All Posts from August 10, 2018

The Andersons 2Q Back in Black; Plant Nutrients Still Under Stress

The Andersons Inc., Maumee, Ohio, reported second-quarter net income attributable to The Andersons of $21.5 million ($0.76 per diluted share) on revenues of $911.4 million, up from the year-ago net loss of $26.7 million ($0.94 per share) and $993.7 million. Adjusted net income was $21.5 million, compared to the year-ago $15.3 million. Adjusted EBITDA was $59.7 million, up from $50.9 million.

For the current quarter, The Andersons recorded a $1.6 million impairment charge on the anticipated sale of its Como, Tennessee, grain elevator. And in its Rail segment, it took $5.2 million in charges due to a decision to scrap approximately 600 railcars due to a four-year high in scrap prices brought on by steel tariffs. The company took a $42 million year-ago impairment in the Plant Nutrient Group’s (PNG) wholesale fertilizer business, which significantly weighed on results (GM Aug. 4, 2017).

Wall Street liked the second-quarter performance. Company shares moved up 12.96 percent on Aug. 8 to close at $40.10.

Although the company reported significantly better results in the Grain and Ethanol units during the second quarter, PNG and Rail results were lower than year-ago levels. Sales volumes of primary and specialty nutrients were reported to be strong, but margins were pressured. Lawn and contract manufacturing, however, were bright spots for the segment.

“Our Plant Nutrient growth continues to be impacted by unfavorable margin conditions,” CEO Patrick Rowe told analysts on Aug. 8. “Because the group’s year is significantly influenced by its performance in the first half, we think it’ll be challenged to equal our full-year adjusted 2017 results. On a positive note, primary nutrient prices are beginning to stabilize and improve, and the inventory appreciation is starting to return to the market for the first time in three years.

“The group is focused on reducing its costs and expenses through manufacturing excellence and growing the top line to improve sales execution. We’re also building on the momentum in our lawn and contract manufacturing business,” said Rowe, adding that the PNG would need more time to recover.

PNG reported second-quarter pretax profit of $15.1 million on sales of $303.1 million, up from the year-ago loss of $25.8 million. However, year-ago adjusted pretax income was higher at a positive $16.2 million. Adjusted EBITDA was $23.5 million, down from the year-ago $24.7 million.

PNG six-month pretax income was $16.2 million, versus the year-ago loss of $19.2 million. The year-ago adjusted pretax number was a positive $22.8 million. Adjusted EBITDA was $32.8 million, down from $39.9 million.

Company-wide six-month net income attributable to The Andersons was $19.8 million ($0.70 per share) on revenues of $1.55 billion, compared to the year-ago loss of $29.7 million ($1.05 per share) and $1.84 billion, respectively. Year-ago adjusted income was a positive $12.3 million. Adjusted EBITDA was $87.3 million, up from $72.3 million.

Compass Reports Larger 2Q Loss; North American Fertilizer Earnings Off 45 Percent

Compass Minerals, Overland Park, Kan., reported a second-quarter net loss of $7.6 million ($0.23 per diluted share) on sales of $246.7 million, compared to a year-ago net loss of $6.4 million ($0.19 per diluted share) and $228 million, respectively. Operating earnings, while up for Salt, were down in both of its Plant Nutrition segments, both North and South America. Adjusted EBITDA was up, at $38.5 million from the year-ago $34.2 million.

“Our second quarter is typically our lowest earnings period, however, I am pleased that we delivered top-line growth across all our businesses. This provides a strong indicator that the fundamental market conditions for our businesses globally have continued to improve in 2018,” said Fran Malecha, president and CEO. “I believe we are now better positioned to deliver on our efficiency investments in our salt business, drive growth in our specialty plant nutrition business, and capitalize on strong grower economics in South America.”

Wall Street was expecting a better performance. Shares dropped 4.32 percent to close on Aug. 7 at $65.30.

Plant Nutrition North America operating earnings were off 45 percent, to $4.2 million on sales of $51.8 million, compared to the year-ago $7.6 million and $50.5 million, respectively. However, EBITDA was up at $17.2 million from $16.2 million. Both sales volumes and prices were up slightly – volumes to 80,000 st from 78,000 st, and average prices to $644/st from $642/st. Sulfate of potash (SOP) sales were up only 2 percent, while micronutrients climbed 39 percent. The average SOP price was $596/st.

Compass said while segments saw a significant decline in logistics costs during the second quarter, that increased production costs resulting from year-over-year step-up in depreciation expense pressured earnings and compressed operating margins. This depreciation expense was driven by the commissioning of new production assets at the Ogden, Utah, sulfate of potash plant.

Compass said it is seeing steady demand for the fall fertilizer season in North America and is modestly increasing its sales volume guidance. It is projecting second-half revenue of $115-$135 million and full-year volumes of 340,000-360,000 st.

Segment six-month operating income was also down at $9.1 million on sales of $104.7 million, compared to the year-ago $15.2 million and $99.7 million, respectively. EBITDA was up at $33.4 million from $32.7 million. While sales volumes were up at 167,000 st from 157,000 st, average prices were down at $626/st from $633/st.

Plant Nutrition South America second-quarter operating earnings slipped to $700,000 on sales of $71.1 million from the year-ago $800,000 and $66.1 million, respectively. EBITDA was up at $6.7 million from $6.4 million. Total ag volumes were up at 90,000 st from 79,000 st, with average sales prices up at $538/st from $519/st. Chemical solutions results were less favorable, with both a volume and price decline to 69,000 st ($331/st) versus the year-ago 72,000 st ($350/st). Segment-wide volumes were 159,000 st, up from 151,000 st, with an average price of $448/st, up from $439/st.

Compass said both the ag and chemical solutions businesses experienced disruptions from the May truckers strike in Brazil. However, the company expects ag growth through the rest of the year will offset much of the impact from second-quarter sales. Exchange rates also negatively impacted revenue and selling price results.

The company said grower economics in Brazil are improving, and the strong U.S. dollar is expected to drive robust demand. In particular, Compass, noting the recent U.S.-China tariff dispute, said soybeans are the largest single crop served by Compass in South America, that the harvested acreage is expanding, and that soybean prices are going up.

The company expects second-half year-over-year growth in revenue with operating margins similar to year-ago levels, though it said further weakening in the Brazilian reais may mute some of the growth when translated into dollars. The company is projecting second-half revenues of $250-$275 million, with full-year volumes of 750,000-875,000 st.

Segment six-month operating earnings saw a larger drop, to $1.5 million from $2.6 million, though sales were up at $137.4 million from $127.4 million. EBITDA edged down to $13.3 million from $13.5 million. Ag sales volumes and average prices were up at 151,000 st ($582/st) from 139,000 st ($553/st), while chemical solutions volumes were up and prices down – 148,000 st ($336/st) versus 144,000 st ($352/st). Total volumes were up at 299,000 st with an average price of $460/st, versus the year-ago 283,000 st and $451/st, respectively.

Salt second-quarter operating earnings were up at $12.5 million on sales of $121.1 million from the year-ago $10.7 million and $109 million, respectively. EBITDA was $26.6 million, up from $23.4 million. While total volumes were up at 1.6 million from 1.37 million st, the average price dipped to $75.47/st from $79.44/st.

In the Salt segment, the company said average selling prices declined due to a shift in the sales mix to highway deicing products, which have a lower average selling price than consumer and industrial product. The company does not expect an increase in salt sales due to production constraints, citing the recently ended 11-week strike at the Goderich mine, which included a seven-day full work stoppage near the end of the strike. However, Compass said the current highway deicing bid season indicates an expected average contract price uptick of 15 percent.

Compass is projecting second-half Salt revenue of $440-$470 million and full-year volumes of 11.8-12.3 million st.

Segment six-month earnings were down at $46.6 million on sales of $437 million from the year-ago $56.1 million and $383.8 million, respectively. EBITDA was down at $75.4 million from $81.7 million. Sales volumes were up at 6.4 million st from 5.4 million st, while average prices were down at $68.62/st from $71.01/st.

Compass-wide six-month net income was down at $5 million ($0.14 per share) on sales of $684.6 million from the year-ago $15.1 million ($0.44 per share) and $615.8 million, respectively. Adjusted EBITDA was off at $99.3 million from $104 million.

Mosaic Reports Positive 2Q Results, P&K Developments, Guidance Increase

The Mosaic Co., Plymouth, Minn., reported second-quarter net earnings attributable to Mosaic of $68 million ($0.18 per diluted share) on net sales of $2.2 billion, compared to the year-ago $97.3 million ($0.28 per share) and $1.75 billion, respectively. Second-quarter EPS included a negative impact of $0.22 per share from notable items, primarily related to non-cash currency translation charges and costs related to the Vale Fertilizantes acquisition, partially offset by discrete tax benefits. Adjusted earnings per share during the second quarter of 2018 were $0.40, ahead of both last year and the first quarter of 2018.

Second-quarter adjusted EBITDA was $461 million and first-half $833 million.

“In fact, we have paid down $500 million in debt this year, which brings us closer to our through-cycle balance sheet targets. As we look ahead, our capital priorities remain unchanged: maintain a strong balance sheet, sustain our assets, invest to grow the business, and return excess to shareholders,” said Joc O’Rourke, president and CEO.

“We are seeing positive developments in potash and phosphate markets, and we expect the momentum to continue. Strong operational performance across our three business units and constructive market developments are driving improved earnings and cash flow. We are making excellent progress on the transformational initiatives at Mosaic Fertilizantes, and are well positioned to benefit from today’s improved business environment,” he continued.

Mosaic increased its full-year adjusted EBITDA guidance to $1.80-$1.95 billion from $1.7-$1.9 billion, and its adjusted EPS guidance to $1.45-$1.80 from $1.20-$1.60.

Mosaic said it has paid down an additional $200 million of long-term debt subsequent to the quarter end, reaching its full-year 2018 debt retirement target of $500 million.

Wall Street reacted well to the news. Mosaic shares closed up 5.32 percent to $31.70 on Aug. 7.

Six-month net earnings attributable to Mosaic were $110.2 million ($0.29 per share) on net sales of $4.14 billion, up from the year-ago $96.4 million ($0.27 per share) and $3.33 billion, respectively.

Phosphate second-quarter gross margins were $154 million on sales of $1.1 billion, up from the year-ago $76 million and $975 million, respectively. Margins were primarily driven by higher average sales prices, as well as operational improvements that lowered controllable operating costs. These were partially offset by higher sulfur costs and a $6 million notable item related to an inventory cost refinement.

Mosaic said higher phosphate prices that resulted from the company’s idling of its Plant City, Fla., plant more than offset lower sales volumes of 2.3 million mt, down from the year-ago 2.6 million mt. Adjusted gross margin per mt was $70, up from $29/mt. The company noted that it achieved record MicroEssentials sales volumes during the quarter.

Phosphate third-quarter sales volumes are projected at 2.1-2.4 million mt, with adjusted gross margin of $75-$85/mt. Full-year sales volumes are put at 8.3-8.9 million mt, narrowed from the earlier 8.2-9 million mt. Year-to-date was 4.2 million mt. The company is now projecting 2018 global phosphate shipments of 70 million mt, up from 2017’s 69.2 million mt.

Mosaic said higher phosphate prices are expected to more than offset higher raw material costs. The company expects to report another quarter of strong premium product sales volumes.

Potash second-quarter gross margins were $132 million on net sales of $569 million, up from the year-ago $110 million and $468 million, respectively. Improved margins were primarily driven by higher average sales prices, partially offset by increased costs of goods in inventory from the impact of the first quarter’s weather and logistics-related containment issues. MOP cash costs, including brine management costs, were $85/mt, up from year-ago levels, primarily as a result of a negative impact from the stronger Canadian dollar compared with a year-ago and timing of turnarounds. The current gross margins also included a $4 million notable item due to the refinement of inventory costs.

Potash sales volumes rose to 2.4 million mt from 2.2 million mt. Adjusted gross margin per mt was $58, up from $50/mt.

Potash third-quarter sales volumes are put at 2.2-2.5 million mt, with adjusted gross margins of $55-$65/mt. Full-year sales tonnage is seen at 8.3-8.9 million mt, narrowed from the previous 8.2-9 million mt. Year-to-date was 4.1 million mt. The company is now projecting 2018 global shipments at 66.9 million mt, up from 2017’s 65.6 million mt.

Mosaic expects the negative impact of planned turnarounds at its lowest cost mines, Esterhazy and Belle Plaine, to be mostly offset by higher prices. The company assumes minimal third-quarter sales to China. The company told analysts that it believes the annual India and China contracts to be less of a bellwether going forward.

Mosaic Fertilizantes second-quarter gross margin was $53 million on net sales of $713 million, up from the year-ago $25 million and $467 million, respectively. Gross margin was negatively impacted by $11 million related to the trucker strike in May and $27 million from a turnaround and related idle plant expenses. Second-quarter sales volumes were 1.8 million mt, up from the year-ago 1.3 million mt, while adjusted gross margin was $29/mt, up from the year-ago $19/mt. The company said the trucker strike reduced sales volumes by an estimated 300,000 mt.

The company said it has delivered Mosaic Fertilizantes synergy targets with $56 million in gross synergies realized year-to-date.

Mosaic Fertilizantes third-quarter sales volumes are put at 3.2-3.6 million mt, with adjusted gross margin of $35-$45/mt. Full-year volumes are seen as 8.7-9.5 million mt, with year-to-date reported at 3.4 million.

Higher selling prices and weaker local currency are expected to more than offset the third-quarter planned turnaround at the Uberaba facility. The company noted that risks to both volume and margin guidance are primarily associated with the Brazil government’s published minimum freight rates related to the May trucker strike. The company has embedded a negative 300,000 mt impact in full-year sales volumes assumptions as a results of these freight rates.

Mosaic told analysts that Brazil is expected to surpass the U.S. in total soybean production for the first time this year, and that this fits well with Mosaic’s P&K.