EVA - Earnings call transcript Q1 2018

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Operator

Good day and welcome to the Enviva's First Quarter 2018 Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would like now to turn the conference over to Ray Kaszuba, Treasurer. Please go ahead.

Ray Kaszuba

to Call. Partners' welcome Financial First and Conference Results morning the LP Enviva Quarter Good your in appreciate today. We interest for thank participating you Enviva Partners and this Chairman John Reeves, On Financial we and Chief CEO Steve Keppler, Officer. call, morning's and have

Steve be release financial and an and morning current our discuss update our Our agenda on John business to will provide for results this outlook.

the We questions. will for then phone lines open up

started, a few get we Before items. housekeeping

we measures. that mind the please the be of our forward-looking in and and to session, First, remarks will subsequent Q&A statements course during will some making refer keep we certain non-GAAP

We Our future concerning morning, of section with in in statements can a our and the this Investor to release events our or differ which cause forward-looking other as new Information uncertainties or the variety forward-looking update or issued to and to statements our those changed reflect website, SEC. could no the that posted comments filings in expectations are is as well our any from forward-looking found risks XX-K assume circumstances. Relations risks. recent statements be obligation to on actual about of business www.envivabiomass.com, results subject materially the

and we each. on non-GAAP call, using be and will this to be the we want During figures of GAAP clear basis

this partnership basis. on As for discussed the results financial as of ended with - XX, X, otherwise XXXX, XXXX indicated the adopted prepared customers three January are the revenue unless on from contracts March call months this

financial in the recoveries incident. of full received and of the Wood like production with over which disposal of margin provided incurred to-date. incident results cases the of have incremental approximate insurance disposal the to would with responses Wood presenting offset financial measures to of cost financial today's to on found March GAAP GAAP in Pellet incremental XXXX press our as expenses to associated Chesapeake full continuity in the may non-GAAP Chesapeake emergency include release. addition measures as business XX, it financial in inventory, John. and certain by repair to well to I Pellet impact included accordance connection be turn asset In results cost logistics References loss Reconciliation excluding we also now impact

John Keppler

Ray. you, thanks Thank for us everyone Good joining morning, and today.

our quarter, As of especially decent published the reported our we that involving we a in transpire earnings had in morning, light release Terminal. events Chesapeake this

continue to First we and year-over-year expect. demonstrate productivity operations foremost, our improvements underlying the

Chesapeake to overall responded last, end business our second our towards to the resume presented been we diversification market goals and challenges progress has at environment and operations well the Second, by normal expect to business the continues never quarter. Terminal the and the the better. fire And by growth the of

all in the but let performance operating the of the the second the take important our during of would to communicated incident quarter. the the of temporary into the as incident month, to special again to is recoverable. of did are last the I'll Terminal at results, highlight, our disrupt fire time costs Chesapeake and incident Steve release will the in we I the business the to nature following of it underlying that in the letter that incident go the and investors, the shortly experienced we the are strength published the quarter's we stills of cost as first describe balance press Before note of believe the itself like quarter effects and position in we substantially

over logistic extended the the overcame derate XX,XXX plant nicely additional quarter QX facility's last complications with production or seasonally the over up basis, up soft basis, same period the the Chesapeake rates initial approximately X% X% First, XX% XXXX after last year. the business were Mid-Atlantic we year QX the incident. is contributes XXXX over growth at increased The our by the production the in of On into our as improvements an same adjusted an last the Chesapeake in was This year performing profile range. despite our on net-net, following ton profile delays that chain, continued plants first organic that of core last annual the still incident. EBITDA our was and and we apples-to-apple year of than better to expected discussed to increase X% the as EBITDA production and associated

has represents our this the of and quarterly is declare and per quarterly consecutive stable increase XX.X% of Board XXth Given growing operating continued a over $X.XXX underlying last year distribution our to this increase. the quarter elected This performance unit. corresponding

underlying previously we coverage its the expect is to And our attributes Chesapeake business normal change modest exacerbates the of the we As trajectory have our to issues an as in basis with but the expressed, indicated, business. course Board timing annual due overall evaluates that seasonality on the timing healthy. no associated and insurance this of recoveries incident. year, due The to temporary I

for original that you markets have On now of the track, consumption as the our have well serious several occurred during its It incremental additional while existing the operations. time, and also to results. that its continue note the now the our from continue release the to transactions contracts year. course you to although global specifics position both internal to our to NG. our volumes Steve this over not extend in our noting, we we European do hand it customer at perspective worth on announce NG increased it and we customers long-standing trading customer will with and to in both like largely I would financial recontracted of contracted as is with both an discuss front, now customers negotiations expect with have European Japanese we

where and on market we turning we see growth to Before the additional update opportunities. provide an

Steve Reeves

Thanks, John.

the unless XXXX XX, ended March results this has discussed the otherwise months call three Ray with ASC-XXX. in accordance prepared mentioned in As indicated are in financial in

including As loss noted associated and insurance in event our incidence net been have in and inventory date cost received repair Chesapeake equipment added adjusted the saw of management, EBITDA. the our Investors, and loss Letter recoveries back of to directly disposal, calculation to with

logistics adjusted recoveries our Associated cost the curtailment temporary into including operations effects place, other back added as in not EBITDA chain to indicated. put incremental and was insurance been logistics of the net production of unless to have

to point extend We expect at Terminal returned these Chesapeake end quarter. costs to the the that the second has through of the operations associated

responsible costs incident the all to substantially be insurance parties. recoverable expect also to from related or We other

cost quarterly results timing the ultimate the recovery, be affected. of the and However, the incurrence of to will due

cost of sources the are received, we incident. accommodate we to short-term While effect have incurred ample liquidity the this before proceeds insurance of

For XXXX a the XXXX. corresponding basis, was year. period revenue the quarter $XXX.X sales of the over sales on of was of quarter quarter, revenue million, $XXX.X as GAAP X.X% for pulp of last first compared million net Pulp representing $XXX to million increase first an of

sales quarter, year, tons been tons the have of pulps last sales of we revenue million of tons. on metric quarter ASC-XXX sold XXXX. $XXX.X effect compared in metric For wood XXX,XXX we XXX,XXX metric as would of At reported first pulp during to the XXX,XXX

of our around generally the shift said over of As timing sales we ratable the by past, course in are quarter-end. year be that the have affected can

inventory the be ending in quarter of their the products has of quarterly tons margin existing and to been million tons roughly below incident. lost tons are production lost The of book quarters due XX,XXX and recorded approximately With based for value recoverable positions the of higher XX,XXX X the parties. or to believe related the all year the the tons of tons substantially other largely the fulfilled responsible at later XXXX, sales of end new supply. income. insurance in are quarter, the XXX,XXX of from inventories will on The the the other recovered difference of XXX,XXX is of the a We average. production mutually shipments in impact shipments curtailment from in agreed the is sources dome Chesapeake of deferral function sold simple customer later The and

of to Chesapeake XXXX For ton the gross of insurance margin related first negative expenses per of On net date a for same margin quarter adjusted million a reported period metric first mainly of was to incident. decrease $XX.X million the XXXX. the to million $X.X the received in due gross $XX.X recoveries XXXX, $X.XX was of from basis, quarter

the correspondent impact $XX.X $XX.X which was the $XX.XX full quarter of million The On to small Excluding for XXXX net for the ton to for Chesapeake recoveries. financial GAAP for adjusted the flat of incident metric net of margin quarter Adjusted a per for the XXXX, of adjusted XXXX. of a roughly of XXXX. related the again $XX.X only. the of was expenses to decrease as the mainly loss compared per would $XX,XXX for quarter, quarter $XX.X margin is to impact quarter XXXX basis, comparison insurance was due of versus of gross Chesapeake first for adjusted ASC-XXX been gross million quarter million, for loss have net metric of ton first corresponding the purposes EBITDA the $XX.XX million of the incident,

partner distribution to would financial to first was million $X.X of million XXXX times. to quarter any XXXX. at Distributable for quarter the distribution quarter first full Chesapeake the for $XX.X the impact of paid been rates which attributable the of first general prior EBITDA the flow covers Excluding - adjusted incident, have the cash X.XX XXXX, distributions

discussed, the EBITDA $XX have half the second mentioned the not year reasons may have For our one-time first below we will in of $XX quarter we we call million and that February. in we the achieve target timing for to expect the coverage million

substantially that will recoverable. from as However, believe Chesapeake cost incident be we the resulting all the

provided guidance expect year $XXX matures of the earnings parties. our partially timing release as achievable, EBITDA as cash adjusted other million well dependent remains distributable guidance million responsible $XX.X full amount $XX.X to flow of last recoveries in We million $XXX the during on and the the million we that to of

to annual also us. our to you've to expect We levels ratio expect from coverage increase come

mentioned, facilities our continue to requires and soft in per expansion our of increasing wood recent projects greater enhanced capital in drive use examples of equipment. that internal our which sawdust, ton. reaffirms the emissions of at dry Support recurring rates unit growth at associated such, storage of modest incident, with incremental quarter of the despite year increases throughout a first XXXX $X.XX perspective, debt our facility XXXX and liquidity the our guidance we end revolving Chesapeake the undrawn partnership expense the expected per million with quarter-over-quarter first year. the the maturity of margin to production throughput on distribution use and is at of we were XXXX. $XXX investment including growth our As continued implement least credit full John From With control

I So, subordinated termination subordination John, units. hand quarter period met have back for of our the that sponsored the to it we will units to would the I note like paid, to common after the first over convert will distributions they and requirements of

As we the have in prospects. its remains for committed said sponsor business past, to the the hence

to like back turn John. I'd Now, to

John Keppler

Steve. Thanks,

we on outlook, final Before I to one Chesapeake make discuss the like the would incident. point market

ways, only portfolio incident and subcontracted model assets unfortunate demonstrate substantial in of While operations business many operations the as of terminal business reliability response we its and where the the that would to third our were in our the note preeminent party. the industry. our our approach supplier occurrence, I to and aspect the validate our

our at now have in-house We operations Chesapeake terminals. and those Wilmington brought

global continues strategy pulp rapid XX% our According by billion. growth forward, years per in by of production our to rate average European increased to remain and expansion nine Asia, contract contracts noteworthy capacity in of look terms with $X contract industrial we by XX% average the be year industrial backlog XXXX. independent firm through is from driven and was increase in to by off-take demonstrated in demand pulp our of to weighted several compound fully experts, recent wood XXXX, It As expected growth developments. continued industry revenue market

wood program illustrate potentially These just gas gas natural preferably to is further coal become natural of to expected carbon binding the the minister of emissions. by and biomass Europe, reduction XX% with its heat encouraging the opportunity. need industrial XXXX reach be to carbon policy complete emissions all the including electricity, renewable phase €X obligations This a this Dutch to with €X XX% XXX dispatchable take government off In ongoing start the gas close grow is the government to a need becomes growing nuclear A heat million increasingly also in which the energy XXXX access generation and to country's demand binding by allocated Dutch continent in where Dutch fall in far stated steam mandates quarter has quickly industrial largest Germany, from gas Dutch program. an by XXXX legal new energy continues low to to option. government natural the has by further intent few XXXX using order source projects, new The more for In The interest about attractive users mandates. to stated recently biomass alternative mandates. energy energy has an is incentive binding projects homes convert retired out largest across from country's of With German billion pulps. are to expected XXXX, program government the beginning industrial natural and Netherlands, by of enhance an restricted highlights of for homes to to renewable. reduction Let's a to a where the a scale all field XXXX launched meet projects goal of the carbon

addition we of capacity several distributors Shifting bulk already quarter, the delivered of the deliver first In a firm development, contract Italy. and of French recently to biomass during executed power original to far Japan, September largest into market the shipments large has exceeding one gigawatts heating as METI positive XXXX, these a its to approved XX shipment in to target. bulk

time. have feed-in And since feed-in new without several utilities developed for projects are launch, their METI tariffs major approval to development that necessarily tariff. of it number introducing currently being is relying a Additionally, on received

going in the Japanese X and restart, generation renewable push operable only As drivers nuclear be will of we nuclear have power the around reduced restarted, to carbon XX government important reactors and uncertainty to increase continue forward. emissions

suppliers, to supply customers system benefit October harvest for sustainability Another challenging many where reasons starts dislocations deliver. result a the emerged why and certification United natural from this South Potential of the States in this And with East Asia. to have market particularly those important practices. beyond effect which biomass utility take company's step Korea, structural our seek the is South of and is forts a potential existing countries likely they on Xst like supply in in sustainable is year shift general resource sustainability their for chain the robust of Southeast and portfolio gallery variety and of stability the of of indeed the fuel derisk plants that

have of light demand. and and we update also forts rolling recent our activities contracts those in provide European I intended geographies, in result, a the to negotiations As developing and Japanese that sponsors' and on the for capacity contracts other want announced, to progressing this an are other that serve plants the several

facilities Our of anticipate XXX,XXX could half our begin John existing the the was production sponsors' Nameplate production to of based our which continues a on first joint the in Carolina. XXXX. venture North construct first in metric Hancock, for your facility Hamlet, tons design facility sponsors

described, John a venture. sponsor new its previously we with joint Hancock extends quarter our with relationship As development last

for production facility of first permit the The acquisition the South to to with receipt the is necessary in The was subject Greenwood, the to XXX,XXX complete the of tons new the capital investment quarter. and of year increase XXXX. its incremental to in rate closed ramp the was invest JV the metric in plant JV Carolina first production expected run

supply The plant in As from which a itself quite MGCT lines which from Hamlet of Wilmington and site is additional with our the long-term the demand expected Hamlet from plant nicely [ph] dropdown UK up to visible the project Macquarie inventory backed consists the Greenwood Asia. result, the the to the Terminal today volumes plant. EBITDA

the in acquisition the expect completed Wilmington dropdown and early second We XXXX other then dropdown portion the and XXXX. in of XXXX terminal to plant be in one

and contract. as In JV as least off-take to well addition, facilities new additional two a Hancock expected at the terminal production is additional develop supported

evaluation been and Mississippi. including Louisville, marine the in Mississippi model, side a our and of deep-water across plans development Here terminal Pascagoula, with focused has the a under the additional on

has once scale into fully develop, received practice sponsors' the they have operations. then to Our full derisk drop facilities partnership the and been contract,

unit it my investment the Our Pascagoula make ramp remarks, Louisville final will growth well the and sponsors' has of our of To a on per decision plant around end generation exception would prepared to Durable increase is the fundamentals incident our year. on distributions the cash short-term impact a overtime. result. Fort platform underlying us The that for business long-term the up substantial process. Chesapeake flow with enables

case. and fond certainly I'm just the know, you of that saying we're started getting still As

we the keeping more their please at I questions. dedication, thank proud all the could work. while people can not managed Chesapeake would As I for Operator, the resilience as incident close, like you of safe. line associates our Enviva everyone and they to hard great be open for

Operator

the question begin now Instructions] The will Goldman ahead. We go come Maguire Brian Please session. with Sachs. from question-and-answer first [Operator

Derrick Laton

Laton guys for morning this good is Derrick Brian. Hey on

Steve Reeves

Derrick. morning, Good

Derrick Laton

sequentially you have color at the ton there fell it's And on gave curious I of any would price just or be a customer per there the Chesapeake. What gross just looking on. impact helpful? am from any average if would color just mix, of Chesapeake a the bit kind excluding the there little maybe that profit in function was Appreciate adjusted been quarter, there.

Steve Reeves

impact issue was customer fundamentally That - that. had had just no a the mix, on the

Derrick Laton

Thanks prospects out that. in for And regard great. growth contracts. for new your then there Okay, wining to

in and bit could how and and maybe those if in pricing, of new are increase any about areas contracts you you now little and Asia? competition seeing Europe and many curious talk a that Just the landscape

John Keppler

see customer I that our my growth better. remarks, volumes both thanks, we as European indication within is prepared indicated that. base and profile The market think the NG a environment would not in No, most say contracted recently great the I that of are good I question.

the notable made Europe continue, going growth a with long-term been I quarter trading for Asia it's and and to the intermediate rate. a houses base historical continues and and the As pace The that do a clearing and it's progress by we trading prospects have as participant Certain the to Marubeni notable of the with grow market well. announcement describe, market, we we markets, have Because in think in global and you're of to their think as contract. geographies. have last largely growth I emerging some example the discussed give intermediate

end Our project progress today, per certainly have with describe ride year the largest XXX,XXX-metric ton previously the here to into the the the in biomass be we year of as multiple track by conditions we Europe. of Asia as as that pressing well as announced the confirm contract the by well contract and continues end expect that on year, to contract incremental announce both

Derrick Laton

last one operations really here the you That's are the And so Great. just impacts just I to assets, weather earnings then far any some the reports your saw Thanks. of Lot of was season in curious one. of south your helpful. wet those companies maybe down if throughout lot particularly quarter?

John Keppler

No, the seasonal haven't, we normal of nothing just ordinary. had a we effect,

Derrick Laton

very thanks much. Great,

John Keppler

Derrick. Thanks,

Operator

ahead. with question next Please The Ryan comes Citi. from Levine go

Ryan Levine

Good morning.

what's given the without the Japanese made in Regarding around you for comments the the driver contract, Japan? [indiscernible] projects the biomass Boe

John Keppler

XX% the non-fossil think includes continued mix generation. think emphasize, I about I fuel generation that government as of have to Japanese target approximately a has they

of on beginning I frankly around as joint result a of FIT. are and opportunity that investments and and biomass questions dedicated either logical basis, think new utility of likelihood the for increasing direct their on coal-fired and field many customers pushes evaluate our the utilization coal-fired the of context the of nuclear a that venture to that those of With pressure outside a partners or biomass basis development the basis a restarts,

Ryan Levine

included DCF EBITDA And $X.X put what in I further also as in Okay. million then I number switching EBITDA included $XX.X gears was that of you to your was your term the out event adjustment, then adjusted that about will million number Chesapeake, loan item was adjusted, curious what And well? incremental in takes think it line calculation?

Steve Reeves

net distinction this a events inventory, of of - which We the do event, the write-off of disposable a and well the in $XX distinction or of the the itself associated control write-off as recoveries repair the between the flow insurance we included represented as Steve. inventory Sure, discrete the the of is fixed disposable being cash of the we and do as statement. the reason of assets about event the million

get $X to the Within of to XXXX add implications. that lack business a delta word, EBITDA million XXXX, for better continuity back reflects back the to adjusted from the

the North to temporary region as setting supply longer trucking instance in So, from well Wilmington of elongated the the, the hauls facilities the up an terminal chain storage for Mid-Atlantic as region.

all two We insurance, along items to from those lines. expect the those we of recoverable be but separated

Ryan Levine

$X.X it is by So, appears insurance? even that million recoverable

Steve Reeves

our That's Yeah. the here. The insurance responsible parties. of belief

Ryan Levine

Okay. implication any to that? And financial the then there delays what's for timing are and shipments

Steve Reeves

Yeah.

You saw yeah but a little higher inventory.

there process. have So, we the schedule to shipping in little, is readjust

than have we probably we higher little otherwise would So, inventory have expected.

as will shipments that Unrelated the of year indicated. our itself deferrals not quarter half And our into of of to the from to pay the customers. our take going the we've will first some the happened any the balance miss under early, adjustments some request. have incidence customers occur we there back out shipments year. timing those to and commercially through certain coming We're to discussed contracts time-to-time were So or

full customer So, as meet we'll our shipping, contractual well obligation our obligations. still year, as hit our to our

Ryan Levine

And then last Okay. question.

we the saying pickup decline the as in that timing then experience you a should gets are adjusted? then well QX some in as and So, QX

Steve Reeves

so Yeah, exactly.

comes back will the more quarter. be I end we the think until of the projecting still the we're that that fact chain So up which second in at with have longer the that has second to to logistics the terminal quarter do

of parties half. occur recoveries a chain supply will in word for the against So, back lack better - or with the those from all business a cost into again elongated supply extended we'll continuity continue to responsible of and the quarter the insurance chain through incur second

indicated will have we So, effect results. dramatic this in call, a quarterly be on as there John

you to year the for full expect to full us So, think be I year our guidance. should back

Ryan Levine

Thank you.

Steve Reeves

Ryan. Thanks,

Operator

comes question Please ahead. next Pavel go Molchanov from The with James. Raymond

Pavel Molchanov

the for question guys. the taking Thanks

the recent with referenced out the in am towards by particular Germany thinking extent of if You've market might of power full And perspective can specifically. largest one the the in kind the pulp. potential of Minister. kind they off Europe's German you address cold. Germany And conversations I comments moves phase your historical How their of in about Eon, takers domestic be your of vis-a-vis customers. market curious

Steve Reeves

Well, thanks Pavel.

I with strategy, generate German to of thermal out And think prior we for also Industry difficult need are to And assets sensitive complete system power. are German adoption energy to German to These announced about biomass. that These the a I achieve any specifically system be that a would and coal their and more very like generation. those multinational major on nuclear critical describe coal, would both publicly phase power relevant about for large generators. country to are the no ones But little localized regional very, to it's condensing the and add and assets talking I without any bit very running plans. what important to generators. and goals one something effort going grid those is the currently critical of customer of be

that be into nuclear. an opportunity will your discussions a for answer and I consistent there so, question coal to pace there generator will And know led appetite with creates the at a are us a would increasing limited specifically the for overtime. expectations is, And market very interesting be that what

Pavel Molchanov

strategy. helpful. regarding Okay. kind And of the near-term That's distribution the

one good you'll as Is safe think So, ran more you're obviously QX, to targeting times of QX, to in out? level that coverage it at in say coverage least less QX. normalized X.X below coverage I negative in back a that times be one is looked net you you've a chance times starting historically well. than There or a getting

Steve Reeves

one well. I've Yes, second with socio be the quarter as that first on so expect to there the and obviously, below quarter's after we below agree your

We changed. to our we half be which to get year's of and order expect recover times over full in to historical back back haven't X.XX therefore target us the target to

Pavel Molchanov

guys. Appreciate it, Okay.

Operator

over conference question-and-answer session. management This turn concludes remarks. for the to our back to like any I closing would

John Keppler

today. for again the next conversation. you. much Thank you appreciate look joining very And your for on We and to time us Thank forward you. And really call, thank we all attention. our

Operator

attending you now today's presentation. has conference The concluded. for Thank

may now disconnect. You

Enviva (EVVAQ) 3 May 182018 Q1 Earnings call transcript