Martin Midstream Partners LP (MMLP) reported a 64% drop in first-quarter operating income for its Sulfur Services business, which includes both sulfur and fertilizer. Operating income was $4.55 million on revenues of $35.7 million, down from the year-ago $12.65 million and $59.1 million, respectively. Adjusted EBITDA was off at $7.2 million from $15.1 million.
Total segment sales volumes were down 32% to 135,000 lt from 198,000 lt. Sulfur volumes were off 35% at 74,000 lt from 114,000 lt, while fertilizer dropped 27% to 61,000 lt from 84,000 lt.
“We had Adjusted EBITDA of $7.2 million compared to guidance of $9.6 million,” said Bob Bondurant, CEO of Martin Midstream GP LLC, the general partner of MMLP, referring to the Sulfur Services segment in a call with analysts. “The cash flow missing our guidance was driven by underperformance in our fertilizer group, which had Adjusted EBITDA of $3.9 million in the first quarter compared to guidance of $6.7 million.
“The primary driver of the cash flow miss was the quantity of fertilizer sold,” he added. “We missed our volume forecast by approximately 27%, as agriculture demand has been significantly delayed due to the impact of unfavorable weather in our marketplace. Also, because of reduced fertilizer demand, our margins have been negatively impacted relative to our guidance.”
However, Bondurant said currently in April, MMLP is seeing increased fertilizer demand compared to March and is optimistic it can achieve its second quarter volume forecast, especially considering the USDA estimated 92 million acres of corn forecasted to be planted. MMLP is giving second-quarter fertilizer Adjusted EBITDA guidance of $7.7 million.
“Our pure sulfur side of our Sulfur Services segment had Adjusted EBITDA of $3.4 million in the first quarter compared to guidance of $2.9 million. The excess cash on this business was achieved from the benefit and the rise in the first quarter Tampa posting, which increased $40 per ton, when compared to the fourth quarter,” he said.
Second-quarter sulfur Adjusted EBITDA guidance of $2.9 million. Total Sulfur Services guidance is $10.6 million.
Company-wide, MMLP posted a first-quarter net loss of $5.1 million on revenues of $244.5 million, down from the year-ago net income of $11.5 million and $279.2 million, respectively. Adjusted EBITDA was $30.6 million when giving effect to the exit of the butane optimization business, versus the year-ago $34.3 million. The first-quarter loss included $5.1 million from a loss on extinguishment of debt. MMLP’s first quarter guidance had been $31.4 million. Second-quarter Adjusted EBITDA guidance is $32.2 million.
MMLP declared a quarterly cash dividend of $0.005 per common unit.
“I’m pleased with our first quarter as adjusted EBITDA of approximately $31 million, after giving effect to the exit of the butane optimization business, was in line with guidance, even as we experienced headwinds in the agriculture market that impacted our fertilizer and lubricants businesses,” said Bondurant. “However, robust demand for our Transportation services, both marine and land, offset those challenges, speaking to the strength of our diversified business model.
“During the quarter we continued our focus on debt reduction resulting in both lower outstanding debt and a lower leverage ratio,” he added. “Borrowings under our revolving credit facility were reduced $16 million, resulting in total debt at March 31, 2023 of $500 million compared to $516 million at December 31, 2022. As we plan to exit the butane optimization business at the conclusion of the selling season during the second quarter, we anticipate additional butane liquidation proceeds of approximately $20 million which are earmarked for further debt reduction.”