UAN - Earnings call transcript Q3 2017

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Operator

Greetings and welcome to the CVR Partners LP Third Quarter 2017 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 Mr. of President Vice Finks, Finance. Jay may Thank you, you begin.

Jay Finks

Officer. Executive We you, today in participation good as our our XXXX are Prior Laws. defined Federal Ball, everyone. that Michelle, me term results, morning appreciate Chief Pytosh, today's Mark Lipinski, Executive third your and may call discussing this our Securities Susan that our Thank Jack Chairman; Officer is you call. conference to contain With Financial quarter me let Chief remind forward-looking statements under

any this forward-looking that expects, statements. plans, words For statements. to may during are the not statements anticipates, identify forward-looking purpose, made be and this similar statements Without be facts foregoing, believes, call limiting expressions the of are historical outlook, to deemed intended

that important may latest our cautioned Exchange these in forth Securities by our Commission with in set affected filings be factors the earnings release. and statements You're

differ SEC Chief said, such in With or to no Mark Executive measures law. financial As publicly morning, a XXXX market. to also results the are the included we prior reconciliation our third to actual call the that statements, the whether most to in turn events new to of that quarter the this Officer, may comparable or result related undertake required extent call the non-GAAP We disclosures except non-GAAP with Pytosh, filed our GAAP from This including includes statements. open as of discussed directly financial measures I'll earnings Mark? measures. a over information, release operations obligation any various forward-looking forward-looking future materially results otherwise, The update result, by to the

Mark Pytosh

morning. million, $XX.X our financial everybody for EBITDA joining of To $XX.X of for included million of XXXX net million. Good and the adjusted net Jay. a loss call morning you, quarter third summarize $X and Thank sales highlights thanks this

had distribute the turnaround, piping year also turnaround quarter, facility. unplanned eight the our UAN the operated exchange East repairs. downtime some the Third fourth were additional on product million. for XX-day to of plant $X.X repairs cost turnaround the approximately deal some ran ammonia unit of days XX Due impact with at the and scheduled production that results on-stream the lost approximately After quarter always reformer. million weakest on we EBITDA gasifier the the downtime quarter third XX.X%, at to volume total experienced a we Dubuque quarter and days the and and rates the $X of the complete to ran impacted quarter by In third the of seasonally pricing. XX.X%. at XX.X%, Remember is Coffeyville, were The at was of

ammonia ran the at While at East unit the the XX.X% operated XX.X%. units UAN Dubuque and

per XXX,XXX the third ton quarter, of ammonia product left UAN. tons approximately approximately of operations We a gate third of of at for approximately XXXX $XXX ton produced the per into price quarter. of ammonia sale. combined produced $XXX at XXX,XXX majority This in ammonia. available quarter UAN total of during XXXX approximately the tons combined converted We our a the versus tons the For of XXX,XXX tons third XX,XXX sold

the fundamentals what the to of compared with These to at the slower the excess combined This and third sold rainfall, upper resulted period seasonally than pricing during to XXXX the spring total as of Heavy prices conditions application second in particularly XXXX. for third per up capacity approximately suggested. coupled new ammonia. into difficult caused as a XX,XXX left $XXX the of floor ton per XXXX market higher a be of in to inventory $XXX a For have of ammonia June we and conditions cost upgrading tons levels at quarter gate tonnage in end summer quarter quarter. ammonia, with ramp product the going fall Midwest further ton compared

We in inventory a by the at expect and past the summer We end was significantly the the prices low be ammonia for the believe months. industry two will seen point normal year. we’ve pricing already levels of were

distributable the held in call, in we us third quarter the to combined in announced quarter. allowed second of quarter quarter, third cash On which $XX.X our the second be distributable to that the from earnings close flow results when breakeven cash company the back million a flow with

remarks, cycle. and will for of to will business before conditions will the We we our year. discuss recovery my outlook the discuss detailed for closing financial I the continue diligent industry results. remainder But until that, In the managing remain and Susan? clear of Susan cash see the

Susan Ball

and you Mark morning. good Thank

million [inventoriable] to decrease period. from expenses due in year the higher as and expenses the to increased prior Dubuque specifically cost costs volumes. The the compared XXXX sales prices The merger. Looking in higher quarter X.X and quarter for Refining. partially third for other offset by sold XXXX. was XXXX quarter, the as expensed due XXXX XXXX the in of third was overall million as to year an increase well as sales offset increase turnaround our $XX.X The from by was the as of and quarter $XX.X in attributable East to and X.X the same million was period hydrogen year million attributable administrative primarily regulatory period quarter ammonia the period. decrease partially maintenance decrease decreases to expenses Dubuque to purchases This sales lower is $XX.X general in with East in the primarily million associated quarter. third $XX.X million and repairs third prior $XX.X for XXXX million primarily operating the prior $XX.X CBR being Selling Direct UAN compared to to of the the were million increased materials to million for third the railcar at lower ammonia for compared net the third to due primarily $X.X

we a $XX.X of recorded the the million XXXX. a is million loss per quarter of net or third $XX.X $X.XX per loss for XXXX compared This common net third or quarter. common unit of unit $X.XX Finally, in to

Now and third maintenance million turning quarter capital in remainder increased projects. for $X.X which the capital XXXX we X.X spend million capital on our for to the spending, projects growth capital

For approximately the approximately XXXX cash CapEx approximately we expect of be debt. for spending the and We as think balance sheet combined maintenance cash million at full equivalents year, two XXth of of XXX we will had $XX September million total facilities and $XX our million.

will from of September information XX the a Mark. back call With $XX.X that, EPS months XX, of on find I’ll adjusted over website presentation third million. in you brief XXXX the of financial Finally, you our including turn to [inflex]

Mark Pytosh

approximately a little of as XXXX. XXX season is that today conditions compared call, the last This our per is same last On for on in still XXXX underway. weather is yield for XX% period but Thanks bushels late year result for a Susan. earnings year's This USDA fill the given to for the harvest the July of discussed season. than for all previous a good of we average The corn– estimated complete XX% five harvest corn years.

the These from with ton higher are firm XXX at which XXX the and of from where prices last prices, be past new proactive more a fill these over seen year customers have higher production and their slightly $XX globally of During to what prices coming from were domestic per [indiscernible] a online. July to still prices US in longer over purchase well fill change XXXX with world prices have These product have product buyers the of July per with in Even the time international prices $XXX market. prices up $XXX year. year’s prices last prices Because Europe capacity. global was production US factoring at have customers was from new basis. about is a more absolute approximately of $XXX purchasing. America closely This prices because higher to would XX were in on around facility, ton ton purchases this regions US to Since nitrogen exports ton lows the the product to the production waiting urea the these were lower per all Higher customers UAN prices. UAN season, urea led factor than below UAN there of ammonia are led at we to prices ton market also higher to per their matched than were durably fill. the lower than Urea with prices. season, but XXXX. equivalent behavior Latin demand thinking per urea late aggressive $XX new increased in in product US were One are more compared

are sold of prices until summer delivery quarter significantly the product in don’t half XXXX. than the first to of for and the the this result, pricing a As from see quarter for those expected higher tons fourth We first impact prices to the than full first higher in be higher of half of and expect XXXX. the pricing XXXX

higher pleased to judicious including marketing we plants with signs costs, on can capital, the prudently on-stream activities. that the of While management control issue our in at market, the see we are the will logistics being focused improvement remain rates, maximizing managing

total approach production, but We marketing, this our in are our cash logistics for with recovery well hold. and for market, takes conservative positioned remain manage to

turn to call over Before our I I’m to going Chairman, to Lipinski. the Jack turn Q&A, Executive

Jack Lipinski

Mark, you, them capable everyone. thank Thank because these you hand. I calls leave in normally I Mark’s don’t join Listen,

the over be the we Executive your It’s retiring You XX.X [a this CVR Partners. company am like wanted after employees Mark as spend Mark But thank of I great since and the days this Energy the retiring better saying support as turning. CVR may and believe people you and wishing I that our your is have all and seen ahead appreciate with I are the years and years. morning shoulders a the the company. in us, time rest been will they very just took Mark's interest moment help look]. that best. of years, announcement hard long Chairman I on great a this a market and I of are did that over I is to CEO,

to So, Mark if you back want over. take

Mark Pytosh

guidance think we With over and Well, turn all Alright. thanks that, thanks I your years. Michelle? to Q&A. these now for it Jack

Operator

with question. line Goldman first the Our with Please [Operator from Samuelson Adam your Instruction] comes Sachs. of proceed question

Adam Samuelson

Yes, thanks. Congratulations And retirement. will morning be Good on Jack, the everyone. missed. you

Jack Lipinski

Thank you.

Adam Samuelson

East own price from Mark, little can new guess future that capacity marketing U.S. your might first evolving and how and in thought the pull bit on a think Dubuque be tons Dubuque, UAN you industry would today East and and between [indiscernible] my Wever the ammonia thoughts on comment we’ve own I with realizations. and of you Port question have price larger your and had any and a there? output, Coffeyville realizations versus and I of would production into the benchmarks realization that Neal mix that mix particular

Mark Pytosh

Yeah.

of that because Let’s if plant UAN pieces The second much from we mix down you in start, that. and ammonia the this in our the with quarter ammonia was in milestone the from different recall had there quarter Coffeyville. June

we that in kind of ammonia Coffeyville And up XX so, the at normally a really in lot June more ammonia we inventory seeds summer with have and ended we the Southern than planes. would don’t

kind Coffeyville up, one-time we that Coffeyville the shift event. so to was unusual; a cheaper ended was the around an that the market pricing So, was mix and of

our planes, price but I Southern normally. why the greater that’s in in Southern than tons pricing the the sale are definitely market planes say would they we was within So of the lower. percentage the were

unit tonnage you so upgrade sold and June UAN we prices very at to ammonia the were largely unique season, and where year season plains low. that pipeline we good had had The but expansion and late. at As were Southern planting our Magellan outage that issues we the a in of was we wasn’t of most that there bunch this in was know, the Coffeyville, with

there there forced great when all not you combine the market. is Southern that a lower prices factors, So, and and a lot in was Ag really those planes of ammonia

spread the there was just difficult. So, proportionately

the economics new the on I East at we bit decent up spread asking yes. driven Dubuque Coffeyville we have by the East facility. -- you’re was the planes Wever what be a as of answer between premium adjusted to question the were as into wide expect that way still down the transportation continue a quite of plants. Wever that little market kind and marketplace relative is two of to and used think lot plant be it will expect There no plants Coffeeville that between as a the It buying it customers the out Northern But that’s to may think spread the I is not good that other all we to Dubuque. settling year other, your spread think really to in but and I and this as is a to be

that spread think we will So, hold.

have I think calmed as a the we’re quite revert seeing kind a of to half during first ’XX down back spread selling bit things levels. and tons we’re of normal into closer

Adam Samuelson

And where your line even much on has first of at versus with maybe how maybe then prices sold any and of in tonnage little are bit Summerville color how That’s more helpful. -- Okay. maybe and those today. along forward quarter sold much XQ and a the been forward they lines, prices

Mark Pytosh

of second fill, the year. we’ve a Well they lot take half know the a you of work, take of lot the in

one, fourth add is the last well fill fill quarter where little priced bit their above those now. October current is actually price to next price. the year will and month So which fill are year for market a below of the be that the that this were market it on into or The UAN is carry prices difference but still producers the and at will prices year conditions in at of in most selling

a of the in that the demand market for did year. year first half first orders the we market for feels ’XX, dynamic half more of any year October really seeing year fall the seeing last 'XX we say the much the the So, weren’t this the earlier are very for and spring, than different we’re in first ’XX. did demand this of it of taking would we fall I constructive that for half and

Adam Samuelson

on sending the Dubuque, is East and any think of has in be at [indiscernible] there fence comments any over that those process or you’d volume up, economics the And the the range Okay. on of the tons? I starting

Mark Pytosh

customer am a will believe be ramping cutting will I I that its ribbon rate. up of going there a by ago full running I the to much month volume to is about We start not quarter had nice rate. its and and at comment on and be how this think plant up end it for customer that’s the and it kind the at the will our for are works the way to rate comparable be new Coffeeville, them will where and periodically, ammonia. us we contract the our and what sell a them the nice with economics plant economics of of and be same sell rest out with them them, the full

complementary So, up and UAN I think to plant, see product so work target be expect they its some that would there. potential to opportunities complementary together will we customers some maybe running and you

Adam Samuelson

going you quarter about operating that inventory quarters I your the expense operating but P&L was prior and expenses think direct thinking this and ROI your direct forward? through think remarks more costs prepared on number up among stepped in I to that running your alluded I any versus

Susan Ball

volumes direct, normally that was well costs during Dubuque's the with costs sold, as quarter that associated tons expensed. time increase would to going and more more was had being be so more this we East unique turnaround quarter given really the to as it down idle No, probably inventoried with

Operator

Our next question. of Shen line HITE. with question from with Please comes Lin your proceed

Lin Shen

questions. versus about So, Mark, have follow realization up benchmark price. two I price I guess question to your just there I want

so change some their that of are mentioned they supply production new customer you are there area. are think they given seeing new I in online, behavior seeing

East spread So, what talk change you for think the long-term spread can maybe for Dubuque can that the achieve? some you do about

Mark Pytosh

Sure.

out the bit this Iowa. is be the Coffeyville was end between of and because a We with Wever to would product now decent little spread the will in and distributed come the then say economics that the used East end trade is I with be year that market there goals compressed the believe again that and the what versus product to, the that first. shifting back pricing of of it start as I'll would terminals plant Dubuque transportation still being So, were shifting be question made up your that a river,

Coffeyville market Dubuque marketplace, my has sell the settle to between of into got both two and now out just opinion we’re that products the East where see spread I plants, the spread to in differential. accommodate But that shift, we’re little the capacity and in ’XX looking the year. that normal of at so see kind say was decent again, a transportation because the going to narrower this into a And the I starting between plants

And I -- follow half lost to the think my question. your trying I of so, I am first have

Lin Shen

I guess maybe from… So,

Mark Pytosh

buying we customer in, coke. I'll year coming little ratably, less is in back and patterns. [indiscernible] and more color Wever ago saying the what last was they completely year saying then of said the it’s been of had are comments what waiting coming year the year, capacity waiting at buying the I they back to, Neal About are back to new tons and The way a and for they we customer bit we buying there, people going X.X What give to. were we and have where had as behavior the to in and is advance buying pattern, it up and running kind they my accustomed the last Port been the more but almost used [indiscernible] and for getting go now little acting a have way expansion to customers with not

settled historical the will kind new the us this say that buying and capacity of that’s gradually this the telling And so, market to I what's been pattern. is market in and

just and what historically waiting was opportunity. holding it what to closer back perceive as reverting back we very we’re for think and I

in kind few change months. the seen as patterns we’ve the here settle markets down their last to So, of customers the beginning

Lin Shen

you gas remind do question, can Great. much rest how books of hedged the me, all your you have hedged Last XXXX. is year for the natural in and

Mark Pytosh

and during of hedged consumption a between’XX we year for months and the ’XX. big winter same chunk our done last we’ve So the winter for the and crossing

for us that winter that were a hedged winter when as winter. and up. another hike coming company So, taken done conditions we’ve biggest there for we’ve The so done the market off table typically a already the this significant the risk period we’ve and for gas good is gas in

Lin Shen

What was disclosing? the average price, you are

Mark Pytosh

We don’t disclose that.

Operator

[Operator Instructions].

Robert with with proceed comes Owen next the Please question. Baird. from question Our Douglas of line W. your

Owen Douglas

Hi guys. good morning

customer Just to and trying there additional this, understand nitrogen. you that economics producing your a coming mentioned starting you to what’s too recognize behavior that capacity of online lag is comes not better buying prior about see already typical to In much between cycles, online. the to return when based say you'd start capacity on the the experience,

Mark Pytosh

US Sure. I came is markets -- a for particular don’t these in lot of how out it played is was know a in precedent the the unique if concentrated to and there this US on. capacity

So, approach was little reversion but ’XX the out bit are more the been and XX the did customers months less and more into the smaller different. the they plants, customer and ago starting and customers historically. pre-capacity we’ve in really of to to consumption our at would buying fall hey the were we’re months buying They expansion into pattern acreage on year. spring seeing as so looking the and last about higher of the times changed historically in were I got back had seeing so buying a of chunks like is we buying a big -- a they that say XX had or What we’re than starting buying were different spike the what way fashion, has ratable bought

to pattern say spread like adjusted feels think of the to but let’s feel yet, is wholly the the and price hat the back the back market markets in that they’re I spread between US still where and sort differential. US it to buying is the like the there will and was and price coming its There it has I still So, capacity, that the higher global compress with between price being international in months. should the are prices, a that compress not even

months coming So that process. this that’s in the last step of probably the

Owen Douglas

Okay.

think of seasonality So, in weak the the a half think as of of quarters about the you your do you just be profitability years, do terms you recognize business? first seasonal really this going in the to changes and the think of your is sort a business, dynamic that XXXX in just

Mark Pytosh

so. think don’t I

into I very I we think to victory as be what third a pattern This think see at recovery shaping there ’XX, appears seasonal low about normal ’XX declaring real us. not will we but but reasons ’XX. were some already, half out for quarter, we’re up extremely there, be for quarter the this least the for is first look of the for I prices all talked

Operator

Suisse. with proceed from Our comes Credit next of question. question the line Gibbons John with Please your

John Gibbons

of to Just And historically the a we you to fall about of issues sort I versus shaping year XX% of sort sort negative application. year equal is of this it for application think harvest talk be Mark you question quick Can else sort on how up same corn said hold are were all fall follow-up there you compared just last would where mentioned XX% also last that some just application year? I whether. guess about

Mark Pytosh

customers in One, or two. pretty here of soybean things I last talking the to There that’s far am I week a along. the there is couple quote didn’t

to temperature degrees. there first so -- [here] be is you will bunch below this the XX the application to piece I going be So, of be need think a also

the that getting the into in field. belt, but we’re So, out soybeans zone the after corn are

the think application be is to to the from I So, soybean the rotations of corn. first going leg

leg cover will good we this I to week able from it out will think should are on of roll harvest the beans another by from or next corn there. soybean and be roll I be along XX then their starting corn rolling and then application we probably pretty that year will days in the plant or the be much to can first there think so, from out corn and farmers here fields who going further the the week so be the that call And and top past will

that cheap application the advantageous. very has so had huge is because a I now than the so application I a good. are urea, discount ammonia big expect Ammonia do season So, expect economics right to be

good they you think this it is I whether application. much get it’s okay good but We still be way don’t will fall rain, I have it So, mixture year. be the a going to a application of think

John Gibbons

of it. your Thank question helpful. of on then just very ’XX a you Got are sell around give about on higher follow-up half, first how comments asked in prices thinking of in your you Wever in you on just you, little any the a try prices of current and around the of previously half your and just strong first others other percentage selling selling can And preference volumes around sort now and and sort I what prices first at potentially the that? guys of that you what and guess are half -- of basically into bit you to ’XX. the hold in color bullish coming volumes on sell are or some prices back guys ’XX with QX would

Mark Pytosh

champ, the be historically it We're market ratable. where not April. we’re it, not If done call we to trying to you going now look we protect trading will in

we weren’t is of dipping getting volume going and it -- -- our but half plants all we’re November just customers those very orders this half so to ratably year the It's point have month. be tonnage tonnage that think market at this the us all buying the in I been huge today guess X, and sold through year be next getting at last to year they today customers down you first percentage least some earlier we quarter a ’XX message the more second will the But the November, is tells way try they but forgot the to in the in is that here view of first the their were building to toe today not. they not book we’re of in market is going the at water but constructive both and the for think and going to our the for have take we good the they’re argued, first that to good [warmer] prices the are again year trying customers, a them half today that not and we’re of marketplace our is start at buy we��ll the convey next But the they this coming volume think spring. So, customers to we will and are last sell prices. isn’t

John Gibbons

and rates and Got it, last would color historically the downtime operated at have very down operational high what to be And any all XX in bit you issues those of just that on to expect you resolved time you helpful. in one sort the know can a you be pretty there in went days on great. just little of guys down Dubuque expand East QX

Mark Pytosh

repaired you we've a which brand for its took plant for turnaround and and issues time, this off But for and way new. suddenly and you goal and think an run plant spanking act is Yeah, our issues They and built issues sometimes great we’ve plant a and you in we’ve we’ve couple run you so sometimes this now everything have of six up these and issues plant long its the and the let it and I this done and one are they The they’ve the just running new had are couple back temperamental you’ve for and up is July and operate. for is plant these way time repairs plants even down out mystifying is long turnaround. of a the take we lot quarters that when then age-old come cycle last down took the one had they conundrum out cleaned before I of of when know full the a pretty. the hope you plant period we think resulted the allow our around mean and brand for of temperamental when know runs a period to let comes is though they’re is shiny all we that of extended back had we been the like knock sometimes frustrating and it to don’t we cool the plant but it's off they a

frustrating off stream. us six of this XX So, to quarters was for after XXX%

behind So hopefully this is us now.

Operator

would closing to now for questions any Thank I remarks. like at time, management this There back further turn over call are you. to the

Mark Pytosh

last forward to Again, the and Jack appreciate thanks you. out we coming to in everybody. talking to years just his Lipinski Thank on results shot quarter the you help over one look we fourth spring. and all

Operator

you. This today’s your your at disconnect and day. a for participation you may this you have Thank wonderful teleconference, lines concludes time. Thank

CVR Partners (UAN) 1 Nov 172017 Q3 Earnings call transcript