LSB Industries Inc. reported second-quarter net income of $25 million on net sales of $166 million, down from the year-ago $103 million and $285 million, respectively. Adjusted EBITDA was $47 million, down from $158 million.
LSB reported adjusted EPS of $0.25 per share for the second quarter, down from last year’s $1.22 but a 6.84% positive surprise compared to Bloomberg’s Consensus Estimate.
Net sales declined during the quarter driven by lower pricing for all products, partially offset by higher sales volumes for ammonia, LSB reported. LSB said the year-over-year decline in operating income and adjusted EBITDA primarily resulted from lower selling prices, partially offset by higher sales volumes and lower natural gas prices.
“For the second consecutive quarter we experienced a significant year-over-year decline in selling prices, reflecting the impact of lower natural gas prices in Europe and weaker industrial activity in Asia,” said LSB President and CEO Mark Behrman. “Additionally, UAN demand was below expectations as farmers opted to apply more urea due to what had been comparatively attractive pricing early this year versus UAN.”
Behrman noted that prices for nitrogen products have begun to improve, however, and the company expects this trend to continue “at a measured pace through the second half of this year,” with further improvement likely building into the 2024 spring planting season.
In addition to improved pricing, LSB said it expects favorable US corn market dynamics to provide support for stronger fertilizer pricing later this year and into next year. Corn prices remain above 10-year averages, the company said, which should incentivize farmers to optimize fertilizer applications in the fourth quarter of 2023 and spring 2024.
The company has no turnarounds planned this year, but LSB said the NuStar pipeline will be down for six weeks during 3Q, so ammonia sales volumes are expected to soften.
Despite the second-quarter headwinds, LSB continued to generate solid free cash flow in the quarter. “As a result, we not only implemented and repurchased stock under our $150 million buyback plan, but we also bought back $125 million of our bonds at a discount to their issuance price,” Behrman said. “Even with this return of capital to our shareholders, we maintained a substantial cash balance that will support our growth initiatives in the coming years.”
Behrman said LSB continues to evaluate projects to increase production capacity and expand its product mix. LSB submitted a capacity expansion project at its El Dorado, Ark., plant to the USDA for funding under its Fertilizer Production Expansion Program. LSB said it was selected for consideration and the company expects the total project expense at $400 million, of which the USDA would fund up to 25%.
Behrman said LSB plans to commence more detailed engineering in the coming weeks, including FEED, on the projects that have the most attractive return profiles. “We would expect to move forward with financial investment decisions on one or more of those projects at some point in the second half of 2024,” he said.
Behrman also highlighted LSB’s recent MOU with Amogy Inc. (GM May 26, p. 29) for the development of ammonia marine fuel.
“Through these projects, and the other projects we are exploring, we are well positioned to benefit from attractive government incentives that are currently in place,” he said. “Additionally, we believe these projects will benefit from anticipated growth in end-market demand, particularly for clean ammonia for power generation and marine locomotion.”
| Product (Gross Sales in $000s) | 2Q-23 | 2Q-22 | % Change |
| AN & Nitric Acid | 69,561 | 96,142 | (28) |
| UAN | 40,905 | 76,986 | (47) |
| Ammonia | 39,612 | 89,444 | (56) |
| Other | 15,767 | 22,231 | (29) |
| Total | 165,845 | 284,803 | (42) |
| Sales Volumes st | 2Q-23 | 2Q-22 | % Change |
| AN & Nitric Acid | 161,987 | 162,014 | (0) |
| UAN | 126,010 | 130,561 | (3) |
| Ammonia | 102,047 | 75,526 | 35 |
| Total | 390,044 | 368,101 | 6 |
| Avg Selling Price $/st | 2Q-23 | 2Q-22 | % Change |
| AN & Nitric Acid | 381 | 525 | (27) |
| UAN | 285 | 553 | (48) |
| Ammonia | 367 | 1,164 | (68) |
| Other Factors | 2Q-23 | 2Q-22 | % Change |
| Avg Nat Gas ($/mmBtu) | 3.39 | 7.15 | (53) |
| Tampa NH3 $/mt | 370 | 1,257 | (71) |
| NOLA UAN $/st | 251 | 584 | (57) |