All Posts from August 4, 2023

Vancouver Dockworkers to Vote Again as ILWU, BCMEA Renegotiate Labor Contract

Canada, Featured, News

International Longshore and Warehouse Union (ILWU) Canada members on Aug. 4-5 will be voting on a new labor contract with the British Columbia Maritime Employers Association (BCMEA), according to an ILWU announcement on Aug. 1.

The scheduled vote is happening a week after ILWU Canada’s voting membership rejected a four-year tentative agreement that was proposed by a senior federal mediator and recommended for ratification by the ILWU Bargaining Committee and their Longshore Caucus (GM July 28, p. 1).

Terms of the new contract were not disclosed, but the BCMEA in a July 29 statement said the earlier contract rejected by the ILWU provided a compounded wage increase of 19.2%,  a signing bonus of $1.48 per hour worked to be paid to each employee, and an 18.5% increase to a Modernization and Mechanization retirement lump sum payment.

“It has been 31 days since ILWU Canada communicated their first intention to strike,” the BCMEA statement said “The disconnect within ILWU Canada and their erratic actions of the past month have impacted Canadians for too long. Of note, while the ILWU have not communicated their next steps, they retain the ability to provide 72-hour strike notice. Regrettably, ILWU’s rejection once again leaves businesses, Canadians, and all those who depend on a stable, well-functioning supply chain hanging in the balance.”

Following the failed vote, Federal Labor Minister Seamus O’Regan on July 29 referred the dispute to the Canada Industrial Relations Board (CIRB) and said he was directing CIRB to determine whether the union’s rejection of the tentative agreement has eliminated the possibility of a negotiated resolution. If the CIRB made this determination, O’Regan said a new collective agreement or final binding arbitration would be imposed on the parties.

On July 30, however, the ILWU Canada and the BCMEA issued a joint statement saying they had secured a new tentative settlement with the help of the CIRB, with both parties recommending ratification by union membership and member employers. The ILWU Canada scheduled a Stop Work meeting for Aug. 2 to recommend the terms to members.

“The longshore caucus is recommending to the membership the negotiated terms of settlement,” Rob Ashton, ILWU Canada President, said in an Aug. 1 statement. “On Thursday, Aug. 3, and Friday Aug. 4, 2023, voting will take place to ratify the new collective agreement.”

Market Volatility Impacts Nutrien’s 2Q Sales, Earnings; Potash Ramp-Up, Geismar Clean Ammonia Project Paused

Ammonia, Earnings, Featured, Indicators, News, Nitrogen, Phosphate, Potash

Nutrien Ltd. on Aug. 2 reported second-quarter net earnings of $448 million ($2.53 adjusted earnings per share) on sales of $11.65 billion, down from last year’s $3.6 billion ($5.85 adjusted earnings per share) and $14.5 billion, respectively. Adjusted EBITDA came in at $2.48 billion versus $4.99 billion.

Earnings per share, net income, and EBITDA fell below the average analyst estimates (Bloomberg Consensus), while second-quarter sales were above the average analyst estimate of $10.95 billion.

“Nutrien’s results have been impacted by unprecedented volatility in global crop input markets over the last 18 months,” said Ken Seitz, Nutrien’s President and CEO. “We continue to see demand strengthen in our key markets, in particular North America, however the process of recovery has been more uneven in offshore markets.”

Nitrogen adjusted EBITDA declined to $569 million in the second quarter, down from last year’s $1.24 billion and below the average analyst estimate of $596.6 million, due to lower net realized selling prices for all major nitrogen products, which more than offset higher sales volumes and lower gas costs.

Nutrien said global urea and nitrate prices have strengthened in the third quarter of 2023, driven by increased demand and supply constraints, including plant turnarounds and reduced Egyptian gas supplies. The company said it expects ammonia markets to strengthen during the balance of the year due to low global inventories, continued supply constraints, and higher values for other nitrogen products.

Potash adjusted EBITDA for the quarter fell to $654 million, down sharply from last year’s $2.02 billion and below the average analyst estimate of $817.4 million. Nutrien said weaker net realized selling prices and lower offshore sales volumes more than offset higher North American sales volumes, with offshore volumes impacted by the strike at the port of Vancouver and the outage at Canpotex’s Portland, Ore., terminal.

Nutrien said potash channel inventories in North America ended the first half at multi-year lows and are seeing strong demand in the third quarter. The settlement of the Chinese potash contract in June also sparked stronger engagement in offshore markets, particularly in Brazil, the company said.

Phosphate adjusted EBITDA fell to $113 million for the quarter, down from last year’s $184 million and below the average analyst estimate of $151.6 million, driven by declines in dry phosphate prices. Nutrien said the spring season ended with low channel inventories, however, and demand has strengthened in the second half.

Nutrien recognized a $233 million non-cash impairment of its White Springs, Fla., property, plant, and equipment during the quarter due to the volatility of phosphate margins forecasts, but planned turnarounds have been completed and Nutrien expects operating rates to increase through the remainder of 2023.

Retail adjusted EBITDA declined to $1.07 billion in the quarter, down from last year’s $1.43 billion but up slightly from the average analyst estimate of $1.06 billion, primarily due to lower gross margins for crop nutrients and crop protection products.

Nutrien’s North American crop nutrient sales volumes were up 16% in the quarter compared to last year, and per-ton margins in the US returned to more normalized levels, the company reported. Crop protection margins were pressured by lower prices for certain commodity products and the impact of selling through higher-cost inventory.

Nutrien said crop prices have been volatile but remain historically high, with new crop corn, wheat, and soybean prices 15-20% above the ten-year average. “Fertilizer affordability has improved significantly compared to the previous year due to the continued strength in crop prices and reduction in fertilizer prices,” the company said, adding that dry conditions in North America have impacted in-season nitrogen and crop protection applications.

Nutrien announced several strategic actions in response to market conditions, including indefinitely pausing the planned ramp-up of potash production capacity to 18 million mt (GM June 10, 2022) by 2025, and suspending work on its proposed 1.2 million mt clean ammonia project in Geismar, La.

Nutrien said some “in-flight projects” related to the potash expansion would be completed in the second half of 2023. The decision to table the Geismar clean ammonia project was due to an increase in expected capital costs compared to the company’s initial estimates, continued uncertainty on the timing of emerging uses for clean ammonia, and the prioritization of other capital allocation alternatives.

“These actions, along with other operational efficiency initiatives, demonstrate our commitment to disciplined capital allocation and focus on long-term value creation,” Seitz said.

Nutrien said it also plans to reduce capital expenditures across smaller investment projects in its Retail business, and to defer the timing of expenditures on certain Nitrogen brownfield projects as the company prioritizes capital and provides flexibility on future allocation alternatives.

Nutrien said it expects to lower capital expenditures by approximately $200 million in 2023 and is targeting a $100 million reduction in expenses compared to its previous estimates. The company said it now expects total capital expenditures of $2.8 billion in 2023, with further reductions anticipated in 2024.

For the first six months, Nutrien posted net earnings of $1.0 billion ($2.03 diluted net earnings per share) and adjusted EBITDAof $3.9 billion ($3.63 adjusted net earnings per share), down significantly from the record levels achieved in the first half of 2022, due primarily to lower net realized fertilizer prices, offshore potash sales volumes, and Nutrien Ag Solutions earnings.

Full-year 2023 adjusted EBITDA and adjusted net earnings per share guidance were revised downward to $5.5-$6.7 billion and $3.85-$5.60 per share, respectively, down from Nutrien’s May 10 guidance of $6.5-$8.0 billion and $5.50-$7.50 per share, respectively.

Adjusted EBITDA guidance by segment fell to $2.0-$2.5 billion for Potash, down from May’s $2.65-$3.35 billion; $1.8-$2.3 billion for Nitrogen, down from $1.95-$2.55 billion; $500-$600 million for Phosphate, down from $550-$700 million; and $1.45-$1.60 billion for Retail, down from $1.60-$1.75 billion in May.

Nutrien’s US ticker dropped 3.7% premarket after the earnings miss and the cut to full-year guidance. Nutrien announced on Aug. 2 that its Board of Directors has declared a quarterly dividend of $0.53 per share payable on Oct. 13, 2023, to shareholders of record on Sept. 29, 2023.

Retail (millions) 2Q-23 2Q-22
Adjusted EBITDA 1,067 1,427
Gross Margin 1,931 2,340
Total Sales 9,128 9,422
Crop Nutrient Sales 3,986 4,548
Potash (millions) 2Q-23 2Q-22
Adjusted EBITDA 654 2,027
Gross Margin 656 2,269
Total Sales 1,009 2,668
Nitrogen (millions) 2Q-23 2Q-22
Adjusted EBITDA 569 1,240
Gross Margin 399 1,058
Total Sales 1,115 1,957
Phosphate (millions) 2Q-23 2Q-22
Adjusted EBITDA 113 184
Gross Margin 49 156
Total Sales 430 514

Lower Prices Impact CF’s 2Q; EPS Beats Estimates

Ammonia, Earnings, Featured, News, UAN, Urea

CF Industries Holdings Inc. reported a 55% decline in net earnings attributable to common stockholders for the second quarter ended June 30, 2023, to $527 million ($2.70 per diluted share) from last year’s $1.17 billion ($5.58 per diluted share). Even so, the EPS for the quarter beat the average analyst estimate of $2.19 (Bloomberg Consensus).

Adjusted EBITDA came in 56% lower, at $857 million versus last year’s $1.95 billion. Second-quarter net sales were 47% lower year-over-year, to $1.78 billion from $3.39 billion in 2022.

CF said second-quarter average selling prices were lower than 2022 due to higher global supply availability as lower energy costs led to increased global operating rates. Sales volumes in the second quarter of 2023 were higher than 2022 as higher UAN volumes were partially offset by lower ammonium nitrate sales volumes.

“Despite downward pressure in the global nitrogen market compared to the unprecedented pricing environment in 2022, industry fundamentals remain positive and forward global energy curves suggest attractive margin opportunities for our cost-advantaged network for the foreseeable future,” said Tony Will, CF’s President and CEO.

Will noted global nitrogen prices stabilized during the latter part of the second quarter as robust demand for spring application emerged in North America, and smaller importing regions such as Asia (excluding India) and Latin America (excluding Brazil) returned to average purchasing patterns compared to 2022.

He said the Northern Hemisphere ended the first half of 2023 with low inventories of nitrogen fertilizer, which, along with expected strong demand from Brazil and India, should support a positive demand environment in the second half of the year.

“Longer-term, we expect the global nitrogen supply-demand balance will remain positive, underpinned by agriculture-led demand and forward energy curves that point to wider-than-average energy spreads for LNG-dependent producers in Europe and Asia,” he said.

Will said the need to replenish global grains stocks, which has supported high prices for corn, wheat, and canola, will continue to drive global nitrogen demand, noting that stocks-to-use ratios remain low for feed grains and oilseeds following lower-than-expected production in 2022.

“We believe that it will take at least two years of harvests at trend yield to fully replenish global grains stocks, supporting strong grains plantings and incentivizing nitrogen fertilizer application over this time period,” he said.

Will said the outlook for farm profitability in North America remained strong for all major crops in the 2023 spring application season, helping drive significant increases in corn and wheat plantings in the US.

“We believe that the North American inventory position at the end of the second quarter for all nitrogen products was below average due to lower import levels, higher export volumes, and increased plant corn and wheat acreage compared to the prior year,” he said.

For Brazil, CF expects urea consumption this year to remain strong, supported by higher corn-planted acres and robust farm incomes, with potential for higher import volumes in the second half of 2023 as favorable weather conditions could encourage demand against a backdrop of low inventories.

However, CF believes production economics in Europe will remain challenged as declining global nitrogen prices continue to make it difficult for European producers to compete with imports, despite the decline in natural gas prices in the region. Approximately 25% of Europe’s ammonia capacity, 20% of its urea capacity, and 35% of its UAN capacity were reported in shutdown/curtailment as of June 2023, CF noted.

“We do not expect full ammonia capacity production rates to return to the region during the year, with a corresponding higher-than-normal level of nitrogen imports to the region, with some facilities continuing to favor importing ammonia in order to manufacture upgraded products,” Will said.

CF expects its own gross ammonia production for full-year 2023 to be in the range of 9.0-9.5 million mt. CF Fertilisers, CF’s UK subsidiary, announced late last month that it will permanently close the ammonia plant at its Billingham complex (GM July 28, p. 1). The Billingham ammonia unit has been halted since August 2022 (GM Aug. 26, 2022), and CF Fertilisers intends to continue producing ammonium nitrate and nitric acid at the site using imported ammonia, as it has for the past 10 months.

For the first half of 2023, CF reported net earnings attributable to common stockholders of the company of $1.09 billion ($5.55 per diluted share), down from $2.05 billion ($9.78 per diluted share) in the same period last year. Six-month adjusted EBITDA was 52% lower year-over-year, to $1.72 billion from $3.60 billion, while net sales for the period declined 39%, to $3.79 billion from $6.26 billion.

CF said average selling prices for the six-month period were lower than 2022 due to higher global supply availability as lower global energy costs led to increased global operating rates. Sales volumes in the first half of 2023 were similar to the first half of last year as higher granular urea sales volumes offset lower ammonium nitrate and ammonia sales volumes.

The average cost of natural gas reflected in CF’s cost of sales was $4.56 per MMBtu in the first half of this year, compared to $6.79 per MMBtu in the same period last year.

In other news, CF said its plans to purchase the Waggaman, La, ammonia plant from Incitec Pivot Ltd. (GM March 24, p. 1) remain subject to the receipt of certain regulatory approvals and other customary closing conditions. The company also touted its growing list of blue and green ammonia projects (GM April 28, p. 1).

Production (000 st) 

  1Q-23  1Q-22  1-H 2023 1H-2022
Ammonia  2,374 2,470 4,733 5,083
Gran urea  1,122 1,157 2,333 2,231
UAN 32    1,665 1,633 3,263 3,498
AN  300 399 688 804

Ammonia      

  1Q-23  1Q-22  1-H 2023 1H-2022
Net Sales ($/M)  525 1,115 949 1,755
Gross Margin ($/M)  222 673 366 1,033
Sales Volumes (000 st) 1,053 1,035 1,705 1,762
Avg Selling Price ($/st)  499 1,077 557 996

Granular Urea 

  1Q-23  1Q-22  1-H 2023 1H-2022
Net Sales ($/M)  460 833 1,071 1,598
Gross Margin ($/M)  238 473 522 968
Sales Volumes (000 st) 1,147 1,181 2,470 2,277
Avg Selling Price ($/st)  401 705 434 702

UAN 

  1Q-23  1Q-22  1-H 2023 1H-2022
Net Sales ($/M)  548 976 1,215 1,991
Gross Margin ($/M)  259 633 580 1,303
Sales Volumes (000 st) 1,809 1,626 3,471 3,454
Avg Selling Price ($/st)  303 600 350 576

AN 

  1Q-23  1Q-22  1-H 2023 1H-2022
Net Sales ($/M)  104 253 263 476
Gross Margin ($/M)  23 102 78 154
Sales Volumes (000 st) 369 436 743 864
Avg Selling Price ($/st)  282 580 354 551

Other 

  1Q-23  1Q-22  1-H 2023 1H-2022
Net Sales ($/M)  138 212 289 437
Gross Margin ($/M)  62 110 121 231
Sales Volumes (000 st) 560 557 1,084 1,102
Avg Selling Price ($/st)  246 381 267 397

Mosaic 2Q Income Drops on Lower Prices; Colonsay Potash Mine Restarted

Earnings, Featured, News, Phosphate, Potash

The Mosaic Co. announced second-quarter net income of $369 million on revenues of $3.4 billion and adjusted EBITDA of $744 million, below analyst estimates (Bloomberg Consensus) of net income at $385 million and adjusted EBITDA at $746 million, but beating estimated revenues of $3.2 billion.

Net income for the quarter was off 64% from the year-ago $1.0 billion, while revenues fell 37% from the $5.4 billion reported in last year’s second quarter. Adjusted EBITDA dropped 63% year-over-year from $2.0 billion.

The company cited lower selling prices amid the ongoing fertilizer market downturn, noting second-quarter gross margin rates softening to 16.8% from 34.4% in 2Q 2022.

“The investments we’ve made in our business over the last decade are yielding results,” said Mosaic President and CEO Joc O’Rourke. “Our Esterhazy potash complex is now the largest in the world and our Fertilizantes business in Brazil accounts for nearly a quarter of all fertilizer sales in one of the most dynamic ag markets in the world. Mosaic is well-positioned to capitalize on the fertilizer market’s recovery, which is well underway.

“Overall, the fertilizer market recovery is playing out as we expected,” O’Rourke added. “In a tight market, volumes are moving and prices are following. Phosphate prices have risen over the last month, while potash prices have stabilized and are now beginning to move higher.”

Potash 2Q sales volumes of 2.2 million mt were down slightly from the year-ago 2.3 million mt. The average selling price of $326/mt was off 52% from $678/mt in second-quarter 2022, however, leading to a 64% decline in operating earnings for the segment, to $328 million from the last year’s $915 million.

Adjusted 2Q EBITDA for the Potash segment dropped to $408 million from $998 million last year, a 50% decline, while per-tonne gross margin slid 62%, to $155/mt from the year-ago $403/mt. Potash production for 2Q was 1.9 million mt, off 21% from 2.4 million mt in the prior year.

The production decline reflected lost output from Mosaic’s idled Colonsay potash mine, the company said, where production was curtailed in late 2022. Originally penciled to restart in February, Colonsay restarted in July to offset a planned summer maintenance turnaround at its Esterhazy mine, the company announced.

Describing the Colonsay restart as “temporary,” Mosaic was noncommittal regarding future plans for the mine.

“For now, Colonsay needs to run to reestablish our inventory levels to where they would have been previous to the Esterhazy shutdown,” O’Rourke said. “We’ll run Colonsay first to fill that, then to make up the gap of what we had … in Q2, and what we’re seeing for the summer fill in Q3. So I would say for the foreseeable future, we could see Colonsay running. But again, I’m not going to run an operation for the sake of running it.”

Outputs at Colonsay were reported at 1.3 million mt/y prior to the curtailment (GM Dec. 9, 2022). Nameplate production capacity at Esterhazy was confirmed at 7.8 million mt/y in the second quarter by an independent third party, Mosaic said.

Mosaic noted a 15% increase in second-quarter Phosphate segment sales volumes, to 1.9 million mt from the year-ago 1.7 million mt. Net sales declined to $1.3 billion, however, down 28% from the year-ago $1.8 billion.

“In North America, a strong spring application season depleted fertilizer inventories, which customers are now looking to replenish,” O’Rourke said. “Logistical constraints associated with low water levels on the Mississippi River and limited trucking capacity persist, but favorable grower economics are leading retailers to secure supplies early to avoid any backups.”

The average selling price for DAP fell 36% year-over-year, to $585/mt from $920/mt, while gross margin per tonne plummeted 71%, to $112/mt from the year-ago $383/mt. Adjusted EBITDA for the Phosphate segment dropped 49%, to $385 million from $758 million in 2Q 2022. Production volumes of finished phosphates firmed 1% in the quarter, to 1.7 million mt.

Net earnings for the January-June period totaled $803.8 million on net sales of $7.0 billion, down from the year-ago $2.2 billion and $9.3 billion, respectively. Gross margin for the six-month period was $1.2 billion, off 62% from $3.3 billion.

Looking ahead, Mosaic expects third-quarter potash sales volumes of 2.1-2.3 million mt, with mine-gate prices landing in the $250-$300/mt range. Third-quarter phosphate sales were projected at 1.7-1.9 million mt, with average DAP pricing anticipated at $475-$525/mt FOB. Lower raw materials costs were expected to positively influence phosphate margins in the third quarter, the company said.

Citing the ongoing war in Ukraine, Mosaic expects the grain and oilseed markets to remain tight through the end of the year and likely into 2024, suggesting continued pressure in global stocks-to-use ratios. With crop prices driven higher in the prevailing fundamental landscape, the low prices observed in the potash and phosphate markets during the second quarter have led to favorable grower economics.

Supply constraints are expected to remain a force in the market, however. Mosaic noted expectations of a 5-6 million mt reduction in potash exports from Belarus compared to pre-war exports, while in North America, export rates were predicted to decline due to constraints at western ports, including the dockworker strike at Vancouver.

“Canpotex is making use of alternative ports in Canada and in the southern and eastern United States to mitigate some, but likely not all, of the impact on international shipments,” O’Rourke said.

Despite a projected increase compared to 2022, Mosaic expects phosphate exports from China to remain well below 2021 totals. “In both phosphates and potash, the fundamental tightness in global markets is expected to persist through 2023 and likely beyond,” the company said.

“Around the world, weather extremes are having a profound effect on crop production,” O’Rourke noted. “North American yields this year could be negatively impacted by dry conditions, and El Niño is hurting production across Southeast Asia and Australia. This situation is exacerbated by under-application of nutrients, especially potash, which is crucial for drought resistance and crop resilience.

“To maximize yields and meet global consumption needs, growers need to increase cropping intensity, which will mean increasing fertilizer applications,” O’Rourke added. “The world can’t afford multiple years of under-fertilization and crop production shortfalls.”

Potash (millions) 2Q-23 2Q-22
Sales Volume (000 mt) 2.2 2.3
Production Volume (000 mt) 1.9 2.4
Gross Margin (million $) 338 928
Operating Earnings (million $) 328 915
Adjusted EBITDA 408 998
Net Sales (million $) 849 1,600
MOP Selling Price $/mt 326 678
Phosphates (millions) 2Q-23 2Q-22
Sales Volume (000 mt) 1.9 1.7
Production (Finished) Vol. (000 mt) 1.7 1.7
Gross Margin (million $) 216 642
Operating Earnings (million $) 146 578
Adjusted EBITDA 385 758
Net Sales (million $) 1,300 1,800
DAP Selling Price $/mt 585 920
Mosaic Fertilizantes (millions) 2Q-23 2Q-22
Sales Volume (000 mt) 2.4 2.3
Gross Margin (million $) 13 450
Operating Earnings (Loss) (million $) (20) 420
Adjusted EBITDA 66 444
Net Sales (million $) 1,400 2,300
Avg Finished Price (Dest.) 595 974

CVR 2Q Income Falls; Ammonia Utilization at 100%

Ammonia, Earnings, Featured, News, UAN

CVR Partners LP reported second-quarter net income of $59.9 million on net sales of $183.0 million, falling from the year-ago $117.6 million and $244.0 million, respectively. EBITDA was $86.5 million, off from $147.2 million in 2Q 2022.

“CVR Partners achieved solid results for the 2023 second quarter led by strong production, including a combined ammonia production rate of 100% offset by lower fertilizer pricing,” said Mark Pytosh, CEO of CVR Partners’ general partner. “The spring planting season went well with favorable weather and strong demand for nitrogen fertilizer.

“As we enter a new planting season, nitrogen fertilizer prices have fully reset and we have seen strong demand for the second half of 2023,” Pytosh added. “Our focus for the remainder of the year will continue to be on safe, reliable operations and maximizing our free cash generation and cash distribution.”

Despite the lower income, CVR posted a 52% increase in ammonia sales for the second quarter, at 79,000 st compared to the year-ago 52,000 st. Sales of UAN were also higher, firming to 329,000 st from 287,000 st in the prior-year period, a 14.6% increase.

The average selling price for ammonia was $707/st ex-plant, off 40% from the year-ago $1,182/st, while the average selling price of $316/st ex-plant for UAN represented a 43% decline from $555/st in the prior year.

“Our facilities ran well during the second quarter of 2023, and despite five days of downtime due to outages at the third-party air separation plant at Coffeyville, we achieved consolidated ammonia plant utilization of 100%,” Pytosh said. “We also achieved new records for monthly ammonia production and daily ammonia shipments at East Dubuque in the quarter.”

CVR posted combined ammonia production for the second quarter at 219,000 st, of which 70,000 st were available for sale. UAN production was noted at 339,000 st.

“The spring planting season went well with favorable weather and strong demand for nitrogen,” Pytosh said. “Customers have shared with us that their inventory levels were at the lowest they have seen in recent years and will need to be replenished in the coming months.

“Looking ahead, we believe we have seen the recent bottom in nitrogen fertilizer prices,” he added. “(We) expect to see prices increasing into the fall due to strong grain prices and farmer economics.” CVR projected ammonia utilization at 95-100% in the third quarter.

Six-month 2023 net income totaled $161.7 million on net sales of $409.3 million, off from the year-ago $211.2 million and $466.9 million, respectively. EBITDA for January-June stood at $210.8 million, below the $270.6 million reported through the same period of 2022.

CVR announced a cash distribution of $4.14 per common unit in the second quarter, to be paid Aug. 21, 2023, to common unit holders of record as of Aug. 14, 2023.

Sales (000 st) 2Q-23 2Q-22
Ammonia 79 52
UAN 329 287
Plant Gate Price $/st 2Q-23 2Q-22
Ammonia 707 1,182
UAN 316 555
Production (000 st) 2Q-23 2Q-22
Ammonia – gross 219 193
Ammonia – net 70 50
UAN 339 331
Feedstock 2Q-23 2Q-22
Petroleum Coke ($/st) 73.91 49.91
Natural Gas ($/mmBtu) 2.35 7.34

Lower Potash, Trio® Prices Impact Intrepid’s 2Q

Earnings, News, Potash

Intrepid Potash Inc. on Aug. 2 reported second-quarter sales of $81.0 million, a 12% decrease from last year’s $91.7 million. Consolidated gross margin for the quarter totaled $15.4 million, while net income came in at $4.3 million ($0.33 per diluted share), down from last year’s net income of $23.7 million ($1.74 per diluted share).

The company posted adjusted EBITDA of $15.8 million in the second quarter, down from $41.5 million in last year’s second quarter, with the lower profitability primarily driven by lower pricing for key products and an increase in cost of goods sold.

“Fertilizer pricing continues to drive strong margins for the company, and our expectation of robust demand underpinned by solid farmer economics was evident in our improved sales volumes in the first half of this year,” said Bob Jornayvaz, Intrepid’s Executive Chairman and CEO.

Potash segment sales in the second quarter were down 3% from last year, to $47.3 million. The lower revenue was driven by a 35% decrease in the average net realized sales price for potash, to $479 per ton from $738 per ton last year. This was partially offset by higher potash sales volumes, which totaled 79,000 tons during the quarter, a 41% increase from last year’s second quarter.

Potash segment gross margin totaled $12.9 million for the quarter and $27.3 million for the first six months, down from $24.9 million and $54 million, respectively, in 2022. Potash production totaled 12,000 tons in the second quarter and 102,000 tons for the first half, down from 25,000 tons and 128,000 tons, respectively, in 2022.

Potash segment sales decreased 5% for the first six months, to $99.8 million, with higher sales volumes of 167,000 tons offsetting a 32% decrease in the average net realized price of $485 per ton.

Trio® segment sales were 19% lower for the quarter at $28.7 million, primarily driven by a lower average net realized sales price per ton of $333, down 32% from last year’s second-quarter. This was partially offset by a 7% increase in Trio® sales volumes for the quarter, to 63,000 tons.

Six-month Trio® segment sales decreased 23%, to $59.0 million, driven by a 29% decrease in the average net realized price to $339 per ton, while six-month sales volumes were down 2%, to 128,000 tons.

Trio® segment gross margin totaled $1.2 million for the second quarter and $2.7 million for the first six months, down from $13.1 million and $29.2 million, respectively, in 2022. Intrepid said the lower gross margin figures were primarily driven by an increase in segment cost of goods sold and lower pricing.

Trio® production totaled 58,000 tons in the second-quarter and 107,000 tons for the first six months, equal to last year’s second-quarter output but down from the 2022 six-month production volume of 123,000 tons. Intrepid said its East Facility had unplanned downtime of roughly eight days in the first quarter, which was the primary reason for the lower first-half production volume.

Intrepid’s Oilfield Solutions segment sales in the second quarter decreased $2.4 million, or 32%, compared with last year, which the company said was primarily driven by a $1.1 million decrease in water sales and a $1.5 million decrease in surface use, rights-of-way, and easement revenues.

Jornayvaz said Intrepid’s key focus over the last year has been successful project execution, with growth capital primarily directed to the company’s potash assets to maximize brine availability and improve brine grade. “As we shared in recent press releases, we successfully executed on three of our key growth projects and are already seeing improvements in our injection rates, with production benefits expected next year,” he said.

Improved Nutrient Volumes Benefit Andersons’ 2Q

Earnings, News

The Andersons Inc. on Aug. 1 reported second-quarter net income attributable to the company of $55 million ($1.61 per diluted share) and adjusted EBITDA of $144 million, down from the year-ago $80.5 million ($2.34 per share) and $169.3 million, respectively.

“Ethanol margins in the Renewables business and increased volume in our Nutrient & Industrial business led the way for the quarter,” said President and CEO Pat Bowe. “This was a significant improvement for Nutrient & Industrial after a softer first quarter. While we expected that some of the typical first quarter nutrient sales volume would shift into the second quarter, we are pleased with the extent of the recovery.”

The Nutrient & Industrial segment posted pretax income of $43 million, up from $38 million in last year’s second quarter. The segment’s second-quarter adjusted EBITDA was $52 million, up from $47 million last year.

After a slow first quarter when reduced sales reflected the falling price environment and planting delays, the company said volumes improved during the 2023 planting season, driving a 21% increase in tons sold versus the second quarter of 2022. Gross profit for the segment improved by $4 million, reflecting higher volumes partially offset by margin compression from peak levels in 2022.

Six-month group income for Nutrient & Industrial was $32.13 million on revenues of $609.5 million, down from the year-ago $49.1 million and $680.3 million, respectively. Adjusted EBITDA was $50.3 million, down from $65.6 million.

The Trade segment recorded pretax income of $5 million and adjusted pretax income of $7 million for the quarter, compared to pretax income of $24 million in the second quarter of 2022. Volumes were down and Trade results were mixed, the company said, with an overall decline in gross profit from last year’s second quarter. Trade’s second-quarter adjusted EBITDA was $27 million, down from $47 million last year.

“In our Trade segment, we had some very strong merchandising results but, as expected, did not repeat the outsized second quarter 2022 performance due to good execution following the Russian invasion of Ukraine,” Bowe said. “With the strong first quarter in Trade, which likely pulled some sales forward, our year-to-date results remain ahead of last year in this business. Geopolitical concerns continue to bring price volatility, which is typically beneficial to us.”

The Renewables segment reported pretax income of $67 million and adjusted pretax income attributable to the company of $32 million in the second quarter, down from $68 million and $46 million, respectively, in last year’s second quarter.

“We remain focused on executing within our stated strategy in our core grain and fertilizer verticals,” Bowe said. “We recently closed on the acquisition of ACJ International, a pet food ingredient supplier that fits well within our strategy for growth in the premium pet food ingredient industry. We continue to explore opportunities for growth in the merchandising of renewable diesel feedstocks, while maintaining our strong position in renewable fuels production along with potential carbon-reduction opportunities.”

Lower Prices Impact Fertiglobe’s 2Q/1H

ADNOC - Abu Dhabi, Ammonia, DEF, Earnings, News, Nitrogen, Urea

Abu Dhabi-based Fertiglobe, the nitrogen joint venture between OCI Global and ADNOC, reported a 72% drop in adjusted EBITDA for the second quarter ended June 30, to $218.2 million from $770.0 million in last year’s second quarter.

Adjusted net profit attributable to shareholders of the company plummeted 81%, to $83.9 million from the year-ago $438.2 million. Adjusted earnings per share were $0.010 against the prior year’s $0.053. Revenues fell by 63%, to $551.5 million from $1.47 billion in last year’s second quarter.

“The second-quarter results were impacted by lower selling prices, as volatility in European gas prices continued while markets saw increased supply from capacities commissioned in 2022, coinciding with the end of the demand season in the northern hemisphere,” Fertiglobe said in its Aug. 2 earnings release.

However, the company noted that nitrogen markets bottomed during the second quarter and are tightening rapidly, with a strong price trajectory in recent weeks despite the traditional summer lull for fertilizers.

“Looking ahead, we believe that limited incremental supply additions over the next several years, coupled with healthy farm economics, which incentivize nitrogen fertilizer application, and elevated marginal production costs in Europe, continue to support a favorable nitrogen outlook in the medium- to longer-term,” said Fertiglobe CEO Ahmed El-Hoshy.

Fertiglobe’s overall sales volumes in the second quarter were 12% lower than last year, falling to 1.562 million mt from 1.776 million mt. Own-produced product sales volumes were 8% lower, at 1.414 million mt from 1.54 million mt, while third-party traded volumes fell 37% year-over-year, to 148,000 mt from 236,000 mt.

El-Hoshy expects to see more permanent closures of European marginal production if ammonia pricing continues to track below marginal production costs.

“Despite a recent drop in gas prices, 2023-2025 forward European gas prices are about $15/mmBtu (or about three times higher than 2025-2019), with higher prices anticipated for next winter,” he said. “The gas forwards imply marginal cost support levels for ammonia of about $750/mt (including full impact CO2) and around $590/mt (excluding CO2) for next winter and 2024, which could result in temporary or permanent closure of European marginal production if pricing remains below cost for an extended period.”

Fertiglobe continues to progress its sustainability-focused projects, including the 1 million mt/y Ta’ziz low carbon ammonia project in the UAE and the low-carbon ammonia pilot at Fertil, UAE. It expects the Final Investment Decision (FID) on the Ta’ziz low-carbon ammonia project in the coming months.

The company also expects to start the Front-End Engineering Design (FEED) process for green hydrogen-to-ammonia projects in both Egypt and the UAE during the second half of this year.

Fertiglobe posted a 63% decline in adjusted EBITDA for the first half of 2023, to $515.5million on revenue of $1.245 billion, down from the year-ago $1.39 billion and $2.66 billion, respectively. Six-month revenues were down 53% year-over-year. The company’s overall sales volumes for the first half were 7% lower, at 3.09 million mt from 3.31 million mt.

Adjusted net profit attributable to shareholders of the company was reported $219.3 million for the first six months, some 73% lower than last year’s $799.2 million. Adjusted earnings per share were $0.026 versus the previous year’s $0.096.

Fertiglobe proposes to pay first-half dividends of at least $250 million, subject to Board approval in September 2023.

Fertiglobe Sales Volumes (‘000 mt)

  2Q-2023 2Q-2022 % change 1H-2023 IH-2022 % change
Fertiglobe
Product Sold 		1,414 1,540 (8) 2,777 2,794 (1)
             
Ammonia 290 357 (19) 526 580 (9)
Urea 1.117 1,183 (6) 2,244 2,214 +1
DEF 7 – – 7 – –
Third Party
Traded 		148 236 (37) 313 512 (39)
             
Ammonia 78 27 +189 109 79 +38
Urea 70 209 (66) 204 433 (53)
Total
Product
Volumes 		1,562 1,776 (12) 3,090 3,306 (7)

OCI 2Q Adjusted EBITDA Down 75%

Ammonia, Earnings, News, UAN, Urea

OCI Global NV posted a 75% drop in adjusted EBITDA for the second quarter, to $325.6 million from $1.29 billion last year, but beat the average analyst estimate of $313 million (Bloomberg Consensus). Revenues were down 52%, to $1.37 billion from $2.86 billion, missing the average analyst estimate of $1.44 billion (Bloomberg Consensus).

OCI reported an adjusted net loss attributable to shareholders of the company of $6.5 million for the quarter, versus the year-ago net profit of $527.5 million. Adjusted earnings per share were $0.031 against the prior year’s $2.51. The company reported a negative free cash flow (after minority distributors) for the quarter of $222 million.

OCI cited lower selling prices compared to both the same quarter last year and the first quarter of this year as mostly driving the results. Second-quarter own-produced sales volumes were marginally up from last year, to 3.075 million mt from 3.062 million mt, and own-produced fertilizer volumes rose 1% year-over-year, to 2.47 million mt from 2.44 million mt.

The company’s third party sales volumes declined by 12%, however, to 796,500 mt, while total sales volumes were off 2% off year-over-year, to 3.872 million mt.

OCI Global CEO Ahmed El-Hoshy said nitrogen prices bottomed out during the second quarter and have rebounded in the third quarter, with Egypt urea prices up around 60% from “trough levels” in June 2023, “underpinned by demand recovery, record low inventories, and very tight supply.”

For the first half of 2023, OCI posted a 71% decline in adjusted EBITDA to $661.8 million on revenue of $2.74 billion, down from the year-ago $2.26 billion and $5.186 billion, respectively. Revenues were down 47% year-over-year.

The company reported a six-month adjusted net loss attributable to shareholders of the company of $21.7 million, compared with a net profit of $881.7 million for the same period last year. Adjusted six-month earnings per share were $0.103 versus the prior year’s $4.196.

OCI Product Sales Volumes

‘000 mt 2Q-2023 2Q-2022 % change 1H-2023 1H-2022 % change
Own Product            
Ammonia 508.3 547.6 (7) 830.1 934.3 (11)
Urea 1,140.8 1,192.7 (4) 2,309.5 2,234.8 +3
CAN 345.4 276.8 +25 522.0 568.2 (8)
UAN 473.0 426.1 +11 673.1 755.7 (11)
Total Fertilizer 2,467.5 2.443.2 +1 4,334.7 4,493.0 (4)
Melamine 17.7 30.1 (41) 27.8 61.1 (55)
DEF 188.0 217.7 (14) 362.8 443.9 (18)
Total Nitrogen
Products 		2,673.2 2,691.0 (1) 4,725.3 4,998.0 (5)
Methanol1 402.0 370.5 +9 623.6 652.0 (4)
Total Own Products
Sold 		3,075.2 3,061.5 0 5,348.9 5,650.0 (5)
Traded Third Party            
Ammonia 121.5 61.4 +98 164.3 118.6 +39
Urea 344.4 403.4 (15) 576.1 853.2 (32)
UAN 31.3 58.7 (47) 83.7 83.0 +1
Methanol 96.2 74.2 +30 225.7 218.3 +3
Ethanol and Other 23.0 – – 37.0 – –
AS 94.7 191.7 (51) 145.6 285.8 (49)
DEF 85.4 110.6 (23) 137.7 195.7 (30)
Total Traded Third
Party 		796.5 900.0 (12) 1,370.1 1,754.6 (22)
Total Own Product
and Traded Third
Party 		3,871.7 3,961.5 (2) 6,719.0 7,404.5 (9)

1 Including OCI’s 50 percent share of Natgasoline volumes

OCI said it launched a cost optimization initiative in May, with target run-rate savings of at least $100 million per annum, of which at least 50 million are expected to be achieved by the end of 2024 at Fertiglobe, OCI’s nitrogen joint venture with ADNOC.

It also expects to report this year on key takeaways and potential decisions related to an ongoing strategic review of all its business lines aimed at unlocking value (GM May 12, p. 26). The review will include an assessment of its Amsterdam stock market, with the Middle East and US being considered as possible alternative listing venues.

OCI said its 1.1 million mt/y blue ammonia plant under development in Beaumont, Texas, remains on track to start production in early 2025, with piling for the ammonia plant complete, foundations and civil works well underway, and erection of steel structures started. OCI and Linde Plc in February signed a long-term agreement under which Linde will supply clean hydrogen and nitrogen feedstocks to the new plant (GM Feb. 10, p. 1).

The expansion of the OCI ammonia import terminal at Rotterdam to 1.2 million mt/y throughput capacity is also on track to start in the first quarter of next year (GM June 17, 2022).

Additionally, the company said it is on track to start production of Diesel Exhaust Fluid (DEF)/AdBlue at OCI Nitrogen in the Netherlands in the first quarter of 2024 (GM Feb. 17, p. 33). The project will add 300,000 mt of DEF for a 100,000 mt of urea equivalent.

Gas Shortage Forces Nutrien to Cut Trinidad Output

Latin America, News, News Briefs, Trinidad and Tobago, U.S.

Nutrien Ltd. is curbing output at its Trinidad & Tobago plants due to natural gas shortages, Bloomberg reported this week. In a statement to Bloomberg on July 31, Nutrien said interruption to gas supplies is resulting in lower production at its Point Lisas facility, and the company is in talks with the government to resolve the matter.

“We are in discussions with the ministry of energy about this important issue and hope that the matter can be resolved in a timely manner and operations at our Trinidad facility returned to normal operations soon,” the statement said.

The Trinidad & Tobago complex, which produces ammonia at four plants, supplies customers in the US, the Caribbean, and Latin America. The plants produce about a third of Nutrien’s ammonia capacity.

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