All posts by mickeybarb@charter.net

Nutrien Ltd. – Management Brief

Management Briefs, Saskatchewan

Nutrien Ltd., Saskatoon, on Feb. 16 announced that Mike Frank, Executive Vice President and CEO of Retail, was leaving the company. “On behalf of our management team, we thank Mike Frank for his contributions to the company over the last three years and wish him well in his future endeavors,” the company said in a statement. “We are fortunate to have an experienced global leadership team at Nutrien Ag Solutions and are expecting a robust spring season and 2021 overall.”

There was no immediate word on a replacement.

Darling Ingredients Inc. – Management Brief

Management Briefs, Obituary, Texas

Organics supplier Darling Ingredients Inc., Irving, Texas, on Feb. 23 announced the passing of long-term board member Charles “Mac” Macaluso on Feb. 22. The company said he joined the board in 2002 and most recently served as Lead Director and Chairman of the Nominating and Corporate Governance Committee. For over 20 years, Macaluso served as a Principal of Dorchester Capital LLC, a management consulting and corporate advisory service firm.

Zuari Board Approves Goa Sale to PPL

Ammonia, India, News, News Briefs, Nitrogen, NPK, Urea

The Zuari Agro Chemicals Ltd. Board of Directors on Feb. 22 announced that it has approved the sale of the company’s nitrogen and NPK fertilizer plant at Goa and associated businesses to Paradeep Phosphates Ltd. (PPL) for an agreed enterprise value of $280 million. The board approved the sale in-principle last summer (GM June 26, 2020).

Zuari Agro Chemicals’ Goa site has four production units comprising ammonia and urea, as well as two NPK units. The company said it would use sale proceeds to reduce debt.

PPL is 80.45 percent owned by Zuari Maroc Phosphates Pvt Ltd., a joint venture between Zuari Agro Chemicals and Maroc Phosphore SA, a wholly owned subsidiary of OCP SA. The Indian government owns the remaining 19.55 percent interest in PPL.

PPL has 1.2 million mt/y production capacity for DAP, NPK, and NP.

Traders Sue Brazilian Farmers for Holding Back Presold Soybeans

Brazil, News, News Briefs

Some Brazilian soybean farmers are defaulting on forward sales made months ago when prices were lower, sparking lawsuits and potentially causing financial losses for trading houses, according to Bloomberg.

Farmers in the world’s largest producer and exporter of the oilseed have sold the most supply ever in advance this season, boosted by strong demand and a weak Brazilian real. By last July, 40 percent of the 2020-21 crop was already sold, compared with the five-year average of 12 percent. Since the first negotiations, prices more than doubled on robust China demand, causing some farmers to regret pre-selling so much volume.

While the defaults are still seen as isolated cases, buyers are growing more concerned that more farmers may take similar action, which could lead to financial losses if exporters have to buy beans in the spot market to cover their own sales overseas.

“Trading companies will have a big financial loss if farmers don’t deliver the soybeans,” said Andre Nassar, head of Abiove, a group representing major trading houses. “If the company doesn’t receive the soybeans, it will have to buy [them] in the spot market at a much higher price. The exporter doesn’t have the option to not meet its contract.”

Forward contracts between traders and farmers usually don’t have a washout clause, but a fine that must be paid in case of non-compliance. The penalty ranges from 20 to 50 percent of the value of the non-delivered cargo, according to lawyers. Considering soy local prices may have doubled since the forward sale, farmers can make more by paying the fine and selling the same beans in the spot market.

Some companies have requested permission from a judge to seize the soybeans they’ve purchased from farms, according to Nassar. While there have been “less than 20” episodes like this so far, Nassar said it’s high for this early stage of the harvest, which is delayed with only 15 percent complete.

Fernando Billoti, a partner at Santos Neto law firm, opened 12 lawsuits in the past two weeks against farmers who declined to deliver the soybeans sold in advance to trading houses. “We have clients that considered as suspicious 2,000 forward contracts from a total of 5,000 signed,” he said.

Beyond lawsuits, companies have taken measures to discourage defaults. Last week, Abiove launched a tool to monitor farmers’ fulfillment of soy contracts. The idea is to register contract data in a confidential platform, providing companies information on the aggregate volume sold by each producer.

This is not the first time Brazilian farmers defaulted on forward contracts. In 2004, the same happened after prices soared during the season, leading grain merchants to cut back forward purchases and reduce the funding for planting, according to Frederico Favacho, a lawyer representing Brazil’s grain exporter group Anec.

“There’s a risk and the market is concerned about it,” he said. “But, at the moment, we consider it as a moderate risk and highly concentrated in certain players.”

Mosaic Reports 70 Percent Increase in January Phosphate Revenues

Earnings, News, Phosphate, Tampa

The Mosaic Co., Tampa, released January statistics on Feb. 24, with the Phosphate segment leading the way, with a 70 percent increase in sales revenues and a 24 percent increase in sales volumes over the year-ago month.

January phosphate volumes were 741,000 mt, up from 599,000 mt, while sales revenues were $337 million, up from $198 million.

Potash and Mosaic Fertilizantes segments both reported results below the year-ago period.

Potash volumes were 624,000 mt, down from 728,000 mt, while sales were $151 million, down from $170 million. However, the segment is coming off a big fourth-quarter that saw an 80 percent increase in potash sales volumes (GM Feb. 19, p. 27).

Mosaic Fertilizantes posted January sales volumes of 718,000 mt, off from the year-ago 752,000 mt, while revenues were $262 million, down from $281 million.

Chemtrade 4Q Loss Doubles

Canada, Earnings, News

Chemtrade Logistics Income Fund, Toronto, reported a fourth-quarter net loss of C$25.8 million on revenues of $319.4 million, compared to the year-ago loss of $12.6 million and $355.3 million, respectively. EBITDA was down to $44.2 million from $70.3 million.

The company said the most significant factor that negatively affected EBITDA during the quarter was lower sales volumes for regen acid due to an extended turnaround at a Chemtrade plant. This plant’s main refinery customer took an extended, once-every-five-years turnaround.

Chemtrade also cited the COVID-19-induced reduction in gasoline use, resulting in refineries operating at low utilization rates, which led to the reduced demand for regen services. Merchant acid demand was lower due to the reduced level of economic activity.

The company declared a fourth-quarter distribution of $0.15 per unit.

Chemtrade reported a full-year net loss of $167.5 million on revenue of $1.4 billion, up from the year-ago loss of $99.7 million and $1.5 billion, respectively. EBITDA was down, at $265.3 million from $295 million.

Martin Doubles Sulfur/Fertilizer Income in 2020; COVID-19 Impacts Refinery Segment

Earnings, News, Sulfur, Texas

Martin Midstream Partners LP (MMLP), Kilgore, Texas, reported operating income of $29 million on revenues of $108 million for the year-ending Dec. 31, 2020, for the Sulfur Services segment, which includes both its sulfur and fertilizer business, whereas year-ago results were $14 million and $111.3 million, respectively. Adjusted EBITDA for the segment was $32 million, up from 2019’s $7.4 million.

Fertilizer volumes were up 6 percent, to 275,000 lt from the 2019’s 260,000 lt, while sulfur tons were off 3 percent, to 642,000 lt from 665,000 lt.

Although MMLP reported that fourth-quarter fertilizer volumes were up 44 percent, operating income for the unit was up only slightly to $4.7 million from $4.6 million, and adjusted EBITDA remained level at $7.4 million. MMLP said fertilizer benefited from an improved planting season and higher prices, while sulfur saw lower margins due to COVID-19’s impact on the refining industry. The unit also had a year-ago benefit of including business interruption insurance.

MMLP-wide was in the loss column for both the fourth quarter and full-year, however, the company did meet the low end of its guidance for full-year adjusted EBITDA.

“Despite the difficulties associated with the pandemic and the specific challenges to our industry, we were able to meet the low end of our full year guidance even though the fourth quarter fell short of our expectations,” said  Bob Bondurant, President and CEO of Martin Midstream GP LLC, the general partner of MMLP.

“Headwinds in both our Transportation and NGL segments impacted our results significantly. In the Transportation segment, as expected, reduced refinery utilization resulted in lower demand for our marine assets,” he said. “In the NGL segment, the backwardation of the butane price curve led refineries to delay purchases anticipating a lower price environment in the first quarter of 2021. This negatively impacted our fourth quarter sales volumes, specifically in December, resulting in a misalignment between physical sales and financially hedged volumes.”

“As we look to 2021, I am optimistic that refinery utilization will continue to increase as demand rises as a result of widespread vaccinations, government stimulus and a rebounding economy,” added Bondurant. “Our businesses remain solid with approximately 62 percent of our cash flows tied to fixed-fee contracts. We will continue to focus on optimizing utilization of our asset base, reducing costs, and generating consistent cash flows to meet our leverage reduction goals and return value to our unitholders.”

MMLP reported a full-year loss of $6.8 million on revenues of $672.1 million, compared to the year-ago loss of $174.9 million and $847.1 million. The year-ago loss reflected discontinued operations. Adjusted EBITDA was $94.9 million, down from $108.3 million.

MMLP is giving guidance for 2021 of 95-$102 million in adjusted EBITDA.

MMLP reported a fourth-quarter net loss of $2.56 million on revenues of $180.1 million, down from the year-ago net income of $6.64 million and $241.9 million, respectively. Adjusted EBITDA was $17.4 million, down from $35.5 million.

Land O’Lakes Earnings Up 29 Percent; Improved Crop Nutrition Performance Cited

Earnings, News

Land O’Lakes Inc., Arden Hills, Minn., reported a 29 percent increase in net earnings for the year-ending Dec. 31, 2020, to $266 million on net sales of $13.9 billion, compared to 2019’s $207 million and $13.9 billion, respectively. Land O’Lakes noted that the $59.1 million increase in earnings came despite the economic challenges and volatile market conditions due to impacts of the global COVID-19 pandemic.

“While I’m proud of our performance, I am even more proud of the team that delivered it. In an evolving and difficult landscape, Land O’Lakes was able to perform,” said Beth Ford, President and CEO of Land O’Lakes, Inc. “We focused on growth in a challenging environment by standing up e-commerce across the business units as everyone moved online, developing revenue options for farmers and working to offset significant market declines.”

2020 earnings strength was driven by improved performance in Dairy Foods and Animal Nutrition businesses. Crop Inputs earnings were lower, as crop protection margins were compressed due to unfavorable product mix driven by grower buying decisions and basic manufacturers lowering prices.

Crop Inputs showed improved performance in both its crop nutrition and international businesses while leveraging its investment in digital sales platforms to help its network of brick-and-mortar retailers avoid service disruptions throughout the pandemic.

OCI Posts 4Q Adjusted Net Loss; Own Volume Sales Up 15 Percent

Ammonia, Ammonium Sulfate, Calcium Ammonium Nitrate, Earnings, Methanol, News, Scandinavia, UAN, Urea

OCI NV, Amsterdam, reported a fourth-quarter 2020 adjusted net loss of $44.8 million, compared to the year-ago $43.4 million. The net loss before adjustments for the quarter came in at $56.9 million, versus the year-ago $90.8 million.

Adjusted EBITDA increased 12 percent to $265.9 million, up from $236.8 million, while revenues rose 22 percent, to $1.04 billion from the year-ago $847.8 million.

Fourth-quarter OCI-produced sold volumes increased 15 percent to 3.4 million mt, up from 2.9 million mt the previous year. Traded third-party volume sales were up 80 percent to 696,600 mt in the quarter, and the company’s total sales volumes increased 23 percent year-on-year to 4.09 million mt.

OCI reported that the impact of recent extreme cold weather and the spike in gas prices in the U.S., which resulted in temporary downtime in its U.S. plants, has been “meaningfully more than offset by cash gains from physical and financial gas hedges.”

It said the COVID-19 pandemic has not had a direct impact on its operations, and all of the company’s products have been deemed essential to ensure uninterrupted supply of food and other essential products. It said supply chains and distribution channels continue to perform “resiliently.”

“We are pleased that we ended the year with a strong quarter of robust volume growth and healthy cash generation. As a result, we achieved a reduction in net debt of $332 million during 2020, despite selling prices for all our products nearing trough cycle levels during the year and on average at materially lower levels than in 2019,” said OCI NV CEO Ahmed El-Hoshy.

“We look forward to delivering another year of robust volume growth in 2021, against a backdrop of nitrogen markets that have not looked as positive since at least 2015,” he said.

Fourth-quarter own-produced nitrogen fertilizer sales rose 10 percent to 2.58 million mt, up from 2.35 million mt. The company cited strong growth in all regions and in most products – except ammonia volumes, which it said were lower, partly due to a turnaround in an ammonia line at Sorfert in Algeria.

However, the company said the significant increase in sales volumes across the nitrogen segment could not offset the lower selling prices in the fourth quarter of 2020, especially for ammonia and nitrates. This was the main driver of a decline in adjusted EBITDA for the Nitrogen U.S. and Nitrogen Europe segments.

However, the company reported Fertiglobe’s adjusted EBITDA improved compared to both the fourth quarter of 2019 and the third quarter of 2020, with the operation continuing to benefit from fixed gas agreements and the increase in higher spot gas pricing and its correlation with product pricing.

Overall, OCI’s nitrogen business saw an 8 percent decline in adjusted EBITDA in fourth quarter 2020, to $213.7 million from the year-ago $233.2 million.

OCI sees the outlook for its nitrogen fertilizer portfolio is now considerably more favorable on higher global pricing.

“Global nitrogen demand is supported by rising corn prices driven by higher corn imports from China, with demand in all our key markets forecast to remain robust in 2021 on improved farm economics and a recovery in industrial consumption,” the company said.

It expects a favorable spring application season in its core U.S. Midwest market, with attractive affordability levels for farmers on the back of rising crop prices. For Europe, it said its nitrates order book is healthy going into the second quarter of 2021.

OCI expects higher fertilizer demand in China on strong domestic crop prices, combined with a recovery in industrial urea consumption, to likely limit urea exports from that country in 2021 to a lower level than in 2020.

It noted industrial nitrogen markets remained relatively subdued in the fourth quarter of 2020 due to GDP/industrial activity slowdown, but sees continued recovery and resilience to ongoing lockdowns.

OCI reported its DEF sales in the U.S. reached record levels in the fourth quarter, which, combined with the higher urea sales prices in the U.S., it sees as supporting an improving trend going into 2021.

OCI Nitrogen Segment

$ million Nitrogen U.S. Europe  Fertiglobe Elim. Total Nitrogen
4Q-2020
Total Revenues 149.4 190.5 498.4 (30.1) 808.2
EBITDA 45.5 20.6 149.1 (1.5) 213.7
Adjusted EBITDA 45.5 20.6 149.1 (1.5) 213.7
4Q-2019
Total Revenues 134.0 194.2 357.8 (13.6) 672.4
EBITDA 60.8 41.3 118.5 2.2 222.8
Adjusted EBITDA 60.8 41.3 128.9 2.2 233.2

Total own-produced methanol sales volumes increased 48 percent in the fourth quarter due to a significant step-up in production at OCI Beaumont in Texas and despite downtime at Natgasoline in Beaumont. Fourth-quarter adjusted EBITDA increased on the same prior-year quarter to $67.0 million, up from $8.0 million, due to the increase in volumes, higher methanol prices, and insurance proceeds for downtime at Natgasoline, more than offsetting slightly higher gas prices in The Netherlands and the U.S. compared to a year ago, the company said.

OCI received a final insurance settlement of $120 million as compensation for property damages and business interruption losses at Natgasoline, of which $55 million was received in prior reporting periods. For the remaining balance, $5 million was received in the fourth quarter of 2020 and $60 million in early 2021.

The company reported that it continues its strategic review to explore multiple value-enhancing opportunities for its methanol group, which, it said, is benefiting from a considerably stronger outlook, with methanol markets having strengthened significantly through the fourth quarter and into 2021.

OCI also highlighted it had made further progress in its effort to grow its green portfolio, and said it anticipated new growth opportunities in that respect for the company.

It believes the use of ammonia or methanol as a shipping fuel “is particularly promising,” as these products are among the best-placed alternatives to help this sector decarbonize in a cost-effective way, it said

“We have therefore made it a top priority to make ammonia an established fuel for shipping, and we are also working on accelerating the transition to producing blue and green ammonia at our plants,” the company said.

In the biofuels business, OCI said it has started supplying Essar Oil (U.K.) Ltd. with bio-methanol as part of a biofuel alcohol mix under a new agreement, strengthening its position in renewable methanol. It added it will continue to roll out bio-methanol as a fuel.

OCI intends to announce its 2030 scope 1 and 2 emission reduction targets at its upcoming ESG Investor Seminar, scheduled to take place March 8, 2021.

OCI posted a full-year 2020 net loss attributable to shareholders of $177.7 million, a narrowing from the FY2019 reported net loss of $334.7 million. The adjusted net loss for 2020 came in at $213.4 million, versus the year-ago $208.4 million. Diluted earnings per share were $0.847, compared with the year-ago $1.598 per share.

FY2020 adjusted EBITDA was 16 percent up on the year at $869.8 million, up from $748.4 million, while revenue increased 15 percent to $3.47 billion, up from $3.03 billion.

OCI Product Sales Volumes

‘000 mt 4Q-2020 4Q-2019 % change FY2020 FY2019 % change
Own product            
Ammonia 380.0 490.3 (22) 1,656.8 1,907.1 (13)
Urea 1,472.4 1,187.2 +24 4,763.2 3,110.8 +53
CAN 290.7 258.7 +12 1,371.8 1,140.8 +20
UAN 434.2 411.2 +6 1,749.9 1,489.6 +17
Total fertilizer 2,577.3 2,347.4 +10 9,541.7 7,648.3 +25
Melamine 37.0 39.2 (6) 144.6 135.8 +6
DEF 181.0 152.2 +19 636.2 508.7 +25
Total nitrogen products 2,795.3 2,538.8 +10 10,322.5 8,292.8 +24
Methanol1 602.4 406.2 +48 1,926.5 1,628.7 +18
Total own products sold 3,397.7 2,945.0 +15 12,249.0 9,921.5 +23
Traded third party            
Ammonia 108.1 18.4 +488 284.3 160.6 +77
Urea 275.1 65.2 +322 910.5 329.5 +176
UAN 22.6 3.7 +511 41.3 24.1 +71
Methanol 35.2 84.8 (58) 258.8 482.6 (46)
AS 200.7 195.5 +3 712.8 713.6 0
DEF 54.9 19.0 nm 227.0 73.3 nm
Total traded third party 696.6 386.6 +80 2,434.7 1,783.7 +36
TOTAL   4,094.3 3,331.6 +23 14,683.7 11,705.2 +25

1 Including OCI’s 50 percent share of Natgasoline volumes

JPMC Posts 35 percent Net Income Boost in 2020, Revenues Decline

Earnings, Jordan, News, Phosphate

Jordan Phosphate Mines Co. (JPMC), Amman, has reported a 35 percent rise in full-year 2020 net income attributable to equity holders of the company of JD29.6 million (approximately $41.7 million at current exchange rates), up from the previous year’s JD21.85 million, according to a company filing to the Amman stock exchange.

The net income boost came despite a 5 percent fall in revenue to JD606.6 million, down from JD640.8 million.

Production of phosphate rock declined 5 percent year-over-year, to 8.73 million mt from 9.14 million mt, while fertilizer production from DAP increased 28 percent, to 707,000 mt versus the year-ago 550,000 mt.

Phosphate rock sales fell 5 percent to 8.55 million mt last year, down from 9.03 million mt. Fertilizer sales were 38 percent higher year-over-year, reaching 776,000 mt, up from 561,000 mt.