Fairmount Santrol Focuses on Efficiency, Costs

Fairmount Santrol of Chesterland, OH has reported second quarter net income of US$14.1 million on revenue of US$221.5 million versus US$43.9 million on revenue of US$334.3 million in the second quarter of 2014. Overall sales volumes decreased to 2.2 million tons from 2.3 million tons. The company says that volume decline was primarily due to reduced demand for proppants resulting from the continued decline in U.S. oil and gas land drilling activity reflecting sustained low oil and gas prices. During the second quarter, Fairmount Santrol idled its resin-coating facility in Voca, TX and closed its resin-coating facility in Bridgman, MI. The company says that consolidation of higher-cost production capacity this year, along with lower costs for resin, has enabled it to reduce the costs per ton of producing its resin-coated products by approximately 20% since the end of 2014. Since the beginning of the year, the company has idled ten smaller, higher-cost terminals and opened two new terminals in order to reduce costs and to better position its products to capture in-basin volumes. Fairmount Santrol’s Proppant Solutions segment contributed an operating margin of US$37.8 million on second quarter sales of US$188.0 million compared with US$103.9 million on sales of US$301.0 million in the prior year period. Total volumes fell 10% to 1.6 million tons. Raw sand volumes were flat at 1.4 million tons and coated proppant volumes fell 45% to 206,572 tons. The company notes that certain customers moved away from using resin-coated sand in the quarter to reduce their near-term input costs. During the quarter, the segment’s average selling price for all products declined about 13%, representing a US$9-12/ton decline in the average selling price of raw frac sand. Fairmount Santrol’s Industrial and Recreational Products segment contributed US$11.2 million on revenue of US$33.2 million in the second quarter compared with US$10.9 million on revenue of US$33.6 million in the same period of 2014. The improved margin was due to a change in mix to more profitable products in the foundry, building products and recreational business. The segment’s shipments were flat at about 640,000 tons. Fairmount Santrol estimates that its 2015 capital expenditure will now be US$95-100 million compared with its original spending plan of US$120 million. By far the biggest component of that is an expansion of its Wedron, IL facility.

Volume 29 issue 16

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