All Posts from November 6, 2020

International Fertilizer Association – Management Brief

Canada, Management Briefs

Canadian researcher Dr. Claudia Wagner-Riddle has been awarded the International Fertilizer Association’s (IFA) 2020 Norman Borlaug Award for her multidisciplinary research that has helped improve fertilizer nitrogen use efficiency and reduce nitrous oxide (N20) losses by up to 70 percent without sacrificing crop yields. IFA said she was among the first researchers to apply micrometeorological techniques to monitor and better understand year-round N20 emissions from cropping systems by using a tunable diode laser trace gas analyzer.

Dr. Wagner-Riddle also leads a large collaborative group of scientists at the University of Guelph, where she is currently a professor at the School of Environmental Sciences, in a new outdoor soil monitoring laboratory. The first of its kind in North America, the laboratory is designed to mimic field conditions while also containing highly sophisticated monitoring equipment.

IFA said the results of Dr. Wagner-Riddle’s research have so far informed Canada’s national inventory of greenhouse gas emissions and the Nitrous Oxide Emissions Reduction Protocol (NERP) approved by the Alberta provincial government for use in its agricultural carbon offsets program, and have led to the recognition of nitrification inhibitors in the province of Ontario’s Climate Change Action Plan.

Idaho Congressional Delegation Sides with Domestic Phosphate Producers

Morocco, News, News Briefs, Phosphate, Russia, Tampa, U.S. Imports

All of the members of Idaho’s Congressional delegation have sent letters to the U.S. Department of Commerce and the U.S. International Trade Commission siding with U.S. phosphate producers in The Mosaic Co.’s June 26 countervailing duty petition against imports from Morocco and Russia. The delegation includes Sen. Mike Crapo, Sen. James Risch, Rep. Mike Simpson, and Rep. Russ Fulcher, all Republicans.

“Throughout Idaho, fertilizer companies have made multi-million dollar investments in fertilizer production facilities and phosphate mining operations,” said the delegation. “These investments, however, are now endangered as our domestic fertilizer companies struggle with an increasingly unfair market driven by foreign producers of fertilizer. In Idaho, further investment in facilities and research and development has been curbed, and we are aware that facilities in some other states have closed.”

While Mosaic is the only producer bringing the petition, J.R. Simplot Co., Boise, has also spoken out in favor of the petition and has made the argument that it has invested heavily in the domestic phosphate industry, with further investment halted due to poor economics at current pricing levels (GM July 24, p. 1).

Idaho also hosts Toronto-based Itafos’ Conda phosphate production and mining operations.

The delegation said while farmers and fertilizer retailers may have benefited from lower prices as a result of these imports, these short-term benefits could lead to irreversible damage to domestic suppliers, and ultimately to potential shortages and soaring prices.

They added that U.S. phosphate producers must adhere to high and expensive U.S. environmental standards with respect to extensive waste management associated with phosphate production that the state-owned Moroccan producer does not. They also added that Moroccan and Russian producers receive significant benefits related to mineral rights, land rights, and tax incentives.

“There simply isn’t a level playing field in our own market, and it is threatening the very existence of our U.S. producers,” the delegation added.

To date, Sen. Marco Rubio, R-Fla., has spoken out in favor of the petition (GM Sept. 11, p. 1) and some eight farm state Republican senators have spoken out against it (GM Aug. 14, p. 30).

Bunge to Sell Rotterdam Refinery

Europe, News, News Briefs, Western Cornbelt

Bunge Ltd., St. Louis, reports that its unit Bunge Loders Croklaan JV has agreed to sell its refinery located in Rotterdam, The Netherlands, to Neste Corp. for €258 million in cash, excluding working capital. Bunge will lease back the facility from Neste in a phased transition through 2024. Bunge, which had promised to shed more assets by the end of 2020 (GM Oct. 30, p. 29), plans to use part of proceeds to reinvest in its asset footprint

Neste plans to increase raw material pre-treatment capacity for the production of renewable products, the company told Bloomberg.

The deal is expected to close in first-quarter 2021.

Land O’Lakes Results Up Across Portfolio

Earnings, News, Northern Plains

Land O’Lakes Inc., Arden Hills, Minn., reported net earnings of $65.7 million on net sales of $2.94 billion for the third-quarter ending Sept. 30, 2020, up from the year-ago $11.9 million and $2.98 billion, respectively.

The company said earnings improved by $54 million in the quarter due to strong performance across the portfolio. Crop Inputs earnings were higher due to improved seed performance, lower working capital resulting in lower debt financing costs, and other targeted cost reductions.

Dairy Foods earnings were higher due to continued strength in Retail, which more than offset lower volumes in Foodservice and commodity market volatility due to impacts of COVID-19. Animal Nutrition earnings improved due to higher sales and favorable product mix in the Lifestyle segment.

“I am grateful for the engagement, agility, and commitment of the Land O’Lakes team that delivered remarkable performance in the face of the most rapidly changing market dynamics in recent memory,” said Beth Ford, Land O’Lakes President and CEO. “While the health and safety of our employees and members remains our first priority, strong performance like this enables us to innovate and expand beyond the traditional boundaries of food and ag.”

Nine-month net earnings were $184 million on net sales of $10.2 billion, up from the year-ago $150.9 million and $10.3 billion, respectively.  

Yara Exits Plans for Mozambique Nitrogen Plant

Africa, News, News Briefs, Nitrogen, Scandinavia

Yara International ASA, Oslo, will not proceed with plans to build a 1.2 million mt/y nitrogen plant in Mozambique due to a strategic shift and low nitrogen prices, according to Bloomberg, citing the Maputo-based news website Zitamar.  Previously, the company had been looking for a partner for the project (GM Nov. 3, 2017).

The company had planned to use natural gas in northern Mozambique to make fertilizer. Yara was among companies, including Shell and Great Lakes Energy, that won rights in 2016 to use natural gas produced in Cabo Delgado province for domestic projects.

Yara had not responded to inquiries for further comment and confirmation at press time.

Gensource Finalizes Shareholdings Agreement

News, News Briefs, Potash, Saskatchewan

Junior potash mine developer Gensource Potash Corp., Saskatoon, said on Nov. 5 it has negotiated the fundamental shareholding structure with the project offtaker and equity investor Helm AG and another financial investor for the Tugaske Project Special Purpose Vehicle (SPV).

The SPV will be the legal entity engaged in the production of potash near the village of Tugaske, Saskatchewan, situated 175 km south of Saskatoon. The initial plans were announced in January (GM Jan. 31, p. 27).

“We are thrilled to make this announcement,” said Mike Ferguson, President & CEO of Gensource. “The finalization of the shareholding structure for the SPV represents one of the last items required for a decision to advance the senior debt approval. This gets the company one step closer to full construction in 2021.

“We see the partnerships with Helm and our other business partner as invaluable  – we are like-minded in our view of taking a multi-generational investment approach. As Gensource’s shareholders know, the company’s vision is to create a number of potash production modules to help achieve global food security by helping to create a new supply chain that is open, transparent and sustainable,” Ferguson added.

Under the shareholding structure, Gensource will own 49.98 percent of the SPV, while Helm and the other investor will each own 25.01 percent. The company’s ownership interest comprises two components: a US$30 million “paid-in capital” amount representing the value of the project that will be vended into the SPV plus the project financing costs expended, and a cash investment.

In addition to being a shareholder of the SPV, Helm is also the offtake partner of the Tugaske Project and committed to purchasing 100 percent of the production, which is expected to be 250.000 mt/y. Helm will market the potash directly to its customers using its existing infrastructure, taking the product directly from the mine site to retail in key agricultural markets in the U.S.

The agreement on shareholdings has been forwarded to KfW IPEX-Bank and Société Générale, the mandated joint lead arrangers for senior debt financing. It is anticipated that Euler Hermes, the German federal government credit insurance agency that offers a wide range of bonding, guarantees, and services for the management of business-to-business trade receivables, will have all the necessary documents to present to its Inter-Ministerial Committee (IMC).

The IMC is the central decision-making body for the provision of export credit guarantees by the German federal government. It is expected that a final decision by the IMC regarding coverage on the Tugaske Project senior debt will be made at one of its next regular meetings. All three partners in the SPV have agreed to move the process ahead as one team in order to meet the requirements for the IMC approval.

The Andersons Reports Improved 3Q; Fertilizer Margins Up on Flat Volumes

Earnings, Eastern Cornbelt, News, News Briefs, Specialty

The Andersons Inc., Maumee, Ohio, reported a third-quarter net loss of $1.06 million ($0.03 per diluted share) attributable to the company on sales of $1.92 billion, an improvement over the year-ago loss of $4.2 million ($0.13 per share) and $1.98 billion, respectively. Adjusted EBITDA was $46.2 million versus the year-ago $38.2 million.

The company said the results from Plant Nutrient Group improved substantially year-over-year in a quarter that is usually seasonally weak. The unit had a pretax loss of $5.4 million, an improvement over the year-ago loss of $7.4 million. Volumes were flat, but margins per ton were improved.

“Our results for the third quarter were solid in light of the current economic environment,” said President and CEO Pat Bowe. “Trade, Ethanol, and Plant Nutrient all recorded improved results year over year. Trade led the way with better merchandising income, as the fall harvest got off to a good start. Ethanol’s results were much improved, notwithstanding large non-cash mark-to-market charges. Plant Nutrient’s results improved substantially year over year in a quarter in which that business is usually seasonally weak. Finally, Rail continued to feel the negative impacts of weak railcar demand.”

The company noted that it was the sixth consecutive year-over-year quarterly improvement for the Plant Nutrient segment. While revenues were off at $102.7 million from $109.4 million, adjusted EBITDA was up at $2.2 million from $900,000. Sales volumes were 396,000 st during the quarter, compared to the year-ago 395,000 st.

Plant Nutrient nine-month pretax income was $12.8 million on sales of $507.4 million, up from the year-ago $4.5 million and $508.5 million, respectively. Adjusted EBITDA was $36.4 million, up from $30.8 million. Volumes were up at 1.76 million st from the year-ago 1.56 million st.

Company-wide, the company had a nine-month net loss of $8.3 million ($0.25 per share) on sales of $5.7 billion, compared to year-ago net income of $11.6 million ($0.35 per share) and $6.3 billion, respectively. Adjusted EBITDA was $131.6 million, down from $170.2 million.

CVR Announces Reverse Stock Split

News, News Briefs, Texas

CVR Partners LP, Sugar Land, Texas, on Nov. 2 announced that the Board of Directors of its general partner had approved a 1-for-10 reverse split of the partnership’s common units to be effective at 5:00 p.m. Eastern Time on Nov. 23, 2020. Ten common units would be converted into one common unit. Following the reverse split, the number of common units outstanding would decrease from approximately 111 million common units to approximately 11 million common units.

The partnership’s common units are expected to begin trading on a split-adjusted basis when markets open on Nov. 24, 2020, under the symbol “UAN” and a new CUSIP number.

CVR believes the move will bring it into compliance with New York Stock Exchange listing requirements. On April 20, 2020, the average closing price of the partnership’s common units over a 30 consecutive trading-day period fell below $1.00 per common unit, resulting in noncompliance with the continued listing standards. CVR received written notification of this noncompliance from the NYSE on April 22, 2020 (GM May 8, p. 33), and currently has until Jan. 1, 2021 to comply.

CVR Losses Down on Higher Volumes, Lower Prices

Earnings, News, News Briefs, Texas

CVR Partners LP, Sugar Land, Texas, reported a third-quarter net loss of $19 million ($0.17 per diluted share) on net sales of $79.5 million, an improvement over the year-ago loss of $23 million ($0.20 per share) on sales of $88.6 million. However, EBITDA was up, at $15 million from $11.1 million. The company cited strong production rates and improved sales volumes, but lower prices than year-ago levels.

“CVR Partners achieved strong production during the 2020 third quarter, with the Coffeyville and East Dubuque fertilizer plants posting a combined ammonia utilization rate of 98 percent,” said Mark Pytosh, CEO of CVR Partners’ general partner. “The solid performance of our fertilizer facilities, coupled with higher product sales volumes, has helped offset lower product pricing.

“In addition, farm economics have significantly improved since the summer,” he added. “Corn and soybean prices have increased by 30 percent since July, and harvest weather conditions have been favorable. Looking ahead, we anticipate strong customer demand for both the fall 2020 and spring 2021 fertilizer applications.”

CVR reported a nine-month loss of $81.3 million ($0.72 per share) on net sales of $259.6 million, compared to a year-ago loss of $10.1 million ($0.09 per share) and $318.1 million, respectively. EBITDA was $23.3 million, down from $96.7 million.

Sales Volumes (000 st)
  3Q-20 3Q-19 YTD-20 YTD-19
Ammonia        54 33 218 179
UAN 365 340 986 968
Plant Gate Pricing ($/st)
Ammonia        242 337 293 416
UAN 140 182 156 206
Production Volume (000 st)
Ammonia gross 215 196 631 586
Ammonia net 71 56 228 168
UAN 330 318 968 969
Feedstocks in Production ($/st and mmBtu for gas)
Petroleum Coke $35.11 $37.75 $36.77 $36.68
Natural Gas $2.10 $2.40 $2.15 $2.88

Intrepid Posts 3Q Loss of $10.2 M

Earnings, News, Potash, Specialty

Intrepid Potash Inc., Denver, posted a third-quarter loss of $10.2 million ($0.78 per diluted share), citing reduced water sales due to COVID-19, which reduced oilfield activity. In addition, it also reported lower potash and Trio prices and volumes. The company had a year-ago loss of only $217,000 ($0.02 per share).

Third-quarter adjusted EBITDA was $1.54 million, down from the year-ago $9.6 million. Sales were $38.1 million, down from $51.2 million.

“Our third-quarter results continue to be affected by the COVID-19 pandemic, as oilfield activity and water sales remain below prior year levels, but up significantly from the second quarter of 2020,” said Bob Jornayvaz, Intrepid’s Executive Chairman, President, and CEO. “Operators are focusing their attention on the strong underlying resource in the Delaware Basin and are forecasting continued improvements in demand over the coming months, which we believe will benefit our bottom line.

“For potash, we ended the summer 2020 evaporation season with great pond levels across our facilities,” Jornayvaz continued. “This will lead to lower per-ton production costs in the coming quarters, and when considered along with the recent price increases, positions us to generate solid cash flow during the spring season. We continue to thoughtfully manage our balance sheet due to the considerable uncertainty still surrounding the COVID-19 pandemic, and remain optimistic about the potential of our business.”

Intrepid said agricultural and industrial potash sales volumes decreased in the quarter and it sold fewer tons into the summer fill program than during the previous year. Likewise, industrial sales were down.

The company said Trio volumes decreased as it continued to sell fewer tons into the international market and focused on the higher priced domestic market.

Intrepid recorded a $2.9 million lower of cost or net realizable value inventory adjustment in the first nine months, it said primarily due to the Trio summer fill price announced by its competitor in June, which lowered the list price of Trio by $15-$20 per ton. It expects to sell at these reduced prices until midway through the fourth quarter.

Intrepid had a nine-month net loss of $26.4 million ($2.04 per share) on sales of $148.5 million, compared to year-ago net income of $11.5 million ($0.88 per share) and $171.2 million. Adjusted EBITDA was $10.7 million, down from $40.5 million.

Potash 3Q-20 3Q-19 YTD-20 YTD-19
Sales ($ 000) 22,187 29,213 80,504 99,090
Gross Margin ($ 000) 1,353 4,588 7,703 22,180
Sales Volume (000 st) 66 78 239 261
Production (000 st) 61 51 202 217
Avg Net Realized Price* 238 266 251 285
Trio 3Q-20 3Q-19 YTD-20 YTD-19
Sales ($ 000) 12,890 14,637 54,722 53,881
Gross Margin ($ 000) (1,348) (1,108) (8,129) 1,077
Sales Volume (000 st) 40 46 180 173
Production (000 st) 55 54 155 183
Avg Net Realized Price* 189 204 197 201
Oilfield Solutions 3Q-20 3Q-19 YTD-20 YTD-19
Sales ($ 000) 3,050 7,310 13,539 19,574
Gross Margin ($ 000) (313) 3,469 5,142 10,031

*$/st

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