LSB Industries Inc. reported increased sales for the fourth quarter and year ending Dec. 31, 2008; however, net income was off. Fourth-quarter net income was $3.6 million ($.16 per diluted share) on sales of $179.5 million, versus the year-ago $4.5 million ($.20 per share) and $134.6 million, respectively. Operating income dropped to $1.8 million from $11.2 million.
“The decline in fourth quarter operating income was partly attributable to certain unusual loss items primarily related to the steep decline in commodities and the effects of the general economic slowdown, both occurring in the latter half of 2008,” said LSB CFO Tony Shelby. In addition, income was negatively impacted by additional unrealized losses relating to commodities contracts still held at year-end of $2.3 million, and $5.1 million as a result of unplanned downtime in the third quarter at the Cherokee nitrogen plan, which was offset by income of $7.6 million from a litigation judgment.
The chemical segment had a fourth-quarter loss of $3.1 million on sales of $94.8 million, versus the year-ago income of $7.9 million and $66.4 million, respectively.
For the year, LSB reported net income of $36.5 million ($1.58 per share) on sales of $749 million, versus 2007’s $46.9 million ($1.84 per share) and $586.4 million. Operating income was $59.1 million in 2008, up slightly from 2007’s $59 million.
Chemical segment operating profit for the year was $31.3 million on sales of $424.1 million, versus the year-ago $35.0 million and $288.8 million.
Going forward, LSB is upbeat that agricultural sales volumes will be about the same in 2009 as in 2008, though due to sales price declines, sales dollars will be down. The company also said that after a period of unprecedented price volatility, that there has been some settling and the market is moving forward. “We expect that many of our mining and industrial customers will take less product in 2009 than in 2008 due to the downturn in housing, automotive and other sectors,” said Barry Golsen, LSB president and chief operating officer. “However, to a certain degree we are insulated by sales agreements with either minimum volume requirements or fixed profit arrangements.”
LSB reiterated that it has received permits to restart its Pryor, Okla., nitrogen plant and is moving ahead with plans for the plant to restart in the third quarter, producing 325,000 st/y of UAN and 35,000 st/y of anhydrous ammonia. LSB told analysts that more than one party is interested in the offtake from the plant, and that it expects an agreement in 45 days. To proceed with the startup it expects to spend another $6-$8 million on capital equipment. In total, it expects to spend some $13-$17 million to complete the startup, with some $7-$9 million borrowed.
While LSB believes sales will be off in its Climate Control business due to the economy, it says the unit should see growth opportunities under the federal stimulus plan as its geothermal heat pumps and other products are used to modernize government facilities. In addition, the unit should benefit from tax breaks for the installation of efficient heating and cooling systems.