Carbo Ceramics Inc. reported financial results for the third quarter of 2017. The company is reporting:
• Revenue for the third quarter of 2017 of $50.2 million, an increase of 148 percent year-over-year and 15 percent sequentially.
• Year-to-date 2017 revenue up 74 percent compared to the same period in 2016.
• Cash levels increased sequentially from $50.6 million to $77.9 million.
• Continued to improve net cash used in operating activities throughout 2017, $19.1 million, $15.8 million and $5.2 million in the first, second and third quarters of 2017, respectively.
• Ceramic technology product sales in both oilfield and industrial businesses continue to experience solid growth.
• Continued progress in reducing structural costs; lowered distribution costs approximately $9 million on an annualized basis in 2017.
• Proactively sold slow moving base ceramic products that are no longer inventoried, which benefited cash generation and will lower future distribution center costs. These sales negatively impacted EBITDA during the quarter due to incentivized pricing.
• Expecting sequential increase in both revenue and operating cash flow for the fourth quarter of 2017.
“Mineral processing revenues are trending in the right direction, and we are pleased with the quarterly growth throughout the year, said CEO Gary Kolstad. “During the quarter, we produced several products for non-oilfield clients. In addition, discussions continued with a number of companies to define what other products our plants can produce for industries outside of the oilfield. Although this revenue is a nominal contributor today, growing our mineral processing opportunities is important to getting our idled plant capacity back to work and producing cash.
“We continued to see improvement in our net cash used in operating activities which declined from $15.8 million in the second quarter of 2017 to $5.2 million in the third quarter of 2017,” Kolstad said. “This is a result of the high revenue growth, as well as a continued focus across the organization to reduce structural costs, such as distribution, where in 2017 we have removed approximately $9 million of costs on an annualized basis. In addition, during the quarter we took steps to reduce certain slow-moving base ceramic inventories through price incentives, which released cash from working capital.
“During the quarter, we closed on the sale of our Russia proppant business,” Kolstand stated. “The sale strengthens our liquidity position, de-risks our company portfolio and allows us to continue to execute on our transformation strategy to return the company to profitability.”
Commenting on the outlook for Carbo, Kolstad stated, “We are expecting a sequential increase in both revenue and operating cash flow for the fourth quarter of 2017. Opportunities within our oilfield business for the fourth quarter of 2017 are tracking positively. Both our ceramic technology and base ceramic volumes are expected to increase sequentially based on our visibility today. Further, we continue to believe that the negative returns throughout the base ceramic industry should lead to increased industry pricing moving forward. Through existing business relationships, we are pursuing multiple projects resulting in increases to our annual sand capacity utilizing ‘asset-lite’ business models. One of these projects should start first production toward the end of the fourth quarter of 2017. To meet our client demand, we expect to ramp up to an annual sand capacity of 600,000 tons by the end of the first quarter of 2018.”