EcoSynthetix Reports 2013 First Quarter Results

TORONTO, May 7, 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 months ended March 31, 2013. Financial references are in U.S. dollars unless otherwise indicated.

First Quarter 2013 Highlights

• Net sales grew 54% to $6.1 million for the three months ended March 31, 2013 (Q1 2013) compared to the three months ended March 31, 2012 (Q1 2012)
• Won three new customers during the quarter
• Six of the top 20 global paper and paperboard manufacturers are commercial with the Company's EcoSphere^® biolatex^® binders
• Signed a five-year industrial partnership with Waterloo Institute for Nanotechnology at the University of Waterloo to collaborate on new applications for EcoSynthetix' EcoSphere^® technology
• Received separate certifications in accordance with the International Organization for Standardization (ISO) - ISO 9001:2008 for Quality Management Systems and ISO 14001:2004 for Environmental Management Systems

"We are growing sales both within our existing customer base and through new customer wins, including three new paper and paperboard customers this year," said John van Leeuwen, Chief Executive Officer of EcoSynthetix. "While coated paper and paperboard will remain a primary market in the near term, we continue to invest in product development. The cost and performance benefits our bio-based materials bring as an alternative to petroleum-based binders are just as relevant to the building products and adhesive markets as the paper and paperboard market. Our teams are hard at work on creating new and innovative applications of EcoSphere and EcoStix that will open new markets and revenue opportunities."

Financial Summary

Net Sales

Net sales increased 54% to $6.1 million in Q1 2013, compared to $4.0 million in Q1 2012. The increase was primarily due to higher sales volume. From a geographic perspective, sales volume increased $1.1 million in North America, $0.5 million in EMEA, $0.4 million in Latin America and $0.1 million in Asia Pacific. EcoSynthetix has won 11 new customers since Q1 2012, including three new customers in Q1 2013. Collectively these new customers accounted for 66% of the $2.1 million increase in net sales. Existing customers accounted for 34% of the sales increase in the quarter, representing a 19% increase in sales to those existing customers compared to the same period last year.  

Gross Profit

Gross profit was $1.1 million in Q1 2013, or 17.3% of sales, compared to $0.8 million, or 19.1% of sales, in Q1 2012. The change in gross profit during Q1 2013 was principally due to higher sales volume and lower manufacturing production costs partly offset by higher corn starch costs.

Gross profit adjusted for manufacturing depreciation as a percentage of sales was 22.3% in Q1 2013 compared to 24.4% in Q1 2012. The change was primarily due to higher corn starch costs partly offset by lower 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 $3.0 million for Q1 2013 compared to $2.4 million in Q1 2012. The change was principally due to increased headcount as part of the Company's strategy to expand its sales and marketing efforts.

Research and Development

Research and development (R&D) expenses were $1.3 million in Q1 2013 compared to $1.1 million in Q1 2012. R&D is a key focus of EcoSynthetix to enhance its bio-based material product portfolio and expand into new applications and markets. The increase in R&D expenses reflects the Company's ongoing investment in product development and innovation for its EcoSphere^® biolatex^® binders, as well as EcoMer and EcoStix.

Adjusted EBITDA¹

Adjusted EBITDA for the quarter was ($2.9) million, compared to ($2.6) million in Q1 2012. The change in adjusted EBITDA is due to higher operating expenses partly offset by higher gross profit.

Net Loss

Net loss in Q1 2013 was $3.5 million, or $0.06 per common share, compared to $2.9 million, or $0.05 per share, for Q1 2012. The change in net loss is principally due to an increase in operating expenses partially offset by higher sales volumes resulting in increased gross profit.

Liquidity

Working capital was $97.3 million at March 31, 2013 compared to working capital of $100.2 million at December 31, 2012.  The decrease in working capital was principally due to cash utilized in operating activities.

Notice of Conference Call

EcoSynthetix will host a conference call on Wednesday, May 8, 2013, at 8:30 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 [phone] or [phone]. 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 Measures

This 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 Q1 2013 and Q1 2012:

	Three months ended
	March 31, 2013		March 31, 2012
Net loss		(3,533,486)	(2,939,492)
Depreciation and amortization		381,907	239,417
Share-based compensation		331,103	240,000
Interest Income		(85,372)	(93,621)
Adjusted EBITDA ^(1)		(2,905,848)	(2,553,696)

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 Statements
Certain 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 28, 2013. 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 U.S. dollars), unaudited
	As at  March 31, 2013		As at December 31, 2012
Assets
Current assets
Cash	90,209,738		93,260,296
Accounts receivable	4,689,004		4,309,355
Inventories	7,835,686		6,822,619
Government grants receivable	180,499		184,118
Prepaid expenses	221,684		154,492
Total current assets	103,136,611		104,730,880
Non-current assets
Intangible assets	182,983		163,501
Property, plant and equipment	13,115,659		13,174,416
Total Assets	116,435,253		118,068,797
Liabilities
Current liabilities
Accounts payable and accrued liabilities	5,719,286		4,282,296
Deferred government grant	123,890		226,920
Total liabilities	5,843,176		4,509,216
Shareholder's Equity
Common shares	492,394,699		492,065,820
Contributed surplus	7,068,457		6,831,354
Accumulated deficit	(388,871,079)		(385,337,593)
Total shareholder's equity	110,592,077		113,559,581
Total shareholders' equity and liabilities	116,435,253		118,068,797
EcoSynthetix Inc.  Consolidated Statements of Operations and Loss
(Expressed in U.S. dollars, unless otherwise noted), unaudited
	Three months ended March 31,
	2013		2012
Net sales	6,120,531		3,978,347
Cost of sales	5,064,405		3,218,533
Gross profit on sales	1,056,126		759,814
Expenses
Selling, general and administrative	3,405,462		2,716,433
Research and development	1,269,522		1,076,494
Total operating expenses	4,674,984		3,792,927
Loss from operations	(3,618,858)		(3,033,113)
Interest income	85,372		93,621
Net loss and comprehensive loss	(3,533,486)		(2,939,492)
Basic and diluted loss per common share	(0.06)		(0.05)
Weighted average number of common shares outstanding	55,689,778		55,248,203
EcoSynthetix Inc.
Consolidated Statements of Cash Flows
(Expressed in U.S. dollars), unaudited
	Three months ended March 31,
	2013		2012
Cash provided by (used in)
Operating activities
Net loss and comprehensive loss	(3,533,486)		(2,939,492)
Items not affecting cash
Depreciation and amortization	381,907		239,417
Share based compensation	331,103		240,000
Changes in non-cash working capital
Accounts receivable	(379,649)		486,701
Inventories	(1,000,062)		784,188
Government grants receivable	3,619		117,349
Prepaid expenses	(67,192)		64,936
Accounts payable and accrued liabilities	1,548,543		(1,513,149)
Deferred government grant	(103,030)		-
	(2,818,247)		(2,520,050)
Investing activities
Cash used for purchase of intangible assets, property, plant and equipment	(467,190)		(3,310,899)
	(467,190)		(3,310,899)
Financing activities
Exercise of common share options	234,879		16,147
Cash provided by financing activities	234,879		16,147
Change in cash during the period	(3,050,558)		(5,814,802)
Cash - Beginning of period	93,260,296		105,713,705
Cash - End of period	90,209,738		99,898,903

 

 

 

SOURCE: EcoSynthetix Inc.

EcoSynthetix Inc.
John van Leeuwen
Chief Executive Officer
Phone: [phone]
E-mail: [email protected]

Investor Relations
Ross Marshall
TMX Equicom
Phone: [phone] (Ext.238)
E-mail: [email protected]