Rentech Inc., Los Angeles, expects its nitrogen-producing subsidiary, Rentech Energy Midwest Corp. (REMC) to see EBITDA of at least $60 million for the fiscal year ending Sept. 30, 2011, up from EBITDA of $32.1 million for the year ending Sept. 30, 2010.
“We are pleased that we have moved through recent lows of the fertilizer cycle with results for fiscal year 2010 that were in line with our expectations,” said D. Hunt Ramsbottom, Rentech president and CEO. “Over the last few months, we have witnessed a dramatic improvement in fertilizer margins that raises our expectation for REMC’s EBITDA to be at least $60 million for fiscal 2011.” The company projects at least $50 million in 2011 operating income.
Ramsbottom told analysts Dec. 15 that after reviewing offers for REMC this past fall, he thinks Rentech “will continue to own it.” He said conditions for REMC’s business continue to improve, and the outlook should be good for the foreseeable future. He said the company would evaluate offers from time to time, but would do the best for its shareholders which now appears to be to hold the company and build upon that asset. To date, REMC has acted as a cash cow, with its cash flow being funneled into Rentech’s alternative energy businesses.
Rentech said that more than 50 percent of REMC’s forecasted deliveries for fiscal year 2011 have already been contracted for sale at fixed prices, and the natural gas required to produce that product has been hedged to fix the products on the pre-sold tonnage. Rentech expects the low gas prices and the strength in demand and pricing for fertilizer to continue throughout the year, supporting its higher EBITDA estimates.
Dan Cohrs, Rentech CFO and executive vice president, told analysts that ammonia prices are approaching $700/st and UAN is nearing $340/st in recent sales. He said for delivered tons this year, REMC saw ammonia prices average $375/st.