Rentech boosts earnings projections, evaluates production expansion

Rentech Inc., Los Angeles, has increased its projection of EBITDA for fiscal year 2011 for its wholly-owned nitrogen fertilizer subsidiary, Rentech Energy Midwest Corp. (REMC), to approximately $75 million from the previous projection of at least $60 million. REMC owns a nitrogen plant in East Dubuque, Ill.

Rentech said REMC, which is favorably located near its customers in the cornbelt region, is benefiting from continuing strong fertilizer demand and pricing, as well as low input costs. As of March 31, 2011, REMC has either delivered, or signed contracts with fixed prices for the sale of, more than 75 percent of REMC’s forecasted deliveries for the fiscal year that will end Sept. 30, 2011, and has already purchased or contracted at fixed prices for the natural gas required to produce that product. Because such a large portion of the year’s projected contribution margin has been pre-contracted, Rentech is confident in projecting record EBITDA.

Rentech has also increased its projection of REMC’s operating income for fiscal year 2011 to approximately $65 million from the previous forecast of at least $50 million.

“We are pleased that REMC’s performance is exceeding our expectations,” said D. Hunt Ramsbottom, Rentech president and CEO. “The cash flow generated at our fertilizer facility helps support our alternative energy business, providing investors with the unique opportunity to invest in two very dynamic industries, both of which have significant growth potential.”

Considering the positive market trends and higher margins for nitrogen fertilizer that REMC has been experiencing, Rentech engaged an engineering firm to evaluate the possibility of expanding REMC’s production and increasing the efficiency of the plant. The feasibility study is expected to take several months to complete, after which Rentech will evaluate the attractiveness of investing in capacity expansion at the plant to meet increased nitrogen demand created by expanded corn acres for the foreseeable future.

Capacity levels at the East Dubuque complex include 332,000 st/y of anhydrous ammonia, 146,000 st/y of urea, 350,000 st/y of UAN, 170,000 st/y of ammonium nitrate, and 144,000 st/y of nitric acid, according to the International Fertilizer Development Center.

For the year ending Sept. 30, 2010, REMC shipped 597,000 st of product with revenues of $128.1 million, compared to the prior year’s 533,000 st and $184.1 million.