CVR Partners(US:UAN)2021-05-04 18:23Financial Data and Key Metrics Changes - For Q1 2021, the company reported net sales of $61 million, a net loss of $25 million, and EBITDA of $5 million, compared to net sales of $75 million, a net loss of $21 million, and EBITDA of $11 million in Q1 2020 [9][16][10] - Direct operating expenses increased to $37 million from $35 million year-over-year, primarily due to higher stock-based compensation and elevated natural gas and electricity costs [17][10] - The company had approximately $77 million in liquidity as of March 31, 2021, with total debt remaining at $647 million [19][20] Business Line Data and Key Metrics Changes - The ammonia plant at Coffeyville operated at 87% utilization in Q1 2021, up from 86% in Q1 2020, while the East Dubuque ammonia plant operated at 89% utilization, down from 101% in the prior year [10][11] - Combined operations produced approximately 188,000 gross tons of ammonia, with 70,000 net tons available for sale, compared to 201,000 gross tons and 78,000 net tons in the prior year [12] - UAN production decreased to 272,000 tons in Q1 2021 from 317,000 tons in the prior year [12] Market Data and Key Metrics Changes - Ammonia prices increased by 14% year-over-year, while UAN prices decreased by 4% due to forward sales agreements [14] - The demand for nitrogen fertilizers is expected to remain strong due to high crop prices, with corn prices at $7 per bushel and soybeans over $15.50 per bushel [26][24] Company Strategy and Development Direction - The company aims to reduce its debt level by approximately $100 million over the next two years, with proceeds from 45Q tax credits contributing to this goal [30] - The focus on sustainability includes reducing the carbon footprint through CO2 sequestration and nitrous oxide abatement initiatives [31][32] - The company plans to refinance its 9.25% senior notes due in 2023, aiming for a favorable rate due to improved market conditions [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the durability of the recovery in farm economics, driven by high grain prices and strong demand for nitrogen fertilizers [54][41] - The company anticipates that the second quarter will reflect higher spot market prices for UAN, contrasting with the first quarter's lower prices due to forward sales [14][68] - Management noted that the spring ammonia application period was strong, and they expect solid conditions for the second half of the year [74][73] Other Important Information - The company repurchased 24,000 common units for $0.5 million during the quarter, with $12 million remaining under the Board's repurchase authorization [21][33] - The company established reserves of $1.5 million for a planned turnaround at Coffeyville in Q4 2021 [21][76] Q&A Session Summary Question: Pricing and Market Understanding - An analyst inquired about how to assess likely pricing for the company’s products in the current and future quarters, emphasizing the importance of understanding spot versus forward pricing [36] - Management explained that pricing is influenced by seasonal demand and supply dynamics, with a significant industry outage affecting supply in February [39][41] Question: Comparison to Historical Performance - Another analyst asked for a comparison of the current business environment to that of 9-10 years ago when corn and fertilizer prices were similarly high [46] - Management highlighted that the business has grown due to acquisitions and emphasized the importance of durable recovery in farm economics [49][54] Question: Natural Gas Sales Impact - An analyst questioned the gain from selling natural gas during the shutdown of East Dubuque and its overall impact on the quarter [57] - Management confirmed the gain was offset by lower production and accelerated maintenance costs [58] Question: Forward Sales and Pricing - An analyst asked if the company was satisfied with the forward sales made in November and December and how it would affect future pricing [59] - Management confirmed that those sales would be cleared out in Q1, with Q2 reflecting more current spot rates [60] Question: Turnaround Expenses Timing - An analyst inquired about the timing of the $8 million to $10 million turnaround expenses [75] - Management indicated that these expenses would be scheduled for Q4 2021 [76]