Covia Holdings Corporation (CVIA) Misses Q4 EPS by 7c, Revenues Miss

Covia Holdings Corporation (NYSE: CVIA) reported Q4 EPS of ($0.37), $0.07 worse than the analyst estimate of ($0.30). Revenue for the quarter came in at $441 million versus the consensus estimate of $464.85 million.

Fourth Quarter 2018 Results

• Total volumes of 7.8 million tons, a decline of 4% sequentially driven primarily by lower Energy volumes and seasonality in the Industrial segment. Fourth quarter 2018 total volumes decreased 14% compared to the fourth quarter of 2017 on a pro forma basis.
• Total revenues of $441.3 million, a decline of 16% sequentially driven by modestly lower Energy volumes and pricing and normal Industrial seasonality. Fourth quarter 2018 total revenues were down 28% compared to the fourth quarter of 2017 on a pro forma basis due to lower Energy volumes and pricing partially offset by higher Industrial revenues.
• Net loss from continuing operations of $48.1 million, or $0.37 per share.
• Adjusted EBITDA of $43.9 million compared to $84.1 million in the third quarter 2018 and $127.8 million in the fourth quarter 2017 on a pro forma basis.
  • Fourth quarter 2018 Adjusted EBITDA was negatively impacted by an $8.1 million gross margin loss from the Seiling and Kermit plants as they scaled production, and $3.6 million in non-cash inventory purchase accounting charges, partially offset by the positive impact of a $5.0 million revaluation of a contingent consideration liability.
• Net cash flow provided by operating activities of $57.1 million.

Jenniffer Deckard, President and Chief Executive Officer, commented, “We are proud of our team’s integration efforts, which are nearing completion and ahead of schedule, as well as our ability to overcome significant market headwinds and deliver fourth quarter volumes that squarely met the guidance we provided for both our Industrial and Energy segments. Our Industrial segment again posted solid top-line results aided by steady economic growth and our unique and diverse combination of mineral, geographic and end market exposure. The overall Energy market was softer than we had initially anticipated, and we faced some challenges related to the ramp-up of our local sand plants; however, we successfully navigated these challenges by leveraging our well-positioned Energy assets to deliver solutions to our customers in all major basins.”

“So far in 2019, demand within our Industrial segment has been relatively flat, and we have instituted low single-digit percentage price increases, on average, across our Industrial portfolio. We anticipate improving demand as we progress through 2019,” Ms. Deckard added. “Energy volumes through most of the first quarter were similar to fourth quarter levels, but we have seen a noticeable strengthening of demand in March. While weather and start up-related challenges have created cost headwinds in the first quarter, we have recently made significant progress in scaling our local plants and have instituted a modest price increase for Northern White sand, and we anticipate additional price opportunities in the second quarter. These positive developments have given us momentum as we exit March, and we expect a meaningfully stronger second quarter.”

Ms. Deckard concluded, “Given our sharp focus on cash flow generation, we have also taken decisive actions to align our capacity and cost structure with current demand. We remain confident that our recent capacity and cost reduction initiatives, combined with synergy capture, capital discipline and our balanced and diverse business model, including our large base of Industrial profitability, will allow us to invest in our core businesses and generate cash flow to reduce net debt as we progress through 2019.”

Full year 2019 expectations are:

• 2019 selling, general and administrative expenses of $160 million to $170 million, which includes approximately $10 million in non-cash stock compensation.
• 2019 capital expenditures are expected to be in the range of $80 million to $100 million, compared to previous guidance of $90 million to $110 million.

For earnings history and earnings-related data on Covia Holdings Corporation (CVIA) click here.

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