Strong demand and pricing from Rentech Inc.’s Rentech Energy Midwest Corp. (REMC) unit pushed revenues for the parent company to $60.4 million for the third quarter ending June 30, 2008, up from the year-ago $50.4 million. Nine-month revenues were $136.4 million, up from $102.7 million.
Rentech told analysts that while record rainfall in eastern Iowa during the spring planting season reduced application of UAN and ammonia, the weather did not have any meaningful financial impact due to REMC’s ability to move product beyond its normal trade zone at or above its budgeted levels.
The company says it continues to consider opportunities to enhance the efficiency of the REMC plant in East Dubuque, Ill., to further capitalize on the strong demand for fertilizer in the Corn Belt. Rentech says the facility has achieved a new UAN production record, as well as record product sales for the nine-month period. Rentech says its has sales agreements on ammonia for 95 percent of its projected fiscal 2008 shipments at an average sales price of $520/st, compared to an average price of $351/st in 2007 and $300/st in 2006. It reports UAN sales agreements for 100 percent of projected fiscal 2008 shipments at an average sales price of $286/st, compared to $209/st in 2007 and $161/st in 2006.
The company said it has 100 percent of fiscal 2008 prepaid products sales margin locked in with gas purchases, inventory produced, or product produced. As a result, Rentech is raising its guidance for fiscal 2008 EBITDA at REMC to $50 million or greater from its previous projection of over $40 million. “We are pleased with the continued robust performance at REMC, which has exceeded our expectations,” said Hunt Ramsbottom, Rentech president and CEO. “In fiscal 2009 we expect increased EBITDA performance from REMC and reductions in spending now that construction of our Product Demonstration Unit (PDU) is complete. We also expect corporate overhead reductions as a result of our company-wide cost review program.”
Rentech says it has executed prepaid product sales for 40 percent of fiscal 2009 UAN shipments and 57 percent of 2009 ammonia shipments, and has locked in the sales margin for these sales with gas purchases, inventory purchased, or product purchased.
Rentech says the PDU is the only synthetic fuels facility in the U.S. today producing transportation fuels. It is designed to produce about 420 gallons per day of synthetic jet and diesel fuel, specialty waxes, and chemicals.
Due to its new technology expenses, Rentech continues to post losses. Third-quarter losses applicable to shareholders were $7.8 million ($.047 per share) versus the year-ago $6.9 million ($.044 per share). Nine-month losses were $54 million ($.327 per share), compared to the year-ago loss of $32.8 million ($.223 per share). Rentech noted that the new credit agreement REMC executed in June limits the company’s flexibility to continue using REMC’s cash flow for new technology in the future, so the company will need to raise additional working capital during fiscal 2009.