All Posts from May 21, 2021

Orica Seeks to Sell Minova; Land Sale Proceeds A$65 M

News, News Briefs

Orica Ltd., Melbourne, said on May 13 it intends to run a sale process for its Minova business. Minova delivers ground support solutions for the mining, civil/tunneling, geotechnical, and construction industries. 

“While Minova has delivered a substantially improved performance in recent times, it has been identified as non-core,” said Orica Managing Director and CEO Sanjeev Gandhi. “Therefore, we will consider selling at an appropriate price.”

Orica identifies its core businesses as mining and infrastructure businesses.

Orica said Minova is an attractive global leader in its field and remains a good cash generation business. 

First-half Minova EBIT was off 35 percent to A$7.2 million from the year-ago A$11.1 million, however, the company said it was a solid performance in the context of a difficult market. The company said Minova continues to perform well following diversification into infrastructure and hard rock mining segments, and expansion into growing markets such as India and Canada. First-half sales revenues were A$219.1 million, down 17 percent from the year-ago A$263 million.

Orica said Minova has several interested parties.

In the meantime, Orica sold Villawood land in New South Wales in March and said it will realize A$65 million in proceeds.

Orica said it continues to review non-strategic assets and land holdings.

Sherritt International Corp. – Management Brief

Management Briefs

Sherritt International Corp., Toronto, on May 18 announced the appointment of Leon Binedell, a 25-year mining industry veteran, as President and CEO, effective June 1, 2021. He was most recently CFO of Guyana Goldfields Inc., a Canadian-based gold producer focused on gold deposits in Guyana.

Binedell has also worked as Finance Operating Executive with Resource Capital Funds, a private equity fund focused on the mining sector. Additional experience includes time as National Leader of Finance Consulting in Mining & Energy at PricewaterhouseCoopers LLP, General Manager of Business Services at Xstrata Nickel (now Glencore), and CFO at Koniambo Nickel SAS.

Binedell, a native of South Africa, succeeds current President and CEO David Pathe, who in November 2020 announced his intention to step down from the role in 2021. He will remain with Sherritt for a period of time to ensure an orderly transition. The company said he leaves after almost 10 successful years as Chief Executive improving every aspect of its business.

CBH Group – Management Group

Australia, Management Briefs

Australian co-operative CBH Group, West Perth, reported that it has begun the search for a new CEO following the resignation of CEO Jimmy Wilson, effective June 30, 2021. CBH Chair Simon Stead said after nearly four years with CBH and with much of the change he was mandated to implement now completed, Wilson decided it is the right time to move on to the next stage of his career.

SQM 1Q Income Up 51 Percent; Specialty Plant Nutrition, MOP/SOP Volumes, Prices Up

Earnings, Mono-Ammonium Phosphate, News, Peru, Specialty, Sulfate of Potash

SQM Inc., Santiago, reported first-quarter net income of $68 million ($0.26 per share), up 51 percent from the year-ago $45 million ($0.17 per share). Gross profit was $136.6 million, up from $107.7 million. Revenues were $528.5 million from the year-ago $392 million. Adjusted EBITDA was $165.6 million, up from $132.9 million.

“Our earnings during the first quarter this year increased around 50 percent when compared to the same period last year as a result of higher sales volumes in almost all of our business lines,” said SQM CEO Ricardo Ramos. “At the same time, we saw positive price trends in each of our business lines.

“We have seen a recovery in the iodine market, which was reflected in 30 percent higher volumes when compared to the previous quarter. We also have good news from the fertilizer business lines with the prices and global demand of most fertilizers increasing as a result of good farmer economics, leading to the highest revenues reported in the last two years in the SPN (Specialty Plant Nutrition) business line,” he continued.

“We saw a strong demand growth for electric vehicles during the first quarter of the year, more than doubling when compared to last year, making us believe that annual demand for lithium chemicals could grow more than 30 percent, more than previously expected,” Ramos added. “As anticipated, prices reached an inflection point in the fourth quarter 2020 and we reported a price increase during the first quarter of this year which we believe should accelerate quarter after quarter for the rest of the year as sales contracts expire. Our lithium capacity expansions in Chile are moving forward ahead of schedule, and as a result, we expect sales volumes to surpass 85,000 mt of lithium products this year.”

Ramos said SQM last month successfully completed a capital increase process raising over US$1.1 billion. “This capital increase will allow us to not just continue working on the expansion projects we have previously announced, but also to capture the many opportunities the lithium business will offer in the near future and strengthen our position in the iodine, SPN and solar salt businesses,” he said.

First-quarter SPN volumes were up 20 percent, to 280,500 mt from the year-ago 233,600 mt. Leading the way were Specialty Blends, up 46 percent at 66,600 mt from 45,700 mt, and Potassium Nitrate-based products, up 18 percent to 163,100 mt from 138,300 mt.

SPN revenues were up 18 percent, to $194.1 million from $165.1 million. SPN gross profit accounted for 33 percent of SQM’s consolidated gross profit during the quarter.

SQM expects SPN demand growth to be 4-5 percent in 2021. It said average potassium nitrate prices were up 2.5 percent during the quarter from fourth-quarter 2020. It expects pricing to increase throughout the year.

Volumes were up 57 percent in the Potassium Chloride and Potassium Sulfate segment, to 202,200 mt from the year-ago 129,000 mt. Revenues were up 39 percent, to $60.3 million from $43.3 million. MOP/SOP gross profit accounted for approximately 6 percent of SQM’s consolidated gross profit during the quarter.

SQM said average MOP/SOP prices were up 9.9 percent compared to the fourth quarter. It expects 2021 volumes to be similar to those of 2020 – 700,000 mt.

International Raw Materials Ltd. – Management Brief

Management Briefs, Obituary, Pacific N.W.

Bill Erickson, a member of International Raw Materials Ltd.’s (IRM) North American Fertilizer Sales team, passed away on May 17 after a very brief respiratory illness. Erickson was based in IRM’s Spokane, Wash., office, and was highly respected by his colleagues and customers in California and the Pacific Northwest.

IRM described him as a “knowledgeable agronomist and sales professional,” who was instrumental in growing the company’s business on the U.S. West Coast. Erickson also served on the board and on various committees of the Western Plant Health Association (WPHA). He is survived by his wife, Lynn, and their four adult children.

Heringer 1Q Results Improve; Record Gross Profit Reported, Volumes Up 38.5 Percent

Brazil, Earnings, News, Specialty

Fertilizantes Heringer, Viana, Brazil, said its first-quarter gross profit was the best ever recorded by the company at R$149.4 million, versus the year-ago R$34.6 million. Revenues were up 91.5 percent, to R$741.3 million from the year-ago $R$387.1 million.

First-quarter net income was still a negative R$7.5 million, but much improved over the year-ago loss of R$205 million. EBITDA was R$103.8 million, up from R$3.4 million.

The company reported a 38.5 percent uptick in fertilizer volumes for the first quarter, to 376,550 mt from the year-ago 271,895 mt. The company said its distribution strategy is to focus mainly on the Southeast, North/Northeast, and Midwest regions.

Specialty fertilizers saw the biggest improvement quarter-over-quarter, with volumes up 57 percent to 181,000 mt from the year-ago 115,000 mt. Conventional fertilizer volumes were up 25 percent, to 196,000 mt from 157,000 mt. The first-quarter specialty versus conventional mix was 48-52 percent, versus the year-ago 42-58 percent.

Orica 1H NPAT Off 54 Percent

Ammonium Nitrate, Australia, Earnings, News

Orica Ltd., Melbourne, reported statutory net profit after tax (NPAT) attributable to shareholders of A$76.7 million for the first-half ending March 31, 2021, down 54 percent from the year-ago A$165.2 million. The company had provided an earnings update in February, warning that first-half EBIT would sink below expectations (GM Feb. 26, p. 28). First-half EBIT came in at A$151.8 million, down 51 percent from the year-ago A$308.6 million.

The EBITDA drop was less severe, down 25 percent to A$361.5 million from A$479.7 million. The decline was attributed to lower volumes in high margin markets, the non-repeat of carbon credits in Canada, and adverse FX movements. Additional impacts were SAP costs and arbitration costs in relation to the Burrup plant rectification works.

Revenues were off 9 percent at A$2.62 billion from A$2.88 billion, as were ammonium nitrate volumes, which were 1.94 million mt when excluding the 160,000 mt from Peru’s Exsa SA, which was acquired April 30, 2020 (GM Feb. 28, 2020).

Orica said the most significant driver of reduced explosives volumes was the impact of COVID-19 on customers across various markets, most notably Asia, Latin America, Europe, and the Middle East. Social unrest in Peru and strikes in Chile further impacted product volumes and services activity in Latin America, while Australian trade tensions with China affected the high margin thermal coal market on Australia’s East Coast. This was offset by increased volume from iron ore customers in the Pilbara region at lower margins.

“Our first-half financial results are in line with our February market update and reflect the impact of various market factors,” said Orica Managing Director and CEO Sanjeev Gandhi. “As we detailed in the update, ongoing COVID-19 disruptions, geopolitical issues, and unfavorable foreign exchange movements impacted us in the half.

“While the factors that impacted us in the first half are expected to largely reverse over time and the fundamentals of our business remain sound, we remain cautious about the short-term outlook,” said Gandhi. “It has been encouraging to see volumes start to increase at the end of the half. While we expect a better second half than the first, given uncertainties remain around market factors, we expect the second-half EBIT to be lower than the pcp.”

Trammo Inks Major Green NH3 Offtake Deal

Chile, Featured, Green Ammonia, News

Transammonia Inc.’s Dubai-based subsidiary, Trammo DMCC, and ASOE Chile Diez SpA, a company owned by AustriaEnergy Group, Vienna, have signed a Memorandum of Understanding (MOU) for an exclusive green ammonia offtake of the entire output of a green hydrogen/green ammonia plant to be developed in Chile, with an estimated annual output of 1 million mt/y of green ammonia. Ammonia is expected to be produced within the next five years, and the parties said major milestones for the project have already been achieved.

“Trammo is excited to participate together with its partners AustriaEnergy and Oekowind in the development of this major green ammonia production project, which is aimed to become one of the most important supply sources in the entire southern hemisphere and an important milestone in the global decarbonization of ammonia production,” said Christophe Savi, Head of Trammo’s Ammonia Division.

“We are proud to achieve this substantial milestone for our HNH energy project, the first crucial step of our cooperation with Trammo, and look forward to jointly developing this major global project,” said AustriaEnergy Managing Director Helmut Kantner.

This project in Chile would be one of the first ones commercializing green ammonia based on a 2GW wind park. AustriaEnergy has partnered with Oekowind, St. Polten, Austria – a company that develops and operates wind, hydro, and solar power plants – for the project.

In March, Trammo signed an MOU to become a partner in the Transhydrogen Alliance, which entails a joint initiative and mutual cooperation on the production and import of green hydrogen and green ammonia into Europe via Rotterdam, as well as its export from selected locations worldwide (GM March 26, p. 1).

In January, Trammo, along with Proton Ventures, signed an MOU for joint cooperation on green ammonia projects (GM Jan. 22, p. 1). Proton would construct green ammonia production units, storage facilities, and import and export terminals (NFuel Projects), and subsequently supply the green ammonia produced through wind and solar energy to Trammo.

PhosAgro Reports 1Q EBITDA Boost on Higher Prices, Sales Volumes

DAP/MAP, Earnings, News, Nitrogen, Phosphate, Russia

PhosAgro, Moscow, swung to a first-quarter IFRS net profit of RUB18.34 billion versus the year-ago loss of RUB15.57 billion. Adjusted for non-cash-cash forex gain/loss, net profit came in at RUB21.23 billion ($286 million), up 28 percent on RUB16.59 billion the previous year.

EBITDA rose 65 percent to RUB34.31 billion ($461 million), up from the prior year RUB20.74 billion, while revenue increased 37 percent to RUB87.58 billion ($1.2 billion), up from RUB64.06 billion.

The group in a May 19 statement cited higher global fertilizer prices as behind the EBITDA increase. Higher sales volumes, coupled with the recovery in global prices for phosphate and nitrogen-based fertilizers at a time when the rouble was weakening against the U.S. dollar, boosted revenue growth.

PhosAgro CEO Andrey Guryev reported that the EBITDA result was a new record for the group since it went public in 2011.

“The efficiency of our production facilities and the availability of key feedstocks enabled us to increase our EBITDA margin by 39.2 percent and generate free cash flow of more than RUB15 billion,” said the CEO.

Total sales volumes increased 3 percent year-over-year to 2.86 million mt, up from 2.79 million mt.

First-quarter EBITDA in the group’s Phosphate-based fertilizer segment increased 64 percent on the year, reaching RUB26.3 billion ($353 million). The group reported that higher profits were recorded for all phosphate products, mainly due to “the record-high” purchasing power of farmers on the back of high prices for agricultural products.

Phosphate-based fertilizer sales volumes in the first quarter were marginally off (-0.5 percent) compared with a year-earlier at 2.08 million mt, down from 2.09 million mt. Latin America and Europe were the main sales markets in the quarter.

For the group’s Nitrogen-based fertilizer segment, EBITDA increased 61 percent year-over-year to RUB7.6 billion ($102 million). Sales volumes increased 12 percent to 787,000 mt, up from the previous year’s 703,000 mt. North America and Europe were the main sales markets.

“The significant increase in profitability was due to the substantial investments in the development the group has been making since 2013, combined with favorable market conditions since the beginning of 2021,” said Guryev.

PhosAgro said it invested RUB9.9 billion ($133 million) into its production assets in the first quarter. Much of this investment went into the construction of the large industrial complex at the group’s Volkhov site in Russia’s Leningrad region, where the first production lines already have been launched with a design capacity of almost 300,000 mt/y of MAP (GM March 19, p. 29; March 12, p. 33).

Once the project is complete, total MAP production capacity of the new complex will reach 870,000 mt/y.

Commenting on market conditions, Guryev noted fertilizer prices in world markets currently remain high despite a slight correction in early April following the end of the season in the northern hemisphere.

In the near term, he expects high prices for agricultural products and increased seasonal demand in the Indian and Brazilian markets to support prices.

The CEO sees risk factors in the short term as including an increase in fertilizer exports from China and a possible decrease in import demand from India due to higher global prices while that country’s subsidies for fertilizer purchases remain unchanged from India’s previous fiscal year. (The CEO’s comments were made before the Indian government announced it had raised the subsidy for DAP from Rs500/45 kg bag to Rs1,200/bag (see Markets).

PhosAgro’s net debt as of March 31, 2021, was RUB145.4 billion ($1.9 billion), down from RUB156.9 billion as of Dec. 31, 2020. As of March 31, 2021, the ruble denominated net debt/EBITDA ratio was 1.45x versus 1.86x at the end of 2020.

The group’s Board has recommended the payment of dividends of RUB105 per share (or RUB35 per global depositary receipt) from retained net earnings as of March 31, 2021, a total of RUB13.5975 billion.

Acron Doubles 1Q EBITDA

Earnings, News, Russia

Acron Group, Moscow, swung to a first-quarter IFRS net profit of RUB10.62 billion versus a year-ago loss of RUB10.13 billion. In U.S. dollar equivalent, net profit was $143 million.

Revenue increased 39 percent on the year to RUB38.95 billion, up from RUB28.08 billion. In U.S. dollar equivalent, revenue was up 24 percent to $524 million from the prior year $423 million.

EBITDA for the first quarter more than doubled to RUB15.74 billion, up from RUB7.28 billion a year ago, and in U.S. dollar equivalent rose 93 percent to $212 million from $110 million.

The group posted a net exchange loss of RUB504 million from revaluation of assets, loans, and liabilities in the first quarter, against a loss of RUB12.3 billion in first-quarter 2020. In the reporting period, financial derivatives delivered a profit of RUB1.44 billion versus a year-ago loss of RUB978 million.

“Acron Group posted several all-time highs for the first quarter, driven by robust sales, higher global U.S. dollar prices for mineral fertilizers, and a weaker ruble,” said Acron Group Chair Alexander Popov.

First-quarter output of key products increased 4 percent on the year at 2.035 million mt, up from the year ago 1.95 million mt (GM April 23, p. 30). Fertilizer output was up 1 percent, to 1.62 million mt. Sales volumes of key products grew 6 percent to 2.109 million mt, up from 1.99 million mt a year ago.

Popov described the sales volume as a record, and said they were made possible by three investment projects completed last year. The Urea 6+ project at Veliky Novgorod, he said, was in the final stage of construction. Last month, the group confirmed the project was on track to come on stream in the second quarter.

The completion of the urea plant upgrade will increase the unit’s production capacity by 520,000 mt/y and will increase Acron Group’s annual urea production capability by over half a million mt to 1.9 million mt, making it the largest urea producer not only in Russia, but also in Europe.

Acron’s capital expenditure in the first quarter of 2021 totaled $44 million.

Popov said although favorable market conditions and strong demand for the group’s products have continued into the second quarter, the Acron Group was “cautiously optimistic” about the current market environment and will focus on reducing its debt burden in the short run.

Acron Group’s net debt stood at RUB99.46 billion as of March 31, 2021, only slightly changed on the Dec. 31, 2020 position. In U.S. dollar equivalent, net debt was down 3 percent, to $1.314 billion from $1.348 billion. The group’s net debt/EBITDA in U.S. dollar equivalent was down to 2.2x as of March 31, 2021, versus 2.8x at the end of 2020.

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