All posts by mickeybarb@charter.net

Itafos Reports Higher 3Q Adjusted EBITDA, Lower Income; Confirms 2022 Guidance

Earnings, News, Pacific N.W., Phosphate

Itafos Inc. announced third-quarter adjusted EBITDA of $50.7 million on revenues of $153.2 million, above the year-ago adjusted $41.2 million and $103.0 million, respectively, while reporting lower net income for the period at $8.1 million, 49.7% below $15.7 million in the prior year.

The company cited historic strength in the NOLA DAP market, noting a 22% year-over-year average price increase to $761/st for the quarter, compared to $624/st in 3Q 2021, primarily attributing its third-quarter revenue boost to the company’s Conda integrated phosphate production facility. The company also noted reduced losses due to the February restart of operations at its 220,000 mt/y Arraias sulfuric acid plant in Brazil (GM Feb. 11, 2022).

“The increase in the company’s 3Q 2022 financial performance compared to 3Q 2021 was primarily due to higher realized prices and sales volumes at Conda, which were partially offset by higher input costs,” the company said. “The decrease in net income was primarily due to higher finance and income tax expenses.”

Itafos reported total 3Q capex spend at $8.7 million, up 16% from $7.5 million, attributing the increase to both Conda maintenance and expenditures related to the Arraias restart.

“We are pleased to report continued strong safety, financial, and operational performance during the third quarter,” said Itafos CEO G. David Delaney. “We recognized … continued strong production out of our Conda facility while achieving company record safety performance.”

The company produced 84,908 mt P2O5 at Conda in the third quarter, down 4.8% from the year-ago 89,220 mt P2O5. Sulfuric acid production at Arraias totaled 32,935 mt, compared to zero mt of production in 3Q 2021.

Itafos also touted a debt refinancing effort completed in the third quarter valued at $200 million, in which lenders advanced the company an $85 million term loan, a $35 million letter of credit, and an $80 million asset-based revolving credit facility (GM Sept. 23, 2022).

“On Sept. 22 we completed a major strategic initiative, refinancing our outstanding debt. The new credit facilities [the company] entered into extend our debt maturity and create more flexibility for the funding of the long-term growth of the business,” Delaney said. “As a result of record financial performance for the nine months ended September 2022, we have made significant progress toward deleveraging our balance sheet. In the first three quarters of 2022, we have reduced net debt by $100 million, resulting in a net leverage ratio of 0.5x at the end of the period.”

The company’s net debt on Sept. 30 was $117.7 million, down from $217.7 million at the end of 2021.

Net income for the nine-month period was $85.4 million on revenues of $458.0 million and $174.6 million adjusted EBITDA, beating the year-ago $27.2 million, $296.5 million, and $95.5 million, respectively. Trailing 12-month adjusted EBITDA was noted at $222.6 million, up 55.2% from $143.4 million at the end of 2021.

The company maintained its full-year 2022 guidance of $210-$230 million for adjusted EBITDA and $100-$105 million for net income. Fourth-quarter guidance was $35-$55 million for adjusted EBITDA and $15-$20 million net income.

Itafos also noted a positive outlook for 2023, expecting the current strength in global agriculture and phosphate fertilizer fundamentals to continue, with continued durability in pricing and volume fundamentals in the phosphate fertilizer markets through 2023 relative to the first nine months of 2022.

Conda (thousands $) 3Q-22 3Q-21 9M-22 9M-21
Production Volume (mt P2O5) 84,908 89,220 254,300 246,411
Gross Revenues (loss) 145,274 103,005 441,744 296,463
Net Income (loss) 29,564 28,746 126,786 67,880
Adjusted EBITDA (loss) 54,242 45,864 185,346 107,733
Operating Income (loss) 45,589 39,363 163,688 89,393
Arraias (thousands $) 3Q-22 3Q-21 9M-22 9M-21
Production Volume (mt sulfuric acid) 32,935 0 63,135 0
Net Income (loss) (684) (435) (2,188) (2,255)
Adjusted EBITDA (loss) 182 (926) (66) (2,698)
Operating Income (loss) (364) (1,039) (1,529) (3,039)

Third Union Rejects Tentative Rail Contract; Votes for Two Largest Unions Expected Nov. 21

Featured, News, Transportation, U.S.

Members of a third union – the International Brotherhood of Boilermakers (IBB) – have voted to reject ratification of the tentative agreement with the nation’s major freight railroads, according to a Nov. 14 announcement by the National Carriers’ Conference Committee (NCCC), which represents most Class I freight railroads in national collective bargaining.

The IBB represents just 300 rail employees out of the approximately 115,000 involved in this bargaining round. Seven unions have already voted to ratify the agreement, which is based on recommendations made by a Presidential Emergency Board (PEB) this summer (GM Aug. 19, p. 1) and includes an immediate 14.1% wage increase, retroactive to Jan. 1, 2020, and a 24% wage increase by 2024; $5,000 in lump-sum bonus payments; adjustments to health care premiums; and an additional paid day off.

“The NCCC and IBB previously agreed to maintain a cooling off period until Dec. 9 in the event the tentative agreement was not ratified,” the NCCC said in a statement. “As such, the failed ratification does not present the risk of any strike or job action taken by IBB and the potential for any resulting service disruptions. The NCCC will remain engaged with IBB throughout the remaining cooling off period and will continue to seek an agreement based on the framework recommended by Presidential Emergency Board 250.”

According to the Association of American Railroads (AAR), average rail worker wages under the tentative agreement would reach about $110,000 per year by the end of the five-year contract. When health care, retirement, and other benefits are considered, the AAR said the value of the total proposed compensation package would average about $160,000 per year.

The two largest unions – the Brotherhood of Locomotive Engineers and Trainmen (BLET) and the International Association of Sheet Metal, Air, Rail, and Transportation Workers Transportation Division (SMART-TD) – are expected to announce their voting results on Nov. 21. Combined, those two unions represent about half of all unionized rail employees.

All 12 unions have to approve contracts to prevent a strike, and if any union continues to reject the contract, all the rail unions would honor their picket lines and refuse to work at the end of the cooling off period.

The Brotherhood of Maintenance of Way Employees Division (BMWED), which is the third largest union, representing almost 12,000 rail workers, voted in mid-October to reject the agreement (GM Oct. 14, p. 1), citing ongoing disputes over paid sick leave and other quality-of-life issues. Just two weeks later, the Brotherhood of Railroad Signalmen (BRS), which represents more than 6,000 rail workers, also voted against the agreement (GM Oct. 28, p. 1).

The BMWED and the freight railroads have agreed to extend their cooling offer period until at least Dec. 4 to allow BLET and SMART-TD to complete their voting. As a result, no work stoppage will occur prior to that date. The BRS has also agreed to maintain the status quo until early December while negotiations continue with the NCCC.

Simplot Adds Outlets in Western Canada and Louisiana

Featured, Louisiana, News, Pacific N.W., Saskatchewan

The J.R. Simplot Co. is acquiring 15 agricultural retail outlets in Saskatchewan and two in Louisiana. Simplot has agreed to acquire G-Mac’s AgTeam, an agricultural retailer in Kindersley, Sask. Founded in 2000, G-Mac’s 15 retail stores will now be Simplot Grower Solutions locations.

“We’re thrilled to expand our retail footprint in Western Canada and to provide products and services to help local growers get the most out of every acre,” said Troy Bolt, Vice President and General Manager Retail Business of Simplot Grower Solutions. “We welcome the new employees, customers, and partners and look forward to continuing the G-Mac’s AgTeam legacy of delivering exceptional service and sound agronomic advice.”

“This is an exciting addition to the Simplot team and I look forward to seeing our continued support of the excellent agronomic services, innovation, and customer relationships that these locations and employees have built over the years,” said Doug Stone, President of Simplot’s AgriBusiness group. “Together we will continue to bring a comprehensive variety of crop-related quality products and services to ensure growers get the maximum return from their land and investments in Western Canada.”

With the acquisition, Simplot welcomes more than 100 new employees to the Grower Solutions team, including more than 40 agronomic advisors with local experience, agronomic knowledge, and relationships with growers. Grower Solutions has more than 230 stores serving more than 40,000 customers in the US and Canada. It employs more than 2,750 people, including over 500 agronomic advisors.

Simplot has also signed a purchase agreement with Ouachita Fertilizer Co., Monroe, La., for its retail locations in New Iberia and Bunkie, La. Subject to Simplot’s due diligence. the locations will become Grower Solutions retail outlets upon deal closure, currently anticipated to be December 2022.

“We are looking forward to increasing our service area in Southern Louisiana and to providing products and services to help local growers get the most out of every acre,” said Bolt. “We’re excited to welcome the new employees, customers, and partners to the Simplot community and continuing the Ouachita Fertilizer culture of delivering exceptional customer service, sound agronomic advice, and expertise in precision-placed, suspension fertilizers.”

CHS Inc. – Management Brief

Management Briefs, Northern Plains

CHS Inc. announced the appointment of Megan Rock as Vice President, Sustainability and Innovation, and Chief Sustainability Officer (CSO). She is responsible for developing and executing sustainability and innovation strategies across the $48 billion enterprise.

In this newly-created position, Rock will oversee the integration of sustainability-related topics, including reporting, as well as Cooperative Ventures, a capital fund focused on creating advancements in breakthrough technologies for the agriculture industry.

Most recently, Rock served as Vice President of Corporate Responsibility, Sustainability, and Sustainable Solutions for Bunge Inc. She also held sustainability and environmental management positions in the government and banking sectors.

Rock holds a B.S. in Soil, Environmental, and Atmospheric Science from the University of Missouri and a graduate certificate in advanced studies in environmental policy and management from the University of Denver.

Rock has served on the Board of Directors for Field to Market and Ag Future of America. In 2015, she received the Changemaker of Tomorrow award from Keep Akron (Ohio) Beautiful, and is a member of the St. Louis Business Journal’s “40 Under 40” class of 2020.

Governments Provide Air Products C$475 M for Alberta Hydrogen Complex

Canada, Hydrogen, News, News Briefs

The Canadian federal and the Alberta provincial governments have announced approximately C$475 million in project funding for Air Products’ multi-billion-dollar net-zero hydrogen energy complex in Alberta.

The plan is for the facility, already being executed, to make Edmonton, Alta., the center of Western Canada’s hydrogen economy and set the stage for Air Products to operate one of the most competitive and lowest-carbon-intensity hydrogen networks in the world.

Since the project’s announcement last year (GM June 18, 2021), Air Products has signed a customer agreement with Imperial Oil Ltd. to take approximately 50% of the low-carbon hydrogen from the 165 million standard cubic feet per day hydrogen production facility. This offtake agreement also saw Air Products increasing the facility’s investment from $1.3 billion to $1.6 billion, as well as including engineering enhancements to the production process that will further reduce greenhouse gases at the facility.

The $485 million government funding will come from three separate agreements: $300 million from the Strategic Innovation Fund (SIF), the Government of Canada’s program designed to spur innovation for a better Canada by providing funding for large projects and national innovation ecosystems; over $160 million from the Alberta Petrochemicals Incentive Program (APIP), part of Alberta’s Recovery Plan to bring multi-billion dollar investments to industrial projects throughout Alberta, add value to natural gas production in the province, and help to strengthen, diversify, and bring new life into the province’s economy and create new opportunities and jobs for Albertans; and $15 million, which was previously announced, from Emissions Reduction Alberta’s Shovel-Ready Challenge, which aims to help deliver on the province’s environmental and economic goals by investing in clean technology that cuts greenhouse gases, attracts investment, and creates jobs in Alberta.

Incitec Pivot Launches Strategic Review for Waggaman After Potential Acquisition Approaches

Ammonia, Australia, Featured, Louisiana, News

Incitec Pivot Ltd. (IPL) said on Nov. 15 it has received a number of unsolicited approaches for a potential acquisition of its Waggaman, La., ammonia plant (WALA), and consequently it now will undertake a review of the strategic options for the facility.

IPL said all approaches were expressed to be “indicative, non-binding, and subject to due diligence” and “at this stage, there is no certainty that a transaction will occur.”

The company emphasized that “under any scenario,” it intends to maintain the strategic value of long-term supply of ammonia from Waggaman into its Dyno Nobel Americas (DNA) explosives business.

“The amount of Waggaman ammonia output that goes into internal purchases by DNA varies on how much we purchase from third parties, but at current production it is between 20% to 30% of the plant’s output,” IPL Managing Director and CEO Jeanne Johns told analysts at a company earnings call on Nov. 15.

Waggaman has production capacity of 800,000 mt/y of ammonia.

As to whether IPL is looking to potentially sell a part or all of WALA, Johns said “all options” will be looked at that preserve the 30% integrated margin that IPL currently holds, as well as maximizing the value of the asset.

“Despite the disappointments of the original construction defect, and the incident at the plant this past February, we have now addressed the vast majority of the issues, and the Waggaman facility is running flawlessly since production restarted on April 19,” said Johns.

The plant suffered a rupture in a section of pipe on Feb. 18 that resulted in a release of hydrogen (GM Feb. 18, p. 1), with production only restarting on April 19 (GM April 22, p. 1).

IPL told shareholders at an Investor Day event on Sept. 6 that Waggaman has been producing above its 800,000 mt/y ammonia capacity since the production restart on April 19 (GM Sept. 9, p. 36).

IPL reported that WALA achieved an EBIT of US$343.8 million for FY2022, up from just US$3.6 million in the previous year, despite the downtime earlier this calendar year.

Responding to an analyst’s question about the replacement cost of the WALA site, Johns reminded that when IPL built the plant, it was achieved at “the low end” of the new build cost profile. But she said US construction costs and US inflation have grown substantially since then.

“I think it would be very, very difficult to build it [now] for less than A$1.5 billion [approximately US1.01 billion at current exchange rates],” she said, adding there is no doubt that there is a significant appreciation of the asset from a replacement value, but also a market outlook value.

“The market outlook is ideally suited for blue ammonia. Waggaman is sitting right on top of the right kind of client reservoirs. There’s a lot of industry players who could get synergies for the infrastructure and the 45Q credits,” Johns said.

The 45Q of the US Internal Revenue Code provides a tax credit for CO2storage. A front end engineering design (FEED) study is underway for a carbon capture facility at the Waggaman plant site that will be capable of processing up to 950,000 mt of CO2to transport via a pipeline to a permanent geological sequestration site (GM Sept. 9, p. 1).

Subject to the successful completion of the FEED study, construction of the carbon capture unit at WALA is expected to begin in 2023 and be completed by the end of 2025. The move is part of IPL’s plans to produce de-carbonized ammonia from the plant.

In response to an analyst’s question as to what had changed given that at the time of IPL’s demerger announcement in late May (GM May 27, p. 1), the company still viewed WALA as very strategically important to the DNA business, Johns said Waggaman’s exposure to excess ammonia has always been something on IPL’s mind.

“The asset is still important for the 30% of integrated margin that it provides, and that is why it was built. The 70% is some [of the output] that is under long-term contract. When we looked at the options, we knew both were value accretive. It was really a matter of timing,” she said, citing the change in how such assets are perceived in the marketplace given that the attractiveness of blue ammonia for use in co-firing or the bunkering industry has grown tremendously.

IPL, Johns said, believes this is the right time to explore that value and that Waggaman is a better strategic fit perhaps with a different counterparty.

Pending the completion of the strategic review of Waggaman, IPL now anticipates that the previously communicated timeline for the release of the demerger booklet and the shareholder approval process for the separation of its fertilizers business will be extended by six to 12 months.

The company originally had been targeting “a practical separation” of the two businesses late in the 2022 calendar year, ahead of the shareholder vote in the first quarter of 2023 and formal separation shortly after, subject to required approvals and consents.

Asked if delay to the demerger timeline is solely dependent upon a successful conclusion of the Waggaman strategic options review, Johns said the delay is “a prudent” time estimate, given that it would likely need to go through regulatory approvals, as well as a deal construct.

EU Members Can Prioritize Fertilizers Amid Gas Risks

Europe, Natural Gas, News, News Briefs

European Union fertilizer producers will get continued and undisrupted access to natural gas at the discretion of member states if the region faces a fuel shortage, according to Bloomberg, citing a Nov. 9 statement by the European Commission (EC).

The EC said it could release €450 million from its agriculture reserve in the 2023 fiscal year for farmers affected by high input costs, according to Janusz Wojciechowski, Commissioner for Agriculture. It said fertilizer prices rose by as much 149% in September 2022, compared with the same period a year earlier. It said farmers are deferring and reducing their fertilizer purchases, which risks lowering yields and raising food prices.

The EC also said it would push for a more efficient use of nutrients and will support investments in renewable hydrogen and biomethane for ammonia production.

Another Rail Union Approves Tentative Contract; Deadline for Possible Strike Pushed to December

Featured, News, Transportation, U.S.

Another union representing railroad employees has voted to accept the tentative contract agreement with the National Carriers Conference Committee (NCCC), which represents most Class I freight railroads in national collective bargaining. With at least two of 12 unions having already rejected the contract, however, the possibility of a rail strike still looms in December.

The International Association of Machinists and Aerospace Workers (IAM) District 19, which represents Locomotive Machinists, Roadway Mechanics, and Facility Maintenance Personnel at NCCC freight rail carriers, announced on Nov. 5 that approximately 4,900 of its members voted to approve the negotiated contract, reflecting a 52% majority. The close result came with just 59% of union members participating in the vote, however.

The ratified agreement includes a 14.1% wage increase effective immediately, retroactive to Jan. 1, 2020, and a 24% wage increase by 2024; $5,000 in lump-sum bonus payments; a cap in monthly healthcare costs at $398.97 through the end of the five-year contract in 2025; an additional paid day off; single room occupancy guarantees for traveling roadway mechanics; and guarantees from the railroads to continue negotiations on overtime, travel expenses, and per diem.

“We are confident that this is the best deal for our members. District 19 leadership worked day and night to communicate the agreement’s benefits and what would happen if it was rejected,” IAM said in a statement. “Our union recognizes that the agreement wasn’t accepted overwhelmingly, so our team will continue conversing with our members at our rail yards across the nation. This agreement is the first step in addressing some of the issues in our industry.”

The IAM’s vote brings the total number of unions approving the tentative contract to seven, with two opposed. Three other unions are scheduled to vote later this month, including the two largest – the Brotherhood of Locomotive Engineers and Trainmen Division of the International Brotherhood of Teamsters (BLET), and the International Association of Sheet Metal, Air, Rail, and Transportation Workers – Transportation Division (SMART-TD).

The Brotherhood of Maintenance of Way Employees Division (BMWED), which is the third largest union representing almost 12,000 rail workers, voted in mid-October to reject the agreement (GM Oct. 14, p. 1), citing ongoing disputes over paid sick leave and other quality of life issues. Just two weeks later, the Brotherhood of Railroad Signalmen (BRS), which represents more than 6,000 rail workers, also voted against the agreement (GM Oct. 28, p. 1).

BMWED indicated earlier that a strike could happen as early as Nov. 20. On Nov. 9, however, the Association of American Railroads (AAR) issued a statement saying that BMWED and the freight railroads had agreed to extend their cooling offer period until at least Dec. 4 to allow BLET and SMART-TD to complete their voting. As a result, no work stoppage will occur prior to that date. The NCCC reported in late October that it and the BRS had also agreed to maintain the status quo until early December.

“This agreement to extend the cooling off period affords all unionized employees the opportunity to vote on their agreements free of a looming strike threat,” said AAR President and CEO Ian Jefferies on Nov. 9. “Our goal remains the same – successfully completing this round of bargaining – and we stand ready to reach an agreement with BMWED based upon the Presidential Emergency Board’s recommendations.”

The 12 unions involved in labor negotiations collectively represent approximately 115,000 rail workers at the major Class 1 freight railroads. All 12 unions have to approve contracts to prevent a strike, and if any union continues to reject the contract, all the rail unions would honor their picket lines and refuse to work at the end of the cooling off period.

The railroads have estimated that a rail strike could cost the economy $2 billion per day. Should a strike appear imminent, Labor Secretary Marty Walsh told Bloomberg on Nov. 4 that the US Congress would likely intervene to prevent any work stoppage.

“Worst case scenario, if we don’t get to an agreement, Congress will have to take action,” Walsh said. “That is by design in the Railway Act. If the unions don’t ratify, Congress is the last stop that would have to take action.”

In a Nov. 7 letter to Sen. Chuck Schumer (D-N.Y.), Sen. Mitch McConnell (R-Ky.), Rep. Nancy Pelosi (D-Calif.), and Rep. Kevin McCarthy (R-Calif.), The Fertilizer Institute (TFI) President and CEO Corey Rosenbusch urged the congressional leaders to take “urgent” steps to prevent a rail network shutdown.

“Fertilizer markets have been experiencing extreme challenges for nearly two years, and this includes poor rail service, which is the worst it has been in decades,” Rosenbusch said in the letter. “As such, it is not possible to ‘catch-up’ on lost shipments due to network disruptions or a shutdown.”

Rosenbusch noted that railroads start pulling sensitive cargoes off the line days prior to any rail service stoppage, and fertilizer falls into this category. In September, embargoes were placed on ammonia shipments four days before a scheduled work stoppage on Sept. 16. A last minute deal on Sept. 15 averted the strike (GM Sept. 16, p. 1), but the temporary suspension of ammonia shipments had longer-lasting effects.

“For every day shipments are embargoed, we essentially lose five shipping days because of the ramp down and ramp up,” Rosenbusch said.

“Inflation is hurting all Americans. Poor rail service is a contributing factor, and a complete halt to all freight rail operations would make inflation drastically worse, especially for those who can least afford it,” Rosenbusch’s letter concluded. “America’s farmers and consumers need your help to avoid a catastrophic disruption to freight rail operations.”

Orica FY22 EBIT Up 36%; Refreshed Strategy, Improved Markets Cited

Australia, Earnings, News

Melbourne-based explosives manufacturer Orica Ltd. reported EBIT for the full-year ending Sept. 30, 2022, of A$579 million, up 36% from the year-ago $427 million. Statutory Net Profit After Tax (NPAT) was $60 million, including $257 million of significant item expense after tax. Orica had a FY21 loss of $173.8 million (GM Nov. 12, 2021). Total full-year revenues were up 36%, to $7.3 billion from $5.7 billion.

Following the sanctions placed on Russia, Orica said it completed the exit of its operating business in Russia in September, and related assets have been fully impaired.

Orica said total ammonium nitrate volumes increased 4% from the prior year due to increased mining activity driven by strong commodity prices and the company’s ability to provide security of supply to customers in a tight supply market.

“Our full-year result reflects the strength and resilience of our team, and a commitment to our refreshed strategy, resulting in improved financial performance and growth across all regions,” said Orica Managing Director and CEO Sanjeev Gandhi. “In November 2021, we refreshed our strategy centered on optimizing our operations, delivering smarter solutions, and partnering for progress across our four business verticals of mining, quarry and construction, digital solutions, and mining chemicals.

“This year has presented both challenges and opportunities for our business, including geopolitical tensions, trade sanctions, strong global commodity prices, and security of supply risks,” he added. “Our commercial discipline and collaborative culture, combined with the strength of our global manufacturing and supply network, have positioned us well to capitalize on the current market conditions and opportunities presented by a growing commodities market.”

The company expects FY23 EBIT from continuing operations to increase from FY22’s $563.8 million, which were up 39% from FY21’s $404.6 million.

“We expect the demand for critical minerals to remain strong in the year ahead, and we are well-positioned to navigate ongoing external challenges with the strengths of our global network and culture, while lowering our greenhouse gas emissions,” said Gandhi.

Compass Finalizes Lithium Supply Agreement

Lithium, News, News Briefs, Pacific N.W., Specialty

Compass Minerals on Nov. 10 announced the signing of a binding, multiyear supply agreement to provide LG Energy Solution (LGES), a global manufacturer of lithium-ion batteries for electric vehicles and energy storage systems, with battery-grade lithium carbonate from its Ogden, Utah, solar evaporation lithium brine development. The agreement is the culmination of negotiations announced in June (GM July 1, p. 27).

Per the terms of the agreement, Compass would deliver up to 40% of its planned, phase one battery-grade lithium carbonate production to LGES for an initial six-year term from supply commencement. Purchase pricing will be based on market index under the agreement.

As previously announced, the company expects an annual commercial production capacity of approximately 35,000 mt of lithium carbonate equivalent (LCE) once fully operational, with an initial phase one capacity of approximately 11,000 mt battery-grade lithium carbonate coming online by 2025.

Compass is pursuing the sustainable development of an approximately 2.4 million mt LCE resource on the Great Salt Lake, readily available for extraction through existing permits, water rights, and operational infrastructure at the company’s Ogden facility, the largest of its kind in the Western Hemisphere.