Enviva Inc. (EVA) Falls Over 50% After Results, Guidance, Elimination of Dividend

Enviva Inc. (NYSE: EVA) Falls Over 50% After Results, Guidance, Elimination of Dividend

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“As we will describe today, the plans and initiatives underway to improve productivity and costs across Enviva’s current asset platform continue to fall behind expectations. While the board of directors remains convinced of management’s ability to deliver the originally forecasted operational and financial performance over time, it is clearly taking longer than expected,” said John Keppler, Executive Chairman of the board. “To more conservatively underwrite that plan and ensure the ability of the Company to capture the value of the fully contracted growth ahead, after careful consideration with management, the board of directors evaluated the most accretive uses of the Company’s capital and decided to revise Enviva’s capital allocation framework, eliminating the Company’s quarterly dividend in order to preserve liquidity and a conservative leverage profile, maintain our current growth trajectory, potentially accelerate future investments in new fully contracted plant and port assets, and implement a limited share repurchase program.”

With the elimination of the dividend, management expects to retain approximately $1 billion in incremental cash flow during the period 2023 to 2026, providing incremental liquidity and investment into the productivity and operational improvements in its current assets and further reduce the need to access the capital markets to fund its current growth plans, which include the construction of the Company’s fully contracted wood pellet production facilities in Epes, Alabama (“Epes”) and near Bond, Mississippi (“Bond”).

President and Chief Executive Officer Thomas Meth commented, “We recognize this is an important departure from the plan we laid out at our Investor Day a month ago, but a lot has changed since then. Compared to our expectations, while our cost position has trended in the right direction, it has done so at a much slower pace than we had anticipated, in part due to slower volume growth, and in part due to a higher spend profile for the volume growth we did achieve.”

Meth continued, “We know what the specific issues are: contract labor is too high, discipline around repairs and maintenance spend is insufficient, wood input costs need to come down further and stay there, and utilization rates at specific plants need to improve and stabilize at those improved levels. Because of where we are in our journey to bend our cost curve down while bending our production curve up, we feel it is prudent to take a much more conservative view of what our business can realistically achieve over the next eight months.”

Meth concluded, “Against this backdrop of operational challenges, we are undergoing an extensive review of where we are allocating our capital. We believe we have more accretive capital allocation alternatives, which start with improving returns from our existing fleet of assets, growing our fully contracted asset base, managing liquidity and leverage, and also include the potential to opportunistically repurchase our shares in the open market, which we believe have traded below their intrinsic value for some time.”

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