LSB Industries Inc. reported a 158 percent increase in operating profits in its chemical business for the second quarter ending June 30, 2008. Chemical operating profits were $20.5 million on sales of $113.4 million, compared to the year-ago $7.9 million and $79.4 million, respectively.
“While chemical business’s sales increased 43 percent due to significantly higher spot market prices for agricultural products, as well as higher selling prices for industrial acids and mining products related to increased raw material feedstock prices, operating income rose even more sharply, from $7.9 million to $20.5 million,” said Jack Golsen, LSB chairman and CEO. “Excluding the impact of $7.6 million (net of attorneys’ fees) from the previously noted litigation judgment, our chemical business’s operating income increased 63 percent to $12.9 million.” This involved the company’s successful lawsuit against Ingersoll Rand.
During the quarter, industrial acid sales were up 85 percent, ag products 17 percent, and mining products 43 percent. UAN tons were up 31 percent from a year ago, while UAN revenues were up 114 percent. LSB said UAN is its stronger gross profit product. Ammonium nitrate, which is a smaller market for LSB, saw volumes off 29 percent due to the cool, wet weather in the region served by the El Dorado, Ark., plant. However, AN revenues were down only 10 percent due to higher prices per ton.
LSB told analysts that it will continue to grow its non-seasonal industrial business, where it can more easily pass on higher raw material costs. It currently puts those sales at 60-65 percent and ag sales at 35-40 percent.
Six-month chemical income was $32.6 million on sales of $204.8 million, versus the year-ago $15.6 million and $153.1 million, respectively.
Company-wide, LSB reported third-quarter net income of $17.9 million ($.75 per diluted share) on sales of $198.0 million, versus the year-ago $13.2 million ($.58 per share) and $156.7 million, respectively.
“The favorable trend of the first quarter continued into the second quarter, producing the best first half in the history of LSB, with growth in net sales and profits of both our climate control and chemical businesses,” said Golsen. “It is especially gratifying that the bottom line gains were achieved despite the significant tax provision in the current periods versus a nominal tax for the 2007 reporting periods.”
LSB six-month net income was $28.8 million ($1.21 per share) on sales of $358.5 million, compared to the year-ago $24.0 million ($.87 per share) and $304.1 million, respectively.
Golsen told analysts that the company continues to study the startup of its idled Pryor, Okla., nitrogen plant. He said several potential strategic industry customers have indicated an interest in reaching an agreement for the offtake of product from the plant. Until an acceptable agreement is reached, there is no assurance that the plant will be restarted, said Golsen, adding that LSB is looking for as little downside risk to the company as possible.
The company expects to make a decision on the startup soon, sometime after environmental permits are issued, which is expected in October. The initial plan is to produce 325,000 st of UAN and an additional 50,000 st of anhydrous ammonia. LSB is mobilizing for the startup by ordering certain equipment. However, Golsen said this equipment can be used at its other plants should it decide not to proceed at Pryor. LSB expects the startup will take 6-12 months and cost $15-$20 million.
In other news, LSB reports that it has received a fully executed new labor contract signed by El Dorado Chemical Co., a subsidiary, and United Steel Workers of America International Union, AFL-CIO, and its Local 13-434. The agreement runs from Aug. 1, 2007-July 31, 2010.