LXU - Earnings call transcript Q1 2022

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Operator

Good day, ladies and gentlemen, and welcome to this LSB Industries' First Quarter 2022 Earnings Conference Call. [Operator Instructions] And to get us started with opening remarks and introductions, I am pleased to turn the floor over to Vice President of Investor Relations, Mr. Fred Buonocore.

Fred Buonocore

Thank you Jim. Good morning everyone.

the Cheryl Mark Officer. Maguire, on Executive our today and Officer; our me call Behrman, are Chief Joining Chief Financial note a on results will the call are the not expectations that actual statements future they of Please because performance factors of and cause and and include projections, materially. statements variety company's to the forward-looking based differ guarantees current wide intent, are today's could

Investors the will looking call non-GAAP reference of press for release http://lsbindustries.com, include turn the of statements non-GAAP forward see this As results results. results, further in like I'd the to ahead to time. to section reconciliations regarding and website, over our call GAAP Mark. please information this go At and to

Mark Behrman

Fred. Thank you,

to you have speak quarter happy XXXX first to opportunity today our very with results. the are about We

can capitalized effective has control, the of it was it and by operating team, we marketing pricing like that strong on we much the top a As by performance their and our environment, favorable our would not position do commitment but for quarter first page is year in I beyond. a for us Financial results again of safely. a of if outlook strong driven the excellent give of great on and of benefited results have the sales thank kind to the that to generated our not to and results our improving delivered the our business. you another of we greatly as deliver that our of of are have products XXXX a we environment question record of factor that balance the line once mean and X great presentation, no with part see out us work growing is bottom pricing start on to taken all this deal efforts. employees to solid our strong and quarter There from we making operations the

organization that employees in day. day home an Our ensure safely primary and of is our as to out goal day and contractors every return all

We and risk and by people, healthy employees standards safe high stakeholders to all to and implementing providing potential the safety communities, are committed workplace minimize environment. to a for assets

corn, entire key this we towards Our regard work to demand continue currently team XXXX, end highest trade to well of hard driver X, year zero of our page is drivers goal. continues agricultural a markets. price our above balance prices key our business XXXX. for levels. the factors. progress to of great summarize multiple Commodity level incident which to is due On the since in over we The ago And make expect its at

constricted driven as miles have EXX discussed through has likely consumption from last waiver EPA's and lockdowns. restriction emissions the production ethanol we rebounded the U.S. when The As recovered will which for is reasons, typically remain top and greater supplies use in drought even corn global corn with lows ongoing a U.S. support as global for lead multiyear for to in stocks. more of America that, demand South coupled prices. providing Western On of recent ethanol of product banned summer, the demand, and result strong pandemic of call corn, the for corn conditions

of May up this June. At to recent weather the weeks, in start the which the Another season. be across planting point, are however, believe we planting has activity closely delayed U.S. belt the dynamic and we made corn wet is that is that watching likely over

prices will futures we from well be demand yields, maximize The to through remain seek of the their for prices above given is for we farmers will that this farm as and XXXX. corn the into current corn expect fertilizer XXXX historic and important believe strong takeaway to all our and remain profitability that that levels that robust call

the A against dramatically been of is the to ammonia, increasing their the to this urea the XXXX world's Further case exports Russian and nitrogen invasion of impact Ukraine. current to and past already levels. of impact largest for the the respect and both economic of prices. has exporters further the to increase from products nitrate expected on the of situation corn nitrogen expect in of prices largest be products despite enacted is global We reflected supply be appears contributing fertilizer prices production to one the causing XXXX. year. reduced Ukraine and With Russia, prices the and Ukraine's in world's to one unstable concern corn corn in geopolitical prices, corn over of fertilizer increase exporters ammonia have that sanctions elevated disrupt

respect natural our relates price for discussing, the particularly attractive mining to the of uneconomical of aspects in one our aggression commodity and that gas, nitrogen end industrial war product been relationships in resulting entering top is already into than towards XXXX, imports some more that the conflict. inflation dynamics production, With of ammonia based in beyond the the give of to us the contracts for producers. the with Ukraine ammonia contribute to gas our visibility from continues impacts to key market which Russia's only I've Finally, the XX% tend it of input market of gas prices industrial page natural more elevated On us have be in cases Ukraine high as drivers highlight to also from but On end we inflation. Russia, European on likely that ammonia quarters, Europe, making far is not even of global customers and prices on insulate X, its cost future sales. many mining to sales

strong and industrial despite the the see can the remain across optimistic mining you all on demand our of profitability our lines, cash currently the supply are industrial in and dynamics XXXX. from end us have flow As issues seeing for for on U.S. the markets our key and demand solid, we prospects pricing chain the disruptions Overall, product side slide, trends widespread for about

our will results second call discuss Now outlook, Cheryl turn our to QX I'll Cheryl. over who and the quarter

Cheryl Maguire

and Thanks, morning. good Mark,

to X, a for see our XXXX. first results Turning of page summary of quarter you'll the

and relative businesses. pricing all line to reflects our top increased products performance strong across Our bottom for XXXX our the

first Our adjusted $XXX a EBITDA of over quarter million is record. company

quarter Additionally, of in generated $X.XX, adjusted the to profitability we EPS strong first coming we continue quarters. the expect in and

than greatly completed to senior better these a XXXX to production trailing below due of organic to the million to secured is opportunities Our annualized our EBITDA. of for decline strong to offering, issuance, get of interest XXXX, projects. previous our The expense improved to ratio we million we to intention of to a the a We growth ahead guidance. have increase respect have a of $XXX with we further relative Even expect first our timing was other purpose quarter liquidity. profitability ended currently On $XXX $XX inorganic total environment. With XX-month more March has of approximately rising of new notes we Notably, X.Xx And expense out pursue X, situation. during rate million, modest capacity offering liquidity tag-on now additional that expect bearing increase be to identified funds XXXX, enable raising us XXXX. the interest an our interest rate debt our that of leverage interest X.XX%. and growth the and de-bottlenecking we of including following facilities that contributed

$XX.X on XXXX result bridges for of adjusted to new have the a green X first primarily illustrates material quarter adjusted versus price of variable quarter EBITDA increased quarter results. of to As Page of continue our shown net first which approximately the selling $XX notes. by positive selling bar of XXXX. the raw light million. the impact is impact EBITDA strength first our $XXX.X price substantial million of The increased million costs, The costs,

course quarter XXXX Our of substantially second and and increased quarter. have costs XXXX natural rose the through gas the first of the in further over

selling Also ammonia wet As the by has fertilizer And sales price the U.S. exceeded prices offsetting $X headwind related representing expect increased impact to green to the of natural areas the of volume indicates, throughout far the weather year. far, of to of partially the bar rising dynamic product prices particularly thus benefit selling the that gas. in certain persist higher we purchases however, approximately on EBITDA delayed of of was farmers, due a million volume benefit

is in second of of what building the quarter, perspective, historically the in increased acid XXXX, production and half first LSB-specific inventory an nitric in which from sales have done. we we selling HDAN that our inventory Additionally, favor and of

lower headed sales While we HDAN margins for higher to of order XXXX of acid, lower therefore made translate in and mix capitalize into did on this quarter the first quarter into product. nitric that the first inventory it in shift

to continue shift mix We the expect product this in future.

years. to transaction costs made result at related operational optimize related product the delivered approximately were quarters past $X This have customer the the have illustrates higher facilities, trends, is made over and in we our several million, nonrecurring improvement expenses. X by favorable Page and improvements strong we our a the primarily we Additionally, the period and distribution bottom line pricing contracts mix. investments of new to

throughout factors the these further and of second in benefit to quarter full expect We year the from XXXX.

year. $XXX its we at ago. pricing second fertilizer benchmark level a than more to pricing last benefit NOLA this compared year continue our outlook, to UAN from double quarter around stronger a currently Regarding XXXX time as significantly is ton,

ammonia top exceed corn weather continued approximately second all the May. Additionally, bottom are closely. to at mentioned, it expect the is adjusted something the of in metric price as watching XXXX versus the Putting first the delay May we through and last benchmark settled the currently wet XXXX ton improvement to season, together, line by to Mark due to planting in Tampa we a of the metric XX%. quarter the start a and EBITDA $X,XXX of belt results ton quarter $XXX expect XX%

of that second forecasted is a our the reasonable range this we improvement of quarter. indication As for sequential today, for outlook believe

making For our the prospects for and another XXXX, end expected remain to year optimistic and growth cash profitability full flow. our year across markets, us in fundamentals are strong of record about market

will strong facilities of El this the the turnarounds during we in Pryor conducting be at expect third Dorado and We growth our spite quarter.

for should income call that number provision a We have net for taxes a carryforward operating handing over taxes do quarters. a that do us of our Mark, while statement. $XXX from million, out I income point like have loss we approximately of Before paying record to on to the to shield would

full expect turn rate XX% be our year. to over approximately tax the I will to now Mark. And We back for effective it

Mark Behrman

Thank Cheryl. you,

quarters to last prices was European shortage LNG late of in the prices have natural call, and U.S. fourth $XX and European other U.S. time, natural year of of earlier natural months feed X XXXX. February, in prices demand. ease of rising exports third selling to around number exacerbating historically role continued have As the prompted illustrates the the over manner invasion products. same rise causing gas a our and the At prices of surging gas high spread global U.S. producers gas costs through from $X production MMBtu. a prices already the gas of to mentioned between the gas increasing The what Ukraine, in X face following European Page of I a Russian major in the XXXX ammonia of the nitrogen to course in MMBtu. volatile the approximately the After increasing products in and curtail in played very in during a how widened first are stock

what European significant to shows intend if costs our European this summary strong line the priorities coming XX allow believe reference a earlier and pricing the online, employees in 'Protect in further that trends has pursue represents The business for gas is operate. shareholders. capitalize back even global we environment advantage Although that to been XXXX, primary discussed of XXXX. to growth and and to cashflow nitrogen value will free our of nitrogen our into and very to to opportunities is our on producers. some bottom throughout is significant the ammonia of supply pricing has We how a our we mantra market impact the months. is U.S.-based will decline guiding dynamic The health safety XXXX of generate principle through price This Page the pronounced. create matters'. and in persist production this us grow a come company We for

meaningful progress safety made So far in we XXXX, have advancing programs. our in

production we Additionally, all capacity increase of of promote organic we have excited continue facilities to operations. our initiatives, de-bottlenecking. meaningfully the to With and the we through to opportunities X safe invest capital about respect reliable our are at very growth to plants

lead believe of would our our facilities significant year, we expect evaluate potential will merit Over sales the at profitability. a this projects to that course ultimately and volumes plan to have we in and multiple increase to

in ammonia into We are enhancement storage optimize approximately of margin $XX and million as well targeting our as to upgrade projects additional capabilities, XXXX distribution also higher-value capital investment downstream products. to for

process million fully the return in when of evaluations, our these generally $X projects are of We expect project to to operational. $X million EBITDA but annual finalizing

In opportunities to the identified our scale profitably we M&A of a are provides our accretive our to profits addition volumes number expand through we've of assets, flexibility and evaluating balance us our portfolio increase to from recapitalized existing with recently and the sheet prospects. activity

compelling for in emerging a few we energy last As green of on our become we've talked leader a that believe markets. and blue clean represent to ammonia and us the calls, ammonia about opportunity our

Our well to sustainable help us create in and logistics, a friendly player and knowledge term can and deliver ammonia we financially. environmentally this storage in handling, significant way long arena extremely value, manufacturing, that positions socially believe a both world become in existing and to more a

are we us we projects hydrogen and of believe a next opportunity, producer that several years. pursuing within the make ammonia clean this can Given

in As that which we project with ammonia page many have In develop the announced have into an release entered in development capture project, a ammonia El Energy team of facility. we've April, our Dorado production announced COX XX. on week, read through sequester decarbonization late infrastructure a focused vertically agreement Dallas a carbon sequestration in were you we Lapis highlighted at was of first CCS. to our or of generated that issued based Lapis founded energy blue is to leading we last may the industry entirely XXXX course and firm permanently capture on integrated press experts. by and They

of will the Lapis full As part agreement, capital of project. fund our requirements the

the reduce XXX,XXX and by LSB operational Our under a evaluating for project from early COX. current Once federal COX in per de-bottlenecking by have Scope code, quantity internal approximately COX to metric to and the that are capture to beginning connection well metric by we the saline approval levels this with subject section projects Dorado X sequester, will XXQ Class at GHG emissions ton $XX has commenced per aquifers, facility. qualifying credits in X XXXX project we the that to permit. sequestered our The XX% in of COX will that while expect currently under under injection ton operational, believe be of we're XXXX, initially the permanently El captured right $XX revenue site. potential underground are tons increase We evaluation per of but increase Congress to metric year of tax we

compared and to capital over They sell facility, enabling requirements As from including the ammonia credit. full Lapis value carbon will CCS third produced of Arkansas capture XXQ fund is the produce tons we in the and of a conventional produce us, in the the us today. This blue project project, COX and state the annually metric sell captured will we will the higher US. expect the project first to owning receive to announced of product purchase CCS they that XXX,XXX ammonia from be a the ammonia

hydrogen the believe climate shareholders. that and initiative combating can an proud well LSB are significant value a as a we key become to is generate that ammonia. long-term to our as of leader role we in taking as decarbonization a for expect We We change

be at to -- any will in the for many XX. concludes to the Boston participating take mention and back happy now the some June on June many we to and to call I'd see quite person speak the Conference time for the in Conference you these -- session, Before during And time. Stifel to and Sector I events on Virtual Stifel prepared hope to our with Cross hand we'll of that the remarks. X Inside event questions. XX SmallCap We you Sidoti first Q&A Thanks. and the to in be operator like That

Operator

at from first Ferazani hear We'll Steve Instructions] Sidoti. [Operator

Steve Ferazani

announcement. the on Congratulations ammonia blue

You is be looking sense, sounds of said think prices next years, financial going the is you want and to the blue pretty prices expect? it? Lapis, were of should be absorbed but this, entirely impact which we you will it And to higher XXXX, potentially by to to you that, you to there quickly were like just indeed then on should how it just anything benefit we couple pretty I clear into and on be ammonia. announced at a but the Is already. that higher I clarify, work going you, over of get

Mark Behrman

Yes.

coupled is revenue for generate Lapis purchase, the to to expect And over today fund gray so when capital COX, out in facility. outlay we of for but will a and think equipment, ammonia of would ammonia operation And the XXXX. premium go profitability XXQ XXX% will we or in to the with they blue between From that capture going own profitability we see modest capture the sell that point can they'll we that credit, into we minimal a current start generating be standpoint, is should now costs. that what they So the we have will XXXX. price, the carbon a

Steve Ferazani

just that could make to Great. that for sure Cheryl, the if restate QX. guidance heard I I you correctly. EBITDA want just

Cheryl Maguire

above almost Xx XXXX. to quarter the Yes. of XX% that's of the quarter And first above XX% second XXXX.

Steve Ferazani

were sales because at cost natural that's if cost margin higher. I were your I sequentially, and estimate, through was gas of a with see out prices EBITDA I'm went even you're natural lighter, what. that? was Production particularly looking sales strong. despite hit issues weather, What bit trying gas and little and lower wherever Great. report figure my volume the prices and volume or -- higher, to your your the a the you Because was when think were to but lower, higher. your mix issue of operating number -- your When and I'm the about you numbers led

Cheryl Maguire

So we the because build of right? we some we season. -- are do that's did of acid, margin. some cost more in we nitric that terms delayed With upgrading it's inventory towards shifting product are of gas so in some higher -- of course sitting inventory, impacting and more sitting of the that's Cause shift

come see QX. you'll through of so And some in that

Steve Ferazani

question, looks up my these you weather leads inventory XQ? if can less wet -- -- issues And QX? mean we your much said you which is on that As of in some next you catch to how is, up can in that because volume as volume catch in terms of it higher, weather, like does see

Cheryl Maguire

so. we Yes, believe

Steve Ferazani

Okay. entirely me before bit, little a Fair then taxes, tax turn And over. everyone one know last was about on the hates for your that enough. given I explain you Can expense. but miss that And talking I NOLs?

Cheryl Maguire

Right.

the have the to do expense for still we cash XX% do so payer, would but the a record and on have we be provision we we of the NOLs, average expense effective around line tax tax don't to So, that expect year. course to expect

Steve Ferazani

entirely And noncash? that's

Cheryl Maguire

Entirely noncash.

Operator

Rob we'll McGuire at Research. Granite hear Next from

Rob McGuire

the on quarter. Congratulations

Mark Behrman

Rob. Thanks

Rob McGuire

to CF delivering issues experienced on accepting Have during using Union you experienced shipments any what Anything the quarter? time? Pacific similar

Mark Behrman

Right we think we're shape. in now, good

Rob McGuire

another? this going substitution spring from nitrogen Can far? year's product seeing there you trends are Is so that with season on you planting any discuss to any one

Mark Behrman

case, see behind less of we probably more for normal be would early put and down. advantageous are we in planting, be to would it put certainly average ground That to urea the to where a UAN on of where UAN that year. with expect delayed see would X But or year would probably be would the it's that. time Well, the little this see our ammonia we

Rob McGuire

any righty. downtime implement? then And as associated ammonia blue at All Dorado production would El product the with there be project you

Mark Behrman

and it the second so. remains I wouldn't don't in XXXX. great Well, question. to that's until see sometime be a half we seen I believe any that guess of of But

Rob McGuire

of well what there in should this should then thinking we to looking would be for expect, when Or the in And say, terms milestones Class approved? we any terms of X are watching that be of we project be progress?

Mark Behrman

I a the But get time – frames about milestone. the mean lots would be yes, approval great conversation approval I that. of think to

we large that file we enough the milestone the likelihood for X X this is up I project we we of backs we a formation on COX of assumptions application. all the think today, believe won’t saline permit high that have getting have expect file the get the Class that actual filing into project the ground is the handle the approved. – permit the unless the Once and than more to we put to that Class

be that application. I the the milestone X would real think Class So filing of permit

Operator

Walthausen We'll DeForest & Instructions] [Operator Co. hear from at Hinman

DeForest Hinman

realizations help side? as I the Just color the the of at the product were you on on I'm expectations quarter, looking in I tonnage last realizations just about of you I think first the in kind the the year quarter. can number down to had think second whole discussed quarter sense. of did you seeing. April any relates it you of makes mechanics then of math you volumes don't in last know tons some some XXX,XXX but talk the with there? the if that guidance, product time us some period? And the you Can

Mark Behrman

give I don't Yes. DeForest, to we we quarter out volumes don't quarter. from mean, -- generally

application. are we think I to as delayed volumes think And I of was, do. question in quarter up mentioned, bit do some a it to we due make the and down Cheryl the expect first this

have product the sold addition that inventory got second to be in that production the have in in quarter, quarter. we second sitting we So all the should in

on sold are we for some UAN As the forward far as quarter. on realized prices

with the UAN. El contract Dorado ammonia strategy by really of we pursuant back design, sold that quote our have, believe quarter and for that's is a will have bulk Tampa mean by We higher for linked. not any out to of we yield the that out that we as and prices second sold ammonia, are On done net the

we right the now. Tampa high like So prices

in a earlier, said so, as have discount. we And it's indexed to Tampa slight calls at

that, than prices that experiencing pretty should of very in think other to a second drive marketplace have us current our we're So significant quarter. and increase I in the

DeForest Hinman

helpful. That’s in know it we different is kind people, been multiple appropriate M&A color just raise in making the looking negative deals, money, what And so some we this timing can side, market you have delineate so is update on Okay. terms a sitting strength delaying the things, on have the hard current to is to because that debt the then I at any talking everybody’s you any did provide of the now of much balance arbitrage. sheet

that I shareholders better think for? what used like you? going be idea to a So what, would lose money Did of to have I is

Operator

Hinman? connected. to still do check is me Mr. our are Allow line. I the show operator. speakers their This

DeForest Hinman

Okay.

Mark Behrman

you are DeForest, there?

DeForest Hinman

Yes, if know or you Hello? got I'm don't cut I got I off back. off. cut

Mark Behrman

with and think opportunities have, amount mean, additional of we if significant have, meaningful and de-bottlenecking EBITDA those but we on capital. a annual significant got move I growth I an forward Yes, was basis, they will take a organic could have through that saying them, should we that generation

for whether or are used fungible, is M&A. projects cash So are they used for they internal

just no that's as look people low purchase sign usually and speaking, timing and multiples at anything. And at side, prices long at these of about before, at of sell people said I at get buy about prices. market don't high On there's a are don't it full there's multiples would the a a to multiple we until there's imminent you market agreement, we assets I live over generally cycles. that middle can that talk From say you are and ground timing a market the as nothing talk reason standpoint, M&A anything

a there reasonable. it's buy think an not is buying if right transactions, asset. the an more time And asset it's strategic become people So nature maybe then to I if then just

DeForest Hinman

great. seems touch tax from if that's for did then a of be carbon and third very be all have would way help phenomenal. the any change in credit that return mean, in able the from Okay, the they on carbon future, especially to Can you color on benefit party up is would it paying this just the the that on understand the I currently capital, change such structured it you sequestration potential in interesting, just And helpful. for a is just further us That's terms if contract putting to how that you structured, you what that that, the change. did future, in we the project,

Mark Behrman

Yes.

built the dollar So current it that If a ton tax we of credit to to per have a will $XX, outsized we going to will per back they’re us, increases $XX us. have into the under regime. pay ton contract, portion that come

Operator

research. take question a follow-up from granite coming Rob we'll And McGuire at

Rob McGuire

about? pricing Just you to of give UAN one other thinking be idea us guidance quarter, your question here. Can an relative EBITDA for the what should we

Mark Behrman

XX% we’ve forward. got Well, sold than less

our for should to capture of means we the than that current pricing. volume that quarter, XX% be sales So greater able

Operator

any question conclude to pleased additional floor answer Ladies our and remarks. management does this time, session. gentlemen, I back am over to turn and today's the for this closing At or team

Mark Behrman

interest, for call for as couple a we first be your this in thank conferences Well, attending of our you we’ll quarter. earlier, and quarter earnings said participating

So we hope to much. Thanks see you so there.

Operator

and does today's gentlemen, conclude this conference LSB thank participation. Ladies first industries' and we for all quarter call, you your do

now your may disconnect that hope lines, rest of day. enjoy and the You we your you

LSB Industries (LXU) 4 May 222022 Q1 Earnings call transcript