Intrepid Potash Inc., which went public in April with a successful stock offering, reported net income of $33.1 million for the first quarter ending March 31, 2008, up dramatically from last year’s first-quarter net income of $6.4 million. Citing strong global demand for fertilizer and a “steep climb” in the price of potash that began in the fourth quarter of 2007, the company said its first-quarter performance even bested its full-year 2007 net income figure of $29.7 million.
“The potash industry is in the midst of an unprecedented demand-driven market, fueled by numerous drivers, including an ever-increasing demand for a more nutritious diet, especially for more protein, resulting from rising populations and growing GDP in developing countries,” said Intrepid CEO Bob Jornayvaz. “These factors have led to significant growth in demand for grains, soybeans, rice, palm oil, and sugar cane, to name a few. I believe these demand-driven markets tend to be stronger, last longer, and have significant underlying support. Intrepid is focused on investing capital in new capacity and efficiency projects to bring on additional low cost tons to satisfy the needs of our customers.”
Sales for the three months ended March 31, 2008, rose to $84.4 million from $48.2 million during last year’s first quarter. Less freight costs, production costs, and warehousing and handling costs, the company realized a gross margin of $34 million for the first quarter, compared with $11.8 million last year. First-quarter income adjusted for significant non-recurring and non-cash items was $27.5 million, compared with $5.1 million last year. Intrepid said net income in the first quarter included $7 million of insurance proceeds related to the reconstruction of a damaged warehouse. EBITDA for the quarter was $38.9 million, also up significantly from last year’s $11 million.
On a pro forma basis, Intrepid reported first-quarter income of $20.3 million, or 27 cents per share, compared with income of $3.9 million, or 5 cents per share, in the year-ago quarter. Operating income for the quarter increased to $29.3 million from $9.2 million last year. Cash from operating activities was $17.1 million, up almost $15 million from last year ?Çô and evidence, the company said, of its “ability to generate stronger cash flow as potash prices increase.”
Intrepid said it produced 224,000 st of potash during the first quarter, a 3 percent increase over last year’s 218,000 st. The company said it sold 213,000 st of potash in the first quarter at an average FOB mine or net sales price of $295/st, compared with 209,000 st at $178/st FOB during the first quarter of 2007. The $117/st increase, Intrepid noted, was achieved in spite of the company having committed roughly 70 percent of its first-quarter sales volumes at prices that were negotiated back in September 2007, before the significant uptick in potash pricing.
Intrepid also referred to its succession of posting hikes for red granular potash FOB Carlsbad, N.M., noting that the price moved from $317/st FOB at the end of 2007 to $582/st FOB for the month of June. “We estimate that every $10 per ton increase in the price of potash will have a pro forma annual earnings impact of approximately $0.07 per share,” the company said.
Intrepid also reported first-quarter production volumes of 56,000 st of langbeinite, a specialty fertilizer containing potassium, magnesium, and sulfur that is marketed under the registered name of Trio®. That figure was up 24 percent from the 45,000 st produced during the first quarter of 2007.
The company said it sold 93,000 st of langbeinite in the first quarter at an average FOB mine or net sales price of $123/st, up from last year’s 48,000 st at $108/st FOB. Intrepid said the large increase in sales volumes was due in part to increased production, but primarily resulted from the sale of inventories that had been intentionally built up in late 2007 to meet export orders. As with potash, Intrepid also tracked its price increases for langbeinite, from $156/st at the end of 2007 to $281/st FOB for the month of June.
Intrepid reported $11.2 million in capital investments for the quarter, which included upgrades such as the addition of two new underground miners, one replacement miner at the West Mine and one miner to create an additional operating panel at the East Mine. The company completed the installation of the additional operating panel in the East Mine in March, which will allow the operation of five mining crews instead of four, and will result in a combined increase of potash and langbeinite production of 30,000 st annually.
Intrepid said the majority of its 2008 capital investment budget of $80-$95 million will be spent later in the year. One key project is the development of its HB Mine, which is a solar evaporation solution mining project in Carlsbad. The company said it is moving forward with the permitting process for the mine. “The timing of the capital expenditures for the development of this project is dependent upon the timing of approval of all necessary permitting and the project will take approximately two years from that date to reach completion and full capacity,” Intrepid said.
Intrepid Potash said it expects to produce 870,000-890,000 st of potash in 2008, along with 210,000-230,000 st of langbeinite. Its estimates for production costs for the year included $140-$150/st for potash, and $75-$85/st for langbeinite.