Covia announced results for the third quarter ended Sept. 30, 2018. As a result of the merger that closed on June 1, 2018, Covia’s 2018 reported results, under U.S. generally accepted accounting principles, include the consolidated financial results of both Unimin Corp. and Fairmount Santrol Holdings Inc. for the four months ended Sept. 30, 2018, as well as the stand-alone results for Unimin for the five months ended May 31, 2018, including the high-purity quartz business, which is reported as discontinued operations.
The company reported:
• Total volumes of 8.2 million tons, a decline of 15 percent compared to the third quarter of 2017 and down 19 percent sequentially, both on a pro forma basis, driven by lower Energy volumes.
• Total revenues of $523.4 million, a decline of 17 percent compared to the third quarter of 2017 and down 27 percent sequentially, both on a pro forma basis, driven by lower Energy volumes and average selling prices.
• Net loss from continuing operations of $288.8 million, or $2.20 per share, driven by the pre-tax impact of $265.3 million in non-cash impairment charges of goodwill and other assets, $24.1 million in restructuring charges, and $5.6 million in merger-related expenses.
• Adjusted EBITDA of $84.1 million, a decline of 42 percent compared to the third quarter of 2017 and down 53 percent sequentially, both on a pro forma basis. Adjusted EBITDA includes $5.5 million in non-cash inventory charges related to purchase accounting and a $6.3 million negative impact from our in-basin facilities as a result of start-up costs and limited production.
• Net cash flow provided by operating activities of $104.7 million aided by strong Industrial segment performance and reduced working capital.
Industrial Segment results included:
• Volumes of 3.7 million tons, relatively flat year-over-year on a pro forma basis.
• Revenues of $198.8 million, up 3 percent year-over-year on a pro forma basis, driven by price increases instituted at the beginning of 2018.
• Segment gross profit of $56.8 million, down $4.0 million, or 7 percent, year-over-year due to higher production costs in Mexico, hurricane-related disruptions in the Southeast and $1.4 million of non-cash inventory charges related to purchase accounting.
“During the third quarter, our dedicated team members made substantial progress on our integration initiatives, including the realization of synergies, further delivering on our commitment to leverage the core strengths of Covia,” said Jenniffer Deckard, president and chief executive officer. “We remained focused on expanding our Industrial business, while also taking decisive actions in response to challenges faced in our Energy segment.”
Deckard continued, “Our Industrial segment again posted solid quarterly results, with contributions from multiple markets, while our Energy segment’s results were adversely impacted by market conditions, which began to deteriorate in July. Exhaustion of operator budgets led a progressive slowdown in proppant demand, which is expected to continue through the end of the year before rebounding. At the same time, in-basin supply continued to grow, resulting in significant volume and pricing pressure. We also experienced some specific Energy customer challenges and had limited production from our new in-basin facilities during the third quarter.”
Deckard concluded, “We have taken significant actions to further strengthen Covia’s leadership position, including the idling of excess capacity and the consolidation of production into our lowest-cost plants, resulting in a more highly competitive footprint. Additionally, our 8 million tons of in-basin capacity is consistently ramping up to meet strong demand for this product. These actions better align our product offering with current market demand, and reduce our overall cost to serve. Further, we are making steady progress in strengthening and diversifying our customer mix, partnering with leading last-mile solutions providers, capturing merger-related synergies and growing our high cash-flow-yielding Industrial business.”