While having significantly reduced the financial bleeding of its Canadian industrial pellet operations, US-headed wood fibre processing and pellet producer Rentech Inc., has still a way to go in getting itself out of trouble as its second quarter 2017 results suggest.
US-headed Rentech Inc., operates three business subsidiaries; Fulghum Fibres, New England Wood Pellets (NEWP) and Wood Pellets Industrial making it a sizeable international wood fibre processing and pellet player with operations across the Americas.
Whilst the company has managed to significantly reduce and bring under control losses at its Canadian industrial pellet operations Atikokan and Wawa in the second quarter 2017 compared to the same period 2016, Fulghum Fibres has also slumped into the red, leaving aside the previously recorded asset and goodwill impairments.
According to a statement, it is a result of “lower revenues as a result of a decrease in biomass product sales in South America, a decrease in chip sales to Asia, the sale of two US chip mills in May 2017, lower processing volumes at existing domestic mills, and an increase in repairs and maintenance expenses for the mills in South America”.
On the upside, the company revealed that in August 2017, it was notified by a client that wishes to exercise its purchase option for six of Fulghum’s chip mills. The parties are in discussions to enter into new operating agreements for Fulghum to continue to operate the mills on terms similar to operating agreements at other Fulghum mills when Fulghum transfers the asset ownership to the customer.
Assuming the deal goes through Rentech would expect to receive a one-time cash payment of approximately US$5 million which would be used to pay off the underlying debt on the mills.
The NEWP residential pellet operations, which began scaling back output and adjusting to market conditions back in February 2016, continued on the 2017 first quarter track with comparatively marginal losses being challenged by relatively warm weather, low fossil fuel prices for heating oil and propane, lower pellet prices and “changes in consumer buying patterns where the consumer now makes purchases on an as-needed basis”.
For its Canadian operations, Rentech is currently negotiating with Drax to cancel the remaining 2017 shipments from its idled Wawa facility.