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Intrepid 1Q Earnings Climb on Higher Potash, Trio Prices

Earnings, Featured, News, Potash, Specialty

Intrepid Potash Inc. reported first-quarter net income of $31.4 million ($2.31 per share) on sales of $104.4 million, up from last year’s net income of $2.5 million ($0.18 per share) on sales of $71.5 million. Intrepid said its first-quarter profitability was driven primarily by higher prices for potash and Trio®, which more than offset lower potash sales volumes during the quarter.

Adjusted EBITDA for the quarter was $50.2 million, up $37.3 million from last year’s first quarter and the best since the third quarter of 2012. Adjusted earnings per share were $2.41 for the quarter, which missed the average analyst estimate of $2.44. Net sales of $3.92 billion were up 71 percent year-over year, but missed the average analyst estimate of $4.08 billion. Bloomberg reported that Mosaic shares dropped 4.5 percent after the net sales miss.

“In the backdrop of close-to-record high potash prices, Intrepid delivered exceptional first-quarter results,” said Bob Jornayvaz, Intrepid’s Executive Chairman and CEO. “We believe the outlook for Intrepid for the remainder of 2022 and the next couple years is very positive as the supply-demand balance for potash should continue to support strong economics.”

Potash segment sales in the quarter increased 30 percent from last year, to $56.4 million, driven primarily by a 149 percent increase in its average net realized sales price, to $703/st. The segment’s higher revenue was achieved despite a 41 percent year-over-year drop in potash sales volumes, to 69,000/st for the quarter. Intrepid said it entered the year with fewer tons in inventory and less potash available in its ponds after a below average 2021 production season.

“On the supply side, the December 2021 sanctions on Belarus took effect in April and strong international pricing continues to absorb supply, which is helping create a U.S. market with minimal excess swing capacity in the near-term,” the company said.

Potash production in the first quarter totaled 103,000 st, down 9 percent from last year’s first quarter, while segment gross margin totaled $29.1 million, more than triple the $8.7 million generated in the first quarter of 2021.

Intrepid said potash pricing continues to be supported by tight supply and steady demand. The company announced a $50/st increase in April (GM April 1, p. 13), which it expects to realize on spot sales in the second quarter.

“Despite our reduced sales volumes as a result of few tons available and unfavorable weather in various parts of the U.S. in the first quarter, which delayed planting, higher commodity prices supported application rates in most of our markets and we are well positioned to meet our customers’ needs as the spring season progresses,” Jornayvaz said.

Potash segment byproduct sales in the quarter decreased by 17 percent from last year, to $4.8 million, due to lower water and magnesium sales, partially offset by higher salt sales. Intrepid said magnesium chlorides sales decreased from last year due to a mild winter, which limited purchases of deicing products in the first quarter. Salt sales were up from last year due to higher realized pricing and growth in the industrial and pool salt markets.

Trio segment sales were up 73 percent from last year, to $41.4 million, driven by a higher average net realized sales price of $469/st in the quarter. Trio sales volumes increased modestly to 71,000 st during the quarter. The Trio segment generated gross margin of $16.1 million and production volumes of 65,000 st during the quarter, 16 percent higher than last year’s first-quarter production volumes.

Oilfield Solutions sales totaled $7.0 million during the quarter, up $2.7 million from last year. Intrepid said the sales increase was driven primarily by higher fresh water sales, surface use agreement sales, brine water sales, and produced water royalties, offset by higher coasts of good sold due to increased contract labor and rental expenses for water recycling equipment. The company said it also incurred additional contract labor expenses and increased water transfer fees during the quarter.

Intrepid noted several improvement products underway at its potash facilities. These include a new injection pipeline at HB, another potash cavern in Moab, Utah, and upgraded wells at its Wendover, Utah, site, which the company expects will add production volume as early as spring 2023. The company said it is also running additional underground shifts at its East mine to increase Trio availability.

“While potash prices remain elevated, we believe crop prices should continue to drive steady demand in the U.S., and U.S. potash prices are still at a record differential to Brazil,” the company said. “Looking into the back half of the year, as our potash production returns to more normal levels after the below-average 2021 evaporation year, our cost-per-ton should also improve, supporting strong cash flow generation.”

The company said it has approximately $80 million in cash on hand and $74 million available under its revolving credit facility as of April 30, 2022, for total liquidity of approximately $154 million.

Potash 1Q-22 Q-21
Sales (000 st) 56,442 43,578
Gross Margin ($000) 29,064 8,673
Sales Volume (000 st) 69 117
Production Vol. (000 st) 103 113
Avg Realized Price ($/st) 703 282
Trio 1Q-22 Q-21
Sales (000 st) 41,052 23,694
Gross Margin ($000) 16,140 (70)
Sales Volume (000 st) 71 69
Production Vol. (000 st) 65 56
Avg Realized Price ($/st) 469 233
Oilfield Solutions 1Q-22 Q-21
Sales (000 st) 7,000 4,253
Gross Margin ($000) 1,972 505

CVR Reports 1Q Income, Sales Improvements

Ammonia, Earnings, News, Texas, UAN

CVR Partners LP, Sugar Land, Texas, on May 2 reported first-quarter 2022 net income of $94 million ($8.78 per common unit) on net sales of $223 million, compared to a net loss of $25 million ($2.37 per common unit) on net sales of $61 million in last year’s first quarter. EBITDA was $123 million, compared with EBITDA of $5 million for the first quarter of 2021.

The company’s average realized gate prices for UAN were up 212 percent in the quarter, to $496/st from $159/st in last year’s first quarter. Ammonia prices were up 252 percent over the prior year, to $1,055/st from $300/st.

“CVR Partners achieved strong first-quarter results led by robust global industry conditions,” said Mark Pytosh, CEO of CVR Partners’ general partner. “The U.S. spring crop planting season is progressing, and a good season will be critical to supporting global food security. We expect industry conditions to remain firm for the remainder of 2022.”

CVR Partner’s fertilizer facilities produced a combined 187,000 tons of ammonia during the first quarter of 2022, down only slightly from the 188,000 tons produced in last year’s first quarter. Of this year’s production total, 52,000 net tons were available for sale while the rest was upgraded to other fertilizer products, including 317,000 tons of UAN. In first-quarter 2021, 272,000 tons of UAN were produced.

The company said it has turnarounds planned for summer 2022 at both its Coffeyville, Kan., and East Dubuque, Ill., facilities. The company said it incurred turnaround expenses of $0.1 million for Coffeyville and $0.5 million for East Dubuque during the first quarter.

CVR Partners also announced that on May 2, 2022, the Board of Directors of its general partner declared a first-quarter 2022 cash distribution of $2.26 per common unit, which will be paid on May 23, 2022, to common unitholders of record as of May 13, 2022. The company said it also achieved its targeted $95 million in debt reduction during the first quarter by redeeming the remaining $65 million of its 9.25 percent Senior Secured Notes due 2023.

“During the past four quarters, CVR Partners has returned an equivalent value to unitholders of approximately $13.30 per common unit through declared cash distributions and unit repurchases, in addition to the $95 million debt reduction, equating to $8.89 per common unit,” Pytosh said.

Sales (000 st) 1Q-22 1Q-21
Ammonia        40 32
UAN 322 239
Plant Gate Price $/st 1Q-22 1Q-21
Ammonia        1,055 300
UAN 496 159
Production (000 st) 1Q-22 1Q-21
Ammonia – gross 187 188
Ammonia – net 52 70
UAN 317 272
Feedstock 1Q-22 1Q-21
Petroleum Coke ($/ton) 56.46 42.91
Natural Gas ($/mmBtu) 5.54 3.10

Stronger Pricing Drives Mosaic’s 1Q Results

DAP/MAP, Earnings, Featured, News, Potash Muriate

The Mosaic Co. reported adjusted EBITDA of $1.45 billion in the first quarter of 2022, up from $560 million last year and slightly above the Bloomberg Consensus of $1.44, which averages the projections from major analytical firms. Revenues were up 71 percent year-over-year to $3.9 billion, as stronger pricing more than offset lower volumes. The gross margin rate in the quarter was 36.7 percent, up from 18.9 percent in the first quarter of 2021.

First-quarter net income was reported at $1.18 billion ($3.19 per diluted share), up from last year’s $157 million and above the Bloomberg Consensus of $900.3 million. Adjusted earnings per share (EPS) for the first quarter was $2.41, above last year’s $0.57, but below the Bloomberg Consensus of $2.44.

“Mosaic’s first-quarter results show the strength of our business, which is able to meet customer needs while also delivering value for our shareholders,” said Joc O’Rourke, President and CEO. “Looking forward, we expect higher annual production across our global platform in both potash and phosphates, as a result of the completed ramp up of Esterhazy K3, a higher run-rate at Colonsay, and a recovery of phosphate output from our North American operations.”

Net sales in the Potash segment totaled $1.06 billion for the first quarter, up from $477 million last year, due to higher prices partially offset by lower volumes. Gross margin for the quarter was $579 million, compared to $140 million last year. Potash operating earnings totaled $563 million, and adjusted EBITDA was $651 million in the first quarter.

First-quarter potash sales volumes were down 188,000 mt compared to the 2021 first quarter, reflecting logistical constraints that delayed shipments. Mosaic said winter weather negatively impacted rail performance, which forced containment at its Colonsay and Belle Plaine mines.

Mosaic said Esterhazy K3 is now at its full MOP annual run rate of 5.5 million mt, and Colonsay is operating at an expanded annual run rate of 1.3 million mt. Total potash production is expected to exceed recent historical levels for the remainder of 2022, the company said. MOP cash costs were $81/mt in the first quarter, compared to $64/mt last year, with most of the increase resulting from higher price-related royalties that were up $12/mt from the first quarter of 2021.

Net sales in the Phosphate segment were $1.50 billion for the quarter, up from $1.00 billion last year, due to higher year-over-year prices, partially offset by lower volumes. Gross margin was $528 million, compared to $173 million last year. Phosphates operating earnings totaled $493 million and adjusted EBITDA was $632 million in the quarter.

Production of finished phosphates totaled 1.7 million mt in the quarter, down 9 percent year-over-year, and sales volumes totaled 1.7 million mt, down 19 percent year-over-year. Mosaic said shipments were negatively impacted by lower available inventories as well as poor rail performance due to Covid-related labor shortages. Rail cycle times are improving, Mosaic said, but will likely not reach normal levels until the end of the second quarter.

Mosaic said the price of ammonia realized in cost of goods sold increased to $532/mt during the quarter, up $216/mt from last year. The company said roughly 80 percent of its first-quarter ammonia consumption was internally produced or sourced from its long-term, natural gas-based CF Industries ammonia contract. Mosaic said it is receiving the maximum volume of ammonia, approximately 720,000 mt/y, under the CF contract.

Net sales in the Mosaic Fertilizantes segment were $1.49 billion for the quarter, up from $763 million last year due to higher year-over-year prices, partially offset by lower volumes. Gross margin was $219 million, compared to $103 million last year. Mosaic Fertilizantes operating earnings totaled $187 million and adjusted EBITDA was $233 million for the quarter. Mosaic said the segment’s results benefited from inventories built late in 2021 that were sold at higher market prices, especially toward the end of the first quarter.

Looking ahead, Mosaic said the war in Ukraine, ongoing supply chain constraints, and high crop prices that justify nutrient application all “point to persistent tight markets for both phosphates and potash.” The company expects Phosphate segment sales volumes of 1.9-2.1 million mt and Potash sales volumes of 2.4-2.6 million mt in the second quarter.

Realized pricing for both nutrients is expected to reflect market pricing on a 60-75 day lag as a result of the impact of delayed rail performance, Mosaic said. For phosphates, second-quarter DAP prices on an FOB basis are expected to be $140-$160/mt higher than in the first quarter. Phosphate production costs will be impacted by the rise in input costs, Mosaic said, though prices are expected to outpace the rise in raw materials. For potash, second-quarter MOP prices on an FOB basis are expected to be $40-$60/mt higher than prices realized in the first quarter.

Mosaic said growth investment in the business is expected to total approximately $400 million in 2022, reflecting the ramp up of Esterhazy K3, reserve additions for a mine extension at South Fort Meade, and other projects.

The company also said it is exploring expanded output across potash and phosphates through targeted debottlenecking projects and a restart of idled capacity. Mosaic said its global annual potash operating run-rate now stands at 10.8 million mt, but has the potential to grow by an additional 1.5 million mt by the second half of 2023. North American phosphate production in 2022 is expected to be roughly 1 million mt higher than production in 2021, the company said.

Mosaic said it expects to complete its goal of reducing long-term debt by $1 billion later this year with the retirement of $550 million, which matures in November. The company repurchased $422 million in shares during the first quarter, which includes the execution of the previously announced Accelerated Share Repurchase (ASR). Settlement of the ASR occurred on April 22 and required an additional payment of $54 million to compensate for the performance of MOS shares since the ASR was initiated on Feb. 24, the company reported.

Potash (millions) 1Q-22 1Q-21
Sales Volume (mt) 1.8 2.0
Gross Margin ($/mt) 323 71
Operating Earnings 563 125
Adjusted EBITDA 651 212
MOP Selling Price ($/mt) 582 200
Phosphate (millions) 1Q-22 1Q-21
Sales Volume (mt) 1.7 2.1
Gross Margin ($/mt) 318 84
Operating Earnings 493 153
Adjusted EBITDA 632 271
DAP Selling Price ($/mt) 785 477
Mosaic Fertilizantes (millions) 1Q-22 1Q-21
Sales Volume (mt) 1.8 2.1
Gross Margin ($/mt) 120 50
Operating Earnings 187 90
Adjusted EBITDA 233 104
Finished Product Selling Price ($/mt) 817 370

CF, Mitsui to Build Blue Ammonia Production Facility on Gulf Coast

Blue Ammonia, Featured, Green Ammonia, Japan, News, U.S. Gulf

CF Industries Holdings Inc. and Mitsui & Co. Ltd. on May 3 announced their intention to jointly develop a greenfield ammonia production facility in the U.S. Gulf Coast region. The new facility will produce blue ammonia by leveraging carbon capture and sequestration processes to reduce carbon emissions by more than 60 percent compared to conventional ammonia.

“Our work with Mitsui has reinforced our shared belief that blue ammonia will play a critical role in accelerating the world’s transition to clean energy and that demand for blue ammonia will grow meaningfully in the second half of this decade,” said Tony Will, CF President and CEO. “We believe that the U.S. offers considerable advantages for blue ammonia production due to access to plentiful and low-cost natural gas, the regulatory and legal framework in place, and the geology suitable for permanent carbon sequestration.”

The two companies said they have secured an exclusive right to acquire a Gulf Coast site suitable for an export-oriented production facility. CF will have 52 percent and Mitsui will have 48 percent ownership of the intended joint venture, with CF responsible for plant operations and maintenance and Mitsui leading the marketing and distribution of the blue ammonia into Asia.

The companies said they are also discussing a commercial expansion of the joint venture to leverage Mitsui’s considerable marketing and distribution capabilities into that market.

“We look forward to working with CF Industries to develop the low-carbon ammonia project in the U.S.,” said Takashi Furutani, Executive Managing Officer and Chief Operating Officer of Basic Materials Business Unit of Mitsui. “Energy solutions remain a strategic focus area for Mitsui; thus, we are excited to commence this new business opportunity with CF Industries in light of global climate action. As a responsible member of the global business community, we will continue to contribute to creating an eco-friendly and sustainable future.”

The companies anticipate that a 9-12 month front-end engineering design (FEED) study will commence shortly, with a final investment decision on constructing the facility expected in 2023. Assuming roughly four years for construction and commissioning, the new project would begin production in 2027 at the earliest.

CF also expects to produce up to 2 million tons/year of blue and green ammonia at its existing facilities beginning in 2024. This includes a $200 million investment to construct a CO2 dehydration and compression facility at its Donaldsonville Complex in Louisiana (GM Nov. 5, 2021).

CF said orders for all major equipment items have been placed and detailed engineering is well underway for the Donaldsonville project. Once the unit is in service and sequestration is initiated, the facility will be able to produce up to 1.7 million tons of blue ammonia per year, CF said, which is equivalent to 1 million tons of net-zero carbon ammonia.

“We believe that ammonia will play a critical role in accelerating the world’s transition to clean energy and that demand for blue ammonia for this purpose will grow meaningfully in the coming years,” Will said. “Our intended joint venture with Mitsui and our project to enable a significant volume of blue ammonia from Donaldsonville starting in 2024 confirms our position at the forefront of this emerging global market.”

Plant Nutrient Revenue Up for Compass Minerals

Earnings, News, Southern Plains, Specialty

Compass Minerals, Overland Park, Kan., on May 5 reported that its Plant Nutrient segment posted second-quarter revenue of $54.3 million, up 1 percent from last year’s second quarter, with the increase driven by a 28 percent increase in average sales prices largely offset by lower sales volumes.

Second-quarter operating earnings for the segment fell $0.9 million year-over-year, however, to $4.4 million, while EBITDA for the quarter was reported at $13.2 million, down from $14.1 million in the 2021 second quarter. The company said favorable pricing was offset by higher per-unit costs and lower production volumes.

Second-quarter operating margin for the Plant Nutrient segment was 8 percent compared to 10 percent last year, the company reported, and EBITDA margin was 24 percent compared to 26 percent last year.

Second-quarter Salt segment revenue totaled $391.3 million, up 6 percent year-over-year, which the company said reflected a 6 percent increase in sales volumes primarily driven by higher North America highway bid season commitments. Salt segment average sales prices were flat year-over-year, with a 3 percent decline in highway deicing average sales prices partially offset by a 9 percent increase in industrial (C&I) average sales price.

“Compass Minerals delivered year-over-year revenue growth during the quarter, in large part enabled by our expanded Salt commitments and strong Plant Nutrition pricing,” said Kevin S. Crutchfield, Compass President and CEO. “Unfortunately, intensifying inflationary pressures – particularly related to escalating fuel surcharges – and ongoing SOP production challenges continued to compress profitability to levels below what I believe is our normalized earnings potential.”

Salt segment operating earnings in the second quarter decreased $42.3 million to $49.3 million year over year, while EBITDA declined $44.1 million to $65.5 million over the same period. Salt segment operating margin was 13 percent in the second quarter, down from 25 percent last year, and EBITDA margin decreased to 17 percent from 30 percent over the same period, primarily due to higher distribution and production costs and lower highway deicing pricing.

Second-quarter consolidated revenue for the company was up 5 percent year-over-year, driven by the increase in highway deicing sales volumes, an 8 percent improvement in consumer and industrial (C&I) sales volumes, and higher Plant Nutrition and C&I pricing. Consolidated operating earnings for the quarter decreased $56.0 million to $20.0 million year-over-year, and Adjusted EBITDA was lower by $47.7 million over the same period, to $64.8 million, primarily driven by higher distribution and production costs.

“We are focused on mitigating the impact of these challenges to the extent possible through continued pricing actions, executing a successful North America highway salt bid season, balancing production volumes with expected demand to improve margin capture, and targeted productivity initiatives,” Crutchfield said.

The company has lowered its estimate of fiscal 2022 consolidated adjusted EBITDA to a range of $170-$200 million from its previously announced range of $200-$235 million, largely due to escalating fuel surcharges across all transportation modes in its Salt segment and continued SOP production yield challenges. Compass said these impacts are expected to only be partially offset by higher pricing in Plant Nutrition and targeted productivity initiatives.

Plant Nutrition (millions) 2Q-22 2Q-21
Sales 54.3 53.7
Operating Earnings 4.4 5.3
EBITDA 13.2 14.1
Sales Volumes (000 tons) 74 94
Avg. Sales Price ($/ton) 736 573
Salt (millions) 2Q-22 2Q-21
Sales 391.3 369.0
Operating Earnings 49.3 91.6
EBITDA 65.5 109.6
Sales Volumes (000 tons) 5,331 5,028
Avg. Sales Price ($/ton) 73.39 73.38

Higher Prices Boost CF’s 1Q Earnings; Anticipates 91-93 Million Corn Acres

Ammonia, Ammonium Nitrate, Earnings, Featured, News, UAN, Urea

CF Industries Holdings Inc. reported first-quarter net earnings attributable to common stockholders of $883 million ($4.21 per diluted share) on net sales of $2.9 billion, compared with net earnings of $151 million ($0.70 per diluted share) on net sales of $1.0 billion in last year’s first quarter.

EBITDA for the quarter was $1.68 billion and adjusted EBITDA $1.65 billion, compared with $398 million last year. CF said its North American manufacturing network achieved record first-quarter gross ammonia, UAN, and diesel exhaust fluid (DEF) production volumes. Gross ammonia production was reported at 2.613 million tons; UAN at 1.865 million tons; granular urea at 1.074 million tons; and AN at 405,000 tons.

“We ran our plants extremely well during the first quarter and expanded our considerable logistics capabilities to help North American customers prepare for the spring fertilizer application season,” said Tony Will, CF President and CEO. “Global grains stocks remain extremely low, an issue that has become amplified because of Russia’s invasion of Ukraine. We think it will take at least 2-3 years to replenish global grains stocks.”

The first-quarter net earnings total missed the Bloomberg Consensus of $892 million, which averages the projections of major analytical firms, while net sales and adjusted EBITDA exceeded the average analyst projections of $2.56 billion and $1.4 billion, respectively (GM April 29, p. 25).

CF said average selling prices for the quarter were higher across all segments due to strong global demand and decreased supply availability, as higher energy costs drove lower operating rates and geopolitical factors disrupted the global fertilizer supply chain. In North America, CF said first-quarter sales volumes were higher than last year due to greater supply availability from higher capacity utilization rates.

Cost of sales for the first quarter was higher than last year, primarily due to higher natural gas costs. CF said the average cost of natural gas reflected in the company’s cost of sales in the first quarter was $6.48 per MMBtu, compared with $3.22 per MMBtu in 2021.

Capital expenditures in the first quarter were $63 million. CF projects capital expenditures for full-year 2022 to be in a range of $500-$550 million, which includes expenditures at CF’s Donaldsonville, La., Complex related to green and blue ammonia projects.

CF said it achieved its highest railcar utilization rate in over five years and highest volume of quarterly rail shipments of nitrogen in ten years. “Supply chain disruptions have developed in the second quarter, particularly related to rail service issues, that the company continues to manage,” CF said. CF noted that it has also chartering three times its typical volume of U.S.-flagged vessels to move UAN to the U.S. East and West Coasts.

CF said it expects planted corn acreage in the U.S. to total 91-93 million acres this year, above USDA’s March 31 Prospective Plantings estimate of 89.5 million acres. CF said it expects global nitrogen industry dynamics to remain strong for the foreseeable future, with robust global nitrogen demand coupled with tight global nitrogen supply and wide energy differentials between North America and marginal production in Europe and Asia.

“Production returns in 2022 on all crops are forecast to be historically high despite high input costs, and the company believes that prices will bid in more corn acres than the USDA planting intentions report from March,” CF said. “U.S. manufacturing and mining activity has remained positive, further supporting nitrogen demand in the region.”

CF said it expects India to tender on a regular basis during the year to meet its urea demands, with total urea imports projected at approximately 8 million mt in 2022, below recent record years. CF said it expects urea exports from China to be limited through at least the first half of 2022 due to China’s export ban, but the company believes some level of nitrogen exports will resume in the second half of 2022.

Urea consumption in Brazil is expected to remain strong in 2022, the company said, supported by high crop prices. CF noted that fertilizer tradeflows to Brazil will be among the most affected by the barriers to Russian exports. With Russia supplying more than 90 percent of the ammonium nitrate imported into Brazil in recent years, CF said it believes Brazilian buyers will substitute other nitrogen fertilizers for AN this year.

As for Europe, CF said natural gas prices remain elevated due in part to the Russian invasion of Ukraine and the uncertainty about gas flows from Russia. Forward curves for natural gas in Europe remain above historical norms, CF said, challenging nitrogen producer profitability and forcing European production into the position of global marginal producer.

CF said it redeemed $500 million in debt on April 21, 2022, lowering gross long-term debt to $3 billion, and repurchased approximately 1.3 million shares for $100 million during the first quarter of 2022. CF’s Board of Directors increased the quarterly dividend by 33 percent to $0.40 per share, a 33 percent increase over the previous dividend. The dividend will be paid on May 31, 2022, to stockholders of record as of May 16, 2022.

Production (000 st) 1Q-22 1Q-21
Ammonia        2,613 2,479
Gran Urea 1,074 1,184
UAN-32 1,865 1,689
AN 405 475
Ammonia 1Q-22 1Q-21
Net Sales ($/M) 640 206
Gross Margin ($/M) 360 126
Sales Volumes (000 st) 727 683
Avg Selling Price ($/st) 880 302
Gas Costs ($/mmBtu) 6.48 3.22
Gran Urea 1Q-22 1Q-21
Net Sales ($/M) 765 399
Gross Margin ($/M) 495 135
Sales Volumes (000 st) 1,096 1,320
Avg Selling Price ($/st) 698 302
UAN 1Q-22 1Q-21
Net Sales ($/M) 1,015 232
Gross Margin ($/M) 670 2
Sales Volumes (000 st) 1,828 1,514
Avg Selling Price ($/st) 555 153
AN 1Q-22 1Q-21
Net Sales ($/M) 223 105
Gross Margin ($/M) 52 10
Sales Volumes (000 st) 428 438
Avg Selling Price ($/st) 521 240
Other 1Q-22 1Q-21
Net Sales ($/M) 225 106
Gross Margin ($/M) 121 16
Sales Volumes (000 st) 545 609
Avg Selling Price ($/st) 413 174

Nutrien’s 1Q Benefits from Higher Prices, Strong Retail; More Potash Capacity Increases Considered

Earnings, Featured, News, Nitrogen, Phosphate, Potash, Saskatchewan

Citing higher realized prices and a strong performance from its Nutrien Ag Solutions retail segment, Nutrien Ltd. reported record net earnings of $1.4 billion ($2.49 diluted net earnings per share) and adjusted EBITDA of $2.6 billion in the first quarter of 2022, up from $133 million ($0.22 diluted net earnings per share) and $806 million, respectively, in last year’s first quarter.

“Global agriculture and crop input markets are being impacted by a number of unprecedented supply disruptions that have contributed to higher commodity prices and escalated concerns for global food security,” said Ken Seitz, Nutrien’s Interim President and CEO. “The situation emphasizes the need for long-term solutions that support a sustainable increase in global crop production.”

Nutrien Ag Solutions delivered record first-quarter adjusted EBITDA of $240 million, with retail sales and gross margin both increasing by 30 percent over last year. Sales volumes decreased due to a pull forward of sales into the fourth quarter of 2021 and delayed spring field activity in North America, partially offset by strong demand in South America and Australia.

Nitrogen adjusted EBITDA increased to $995 million, Nutrien reported, with higher net realized selling prices more than offsetting higher natural gas costs and lower sales volumes due to unplanned production outages, along with the delayed North American planting season. Cost of goods sold increased primarily due to higher natural gas costs and higher raw material costs.

Nutrien said global nitrogen supplies have tightened due to reduced availability from Russia, as well as the Chinese government restrictions on urea exports. Russian natural gas supply uncertainty has also contributed to very high and volatile natural gas prices in Europe, the company said, which has led to reduced nitrogen operating rates in the region. Nutrien said it expects Henry Hub natural gas prices to average $5.50-$6.50 per MMBtu in 2022, well below import pricing levels in Europe and Asia.

Potash adjusted EBITDA increased to $1.4 billion in the quarter due to higher net realized selling prices, which more than offset a small reduction in total sales volumes and higher royalties and provincial mining taxes. The company said its North American sales volumes decreased due to a delayed start to the planting season, but offshore volumes increased due to strong global demand. Cost of goods sold increased in the quarter primarily due to higher royalties resulting from increased selling prices.

Phosphate adjusted EBITDA increased to $239 million, more than double last year’s first quarter, due to higher net realized selling prices, which more than offset higher raw material costs and lower sales volumes due to the wet spring planting season. Industrial and feed net selling prices increased to a lesser extent than fertilizer prices, Nutrien said, due to a lag in price realizations relative to spot prices. Cost of goods sold increased primarily due to significantly higher sulfur and ammonia input costs.

Nutrien said it is raising its full-year 2022 adjusted EBITDA guidanceand full-year 2022 adjusted net earnings per share guidance, primarily due to the expectation of higher realized selling prices, increased potash sales volumes, and higher Retail crop nutrients and crop protection products gross margins.

Nutrien has raised potash sales volume guidance to 14.5-15.1 million mt in 2022. The company’s nitrogen sales volume guidance was reduced to 10.7-11.1 million mt in 2022, reflecting the impact of unplanned plant outages that occurred during the first quarter of 2022.

The company is also weighing further increases to potash production as sanctions continue to limit shipments from Russia and Belarus, Seitz said on a May 3 earnings call. In March, Nutrien said it planned to increase potash production capability to roughly 15 million mt in 2020, up nearly 1 million mt from previous expectations, with the majority of the additional volume anticipated in the second half (GM March 18, p. 1).

“We expect to generate higher earnings and cash flows in 2022, which provides an opportunity to accelerate our strategic initiatives that we believe will advance sustainable agriculture practices and create long-term value for all our stakeholders,” Seitz said. “This includes the potential to expand our low-cost fertilizer production capability, enhance our leading global distribution network and proprietary products business, and return additional cash to our shareholders.”

Nutrien reported that it repurchased approximately 9 million shares year-to-date as of April 29, 2022, under its normal course issuer bids, for a total of approximately $740 million.

Retail (millions) 1Q-22 1Q-21
Adjusted EBITDA 240 109
Gross Margin 845 652
Total Sales 3,861 2,972
Cost of Goods Sold 3,016 2,320
Potash (millions) 1Q-22 1Q-21
Adjusted EBITDA 1,406 380
Gross Margin 1,545 320
Net Sales 1,850 611
Cost of Goods Sold 305 291
Nitrogen (millions) 1Q-22 1Q-21
Adjusted EBITDA 995 300
Gross Margin 860 150
Net Sales 1,462 573
Cost of Goods Sold 640 440
Phosphate (millions) 1Q-22 1Q-21
Adjusted EBITDA 239 97
Gross Margin 207 66
Net Sales 563 344
Cost of Goods Sold         360 282

AdvanSix Reports Record 1Q Sales and Earnings, Cites “Robust” Ammonium Sulfate Performance

Earnings, News

AdvanSix, Parsippany, N.J., reported record sales, earnings, and margins for the first quarter, reflecting what the company described as “robust ammonium sulfate fertilizer performance.” Sales for the quarter were up 27 percent from last year’s first quarter, to $479.1 million, driven by higher pricing across the company’s ammonium sulfate and nylon product lines.

Net Income for the quarter was $63.1 million, up $34.9 million from last year’s first quarter. Adjusted EBITDA came in at $103.2 million, reflecting an increase of $45.6 million from last year, and adjusted earnings per share of $2.26 increased $1.21 versus the prior year. Ammonium sulfate sales totaled $154.7 million during the quarter, representing 32 percent of total sales and more than double the $70.8 million sales posted in last year’s first quarter.

“AdvanSix delivered robust first-quarter results to start 2022, delivering both sequential and year-over-year top and bottom line growth,” said Erin Kane, AdvanSix President and CEO. “Our collective organization contributed to achieving record sales, earnings, and margins in the quarter reflecting the advantage of our diverse portfolio, as well as disciplined execution to serve our key customers and meet strong end market demand amid a tightened supply environment.”

AdvanSix said it is targeting significant earnings growth in 2022, with continued healthy North American demand for nylon and chemical intermediates. The company noted that it closed the acquisition of U.S. Amines in the first quarter (GM Feb. 18, p. 1), a North American producer of high-value intermediates used in agrochemicals, pharmaceuticals, and other applications, and expects to successfully integrate that business to deliver year-one earnings accretion.

Capital expenditures of $21.0 million in the quarter increased $6.8 million versus the prior year, AdvanSix reported. AdvanSix expects capital expenditures to be $95-$105 million in 2022, and it expects the pre-tax income impact of planned plant turnarounds to be approximately $32-$37 million for the year.

“Looking forward, we see healthy to strong demand across our end markets, and in particular a set of constructive industry factors in agriculture and nitrogen and sulfur fertilizers,” Kane said. “While the macro environment remains dynamic on a number of fronts, our cost-advantaged asset base and diverse product portfolio continue to support our expectations for significant earnings growth and robust cash flow in 2022.”

The company’s Board of Directors declared a quarterly cash dividend of $0.125 per share on the company’s common stock, payable on May 31, 2022, to stockholders of record as of the close of business on May 17, 2022.

BHP Looks at Acceleration Options for Jansen

Australia, News, News Briefs, Potash, Saskatchewan

BHP Group Ltd. is considering ways it could speed up development of the US$5.7 billion Jansen potash mine in Saskatchewan as potash prices surge amid supply shortfalls. BHP Group Minerals Americas President Ragnar Udd was in Saskatchewan last week evaluating acceleration options, according to a Bloomberg report.

“If there are options to bring it forward – there may be a month or two in it one way or the other – we will take a look at that,” the report cited him as saying in an interview on May 3. But Udd added that BHP isn’t building Jansen “for what may play out in the next six months,” but “rather for its long-term value.”

BHP’s Board gave the final investment approval last August for the Jansen Stage 1 to go forward (GM Aug. 20, 2021). Completion of Stage 1 is currently targeted for calendar 2027. On completion, Jansen Stage 1 will have capacity to produce 4.35 million mt/y of potassium chloride.

The project to complete the excavation and lining of the mine’s production and service shafts and the installation of essential surface infrastructure and utilities is now 99 percent complete, and the Stage 1 project is 5 percent complete, BHP reported last month (GM April 22, p. 30).

BHP plans to market and sell Jansen potash directly to customers rather than selling via the Canpotex export organization, Udd re-iterated. Product will be railed to the Westshore terminal in Delta, B.C., for export shipment.

BHP Canada Inc., a subsidiary of BHP Group, inked an agreement last July with Vancouver-based Westshore Terminals LP for the terminal company to provide port services to the proposed Jansen potash mine at its Westshore terminal (GM July 23, 2021). Certain existing infrastructure at the Westshore terminal will be modified to support handling potash at the terminal’s berth 2.

E.U. to Add Belaruskali, BPC to Proposed Sanctions List

Belarus, Europe, News, News Briefs, Potash

The European Union (E.U.) is proposing to add Belarusian potash producer Belaruskali OAO and its marketing/export arm Belarusian Potash Co. (BPC) to the list of sanctioned companies in its proposed sixth package of sanctions against Russia, according to a Reuters report on May 4, citing people familiar with the matter.

The proposed new sanctions will also target Belarusian state-run oil refinery OJSC Naftan, according to Reuters, as well as a phase-out of E.U. imports of Russian crude oil and petroleum products. The European Commission sees Belarus as playing a supporting role in Russia’s invasion of Ukraine.

Imports of Belarusian potash into the E.U. have been prohibited since February this year, when the Commission widened its ban to include all grades of Belarusian potash imports (GM March 4, p. 30).

The Commission first imposed a ban on certain grades of Belarusian potash from June 25, 2021, following the forced landing of a Ryanair flight and the arrest of journalist Raman Pratasevich and his girlfriend in Minsk on May 23 (GM May 28, 2021). The initial sanctions excluded a key grade of Belarusian potash: potassium chloride with a potassium content evaluated as K2O by weight, exceeding 40 percent but not exceeding 60 percent on the dry anhydrous product.

In its fifth package of sanctions against Russia adopted on April 8, the Commission imposed a cap on Russian imports of potassium chloride as a way to avoid the ban on potash imports from Belarus being circumvented via Russia (GM April 8, p. 1). The E.U. set a quota of 837,570 mt on Russian imports of potassium chloride (CN 3104 20) into the Bloc from July 10 to July 9 the following year, and effectively at historic import levels.

European Commission President Ursula von der Leyen, addressing the European Parliament in Strasbourg on May 4, has also called on the E.U.’s 27 member countries to phase out imports of Russian crude oil within six months and refined products by the end of this year. She said the phasing out of Russian oil will be done in an “orderly fashion” and in a way that allows the E.U. and its partners to secure “alternative supply routes and minimizes the impact on global markets.” The E.U. gets about 25 percent of its oil from Russia.

The proposed sanctions package requires the unanimous approval by all 27 Member States to come into effect. The latest sanctions became possible, according to media reports, after Berlin dropped its opposition, and von der Leyen’s proposal asked that Hungary and Slovakia, both hugely dependent on Russian oil, be given more time to meet the ban.

She also proposed that Sberbank, Russia’s largest bank, and two other major Russian banks be disconnected from the SWIFT international banking payment system, and called for a ban on three state-owned broadcasters.