The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from CNW Group

EcoSynthetix Reports 2012 Fourth Quarter and Year-End Results

Tuesday, March 05, 2013

EcoSynthetix Reports 2012 Fourth Quarter and Year-End Results18:30 EST Tuesday, March 05, 2013BURLINGTON, ON, March 5, 2013 /CNW/ - EcoSynthetix Inc. ("EcoSynthetix" or the "Company"), a renewable chemicals company that produces a family of commercially proven bio-based products, today announced its financial results for the three and twelve months ended December 31, 2012. Financial references are in U.S. dollars unless otherwise indicated.Fourth Quarter and Fiscal 2012 HighlightsNet sales grew 59% to $5.9 million for the three months ended December 31, 2012 (Q4 2012) compared to the three months ended December 31, 2011 (Q4 2011)Won three new customers during the quarter and twelve total new customers during calendar 2012, and three new customers wins subsequent to the end of the periodSix of the top 20 global paper and paperboard manufacturers are commercial with the Company's EcoSphere® biolatex® binders"We continued building a foundation for growth by attracting high-calibre executives, enhancing our sales strategy and our product innovation process - and it's paying off. We are winning new customers and increasing sales to our existing customers. We won two new customers from the top 20 global paper and paperboard manufacturers and twelve new customers in total during 2012," said John van Leeuwen, Chief Executive Officer of EcoSynthetix. "These wins show that our message is resonating with the customer. By using our EcoSphere® biolatex® binders they benefit from improved or comparable performance with lower and more stable pricing than the higher and volatile pricing of petroleum-based binder alternatives."Financial SummaryNet SalesNet sales for the quarter increased 59% to $5.9 million, compared to $3.7 million in Q4 2011. For fiscal 2012, net sales were $19.6 million, compared to $20.8 million in the prior period. The 6% decrease in net sales was primarily due to lower purchases from one customer in Asia Pacific which accounted for significant sales in 2011. Net sales increased by $6.1 million or 45% in fiscal 2012 compared to 2011 after adjusting for the impact of this customer. The 45% growth consists of a 13% increase in sales to existing customers compared to fiscal 2011 and 32% from sales to the twelve new mills commercialized during calendar 2012, including the three in Q4 2012.Gross ProfitGross profit was $1.2 million for Q4 2012, or 20.1% of revenue, compared to $0.8 million, or 21.4% of revenue, in Q4 2011. For fiscal 2012, gross profit was $3.9 million, or 19.7% of revenue, compared to $5.0 million, or 23.9% of revenue in the prior period. The change in gross profit during fiscal 2012 was due to higher manufacturing depreciation costs, higher corn starch prices, lower selling prices and decreased sales volume which was partly offset by lower contract manufacturing costs.Gross profit adjusted for non-cash items as a percentage of sales was unchanged at 25.2% in Q4 2012 compared with Q4 2011. Gross profit adjusted for non-cash items as a percentage of sales was 24.9% in fiscal 2012 compared to 25.5% in fiscal 2011. The changes in the Q4 and fiscal year periods are due to increased corn starch costs and lower selling prices partially offset by lower contract manufacturing production costs.Selling, General and Administrative (Excludes share-based compensation, depreciation and amortization and foreign exchange loss or gain)Selling, general and administrative (SG&A) costs were $2.9 million for Q4 2012 compared to $1.8 million in Q4 2011. For fiscal 2012, SG&A costs were $10.2 million compared to $7.3 million in 2011. The change is primarily due to higher salaries & benefits and office administration costs associated with a 50% increase in headcount as well as additional professional fees related to the requirements of a public listing for the full twelve-month period.Research and Development Research and development (R&D) expenses were $1.5 million in Q4 2012 compared to $1.1 million in Q4 2011. For fiscal 2012, R&D costs were $4.4 million compared to $2.5 million in 2011. R&D is a key focus of EcoSynthetix to enhance its bio-based material product portfolio and expand into new applications and markets. The change in R&D expenses in both Q4 2012 and fiscal 2012 represent the Company's ongoing investment in product development and innovation for its EcoSphere biolatex binders, as well as EcoMer and EcoStix.Adjusted EBITDA1Adjusted EBITDA for the quarter was ($3.0) million, compared to (1.9) million in Q4 2011. For fiscal 2012, adjusted EBITDA was ($9.7) million, compared to ($4.5) million in the prior period. The change in adjusted EBITDA in Q4 2012 is primarily due to higher operating expenses partially offset by increased gross profit.Net LossNet loss in Q4 2012 was $3.4 million, or $0.06 per common share (basic and fully diluted), compared to a net loss of $2.3 million, or $0.04 per share (basic and fully diluted), for Q4 2011. For fiscal 2012, net loss was $11.4 million, or $0.21 per common share (basic and fully diluted) compared to $252.7 million or $10.93 per common share (basic and fully diluted) in the prior period. The decrease in net loss during fiscal 2012 is primarily due to a lower loss related to the change in fair value of warrants and redeemable preferred shares partly offset by an increased loss from operations.Liquidity Working capital was $100.2 million at December 31, 2012 compared to working capital of $113.8 million at December 31, 2011. The decrease in working capital was principally due to cash utilized in operating activities and production expansion.Notice of Conference Call EcoSynthetix will host a conference call on Wednesday, March 6, 2013, at 8:00 AM ET to discuss its financial results.  John van Leeuwen, CEO, and Robert Haire, CFO, will co-chair the call. All interested parties can join the call by dialling (647) 427-7450 or (888) 231-8191. Please dial in 15 minutes prior to the call to secure a line. A live audio webcast of the conference call will also be available at www.ecosynthetix.com. The presentation will be accompanied by slides, which will be available via the webcast link. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.1Non-IFRS Financial MeasuresThis press release makes reference to certain non-IFRS measures. These non-IFRS measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing a further understanding of results of operations of EcoSynthetix from management's perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of the financial information of EcoSynthetix reported under IFRS. The Company uses non-IFRS measures such as Adjusted EBITDA to provide investors with a supplemental measure of operating performance and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures. Management also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess the Company's ability to meet its capital expenditure and working capital requirements.Adjusted EBITDA is not a measure recognized under IFRS and does not have a standardized meaning prescribed by IFRS. The Company presents Adjusted EBITDA because the Company believes it facilitates investors' use of operating performance comparisons from period to period and company to company by backing out potential differences caused by variations in capital structures (affecting relative interest expense), the book amortization of intangibles (affecting relative amortization expense) and the age and book value of property and equipment (affecting relative depreciation expense). The Company also presents Adjusted EBITDA because it believes it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance. Adjusted EBITDA as presented herein is not a recognized measure under IFRS and should not be considered as an alternative to operating income or net income as a measure of operating results or an alternative to cash flows as a measure of liquidity. Adjusted EBITDA is defined as consolidated net income (loss) before interest, income taxes, depreciation, amortization, other non-cash expenses and charges which include the movement in the unrealized gains and losses on the Company's redeemable preferred shares and warrants classified as financial liabilities prior to the initial public offering and share based compensation expense.The following table reconciles net loss to Adjusted EBITDA for Q4 2012 and Q4 2011:    December 31,2012December 31,2011Net loss(3,394,357)(2,345,937)Depreciation and amortization384,769258,341Share-based compensation145,000276,217Interest expense (income)(85,776)(75,275)Adjusted EBITDA (1)(2,950,364)(1,886,654)About EcoSynthetix Inc. (www.ecosynthetix.com) EcoSynthetix Inc. is a renewable chemicals company specializing in bio-based products that can be used as inputs in industrial manufacturing for a wide range of consumer products. The Company's products offer a reduced carbon footprint and are marketed primarily on the basis of lower cost, stable pricing and equal or superior performance. EcoSynthetix's lead product, EcoSphere® biolatex® binders, is used commercially by a number of the global top 20 manufacturers in the coated paper and paperboard industry.Forward Looking StatementsCertain statements in this Press Release constitute "forward looking" statements that involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, objectives or achievements of the Company, or industry results, to be materially different from any future results, performance, objectives or achievements expressed or implied by such forward looking statements. These statements reflect our current views regarding future events and operating performance and are based on information currently available to us, and speak only as of the date of this Press Release. These forward looking statements involve a number of risks, uncertainties and assumptions and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such performance or results will be achieved. Those assumptions and risks include, but are not limited to, the fact that our results of operations and business outlook are subject to significant risk, volatility and uncertainty. Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward looking statements, including the factors identified in the "Risk Factors" section of the Company's Annual Information Form dated March 30, 2012. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward looking statements prove incorrect, actual results may vary materially from those described in this Press Release as intended, planned, anticipated, believed, estimated or expected. Unless required by applicable securities law, we do not intend and do not assume any obligation to update these forward looking statements.EcoSynthetix Inc.    Consolidated Balance Sheets (Expressed in US dollars), unaudited                As at December 31, 2012 As at December 31, 2011    Assets       Current assets   Cash93,260,296 105,713,705Accounts receivable 4,309,355 3,116,445Inventory6,822,619 10,243,410Government grants receivable184,118 639,685Prepaid expenses154,492 182,842 104,730,880 119,896,087    Non-current assets   Intangible assets 163,501 -Property, plant and equipment 13,174,416 10,766,124Total assets118,068,797 130,662,211    Liabilities        Current liabilities   Accounts payable and accrued liabilities 4,282,296 6,142,668Deferred government grant226,920 -    Total liabilities4,509,216 6,142,668    Shareholder's Equity       Common shares 492,065,820 492,353,321Contributed surplus6,831,354 6,073,080Accumulated deficit(385,337,593) (373,906,858)    Total shareholder's equity 113,559,581 124,519,543    Total shareholders' equity and liabilities118,068,797 130,662,211       EcoSynthetix Inc.Consolidated Statements Operations and Comprehensive Loss(Expressed in US dollars, unless otherwise noted), unaudited    For the year endedDecember 31, Three months ended December 31, 2012 2011 2012 2011        Net sales19,552,345 20,769,851 5,923,661 3,719,129        Cost of sales15,694,487 15,796,830 4,730,908 2,922,655        Gross profit on sales3,857,858 4,973,021 1,192,753 796,474        Expenses       Selling, general and administrative11,266,518 8,518,299 3,153,970 2,128,841Research and development4,382,854 2,516,360 1,518,916 1,088,845 15,649,372 11,034,659 4,672,886 3,217,686        Loss from operations(11,791,514) (6,061,638) (3,480,133) (2,421,212)                Interest income360,779 183,027 85,776 75,275        Loss related to change in value of warrants and redeemble preferred shares- (246,829,537) - -        Net loss and comprehensive loss(11,430,735) (252,708,148) (3,394,357) (2,345,937)                Basic and diluted loss per common share (0.21) (10.93) (0.06) (0.04)        Weighted average number of common shares outstanding55,288,432 23,125,647 55,297,736 55,239,412EcoSynthetix Inc.Consolidated Statements of Cash Flows(Expressed in US dollars), unaudited For the year endedDecember 31, Three months endedDecember 31,Cash provided by (used in)2012 2011 2012 2011        Operating activities       Net loss and comprehensive loss(11,430,735) (252,708,148) (3,394,357) (2,345,937)Items not affecting cash        Depreciation and amortization 1,207,584 583,380 384,769 258,341 Share based compensation expense847,104 984,325 145,000 276,217 Changes in fair value of warrants and redeemablepreferred shares- 246,829,537 - -Changes in non-cash working capital        Accounts receivable(1,192,910) (376,875) 156,416 1,379,202 Inventory3,535,225 (8,055,027) 794,393 (1,947,970) Government assistance receivable455,567 334,066 254,099 262,468 Prepaid expenses28,350 (101,753) 59,892 (7,374) Accounts payable and accrued liabilities(6,120) 226,620 642,413 (657,082) Accrued compensation- (1,005,371) - - Deferred government assistance (10,080) (486,961) (234,103) -  (6.566,015) (13,776,207) (1,191,478) (2,782,135)         Investing activities       Purchase of intangible assets, property and equipment(5,748,063) (10,012,325) (403,264) (3,766,427)                Financing activities       Common share issuance costs- (10,792,531) - 10,249Issuance of common shares- 102,451,082 - -Repurchase of common shares(521,729) - - -Exercise of common share options145,398 109,696 3,614 5,205Exercise of common share warrants - 29,494 - -Increase in government grants237,000 2,511,459 237,000 - (139,331) 94,309,200 240,614 15,454        (Decrease) increase in cash during the period (12,453,409) 70,520,668 (1,354,128) (6,533,108)        Cash - Beginning of period105,713,705 35,193,037 94,614,424 112,246,813Cash - End of period 93,260,296 105,713,705 93,260,296 105,713,705       SOURCE: EcoSynthetix Inc.For further information: EcoSynthetix Inc. John van Leeuwen Chief Executive Officer Phone: (289) 288-5010 E-mail: jvanleeuwen@ecosynthetix.com  Investor Relations Ross Marshall TMX Equicom Phone: (416) 815-0700 (Ext.238) E-mail: rmarshall@tmxequicom.com