Unplanned downtime at its El Dorado and Pryor facilities impacted LSB Industries Inc.’s net income for the second quarter ending June 30, 2012. LSB net income was $26 million ($1.11 per diluted share) on sales of $209.3 million, down from the year-ago $28.6 million ($1.22 per share) on sales of $235.6 million. Operating income was $42.3 million, down from $48.3 million. The year-ago quarter included an $8.6 million insurance recovery.
Operating income was off 1.9 percent from LSB’s Climate Control segment, which saw a 12.5 percent drop in sales.
“We were disappointed that net income and earnings per share for the second quarter were lower than last year’s second quarter, although we feel the results were remarkable considering the explosion and downtime at our El Dorado Facility and the repairs that were underway at the Pryor Facility,” said Jack Golsen, LSB chairman and CEO.
The LSB Chemical segment saw operating income drop to $39.1 million on sales of $138.1 million during the quarter, compared to the year-ago $42.7 million on sales of $155.6 million. Gross profit was $43.5 million, down from $47.6 million.
LSB estimates that the Pryor, Okla., complex lost approximately 70,000 st of potential UAN sales due to the unplanned downtime of its urea reactor. After going offline Feb.
27, the unit was unable to produce UAN through the end of the second quarter. This was partially offset by continued ammonia production and sales of ammonia into the agricultural markets. LSB estimates the Pryor incident shaved about $10 million off Chemical operating profits during the quarter. Pryor operating income dropped to $13 million from the year-ago $23 million. Although the urea reactor returned to production in July, due to continued problems at the main ammonia converter at Pryor, LSB plans to replace the converter and make modifications in early 2013. The Pryor facility will take a turnaround late in the fourth quarter that will lead up to the addition of one new Kellogg ammonia converter, which will take the place of six existing smaller converters. Catalysts will also be replaced, and a new chiller will be added to lower the high temperatures that reduce capacity in hot weather. Once complete, it is hoped that production can increase up to 700 st/d. To date, 600 st/d has been achieved.
Also at Pryor, two long-idled smaller ammonia plants are expected to return to production by the end of the year. They will produce a combined 60,000 st/y and cost between $6-$7 million.
The company estimates downtime at the El Dorado, Ark., facility cut about $7 million from Chemical income. The plant was shut down May 15 when a reactor in its 98 percent concentrated nitric acid (DSN) plant exploded, destroying the plant and damaging three regular concentration nitric acid plants, as well as a sulfuric acid plant. Currently, LSB said two of the three remaining nitric acid plants are back in production, and a third is expected back up by the end of August. Sulfuric acid production should restart in the fourth quarter.
The DSN plant is not being repaired, but is being replaced by a new 65 percent concentrated nitric acid plant and a separate nitric acid concentration plant. The new facility is expected to take about two years to construct and cost over $100 million. LSB expects insurance to cover most of this amount, as it has a $1 million deductible. LSB said that the new production, which will represent about 20 percent of nitric acid production at El Dorado, will be dedicated to one large customer. LSB said it has been able to supply customers in the meantime by squeezing its other operations and sourcing product elsewhere.
The company has not yet pulled the trigger on plans to build an anhydrous ammonia plant at El Dorado that would supply its existing facility, thereby switching its current feedstock to natural gas rather tha