Intrepid 4Q net income off 70 percent, potash sales volumes move up 60 percent

While Intrepid Potash Inc. fourth-quarter net income fell 70 percent from year-ago levels, potash sales volumes moved up 60 percent, thanks mainly to positive movement in November. Fourth-quarter net income was $6.7 million ($.09 per diluted share) on sales of $73.1 million, versus the year-ago $22.7 million ($.30 per share) and $79.5 million, respectively. Actual potash and langbeinite (Trio^TM) sales volumes moved up to 150,000 st and 25,000 st, respectively, versus the year-ago 94,000 st and 17,000 st.

“The fourth quarter was characterized by weather-driven demand for potash at market prices, indicating that the North American potash market may be returning to a more historical level of demand,” said Bob Jornayvaz, Intrepid CEO. “North American farmers faced an extremely wet October in the corn growing region, followed by much improved conditions during November, allowing them to apply potash in the fields at more historically normal levels. This resulted in our selling 65,700 tons of potash in November. Given the fall applications and the robust activity that we have seen thus far in 2010, potash application rates appear to be returning to more typical levels. Our inventories have begun to decline as a result.

“Although 2009 presented Intrepid with many challenges, we successfully managed through the difficult market environment by staying focused on margins and deploying capital investment dollars to projects designed to lower our per tons costs. Looking forward, we believe that 2010 sales volumes should be improved from the last twelve months, and we are beginning to ramp up our mines and plants to operate at more normal production rates. The continued strength of our balance sheet provides us the flexibility to make balanced business decisions in what remains a promising, but somewhat uncertain market.”

Intrepid said its current red granular inventory is fully committed through the end of March. It said it continues to move some volumes forward into the distribution system with certain large distributors to assure customers that Intrepid product will be in place and available to meet their requirements. The company added that it has also made sales into April.

Intrepid said it moved more potash in January-February 2010 than it did for the entire fourth quarter of 2009. While it didn’t give the precise 2010 number, the fourth quarter number was 150,000 st.

The company noted that farmers bought potash in November even before prices dropped as they did in late December/early January.

On March 1, Intrepid’s potash posting went from $360/st FOB to $390/st FOB, and its Trio price went from $181/st to $196/st.

Intrepid said it plans to bring its West mine back to more historic capacity utilization by mid-year. It said it is now running all Carlsbad operations on a 24-7 schedule.

Intrepid expensed $9.4 million in the fourth quarter due to abnormal production costs associated with weather-related disruptions at the Carlsbad East facility, and also due to operating at a lower rate at the West and Wendover locations (GM Jan. 25, p. 14).

Intrepid is spending $14 million in 2010 to build a compaction facility at its Moab, Utah, location. This will allow the company to compact 100 percent of the product there so that it can all go into the agricultural market. The non-compacted product goes into the oil and gas drilling markets. While overall rig count rates have been going up, Intrepid said it has not seen the increased rates in the Rocky Mountains.

Intrepid is also eyeing a $70-$160 million upgrade to make more of its Trio product granular, rather than standard. The company said that it sold out of granular product during 2009, but that standard, which is popular in the export market, was in less demand. The cost of the upgrade will depend on how fast and how far it opts to go in this regard. At the present time it expects the expenditure, which is still being weighed, to be toward the lower end of the range.

For the year ending Dec. 31, 2009, net income was off 55 percent, to $55.3 million ($.74 per share) on sales of $301.8 million, versus 2008’s $124.1 million ($1.65 per share) and $415.3 million, respectively. Potash sales volumes were off 39 percent, to 440,000 st from 724,000 st. Langbeinite sales were off 28 percent to 149,000 st, down from 207,000 st.