PyroGenesis Announces Q2, 2018 Results: Revenues of $1.4MM; Gross Margin of 35%; Current Backlog $4.1MM

MONTREAL, Aug. 29, 2018 (GLOBE NEWSWIRE) -- PyroGenesis Canada Inc. (http://pyrogenesis.com) (TSX-V: PYR), a TSX Venture 50® high-tech company, (the "Company", the “Corporation” or "PyroGenesis") a Company that designs, develops and manufactures plasma waste-to-energy systems and plasma torch systems, is pleased to announce today its financial and operational results for the second quarter ended June 30, 2018.

2018, to date, has seen the Company enter into significant commercial discussions in all of its business lines. It is fully expected that these conversations will translate into commercial contracts towards the end of Q3, 2018.  In the first six months of 2018, the Company started putting in place the required infrastructure and personnel in order to fulfill this growth.

Q2, 2018 results reflected the following highlights:

  • Revenues of $1.4MM in Q2, 2018, a decrease of 35% from $2.2MM posted in Q2, 2017;
  • Gross margin of 34.9% a decrease of 13.1% over the same period in Q2, 2017;
  • Powder inventory increased to $611K in Q2, 2018, compared to Nil in Q2, 2017;
  • An amount of $230K has been spent and capitalized for the plasma atomization system and related development;
  • A Modified EBITDA loss of $1,0MM compared to a Modified EBITDA gain of $12K over the same period in Q2, 2017;
  • Backlog of signed contracts as of the date of this writing is $4.1MM;
  • Cash on hand on June 30, 2018 was $84K (December 31, 2017: $623K).

The following is a summary of PyroGenesis’ main activities.

Synopsis:

• Powder Production:

  • nominated “Materials Company of the Year” at the 3D Printing Industry Awards 2018;
  • recently Contracted for an order of 10 tons (minimum) of titanium powders;
  • recommended by leading 3D Printer OEM to their customers as titanium powder supplier;
  • strategic commercial discussions with 3D printer manufacturers, distributors, and end-users continue.

• DROSRITE™:

  • construction of second demonstration unit in progress; Completion expected over the next two (2) months;
  • enters the Zinc Market;
  • second DROSRITE™ Furnace System Completed;
  • embraces Tolling Strategy; Joint Venture discussions in progress.

• HPQ:

  • HPQ secures financing for the balance of the project;
  • Pilot Plant in progress after significant improvements. 

• US Military:

  • interest for two (2) US Aircraft Carrier systems received (US$10-12MM); Order expected Q1, 2019;
  • seeking to establish a presence in the USA to, amongst other things, better serve the US Military’s needs.

• Torch/Equipment Sales:

  • PyroGenesis continues to address interest for plasma torch/equipment;
  • order expected before year end. 

A) Powder Production:

2017 became the year in which the Company went from relative obscurity within the additive manufacturing industry, to being nominated “Materials Company of the Year” at the 3D Printing Industry Awards 2018. 

During this period, not only did the Company successfully assemble and commission its first metal powder production system, but also (i) successfully delivered orders for Titanium and Inconel powders, all while still in the ramp up phase, (ii) generated new, game changing, IP which provides for more control over particle size distribution, with little to no waste, while increasing powder production even further, and (iii) entered into several NDA’s  with significant players in the industry (end users, printer manufacturers, and distributors) all with a view of providing sample orders, repeat orders, long term orders, contract R&D, and/or strategic partnerships for long term powder supply contracts, some with a view to a possible acquisition.  Given the level of activity, and the prospect of significant orders in the near term, management decided to order the long lead items for two powder production systems, both of which were scheduled to be fully operational during the summer 2018; due to summer delays this is now targeted for end of September 2018-beginning of October 2018. These new powder production units will incorporate some of the cutting-edge IP that has recently been developed and/or is in development. We expect these units will cost significantly less to manufacture, generate higher production rates, and provide greater control over particle size distributions.

Of note, although the Company’s strategic plan has always been based on its existing IP, know-how, and system (the economics of which remain true to this day), management has decided to leverage off of its significant advantage in plasma technology and dedicate certain limited assets to increasing its IP base with the goal of further significantly reducing capital and operating costs of the powder production system while at the same time improving production rates even further.  PyroGenesis is confident that these goals once achieved will significantly impact the build out strategy for the better.

The Company’s press release dated May 17, 2018 (which announced a commercial agreement for a minimum order of 10,000 kg of Titanium powder over two (2) years from Asia), together with those issued on August 14 and 20 (which announced results of powder testing by a top OEM as well as their recommendation to their clients to use such powder), has underscored the need for PyroGenesis to be even more focused than ever before on addressing market demand for its powder.

The Company decided to have, at the ready, an optimum industrialization plan for multiple powder production units (in multiples of 1, 3, and 5 units), to be executed on the back of a significant take-or-pay contract. This has now been completed and the Company is continuing to look at ways to accelerate the technological advances mentioned above.

B) DROSRITE™:

As the Company positioned itself, during 2017, to become a significant powder producer to the Additive Manufacturing Industry, it also successfully positioned its DROSRITETM Furnace System to become a fully commercial product line in and of its own right.

2017 saw the commercial acceptance of PyroGenesis’ patented DROSRITE™ System with, not only an acceptance of its first commercial sale, but a subsequent re-order by the same client at a higher price.

During this time, successful demonstrations of the DROSRITE™ System in the Middle East and India has resulted in significant interest from those regions.  Of note, the Company’s demonstration unit is fully booked in India, to the beginning of October 2018, with paid-for-demonstrations. This flurry of activity and interest for the DROSRITE™ System resulted in the Company hiring a full-time business development manager to market the DROSRITE™ System, and who’s role is exclusively to secure DROSRITE™ System sales.

The total worldwide production of Aluminum dross was 3,000,000 TPY (2017)1. PyroGenesis has designed systems to process either 500, 3,000 or 5,000 TPY representing a market potential of over $1 billion from Aluminum dross alone. 

PyroGenesis is currently aggressively targeting both primary aluminum smelters in Asia and the Middle East where the market is estimated to be in excess of 1 million tons of dross2, as well as tertiary casting producers worldwide. The Company has recently added zinc recovery from dross as a target market. 

Due to this high demand for on-site paid-for-demonstrations, the Company is in the process of constructing a second DROSRITE™ demonstration system which is expected to be available in Q3, 2018. There is a high probability that PyroGenesis will be profitable in 2018 from DROSRITE™ System sales when combined with existing backlog.

The Company is also investigating the prospect of providing on-site dross tolling services under long term take-or-pay contracts.  The Company has found that there is a large interest for this service from smelter operators who do not want to engage in a different business line but would be open to having on-site tolling under a benefit-sharing arrangement. PyroGenesis is also in discussions with potential partners who would provide local management and support while at the same time accelerate this opportunity.

C) US Military:

Originally it was thought that just one new US Aircraft Carrier would be ordered in 2018, with an estimated value of approximately US$6MM, but now it seems that the interest is for two, for an estimated value of between US$10-12 MM.  This contract is now expected Q1, 2019.

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