All Posts from August 6, 2021

AN Causing Beirut Blast Just One-Fifth of Original Shipment, Says FBI

Ammonium Nitrate, Lebanon, News, News Briefs

An FBI investigation into the deadly explosion in a Beirut warehouse on Aug. 4 last year involving ammonium nitrate (AN) that rocked the Lebanese capital, killing 218 people and injuring more than 5,000, found that just one-fifth of the original shipment exploded.

The findings of the FBI probe, which were published on July 30 by Reuters, found only 552 mt of the original 2,754 mt of AN that arrived in Beirut port seven years before the blast went up in flames on the day of the explosion.

The FBI investigation did not provide a reason for the discrepancy or indicate where the remainder of the AN may have gone, according to the report. But it adds to suspicions that most of the stockpile in the warehouse went missing or was diverted before the August 2020 fire and explosion.

According to Reuters and other media reports this week, many officials in Beirut believe that much of the shipment was stolen, while others said not all of the cargo detonated.

The 2013 shipment was loaded in the Georgian port of Batumi aboard the MV Rhosus, a Russian-leased ship steaming under the Moldovan flag. According to the shipping documents, the ship and the cargo were headed for Mozambique. However, the ship was instructed to make an unscheduled stop in Beirut, reportedly to pick up additional cargo to help boost its Russian lessee’s earnings. But the Beirut port authorities detained the ship as it was deemed to be unseaworthy, as well as a dispute over unpaid port fees, according to an Associated Press report at the time, citing the ship’s captain.

The impounded AN cargo was subsequently transferred to the port’s hangar 12 in October 2014, where it remained for the next six years.

Evidence to date has raised questions regarding whether the AN was intended for Mozambique, and whether Beirut was the intended destination.

The detonation of the AN, which was reported to have been triggered by a fire in a nearby warehouse filled with fireworks, caused one of the largest non-nuclear explosions in history, decimating the port and damaging over half of the city.

Media reports talk of longstanding corruption and mismanagement at the port, with systemic problems in Lebanon’s legal and political system allegedly allowing senior officials to avoid accountability.

The Beirut Bar Association on Aug. 2 filed a lawsuit in the High Court of Justice in London against U.K. company Savaro Ltd., the importer of the AN that exploded.

The lawsuit seeks indemnification for, among other things, “the failure to take any actions to secure or properly dispose of the ammonium nitrate, causing death, injury, loss, and damage to the Claimants in the Beirut Port Explosion, for which the Claimants hold Savaro Ltd. liable together with other parties.”

The civil action was filed in a London court due to Savaro Ltd. being incorporated in the U.K. with offices in London, and therefore subject to the jurisdiction of English courts, according to media reports, citing Melhem Khalaf, President of the Beirut Bar Association.

Hawthorne Boosts Scotts 3Q Sales; Guidance Retained Despite Commodity Price Uptick

Earnings, Eastern Cornbelt, News, Specialty

The Scotts Miracle-Gro Co., Marysville, Ohio, reported net income of $225.9 million ($3.94 per diluted share) on net sales of $1.61 billion for the third-quarter ending July 3, 2021, compared to the year-ago $203.3 million ($3.55 per share) and $1.49 billion, respectively. Adjusted EBITDA was $357.1 million, up from $345.1 million.

The company noted that second-quarter sales were up 8 percent, driven by its specialty Hawthorne Gardening Co. segment, which saw sales growth of 48 percent. While the U.S. Consumer sales declined 4 percent, they were still up for the year-to-date by 19 percent.

“Our results in the third quarter continue to speak to the strength of our brands and the execution of our strategy,” said Jim Hagedorn, Chairman and CEO. “Despite difficult year-over-year comparisons, we saw record Q3 sales at Hawthorne with growth in all categories. Our U.S. Consumer business continued to excel despite a modest decline in sales compared with last year’s record levels.” The company noted that the year-ago quarter included six more days in the peak lawn and garden season.

“Even in the face of increasing distribution and commodity costs that are putting pressure on our gross margin rate, we remain on track to deliver the updated full-year guidance we provided in early June, which would result in both record sales and adjusted earnings.”

The company said going forward it expects to add $20 million in annualized sales from the recent purchase of HydroLogic Purification Systems, Santa Cruz, Calif. (see related story).

Nine-month net income was $561.3 million ($9.81 per share) on net sales of $4.19 billion, up from the year-ago $384.4 million ($6.76 per share) and $3.24 billion, respectively. Adjusted EBITDA was $911.7 million, up from $704.7 million.

Scotts is maintaining its guidance of 17-19 percent sales growth with the U.S. Consumer segment expected to grow 7-9 percent in fiscal 2021 and Hawthorne sales expected to increase 40-45 percent. Guidance for non-GAAP adjusted earnings per share was also reaffirmed in a range of $9.00-$9.30. The gross margin rate is now expected to decline 250 to 275 basis points, with SG&A expected to be flat to slightly down on a full-year basis.

“The continued pressure from commodity prices is likely to result in a lower gross margin rate than we expected when we last updated our guidance in June,” said Cory Miller, Senior Vice President and Interim CFO. “However, we’re finding offsets to that pressure that are allowing us to maintain our earnings guidance on a full-year basis.”

Scotts is planning to sell about $400 million of bonds to provide greater liquidity, added Miller in the company’s earnings call. “We currently are contemplating another bond offering to lock in longer-term bonds, probably with a 10- to 12-year maturity, at roughly 4 percent,” Miller said. “This will allow for flexibility on liquidity and lock-in strong borrowing rates for the next decade.”

“Like a lot of consumer companies, the cost pressures we’re seeing from commodities are starting to feel unrelenting,” said CEO Hagedorn, who said the company may take a second price increase in January, depending on what happens with commodities.

“As we look ahead to next year, only about 25 percent of our costs are locked in right now,” said Miller. “That’s lower than normal for two reasons. First, it’s been harder to lock in rates on some commodities, especially resin. And second, we’ve paused our hedging effort for a few weeks with a hope of seeing some relief. I’ll reinforce Jim’s point that our goal is to take enough pricing for fiscal 2022 to offset the commodity pressure.”

Asked about urea, Hagedorn added that the company likes to be around 50 percent hedged, but has chosen not to do that. He said he expects prices to generally soften, and that the company is monitoring that right now.

Urea, diesel, and resin are among the major commodities purchased by Scotts.

($ millions) 3Q-21 3Q-20 YTD-21 YTD-20
Net Sales        
U.S. Consumer 1,046 1,093 2,828 2,372
Hawthorne 422 286 1,095 686
Profit (Non-GAAP)        
U.S. Consumer 264 314 746 648
Hawthorne 52 38 134 74

The Andersons 2Q Income Up 43 Percent; Record Quarterly Adjusted EBITDA Reported

Earnings, Eastern Cornbelt, News, Specialty

The Andersons Inc., Maumee, Ohio, reported second-quarter net income attributable to the company of $43.5 million ($1.30 per diluted share) on revenues of $3.27 billion, up from the year-ago $30.4 million ($0.92 per share) and $1.89 billion, respectively. Adjusted EBITDA hit a record, the highest ever for a quarter at $118.1 million, up from the year-ago $70 million.

Pretax income from the company’s Plant Nutrient segment was up at $24 million on revenues of $321.4 million from the year-ago $19.4 million and $279.8 million, respectively. Adjusted EBITDA was $31.6 million, up from $27.2 million.

The company said the Plant Nutrient segment saw margin improvements across the breadth of product lines and reflect strong demand, improved grower income, and well-positioned inventory, though it said its engineered granules manufacturing lines remain challenged with labor and material cost inflation.

“We expect our Plant Nutrient business to continue to perform well,” President and CEO Pat Bowe told analysts. “Without the typical summer price reset and continued tight stocks, fall demand looks to be solid. Demand for engineered granules and specialty liquids, agricultural and industrial products, has also been strong. We expect that to trend on into the next year.

“I’m very pleased that each of our four businesses delivered outstanding, year-over-year improvement with good execution in volatile markets,” said Bowe. “I’m proud of our team; they anticipated market opportunities and executed well. These market conditions play into our strengths of commodity trading, logistics, and position management. We expect that North American demand will remain strong and currently anticipate large harvests in our key draw areas this fall, which should drive strong performance into 2022.

“While ethanol margins have been volatile, risk management and effective hedging coupled with strong returns from co-products are evident in the segment’s results,” he added. “Plant Nutrient followed up a very strong first quarter with a great second quarter driven by strong margins in supply-constrained markets.

“And while Rail continues its slow recovery, it has capitalized on record high scrap steel prices to extract value on end-of-life railcars,” Bowe continued. “Lastly, I’m pleased to announce that our twelve trailing months adjusted EBITDA was greater than $342 million, well in excess of the $300 million run rate goal we established for 2021.”

Company-wide six-month net income was $58.6 million ($1.74 per share) on revenues of $5.91 billion, up from the year-ago loss of $7.2 million ($0.22 per share) and $3.74 billion, respectively. Adjusted EBITDA was $198.3 million, up from $81.3 million.

Six-month Plant Nutrient pretax income was $32.5 million on revenues of $490.7 million, up from $18.2 million and $404.7 million, respectively. Adjusted EBITDA was $47.6 million, up from $34.2 million.

Intrepid 2Q Income Up on Prices, Demand

Earnings, News, Potash, Specialty

Intrepid Potash Inc., Denver, reported second-quarter net income of $19.5 million ($1.46 per diluted share) on sales of $67.9 million, up from the year-ago loss of $8.9 million ($0.68 per share) and $46.5 million, respectively. Gross margin was $14.2 million, up from the year-ago negative $599,000. Adjusted EBITDA was $16.9 million up from $555,000.

“Second-quarter and first-half results continued to benefit from strong commodity prices and rising potash and Trio® pricing and demand, leading to significant improvements in net income, gross margin, and EBITDA compared to the prior year,” said Bob Jornayvaz, Intrepid Executive Chairman and CEO. “Since announcing another potash and Trio® price increase in June, the fertilizer market continued to move up with buyers eager to secure supply in a limited market.

“We began our HB production season this week and expect to start our Utah solar solution mining facilities in early September. We are well positioned to supply our customers when the fall season begins and have already received strong buyer interest in new orders for fourth quarter delivery. We have been thoughtful in waiting to accept orders as the market remains tight,” he continued.

“We announced a $20 increase to potash prices in May and booked historic volumes for the third-quarter delivery as distributors restocked warehouses after a busy spring,” Matthew Preston, Vice President of Finance told analysts. “Since the May announcement, potash pricing has moved up considerably in the barge and inland warehouse markets as buyers compete over limited supply for third-quarter delivery. We expect the third-quarter average net realized sales price will be between $355-$365/st, with additional upside into fourth-quarter 2021.”

He added that first-half Trio sales volumes exceeded the prior year by 5,000 st as strong customer relationships and robust demand led to record domestic deliveries, which more than offset reduced international volumes. He noted that the company increased Trio pricing $20/st in May and $35/st in June. The company expects a third-quarter Trio net realized price of $310-$325/st.

Zachry Adams, Vice President, Sales and Marketing, told analysts that most buyers in the Midwest have tons in place or on order for what they are going to need to get started this fall. “So we don’t see a lot of liquidity at those levels today.

“We certainly have transacted on some spot tons from our demand side to that point,” he said. “Looking ahead to Q4, we’ve not booked any tons for Q4 yet on the potash side. We’re going to hold off from booking tons there and the market remains tight. And we feel comfortable with what we have for Q3, and we’ll address Q4 later.”

Asked about demand destruction, Adams said that the company is not seeing a downtick in demand from growers.

“I think when you look at farmer economics, they’re doing extremely well right now globally,” added Jornayvaz. “’We tend to look at all commodities that use significant amounts of potash and we’re seeing strength across the board….So, given the strength across the entire spectrum, we believe that we’re finally at what is reasonable market pricing. I think we look at farmers’ economics, we’ve got plenty of room and we should not see any demand destruction at these levels.”

Addressing the Oilfield Solutions segment, Jornayvaz said oilfield activity continues to improve in the Delaware Basin as growth in rig counts and frac crews led to increased produced water royalty and surface use agreement revenue in the second quarter.

“We opportunistically scheduled our water on our South Ranch in the second quarter in anticipation of higher margin jobs, which have materialized, in the second half of the year, Jornayvaz added. “We expect steady growth in our Oilfield Solutions segment over the next six months and into 2022.”

The company said that in May it sold 326 acres of land in Texas for $6.0 million and recognized a gain on the sale of the land of $2.8 million. The company purchased this land in May 2019 for the development of a produced water disposal facility and had permitted two disposal wells on the property.

In June 2021, Intrepid received notice that the Small Business Administration had remitted funds to its bank to fully repay the company’s Paycheck Protection Program (PPP) loan and accrued interest. The company recognized a gain of $10.1 million related to the forgiveness of the PPP loan and the associated accrued interest on the loan.

Six-month net income was $21.9 million ($1.65 per share) on sales of $139.4 million, up from the year-ago loss of $16.3 million ($1.25 per share) and $110.4 million, respectively. Gross margin was $23.3 million, up from $5 million. Adjusted EBITDA was $29.7 million, up from $9.4 million.

Potash 2Q-21 2Q-20 YTD-21 YTD-20
Sales (000 st) 37,693 24,526 81,270 58,317
Gross Margin ($000) 10,131 2,015 18,803 6,349
Sales Volume (000 st) 92 74 208 173
Production Volume (000 st) 51 4 164 140
Avg Realized Price ($/st) 319 256 300 256
Trio 2Q-21 2Q-20 YTD-21 YTD-20
Sales (000 st) 26,924 19,251 50,619 41,832
Gross Margin ($000) 3,162 (3,225) 3,093 (6,780)
Sales Volume (000 st) 75 64 145 140
Production Volume (000 st) 63 50 119 100
Avg Realized Price ($/st) 271 208 251 200
Oilfield Solutions 2Q-21 2Q-20 YTD-21 YTD-20
Sales (000 st) 3,331 2,747 7,584 10,488
Gross Margin ($000) 906 611 1,411 5,455

CVR Back to Black in 2Q

Ammonia, Earnings, News, Texas, UAN

CVR Partners LP, Sugar Land, Texas, reported second-quarter net income of $7 million ($0.66 per diluted limited partnership unit) on net sales of $138 million, compared to the year-ago loss of $41.6 million ($3.68 per unit) and $105.1 million, respectively. Adjusted EBITDA was $51.5 million, up from the year-ago $38.6 million.

“CVR Partners experienced a solid 2021 second quarter, led by a combined ammonia utilization rate of 98 percent,” said Mark Pytosh, CEO of CVR Partners’ general partner. “Further contributing to the quarter were ideal spring planting conditions and strong shipments of nitrogen fertilizer at both facilities.

“So far in the third quarter, farm economics remain robust, with grain prices nearing a 10-year high and demand for all crop inputs, including nitrogen fertilizer, remaining strong,” he added. “Nitrogen fertilizer pricing also continues to remain firm due to supply constraints resulting from Winter Storm Uri-related production outages and the planned major plant turnarounds scheduled across the industry for the second half of the year.”

Pytosh told analysts that due to COVID-19, many North American nitrogen producers delayed turnarounds in 2020 to 2021 and he believes many of these will begin in the third quarter. As a result, he expects North American nitrogen production for second-half 2021 to be below second-half 2020.

As for the market, Pytosh said, “As compared to the past five years, we did not see the normal seasonal decline in nitrogen fertilizer prices into the summer. Sales for summer ammonia fill, fall prepay and UAN fill were completed in late June and July at price levels comparable to spring spot pricing. We have a solid order book for both UAN and ammonia going into the fall. And our sales effort, we factored in our planned fall turnaround at the Coffeyville plant that is expected to start in early fourth quarter.”

Pytosh outlined other factors that the company is monitoring: possible carbon capture and sequestration at both of its plants; certifying both plants as blue ammonia production; any multi-year change to the UAN market due to the current antidumping and countervailing duty case; and expanded grain and soy consumption for renewable fuels.

CVR also announced a second-quarter 2021 cash distribution of $1.72 per common unit, which is the first distribution paid to unitholders since the fourth quarter of 2019.

CVR reported a six-month net loss of $18.4 million ($1.72 per unit) on net sales of $199 million, compared to the year-ago loss of $62.3 million ($5.51 per unit) and $180.2 million, respectively. Adjusted EBITDA was $56.1 million, up from $49.3 million.

Sales (000 st) 2Q-21 2Q-20 YTD-21 YTD-20
Ammonia        80 111 112 164
UAN 370 337 609 621
Plant Gate Price $/st 2Q-21 2Q-20 YTD-21 YTD-20
Ammonia        403 332 373 310
UAN 237 165 206 166
Productions (000 st) 2Q-21 2Q-20 YTD-21 YTD-20
Ammonia – gross 217 216 404 417
Ammonia – net 70 79 140 157
UAN 334 321 606 638
Feedstock 2Q-21 2Q-20 YTD-21 YTD-20
Petroleum Coke $/st 36.69 31.13 39.73 37.59
Natural Gas ($/mmBtu) 3.04 1.94 3.07 2.18

Fertilizantes Heringer Reports 2Q Earnings Surge; Volumes Up 29 Percent

Brazil, Earnings, Specialty

Fertilizantes Heringer, Viana, Brazil, reported a 407.3 percent surge in second-quarter earnings to R$144.7 million on net revenue of R$568.6 million, compared to the year-ago loss of R$47.1 million on revenue of R$293.8 million. EBITDA was R$105.9 million, up from the year-ago R$16.8 million.

Second-quarter fertilizer sales volumes were up 29 percent to 237,769 mt from the year-ago 184,495 mt. Second-quarter specialty fertilizers represent 52 percent of volumes at 123,000 mt, with conventional at 48 percent at 115,000 mt. This compares to the year-ago period, when specialty represented only 45 percent at 83,000 mt, versus conventional at 55 percent and 102,000 mt.

Six-month net income was R$137.3 million on net revenue of R$1.31 billion, up from the year-ago loss of R$252.1 million and revenue of R$680.9 million. EBITDA was R$209.7 million, up from the year-ago R$20.2 million.

Six-month sales volumes were up 34.4 percent, to 614,319 mt from the year-ago 457,137 mt. Specialty products represented 49 percent of sales at 304,000 mt, with conventional at 51 percent at 310,000 mt. The year-ago mix was 43 percent for specialty at 198,000 mt and 57 percent for conventional at 259,000 mt.

Compass Minerals Postpones 2Q Release; Restatement of Earnings Planned

Earnings, News, Specialty, Western Cornbelt

Compass Minerals, Overland Park, Kan., said on Aug. 4 it is postponing its second-quarter results after corrections to its interim inventory valuation methodology resulted in the identification of a historical understatement of first-quarter operating income.

For 2021, this correction resulted in shifting approximately $12 million of previously reported Salt segment operating expenses from the first quarter of 2021 to subsequent quarters. It said the understatement is completely offset in subsequent quarters, with no impact to FY results.

The adjustments to the statement of operations will be reflected in the quarterly information presented as an amended Annual Report on Form 10-K for the year ended Dec. 31, 2020, and an amended Quarterly Report on Form 10-Q for the period ended March 31, 2021. It also intends to restate other immaterial prior-period items.

Compass had originally planned to release second-quarter results on Aug. 4 and have an earnings call on Aug. 5.

The company is rescheduling its quarterly earnings conference call, and it intends to file its Quarterly Report on Form 10-Q for the period ended on June 30, 2021, on Aug. 9, 2021, or as promptly as possible thereafter.

Compass anticipates reporting a material weakness in internal control over financial reporting with respect to interim inventory controls related to interim financial reporting. The company is remediating controls around its interim inventory accounting process. It said these controls will be tested for effectiveness in future periods.

ADNOC, Fertiglobe Sell First Blue Ammonia Cargo to Japan’s Itochu for Fertilizer Production

ADNOC - Abu Dhabi, Ammonia, Featured, Japan, News

The Abu Dhabi National Oil Co. (ADNOC) announced on Aug. 3 that, in partnership with Fertiglobe, it has sold its first cargo of blue ammonia to Itochu Corp. in Japan for use in fertilizer production. The company said the sale builds upon recently announced joint efforts to enhance industrial cooperation between the UAE and Japan and support the development of new UAE-Japan blue ammonia supply chains.

Fertiglobe, a 58-42 partnership between OCI NV and ADNOC, will produce blue ammonia at its Fertil plant in the Ruwais Industrial Complex in Abu Dhabi for delivery to ADNOC’s customers in Japan. ADNOC said the shipments were sold at an attractive premium to gray ammonia and underscore the favorable economics for blue ammonia as an emerging source of low-carbon energy. It said they represent the first production milestone of a planned scale-up of blue ammonia production capabilities in Abu Dhabi, which is expected to include a low-cost debottlenecking program at Fertil.

While the ammonia Fertil produces is typically considered as “gray” ammonia, the plant will be fitted with CO2 liquefaction units, and CO2 will be transferred to – and reinjected into – underground reservoirs by the ADNOC Al Reyadah carbon capture and storage plant to facilitate the production of blue ammonia.

The Al Reyadah facility is the first commercial-scale carbon capture plant in the Middle East, and the world’s first commercial facility to capture CO2 from the iron and steel industry. The CO2 is subsequently used in ADNOC Onshore’s Rumaitha and Bab fields, where it is stored underground. Each year, Al Reyadah captures up to 800,000 mt of CO2 from local UAE steel production.

In addition, it was announced in June that Fertiglobe will join ADNOC and ADQ as a partner in a new world-scale 1 million mt/y blue ammonia project at Ta’ziz in Ruwais, subject to regulatory approvals (GM June 25, p. 33). The design contract for this project has already been awarded, with a final investment decision for the project expected in 2022, and start-up targeted for 2025.

Kalium Continues to Target Late September for First SOP Production

Australia, News, News Briefs, Specialty, Sulfate of Potash

Junior sulfate of potash (SOP) producer Kalium Lakes Ltd., Balcatta, Western Australia, said on Aug. 4 it is still targeting late September 2021 (GM May 14, p. 33) for its first SOP production at its Beyondie SOP Project, located about 160 km southeast of Newman, Western Australia. The company reported that it has stockpiled 90,000 mt of potassium salts, equivalent to approximately 9,000 mt of SOP production.

“I am delighted that our forethought, careful planning, and well executed production readiness strategy is delivering results,” said CEO Rudolph van Niekerk. “Having installed a robust network of brine supply and evaporation ponds, we continue to reap the bounty of large volumes of potassium salts above the plant feed cut-off grade, which are harvested and delivered to the ROM pad. With this ample supply of potassium salts, we have expanded our stockpile area and will soon be ready to move from commissioning to production.”

Kalium’s projected initial SOP production capacity is 90,000 mt/y of SOP. However, in March, it indicated that at least 100,000 mt/y capacity might be achievable, and revealed that additional work was underway to increase production beyond 100,000 mt/y, and that the potential to increase throughput up to 120,000 mt/y has been identified through some short-term, low capital intensity improvements (GM March 26, p. 36).

The company has a binding 10-year offtake agreement for Beyondie with Germany’s K+S Group for the purchase of up to 90,000 mt/y of SOP.

Strike Reports Plenty of Interest in Proposed Urea Production

Australia, News, News Briefs, Urea

Strike Energy Ltd., Thebarton, South Australia, which has proposed Project Haber, a 1.4 million mt/y urea project adjacent to Geraldton Port, Western Australia, said on Aug. 4 it has closed the second round of its urea offtake process, with some 4.75 mt/y of firm proposals with attractive pricing formulas received. It said the offers were for up to 15 years in length, which can support future bankability of the proposed development.

Strike said it has subsequently short-listed parties to proceed to negotiate binding agreements and will look to conclude those negotiations over the coming quarter. Once binding offtake agreements are in place, Strike will then move to market and sell down the equity in the project, and has appointed Azure Capital to support this process.

Strike’s Board of Directors will meet in the September quarter to review the pre-FEED outcomes from Technip Energies and Haldor Topsoe and will look to make recommendations on the ownership and operating structure for the proposed development.

It said these recommendations, in conjunction with the latest capital estimate from the pre-FEED, will be critical for informing the equity sell down process and subsequent debt sizing and structuring programs, where Azure Capital will be supported in debt advisory by Natixis and ANZ.

The second round was a formal “Request for Proposal” process with the proposed offtakers, with a view to converting initial expressions of interest into binding long term offtake agreements.

In June, Strike concluded the first round of its urea offtake process, and said it received expressions of interest from “numerous” potential offtakers for both Australian and international sales. According to Strike, it received expressions of interest totaling more than 3.5 million mt/y (GM June 11, p. 29).

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