All posts by hlancey@bloomberg.net

CF 4Q Income Off 68%; Loses NH3 Production to Cold Weather After Heavy Fall Application Season

Ammonia, Ammonium Nitrate, Brazil, China, Earnings, Nitrogen, UAN

CF Industries Holdings Inc. reported fourth-quarter net income attributable to common shareholders of $274 million on net sales of $1.57 billion, down 68% from the year-ago $860 million and $2.61 billion, respectively. Adjusted EBITDA was $592 million versus the year-ago $1.3 billion. Tons sold were 4.91 million st, up from 4.46 million st.

CF missed the Bloomberg Consensus by 7.4% on net income and 4.48% on adjusted EBITDA, but surpassed the estimates on revenues by 4.87%.

“CF Industries’ 2023 results demonstrate the strength of our business and our team,” said Tony Will, CF President and CEO. “We ran our plants well, added the Waggaman ammonia production facility to our network, and advanced our clean energy strategy.”

Will said CF believes the global energy cost structure presents attractive margin opportunities for the company’s North American-based production network in the near-term, with the global nitrogen supply-demand balance tightening considerably in the medium-term.

“As a result, we expect to continue to drive strong cash generation, underpinning our ability to create significant shareholder value from disciplined investments in growth opportunities and returning substantial capital to shareholders,” he said.

Full-year net income was $1.53 billion on sales of $6.63 billion, down from the year-ago $3.35 billion and $11.2 billion, respectively. Adjusted EBITDA was $2.76 billion, down from $5.88 billion. Tons sold were 19.1 million st versus 2022’s 18.3 million st.

CF projects US corn acreage at 91 million acres in 2024 and believes North American farmer profitability will improve compared to 2023 as lower crop prices are offset by lower input costs. CF suggested that the current warm weather in the Midwest could mean an early spring, which would pull demand forward and result in early river openings for barges.

CF said North American nitrogen inventories remain below average following what was probably its second-best fall ammonia application season in ten years. “A strong fall application season indicates a commitment to nitrogen-consuming crops on these acres and robust demand for additional urea and UAN applications through the first half of 2024,” said Bert Frost, CF Vice President, Sales, Market Development and Supply Chain.

CF confirmed that it lost some 150,000 st/y of ammonia production in January due to cold weather shutdowns, and believes other producers lost tonnage as well. The company added that nitrogen imports are below their three-year average.

Demand remains good from other major buyers, CF said. Brazil is now the top urea importer, surpassing India, with Brazil expected to take 7-8 million mt in 2024 and India 6-7 million mt.

Will added that the construction of new nitrogen production capacity is not sufficient to keep pace with the historical nitrogen demand growth rate of roughly 1.5% per year in traditional applications. He said emerging low carbon ammonia should further tighten the already strained global supply-demand balance.

CF said about 40% of European ammonia and 25% of urea were curtailed as of early January due to high natural gas prices, keeping European nitrogen imports elevated at a time when low gas costs make US producers very competitive.

In the meantime, other producing countries are not at full speed on exports. China urea exports are projected to be 4 million mt, with the country keeping much of its production to satisfy local demand. Also on the production side, CF cited downtime in Malaysia and export restrictions in Indonesia.

CF noted that ammonia exports from Russia remain lower due to the war and the closure of the ammonia pipeline to the port of Odessa, but Russia’s exports of other nitrogen products are at pre-war levels.

Production (000 st)   4Q-23 4Q-22 YTD-23YTD-22
Ammonia2,5252,4419,4969,807
Gran Urea 1,1301,1434,5444,561
UAN 321,8401,8276,8526,706
AN4163551,5201,517
Ammonia 4Q-234Q-22YTD-23YTD-22
Net Sales ($/M)4958041,6793,090
Gross Margin ($/M)154388541 1,599
Sales Volumes (000 st)1,0778953,5463,300
Avg Selling Price ($/st)460898473936
Gas Costs ($/mmBtu)3.01 6.88 3.677.18
Gran Urea 4Q-234Q-22YTD-23 YTD-22
Net Sales ($/M)3926051,8232,892
Gross Margin ($/M)1573018131,564
Sales Volumes (000 st)1,0381,0334,5704,572
Avg Selling Price ($/st)378586399633
UAN 4Q-234Q-22YTD-23YTD-22
Net Sales ($/M)418845 2,0683,572
Gross Margin ($/M)1044588172,083
Sales Volumes (000 st)1,8121,6907,2376,788
Avg Selling Price ($/st)231500286 526
AN4Q-234Q-22YTD-23YTD-22
Net Sales ($/M)120189497845
Gross Margin ($/M)2550138248
Sales Volumes (000 st)4143671,5711,594
Avg Selling Price ($/st)290515316530
Other 4Q-234Q-22YTD-23YTD-22
Net Sales ($/M)146165564787
Gross Margin ($/M)6159236367
Sales Volumes (000 st)5714792,2062,077
Avg Selling Price ($/st)256344256379

USDA Projects More Soybeans, Less Corn and Wheat

Brazil, China, News Briefs, U.S.

USDA on Feb. 15 projected 2024/25 US corn acreage at 91 million acres, down 4% from the year-ago 94.6 million and below the 91.6 million estimate from a Bloomberg survey of analysts.

Corn is expected to see lower production, greater domestic use, increased exports, and higher ending stocks, with production projected at 15.040 billion bushels, down about 2% from the prior year’s record.

Domestic inventories of corn are seen ballooning to 2.53 billion bushels (roughly 64 million mt) by the end of the 2024/25 season, according to the USDA forecast. That would mark the largest year-end stockpiles since 1987. Ending stocks for wheat and soybeans are also poised to grow.

One of the factors driving the higher US stockpiles is Brazil’s growing relationship with China, said Seth Meyer, the USDA’s Chief Economist, in remarks the Agricultural Outlook Forum in Washington, D.C., on Feb. 15.

As inventories rise, farm prices for corn are seen falling 8%, to an average of $4.40 per bushel in the next season, USDA said, with soybean prices slipping 11% and wheat dropping sharply by 17%. Corn, wheat, and soybean futures slid on the Chicago Board of Trade after the announcement. The Bloomberg Grains Spot Index has fallen nearly 30% over the past year.

Soybean acreage is expected to grow to 87.5 million acres from the year-ago 83.6 million. The increase was attributed to stronger demand for domestic crush, largely driven by the growth in biofuel use. Exports likely face competition from supplies in South America during the 2024/25 marketing year.

Wheat acres are projected to drop to 47 million from 49.6 million, with the decline due in part to relatively favorable prices for competing crops such as cotton and sorghum, USDA said. Sorghum acreage is expected to drop to 7 million from the year-ago 7.2 million.

The three major crops combined have a total of 225.5 million acres, down about 1% from the year-ago 227.8 million acres. USDA said this reflects lower prices and a reversion to a more typical level of prevent plant acres.

Rice planted acreage is expected to be level at 2.9 million acres as higher long-grain acreage is almost offset by a reduction in medium- and short-grain acreage. The season is starting with higher supplies due to larger beginning stocks and record-high imports. Despite increased exports and domestic use, USDA said rice ending stocks are projected to reach the highest level since 2014/15.

Cotton acreage is forecast at 11 million, up 7.5% from the year-ago 10.2 million acres. Domestic mill use is expected to remain unchanged, while exports are projected to be higher, reflecting the recovering US production level and share of global trade. Ending stocks and the stocks-to-use ratio are also projected to be higher.

Sawiris Reportedly Considering OCI Global Assets Sale, Becoming Cash-Shell for New Acquisitions

Blue Ammonia, Egypt, Featured, Texas

OCI Global’s biggest shareholder, Egyptian billionaire Nassef Sawiris, is reported to be considering a radical overhaul of his chemicals and fertilizers empire that could include breaking up his main holding – Dutch-listed OCI Global – and offloading its parts.

Sawiris, who holds a 38.71% stake in OCI and his family a further 14.22% interest as of Oct. 23, 2023, said in an interview this week with the UK’s Financial Times that options for OCI include selling off all assets and turning it into a cash shell for acquisitions in new industries.

“We are evaluating what we want to do, not just with the money [from the asset sales] but as a team,” he told the newspaper. “And maybe OCI stays with a piece or two pieces and it becomes a cash cow, and becomes a machine for further investment. We’re quite open-minded. It doesn’t have to be fertilizer, doesn’t have to be chemicals.”

OCI in December announced binding agreements for the sale of two of its key businesses – Wever, Iowa-based Iowa Fertilizer Co. LLC (IFCo) (GM Dec. 22, 2023) and its 50% + 1 share stake in ADX-listed Fertiglobe (GM Dec. 15, 2023). The two sales are expected to bring in gross proceeds of $7.22 billion.

The sales agreements followed a strategic review by the company of all its business lines, as well as a listing review in the Netherlands after US activist investor Jeff Ubben, who owns a 5% stake in OCI, urged the company to explore options, including asset sales to improve shareholder returns.

Responding to analyst questions for comment on the Financial Times interview, OCI CFO Hassan Badrawi said in a company earnings call on Feb. 14 that it was “in OCI’s DNA to look at value maximization” and to look at opportunities that unlock value for shareholders.

“What is ascribed to Nassef in the Financial Times piece is fairly consistent with everything that we have done in the past and everything we are saying today as part of the strategic review that’s been ongoing by OCI,” Badrawi said.

OCI confirmed in its earnings statements this week that following the two announced divestments, it has received “considerable inbound inquiry and interest in its remaining business,” and the company has decided in Board discussions to reopen the strategic review.

OCI CEO Ahmed El-Hoshy told analysts that OCI is exploring further value-creative strategic options across the portfolio, including the previously announced equity participation in its Texas Blue Ammonia project. “All options are on the table,” he said.

Following the announced sales transactions, OCI’s business is now focused on just two industrial sites: OCI Nitrogen in Geleen and the Texas Beaumont complex, which is also the location of the company’s Texas Blue Ammonia project with capacity of 1.1 million mt/y. The plant remains on track for commissioning in early 2025.

Pipeline Segment Benefits NuStar Earnings

Ammonia, Earnings, Texas

San Antonio-based NuStar Energy LP on Feb. 15 reported fourth-quarter net income of $70.4 million on revenues of $451.7 million, down from the year-ago $91.6 million and $430 million, respectively. EBITDA was $199.2 million, down from $213.4 million.

“I am pleased to report that we have delivered another quarter of solid earnings results and made significant progress on many of our strategic initiatives in 2023,” said NuStar Chairman and CEO Brad Barron. The company singled out the strong revenues and volumes of its refined products pipelines, which include anhydrous ammonia, and a strong performance by the Fuels Marketing segment.

NuStar’s Pipeline segment generated fourth-quarter operating income of $129.6 million and EBITDA of $174 million, compared to the year-ago $131.6 million and $176 million, as increased revenues and throughputs across refined products systems were offset by decreases from the Permian Crude System and Corpus Christi Crude System.

“As we have said on prior calls, our Permian volumes reflected some producer-specific operational issues and delays in 2023, which were largely resolved over the course of the year,” Barron said. Fourth-quarter revenues were $228.6 million, nearly level with the year-ago $229.9 million.

For full-year 2023, NuStar’s Pipeline generated operating income of $483.2 million and EBITDA of $659 million, compared to operating income of $438.7 million and EBITDA of $617 million in 2022. Revenues were $873.9 million, up from $828.2 million.

“Our refined products systems, along with our ammonia system, generated solid, dependable revenue in 2023 as total throughputs were up compared to 2022, reflecting the strength of these assets and our strong position in the markets we serve in the mid-Continent and throughout Texas,” Barron said.

NuStar reported full-year net income of $273.7 million on revenues of $1.63 billion, up from the year-ago $222.7 million and $1.68 billion, respectively. EBITDA was $776.1 million, up from $694.2 million.

Although the pending $7.3 billion acquisition by Sunoco LP (GM Jan. 26, p. 1) is expected to close as early as second-quarter 2024, 2024 financial expectations were provided for NuStar on a stand-alone basis. The company expects to generate full-year 2024 net income in the range of $220-$260 million and full-year 2024 EBITDA in the range of $720-$780 million.

Sunoco CEO Joseph Kim told analysts in January that the company would be able to accelerate expansion opportunities within the NuStar Ammonia System’s 2,000-mile ammonia pipeline. The company sees the potential due to the growing low carbon ammonia capacity, which benefit the pipeline and storage and export out of its St. James, La., facility.

Ammonia Plant Woes Weigh on Sherritt

Ammonia, Canada, Earnings, Nitrogen

Toronto-based Sherritt International Corp. reported that a prolonged third-quarter outage due to compressor issues at its Fort Saskatchewan ammonia plant required an advancement of significant maintenance funds and resulted in lower fertilizer volumes.

Sherritt had to buy ammonia during the period to meet its needs. Fertilizer prices also declined, and the company took a third-quarter $8.9 million writedown on its fertilizer inventory. Fourth-quarter fertilizer production returned to normal levels. Sherritt said it does not expect a recurrence of the ammonia problem.

In addition to the unplanned maintenance at the ammonia plant, Fort Saskatchewan experienced higher-than-normal maintenance costs, in part due to the planned biannual acid plant shutdown, which identified a larger-than-anticipated remedial scope of work.

Sherritt’s 2023 losses were attributed to lower fertilizer sales; lower fertilizer, nickel and cobalt prices; higher maintenance costs; inventory writedowns; delayed nickel sales; and an increase in rehabilitation and closure costs related to legacy Oil and Gas assets.

The company said fertilizer prices stayed low due to an ample supply of nitrogen. It expects 2024 prices to remain relatively unchanged from 2023.

Fourth-quarter fertilizer production was off only 2%, to 61,092 mt from the year-ago 62,254 mt, while sales volumes were down 10%, to 55,509 mt from 61,664 mt. Average prices were down 36%, to $414.80/mt from $647.03/mt. Revenue fell 42%, to $23.1 million from $39.9 million.

Full-year fertilizer production was off 12%, to 219,707 mt from 250,147 mt. However, sales volumes were level with the prior year at 170,161 mt versus 170,427 mt. Prices were down 28%, to $548.16/mt from $759.91/mt, while full-year revenue was off 28%, to $93.3 million from $129.5 million.

Sherritt reported a fourth-quarter net loss on earnings from continuing operations of $53.4 million on revenue of $34.8 million, down from the year-ago loss of $7.3 million and $48.6 million, respectively. Adjusted EBITDA was a negative $7 million down from a year-ago positive $35.5 million.

Sherritt had a full-year loss from continuing operations of $64.3 million on revenue of $223.3 million, down from the year-ago net income of $63.7 million and $178.8 million. Adjusted EBITDA was $46.1 million versus the year-ago $233.1 million.

As reported last month (GM Jan. 19, p. 24), Sherritt is reducing its workforce across Canada by 10% and is making changes to executive management as it seeks to improve Metals segment operations following a disappointing 2023. Fertilizer is within the Metals segment. Metals will be streamlined, while Technologies will be restructured.Elvin Saruk was named Chief Operating Officer, responsible for leading both Sherritt’s Metals and its Power and Oil and Gas divisions.

OCI Slides after Tough 4Q, Lower Dividend

Ammonia, CAN-17, Earnings, Nitrogen, Urea

OCI Global posted a 69% drop in adjusted EBITDA for full-year 2023, to $1.21 billion from $3.89 billion the previous year, but beat the average analyst estimate of $1.18 billion (BloombergConsensus). Revenue was down 48%, to $5.02 billion from the prior year’s $9.71 billion.

The company reported an adjusted net loss for the year of $162.9 million, missing the $116.6 million estimated loss by analysts (BloombergConsensus). OCI reported an adjusted net profit of $1.34 billion in FY2022.

The loss was “driven primarily by materially lower nitrogen pricing globally,” OCI said in its Feb. 14 earnings statement. The company also cited a “challenging year” for global methanol markets.

During the 12 months, there was an extended IFCO turnaround as well as other planned and unplanned outages in the US with an estimated financial impact of around $44 million.

For the fourth quarter of 2023, OCI reported an adjusted net loss attributable to shareholders of the company of $46 million compared to an adjusted net profit of $204.6 million the previous year. Fourth-quarter adjusted EBITDA was 54% lower year-over-year, to $310.4 million from $669.2 million, while revenue fell 45%, to $1.21 billion from $2.2 billion.

OCI noted that despite a reduction in global nitrogen prices in the fourth quarter, the company’s operations benefited from lower natural gas prices in Europe and the US, as well as a reduced negative impact from realized hedging losses. The company said realized gas hedging losses amounted to $38 million in the fourth quarter.

However, it said higher gas prices later in the quarter led to reduced sales volumes as customers delayed purchases for the spring application season.

The company’s own products sales volumes for the fourth quarter totaled 2.395 million mt, down 2% from the prior year’s 2.64 million mt. Own-produced fertilizer sales volumes were down 6%, to 1.98 million mt from 2.09 million mt

For the full year, own products sales volumes were down 3%, to 10.54 million mt from 10.89 million mt. Own-produced fertilizer sales volumes were 2% lower than in 2022, to 8.47 million mt from 8.63 million mt.

OCI believes the outlook for nitrogen markets remains supportive, underpinned by healthy agricultural demand fundamentals, emerging demand for low carbon ammonia, and tightening supply dynamics in the medium term.

“Nitrogen markets were relatively quiet during the fourth quarter of 2023, and urea prices were impacted by demand deferrals into 2024,” the company said. “However, urea prices have rebounded so far this year as the deferred demand ahead of the spring season application started to materialize in the Northern Hemisphere.”

OCI sees further support for nitrogen fertilizer prices during the coming months driven by low inventories in key importing regions, ongoing restrictions on Chinese exports, low operating rates in Iran due to gas shortages, and supply chain disruption in the Red Sea.

The company further believes medium-term fundamentals remain positive with limited major new supply and a significantly slower pace of capacity additions over the 2024-2027 period compared to the previous three years.

OCI’s shares dropped as much as 5.1% after the company’s forecast for shareholder returns of only $3 billion this year following the sale of the company’s stakes in Fertiglobe and Iowa Fertilizer Co. LLC, an amount in line with only some analysts’ expectations, including Jefferies analyst Charlie Bentley, as cited by Bloomberg.

The Amsterdam-listed company expects $6.2 billion of cash proceeds on a net basis – equating to approximately €27 a share – from the two sales, subject to closing adjustments.

OCI on Feb. 14 said it would use the proceeds from the two sales to “significantly” cut holding company debt to a net cash position by year-end 2024, alongside a “substantial” distribution of capital to shareholders of at least $3 billion. OCI also said it would fund the remaining capital expenditure required to complete its Texas Blue Ammonia project in Beaumont from the sale proceeds.

OCI said construction at the 1.1 million mt/y blue ammonia project is well underway with about $500 million spent to date of a total investment of over $1 billion. The plant remains on track for commissioning in early 2025.

OCI Product Sales Volumes

‘000 mt4Q-2023 4Q-2022 % change FY2023 FY2022 % change
Own Product            
Ammonia 585.9 571.2 +3 1,898.2 1,986.7 (4)
Urea 1,141.8 957.0 +19 4,621.0 4,241.4 +9
CAN143.4 213.9 (33) 877.6 1,018.5 (14)
UA105.2 350.8 (70) 1,073.9 1,383.0 (22)
Total Fertilizer 1,976.3 2,092.9 (6)8,470.7 8,629.6 (2)
Melamine18.7 7.3 +156 63.4 83.8 (24)
DEF94.9 254.4 (63) 645.0 917.2 (30
Total Nitrogen
Products		2,089.9 2,354.6 (11) 9,179.1 9,630.6 (5)
Methanol1305.4 286.0 +7 1,375.6 1,255.1 +8
Total Own Products
Sold 		2,395.3 2,640.6 (2) 10,536.7 10,885.7 (3)
Traded Third-Party            
Ammonia 96.7 76.7 +26 292.3 358.5 (18)
Urea 110.6 223.3 (50) 724.4 1,541.7 (53)
UAN 9.5 121.2 (92) 108.4 329.7 (67)
Methanol 198.7 99.0 +101 510.7 381.3 +34
Ethanol and Other 27.6 9.7 +185 94.3 23.3 +305
AS 31.5 80.9 (61) 273.7 542.2 (50)
DEF 139.5 90.1 +55 374.2 419.3 (11)
Total Traded
Third-Party 		614.1 700.9 (12) 2,378.0 3,596.0 (34)
Total Own Product
and Traded Third-
Party 		3,009.4 3,341.5 (10) 12,914.7 14,481.7 (11)

1 Including OCI’s 50 percent share of Natgasoline volumes

Fertiglobe Profits Decline; Expects Strong Demand

Ammonia, Earnings, Nitrogen, Urea

ADX-listed Fertiglobe Plc, the strategic joint venture between OCI Global and UAE state-owned oil giant Abu Dhabi National Oil Co. (ADNOC), reported a 39% decline in fourth-quarter adjusted EBITDA, to $289.2 million from the prior-year $472.1 million. Revenue also fell 39% year-over-year, to $645.9 million from $1.05 billion.

Fourth-quarter net profit was $94.5 million, down 45% the prior year’s $171.9 million, while adjusted net profit after minorities was $102.5 million for the quarter, some 48% lower than the prior year’s $196.4 million.

Fourth-quarter own-produced sales volumes grew 15% year-over-year, to 1.46 million mt, driven mainly by higher sales volumes. Third-party traded volumes fell 51%, however, to 119,000 mt. Total product sales volumes in the quarter were 5% lower year-over-year at 1.58 million mt.

For the full-year 2023, own-produced sales volumes grew 5%, to 5.71 million mt, while third-party traded volumes fell 57%, to 472,000 mt. Total product sales volumes for the 12 months were 6.18 million mt, a 5% downturn on FY2022’s 6.52 million mt.

Fertiglobe posted a full-year 2023 net profit of $348.9 million, down 72% from the prior year’s 1.25 billion, although the result was essentially in line with the average analyst estimate of $347 million (BloombergConsensus). Adjusted net profit after minorities was $363 million in 2023 versus $1.29 billion the previous year.

FY2023 earnings per share were 4.20 cents versus 15.1 cents in 2022, missing the average estimate of 4.23 cents per share. Adjusted EBITDA for the 12 months was down 59% from the previous year, to $1.0 billion from $2.47 billion. Full-year revenue fell 52%, to $2.42 billion from $5.03 billion, and came in below the average analyst estimate of $2.45 billion.

Fertiglobe attributed the fall in revenues to a decrease in nitrogen product prices, but the company highlighted a 23% quarter-over-quarter growth in revenues and a 45% increase in adjusted EBITDA in the fourth quarter versus the third quarter.

“This growth reflects a strong order book, higher sales volumes, and increased ammonia prices driven by a higher gas prices and tight markets due to supply disruptions,” the company said. “In the fourth quarter of 2023, ammonia prices increased due to widespread supply disruptions, while urea prices were impacted by demand deferrals into early 2024, resulting in reduced imports from key regions.”

Fertiglobe expects demand to recover ahead of the spring application season in the Northern Hemisphere, with healthy demand in other regions, including Brazil and Australia, which will provide a platform for its own prices to move higher. The company said the medium- to long-term outlook for nitrogen markets continues to be supported by limited incremental capacity additions and healthy demand growth.

“Further price support in the coming months is expected to be driven by low inventories in key importing regions, ongoing restrictions on Chinese exports, and supply chain disruption in the Red Sea, to which Fertiglobe has limited exposure,” the company said.

The company said it will pay dividends of $200 million, equivalent to 9 fils per share, for second-half 2023, subject to shareholder approval at the AGM in April. This will take full-year dividends to $475 million, including $275 million already paid in the fourth quarter, and will be “one of the highest dividend yields in the company’s industry and market.”

Fertiglobe said it is also ready for its “next chapter” in light of the announced sale last December of OCI’s 50% + 1 share stake in Fertiglobe to ADNOC for a total consideration of $3.62 billion (GM Dec. 15, 2023).

The completion of the transaction will see OCI fully exiting the Fertiglobe jv and ADNOC becoming the majority shareholder in Fertiglobe with a total ownership of 86.2%. The free float traded on the Abu Dhabi Securities Exchange will remain at 13.8%.

The transaction remains subject to legal and regulatory conditions, including antitrust approvals, but is expected to close during 2024. OCI CEO Ahmed El-Hoshy told investors and analysts at a company earnings call on Feb. 14 that Fertiglobe doesn’t expect any regulatory challenges.

“ADNOC doesn’t have any urea or any material ammonia production outside of Fertiglobe, so it should be relatively straightforward,” he said. “The deal supports our future growth plans and makes us a key component of ADNOC’s ambitious roadmap and will enable Fertiglobe to further leverage ADNOC’s resources, expertise, and network to pursue new growth opportunities, especially in the emerging markets of clean ammonia and blue hydrogen.”

El-Hoshy said Fertiglobe’s priorities will be to continue to unlock potential in its core products of urea and ammonia, accelerate the pursuit of new market and product opportunities, and expand its focus on sustainable ammonia.

“The strategy will be to continue balancing dividend payments with selective investment in value accretive growth projects,” he said. “This will be supported by healthy free cash flow conversion and a robust balance sheet.”

AdvanSix Posts 4Q Loss; 1Q Disruption to Have $23-$27 M Impact

Ammonium Sulfate, Earnings, Featured, Nitrogen

AdvanSix reported a fourth-quarter loss of $5.1 million on sales of $382.2 million, down from year-ago net income of $33.6 million and sales of $404.1 million. Adjusted EBITDA dropped to $15.1 million from $66.6 million.

“Our healthy balance sheet helped to support our performance through challenging market conditions, particularly in Nylon Solutions, while maintaining organic investments and return of cash to our shareholders,” said Erin Kane, President and CEO. “Core to our long-term strategy is accelerating growth in the most profitable areas of our portfolio, continuous improvement to strengthen the underlying earnings power of the business, and sustaining our cost-advantaged business model.”

AdvanSix said market-based pricing during the quarter was unfavorable by 22% compared to the prior year, primarily reflecting reduced ammonium sulfate pricing and lower raw material input costs and a more stable global nitrogen supply environment, as well as lower nylon pricing due to unfavorable supply and demand conditions.

Sales volume increased approximately 16% during the quarter, primarily driven by higher export shipments of ammonium sulfate and nylon. Raw material pass-through pricing was favorable by 1% as a result of a net cost increase in benzene and propylene, both inputs to cumene, which is a key feedstock for some of its products.

Full-year net income was $54.6 million on sales of $1.53 billion, down from the year-ago $171.9 million and $1.95 billion, respectively. Adjusted EBITDA was $153.6 million, down from $308.5 million. Full-year ammonium sulfate sales were $440.9 million, or 29% of the company’s total sales, versus $629 million or 33% for 2022.

Going forward, the company anticipates strong ammonium sulfate seasonal demand supported by continued favorable underlying agriculture industry fundamentals. It expects first-half year-over-year pricing declines amid a lower nitrogen pricing environment.

AdvanSix expects to incur a $23-$27 million impact to first-quarter pre-tax income as a result of the process-based operational disruption at its Frankford, Pa., manufacturing site (GM Jan. 19, p. 1) and a delayed ramp-up to planned utilization rates. This is up from the $18-$23 million assessment the company gave in January. At the time, AdvanSix told Green Markets that ammonium sulfate production at Hopewell, Va., was also impacted, but the company was taking actions to ensure it had adequate supply for the upcoming spring season.

AdvanSix expects 2024 planned maintenance to have a pre-tax impact of $38-$43 million versus $30 million in 2023. It said maintenance will be staggered across unit operations to maintain output.

AdvanSix reported a 2024 Capex of $140-$150 million, reflecting increased spend to address critical enterprise risk mitigation and growth projects, including the company’s SUSTAIN program (GM May 5, 2023), which is a multi-year investment targeting expansion of granular ammonium sulfate production predominately through increased conversion by about 200,000 st/y. The company is targeting 65% conversion in 2024 and up to 75% in 2027.

“While the previously disclosed operational disruption at our Frankford, Pa. manufacturing site is impacting our first-quarter results, our teams have been focused on stabilization of phenol production, which is enabling us to ramp up our Hopewell and Chesterfield manufacturing facilities to our targeted utilization rates,” Kane said.

“We thank our customers, partners, and AdvanSix teammates for their collaboration and agility to mitigate the value chain impact of this event,” she added. “Our focus remains on performing in the current set of industry dynamics and executing levers in our control, including remaining disciplined on cost and optimizing working capital. Our outlook reflects a continued investment in our long-term potential through both our SUSTAIN program’s planned expansion in granular ammonium sulfate production and increased infrastructure spend in 2024 to mitigate enterprise risk.”

CF/Mitsui Blue Project Cost Now Estimated at $3 B; Commissioning Underway at Green Facility

Ammonia, Carbon, Featured, Green Ammonia, U.S.

CF Industries Holdings Inc. and Mitsui & Co. Ltd.’s proposed low carbon ammonia plant at CF’s Blue Point Complex in Louisiana has a cost estimate of $3 billion, according to a recently prepared front-end engineering and design (FEED) study. Initial projections were put at $2 billion in 2022 (GM Aug. 19, 2022).

The FEED was for a 1.7 million mt/y greenfield steam methane reforming (SMR) ammonia facility and carbon capture and sequestration (CCS) technologies.  Approximately $2.5 billion was allocated to the ammonia facility and CCS and approximately $500 million to scalable common infrastructure for the site, such as ammonia storage and vessel loading docks.

The partners have opted to progress two additional FEED studies before making a final investment decision (FID). These will be focused on technologies with the potential to further reduce the carbon intensity of the proposed ammonia plant, and include a previously announced FEED study evaluating autothermal reforming (ATR) ammonia production technology and a recently added FEED study assessing the cost and viability of adding flue gas capture to an SMR ammonia facility. Both FEED studies are expected to be completed in the second half of 2024.

CF and Mitsui also expect greater clarity later in 2024 regarding demand for low-carbon ammonia, including the ammonia carbon intensity requirements of offtake partners as well as government incentives and regulatory developments in local jurisdictions. As a result of these factors, the companies are targeting the second half of 2024 for FID on the proposed ammonia plant.

Will explained to analysts that conventional CCS technologies sequester 70% of the CO2, while the alternatives being explored can pull 90-95%. However, they may have a much higher cost to install as the ATR option would require a very large air separation unit and more electricity.

What the customers want is also a factor. He said the Japanese preliminarily have said they would be willing to accept lower carbon intensity, whereas some other nations, specifically Korea, are looking for carbon intensity that basically has a 90% reduction.

“I would say the Korean government and the customers, as a result, are a little bit behind from a timeline perspective compared to the Japanese, and so we will likely be making a decision around a plan principally targeting the Japanese market first, and then we’ll eventually look at both Korean and potentially European partners,” Will told analysts.

CF said the electrolysis system is mechanically complete and commissioning activities are underway at its 20,000 st/y green ammonia facility at its Donaldsonville Complex. CF said this represents North America’s first commercial-scale green ammonia capacity.

Once the green project is complete, CF said it will move toward the production of blue ammonia. Will told attendees of the BMO 2023 Growth & ESG Conference in December (GM Dec. 8, 2023) that the time for massive investment in green ammonia production is not here yet and it could be decades away. Instead, he said blue ammonia is in big demand.

CF said engineering activities for the construction of a dehydration and compression unit at Donaldsonville continue to advance, all major equipment for the facility has been procured, and fabrication of the CO2 compressors is proceeding. Once in service, the dehydration and compression unit will enable up to 2 million tons of captured process CO2 to be transported and permanently stored by ExxonMobil. Start-up for the project is scheduled for 2025, at which point CF will be able to produce significant volumes of low-carbon ammonia.

CF expects a net benefit from the Donaldsonville blue ammonia project at about $100 million per year. The company said that based on a relatively small volume of decarbonized or blue ammonia that will be available from the company in 2025 and the appetite in the marketplace, it believes that the commodity will be in scarce supply.

CF also reported that it has entered into an agreement for 2024 with BP for the purchase of 4.4 billion cubic feet of certified natural gas, which is double its purchase in 2023 (GM Feb. 17, 2023). The certificates purchased by CF are issued by not-for-profit MiQ and certify that certain natural gas produced by BP has a 90% lower methane emissions intensity – the ratio of methane emissions to natural gas produced – than the industry average. CF said methane emissions throughout the natural gas supply chain are a significant contributor to the lifecycle carbon intensity of ammonia production and the second largest source of Scope 3 emissions for the company.

MMLP Exceeds Expectations; JV to Produce ELSA

Earnings, Sulfur, Sulfuric Acid, Texas

Martin Midstream Partners LP (MMLP), Kilgore, Texas, on Feb. 14 reported that full-year adjusted EBITDA exceeded company expectations by $2.5 million. It also said construction is underway so that a joint venture can produce electronic-level sulfuric acid for the semiconductor industry.

Fourth-quarter adjusted EBITDA for MMLP’s Sulfur Services segment, which includes fertilizer, also exceeded expectations at $7.4 million versus $6 million. The year-ago figure was $5.7 million. MMLP cited increased fertilizer sales and operating fees associated with higher prilled sulfur volume. Despite the uptick, the unit’s fourth-quarter operating income was off at $4.8 million from $9.1 million.

Full-year Sulfur Services adjusted EBITDA was $28.1 million, up from expectations of $26.6 million. The year-ago figure was $30.1 million.

Sulfur Services had full-year operating income of $17.4 million on revenues of $141 million, down from 2022’s $24.2 million and $179.2 million. Fertilizer volumes were up 20%, to 254,000 lt from 2023’s 211,000 lt, while sulfur was up 6%, to 478,000 lt from 452,000 lt.

“Fiscal year 2023 was significant for the partnership as we focused on debt reduction and stability in our earnings by concentrating on our diversified refinery services assets and exiting the butane optimization business,” said Bob Bondurant, President and CEO of Martin Midstream GP LLC, the general partner of the partnership.

“We exceeded our full year adjusted EBITDA guidance by $2.5 million, excluding losses related to the exit of our butane optimization business, and met our long-term goal of adjusted leverage at or below 3.75 times,” he continued. “The partnership had a strong fourth quarter, as each of our four operating segments either met or exceeded guidance, even as we experienced headwinds in the lubricants business and downtime in our marine transportation business due to accelerated regulatory inspections, demonstrating the value of our diversified business model.”

Bondurant noted as well that the company in 2023 started construction on an oleum tower located within its Plainview, Texas, sulfuric acid plant, which will provide feedstock to its joint venture DSM Semichem LLC (GM Oct. 21, 2022) to produce electronic level sulfuric acid (ELSA) for applications in the semiconductor industry.

“We anticipate the project to be complete in the first half of 2024 with a capital spend of $10.4 million this year, which along with our $6.5 million of cash contribution to the joint venture, makes up the majority of our anticipated growth capital expenditures for the year,” he said. “We anticipate this project will begin returning cash flows to the partnership by the fourth quarter of 2024.”

In addition to owning a 10% non-controlling interest in DSM, MMLP will be the exclusive provider of feedstock to the ELSA facility, and its affiliate Martin Transport Inc. will provide ELSA transportation services to end-users. MMLP is partnering with Samsung C&T America Inc. and Dongjin USA Inc. in the venture. The partners said the new facility will incorporate technology currently being utilized to produce ELSA in Taiwan, which exceeds the quality of sulfuric acid being produced in the US.

MMLP-wide fourth-quarter adjusted EBITDA was $29.2 million after giving effect to the May 2023 exit of the butane optimization business, up from the year-ago $28.5 million. The company posted fourth-quarter net income of $500,000 on revenues of $181.1 million, compared to a year-ago net loss of $400,000 and $243.4 million.

Full-year adjusted EBITDA was off at $117.7 million from the year-ago $122 million. The company reported a net loss of $4.5 million on revenues of $798 million, an improvement over the 2023 loss of $10.3 million and $1.02 billion, respectively.

MMLP expects full-year 2024 adjusted EBITDA of approximately $116.1 million, growth capital expenditures of approximately $17.4 million with $16.9 million dedicated to the DSM Semichem jv, and maintenance capital expenditures of $32 million.