All Posts from May 3, 2019

EPA Finds No Health Risk from Glyphosate

News, News Briefs

The U.S. Environmental Protection Agency (EPA) on April 30 announced that it continues to find no risks to public health from glyphosate when the herbicide is used in accordance with its current label. The findings of its latest review of glyphosate support the EPA’s 2017 health risk assessment of the herbicide, which found that the product is not a carcinogen.

“EPA has found no risks to public health from the current registered uses of glyphosate,” said EPA Administrator Andrew Wheeler. “Today’s proposed action includes new management measures that will help farmers use glyphosate in the most effective and efficient way possible, including pollinator protections. We look forward to input from farmers and other stakeholders to ensure that the draft management measures are workable, realistic, and effective.”

The EPA’s announcement is a big win for Bayer, which acquired glyphosate manufacturer Monsanto Co. last year (GM June 8, 2018). Bayer has suffered some legal setbacks related to glyphosate, including an August 2018 decision by a California jury (GM Aug. 17. 2018) awarding $289 million in damages to a groundskeeper who claimed RoundUp gave him cancer, although that amount was later reduced to $78 million (GM Oct. 26, 2018).

A U.S. jury awarded a second California man more than $80 million in March over a similar claim, and there are currently 13,400 other Roundup lawsuits pending in U.S. courts. Bayer said it will appeal the rulings.

“Bayer firmly believes that the science supports the safety of glyphosate-based herbicides, which are some of the most thoroughly studied products of their kind, and is pleased that the regulators tasked with assessing this extensive body of science continue to reach favorable conclusions,” Bayer said in a statement following the EPA announcement.

Glyphosate is the most widely used herbicide in U.S. agriculture, EPA noted, and is approved for use on more than 100 food crops, including glyphosate-resistant corn, soybeans, cotton, canola, and sugar beets. Non-agricultural uses include residential areas, aquatic areas, forests, rights of way, ornamentals, and turf.

“If we are going to feed 10 billion people by 2050, we are going to need all the tools at our disposal, which includes the use of glyphosate,” USDA Secretary Sonny Perdue said in response to the EPA announcement. “USDA applauds EPA’s proposed registration decision as it is science-based and consistent with the findings of other regulatory authorities that glyphosate does not pose a carcinogenic hazard to humans.”

The EPA conclusion was criticized by a number of environmental groups, including the Natural Resources Defense Council, the Environmental Working Group, and the Center for Biological Diversity. It is also at odds with the findings of a 2015 World Health Organization study, which classified glyphosate as “probably carcinogenic to humans.” A more recent meta-analyses by researchers from the University of Washington also found that glyphosate exposure raises cancer risks by 41 percent.

Earlier this year, however, Health Canada concluded that concerns about glyphosate safety “could not be scientifically supported” after a thorough scientific review. Health Canada noted that the 20 scientists who conducted the review “left no stone unturned” and “had access to all relevant data and information from federal and provincial governments, international regulatory agencies, published scientific reports, and multiple pesticide manufacturers.”

Following a Federal Register notice publishing EPA’s findings, the public will be able to submit comments on EPA’s proposed decision at www.regulations.gov in docket # EPA-HQ-OPP-2009-0361.

LSB 1Q Fertilizer Volumes Off 24 Percent

News, News Briefs

Despite improving operational rates, a 24 percent drop in first-quarter fertilizer sales volumes weighed on LSB Industries Inc.’s results, though prices were up for all major products. The Oklahoma City-based company posted a net loss of $11.5 million, up from the year-ago loss of $5.6 million.

The net loss attributable to common shareholders was $19.4 million ($0.69 per diluted share) on net sales of $94.1 million, versus the year-ago loss of $13.6 million ($0.49 per share) and $100.4 million, respectively.

First-quarter operating income was a positive $71,000, versus the year-ago $1.9 million. Adjusted EBITDA was positive, but down at $18.1 million versus $23.1 million.

“We had solid operating performance at our facilities and benefited from favorable agricultural product pricing trends in the first quarter,” said LSB President and CEO Mark Behrman. “Overall, we were pleased with the operating performance of our facilities, with our ammonia plants averaging a 93 percent onstream rate for the quarter.

“More importantly, over the past three quarters, our ammonia plants have collectively averaged a 94 percent onstream rate, which represents our target for 2019. However, these positive factors were offset by reduced sales volumes resulting from cold, wet weather throughout much of the Midwest during the first three months of the year, which delayed the start of the spring fertilizer application season and weighed on our net sales and adjusted EBITDA,” said Behrman.

“Despite the weather-related volume decline, we did see continued improvement in pricing for our agricultural products as we expected heading into the year,” he added. “Net pricing per ton for UAN, agricultural ammonia, and HDAN increased 54 percent, 12 percent, and 5 percent, respectively, compared to the first quarter of 2018.

“Pricing for industrial products was lower for the quarter compared to the first quarter of 2018, mainly due to a decline in the Tampa ammonia benchmark price, which is the relevant index used to price many industrial products. The impact of an overall poor fall and spring application season in U.S. agricultural markets led to a build in ammonia inventory across the distribution channel, resulting in downward pressure on Tampa ammonia benchmark pricing,” Behrman said.

“With respect to the second quarter, despite the challenging weather, which has persisted so far in April, based on our order book and recent shipment activity, we expect a meaningful improvement in net sales and adjusted EBITDA both sequentially and as compared to a year ago,” he continued. “Looking at 2019 overall, we expect full-year growth in net sales and adjusted EBITDA relative to 2018 driven by continued improvement in operations and year-over-year improvement in product pricing.”

While LSB said UAN prices have begun to improve, it said prices have been on a decline due to increased imports over the past three months. It attributed those in part to the European Union’s antidumping actions, which have resulted in more tons being steered toward the U.S.

First-quarter average natural gas costs were up at $2.91/mmBtu from the year-ago $2.79/mmBtu. However, the company said it has locked in 60 percent of its second-quarter gas requirements at $2.40/mmBtu. It also noted that it has consolidated its gas purchasing for its three major plants, allowing for both cost savings and better management.

The company is planning a major summer turnaround for its Pryor, Okla., complex, that will enhance ammonia, nitric acid, and urea production. The El Dorado ammonia plant will have a 14-day August turnaround, and the next one is not expected until 2022. El Dorado will also get a third-quarter HDAN capacity increase and reliability improvements, as well as a sulfur acid converter replacement by the end of the year.

Market Sector – Net Sales $/M

  1Q-19 1Q-18
Agriculture 46.8 52.3
Industrial 37.9 38.1
Mining 9.5 10.1
Total 94.2 100.5

 

Product Tons Sold (st)

  1Q-19 1Q-18 %Change
UAN 94,577 102,292 (7)
HDAN 59,845 92,713 (35)
Ammonia 19,205 32,996 (42)
Other 3,328 4,183 (20)
Total 176,955 232,094 (24)

 

Average Selling Prices ($/st)

  1Q-19 1Q-18 %Change
UAN 213 138 54
HDAN 232 220 5
Ammonia 3,567 320 12

Industrial – Tons Sold (st)

  1Q-19 1Q-18 %Change
Ammonia 74,834 68,098 10
Nitric Acid* 22,375 20,213 11
Other 8,274 8,613 (4)
Total 105,483 96,923 9

*Excludes Baytown

 

Mining Tons Sold

  1Q-19 1Q-18 % Change
AN/AN Sol. 36,615 38,179 (4)

 

SiteOne 1Q Income Off, Revenues Up

News, News Briefs, Specialty

SiteOne Landscape Supply Co., Roswell, Ga., reported a first-quarter net loss of $24.1 million, compared to a year-ago loss of $17 million in what is normally a seasonally weak quarter for the company. Adjusted EBITDA was a loss of $5.9 million, compared to the year-ago loss of $5.1 million. The company added that most of its acquisitions lose money in the first quarter.

First-quarter net sales were up 12 percent, to $417.3 million from the year-ago $371.4 million. The company told analysts that although weather was difficult in February and early March, the season began to ramp up during the last two weeks of March, supporting solid organic sales growth, which was up 5 percent for the quarter to $377.3 million from $360.9 million.

Agronomic sales, which includes fertilizer, which saw good growth in 2018, continued to be strong in the first quarter, with 7 percent organic daily sales growth. Acquisitions added $40 million, or 8 percent growth, up from $10.5 million.

“We saw good growth in the Southeast up through the Mid-Atlantic, and weakness out west in California due to wet weather and in the Mountain States, which are experiencing a much later spring this year,” CFO John Guthrie told analysts.

The company said at the beginning of the year it saw price increases from many of its suppliers, and has been passing 3-4 percent increases on to its customers.

Koch Building $33M Brandon Headquarters; Up to $130M in Site Upgrades Expected

Canada, Featured, News

Koch Fertilizer Canada ULC reports it is constructing a new headquarters in Brandon, Manitoba, that will bring together operations, logistics, and sales and marketing under one roof, with office space for more than 100 employees. Currently, Koch Fertilizer’s Brandon personnel are spread out in several buildings, some of which are offsite. The two-story building is scheduled to open in fourth-quarter 2020.

Koch said the $33 million project, one of the largest investments ever made at the site, is the first of several significant upgrades designed for expansion, efficiency, and improved environment, health, and safety performance. Koch Fertilizer expects to invest nearly $130 million into the overall improvements to the site over the next five years. Brandon-based Horizon Builders Ltd. has been selected as the project’s general contractor.

“Brandon is a critical part of the company’s overall operations, and we are always looking for ways to improve for our customers,” said Plant Manager Paul Liddle. “Not only are we making a significant investment in our business and our community, but our plans are a clear demonstration we are growing in Manitoba and believe we have a strong future in the province.”

The facility will include a new control room with upgraded process control instrumentation, plus the laboratory and maintenance shop. Koch is also building a new access road to improve the customer and driver experience at the facility.

Koch bought the Brandon nitrogen manufacturing complex, along with distribution assets in Oak Bluff, Manitoba, and Watson and Tuxford, Sask., from J.R. Simplot Co. in 2006 (GM Aug. 21, 2006). At the time, Simplot had already made several upgrades to the facility, which was built in the mid-1960s. Koch announced another round of upgrades in 2013 (GM Dec. 23, 2013).

Innophos 1Q Income Down, Midwest Flooding Cited

News, News Briefs

Innophos Holding Inc., Cranbury, N.J., reported a 20 percent drop in first-quarter net income, in part citing the impact of Midwest flooding on its low-grade phosphoric acid business into fertilizer markets. Net income was $8.7 million ($0.44 per diluted share) on sales of $191.4 million, down from the year-ago $10.9 million ($0.55 per share) and $205.4 million, respectively. Adjusted EPS of $0.57 beat analyst estimates of $0.43, according to Bloomberg. Adjusted EBITDA was $30.3 million, down from $32.4 million.

“Innophos’ first-quarter performance was marked by our ability to deliver an adjusted EBITDA margin in line with last year, despite a difficult year-over-year comparison on the top line,” said Kim Ann Mink, Ph.D., Chairman, President, and CEO. “First-quarter sales were down compared with the prior-year quarter as Innophos’ pricing power was offset by the planned discontinuation of low-margin nutrition trading business, order pattern, and impact from Midwest flooding.

“In addition, there was weaker than expected demand in certain industrial categories,” Mink continued. “Our ability to maintain an adjusted EBITDA margin equal to last year was due to our cost management efforts implemented in the second half of 2018, continued success in capturing price increases, and improved mix. Adjusted EBITDA was sequentially flat, marking the fourth straight quarter of relatively stable adjusted EBITDA.”

She said the company made progress with its new product development program to continue the shift of product mix to higher levels of the attractive Food, Health, and Nutrition (FHN) business.

The company also said price actions continued to offset input cost increases. It said the transition to lower cost value chain structure at Geismar, La., successfully optimized the processing of the new multi-sourced supply mix and scale up to targeted run rates.

The company noted that it is bringing in more merchant grade acid to Geismar from its Coatzacoalcas, Mexico, facility. It added that the Coatzacoalcas facility will undergo and complete a planned annual shutdown in the second quarter at one of its units, with maintenance and under-absorption costs of $3 million. These costs are already baked into guidance.

Innophos maintains its 2019 adjusted EBITDA guidance for growth of 1-3 percent from 2018’s $125 million. However, 2019 revenues, which were expected to be level with 2018, have been tweaked downward by 1-2 percent below 2018’s $802 million. It said the move reflects the impact from the softer first-quarter demand in certain industrial categories.

Scotts Reports Strong 2Q

News, News Briefs, Specialty

The Scotts Miracle-Gro Co., Marysville, Ohio, reported a huge boost in net income and revenues for the second quarter ending March 30, 2019. Net income was $396.4 million ($7.09 per diluted share) on revenues of $1.19 billion, up from the year-ago $149 million ($2.59 per share) and $1.01 billion, respectively.

Scotts said the sales increase was company-wide, and was driven by the acquisition of Sunlight Supply and volume growth in both major business segments. Consumer purchases of its core lawn and garden products at its largest retailers in the U.S. increased by 13 percent.

The quarter also benefited from $259.8 million from the company’s divestiture of its minority stake in TruGreen (GM March 22, p. 27). In addition, Scotts said it recently sold its ownership stake in a joint venture of a professional U.S. industrial, turf, and ornamental herbicide company to Bayer for $37 million. Also, after the quarter, it said Bayer agreed to reimbursements of $20 million related to incremental expenses that the company has incurred and will incur later this year related to its Roundup business.

“Consumers came flying out of the gate compared with last year to get a head start on the lawn and garden season,” said Scotts Chairman and CEO Jim Hagedorn. “We’ve seen strong consumer engagement in every region, in every channel of retail, and in nearly every product category in which we compete. Innovation has helped drive double-digit increases in lawn food, grass seed, and growing media products, while retailer support led to over a 30 percent increase in consumer purchases of mulch. In addition, consumer purchases of non-selective weed control also are well ahead of last year, including a more than 20 percent increase in Roundup purchases.

“In Hawthorne, shipments increased double digits on a comparative basis in every month of the quarter, and again in April,” said Hagedorn. “We’re seeing consistent growth in both durable and consumable products, and solid performance in both new and established markets.

“Our strong start in both businesses gives us increased confidence in our full-year guidance and increases the probability that sales growth for the full year could exceed our original guidance range of 10 to 11 percent,” Hagedorn added.

The company reaffirmed annual adjusted earnings per share guidance of $4.10-$4.30.

The company told analysts that it has locked in 90 percent of this year’s commodity purchases, and that they have come in as expected.

Second-quarter U.S. Consumer profit was up 12 percent, to $320 million on sales of $993.5 million from the year-ago $286.2 million and $920.2 million, respectively. Hawthorne profit was $10.3 million on sales of $144.1 million, up from a year-ago loss of $4.8 million and $41.8 million, respectively.

Six-month net income was $316.8 million ($5.67 per share) on revenues of $1.49 billion, compared to the year-ago $127.8 million ($2.20 per share) and $1.23 billion, respectively.

Six-month U.S. Consumer profits were $277 million on sales of $1.13 billion, up from $248.3 million and $1.05 billion, respectively. Hawthorne profits were $14.7 million on sales of $284.8 million, up from a year-ago loss of $3 million on sales of $118.5 million.

 

 

Crystal Peak Closes on Private Placement

News, News Briefs, Specialty, Sulfate of Potash

Junior sulfate of potash producer Crystal Peak Minerals Inc., Toronto, said on May 2 that it has closed its previously announced non-brokered private placement with EMR Capital Resources Fund 1 LP (EMR) (GM April 26, p. 27). The company issued EMR 39,215,686 units of Crystal Peak at a price of C$0.17 per unit, for gross proceeds of approximately US$5 million.

Each unit is composed of one common share of Crystal Peak and one-half of one common share purchase warrant, for an aggregate of 39,215,686 common shares and 19,607,843 warrants. Each warrant entitles the holder to subscribe for one common share at a price of C$0.21 per common share until Nov. 2, 2020.

Crystal Peak intends to use the funds for expenses required to reach the construction phase of its Sevier Lake Project, and for other general working capital purposes.

EMR has increased its holdings in Crystal Peak to approximately 183.1 million common shares, representing approximately 63.1 percent of Crystal Peak’s issued and outstanding common shares.

BHP Group – Management Brief

Australia, Management Briefs

BHP Group, Melbourne, has appointed Tristan Lovegrove as Group Investor Relations Officer, effective July 15, 2019. Lovegrove replaces Adrian Wood, who was previously announced as BHP Vice President Finance Minerals Australia.

Lovegrove joins BHP from RBC Capital Markets in London, where he held the position of Managing Director, Corporate Broking and Equity Capital Markets and led coverage of the mining, oilfield services, industrial, business services, and transport sectors. Prior to RBC, he spent ten years with Credit Suisse.

Lovegrove will report to BHP CFO Peter Beaven, and will relocate from London to Melbourne.

Sirius Launches Stage 2 Financing, Raises $425M in New Share Offer

England, Featured, News, Polyhalite, Specialty

Sirius Minerals Plc, Scarborough, England, early this week announced the launch of its “markets-led” Stage 2 project financing, under which it aims to raise a total of US$3.8 billion (including financing costs) to fund its North Yorkshire polyhalite mine and processing plant project to completion.

The US$3.8 billion financing will comprise a US$400 million equity fundraising, a US$644 million issue of convertible bonds, a US$500 million senior secured bond issue, and a revolving credit facility for up to a maximum of US$2.5 billion.

Sirius has signed an engagement letter with JP Morgan Securities LLC for the proposed US$2.5 billion revolving credit facility. That credit facility is contingent upon the completion of the full US$500 million bond issue before Oct. 30, 2019.

Sirius revealed in March that it had secured a conditional proposal from “a major global financial institution” in respect of its stage 2 financing (GM March 15, p. 1). While JP Morgan is the sole lead arranger, it is expected that the credit facility will be syndicated to other lenders.

The polyhalite developer launched the US$400 million share placing on April 29, and later revealed that the shares would be sold for 15 UK pence each. The placing was oversubscribed, and Sirius on May 1 confirmed that it had raised a total of US$425 million via the share placing.

Sirius also this week launched the buy-back convertible bond issue, which is expected to close in May. The buy-back convertible bond issue, the underwritten placing, and open offer together will raise about US$1 billion of new funds.

Sirius will aim to issue the separate US$500 million senior secured bonds by the end of September. As long as it is completed by Oct. 30, the revolving credit facility will be put in place. However, while J.P. Morgan would endeavor to procure purchasers for the full US$500 million of these initial bonds, it would not be under any obligation to acquire any for which it cannot procure purchasers. As a result, Sirius said it does not have any certainty that it will receive the full US$500 million of gross proceeds of the initial bonds.

Despite the uncertainties, this week’s financing announcement will go some way to assuage skeptics that doubted whether the company could raise the rest of the required funding – and enough customers – for its polyhalite project. Sirius has been pursuing a senior debt financing for the project with a group of prospective lenders since 2016, and until now, without success.

Last September, the company revealed that it had upwardly revised the capital cost requirement of the polyhalite mining project to US$4.17 billion (including contingency), and would need an additional US$400-$600 million in its stage 2 funding, putting its revised stage 2 capital funding requirement at between $3.4-$3.6 billion, up from the previous estimate of $3 billion (GM Sept 7, 2018).

Last week, Sirius announced that it had secured its first European customer, and had signed an exclusive 10-year supply and distribution deal with Munich-based agri-business group BayWa Agri Supply & Trade BV (BAST) (GM April 26, p. 1). The deal has taken the polyhalite developer’s aggregate peak contracted sales volume to 10.7 million mt/y, which equates to slightly more than the North Yorkshire project’s targeted first-phase capacity, and up from 8.2 million mt/y at the end of last year.

As the project develops, the plan is for the short-term financing to be converted into further bond issues. Sirius is targeting the extraction of the first polyhalite from the Woodsmith Mine by the end of 2021.

The polyhalite developer this week reported a £12.5 million total loss for 2018, a marked improvement on its end-2017 loss position of £78.9 million. The company attributed the main driver of the loss as the fair value re-measurement of the derivatives associated with convertible loans. As of the end of last year, the company had total funds of £290.4 million, comprising cash and cash equivalents of £230.1 million and restricted cash of £60.3 million.

 

Compass 1Q Fertilizer Volumes Down

News, News Briefs, Specialty

Compass Minerals, Overland Park, Kan., reported first-quarter North American fertilizer volumes down 34 percent and those for South America down 15 percent, with both segments reporting operational losses. Salt, on the other hand, put in a better-than-expected performance, helping to keep company-wide net earnings in the plus column at $7.6 million ($0.22 per diluted share) on sales of $403.7 million, down from the year-ago $12.6 million ($0.37 per share) and $437.9 million, respectively. However, adjusted EBITDA was up at $68.1 million from $60.8 million.

“We are very pleased with the performance of the Salt business thus far in 2019,” said Compass interim CEO and Chairman Dick Grant. “Improved production at both of our North American salt mines, as well as favorable logistics and commercial execution throughout the Salt business, enabled us to capitalize on above average winter in North America and generate sales and earnings above our expectations.

“These positive results more than offset the softness experienced in our Plant Nutrition business. Looking forward, we are encouraged by the outlook for the Salt business in North America, and while there are challenging market conditions facing the agriculture sector in North and South America, we believe we’re well-positioned for success as market conditions improve,” added Grant.

Compass said while sales from Plant Nutrition North America are beginning to improve, it is unlikely to fully recover first-quarter volume shortfall due to the shortened planting season. However, it said the full-year market conditions for key crops remain attractive.

Plant Nutrition North America posted a first-quarter operating loss of $1.6 million on revenues of $37.2 million, compared to the year-ago earnings of $4.9 million and revenues of $52.9 million. EBITDA was $10 million down from $16.2 million.

Tons sold dropped to 57,000 st from 87,000 st. However, average selling prices were up 8 percent to $656/st from $610/st, with this attributed to higher-priced micronutrients. Sulfate of potash (SOP) prices did edge up from year-ago levels to $598/st from $583/st.

Compass particularly noted heavy rains in California and the Northwest, as well as high river levels and flooding in the Midwest. In addition, the company reported increased logistics costs due to less favorable geographical product mix. Product that would have been sold in the West was sent to the Eastern market at higher cost.

Luckily, the company said imports are down and its warehouses are fully stocked and ready to serve customers. It expects per unit costs to decline throughout the remainder of the year.

Meanwhile, at Plant Nutrition South America, Compass said farmers have been cautious due to international trade concerns. The segment posted a first-quarter operating loss of $2.6 million on sales of $57.7 million, compared to year-ago income of $800,000 and $66.3 million, respectively. EBITDA was $2.9 million, down from $6.6 million. First-quarter fertilizer sales volumes were 52,000 st, down from 61,000 st. However, average price per ton was up at $681/st from $646/st.

South American chemical solution sales were up slightly at 82,000 st from 79,000 st, though pricing was down at $275/st from $339/st.

The Salt segment posted operating earnings of $52.3 million on sales of $306.4 million, up from $34.1 million and $315.9 million, respectively. EBITDA was $67.6 million, up from $48.8 million.

Going forward, Compass is giving second-quarter Plant Nutrition North America EBITDA guidance of $15-$20 million on revenues of $50-$60 million. Its annual tonnage estimate is 340,000-380,000 st, down from the earlier 350,000-400,000 st.

Second-quarter Plant Nutrition South American EBITDA guidance is $5-$8 million on revenues of $75-$85 million. Full-year tonnage guidance is 800,000-900,000 st.

Second-quarter Salt guidance is $30-$40 million on revenues of $105-$120 million. Full-year tonnage is put at 10.5-11 million st, up from the prior 10-10.5 million st.

Consolidated 2019 EBITDA is projected at $310-$350 million.

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