LSB Industries Inc., Oklahoma City, told analysts that it expects strong third-quarter fertilizer prices to offset higher natural gas prices and a current 30-day turnaround at its Cherokee, Ala., facility. Turnarounds are planned for the company’s Pryor, Okla., and El Dorado, Ark., plants in 2022. LSB reported second-quarter earnings July 28 (GM July 30, p. 27).
“Pricing for our agricultural products remained strong and has not reset the way it typically does in the third quarter, which will be good news for our results for the period,” said Cheryl Maguire, Executive Vice President and CFO. “Given our forward order book for UAN, we are principally sold out for the third quarter at prices above $300/st. That compares to our average Q3 2020 UAN selling price of $130/st.
“Additionally, we have sold agricultural ammonia during the third quarter at prices north of $500/st, which compares favorably to our average Q3 2020 agricultural ammonia selling price of approximately $180/st,” she continued.
“Partially offsetting some of the improved pricing is the impact from higher natural gas cost, which we expect will average over $3.50 per mmBtu for the quarter, or more than $1.50 higher per mmBtu versus third quarter last year.” Maguire added that the direct turnaround expenses at Cherokee will be $7-$7.5 million. Lost production and sales volumes due to the turnaround are expected to impact EBITDA by $10-$12 million. Putting it all together, she said the company expects significant year-over-year improvement.
“We currently expected adjusted EBITDA for the period to be between $30-$35 million, or over 3x that of the third-quarter of 2020. This is traditionally our weakest quarter given the historical reset of fertilizer prices,” she said.
In other news, CEO and President Mark Behrman told analysts that he expects to submit a blue/green ammonia plan to the company’s Board of Directors during second-quarter 2022. “Our current focus is on choosing a technology partner that will perform a feasibility study for each of our sites to determine the infrastructure needed to produce green or blue ammonia and its derivative products that will help support LSB’s medium and long-term commercial sustainability objectives.”
Behrman expects the study to be completed over the next six months. He said the company is also reviewing its options with respect to reducing nitrous oxide emissions.