U.S. Silica (SLCA) Tops Q2 EPS by 42c, Revenues Beat

U.S. Silica (NYSE: SLCA) reported Q2 EPS of ($0.09), $0.42 better than the analyst estimate of ($0.51). Revenue for the quarter came in at $172.5 million versus the consensus estimate of $143.57 million.

Second Quarter 2020 Highlights

Total Company

• Revenue of $172.5 million for the second quarter of 2020 compared with $269.6 million in the first quarter of 2020, down 36% sequentially and down 56% from the second quarter of 2019.
• Overall tons sold of 1.904 million for the second quarter of 2020 compared with 4.161 million tons sold in the first quarter of 2020, down 54% sequentially and down 61% from the second quarter of 2019.
• Net loss of $32.4 million, or $(0.44) per basic and diluted share, for the second quarter of 2020, compared with net income of $6.2 million, or $0.08 earnings per basic and diluted share, for the second quarter of 2019.
• Contribution margin of $61.3 million for the second quarter of 2020 compared with $76.2 million in the first quarter of 2020, down 20% sequentially and down 50% from the second quarter of 2019.
• Adjusted EBITDA of $40.8 million for the second quarter of 2020 compared with $48.2 million in the first quarter of 2020, down 16% sequentially and down 52% from the second quarter of 2019.

"I am extremely proud of our colleagues for delivering strong second quarter results, while continuing to prioritize health and safety, during these challenging times," said Bryan Shinn, chief executive officer. "Our operations and logistics teams did a stellar job of rapidly and aggressively right-sizing our cost structure to minimize the impact of sharply lower oilfield activity and weaker demand for some industrial sand products in the quarter. We have made commendable progress but still have additional cost reduction opportunities, particularly in the area of leased railcar costs. We continue to actively work with key lessors to complete necessary lease amendments to make our ongoing railcar costs sustainable over the long term."

"In July, we are experiencing a rebound in whole grain industrial sand sales as customers restart temporarily idled plants. We also expect our filtration product lines to continue to perform well, driven by robust consumer demand for food and beverage products. In the third quarter, Oil & Gas segment proppant volumes and SandBox loads are expected to increase sequentially," he added.

"Finally, while many industry peers pursue financial restructuring, we are keenly focused on serving our customers and maintaining a strong balance sheet. We remain confident that the strategic actions we have taken to further improve our cost structure will pay off handsomely once we return to a more normalized operating environment," he concluded.

Outlook and Guidance

In the Industrial and Specialty Products segment, the Company expects a rebound in third quarter whole grain and higher-margin ground silica volumes as customers that had temporarily idled their facilities in May ramp back up. U.S. Silica's outlook calls for continued strength in its diatomaceous earth and specialty clays business, where market demand for filtration media remains robust.

As a result, the Company expects the ISP segment's contribution margin to be up 5%-10% in the third quarter compared with the second quarter. Fourth quarter volumes and profitability are expected to be similar to third quarter levels, although visibility remains limited given the highly uncertain economic environment.

In the Oil & Gas segment, U.S. Silica forecasts a mid-single-digits percentage increase in third quarter proppant volumes and a meaningful increase in SandBox loads. However, due to second quarter benefits from customer shortfall penalties, segment contribution margin is expected to be down sequentially, but the Company expects the underlying business should be stronger.

In the fourth quarter, the Company presently expects a mid-single-digits sequential increase in both proppant volumes and loads but acknowledges that visibility is limited. Unlike the past two years, where E&P budget exhaustion has resulted in a drop-off in fourth quarter activity, some customers have indicated the potential for a modest sequential increase this year, especially if WTI prices remain above $40/bbl.

For earnings history and earnings-related data on U.S. Silica (SLCA) click here.

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