UAN - Earnings call transcript Q1 2021

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Operator

Greetings and welcome to the CVR Partners First Quarter 2021 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, Senior Manager of Financial Planning and Analysis and Investor Relations. may you sir, you, begin. Thank

Richard Roberts

Jackson, securities Good Thank results, may defined management. participation federal our Prior as We Officer; let Tracy your statements to call discussing first remind everyone. today's you, Chief other call. quarter under of Officer; Pytosh, me Christine. conference in Mark With appreciate are you contain is Financial this XXXX morning laws. forward-looking me members Chief term our our that Executive and today that

this historical deemed this statements forward-looking For statements that call during purpose, made facts any are not statements. to of be may be

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

actual a differ results may information, result of a to materially statements. undertake results as or in future discussed or extent update except no operations whether result law. the publicly statements We to by obligation forward-looking the the otherwise required new events, forward-looking from any As

release split-adjusted includes remind CVR of on the its XXXX. This Partners of measures we related disclosures X-for-XX after split measures earnings to November XXXX reverse on filed on units also reconciliation financial The common yesterday per financial measures. most market. with that SEC close me such including that are comparable a our the quarter call unit call references first GAAP Any non-GAAP the directly to are you the this in various included completed made non-GAAP a Let basis. XXrd,

a are variable also MLP. me Let we that you remind distribution

may needs amounts anticipated reserves, by current general as for partner's cash previously other our needs, usage, cash review cash established evaluate will our Board. determined future future reserve and We

Mark? for factors result, our received limited but in With partner. of not our the reserves including Mark general of the operating several quarter-to-quarter call will a over to the performance, turn or to Directors appropriate our from products, prices that distributions deemed finished necessary capital Executive said, fluctuations to by cash As Pytosh, Officer. due expenditures, vary any Board I'll if and Chief

Mark Pytosh

and the net distribution thank you today's for CVR net units of everyone Richard for XXXX first highlights call. We you, million, joining of this for quarter. million. million there and quarter no summarized loss XX,XXX for The good $XX million, common financial repurchased and included Thank cash of us $XX sales of EBITDA available Partners for $X.X a $X is and morning

to too at downtime due the by the quarter of first of first outages. At Dubuque, was to plant compared Coffeyville During quarter first experienced utilization XX% outage unit quarter to ammonia impacted in a into XX% that January. of XXXX gas plant in the the of year winter Dubuque several production days the the spike severe and for and result operated weather at fall The of following elected XXXX. the at period our XX% utilization volumes prior pricing shut-in operations contracted to the operated third-party an XXXX, East turnaround in February compared air also at to market. the unplanned plant natural downtime natural separation XXXX for XXX% we in gas third-party ammonia caused some strong sold we at in the of Coffeyville in East The due

year in We prior the as available year which tons XX,XXX compared were period. gross quarter tons UAN XXX,XXX of the produced compares to net of the available in ammonia XX,XXX for combined This tons the to sale period. for of in XXX,XXX of of of Our ammonia XXXX. XXX,XXX XXXX, tons which first quarter produced were first sale gross approximately tons of operations for prior of tons net XXX,XXX production

per Year-over-year X% and to XX% $XXX prices fertilizer approximately but related quarter of were lower UAN environment season. of at the higher ton. Uri. the as quarter sales XX,XXX tons in of XXXX, ammonia, of agreements. the to spring continued November-December an volumes UAN previously well average impacted sold start was tons UAN, pricing storm strength we into the the the of of for shipping reflective per planting During the significantly price increased approximately Sales due price of an restrictions, forward $XXX for were winter and XXX,XXX have prices by the price ton Nitrogen first more year since discussed average as as that ammonia at downtime,

stronger environment Although, quarter prices, we our evident price not more in be market first quarter our results reflect increased will believe second spot did that results.

are Continued which will in demand to crop over I our call financial my strong results. now the turn closing will strong driving further remarks. Tracy for I inputs, prices to crop discuss discuss

Tracy Jackson

you, Mark. Thank

XXXX. million. million $X Turning and of prior operating million reported operating were expenses an UAN for losses XXXX ammonia and of and quarter an loss and $X.XX compares million sales a to of our net first of decrease million in were first driven the results and $XX Net operating unit of of prior compared of XXXX, sales This year million, was the for by UAN first was quarter the in first period. period. million EBITDA prices. $X.XX $XX EBITDA the to in $XX per quarter sales $XX of year quarter $X million to $XX common we unit XXXX loss for of the loss million, or of common or compared Direct EBITDA volumes sales $XX The net million net $XX lower to $XX and lower for the of per year-over-year

to natural result expenses $X increased Uri. of compensation the by costs Excluding higher stock-based result and a elevated as storm electricity increased of approximately operating as million, direct a winter price impacts, and primarily unit and turnaround inventory related gas

to Turning spending. capital

to During be is million million maintenance primarily $XX to million, $XX XXXX million to for approximately capital spending, to on expected maintenance we million. This $XX approximately we $X capital. which which which million capital million be to expect of quarter XXXX, total capital. estimate to $X $XX excludes turnaround the $XX first spending be projects, We spent of was

the balance at Looking sheet.

XXXX, As XX, was of of XXXX. $XX our notes of million product. were $XX the which related $XX a cash in comprised focus. key senior which senior Total balance availability of delivery our X.XX% at the of million, of customer future of million was debt in million, that we we to of approximately million. March under senior notes of million million Within remained $XXX $XX ABL and sheet and approximately approximately Refinancing prepayments April on XXXX million balance of cash in $X facility the due approximately had of notes for $XXX $XX had in repaid comprised remains due liquidity,

in be the at callable the capital a a rate. able strength these markets As refinance become we mid-June. favorable debt Between believe and the to recent we reminder, market, in fertilizer notes continued notes the should improvement par in at

We that million debt million, debt are capital we cash flow. could a next In total outstanding cash addition generate lower generated of reduce the years, for service also evaluating in reduce interest structures and ability maintenance which to $XX to current debt of expenditures. for available costs distribution, for our rate, million over had to service allow $X few our our annual us cash EBITDA and needs $X assessing further our could increase

over of cash just million. During common we total $X.X XX,XXX quarter, repurchased units consideration the for

the established of $X.X $X.X turnaround of Board Coffeyville the In of and of reserves in reserves our million established addition, Directors planned million. fall of general previously XXXX, at for the partner released

available cash distribution. was no for there As a result,

Looking XX%; spending million ahead to back the expenses we I'll second XXXX, greater that, inventory With the estimate $X to expect than we Mark. direct operating capital call million, quarter excluding utilization be $XX range between to and $X ammonia between our turn to total be and and of million to impact; rate million. $XX

Mark Pytosh

crop the prices spring our into last have farmer season. Tracy. and continued call, planting Thanks, the earnings economics Since in strengthen

For bushels the are million, acre XX million, for and which to bushels believe planted the currently acre estimates soybean XXX be currently yield acres corn estimates be and for season, we Crop acres conservative. XXXX per XX corn XX per planting to are soybeans. USDA

as X.X% since bodes be the soybeans planting estimates crop forecast carryout expected This hold, US corn for of for should and well for demand but corn not demand support year, XXXX only lowest X.X% corn purchases fertilizer in will a XXXX of for uptick for lend for inventory Demand has Chinese XXXX continued well. the in crop and Assuming driven the XXXX. yield the by and been blending. ethanol largely

over $X bushel, a corn soybeans are a currently and New bushel. prices $XX.XX at crop are

helped most December, our in supply first The spring This incentive on selling seen of point urea affordability complete incremental While higher advance prices application With to since prices $XXX high of the spring application realization at during sales the to application over years. a the loss Uri significantly in historical than results. prices is beginning and prices is Since has nitrogen fertilizer also of UAN of premium US urea, and fertilizer peak several of in The significantly period of January added coupled further globe. from first NOLA Because April. the XXXX, to inventories. of the Spot as well was increased forward significantly quarter of in the lower grain went quarter with of US. an urea XXXX to than tighten prices but equivalent low there reached discount low be March selling per prices, second basis strong. the due rose in prices were producer a fertilizer was average to more last will measured domestic it have UAN prices strength nitrogen use UAN and the market X, for led yields. rallied pricing norms. for the within demand grain improve have an urea beginning normally netback risen the to inflection across to for against production in is in a of spot at by ton in and demand the February, quarter, when at a November, largely ammonia as

tax evaluate the performing. structuring pursuit of XXQ We are for credits activities to currently alternatives continue we for

moving In that there sequestration. carbon provide of proposed additional and final published for the pursue regulations companies January, by addition can and the to through capture IRS several are legislation Congress in incentives to flexibility pieces

all the the we putting credits. maximize on these and progress, partnership has is a pieces done. of in but meaningful potential to to to been remains place believe value credits there necessary the We've the work made focus XXQ monetize be more Our for

its by overall reduce reduce CVR focus years, on recent $XXX Energy helping is over increasing XXQ Our next debt us steps to two part our be been goal. credit proceeds has years, million In carbon goal and sustainability. of approximately will level this to the footprint achieve its and taking

the As facilities. abatement strategy the focused COX Coffeyville has of part nitrous both East and carbon facility Dubuque the reducing been enhanced footprint oil to sequestering recovery, through our at on oxide CVR Partners Coffeyville and at

As have combined fertilizer footprint by of lowest production initiatives, result tons a have a over per nitrogen that per North of believe year. our ton of these footprint fertilizer our We metric one million carbon we producer. American of reduction contributed carbon any plants the

reduce In further carbon report those to addition they become these to and on we'll initiatives with reductions, when we footprint additional exploring actionable. opportunities are our

both is goal be of ammonia produce at certified blue ultimate to our able facilities. as Our to

repurchase of small Directors $XX authorizations our million continue the XXXX, to quarter currently we As future did remaining will first during we of repurchases. I repurchases there's and under Board the but mentioned, of evaluate units

and questions. have employees, focus reliably focus incremental investments In high targeting fertilizer planting marketing we with and judicious being spring flow changed With Christine? on a and our markedly in execute and for level thank generation ready production closing, keen answer I improved to healthy to managing on that maximizing with like another at capabilities. their of by While maximizing but conditions capital, to costs we our our contractors would select recent not safety capacity in projects and cash allowing commitment months, reliability for a to operating and safe are additions any prudently our logistics health communities, employees plants market safely the have and season. to our and being us

Operator

Thank you.

Instructions] Thank We will now [Operator be question-and-answer conducting session. you. a

comes question. first of the Stein, Our your a from Please with investor. William line question proceed private

Unidentified Analyst

my Thank you taking questions. for

asking should to follow-up in the I wanted pricing. that normally you the securities Any that a I exchanges pricing? always outsider how April that helpful. understand in your would forward not don't this, price But on analyst the would about look that and company, inflection likely broader spot looking and at? would positive a talk do guide to First future the market that. color in even were into Is current you question. you go trying Is if your happened comments you I'm What a notwithstanding the about what ever I be to understand achieve better we then company consideration? have it And quarters? about

Mark Pytosh

Sure.

to there fill about and way spring application spring there the is in and is season forward and of application. and fall it of sales. three either lot the think in the the for the spot -- lot forward a the fall summer sales have of those is seasons. a The the that. fall topdress. And But we sidedress, it's many into pre-planting is spring So kind during there Then and sales cases around then

not the and any is probably So -- so there third first quarter but quarter because application. less in the

is not is need. immediate there a there if So demand any

didn't balances skyrocketed, supply/demand plants side all interesting -- of quarter was. are for of in forward the produce. sales and in supply in February, a that's -- one Its And we quarters pricing. there because in the virtually pricing conducted lot forward for because lot I gas, call the it's So an usually between this on natural really outage factors terms when has because it's to weeks of -- had down, but is sense first shut industry into first complete because fertilizer. pre-stocking a obviously go more a two spring what that were it's are stocking. and it But we and sales application. November It's typically a and make of year those year, December

didn't So down very either had took your were shut you at did, it a down, produce and plant you high or if as to sense we under did, gas and economic contract, plant you because your sold prices, to not contracted make product. you'd

supply was at the plants into the side the reduced that due significantly spring was coming so, And and fairly actually the outages to industry-wide.

very So shape. side's in the supply good

On is last since the side, to Grain level change farm -- demands the July, close seen economics economics. we've United the really demand prices XX-year in farm States. we are demand big driver we forward the at at biggest sea And a in get the for driver into and year, high that's call nitrogen, highs. we look prices, And the as new you -- are and the are levels. -- very summer crop the fall corn what which of

was price in $X. So Last July, $X.XX. the is at new price crop at the July

about So the cost of the that incentivize about and farmer use to economics is base. X%. for would farm farmer overall to revenue the to nitrogen of the because is maximize a corn Fertilizer XX% nitrogen production,

not for going a And number. corn. of -- is at big $X there's with nitrogen a lot corn there it's So to demand for prices

if -- so, the we because the in And positive, more second go we back they tangentially, half look if but year, nitrogen, of January because money buy paid next as getting of that's to for -- lot pocket of inputs prices. soybean not into a in for you And this they a are farm is continuing this trend prices to see their year. lot a soybeans, high consume farmer also the directly have level started soybean economics, grain

for this farming biggest or or sea United we've the in a prices have to years changed So in level maybe fundamental States. the is seen -- gotten probably ago. have change economics XX that seven Grain since the eight

Unidentified Analyst

into which That's is big very the sort of have, second it picture. very helpful segues and question I

the stock able let's the month-to-month what or and at ago changes looked what's I this and and sort are this $XXX trying for frame $XX the back you can between serves, asking nine $XXX. what's saw that, corn memory of them very expect to, those to and about what's instead difference you say, from to and there’s like, as writing on exactly in hoping years they today sort and to it say, and probably going economics just today. saw going yes, farm going up nine, forecast business basis, calculations last investors today forecast that's what was articles way to Seeking ago, exact week-to-week of the in the I looking business investors, I'm I'm a these but quarter-to-quarter. split You're and to on such to XX I last fertilizer relative the compare the is business adjusted were we level last year wouldn't around. when relative level. to described of XX suppose, aware a take If you big are maybe years be at we saw ask a happen exactly say, you you a want this on step distributions Alpha happen time lot to not time perhaps you let's

you've business and of bigger higher that we maybe are frame is be can and this or offsets how your think profitability other an cycle will maybe think level today, I that that looks acquisition that done comparison much because there debt, or maybe worse for much what Thank different you should things totally you. is us? but lower, a

Mark Pytosh

Sure.

saying this of for a is the That the think important economics. driver business farm that has is and are. really but And very time drove different me, there reasons. from overall our think, just changing the -- the is to And So, XXXX different and different, was When that market soybeans by I from in the I back thing the is, that corn renewable a little but, than demand this need What -- -- cycle seems the I for our East business the through obviously cycle, and ethanol you corn company because came more legs And We've because this as we've cyclical business. that farming, to We're a would the minute to of has before. the company, for and say set blending a you ag corn XXXX blended, where the industry, difficult factors been that a that the went for first being reemerged. And we is And but market. is level fuels. recovery we're and step started added aside driving not if most leg and it cyclical. we this. for is of driven the recovery, period drove if I'm are fundamentally some actually Dubuque. of durability

Now in sustainability and push we're is where fuels. leg, a the towards second there big renewable

And of soybeans, part biodiesel because work. that too, is the of now

And so now farming, which it, only blending. on leg -- which used for is fuels also is another to for be food, has

And different waiting cost is so, a to that took to we've financial us I think, opportunity I little say of recover East been industry we and this and just before. a for as debt. reset Dubuque, it's recovery than for this patiently before markets would company we on the the market buy in debt our

in so But happen. company direction benefit. And we and intend months there patient that, the going a to of the by for kind in that make we being things over -- coming good to is come have waiting and

as -- cost. refinance reduce ahead will the of effectively And to resetting overall going Dubuque, past of reset we us we've a years clearly -- we the the the we're going the stronger to move I and was when five East also we think So that which ago, and company on to refinancing. been, like structure capital level we're the put stating debt that kind we'd purchase position pretty in

the the -- Dubuque, repositioning an for that isn't recovery. a of got it's lot has durability kind say key farm for and I'd quarters. to momentum. finalizing of of this us And is for not industry We think So, post-East quarter-to-quarter, in want years, company last economics I the of

I is comments, great in the grain as next with where early what I is confidence gives looking to very but stretch customer are and and already in in we I'm a So, at business this they're We're the healthy any as stages, stated product health willingness buy been really the the think in us as fall the cycle. your prices the key they've the and which doing, decade. of is this my doing into customer spring, our to

Unidentified Analyst

Thank you.

Operator

comes from next with Brian question your Baird. of line the Please Our proceed question. with DiRubbio

Brian DiRubbio

questions back, this reading you of morning. Good about selling Dubuque, you you. natural was am I a $X.X that Starting shut gas the Maybe down million? right for from received couple the out, when East that gain

Mark Pytosh

correct. That's

Brian DiRubbio

Okay.

and you impacted So other can what us you the understand that challenges talked those quarter, had was you by? outages help unplanned you some the expenses as of of totality about the were in the

Mark Pytosh

you sold if the combination to want I had to we while What And something had at that quantify to opportunity, by sell. was at don't lower And than was production decently that that that Dubuque accelerate our would tell -- other volumes last the we year. took is lower it We the activities. looked is offset a largely down we that level. the less that at maintenance you loss was East we gain tons of plant

So the maintenance between We we would to was that year. appear offset with the pulling and quarter largely those it that the later lower windfall two, cost have in forward sales product it in that done costs be. not might

of quarter. what So happened the sort that's in

Brian DiRubbio

we'll as see we now -- at about fully satisfied in those makes think the you guess see as rates? will out P&L with and quarter the spot sales representative Whereas is the in Okay. current And made that more the of those the are sales sales November, second forward sales? sense. I you That December, we'll be

Mark Pytosh

That's Yes. correct.

in that So and the quarter and second were we we during out product selling cleared quarter first a quarter spot first the quarter all into loans. the for the second that

Brian DiRubbio

pricing just coke of on year-over-year, source Coffeyville? me did but are this much what high. really, for costs. Obviously, at terms of you Then seeing from point? How two difference pet that. questions really And up for much pet you came not sequential part coke of guess, a Great. final in one I

Mark Pytosh

They obviously impacted was -- quarter-to-quarter tell the down. was winter would by the the you I that storm. refinery Coffeyville

production we was lighter the they running rate less. source lower so and also so did crudes, were And

steady, bring Our it third-party barge that pet has easily coke and plant. by been pretty the we in to but truck then

that's been refineries other market by and storm. steady weather been needed we also when it. were pretty able in So access affected Kansas, they the the all we draw pet But from to and Oklahoma we've coke too

I we kind running. have typically source to overall, river And all because in more, second would off and quarter, normalize drawing the nearby say, So, of versus our back of will that up refineries. the from they're

to in they In fact XX% to rates running are rather the refineries XXXX, utilization. is XXXX raise starting back were XX% closer to than where were they which

XX% Now closer they're to more XX%. to

Brian DiRubbio

the Appreciate Perfect. you. Thank color.

Operator

Our from question with Roger comes next of Please with proceed your America. the of question. line Spitz Bank

Roger Spitz

much. Good very morning. Thanks

So, prevailing said correctly. the speaking on so, pricing, should we on should base be go those forward Thank price prices to like Could is QX? we those, closer it we QX, you. like just pricing November, the generally QX, on seasonally it How for I if December returning QX, think for levels should QX based that prices, one heard for of sounds about spot? you've each

Mark Pytosh

Yes.

February In for March have complications out into May. a more pricing lot you've April, -- quarter, to yes declines of been QX June. going the there. look second much be and will prevailing much we're through quarter then -- a the second spot. the mix season that closer is sort selling to in so it gradually we of were But if So There that more following market. That is the end peaks May started the and probably

early. first look into the Clearly, second and season planting were our Sidedress selling gotten when the at higher in we it to just different then higher haven't that get too of that is half into much And lot we view much quarter. the going We're It's the second half second to the half. through is Topdress. than think XXXX, prices and So trying I a settles.

expect to we for very was on cycle. second this so, outlook of low -- different half past periods in lower the half a And a compared very XXXX period which second

Roger Spitz

sales seasonally about mean QX you because I do -- think in back also historically? historically Is historically it. prices? those think being to Got those and some more that forward time prevailing that's prior some how we then -- Maybe But we we somewhat QX sales? talked should about of QX? should forward in look How about because in spot QX

Mark Pytosh

would Yes. to UAN I'm that's... for say because -- that I UAN going use

Roger Spitz

Yes.

Mark Pytosh

UAN quoting July, July. urea. I'm UAN typically It took decently is we That's in don't reset peak not they other. But was And is each follow The spring price -- price urea. the the -- be lower. at if again looked lower. sell follow it will you why and typically

think outlook relationship. would with similar of so has because And a pricing the supply-demand years fall last will I far expect we don't and just all the dynamics year, as few for the it this crop as it the producers.

manageable that inventory this expect I So to levels low fertilizers. we're likely to end spring season pretty with

pocket pretty comfortable to economics supply because be We're starting customers into dynamics be summer good. good the and I in with hear year's think be money this their it than inputs going So the typically this already fill the year tax sell to are buy crop help should they discussion normal inputs their farmers expressing interest to on half buying in demand a because situations. summer, the farm will they have going to when going they're manage and second underlying earlier

there. that So have cost they embedded in

the half. shape side good think in side good So quite conditions second is solid in the demand the think be are And I and to shape. I in is supply going

forward. feel go good about So the

Roger Spitz

you But be million take Last think to of QX. which or QX One winter it. turnaround turnaround those that expenses you million we $X gave some to fall were hear the expense the to into maintenance of in you like more sounds thing, million. When $XX year? Happy perhaps, it down call less for said in maybe opportunity would of $XX an or to answer your million Uri. storm do the I because other $X I that the use to this while before be plants in spent should model

Mark Pytosh

turnaround will in put is fourth on we that plant. in million maintenance to the the million year. plant be $XX which was I Coffeyville Dubuque to this the the for Well that East And not would be did The $X going quarter.

is turnaround. fourth current Our schedule a quarter

Roger Spitz

much. very you Thank

Operator

We have turn now end floor to I session. reached for closing question-and-answer of like back comments. would the the to the management over

Mark Pytosh

the much. to results. CVR and the interest look quarter Partners to their and for next speaking wanted thank XQ with forward Thank very joining you for we Again everybody call you in

Operator

Ladies and conclude teleconference. today's gentlemen this does

your and have at time. you may for You wonderful your Thank disconnect lines a this participation day.

CVR Partners (UAN) 4 May 212021 Q1 Earnings call transcript