LSB Industries, Inc. Reports Operating Results for the 2024 First Quarter
LSB Industries, Inc. reported first-quarter results for 2024, with net sales of $138 million compared to $181 million in 2023, net income of $6 million compared to $16 million, and diluted EPS of $0.08 compared to $0.21. Adjusted EBITDA was $33 million compared to $51 million. The company repurchased shares and Senior Secured Notes, holding $265 million in cash and short-term investments as of March 31, 2024. President and CEO Mark Behrman highlighted a solid increase in sales volumes due to strong demand for fertilizers, generating solid cash flow. LSB remains committed to clean ammonia initiatives and aims to become a leader in low-carbon ammonia production. The market outlook for nitrogen fertilizers is favorable, with strong demand and pricing stability. LSB is progressing on its low-carbon ammonia projects and expects to see positive results in the near future.
- Solid increase in sales volumes driven by strong demand for fertilizers
- Healthy cash flow generation allowing for return of value to shareholders through stock repurchases
- Strategic investments in facilities reliability and safety expected to lead to greater production volumes
- Progress in clean ammonia initiatives with favorable indications from the EPA and strong interest in off-take for low-carbon nitrogen products
- Positive market outlook for nitrogen fertilizers with strong demand and pricing stability
- Progress on low-carbon ammonia projects with significant milestones achieved
- Decrease in net sales and operating income due to lower pricing for all products
- Lower pricing partially offset by higher sales volumes across all products
- Operating profit affected by lower natural gas prices
- Challenges in pricing and operating income impacting financial performance
- Continued headwinds from lower pricing affecting profitability
Examining LSB Industries' Q1 2024 financials exposes several points of interest for investors. A decline in net sales from $181 million to $138 million year-over-year suggests a significant market shift, potentially influenced by external factors such as the fluctuation in nitrogen prices mentioned. Notably, the drop in net income from $16 million to $6 million underscores a pressure point on profitability despite management's claim of sales volume increase and lower natural gas costs.
Moreover, the repurchase of 0.7 million shares of common stock reflects a strategy to bolster shareholder value in the face of declining profits. The company's capital allocation strategy is gaining gravity as they balance returning value to shareholders with internal investments aimed at increasing production efficiency. This move can be viewed as an assurance of financial solidity or as a warning flag depending on future earnings trajectories.
From a market standpoint, the report implies a complex landscape. The stability in ammonia demand and pricing, coupled with constraints on ammonia imports into Europe, signals a potential advantage for domestic producers like LSB. The favorable outlook for nitrogen fertilizers and projected robust demand for industrial and mining applications can be a dual-edged sword, presenting both growth opportunities and exposure to volatile commodity cycles.
Additionally, LSB's involvement in low-carbon ammonia projects positions the company at the forefront of the energy transition trend, aligning with global sustainability goals. These initiatives, while still in developmental stages, could offer long-term growth prospects and income streams, pivotal in attracting ESG-minded investors and possibly justifying the current financial performance in the eyes of long-term stakeholders.
LSB's focus on clean ammonia initiatives, particularly their partnership with Lapis Energy for carbon capture and sequestration, aligns with the emerging trend in the energy sector for sustainable production practices. The anticipation for EPA's timeline approval and initiation of the CCS project at the El Dorado facility suggests a forward-leaning posture in environmental accountability and innovation. Should these projects progress as planned and meet regulatory approvals, LSB could secure a competitive edge in an industry increasingly influenced by carbon footprint considerations.
Nonetheless, it is essential for investors to closely monitor the execution risk associated with these capital-intensive projects and regulatory environments, which can considerably affect both timelines and profitability.
First Quarter 2024 Results and Recent Highlights
-
Net sales of
$138 million $181 million -
Net income of
$6 million $16 million -
Diluted EPS of
$0.08 $0.21 -
Adjusted EBITDA(1) of
$33 million $51 million -
Cash Flow from Operations of
$24 million $18 million - Repurchased approximately 0.7 million shares of common stock during the first quarter of 2024, and approximately 1.5 million shares year-to-date
-
Repurchased
$33 million $75 million -
Total cash and short-term investments of approximately
$265 million
| ____________________________ | ||
(1) |
This is a Non-GAAP measure. Refer to the Non-GAAP Reconciliation section. |
|
“Our first quarter results were consistent with our expectations for a significant improvement relative to our fourth quarter of 2023," stated Mark Behrman, LSB Industries’ President and CEO. "Selling prices remained lower relative to the prior year quarter as the spike in nitrogen prices experienced in 2022 kept prices elevated during the first quarter of 2023. This was partially offset by a solid increase in sales volumes driven by strong demand for fertilizers, enhanced by our strategic commercial efforts. Additionally, we benefited from a healthy increase in downstream production volumes.”
"We generated solid cash flow in the first quarter, contributing to our ability to return value to shareholders through stock repurchases, while further de-risking our balance sheet by repurchasing bonds at a discount to market. We continue to make investments in the reliability and safety of our facilities that we expect to lead to greater production volumes. During the second half of this year we will be deploying capital to conduct Turnarounds at our
"We are increasingly excited about our clean ammonia initiatives as we continue to make progress in bringing our two projects to fruition. Indications from the EPA remain favorable with respect to the anticipated timeline for our partner, Lapis Energy, to begin capturing and sequestering CO2 at our
Market Outlook
- The outlook for nitrogen fertilizers is favorable:
- Current prices for ammonia and other nitrogen products should prove attractive to retailers and farmers
- Attractive
- Ammonia demand has been strong and pricing has been stable driven by:
- Robust agricultural demand in the fourth quarter of 2023 and first quarter of 2024
- Constrained ammonia imports into
- Delayed startup of new production capacity
- UAN demand and pricing are expected to remain strong through much of Q2'24 reflecting:
- Tight inventories throughout much of the
- Lower import levels due to unplanned production issues
- Industrial and mining business is robust reflecting:
- Steady demand for industrial products supported by resilient
- Demand for AN for mining applications is steady due to attractive market fundamentals for quarrying/aggregate production and
Low-Carbon Ammonia Projects Summary
- Houston Ship Channel Blue Ammonia project with INPEX, Air Liquide and Vopak Exolum Houston
- Feasibility study completed during Q1'23 on a 1.1 million metric ton per year blue ammonia plant utilizing blue hydrogen provided by Air Liquide/INPEX (JV)
- Selected KBR to provide the technology licensing and proprietary engineering design for the ammonia loop portion of the plant
- Selected Samsung Engineering to perform a Pre-FEED (Front End Engineering Design) to refine the cost estimate for the ammonia loop. Pre-FEED is underway with expected completion in Q3'24
- FEED study expected to begin in Q4'24 with expected completion during Q3'25 and final investment decision in Q4'25
- El Dorado Carbon Capture and Sequestration (CCS) Project with Lapis Energy
- Awaiting approval of Class VI permit to construct application by the EPA
- Lapis Energy, our partner, will begin construction of the CCS equipment upon approval of Class VI permit to construct
- Lapis has ordered long lead time items
- Focused on beginning operations in Q1'26
- Expect Lapis, the owner of the CCS equipment, to receive the 45Q federal tax credits for sequestered CO2 and pay LSB a fee for each ton of CO2 captured and permanently sequestered
- MOU with Amogy to Develop Ammonia as a Marine Fuel
- Collaborating on the evaluation and development of pilot program that would combine LSB's low-carbon ammonia and Amogy's ammonia-to-power engine solution
- Amogy to test tugboat with engine retrofitted for ammonia as a fuel during Q3'24
First Quarter Results Overview
|
|
Three Months Ended |
|
|||||||||
|
|
March 31, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
% Change |
|
|||
Product Sales ($ in Thousands) |
|
|
|
|
|
|
|
|
|
|||
AN & Nitric Acid |
|
$ |
48,435 |
|
|
$ |
58,272 |
|
|
|
(17 |
)% |
Urea ammonium nitrate (UAN) |
|
|
41,192 |
|
|
|
46,590 |
|
|
|
(12 |
)% |
Ammonia |
|
|
39,530 |
|
|
|
63,415 |
|
|
|
(38 |
)% |
Other |
|
|
9,047 |
|
|
|
12,687 |
|
|
|
(29 |
)% |
Total net sales |
|
$ |
138,204 |
|
|
$ |
180,964 |
|
|
|
|
|
Comparison of 2024 to 2023 quarterly periods:
- Net sales and operating income declined during the quarter driven by lower pricing for all of our products. The headwind of lower pricing was offset by higher sales volumes of all of our products. Operating profit also benefited from lower natural gas prices.
The following tables provide key sales metrics for our products:
|
|
Three Months Ended |
|
|||||||||
|
|
March 31, |
|
|||||||||
Key Product Volumes (short tons sold) |
|
2024 |
|
|
2023 |
|
|
% Change |
|
|||
AN & Nitric Acid |
|
|
128,801 |
|
|
|
122,745 |
|
|
|
5 |
% |
Urea ammonium nitrate (UAN) |
|
|
134,933 |
|
|
|
113,026 |
|
|
|
19 |
% |
Ammonia |
|
|
94,831 |
|
|
|
88,997 |
|
|
|
7 |
% |
|
|
|
358,565 |
|
|
|
324,768 |
|
|
|
10 |
% |
Average Selling Prices (price per short ton) (A) |
|
|
|
|
|
|
|
|
|
|||
AN & Nitric Acid |
|
$ |
319 |
|
|
$ |
417 |
|
|
|
(23 |
)% |
Urea ammonium nitrate (UAN) |
|
$ |
265 |
|
|
$ |
379 |
|
|
|
(30 |
)% |
Ammonia |
|
$ |
403 |
|
|
$ |
703 |
|
|
|
(43 |
)% |
(A) Average selling prices represent “net back” prices which are calculated as sales less freight expenses divided by product sales volume in tons.
|
|
Three Months Ended
|
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
% Change |
|
|||
Average Benchmark Prices (price per ton) |
|
|
|
|
|
|
|
|
|
|||
Tampa Ammonia (MT) Benchmark |
|
$ |
466 |
|
|
$ |
728 |
|
|
|
(36 |
)% |
NOLA UAN |
|
$ |
251 |
|
|
$ |
318 |
|
|
|
(21 |
)% |
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Input Costs |
|
|
|
|
|
|
|
|
|
|||
Average natural gas cost/MMBtu in cost of materials and other |
|
$ |
2.82 |
|
|
$ |
6.39 |
|
|
|
(56 |
)% |
Average natural gas cost/MMBtu used in production |
|
$ |
2.33 |
|
|
$ |
5.66 |
|
|
|
(59 |
)% |
Conference Call
LSB’s management will host a conference call covering the first quarter results on Tuesday, April 30, 2024 at 10:00 am ET / 9:00 am CT to discuss these results and recent corporate developments. Participating in the call will be President & Chief Executive Officer, Mark Behrman, Executive Vice President & Chief Financial Officer, Cheryl Maguire and Executive Vice President & Chief Commercial Officer, Damien Renwick. Interested parties may participate in the call by dialing (877) 407-6176 / (201) 689-8451. Please call in 10 minutes before the conference is scheduled to begin and ask for the LSB conference call. To coincide with the conference call, LSB will post a slide presentation at www.lsbindustries.com on the webcast section of the Investor tab of our website.
To listen to a webcast of the call, please go to the Company’s website at www.lsbindustries.com at least 15 minutes prior to the conference call to download and install any necessary audio software. If you are unable to listen live, the conference call webcast will be archived on the Company’s website.
LSB Industries, Inc.
LSB Industries, Inc., headquartered in
Forward-Looking Statements
Statements in this release that are not historical are forward-looking statements within the meaning of the
Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for our management to predict all risks and uncertainties, nor can management assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Unless otherwise required by applicable laws, we undertake no obligation to update or revise any forward-looking statements, whether because of new information or future developments.
See Accompanying Tables
LSB Industries, Inc. |
||||||||
Consolidated Statements of Operations |
||||||||
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
(In Thousands, Except Per Share Amounts) |
|
|||||
Net sales |
|
$ |
138,204 |
|
|
$ |
180,964 |
|
Cost of sales |
|
|
115,926 |
|
|
|
139,359 |
|
Gross profit |
|
|
22,278 |
|
|
|
41,605 |
|
|
|
|
|
|
|
|
||
Selling, general and administrative expense |
|
|
10,294 |
|
|
|
9,867 |
|
Other expense, net |
|
|
724 |
|
|
|
1,203 |
|
Operating income |
|
|
11,260 |
|
|
|
30,535 |
|
|
|
|
|
|
|
|
||
Interest expense, net |
|
|
9,729 |
|
|
|
12,212 |
|
Gain on extinguishment of debt |
|
|
(1,134 |
) |
|
|
— |
|
Non-operating other income, net |
|
|
(3,561 |
) |
|
|
(3,476 |
) |
Income before provision for income taxes |
|
|
6,226 |
|
|
|
21,799 |
|
Provision for income taxes |
|
|
603 |
|
|
|
5,898 |
|
Net income |
|
|
5,623 |
|
|
|
15,901 |
|
|
|
|
|
|
|
|
||
Income per common share: |
|
|
|
|
|
|
||
Basic: |
|
|
|
|
|
|
||
Net income |
|
$ |
0.08 |
|
|
$ |
0.21 |
|
|
|
|
|
|
|
|
||
Diluted: |
|
|
|
|
|
|
||
Net income |
|
$ |
0.08 |
|
|
$ |
0.21 |
|
LSB Industries, Inc. |
||||||||
Consolidated Balance Sheets |
||||||||
|
|
|
|
|
|
|
||
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
|
|
(In Thousands) |
|
|||||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
125,991 |
|
|
$ |
98,500 |
|
Restricted cash |
|
|
2,532 |
|
|
|
2,532 |
|
Short-term investments |
|
|
139,238 |
|
|
|
207,434 |
|
Accounts receivable |
|
|
54,108 |
|
|
|
40,749 |
|
Allowance for doubtful accounts |
|
|
(366 |
) |
|
|
(364 |
) |
Accounts receivable, net |
|
|
53,742 |
|
|
|
40,385 |
|
Inventories: |
|
|
|
|
|
|
||
Finished goods |
|
|
19,643 |
|
|
|
26,329 |
|
Raw materials |
|
|
2,320 |
|
|
|
1,799 |
|
Total inventories |
|
|
21,963 |
|
|
|
28,128 |
|
Supplies, prepaid items and other: |
|
|
|
|
|
|
||
Prepaid insurance |
|
|
10,768 |
|
|
|
14,846 |
|
Precious metals |
|
|
11,560 |
|
|
|
12,094 |
|
Supplies |
|
|
30,682 |
|
|
|
30,486 |
|
Other |
|
|
2,767 |
|
|
|
2,337 |
|
Total supplies, prepaid items and other |
|
|
55,777 |
|
|
|
59,763 |
|
Total current assets |
|
|
399,243 |
|
|
|
436,742 |
|
|
|
|
|
|
|
|
||
Property, plant and equipment, net |
|
|
832,192 |
|
|
|
835,298 |
|
|
|
|
|
|
|
|
||
Other assets: |
|
|
|
|
|
|
||
Operating lease assets |
|
|
27,235 |
|
|
|
24,852 |
|
Intangible and other assets, net |
|
|
1,449 |
|
|
|
1,292 |
|
|
|
|
28,684 |
|
|
|
26,144 |
|
|
|
|
|
|
|
|
||
|
|
$ |
1,260,119 |
|
|
$ |
1,298,184 |
|
LSB Industries, Inc. |
||||||||
Consolidated Balance Sheets (continued) |
||||||||
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
|
|
(In Thousands) |
|
|||||
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
56,064 |
|
|
$ |
68,323 |
|
Short-term financing |
|
|
9,018 |
|
|
|
13,398 |
|
Accrued and other liabilities |
|
|
38,820 |
|
|
|
30,961 |
|
Current portion of long-term debt |
|
|
5,742 |
|
|
|
5,847 |
|
Total current liabilities |
|
|
109,644 |
|
|
|
118,529 |
|
|
|
|
|
|
|
|
||
Long-term debt, net |
|
|
543,835 |
|
|
|
575,874 |
|
|
|
|
|
|
|
|
||
Noncurrent operating lease liabilities |
|
|
18,260 |
|
|
|
16,074 |
|
|
|
|
|
|
|
|
||
Other noncurrent accrued and other liabilities |
|
|
523 |
|
|
|
523 |
|
|
|
|
|
|
|
|
||
Deferred income taxes |
|
|
69,672 |
|
|
|
68,853 |
|
|
|
|
|
|
|
|
||
Commitments and contingencies |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Stockholders' equity: |
|
|
|
|
|
|
||
Common stock, |
|
|
9,117 |
|
|
|
9,117 |
|
Capital in excess of par value |
|
|
501,097 |
|
|
|
501,026 |
|
Retained earnings |
|
|
232,638 |
|
|
|
227,015 |
|
|
|
|
742,852 |
|
|
|
737,158 |
|
Less treasury stock, at cost: |
|
|
|
|
|
|
||
Common stock, 18.9 million shares (18.1 million shares at December 31, 2023) |
|
|
224,667 |
|
|
|
218,827 |
|
Total stockholders' equity |
|
|
518,185 |
|
|
|
518,331 |
|
|
|
$ |
1,260,119 |
|
|
$ |
1,298,184 |
|
Non-GAAP Reconciliations
This news release includes certain “non-GAAP financial measures” under the rules of the Securities and Exchange Commission, including Regulation G. These non-GAAP measures are calculated using GAAP amounts in our consolidated financial statements.
EBITDA and Adjusted EBITDA Reconciliation
EBITDA is defined as net income (loss) plus interest expense and interest income, net, less gain on extinguishment of debt, plus depreciation and amortization (D&A) (which includes D&A of property, plant and equipment and amortization of intangible and other assets), plus provision (benefit) for income taxes. Adjusted EBITDA is reported to show the impact of non-cash stock-based compensation, one time/non-cash or non-operating items-such as, one-time income or fees, loss (gain) on sale of a business and/or other property and equipment, certain fair market value (FMV) adjustments, and consulting costs associated with reliability and purchasing initiatives (Initiatives). We historically have performed turnaround activities on an annual basis; however, we have moved towards extending turnarounds to a two or three-year cycle. Rather than being capitalized and amortized over the period of benefit, our accounting policy is to recognize the costs as incurred. Given these turnarounds are essentially investments that provide benefits over multiple years, they are not reflective of our operating performance in a given year.
We believe that certain investors consider EBITDA a useful means of measuring our ability to meet our debt service obligations and evaluating our financial performance. In addition, we believe that certain investors consider adjusted EBITDA as more meaningful to further assess our performance. We believe that the inclusion of supplementary adjustments to EBITDA is appropriate to provide additional information to investors about certain items.
EBITDA and adjusted EBITDA have limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of EBITDA and adjusted EBITDA may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to EBITDA and adjusted EBITDA for the periods indicated.
Non-GAAP Reconciliations (continued) |
||||||||
LSB Consolidated ($ In Thousands) |
|
Three Months Ended
|
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net income |
|
$ |
5,623 |
|
|
$ |
15,901 |
|
Plus: |
|
|
|
|
|
|
||
Interest expense and interest income, net |
|
|
6,135 |
|
|
|
8,731 |
|
Net (gain) on extinguishment of debt |
|
|
(1,134 |
) |
|
|
— |
|
Depreciation and amortization |
|
|
17,148 |
|
|
|
17,604 |
|
Provision for income taxes |
|
|
603 |
|
|
|
5,898 |
|
EBITDA |
|
$ |
28,375 |
|
|
$ |
48,134 |
|
|
|
|
|
|
|
|
||
Stock-based compensation |
|
|
1,393 |
|
|
|
719 |
|
Legal fees (Leidos) |
|
|
377 |
|
|
|
273 |
|
Loss on disposal and impairment of assets |
|
|
1,454 |
|
|
|
1,890 |
|
Turnaround costs |
|
|
915 |
|
|
|
(6 |
) |
Growth Initiatives |
|
|
81 |
|
|
|
|
|
Adjusted EBITDA |
|
$ |
32,595 |
|
|
$ |
51,010 |
|
Ammonia, AN, Nitric Acid, UAN Sales Price Reconciliation
The following table provides a reconciliation of total identified net sales as reported under GAAP in our consolidated financial statements reconciled to netback sales which is calculated as net sales less freight and other non-netback costs. We believe this provides a relevant industry comparison among our peer group.
|
|
Three Months Ended
|
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
(In Thousands) |
|
|||||
Ammonia, AN, Nitric Acid, UAN net sales |
|
$ |
129,157 |
|
|
$ |
168,277 |
|
|
|
|
|
|
|
|
||
Less freight and other |
|
|
14,192 |
|
|
|
11,754 |
|
|
|
|
|
|
|
|
||
Ammonia, AN, Nitric Acid, UAN netback sales |
|
$ |
114,965 |
|
|
$ |
156,523 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20240429344622/en/
Company Contact:
Cheryl Maguire, Executive Vice President & CFO
(405) 510-3524
Fred Buonocore, CFA, Vice President of Investor Relations
(405) 510-3550
fbuonocore@lsbindustries.com
Source: LSB Industries, Inc.
