SCL - Volume Collected (in '000 MT): http://media3.marketwire.com/docs/213nal_graphs.pdf
Ville Ste-Catherine
VSC is our lead-acid battery recycling facility. This facility generates revenue from a combination of direct lead sales and tolling fees received for processing batteries. Fluctuations in the price of lead affect our direct sales revenue and waste battery procurement costs. Tolling fees are generally fixed, reducing our exposure to fluctuations in lead prices. The cost to acquire waste batteries is generally related to the trading price of lead at the time of purchase. As a result of the shipping, processing and refining of lead, there is a lag between the purchase and final sale of lead. Slow and modest changes in the value of lead result in a relatively stable differential between the price received for recycled lead and the cost to acquire lead acid waste batteries. However, sharp short-term swings in the London Metal Exchange ("LME") price can distort this relationship, resulting in a temporary disconnect in values.
Our objective is to ensure optimal performance at VSC, which historically has meant balancing direct sales and tolling volumes equally. In 2012, our split was approximately 50/50. Production volumes will be managed to optimize performance under prevailing market conditions. In addition, fluctuation in the U.S./Canadian dollar exchange rate impacts revenue and procurement. Substantially all of VSC's revenue and the majority of our battery procurement costs are denominated in U.S. dollars, with the balance of our operating costs denominated in Canadian dollars.
Q4 2012 revenue was up 14% compared to prior year. The increase was mainly attributable to a shift in our tolling/direct mix towards direct sales in addition to a 4% increase in LME pricing. The lagged LME price increased to U.S. $2,167/MT (Q4 2011 - U.S. $2,076). VSC volumes were 17,600 MT (Q4 2011 - 19,800 MT), in line with our quarterly average. The increase in price was more than offset by increased procurement costs.
Compared to 2011, VSC revenue decreased 16%, primarily due to the decline in lead price. Lagged LME price decreased 16% to U.S. $2,041/MT (2011 - U.S. $2,435/MT). Sales volume in 2012 decreased 10% to 64,700 MT (2011 - 71,700 MT). The direct and tolling split was consistent with 2011.
RESULTS OF OPERATIONS - ONSITE DIVISION
Overview
Onsite includes a network of more than 25 facilities with over 700 employees across Canada and the U.S. Onsite services involves the mobilization of equipment and our people to manage industrial by-products at our customer sites. Onsite includes: the processing of oilfield-generated wastes and the sale of recovered crude oil for our account; industrial cleaning; site remediation; dredging and dewatering and drill site processing, including solids control and drill cuttings management. Onsite includes the Western Onsite, Eastern Onsite and Heavy Oil business units.
Our Onsite services, excluding drill site, generally follow a similar sales cycle. We establish our market position through the execution of short-term projects which ideally may lead to longer term contracts, providing a more stable cash flow. The cycle to establish longer term contracts can be between 18 months to three years. Characteristics of projects and contracts are:
-- Projects: non-recurring and/or seasonal services completed in less than one year, primarily completed between March and November and will vary from period-to-period, and-- Contracts: typically evolve from projects and are generally year round arrangements based on fee for service solutions with terms longer than one year and no direct commodity price exposure.
