All Posts from January 15, 2014

Intrepid cuts workforce in response to falling potash prices

Intrepid Potash Inc. on Jan. 14 announced a number of cost-savings initiatives, including the elimination of approximately 7 percent of its workforce, to “better align its cost structure” due to declining potash prices since mid-2013 and the conclusion of major capital projects.

Denver-based Intrepid announced other cost-saving measures as well, including decreases in executive compensation, a reduction in the use of outside professionals, and cutbacks in other general and administrative expenses. The company said the workforce reduction includes support staff related to its various capital projects, which are nearly complete.

“These are difficult, but necessary decisions. The changes we have made better position Intrepid in today’s market environment and enhance our long-term competitiveness,” said Dave Honeyfield, Intrepid’s president and Chief Financial Officer. “We have taken a thoughtful approach to ensure that we are balancing the current market environment with what we see as a healthy long-term business model with a continued commitment to safe operations. We are treating those impacted by these changes with the respect and fairness they deserve, while creating value for our shareholders by running Intrepid as efficiently as possible.”

Intrepid gave no specifics on the number of employees affected by the decision. It said the workforce reduction is expected to result in a first-quarter 2014 pre-tax charge of approximately $1.5-$2.0 million. Intrepid estimates saving approximately $15 million annually from these initiatives, with the majority being in general and administrative expense and the remainder being cost of goods sold.

Intrepid’s announcement follows a similarly one by PotashCorp of Saskatchewan Inc. in early December (GM Dec. 9, 2013), when PotashCorp announced that it was slashing its workforce by approximately 18 percent, closing several facilities in its potash and phosphate businesses, and scaling back production at others due to sluggish demand and a “challenging market environment.”

Several analysts at the time said they expected other potash producers to follow PotashCorp’s lead, citing the drop in potash demand and prices that followed this summer’s decision by Russian producer OAO Uralkali to withdraw from Belarusian Potash Co. (BPC) and pursue a volumes-over-price global marketing strategy (GM Aug. 5, 2013).

Intrepid is the largest producer of potash in the U.S., with six active production facilities in New Mexico and Utah that produce approximately 870,000 tons of potash and 200,000 tons of langbeinite annually. In addition to potash, Intrepid also produces and markets Trio®, a specialty fertilizer that combines potassium, magnesium, and sulfur in a single particle.

Intrepid’s major capital projects include the newly commission HB Solar Solution mine 20 miles northeast of Carlsbad, N.M.; a new compaction plant at its North Plant in Utah; additional solution mining opportunities at its Moab, Utah, facility; and a Langbeinite Recovery Improvement Project to add granulation capacity to its Trio production stream.

Yara accepts corporate penalty of NOK 295 million

The Board of Yara International ASA reported on Jan. 15 that it has informed the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime (Økokrim) that the company acknowledges guilt and accepts a corporate fine and confiscation totalling NOK 295 million related to certain agreements dating back to 2007 and earlier.

Oslo-based Yara said the fine of NOK 270 million stems from historical irregularities linked to the establishment of Libyan Norwegian Fertilizer Co. (Lifeco), an unrealized project in India, and Yara’s activities in Switzerland. In addition, Økokrim has imposed a confiscation of NOK 25 million related to earlier phosphate deliveries.

“This is a serious case. Both the company’s external investigation and the Økokrim investigation have uncovered unacceptable and disappointing behaviour. We have throughout the process cooperated with Økokrim and given them access to all material," said Jørgen Ole Haslestad, Yara president and CEO. “The incidents in question took place several years ago. We have since invested considerably in our compliance processes, based on our clear zero tolerance for corruption. Most importantly, we have worked with culture and attitudes to ensure that such incidents do not occur in the future.”

Yara launched an external investigation in April 2011, and concurrently notified Økokrim of possible irregularities 2011 (GM April 18, 2011). The main findings of the external investigation, published in June 2012 (GM July 2, 2012), included documented unacceptable offers of payment to a consultant related to the establishment of Lifeco, although the completion of the actual payment was not documented; an unacceptable payment of US$1 million in 2007 to a consultant in India related to negotiations with Krishak Bharati Cooperative Ltd. (Kribhco); and a number of payments over several years from the company Balderton in Switzerland, totaling approximately $15 million, that were made to persons employed by or associated with companies that are suppliers to Yara or Balderton. Payments from Balderton that had no commercial basis were also uncovered by the investigation.

Økokrim in May 2012 (GM May 21, 2012) charged two members of Yara’s corporate executive management team – Head of Upstream Tor Holba and CFO and Head of Strategy Hallgeir Storvik – with suspicion of “gross corruption” related to the findings of its investigation. Holba and Storvik subsequently stepped down from their executive management positions at the company as the investigation continued.

“Our acknowledgement of guilt and acceptance of a fine reflect that the Økokrim findings are in line with those of our own investigation,” said Bernt Reitan, chairman of the board of Yara. “The penalty is severe, but we accept it.”

Tampa sulfur price moves up

As expected, all major players have concluded new business at Tampa for the first quarter at $110/lt, up $35/lt from the fourth-quarter’s $75/lt.