CVR Partners(UAN) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q3 2024, the company reported net sales of $125 million, net income of$4 million, and EBITDA of $36 million, with a declared distribution of$1.19 per common unit [9][14][18] - The increase in EBITDA compared to Q3 2023 was primarily due to higher market prices for ammonia and UAN, along with lower feedstock and operating expenses [14][12] - Direct operating expenses for Q3 2024 were $56 million, a decrease of approximately$3 million from Q3 2023, mainly due to lower natural gas and electricity costs [15] Business Line Data and Key Metrics Changes - Consolidated ammonia plant utilization was 97%, with combined ammonia production of 212,000 gross tons and UAN production of 321,000 tons [10] - Approximately 336,000 tons of UAN were sold at an average price of $229 per ton, while 62,000 tons of ammonia were sold at an average price of$399 per ton [11] - Ammonia prices increased by 9% and UAN prices by 3% compared to Q3 2023 [12] Market Data and Key Metrics Changes - Demand for summer UAN fill and ammonia fall prepay was strong, with low customer inventory levels ahead of fall [13] - Corn yields are expected to be the highest in history, with USDA estimating yields of almost 184 bushels per acre [21] - Geopolitical risks continue to pose a wildcard for the nitrogen fertilizer industry, particularly due to significant production capacity in the Middle East, North Africa, and Russia [24] Company Strategy and Development Direction - The company is focusing on improving reliability and redundancy at its plants, with capital spending planned for the next two to three years [29] - A project to utilize natural gas as an alternative feedstock is under consideration, which could provide flexibility in feedstock choices [26][27] - The company is also implementing debottlenecking projects to enhance reliability and production rates [28] Management Comments on Operating Environment and Future Outlook - Management noted that the company is currently in a mid-cycle environment for nitrogen fertilizer pricing, with prices increasing relative to the previous year [12][20] - The company anticipates higher volatility in the business for the remainder of 2024 and into 2025 due to geopolitical factors and natural gas market issues in Europe [24][25] - The company expects ammonia utilization rates for Q4 2024 to be between 92% and 97%, with potential downtime anticipated [19] Other Important Information - The company ended the quarter with total liquidity of $150 million, including$111 million in cash [17] - Capital spending for 2024 is estimated to be between $39 million and$42 million, with a significant portion funded through cash reserves [16] Q&A Session Summary Question: Impact of low river levels on Corn Belt prices for UAN and ammonia - Management indicated that there have not been major impacts on UAN and ammonia prices due to low river levels, as most ammonia is already positioned and transported via pipeline [33][34] Question: Cost estimates for the Coffeyville natural gas project - The project is estimated to cost around $10 million, which would be funded from reserves set aside for growth capital [35] Question: Developments regarding CVR Energy's 13D filing - Management reported no new developments regarding the 13D filing on CVR Energy this quarter [36]