CVR Partners, LP (NYSE: NYSE:UAN), a leading producer of nitrogen fertilizer products, has reported its financial results for the third quarter of 2024. The company announced net sales of $125 million, net income of $4 million, and EBITDA of $36 million. A third-quarter distribution of $1.19 per common unit was declared and is payable on November 18 to unitholders of record as of November 8. The company also highlighted a strong operational performance with consolidated ammonia plant utilization at 97%.
Key Takeaways
- Net sales reached $125 million with a net income of $4 million.
- EBITDA stood at $36 million for the quarter.
- A distribution of $1.19 per common unit will be paid in mid-November.
- Ammonia plant utilization was high at 97%.
- Ammonia and UAN sales volumes were in line with the previous year, with ammonia prices up by 9% and UAN prices up by 3%.
Company Outlook
- Ammonia utilization rate for Q4 2024 is estimated to be between 92% and 97%.
- Direct operating expenses for Q4 2024 are expected to be between $60 million and $70 million.
- Total capital spending for Q4 2024 is projected to be between $19 million and $23 million.
Bearish Highlights
- The company experienced some unplanned downtime at the upgrading units, affecting UAN sales volumes.
- Geopolitical risks continue to be a wildcard for the nitrogen fertilizer industry.
Bullish Highlights
- Strong demand for summer UAN fill and fall ammonia prepay.
- Prices for ammonia and UAN have increased since summer.
- Customer inventory levels have been low ahead of fall, contributing to rising prices.
Misses
- UAN sales volumes were lower due to unplanned downtime.
Q&A Highlights
- Low river levels on the Mississippi have not significantly impacted UAN and ammonia prices due to pre-positioned ammonia and rail transport for UAN.
- The potential Coffeyville natural gas project is estimated to be around a $10 million investment, with funding expected to come from reserved growth capital.
CVR Partners has demonstrated a solid operational performance in the third quarter of 2024, marked by high utilization rates and an increase in ammonia and UAN prices. The company remains cautious about geopolitical risks but is encouraged by the strong demand and pricing environment for its products. The strategic discussions on feedstock flexibility and capital investment projects reflect CVR Partners' commitment to long-term operational efficiency and market responsiveness. The company's financial health is evidenced by its ability to declare a consistent distribution to its unitholders, underlining the stability of its business model amidst market fluctuations.
InvestingPro Insights
CVR Partners' (NYSE: UAN) strong operational performance in Q3 2024 is further supported by data from InvestingPro. The company's profitability over the last twelve months aligns with its reported net income and EBITDA figures. Additionally, UAN's high shareholder yield and significant dividend payments underscore its commitment to returning value to unitholders, as evidenced by the recently declared $1.19 per common unit distribution.
InvestingPro data reveals a dividend yield of 10.83%, which is particularly attractive given the company has raised its dividend for three consecutive years. This trend supports CVR Partners' ability to maintain consistent distributions despite market fluctuations.
The company's valuation metrics also paint an interesting picture. With a P/E ratio of 13.28 and a Price to Book ratio of 2.28, UAN appears to be reasonably valued, especially considering the InvestingPro Tip that suggests the valuation implies a strong free cash flow yield. This could indicate that the market may not be fully pricing in the company's cash-generating capabilities.
It's worth noting that while CVR Partners has shown strong performance, its revenue growth for the last twelve months stands at -29.88%. However, this should be viewed in the context of the cyclical nature of the fertilizer industry and the company's ability to maintain profitability and shareholder returns.
For investors seeking a deeper understanding of CVR Partners' financial health and prospects, InvestingPro offers 7 additional tips, which could provide valuable insights into the company's long-term potential and market position.
Full transcript - CVR Partners LP (UAN) Q3 2024:
Operator: Greetings, and welcome to the CVR Partners Third Quarter 2024 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session, will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Richard Roberts of Financial Planning and Analysis and Investor Relations. Thank you, sir. You may begin.
Richard Roberts: Thank you, Christine. Good morning, everyone. We appreciate your participation in today's call. With me today are Mark Pytosh, our Chief Executive Officer; Dane Neumann, our Chief Financial Officer; and other members of management. Prior to discussing our 2024 third quarter results, let me remind you that this conference call may contain forward-looking statements, as that term is defined under Federal Securities Laws. For this purpose, any statements made during this call that are not statements of historical facts may be deemed to be forward-looking statements. You are cautioned that these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission, and in our latest earnings release. As a result, actual operations or results may differ materially from the results discussed in the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, public events or otherwise, except to the extent required by law. This call also includes various non-GAAP financial measures. The disclosures related to such non-GAAP measures, including reconciliation to the most directly comparable GAAP financial measures, are included in our 2024 third quarter earnings release that we filed with the SEC for the period. Let me also remind you that we are a variable distribution MLP. We will review our previously established reserves, current cash usage, evaluate future anticipated cash needs and may reserve amounts for other future cash needs as determined by our general partner's Board. As a result, our distributions, if any, will vary from quarter-to-quarter due to several factors, including, but not limited to, operating performance, fluctuations in the prices received for finished products, capital expenditures and cash reserves deemed necessary or appropriate by the Board of Directors of our general partner. With that said, I'll turn the call over to Mark Pytosh, our Chief Executive Officer. Mark?
Mark Pytosh: Thank you, Richard. Good morning, everyone, and thank you for joining us for today's third quarter call. To summarize financial highlights for the third quarter of 2024 include net sales of $125 million, net income of $4 million, EBITDA of $36 million, and the Board of Directors declared a third quarter distribution of $1.19 per common unit, which will be paid on November 18, to unitholders of record at the close of the market on November 8. Our facilities ran well during the third quarter of 2024, with consolidated ammonia plant utilization of 97%. Combined ammonia production for the third quarter of 2024 was 212,000 gross tons, of which 61,000 net tons were available for sale, and UAN production was 321,000 tons. During the quarter, we sold approximately 336,000 tons of UAN at an average price of $229 per ton, and approximately 62,000 tons of ammonia at an average price of $399 per ton. Relative to the third quarter of 2023, ammonia sales volumes were in line, and UAN sales volumes were lower as a result of some unplanned downtime at the upgrading units at both facilities. Prices for the third quarter increased from the third quarter last year, with ammonia prices increasing 9% and UAN prices increasing 3%. After the peaks in nitrogen fertilizer pricing we saw over the past few years, we believe we're currently in a more of a mid-cycle type of environment, and we were encouraged to see ammonia and UAN prices for the third quarter, increasing relative to the third quarter of last year. Demand for summer UAN fill, and ammonia fall prepay were strong and customer inventory levels have been low ahead of fall. As a result, we have seen prices continue to increase for both ammonia and UAN since summer, which I will discuss further in my closing remarks. I will now turn the call over to Dane to discuss our financial results.
Dane Neumann: Thank you, Mark. For the third quarter of 2024, we reported net sales of $125 million, and operating income of $11 million. Net income for the quarter was $4 million, or $0.36 per common unit and EBITDA was $36 million. Relative to the third quarter of 2023, the increase in EBITDA was primarily due to a combination of higher market prices for ammonia, and UAN and lower feedstock and operating expenses. Direct operating expenses for the third quarter of 2024 were $56 million. Excluding inventory impacts, direct operating expenses decreased by approximately $3 million, relative to the third quarter of 2023, primarily due to lower natural gas and electricity costs. During the third quarter of 2024, we spent $10 million on capital projects, which was primarily maintenance capital. We estimate total capital spending for 2024 to be approximately $39 million to $42 million, of which $31 million to $33 million is expected to be maintenance capital. We anticipate a significant portion of the profit and growth capital spending planned for 2024, will be funded through cash reserves taken over the past seven quarters. We ended the quarter with total liquidity of $150 million, which consisted of $111 million in cash and availability under the ABL facility of $39 million. Within our cash balance of $111 million, we had $31 million related to customer prepayments for the future delivery of product. In assessing our cash available for distribution, we generated EBITDA of $36 million, and had net cash needs of $23 million for interest costs, maintenance CapEx and other reserves. As a result, there was $13 million of cash available, for distribution and the Board of Directors of our general partner, declared a distribution of $1.19 per common unit. Looking ahead to the fourth quarter of 2024, we estimate our ammonia utilization rate to be between 92% and 97%, with some potential downtime with the third-party air separation unit at Coffeyville expected in the quarter. We expect direct operating expenses, excluding inventory impacts, to be between $60 million and $70 million, and total capital spending to be between $19 million and $23 million. With that, I will turn the call back over to Mark.
Mark Pytosh: Thanks, Dane. In summary, we had another good quarter operationally with ammonia utilization of 97%, and we were pleased to see pricing for the third quarter of 2024 come in higher for both ammonia and UAN, compared to the third quarter of 2023. We saw strong demand for our products over the summer, which combined with plant disruptions and natural gas issues, in certain global markets has led to fertilizer prices increasing, from the levels we saw in early summer. Harvest is nearing completion and ahead of schedule, and corn yields are expected to be the highest in history. The USDA is estimating yields of almost 184 bushels per acre, on 91 million planted acres of corn, and inventory carryout levels of approximately 13%. Soybean yields are estimated to be at 53 bushels per acre, on 87 million acres planted with inventory carryout levels, also estimated at around 13%. Corn prices have been weaker with the expectation of a large U.S. crop. And December corn prices are currently at $4.15 per bushel, roughly in line with prices from July. With the early harvest, we believe conditions will be favorable for fall ammonia application, and prices for fourth quarter are up approximately $50 per ton for ammonia, and $10 per ton for UAN, compared to the fourth quarter of 2023. Geopolitical risks, continue to represent a wildcard for the nitrogen fertilizer industry, given the significant fertilizer production capacity residing in countries, across the Middle East, North Africa and Russia. We continue to monitor developments in the Middle East that, could impact energy and fertilizer markets, and we expect the remainder of 2024 and 2025, will likely be periods of higher than historical volatility in the business. Natural gas prices in Europe, have increased $1 to $2 since our last earnings call, trending around $13 per MMBtu for the fourth quarter, while U.S. prices remain in the $2 to $3 per MMBtu range. Although the cost to produce nitrogen fertilizer in Europe has remained lower than in 2023, it is still at the high end of the global cost curve, particularly compared to the U.S. We continue to believe Europe faces structural natural gas market issues that, will likely remain in effect over the next two years. At our Coffeyville facility, we're progressing on detailed engineering studies on the potential to utilize natural gas, as an alternative feedstock to third-party pet coke, and we expect to have these studies completed later this year. If this project is approved by the Board and successfully implemented, it give us the ability to choose the optimal feedstock mix, and be the only nitrogen fertilizer plant in the U.S. with that flexibility. As a reminder, if this project were implemented, we would likely continue to utilize the pet cokes implied by the adjacent Coffeyville refinery, while the remainder of the feedstock can be flexed, between natural gas and pet coke depending on prevailing prices. With crude oil prices down, we have seen a softening of pet coke prices in the U.S., and expect to see our pet coke cost decline in 2025. We also began implementing certain debottlenecking projects at both plants that are expected to improve reliability and production rates. The Board elected to continue reserving capital in the third quarter that, we expect to spend over the next two to three years as we focus on improving reliability and redundancy, at the two plants in efforts to provide better production rates, and lower downtime in the future. We began spending capital on these projects in the third quarter of 2024, with funds coming from reserves taken over the last seven quarters. The third quarter continued to demonstrate, the benefits of focusing on reliability and performance. In the quarter, we executed on all of the critical elements of our business plan, which includes safely and reliably operating our plants, with a keen focus on the health and safety of our employees, contractors and communities, prudently managing cost, being judicious with capital, maximizing our marketing and logistics capabilities, and targeting opportunities to reduce our carbon footprint. In closing, I'd like to thank our employees for their excellent execution, achieving 97% ammonia utilization and solid delivery on our marketing and logistics plans, resulting in a distribution of $1.19 per common unit for the third quarter. With that, we are ready to take questions, Christine.
Operator: Thank you. [Operator Instructions] Our first question comes from the line of Brian DiRubbio with Baird. Please proceed with your question.
Brian DiRubbio: Good morning, gentlemen. A couple of questions for me. First off, just with the river levels on the Mississippi abnormally low again. Is that having a positive impact on Corn Belt prices for UAN and ammonia?
Mark Pytosh: We haven't seen any major impacts on either of those. A lot of the ammonia is - was positioned already, and there's a lot of ammonia that moves into the Corn Belt from pipeline. And same on UAN, a lot of what's needed in Corn Belt moved by rail. So it hasn't had a big impact on the marketplace. We're watching it closely more for grain movements. So as harvest is nearing completion, the ability to move grain could be impacted. And so, we're following that closely to see, how high storage gets and the ability to move grain, from the Midwest to the Gulf.
Brian DiRubbio: Got it. That's helpful. Thank you. And just with the Coffeyville natural gas project, I know you said you're going to complete some of the front-end engineering studies this quarter. But any rough guesstimates on how much that would cost? And how the company would look to fund that investment?
Mark Pytosh: I'll start with the second question first. We've been setting aside reserves for growth capital, and that capital would be taken out of the reserve, if it's approved. And we roughly think it's about a $10 million project. That's what we think now. But we've already - that would be part of the reserve that, we've set aside for growth projects for the plant.
Brian DiRubbio: Got it. I thought you're going to be able to answer this, but earlier this year, there was a 13D filing on your sister company, CVR Energy (NYSE:CVI), potentially about a large owner evaluating options for CVR Partners. Any developments there that you are able to discuss, or comment on?
Mark Pytosh: We don't really have anything to report on that - the 8-K that was filed. And so nothing new, no new news this quarter to report on that.
Brian DiRubbio: Appreciate all the color. Thank you so much.
Mark Pytosh: Thanks, Brian.
Operator: Thank you. We have reached the end of the question-and-answer session. I would now like to turn the floor back over to management for closing comments.
Mark Pytosh: Again, thanks, everyone, for joining our call today, and we look forward to reviewing our fourth quarter results in February. So thanks, and have a good day.
Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.