Polaris Materials Corp. reports that shipments from its Orca Quarry for the 12 months ended Dec. 31, 2015, were 3.02 million tons, a decrease of approximately 12.5 percent versus 2014, reflecting the impact of previously reported supply disruptions in the second and third quarters of 2015.
Shipments in the fourth quarter of 2015 were robust at 803,000 tons, an increase of 10 percent over the fourth quarter of 2014 despite the cancellation of two shipments in December driven primarily by adverse weather conditions.
Highlights of its report include:
- Strong financial position and robust balance sheet: Year-end cash balance of $10.5 million and no long term debt; Polaris generated positive cash flow in the fourth quarter of 2015.
- Continued gross margin Improvement through healthy market prices, ongoing cost control initiatives and the benefit of continuing weakness in the Canadian dollar and oil prices.
- Low energy prices improve competitive positioning of Orca products versus local suppliers and reduce quarry and terminal operating costs
- Weak Canadian dollar benefits gross margins as sales are almost entirely in U.S. dollars while quarry cash operating costs are primarily in Canadian dollars.
- Favorable local market conditions should provide insulation from global economic turmoil with 5 percent growth in U.S. cement consumption and 6 percent growth in U.S. construction starts forecast for 2016.
- Differentiated product: The Orca Quarry provides a uniquely high-quality aggregate product, and the company continues to focus on opportunities where Polaris' products provide measurable value to the end user. This strategy has positioned the company to compete effectively against local aggregate suppliers on a number of major high specification projects.
Management currently anticipates that volumes into the San Francisco market will be similar to 2015. Polaris is in advanced discussions with a number of potential customers in Los Angeles, San Francisco and other markets outside of California which could drive incremental volumes at attractive margins. The company will provide further updates as and when appropriate.
Polaris expects to achieve continued strong gross margins in 2016 as it works with customers to realize the unique value proposition of its products, as well as through operating cost savings and the impact of the weak Canadian dollar.
The company will continue to focus on improving visibility on sales expectations with its key San Francisco Bay area customers. This is expected to provide for increased reliability of shipping schedules and quarry production, and allow for optimal positioning of the company's products for inclusion in high-specification, high-value projects.
The company has recently secured tenure over a hard rock deposit located in close proximity to the Orca Quarry, referred to as the Black Bear Project. Black Bear represents a bolt-on opportunity that will provide the company with increased flexibility in product mix while utilizing existing infrastructure for crushing and ship loading.
Polaris expects to advance permitting of Black Bear during 2016 and has implemented a preliminary work plan with minimal funding requirements that will allow the company to evaluate the project in co-operation with its First Nations partners and local stakeholders.
Ken Palko, president and CEO commented, "We are very excited about 2016. The expected sales from Long Beach to supply large scale projects in Los Angeles, and the advancement of our Black Bear deposit, will both be highlights for our company in the coming year. Our end-user-focused strategy will continue to help the company and its customers realize the value of Orca's high-quality materials and positions us well to capitalize on growth in a healthy California market. We maintain a strong balance sheet with more than $10 million in cash and no long-term debt aside from equipment financing leases."