CVR Partners(US:UAN)2020-08-04 20:42Financial Data and Key Metrics Changes - For Q2 2020, the company reported net sales of $105 million, a net loss of $42 million, and EBITDA of negative $2 million, which included a non-cash goodwill impairment of $41 million [7][14] - This compares to net sales of $138 million and operating income of $35 million in Q2 2019, indicating a significant decline in performance year-over-year [13][14] - Direct operating expenses decreased to $40 million from $46 million in the prior year period, reflecting cost reduction efforts [15] Business Line Data and Key Metrics Changes - The company produced approximately 216,000 gross tons of ammonia in Q2 2020, with 79,000 net tons available for sale, compared to 211,000 gross tons and 71,000 net tons in the prior year [9] - UAN production was 321,000 tons in Q2 2020, slightly up from 316,000 tons in the prior year, while sales were approximately 337,000 tons at an average price of $165 per ton [10] - Ammonia sales reached approximately 111,000 tons at an average price of $332 per ton, with year-over-year pricing down 27% [10] Market Data and Key Metrics Changes - The company noted that normal weather conditions for spring fertilizer application resulted in approximately 92 million acres of corn planted, an increase of over 2 million acres compared to last year [11] - Despite lower nitrogen fertilizer prices, demand remained strong, and the company has a good order book for the coming months [11][27] - Natural gas prices have been trending lower, which helped offset some price weaknesses in UAN and ammonia [10][28] Company Strategy and Development Direction - The company aims to maximize free cash flow by operating plants reliably and at high utilization rates while managing costs prudently [29] - There is a focus on selectively investing in reliability projects and incremental production capacity additions [29] - The company plans to run full capacity for the remainder of the year, with no turnarounds scheduled for the second half of 2020 [28] Management's Comments on Operating Environment and Future Outlook - Management expressed that the recovery in gasoline and ethanol demand is more elongated than expected, contributing to volatility in corn markets [26] - The company anticipates ammonia utilization rates for Q3 2020 to be between 95% and 100% and expects direct operating expenses to be approximately $37 million to $42 million [21] - Management highlighted the importance of summer growing conditions and noted that inventory carryout will be higher than last year but lower than market expectations [25] Other Important Information - The company reported liquidity of approximately $53 million as of June 30, with total debt remaining at $647 million [17][18] - The Board established reserves of $14.5 million for planned turnaround and future operating needs, resulting in no cash available for distribution this quarter [20][21] Q&A Session Summary Question: Details on the impairment - Management clarified that the $41 million goodwill impairment was related to the Farmland acquisition, triggered by a significant decline in prices [37] Question: UAN inventories exiting spring - Management indicated that UAN inventories were low at the end of June, but in good shape going into the summer [38] Question: Financing plans and refinancing opportunities - Management is monitoring high-yield markets for opportunities to reduce interest burdens and is looking for an opportunistic window for refinancing [39]