Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CVR Partners LP (UAN, Financial) reported net sales of $133 million and net income of $26 million for the second quarter of 2024.
- The company achieved an EBITDA of $54 million and declared a distribution of $1.90 per common unit.
- Facilities ran well with consolidated ammonia plant utilization of 102%, producing 221,000 gross tons of ammonia and 337,000 tons of UAN.
- Strong demand for ammonia and UAN was observed during the spring planting season, with better-than-expected pricing for UAN fill and ammonia fall prepay ordering.
- The company ended the quarter with total liquidity of $98 million, including $48 million in cash and $50 million in availability under the ABL facility.
Negative Points
- Prices for ammonia and UAN declined by 26% and 15% respectively compared to the second quarter of 2023.
- Direct operating expenses for the second quarter were $47 million, with an increase in expected direct operating expenses for the third quarter to be between $53 million and $58 million.
- Capital spending for 2024 is estimated to be between $40 million and $43 million, with a significant portion allocated to maintenance capital.
- The company anticipates higher than historical volatility in the business due to geopolitical risks and structural natural gas market issues in Europe.
- Grain prices have softened recently, with December corn prices at approximately $4.10 per bushel and November soybeans at approximately $10.35 per bushel, impacting farmer economics.
Q & A Highlights
Highlights of CVR Partners LP (UAN) Q2 2024 Earnings Call
Q: Can you remind us what you anticipate the total cost of the natural gas feedstock versus coke capabilities project to be? And when do you think it might be complete?
A: We haven't finished all the detailed engineering yet, so we can't quantify the cost. We don't expect it to be a large material capital item. The plan is to complete the studies by the end of this year, get Board approval, and execute the installation in the first half of 2025.
Q: Can you give us an idea of the increase in reserves for investing and what level we should see in the second half of this year?
A: The increase in reserves for investing was primarily due to the timing of capital expenditures. We expect capital spending to increase in the third and fourth quarters. We won't guide on future expectations, but our reserves for growth capital have been consistent.
Q: How much of your ammonia is sold outside of the agricultural market, and what are those markets?
A: Typically, 30% to 40% of our ammonia is sold into industrial markets, which include a broad mix of feedstock-based usages. Ag sales are heavy in the second and fourth quarters, while industrial sales are more consistent throughout the year.
Q: Do you sell any of that ammonia into the industrial market on contract, or is it all spot?
A: A significant portion of our industrial ammonia sales is under contract, not spot. These are generally ratable sales during the year, matching up with the buyer's production needs.
Q: How does the price of corn impact fertilizer sales?
A: The health of our customers, the farmers, is critical. Corn prices over $4 per bushel are generally good for farmers' economics. While prices were extraordinarily high in the past couple of years, current levels are still attractive for farmers, especially with mid-cycle fertilizer pricing.
Q: Is inflation playing a role in bumping up the price of corn over time?
A: Inflation is embedded in both our cost structure and the farmers' cost structure. While historical measures might not be as good, current corn prices, even with inflationary costs, still provide solid economics for farmers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
