US Silica Holdings grows 16% as it wraps up its EP Minerals acquisition

US Silica Holdings has had a very positive second quarter this year with revenues up 16% sequentially to $427.4 million. The 118-year-old company, which describes itself as “a leading producer of commercial silica used in the oil and gas industry,” has now concluded its acquisition of EP Minerals, a major US player in “the production of products derived from diatomaceous earth, perlite, engineered clays, and non-activated clays.”

In a statement to the stock markets this week, US Silica said that it has “authorised a new $200 million share repurchase program, closed on the acquisition of EP Minerals and made a $16.2 million impairment charge related to exiting the resin coating business.”

According to the company, US Silica has: “A net income of $17.6 million or $0.23 per basic and $0.22 per diluted share for the second quarter ended June 30, 2018, compared with net income of $29.5 million or $0.36 per basic and diluted share for the second quarter of 2017. The second quarter results were negatively impacted by $17.6 million or $0.17 per share in M&A related expenses, asset impairment charges of $16.2 million or $0.16 per share to close the Company’s resin coating facility and $10.7 million or $0.10 per share in costs related to plant startup and expansion expenses. These expenses were partly offset by a credit of $1.9 million mostly related to the completion of the sale of assets in the first quarter, resulting in adjusted EPS for the second quarter of $0.64 per basic and diluted share.”

Announcing the results, Bryan Shinn, president and chief executive officer said: “I’m extremely pleased with the outstanding performance by our two operating segments during the second quarter. Higher sand volumes and pricing plus strong performance from Sandbox (the group’s specialist logistics division) drove record contribution margin for Oil and Gas in the quarter. For our ISP segment, record revenue, contribution margin and contribution margin per ton was driven by a mix of higher volumes, higher pricing and a strong contribution from the EP Minerals acquisition, which closed during the second quarter.”

Also: “During the quarter we also decided to exit the resin coated sand business, which primarily served the oil and gas market, based on customer feedback that demand for this type of product is rapidly declining. This has been a very small business for us and we don’t anticipate any impact to earnings beyond the impairment charges in the second quarter.”

According to Shinn: “Looking forward, we expect strong demand in Oil and Gas for both sand and Sandbox. We are heavily contracted in this market at attractive margins and are well positioned to serve our blue-chip customer base in the years ahead. In ISP, we expect significant margin growth from pricing, new products and accretive acquisitions. Given these many positive catalysts, we should generate substantial free cash flow in the coming quarters, with free cash flow yield approaching 15% at our current market capitalisation next year.”

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