LSB Industries Inc., Oklahoma City, reported second-quarter net income of $103.4 million on net sales of $284.8 million ($1.15 per diluted share), up from the year-ago $23.7 million ($0.32 per share) and $140.7 million, respectively. Adjusted EBITDA was $158.1 million, up from the year-ago $46 million.
“We had another quarter of record results with significant year-over-year growth in net sales, adjusted EBITDA, and EPS,” said Mark Behrman, LSB President and CEO. “We benefitted from higher selling prices compared to last year, and our strategic commercial initiatives enabled us to optimize our sales mix in the face of a dynamic market environment.
“Nitrogen pricing declined through the second quarter from April’s peak levels,” he added. “This decline was largely due to a combination of wet weather throughout the Cornbelt, which delayed the fertilizer application season, along with the typical drop in fertilizer demand headed into the summer season.
“Even so, pricing remains well above year ago levels, and there are multiple supply and demand factors currently at play that we expect will support strong pricing for the remainder of 2022 and for 2023, if not longer, even in the event of a recession,” Behrman continued.
Behrman told analysts that longer-term, LSB believes it will take two-to-three years of good corn growing seasons to bring the stock-to-use ratios back in line with historical averages.
“Our robust second-quarter cash flow further enhanced our balance sheet, putting us in a financial position that we expect will enable us to pursue growth opportunities while at the same time, weather a potential economic downturn,” he said. “In May our Board authorized a $50 million stock repurchase program to return capital to shareholders by taking advantage of the value opportunity they believe currently exists with our shares. Over the longer term, we believe we have an opportunity to drive shareholder value through debottlenecking projects that we are evaluating.
“These projects can materially increase the production capacities of our facilities, enhancing our profit margins as we capitalize on the operating leverage inherent in our business model,” Behrman added. “We expect to formalize our debottlenecking plans by the end of this year and anticipate moving forward on one or more of these projects in early 2023.
“In addition, we continue to advance our decarbonization activities,” he concluded. “Following our late-April announcement of our CO2 capture and sequestration or ‘blue’ ammonia project at our El Dorado facility, in late May we announced a feasibility study for a zero-carbon or ‘green’ ammonia project at our Pryor facility.”
Behrman reminded analysts that the company is performing planned turnarounds at the El Dorado and Pryor facilities during the third quarter. He said each turnaround is expected to last approximately 30 days and result in combined lower ammonia production of approximately 60,000 st, which will also impact downstream production and sales of UAN, nitric acid, and other products.
He added that the NuStar ammonia pipeline, which is utilized to ship ammonia from the El Dorado plant, will also be down for scheduled maintenance for approximately 6-8 weeks in the third quarter and will further lower company ammonia sales during the quarter.
While third-quarter natural gas costs are expected to be about double year-ago levels, Behrman expects third-quarter adjusted EBITDA to be $40-$50 million, exceeding year-ago levels. Fourth-quarter is also expected to surpass year-ago levels, and full-year is expected to be around $400 million, up from 2021’s $191 million and 2020’s $65.5 million.
As a result of high European gas prices, Behrman expects ammonia prices to remain well above multi-year averages for the balance of 2022 and for the full-year 2023 even if European gas costs decline in coming months. Even with higher gas prices in the U.S., he noted that U.S. nitrogen producers have a significant advantage, with current cost of ammonia production in Europe put at $2,000 mt due to gas costs.
Six-month net income was $162.2 million ($1.81 per share) on net sales of $483.8 million, up from the year-ago $10.4 million (negative $0.28 per share) and $238.8 million, respectively. Adjusted EBITDA was $259.2 million, up from $63.3 million.
| Product (Gross Sales $) | 2Q-22 | 2Q-21 | % Change |
| AN & Nitric Acid | 91,142 | 56,739 | 69 |
| UAN | 76,986 | 29,899 | 157 |
| Ammonia | 89,444 | 38,541 | 132 |
| Other | 22,231 | 15,517 | 43 |
| Total | 284,803 | 140,696 | 102 |
| Sales Volumes st | 2Q-22 | 2Q-21 | % Change |
| AN & Nitric Acid | 162,014 | 186,962 | (13) |
| UAN | 130,561 | 121,995 | 7 |
| Ammonia | 75,526 | 84,540 | (11) |
| Total | 368,101 | 393,497 | (6) |
| Avg Selling Price $/st | 2Q-22 | 2Q-21 | % Change |
| AN & Nitric Acid | 525 | 259 | 103 |
| UAN | 553 | 231 | 139 |
| Ammonia | 1,164 | 441 | 164 |
| Other Factors | 2Q-22 | 2Q-21 | % Change |
| Avg Nat Gas ($/mmBtu) | 7.15 | 2.78 | 157 |
| Tampa NH3 $/mt | 1,257 | 545 | 131 |
| UAN Southern Plains $/st | 612 | 342 | 79 |