All Posts from July 26, 2019

CVR Results Up on Increased Volumes, Prices; Turnarounds Expected to Add Capacity

Despite a very wet spring season, CVR Partners LP, Sugar Land, Texas, reported much-improved results on higher volumes and prices for the second quarter and first half ending June 30, 2019. Second-quarter UAN prices were up 14 percent, with a 26 percent uptick in sales volumes, while ammonia prices climbed 31 percent, with volumes up 34 percent.

Second-quarter net income was $19 million ($0.17 per common unit) on net sales of $137.7 million, up from the year-ago loss of $16.4 million ($0.15 per unit) and sales of $93.2 million. Adjusted EBITDA was $59.8 million, up from the year-ago $26 million.

“We continued to experience wet weather across the Midwest during the second quarter of 2019, which impacted the spring planting season and hindered the movement of nitrogen fertilizer across the country,” said Mark Pytosh, CEO of CVR Partners’ general partner. “However, our plants ran well in the quarter, with ammonia utilization rates of 97 percent at Coffeyville and 98 percent at East Dubuque. Despite the weather impacts, we experienced solid demand for fertilizer during the second quarter, and were able to deliver significant volumes of product to customers at netback prices much higher than the second quarter 2018.”

Pytosh told analysts that in addition to the late planting, severe flooding in Kansas and Oklahoma curtailed UAN rail shipments for 18 days between mid-May to mid-June.

He added that CVR created strong distributable cash during the quarter and declared a distribution of $0.14 per unit.

Second-quarter direct operating expenses decreased $6 million, primarily due to a year-ago turnaround.

Total capital expenditures for the year continue to be put between $20-$25 million. The company plans a $7 million 28-day turnaround in September at the East Dubuque plant. Over the next several turnarounds at both plants, CVR said it intends to improve on reliability and debottleneck the plants in incremental ways to gain added production.

Pytosh said the late planting season extended well into July, and he expects customer inventories to be at very low levels. He noted that the late season also delayed the start of the summer UAN fill.

Like many, Pytosh believes USDA corn acreage and yield estimates to be overstated. “We expect fertilizer demand to be strong in the third quarter and expect demand to further increase when customers begin focusing on the spring 2020 planting season, where we currently expect planted acres to be significantly higher than 2019.”

Six-month net income was $12.9 million ($0.11 per unit) on sales of $229.5 million, up from a year-ago loss of $35.5 million ($0.31 per share) and $173 million, respectively. Adjusted EBITDA was $85.8 million, up from $39.1 million.

*Used in production

Southwestern Fert Conference Shatters Attendance Record; Attendees Note Unease after Tough Spring

A record 2,096 industry participants gathered in Nashville, Tenn., on July 21-25 for the 94^th annual Southwestern Fertilizer Conference. The event easily surpassed last year’s record of 1,850 attendees, with the new Nashville venue and the active fertilizer market both contributing to this year’s surge in interest.

One source described the mood at the conference as “uneasy,” with the agriculture industry facing ongoing trade issues and trying to rebound from a tough spring.  An informal poll of attendees at the July 24 breakfast session found that most believe this year’s planted corn acreage will total 84-86 million acres when USDA issues revised figures in August, well below the agency’s June 28 estimate of 91.7 million acres (GM June 28, p. 1).

A lower acreage estimate in August would likely prod the corn market, and attendees were optimistic that fertilizer demand will be strong for the 2020 crop year. “If we can figure out some of these trade issues, 2020 is going to be a great year,” said Garrett Lofto, President and CEO of J.R. Simplot Co., keynote speaker at the conference’s breakfast session.

The fall 2019 application season remains uncertain, however, due to an expected late harvest, the threat of an early frost, and unpredictable autumn weather conditions. Although the recent heat wave has given late-planted corn fields a needed boost, most attendees said the fall harvest will be at least two weeks later than usual, with some areas likely to see the start of harvest activities pushed out to late October or early November.

Lofto outlined a series of key events from 2007-2015 that made for “fantastic years for agriculture.” He said the global food marketplace “ramped up” during this period, forcing the food industry to move fast to capitalize on trends. The result was an industry shift toward transparency, freshness, sustainability, and social responsibility, all driven by consumer demand.

What this means for fertilizer use, according to Lofto, is that technology will play a larger role; transparency and traceability will increase; nutrient stewardship will continue to play a lead role as growers strive for “more crop for the drop;” more specialty products will be launched, with “more science behind them;” and the push for reducing the industry’s carbon footprint will only grow.

“You are going to get closer to the food consumer than ever before,” he said, referring to the push for transparency as both a “challenge and an opportunity.” Lofto cautioned that market volatility will continue, however, and remain heavily influenced by the “two t’s: trade and tweets.”

Conference organizers also used the event to honor three new inductees into the Fertilizer Hall of Fame: Neal Pratt of the Texas Agriculture Extension Service; Jerry Christian of CF Industries; and Bill Doyle, former CEO of Potash Corp. of Saskatchewan Inc. They join the hall’s other members, which include 2018 inductees Ford West, Dee Willard, and Ken Winborn; 2017 inductees Nelson Abell and Harold Trammel; 2016 inductees Ed Krysl, Sam Killebrew, and Dr. Yates Smith; and 2015 inductees Donald Ford, Dr. John Douglas, and Tom Tiefel.