Impairments Weigh on Itafos; Conda Reports Positive Results

Some $146.6 million in impairments on its junior properties weighed on Itafos, Toronto, for the fourth quarter and full year ending Dec. 31, 2018. However, Itafos Conda, which the company acquired Jan. 12, 2018, was in the plus column for the quarter and year.

Idaho-based Itafos Conda, which the company acquired from the former Agrium Inc., Calgary, prior to its merger with Potash Corp. of Saskatchewan Inc., Saskatoon, to become Nutrien Ltd., Saskatoon, has the capacity to produce 550,000 mt/y of MAP, super phosphoric acid (SPA), merchant grade phosphoric acid (MGA), and ammonium polyphosphate (APP).

Nutrien will buy all of the Itafos Conda MAP and provide it with anhydrous ammonia through 2023. The company produces 40 percent of its sulfuric acid and buys the rest from third parties. Itafos Conda uses some 2 million mt/y of phosphate rock, and is involved in expansion plans.

Itafos Conda reported fourth-quarter net income of $16.6 million on revenues of $92.9 million. Adjusted EBITDA was $20.9 million. Fourth-quarter MAP volumes were 101,652 mt, with an average realized price of $473/mt. SPA volumes were 41,079 mt and $1,006/mt, MGA acid (MGA) at 113 mt and $1,106/mt, and APP at 8,602 mt at $396/mt.

The company said the facility achieved its highest-ever production rates in October 2018.

Itafos Conda full-year net income was $84.2 million on revenues of $276.5 million, with adjusted EBITDA of $63.6 million. Full-year MAP sales were 327,851 mt at $439/mt, SPA 128,369 mt at $942/mt, MGA 394 mt at $985/mt, and APP 26,527 mt at $420/mt.

Itafos said global phosphate markets were subdued in first-quarter 2019 due to cold and wet weather in North America and a heavy import line up at NOLA, as well as lower expected imports from India. It noted this has been somewhat offset by the flooding impact on Incitec Pivot Ltd. in Australia, production cutbacks by The Mosaic Co., and fewer exports from China.

Company-wide, due to the impairments, Itafos posted a fourth-quarter net loss of $153.3 million ($1.08 per diluted share) on revenues of $100.6 million. Adjusted EBITDA was $7.6 million. The company had a full-year loss of $113.5 million ($0.82 per share) on revenues of $302.2 million, with an adjusted EBITDA of $34.1 million.

While Itafos Arraias in Brazil achieved commercial production on July 3, 2018, the company said operational challenges occurred thereafter, resulting in lower-than-optimal levels of capacity utilization. The company said lower production volumes due to the implementation of an efficiency improvement program drove fourth-quarter revenues of $7.7 million and a negative adjusted EBITDA of $9.3 million. Full-year revenues were $25.7 million, with negative adjusted EBITDA of $18.6 million. It had a fourth-quarter net loss of $148.1 million and full-year loss of $161.8 million.

Moving forward, Itafos Arraias has a repurpose plan, which is to optimize production with a multi-product portfolio of higher grade SSP, micronutrient SSP, and value-added premium PK compound products. The company plans to procure higher-grade phosphate rock from third parties, and once operational, from Itafos Farim.

Itafos Arraias in Tocantins, Brazil, has production and sales capacity for 500,000 mt/y of SSP and SSP+ products, as well as approximately 40,000 mt/y of excess sulfuric acid. All of the product is sold in Brazil. The company had been sourcing its phosphate rock from three mines it owns within 10 miles of its production facilities.

The company said it successfully completed its biannual sulfuric acid plant turnaround on schedule and budget. It hopes to maximize the sale of excess acid to a growing industrial customer base and to offset energy requirements through its cogeneration capabilities.

On the Brazil market front, it noted that the closure of Petrobras ammonia plants will leave Yara International ASA in significant control of the local market.

Of the $146.6 million in impairments, some $132.3 million was booked to Itafos Arraias, $11.2 million to Itafos Farim, and $3.1 million to Itafos Santana. The company said the Itafos Arraias impairment was primarily due to the delay in ramp-up to optimal capacity utilization and associated capital expenditures and working capital requirements, combined with lower projected run-rate EBITDA due to margin compression.

Nonproducing junior projects include Itafos Farim, phosphate in Guinea-Bissau; Itafos Santana, phosphate in Para. and Brazil; Itafos Araxa, phosphate and rare earth oxide in Minas Gerais, Brazil; and Itafos Mantaro, phosphate in Junin, Peru.