U.S. Silica (SLCA) Posts Lower-than-Expected Loss In Q2

U.S. Silica Holdings, Inc. (NYSE:SLCA) recorded net loss of $12 million or 19 cents per share in second-quarter 2016. The company has posted a profit of $10 million or 18 cents per share in the year-ago quarter. The company slipped to loss in the second quarter due to restructuring costs and business development-related expenses.

Barring restructuring costs of $1.1 million and a $0.9 million development-related expense, U.S. Silica’s adjusted loss came in at 17 cents per share in the quarter, narrower than the Zacks Consensus Estimate of a loss of 23 cents.

Revenues plunged nearly 21% year over year to $117 million in the reported quarter. The figure, however, beat the Zacks Consensus Estimate of $116 million. Overall sales volume fell 1% year over year in the quarter to 2.2 million tons.

U.S. Silica’s shares rose 8.3% to close at $36.99 on Aug 3.

Segment Analysis

Revenues for the Oil & Gas division aggregated $64.9 million in second-quarter 2016, down roughly 29% year over year. Overall sales volume rose 9% in the quarter to 1.3 million tons from 1.2 million tons sold in the prior-year quarter.

Revenues for the Industrial and Specialty Products division aggregated $52.1 million in the second quarter, down roughly 8% year over year. Overall sales volume declined 13% in the quarter to 0.9 million tons.

Financials

U.S. Silica had $454.2 million in cash and cash equivalents as of Jun 30, 2016, up roughly 80.6% from $251.5 million a year ago. Long-term debt as of Jun 30, 2016 was $486.7 million, down 0.7% from $490 million as of Jun 30, 2015.

Capital expenditures in the reported quarter totaled $17.3 million, mainly due to the company's purchase of reserves adjacent to its Ottawa, IL facility and investments in various maintenance, expansion and cost improvement projects.

Acquisition

In Jul 2016, U.S. Silica entered into an agreement and plan of merger to purchase all of the outstanding capital stock of New Birmingham, Inc. – a low cost, regional frac sand producer – for about $210 million. The transaction, which is subject to customary adjustments at closing, is expected to complete in Aug 2016.

Outlook

Owing to lack of visibility in the Oil and Gas business, U.S. Silica said that it will not provide any guidance for adjusted EBITDA until it gets a clear picture of business activity levels and related demand for its products. Looking at current market conditions, the company expects its capital expenditures for 2016 to be in the range of $28–$33 million.

Zacks Rank

U.S. Silica currently holds a Zacks Rank #2 (Buy).

Other well-placed stocks in the basic materials sector include Rio Tinto (LON:RIO) plc (NYSE:RIO) and Silvercorp Metals Inc. (OTC:SVMLF) , both sporting a Zacks #1 (Strong Buy), and Klondex Mines Ltd. (NYSE:KLDX) holding a Zacks Rank #2.