Despite improving operational rates, a 24 percent drop in first-quarter fertilizer sales volumes weighed on LSB Industries Inc.’s results, though prices were up for all major products. The Oklahoma City-based company posted a net loss of $11.5 million, up from the year-ago loss of $5.6 million.
The net loss attributable to common shareholders was $19.4 million ($0.69 per diluted share) on net sales of $94.1 million, versus the year-ago loss of $13.6 million ($0.49 per share) and $100.4 million, respectively.
First-quarter operating income was a positive $71,000, versus the year-ago $1.9 million. Adjusted EBITDA was positive, but down at $18.1 million versus $23.1 million.
“We had solid operating performance at our facilities and benefited from favorable agricultural product pricing trends in the first quarter,” said LSB President and CEO Mark Behrman. “Overall, we were pleased with the operating performance of our facilities, with our ammonia plants averaging a 93 percent onstream rate for the quarter.
“More importantly, over the past three quarters, our ammonia plants have collectively averaged a 94 percent onstream rate, which represents our target for 2019. However, these positive factors were offset by reduced sales volumes resulting from cold, wet weather throughout much of the Midwest during the first three months of the year, which delayed the start of the spring fertilizer application season and weighed on our net sales and adjusted EBITDA,” said Behrman.
“Despite the weather-related volume decline, we did see continued improvement in pricing for our agricultural products as we expected heading into the year,” he added. “Net pricing per ton for UAN, agricultural ammonia, and HDAN increased 54 percent, 12 percent, and 5 percent, respectively, compared to the first quarter of 2018.
“Pricing for industrial products was lower for the quarter compared to the first quarter of 2018, mainly due to a decline in the Tampa ammonia benchmark price, which is the relevant index used to price many industrial products. The impact of an overall poor fall and spring application season in U.S. agricultural markets led to a build in ammonia inventory across the distribution channel, resulting in downward pressure on Tampa ammonia benchmark pricing,” Behrman said.
“With respect to the second quarter, despite the challenging weather, which has persisted so far in April, based on our order book and recent shipment activity, we expect a meaningful improvement in net sales and adjusted EBITDA both sequentially and as compared to a year ago,” he continued. “Looking at 2019 overall, we expect full-year growth in net sales and adjusted EBITDA relative to 2018 driven by continued improvement in operations and year-over-year improvement in product pricing.”
While LSB said UAN prices have begun to improve, it said prices have been on a decline due to increased imports over the past three months. It attributed those in part to the European Union’s antidumping actions, which have resulted in more tons being steered toward the U.S.
First-quarter average natural gas costs were up at $2.91/mmBtu from the year-ago $2.79/mmBtu. However, the company said it has locked in 60 percent of its second-quarter gas requirements at $2.40/mmBtu. It also noted that it has consolidated its gas purchasing for its three major plants, allowing for both cost savings and better management.
The company is planning a major summer turnaround for its Pryor, Okla., complex, that will enhance ammonia, nitric acid, and urea production. The El Dorado ammonia plant will have a 14-day August turnaround, and the next one is not expected until 2022. El Dorado will also get a third-quarter HDAN capacity increase and reliability improvements, as well as a sulfur acid converter replacement by the end of the year.
Market Sector – Net Sales $/M
| 1Q-19 | 1Q-18 | |
| Agriculture | 46.8 | 52.3 |
| Industrial | 37.9 | 38.1 |
| Mining | 9.5 | 10.1 |
| Total | 94.2 | 100.5 |
Product Tons Sold (st)
| 1Q-19 | 1Q-18 | %Change | |
| UAN | 94,577 | 102,292 | (7) |
| HDAN | 59,845 | 92,713 | (35) |
| Ammonia | 19,205 | 32,996 | (42) |
| Other | 3,328 | 4,183 | (20) |
| Total | 176,955 | 232,094 | (24) |
Average Selling Prices ($/st)
| 1Q-19 | 1Q-18 | %Change | |
| UAN | 213 | 138 | 54 |
| HDAN | 232 | 220 | 5 |
| Ammonia | 3,567 | 320 | 12 |
Industrial – Tons Sold (st)
| 1Q-19 | 1Q-18 | %Change | |
| Ammonia | 74,834 | 68,098 | 10 |
| Nitric Acid* | 22,375 | 20,213 | 11 |
| Other | 8,274 | 8,613 | (4) |
| Total | 105,483 | 96,923 | 9 |
*Excludes Baytown
Mining Tons Sold
| 1Q-19 | 1Q-18 | % Change | |
| AN/AN Sol. | 36,615 | 38,179 | (4) |