All Posts from May 10, 2019

Intrepid 1Q Income Up on Higher Prices

Intrepid Potash Inc., Denver, reported first-quarter net income of $6.1 million ($0.05 per diluted share) on sales of $57.5 million, up from the year-ago $1.7 million ($0.01 per share) and $57.3 million, respectively. Adjusted EBITDA moved up to $15.9 million from $11.6 million.

“Higher realized prices for potash and Trio® and a great quarter from our diverse revenue streams of byproducts, water, and mixing services contributed to another year-over-year improvement in our quarterly results,” said Intrepid Executive Chairman, President, and CEO Bob Jornayvaz. “Our focus on revenue diversification is paying off with a significant increase in salt sales during the quarter and additional traction for our high-speed mixing service as we completed multiple jobs and fielded inquiries about expanding our service into the Permian Basin.

“Water infrastructure projects around our Carlsbad facilities are nearing completion, and drilling activity in southeast New Mexico continues at a staggering pace,” Jornayvaz continued. “This activity supports our expectation for strong water sales in the coming months and gives us confidence in the growth and long-term potential of our water business. We are seeing solid potash and Trio® sales as the spring agricultural season wraps up, and we expect to deliver a strong second quarter with a significant increase in cash flow from operations as compared to the first quarter.”

The company added that it now has a full-time salt salesman and those sales were $3.3 million in the first-quarter, up from the year-ago $1.8 million.

Jornayvaz noted the May 1 completion of the Dinwiddie Jal Ranch (GM March 15, p. 1; Feb. 15, p. 23) acquisition in southeast New Mexico as a significant step forward for the water midstream infrastructure system, adding that it will provide additional water supply for Intrepid partners in the area.

He said the company negotiated a reduced purchase price of $53 million due at closing with an additional $12 million pending the resolution of certain issues identified during due diligence. He said the company immediately began selling water out of the property, which is now called Intrepid South. “We remain in a favorable liquidity position after the acquisition and we are excited to tap into the significant growth potential of the Dinwiddie property,” said Jornayvaz.

Despite the wet spring season, Intrepid said it has strong order books for both potash and Trio for the second quarter, and it expects to recoup any missed first-quarter tons in the second quarter. Jornayvaz told analysts that except for the I-states (Iowa, Illinois, and Indiana), the geographies the company serves were seeing really good movement.

He said the Pacific Northwest and Texas have been strong despite wet weather. The company expects stable potash pricing for the rest of the year. However, he said Intrepid may sell less potash in the first-half versus last year as it holds back some inventory to increasingly serve industrial demand.

On the Trio side, the company expects a sizeable second-quarter international shipment will drive an approximate 10-15 percent decrease in average net realized prices compared to the first quarter.

The Potash segment had a first-quarter gross margin of $9.4 million on sales of $34.3 million, up from the year-ago $5 million and $30.6 million, respectively. Sales were down at 88,000 st, though with a higher net realized sales price of $288/st versus the year-ago 97,000 st and $243/st, respectively. Production was 110,000 st, down from 125,000 st.

Trio gross margin was $731,000 on sales of $17.8 million, up from the year-ago loss of $2.1 million on sales of $21.8 million. While volumes were down at 56,000 st, the average sales price was up at $206/st, versus the year-ago 77,000 st and $194/st, respectively. Production was up at 63,000 st from 47,000 st.

The Oilfield Solutions segment reported a gross margin of $3.1 million on sales of $6.6 million, down from the year-ago $4.3 million and $4.9 million, respectively.

Weather Weighs on The Andersons Fertilizer Results; Company “Challenged” to Catch Up

The Andersons Inc.’s Plant Nutrient Group (PNG) reported a first-quarter pretax loss of $3.9 million on revenues of $128.5 million, versus the positive year-ago $1.1 million on revenues of $135.6 million. The company cited delayed primary and specialty nutrient sales and lower lawn and contract manufacturing results due to extended cold and wet weather.

Primary nutrient ton volumes were 178,000 st, down from 202,000 st. Specialty were 165,000 st, down from 186,000 st. Other tons were level at 16,000 st. PNG said while primary nutrient margins improved, specialty margins were somewhat lower. While the company said lawn and contract got off to a decent start, volumes were down even more than expected. PNG’s EBITDA was $5 million, down from the year-ago $9.3 million.

The Andersons said PNG full-year results are highly dependent on the critical planting season, and will likely finish at or below those of 2018. The company said it will be challenged to make up the significant lost tonnage from the first quarter in the remainder of the year. The company noted that as of May 6, the percentage of corn planted was at only 23 percent, versus the five-year average of 46 percent.

“Quite simply, as the wet weather persists across much of our market area, we are concerned that farmers may not have time or an inclination to use as much fertilizer as we anticipated in the face of continuing low grain prices,” the company told analysts. “We still expect a good year from our lawn and contract manufacturing business, though it will not repeat the record 2018 performance.”

Company-wide, the Maumee, Ohio-based The Andersons reported a first-quarter loss attributable to the company of $14 million ($0.43 per diluted share) on sales of $2.08 billion, up from the year-ago loss of $1.7 million ($0.06 per share) and $635.7 million. Adjusted EBITDA was $40.2 million, up from $27.7 million.

“We closed our acquisition of Lansing Trade Group (LTG) successfully in early January (GM Jan. 18, p. 1), and our work to integrate it with our former Grain Group is on schedule,” said The Andersons President and CEO Pat Bowe. “I am very pleased with how well the new Trade Group team is functioning. However, our overall results were hampered by markets that continue to be negatively impacted by trade disruptions and poor weather that are affecting multiple business units significantly.

“The Trade Group’s adjusted results were mixed, as weak markets and foreign trade uncertainty limited grain margin opportunities, and the group also incurred some insured property losses at one Nebraska facility due to heavy rains,” he continued. “The Ethanol Group’s results were encouraging, as the group remained profitable by continuing its excellent plant efficiency and hedging its production well.

“The Plant Nutrient Group continues to struggle, as its results were hurt by lower volume, primarily in agriculture and lawn fertilizer, and higher operating expenses,” added Bowe. “Rail’s results improved on better leasing and repair results, even while it reduced car sale income by electing to sell fewer cars.”

Much of the first-quarter loss was due to the LTG acquisition. Adjustments included $8.7 million ($0.27 per share) of expenses related to LTG. In addition, it incurred $4.4 million ($0.10 per share) of depreciation and amortization expenses due to the revaluation of LTG and Thompsons Ltd. (GM Aug. 5, 2013) fixed assets and the valuation of its definite-lived intangibles. It expects to incur similar amounts each quarter through 2021.

First-quarter revenues were up due to the acquisitions of both LTG and Thompsons Ltd. The Andersons now owns 100 percent of each company, whereas it used to own minority stakes in each.

Company-wide, The Andersons told analysts that it expects 2019 results to improve significantly over those of 2018 on an operating basis, even considering the slow start.

Mosaic 1Q Earnings Up; Guidance Down; Plant City Decision Expected Soon

The Mosaic Co., Plymouth, Minn., reported first-quarter net earnings attributable to Mosaic of $130.8 million ($0.34 per diluted share) on net sales of $1.9 billion, up from the year-ago $42.3 million ($0.11 per share) and $1.93 billion, respectively. Adjusted EBITDA was $430 million ($0.25 per share), up from the year-ago $399 million ($0.20 per share).

“Mosaic overcame weather and regulatory changes to deliver solid results,” said Mosaic President and CEO Joc O’Rourke. “We expect our resilient and strong business to generate good results this year and across the business cycle.”

Citing curtailments, higher costs, and Canadian resource taxes, the company has revised downward its full-year adjusted EBITDA guidance to $2-$2.3 billion from the earlier $2.2-$2.4 billion, and adjusted EPS to $1.50-$2.00 from $2.10-$2.50. The company said it widened its range to acknowledge increased logistics-related risks impacting spring demand and slowing the recovery in phosphate margins.

It expects a balanced potash market through 2019. However, Mosaic said despite a slow start, it still assumes in its forecast a normal North American spring application season. “We’ve seen seasons like this before, and the historical data shows us by and large we really don’t miss far on farm demand,” Mosaic Director of Market and Strategic Analysis Andy Jung told analysts.

Wall Street did not react well to the Mosaic news, with shares falling 8 percent to close on May 7 at $23.25. However, after the fall, some analysts said the new price was a good entry point to buy as some of Mosaic’s problems, such as Brazil regulatory issues, were only temporary. Mosaic shares rallied up 3 percent to close May 8 at $23.94.

Mosaic retains its previous full-year volumes guidance of 9-9.4 million mt of potash, 8.6-9 million mt of phosphate, and 9.4-9.8 million mt for Mosaic Fertilizantes. Second-quarter volume guidance is 2.3-2.6 million mt for potash with an adjusted gross margin of $70-$80/mt; phosphate 2.3-2.6 million mt at $40-$50/mt; and Mosaic Fertilizantes 2-2.3 million mt and $15-$25/mt.

Mosaic expects up to $100 million in costs at Mosaic Fertilizantes in 2019 due to costs associated with managing tailings dam regulatory changes. Approximately $50 million of these costs will flow through cost and goods sold and gross margin in the second quarter. Due to the regulatory situation, three mines are down, with the Catalao mine expected back up in the second quarter, and Tapira and Araxa in the third quarter.

In the meantime, Mosaic expects to ship some 600,000 mt of phosphate rock from its majority-owned Miski Mayo mine in Peru to replace approximately 40 percent of the Brazilian mine output, while 300,000 mt of finished phosphates from Florida will go to Brazilian customers. The company expects all of its Brazilian mines to be operational by the end of the year.

First-quarter Phosphate gross margins were off at $55 million on sales of $806 million from the year-ago $97 million and $866 million, respectively. The company said average selling prices were essentially flat and raw materials costs were higher, negatively impacting gross margin per mt. Gross margin per mt dropped to $31 from $49, and on an adjusted basis was $36, down from $57.

The company noted that both sulfur and ammonia costs are down so far in the second quarter. Florida-mined phosphate rock costs are expected to remain elevated at $43/mt as the company transitions to new mining areas. The company also cited high carryover inventories in North America, high and early seasonal imports, as well as increased first-quarter Chinese exports.

Mosaic said while MicroEssentials sales volumes were essentially flat with year-ago levels, reflecting the slower start to the North American season, that the average premium over MAP was $62/mt, while the 2018 average was $43/mt. Projections for the year are $40-$50/mt.

In the current market, Mosaic said it is well positioned, with some 40 percent of its product up country at the end of the quarter, and it now achieving premiums of up to $95/mt over NOLA. It estimated there are only 100 or so barges at NOLA representing only 130,000 mt, which is not that great an overhang when you consider that the summer fill market is 2 million mt.

It said it is confident that the NOLA numbers are overly discounted. The company noted its recent $55 million purchase of the Pine Bend, Minn., terminal (GM May 3, p. 27; April 19, p. 1) from CF Industries Holdings Inc., Deerfield, Ill., as a continued beef-up of its inland storage assets.

The company told analysts that it must make a decision on the fate of the idled Plant City, Fla., plant by July. The company took the 2 million mt/y capacity plant down at the end of 2017 (GM Nov. 3, 2017). The plant had been producing at a rate of approximately 1.5 million mt/y.

If it opts to permanently idle the facility, the company said it would be looking at a non-cash asset writedown. Currently, the facility is valued at $230 million, and there would likely be a five-year post closure cost of $100 million to cover the asset retirement of the facility.

First-quarter Potash gross margin was up at $186 million on sales of $504 million from the year-ago $103 million and $404 million, respectively. Gross margin was driven by higher average sales prices, while cash costs remained flat despite lower operating rates. Sales volumes were 1.9 million mt, up from 1.7 million mt. Gross margin per mt was $100, up from $61, while adjusted gross margin was $100, up from $64.

First-quarter Mosaic Fertilizantes gross margin was $52 million on sales of $698 million, down from $59 million and $665 million, respectively. The margin decrease was driven by turnaround costs and costs associated with idling of the Araxa mining complex as a result of the new mining regulations. Higher prices and distribution margins were partially offset by the impact of higher raw materials costs and lower production volumes. Volumes were 1.5 million mt, down from 1.6 million mt. Gross margin per mt was $34, down from $37, with the same numbers for adjusted EBITDA per mt.