Lower nitrogen prices put a major dent in results for Rentech Inc. for the third quarter ending June 30, 2010. Rentech owns nitrogen producer Rentech Energy Midwest Corp. (REMC), which contributes much of the cash flow for Rentech’s alternative-fuel technology business.
Rentech reported a third-quarter net loss of $1.7 million ($.01 per basic and diluted share) on sales of $49.8 million, compared to year-ago net income of $33.5 million ($.20 per basic and diluted share) on sales of $93.3 million. Rentech reported a nine-month loss of $33.1 million ($.15 per share) on sales of $96.1 million, versus the year-ago net income of $7.2 million ($.04 per share) on sales of $160.9 million.
Despite these lower results, Rentech still expects fiscal year 2010 operating income to exceed $20 million, and EBITDA to exceed $30 million.
Rentech says REMC will benefit from significantly improved product prices and margins for the remainder of the year due to positive fundamental factors, including higher corn prices, strong farmer income, and reasonably priced natural gas.
The average sales price per ton in the third quarter was down by 51 percent for anhydrous ammonia and by 37 percent for UAN versus the year-ago quarter. These two products comprised approximately 89 percent and 93 percent of the product sales for the three months ended June 30, 2010, and 2009, respectively.
Third-quarter 2010 ammonia sales were 51,000 st with $20.8 million in revenues, versus the year-ago 67,000 st and $55.3 million. UAN sales were 112,000 st and $23.2 million, versus last year’s 93,000 st and $30.7 million.
Nine-month ammonia sales were 118,000 st and $43.7 million versus the year-ago 115,000 st and $87.5 million, while UAN was 195,000 st and $35.7 million versus the year-ago 163,000 st and $53.3 million.
On ammonia, Rentech says it has now sold product at $500/st for fall delivery. It noted that without higher gas prices, which are remaining below $5.00/mmBtu, margins should expand.
In other news, Rentech recently announced that REMC has entered into a $20 million incremental loan agreement and amended its existing $62.5 million term loan. Credit Suisse was the sole lead arranger of the incremental loan. All of the net proceeds from the $20 million incremental loan will be available to Rentech for general corporate purposes, including development of the company’s technology and synthetic fuels and power projects. The incremental term loan will mature in 2014 on the same schedule as the existing term loan, and is expected to be repaid from cash flows generated by REMC.