31, it was announced that Los Angeles had reached agreement with the IOC with respect of hosting the 2028 Summer Olympics. While this agreement remains to be ratified in September 2017, we are encouraged that significant progress has been made towards a final decision. The Games are expected to drive significantly increased commercial and infrastructure construction in LA in the coming years. Orca’s high-performance concrete aggregates are well positioned to be an essential component of the high specification concrete work that will be required.

“At the Orca Quarry, we completed the majority of the work related to the new Fine Sand product, with the remaining work to be completed in in Q3,” the company continued. “We recently announced that Tyson Mackay has been promoted to the position of mine manager at the Orca Quarry. Tyson has been an integral part of operations at Orca since joining in 2013. His leadership of the Orca safety culture led to the company’s fifth Stewart/O’Brien Award in 10 years for zero lost time accidents in 2016. As well, Keven Wasylyshyn joined the company as director, supply chain in January and has already provided a significant benefit in improving our logistics efficiency and inventory management practices.”

Ken Palko, president and CEO, commented, “The first half of 2017 reflects a great outcome for Polaris, with reduced net loss, improved gross profit and EBITDA, and several capital projects underway as we position ourselves for additional sales of our new Fine Sand product. Volume is expected to increase significantly in the third quarter, while we work to maintain the current underlying cost structure and drive further margin improvements. We have already achieved several price increases for this year and we continue to negotiate actively with our customers to ensure our business reflects the strong market conditions prevailing in California.”

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