January 24, 2017
POLARIS MATERIALS ANNOUNCES 2016 OPERATING RESULTS, 2017 PRELIMINARY OUTLOOK
VANCOUVER, BC - Polaris Materials Corporation ("Polaris" or the "Company") (TSX:PLS) reports that sales volumes for the twelve months ended December 31, 2016 were 3.02 million tons, an increase of approximately 2.6% versus 2015 and within our revised target range for the full year. Growth in sales volumes reflects the start-up of our Long Beach terminal and increased domestic sales, offsetting a modest decline in volumes sold into San Francisco versus 2015.
- Strong Financial Position and Robust Balance Sheet: December 31, 2016 cash balance of US$12.9 million (C$17.3 million), and no long term debt1; Polaris increased its cash from US$10.5 million (C$14.5 million) as of December 31, 2015. Polaris entered into a supplier finance program with Bank of America and Cemex in late December 2016 which is expected to return the payment schedule to its original terms and allow both parties to optimize their working capital.
- Successful Long Beach Terminal Start-up: Our Long Beach terminal started commercial operations on February 1, 2016. We delivered to a number of challenging high volume projects throughout the year and have proved our value proposition driven by the high quality of our material and the capabilities of our operating team.
- New Fine Sand Product: We identified a new market for fine, natural sand from the Orca Quarry in 2016 and are pleased to announce that we have signed a letter of intent for sale of this product commencing in 2017.
- Logistic Cost Improvements: We significantly reduced or avoided logistics costs throughout 2016, including reductions in contract barging, demurrage, port costs and vessel turnaround time. This will continue to be an area of significant focus for 2017.
- Black Bear Progress: During 2016, we announced the discovery of our Black Bear Project, and made significant progress, including completion of preliminary material testing and release of a maiden resource estimate for the project via our press release on October 3, 2016
- Management Transition at Orca: Late in 2016 we implemented a transition of senior management at the Orca Quarry. We expect our new management team to provide a refreshed perspective on potential optimizations at the quarry over the coming months.
Our preliminary expectation for 2017 is that total sales volumes could decline in the range of 5%. However, we have visibility on several opportunities which could have a significant positive impact on 2017 sales, particularly in light of the potential for new federal infrastructure spending programs in the U.S., as well as state-level measures in California. Volumes into our Long Beach Terminal are expected to see significant growth, with higher committed orders to date for 2017 than we achieved in full year 2016, as well as several additional projects where we are well positioned to help our customers provide engineered concrete solutions with our high quality concrete aggregate. We have also signed a letter of intent for multi-year sales of our new fine sand product. Our 2017 volumes into the San Francisco market are currently anticipated to be 15-20% lower than 2016 as a result of the expiry of our sales agreement with Hanson on December 31, 2016. The Hanson contract was important to our logistics and cost structure as the construction market recovered from 2012 through 2016, but with growth in other markets is no longer integral to our San Francisco Bay operations. We will provide an update to our outlook with the release of our 2016 annual financial results once 2017 demand forecasts have been finalized with our customers.
Despite modestly lower expected sales volumes, we expect our revenues to increase significantly in 2017, driven by increased volumes to customers with delivered pricing as well as "same store" pricing improvements. We also expect to see unit margins improve in 2017, as the impact from the above-mentioned pricing improvements, logistics cost reductions and changes in sales mix improve our profitability (assuming current C$/US$ exchange rates). As part of our ongoing succession planning process, we recently completed a management transition at our Orca Quarry. We expect our new team to provide a refreshed perspective on potential optimizations at the quarry over the coming months. We are also in the final stages of preparation of an Environmental Product Declaration for all products from Orca into both the San Francisco and Los Angeles markets, which is an important tool for end users of our products to establish LEED status.
With the receipt of a letter of intent for multi-year sales of fine sand, we have confirmed our plans to expand the inventory and ship loadout system at Orca and have committed orders for the longest-lead time equipment. Installation is expected to commence in late Q1 / Q2 with integration targeted for mid-year. We continue to develop additional opportunities for this exciting new product, which allows us to diversify our product offering and customer base. We are also evaluating opportunities for our high quality concrete aggregate in several new markets, although discussions with potential customers in these markets are currently in the early stages.
At our Black Bear Project, we continue to advance the project through the permitting process. We are approaching the completion of environmental baseline data gathering, which will enable us to complete the application for a permit for operations at Black Bear.
Ken Palko, President and CEO commented: "2016 was a year of transition for the company as our new executive team settled into their roles. We started commercial operations at our Long Beach Terminal, achieved several important logistic cost reductions and identified a new product line to augment our current sales and product offerings. As we look forward to 2017 we see several opportunities for our company, as we seek to position ourselves as a supplier of choice for high specification concrete projects. Our high quality concrete aggregates are currently scheduled for use in several high profile projects in Los Angeles and San Francisco, and we will continue to work to reinforce our end-user focused marketing strategy with current and new customers and markets. We are excited about several new opportunities that we've identified for this year, including our fine sand product and continued progress at Black Bear. Finally, with the implementation of the supplier financing arrangement with Bank of America and Cemex, we have further improved our balance sheet and are well positioned to advance our world-class portfolio of construction material investment opportunities."
About Polaris Materials Corporation:
Polaris Materials Corporation is engaged in the development and operation of construction aggregate quarries in Canada to supply distribution facilities in the United States through coastal shipping. The Company's active construction aggregate interests consist of its Orca Sand and Gravel Quarry in British Columbia and two associated receiving terminals in Richmond and Long Beach, California. The Company also owns the Black Bear Project located in close proximity to the Orca Quarry, and a controlling interest in the Eagle Rock Quarry Project, located on the south coast of Vancouver Island.
For further information, please contact:
Nicholas Van Dyk
Vice President, Investor Relations and Corporate Development
Polaris Materials Corporation
Tel: (604) 915-5000 Ext. 104
Cautionary Note Regarding Forward Looking Statements
This press release contains "forward-looking statements" and "forward-looking information" within the meaning of applicable securities laws. These statements and information appear in this document and include estimates, forecasts, information and statements as to management's expectations with respect to, among other things, the future financial or operating performance of the Company, including increases in gross margins, increases in sales volumes and revenues (including in the Long Beach market), new customer contracts, shipments and selling prices, costs of production, capital and operating expenditures, requirements for additional capital, government regulation of quarrying operations, environmental risks, reclamation expenses, and title disputes, the Canadian dollar compared to the US dollar, the return to the original Cemex payment terms, increases in Californian construction activity and US infrastructure funding, statements regarding potential new customers and the development of Black Bear. Often, but not always, forward-looking statements and information can be identified by the use of words such as "may", "will", "should", "plans", "expects", "intends", "anticipates", "believes", "budget", and "scheduled" or the negative thereof or variations thereon or similar terminology. Forward-looking statements and information are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Readers are cautioned that any such forward-looking statements and information are not guarantees and there can be no assurance that such statements and information will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company's expectations are disclosed in the Company's continuous disclosure documents which are filed with Canadian regulators on SEDAR (www.sedar.com), including under the heading "Risks and Uncertainties" in the Company's Annual Report and under the heading "Risk Factors" in the Company's Annual Information Form. Such factors include, amongst others, the effects of general economic conditions, changing foreign exchange rates and actions by government authorities, uncertainties associated with legal proceedings and negotiations, industry supply levels, competitive pricing pressures, mineral resource and reserve estimates and the timing and development of the Black Bear project. The Company expressly disclaims any intention or obligation to update or revise any forward-looking statements and information whether as a result of new information, future events or otherwise, except as required by applicable law. All written and oral forward-looking statements and information attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements.
1 Excluding equipment financing leases.