Wood pellet maker Enviva reported a big quarterly loss Thursday, replaced its CEO and says it's at risk of failing because of collapsing prices and debt.
Enviva also cited unspecified "operational challenges" at its plants this year. In a news release, the company said its financial difficulties "raise substantial doubt regarding the company’s ability to continue as a going concern."
Although Enviva sold more wood pellets during the third quarter, lower prices led to a 5% decline in revenues. That led to an $85 million loss in the quarter, compared with an $18 million loss a year ago.
It also said that long-term contracts at low prices could lead to even wider losses in the coming quarters.
The Maryland-based company is the world's largest producer of wood pellets, which are sold in Europe and Asia to be burned for electricity. It has 10 plants across the South, including four in North Carolina and one in South Carolina, along with a port at Wilmington. The closest one to Charlotte is in Richmond County. Others are in Northampton, Hertford and Sampson counties and in Greenwood, South Carolina.
New CEO announced
Enviva also announced a restructuring that included naming Glenn Nunziata as interim CEO. He also keeps his current title of chief financial officer, which he has held only since last November when he joined the company. He replaces Thomas Meth, who stays on as president. Enviva said Meth will help renegotiate customer contracts to try and improve profitability.
The company also said it's hiring financial and legal advisers for a "comprehensive review of alternatives to strengthen its capital structure, augment liquidity, address contractual liabilities, and increase long-term profitability."
"While we have a great deal of work to do, we are encouraged by the progress being made through our cost reduction and productivity initiatives. At the same time, we are actively addressing the Company’s cash flow and liquidity challenges as well as working with customers to renegotiate contracts. The decisive steps we are taking are expected to better position Enviva to continue leading the industrial biomass sector through its next leg of growth," Nunziata said in the press release.
The company said despite the troubles, it's continuing its expansion with one plant under construction in Alabama and another planned in Mississippi.
Enviva has grown during its nearly 20-year history thanks to European policies that classify wood pellets as clean energy and subsidies that make it profitable for power producers to burn wood pellets, known as biomass. Environmental groups have criticized the industry and Enviva, arguing that biomass is not cleaner than the coal it replaces.
Those groups also have raised concerns about pollution and traffic near the plants, which are mainly located in lower-income communities of color.
Enviva's shares fell below $1 Thursday.
