November 4, 2009 / 7:07 PM / 8 years ago

PREVIEW-Rising commodity prices to help Newalta post Q3 profit

* What: Newalta Q3 results

* When: Thursday, Nov 5

* Analysts expect Q3 profit

* Higher oil, lead prices to help revenue

By Koustav Samanta

BANGALORE, Nov 4 (Reuters) - Canada’s industrial waste management company Newalta Inc (NAL.TO) is expected to turn profitable in the third quarter, after posting losses for two consecutive quarters, as the company benefits from rising commodity prices.

Analysts expect the recent recovery in commodity prices, particularly oil and lead, to drive quarterly results for Newalta.

The company’s Western segment recovers and resells crude oil from oilfield waste and its Eastern segment provides a lead recycling facility and industrial waste collection services.

“With rising commodity prices, decreased costs and profitable organic growth potential, we are positive on Newalta,” National Bank Financial analyst Rupert Merer said in a note dated Oct. 29.

However, in an updated note Thursday, Merer said a 6 percent increase in the Canadian dollar would offset stronger oil prices in the third quarter, reducing the benefit to Newalta.

“The situation should turn for the better in fourth quarter,” he said.

Newalta is expected to post a profit of 26 Canadian cents a share for the third quarter, on revenue of C$144.5 million, according to Thomson Reuters I/B/E/S.

The company, which operates through its wholly owned subsidiaries Newalta Corp and Newalta Industrial Services Inc, recently raised C$46 million in an equity financing to fund its capital projects and repay debt.

It also amended its credit facility with its Canadian lending syndicate to reduce the principal amount by C$25 million to C$350 million.

“Our view towards the debt position has certainly improved in recent months and I think the equity financing moves them comfortably outside their financial covenants,” CIBC analyst Jeff Fetterly said by phone.

In his note dated Oct. 27, Fetterly said, the focus of the company’s 2010 capital program would be on expanding its national onsite business and capitalizing on additional opportunities in the heavy oil/SAGD (Steam Assisted Gravity Drainage -- an oil recovery technology) market.

The company will restrict its capital spending, dividends and funding of working capital within its cash flow in 2010, the analyst said.

“The company is expected to have C$40-C$50 million for growth capital and debt repayment,” he said. (Reporting by Koustav Samanta in Bangalore; Editing by Ratul Ray Chaudhuri)

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