CVR Partners Q4 2024 Earnings Report

CVR Partners EPS Results

• Actual EPS: $1.73
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

CVR Partners Revenue Results

• Actual Revenue: $139.56 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

CVR Partners Announcement Details

• Quarter: Q4 2024
• Date: 2/18/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, February 19, 2025
• Conference Call Time: 11:00AM ET

CVR Partners (NYSE:UAN), together with its subsidiaries, engages in the production and sale of nitrogen fertilizer products in the United States. The company offers ammonia products for agricultural and industrial customers; and urea ammonium nitrate products to agricultural customers, as well as retailers and distributors. CVR GP, LLC serves as the general partner of the company. CVR Partners, LP was incorporated in 2007 and is based in Sugar Land, Texas. CVR Partners, LP is a subsidiary of CVR Energy, Inc.

CVR Partners Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Greetings, and welcome to the CVR Partners Fourth Quarter twenty twenty four Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Richard Roberts, Vice President of Financial Planning and Analysis and Investor Relations.

[Operator]

Thank you, sir. You may begin.

[Richard Roberts, Vice President of Financial Planning and Analysis and Investor Relations at CVR Partners]

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

[Richard Roberts, Vice President of Financial Planning and Analysis and Investor Relations at CVR Partners]

For this purpose, any statements made during this call that are not statements of historical facts may be deemed to be forward looking statements. You are cautioned that these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and in our latest earnings release. As a result, actual operations or results may differ materially from the results discussed in the forward looking statements. We undertake no obligation to publicly update any forward looking statements whether as a result of new information, future events or otherwise, except to the extent required by law. This call also includes various non GAAP financial measures.

[Richard Roberts, Vice President of Financial Planning and Analysis and Investor Relations at CVR Partners]

The The disclosures related to such non GAAP measures, including reconciliation to the most directly comparable GAAP financial measures, are included in our twenty twenty four fourth quarter earnings release that we filed with the SEC and Form 10 K for the period and will be discussed during the call. Let me remind you that we are a variable distribution NLP. We will review our previously established reserves, current cash usage, evaluate future anticipated cash needs and may reserve amounts for other future cash needs as determined by our General Partners Board. As a result, our distributions, if any, will vary from quarter to quarter due to several factors, including but not limited to operating performance, fluctuations in the prices received for finished products, capital expenditures and cash reserves deemed necessary or appropriate by the Board of Directors of our General Partner. With that said, I'll turn the call over to Mark Pytosh, our Chief Executive Officer.

[Richard Roberts, Vice President of Financial Planning and Analysis and Investor Relations at CVR Partners]

Mark?

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

Thank you, Richard. Good morning, everyone, and thank you for joining us for today's call. To summarize financial highlights for the fourth quarter of twenty twenty four included net sales of $140,000,000 net income of $18,000,000 EBITDA of $50,000,000 and the Board of Directors declared a fourth quarter distribution of $1.75 per common unit, which will be paid on 03/10/2025, to unitholders of record at the close of the market on March 3. For the full year 2024, we reported EBITDA of $179,000,000 and distributions of $6.76 per common unit. We had another year of solid operations for our facilities with an ammonia utilization rate of 96% for the year.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

At East Dubuque, we set new records in 2024 for ammonia utilization rate of 102 as well as ammonia production volumes at approximately 399,000 tons. We're also proud to report continued improvement in our safety metrics in 2024 with a 40% reduction in total recordable incident rate compared to 2023. For the fourth quarter of twenty twenty four, our annual our ammonia plant utilization was 96%. This resulted in total ammonia production of 210,000 gross tons, of which 80,000 net tons were available for sale. Total UAN production was 310,000 tons, substantially all of which was sold at an average price of $229 per ton.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

We sold approximately 97,000 tons of ammonia at an average price of $475 per tonne. Relative to the fourth quarter of twenty twenty three, ammonia sales volumes were in line and UAN sales volumes were down approximately 3%, partially due to the challenging weather conditions during the fall application. Fourth quarter prices for ammonia increased approximately 3% and UAN prices declined approximately 5% relative to the prior year period. Despite some unfavorable weather conditions in the fourth quarter, we saw good demand for nitrogen fertilizer that drove prices higher compared to the third quarter and we had strong shipments from our facilities. Supply and demand for nitrogen fertilizer products have been tight to start the new year and prices have continued to increase.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

With the recent rally in grain prices, market conditions look favorable for the spring planting season, which I will discuss further in my closing remarks. I will now turn the call over to Dane to discuss our financial results.

[Dane Neumann, EVP, CFO, Treasurer & Assistant Secretary at CVR Energy]

Thank you, Mark. Turning to our results. For the full year 2024, we reported net sales of $525,000,000 and operating income of $90,000,000 Net income for the year was $61,000,000 or $5.76 per common unit and EBITDA was $179,000,000 For the fourth quarter of twenty twenty four, we reported net sales of $140,000,000 and operating income of $26,000,000 Net income for the fourth quarter was $18,000,000 or $1.73 per common unit and EBITDA was $50,000,000 Relative to the fourth quarter of twenty twenty three, EBITDA increased primarily due to higher ammonia sales prices and lower petco feedstock costs. Direct operating expenses for the fourth quarter of twenty twenty four were $56,000,000 Excluding inventory and turnaround impacts, direct operating expenses declined by approximately $3,000,000 from the fourth quarter of twenty twenty three, primarily related to lower repair and maintenance expenses. Capital spending for the fourth quarter was $18,000,000 which was primarily maintenance capital and full year 2024 capital spending was $37,000,000 dollars of which $30,000,000 was maintenance capital.

[Dane Neumann, EVP, CFO, Treasurer & Assistant Secretary at CVR Energy]

We estimate 2025 maintenance capital spending to be about $35,000,000 to $45,000,000 and growth capital spending to be $20,000,000 to $25,000,000 We expect a significant portion of the 2025 growth capital spending will be funded from cash the Board elected to start reserving over the past two years. We ended the quarter with total liquidity of $130,000,000 which consisted of $91,000,000 in cash and availability under the ABL facility of 39,000,000 Within our cash balance of $91,000,000 we had approximately $9,000,000 related to customer prepayments for the future delivery of product. Assessing our cash available for distribution, we generated EBITDA of $50,000,000 and had met cash needs of approximately 32,000,000 for interest costs, maintenance CapEx and other reserves. As a result, there was $18,000,000 of cash available for distribution and the Board of Directors of our general partner declared a distribution of $1.75 per common unit. Looking ahead to the first quarter of twenty twenty five, we estimate our ammonia utilization rate to be between 95100%.

[Dane Neumann, EVP, CFO, Treasurer & Assistant Secretary at CVR Energy]

We expect direct operating expenses to be $55,000,000 to $65,000,000 excluding inventory impacts and total capital spending to be between $12,000,000 and $16,000,000 With that, I'll turn the call back over to Mark.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

Thanks, Dane. In summary, we had another strong quarter of operations and despite difficult application conditions in the fall, we experienced strong demand for nitrogen fertilizer throughout the quarter. With the 2024 harvest complete, the USDA is now estimating record high corn yields of 179 bushels per acre, but these yield estimates are down from previous estimates of 183 bushels and inventory carryout levels for 2025 are now estimated to be approximately 10%. Soybean yields are estimated to be 51 bushels per acre down from 53 bushels previously with an estimated inventory carryout of approximately 9%. These inventories are now below the ten year averages, which has driven both corn and soybean prices higher since our last earnings call with March corn prices at $5 per bushel and soybeans at $10.35 With tighter supply demand balances in fertilizer and higher grain prices, we expect to see strong demand for nitrogen fertilizer for spring application.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

At current grain prices, planting favors corn over beans and most estimates are calling for 91,000,000 to 94,000,000 planted acres of corn for spring twenty twenty five. Geopolitical risk continue to represent a wildcard for the nitrogen fertilizer industry, given the significant fertilizer production capacity residing in countries across The Middle East, North Africa and Russia. We continue to monitor developments in The Middle East that could impact energy and fertilizer markets and we expect 2025 will likely be a continued period of higher than historical volatility in the business. With the new administration in Washington, the dynamics are beginning to change with the stated desire to end the conflicts in The Ukraine and The Middle East. We're also closely watching the potential imposition of tariffs on foreign fertilizer and energy imports, particularly Canadian products.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

The U. S. Is a significant importer of Canadian fertilizer and a disruption in import flows could cause prices to increase in The U. S. Depending on the size and timing of tariffs.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

Natural gas prices in Europe have remained around $15 per MMBtu since our last earnings call, while U. S. Prices continue to range between $3 and $4 per MMBtu. Europe has drawn down natural gas inventories more than expected and there are concerns about the ability to replenish the inventory before winter of twenty twenty five given supply constraints into Europe, although this could potentially be alleviated by additional gas supplies from Russia pending any resolution of the war in Ukraine. The cost to produce ammonia in Europe is remitting durably at the high end of the global cost curve and several plant closures have been announced, which we expect will continue to keep the global supplydemand balance tight through the first half of twenty twenty five.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

We continue to believe Europe faces structural natural gas market issues that will likely remain in effect over the next two years. At our Coffeyville facility, we have completed detailed engineering studies on the potential to utilize natural gas as an alternative feedstock to third party pet coke and we have seen no significant technical issues with implementing the project. We're currently working on construction design plans and plan to seek board approval to begin construction on the project. If successfully implemented, this project could give us the ability to choose the optimal feedstock mix and be the only nitrogen fertilizer plant in The U. S.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

With that flexibility. As a reminder, if this project were implemented, we would likely continue to utilize the pet coke supplied by the adjacent Coffee Mill refinery, while the remainder of the feedstock can be flexed between natural gas and pet coke depending on prevailing prices. As we mentioned on the last earnings call, we have seen a softening of pet coke prices in The U. S. And expect to see our pet coke costs decline further in the first quarter of twenty twenty five.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

We also continue to execute certain debottlenecking projects at both plants that are expected to improve the reliability production rates. The goal of these projects is to support our target of operating our plants at utilization rates above 95% of nameplate capacity, excluding the impact of turnarounds. We completed the installation of two new boilers in Coffeyville in the fourth quarter, which should improve our steam availability and reliability. For 2025, we're focused on water and electricity reliability and quality at both plants among other projects. We're also planning to install a nitrous oxide abatement unit at the Coffeeville plant during our fall twenty twenty five turnaround.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

After installation, we would have nitrous oxide abatement units, all four of our nitric acid plants, which aligns with our strategy of reducing the carbon footprint of our operations. The Board elected to continue reserving capital in the fourth quarter that we expect to spend over the next two to three years as we focus on improving reliability and redundancy at the two plants in efforts to provide better production rates and lower downtime in the future. The funds needed for the twenty twenty five projects are coming from the reserves taken over the last two years. The fourth quarter continued to demonstrate the benefits of focusing on reliability and performance. In the quarter, we executed on all the critical elements of our business plan, which include safely and reliably operating our plants with a keen focus on the health and safety of our employees, contractors and communities, prudently managing cost, being judicious with capital, maximizing our marketing and logistics capabilities and targeting opportunities to reduce our carbon footprint.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

In closing, I'd like to thank our employees for their excellent execution, safely achieving 96% ammonia utilization and solid delivery on our marketing and logistics plans, resulting in a distribution of 1.75 per common unit for the quarter. With that, we're ready to take any questions.

[Operator]

Thank you. We will now be conducting a question and answer session. Thank you. Our first question comes from the line of Brian D'Arubio with Baird. Please proceed with your question.

[Brian Dirubbio, Managing Director at Baird]

Good morning, gentlemen. Just a couple for me this morning. First off, have you seen any changes in customer ordering patterns with the Fed lowering short term interest rates over the last couple of quarters? I think you're saying, Mark, last year that there was sort of more just some time ordering given the higher working capital costs.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

Good morning, Brian. We haven't seen any real change in that pattern. I don't think the 100 basis points was enough to bring change customers' view on how much inventory to hold. So we're still seeing more ratable buying. And so really since the summer last year, it's been very ratable for the last six, seven months.

[Brian Dirubbio, Managing Director at Baird]

Got it. Thank you. And just switching gears, the timing of that Coffeyville project, where you stand now, is that still a potential 2026 event?

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

I'm not sure which project

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

are you referring to.

[Brian Dirubbio, Managing Director at Baird]

I apologize. The what I'm calling the dual fuel project, the ability to switch from nat gas to pet coke?

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

Yes. The plan would be to if it's approved by the board would be to have it in place to be able to execute on a decision on feedstock for 2026.

[Brian Dirubbio, Managing Director at Baird]

So you start construction in

[Brian Dirubbio, Managing Director at Baird]

'26, so you get approval and then just trying to see where this starts?

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

We would start construction if it's approved, we did construction this year, so that we would have the option we have to sort of declare or make a decision before year end on whether we would use pet coke or natural gas. So we would try to get that in place before year end until we have that choice to make for next year.

[Brian Dirubbio, Managing Director at Baird]

So how would this work then? Could you not then switch back and forth daily or weekly? You'd have to commit to one fuel or another for a year period?

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

I wouldn't say we would commit for a year period, but it won't be daily or weekly. We would probably make decisions over months, not days or weeks.

[Brian Dirubbio, Managing Director at Baird]

Okay. So mechanically, you then operate on petcoke for, let's just say, argument, say, for a quarter, if natural gas prices then collapse, then you just basically turn off the pet coke valve and turn on the natural gas one and then you just start producing via natural gas?

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

Actually, it wouldn't work that way. We would be we have two gasifiers. So we would have a Petco gas fire running and a natural gas fire running. And if we wanted to to if we go into turnaround on the Petcoke, we would run 100% natural gas for a period of time and then come back on Petcoke or vice versa. If we want to run more Petcoke, we would run switch over to the Petcoke gas fire, run 100% there and it would produce enough hydrogen for our needs to produce.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

So today, we only run one gas fire. Under this scenario, we'd run both gas fires.

[Brian Dirubbio, Managing Director at Baird]

Okay. That's helpful there. Great. That's all I've got. Appreciate it.

[Brian Dirubbio, Managing Director at Baird]

Thank you.

[Operator]

Our next question comes from the line of Rob Maguire with Granite Research. Please proceed with your question.

[Rob McGuire, Equity Research Analyst at Granite Research]

Good morning, Mark, Dane and Richard. Thank you for taking my questions.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

Good morning, Rob.

[Rob McGuire, Equity Research Analyst at Granite Research]

Just a few questions on market trends, if you could give us a little more insight, Mark. You mentioned supply demand is tight. Can you talk about three trends? One is, are you feeling an impact of UAN demand as a consequence of higher urea prices? And can you give us a feel for UAN and ammonia inventories at the distributor to the farm level?

[Rob McGuire, Equity Research Analyst at Granite Research]

And then lastly, have you seen any trends towards the use of more UAN versus ammonia in the spring and fall planting seasons? And do you think there'll be any material shifts this year?

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

Okay. There's a lot of questions there. Let's sort of take into pieces. The big driver in the market right now is urea. Urea is tight globally and the price has risen, these are public prices, but it's north of $400 in NOA in New Orleans.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

And that's following the global price, which right now is like $450 a ton metric. So they're just a lot of our customers have been looking to buy more urea into the spring and there's been, I'd say, limited availability. And so the market's tightened up and that's sort of lifted both UAN and ammonia. Ammonia is a little bit different because we typically sell the spring prepay in December. So we'll see the effect of the higher pricing there and when they buy cash orders starting in the spring.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

But we're seeing UAN kind of following urea. UAN looks from where the market's priced today, maybe a little cheap. And so we may actually find more demand there. And so there's I would say the supply side has been tight and I think our customers are seeing greater corn acreage in the spring. I was at a conference last week and the customers were telling us that corn seed sales are up significantly year over year, which typically implies more acreage of corn planting.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

And so I think the customers are feeling like they need to be buying more in advance because there's likely to be more acreage there. So I actually think all the nitrogens will be stronger. I think UAN where it's priced today is pretty attractive. And if urea stays difficult to purchase, then the next the customers would turn to UAN and apply more UAN, both at pre plant, but also in side dress and top dress season. Sorry, I'm kind of rambling there, so I'll stop and see if I've answered your questions.

[Rob McGuire, Equity Research Analyst at Granite Research]

No, that was great. Has there been a trend towards more UAN versus ammonia?

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

I wouldn't say that there's really a big trend in that direction. A lot of times it's more of the relative pricing at a moment in time. I would say right now, ammonia looks pretty cheap compared to not unduly cheap, but a little bit cheaper than urea and UAN, typically the relationship there. The fall was difficult. We scrambled and the customer scrambled and we did for as difficult as the weather conditions are, we actually did get most of our ammonia orders out in the fourth quarter, but there could be some catch up in the spring.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

And if they don't get there with ammonia in the spring for nitrogen, they'll come back with UAN or urea. So there's probably going to be a little bit of a pickup on UAN and urea in the spring for what didn't get down on pre plant in the back in the fall.

[Rob McGuire, Equity Research Analyst at Granite Research]

This is great color. Thank you. And then we're two thirds of the way through February. Can you give us an idea of how much UAN has been presold in the first quarter and perhaps even into the second quarter of twenty twenty five?

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

Yes. I don't like to get very specific in our book. I would just say that the customers have been buying kind of the previous question about ratable. We've been sort of consistently sold forward, but not at the length that we are. But we have a solid book of business going into the spring already for UAN and ammonia.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

And customers are looking for more than what's available, which is that's what's pushed the market up here in the last six weeks. So the customers would like to buy more. What I heard at the conference, very difficult to find March tonnage available. And so the market is kind of in April at this point, just broadly amongst all the producers. So it just tells you the market is tight and firm.

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

And we'll be working hard to fulfill what the customer needs in April and May. But it's stronger this year than last year. I think our order book and the market itself going into the spring this year is stronger than last year. And it looks like we're going to have somewhere between 2,000,000 to 4,000,000 more acres of corn this year than last year.

[Rob McGuire, Equity Research Analyst at Granite Research]

That's helpful. Thank you. And then shifting gears and the last question. How should CapEx excluding turnaround reserves look for the balance of the year?

[Dane Neumann, EVP, CFO, Treasurer & Assistant Secretary at CVR Energy]

Yes. Rob, looking forward to 2025, I don't think you should expect to see a substantial change in the reserves. Obviously, as we look at the higher CapEx profile, the balance of the growth projects has really already been reserved and will continue to reserve at a comparable level and same on the turnaround.

[Rob McGuire, Equity Research Analyst at Granite Research]

Okay, Dane, I appreciate it. Mark, thank you again. Richard, thank you.

[Dane Neumann, EVP, CFO, Treasurer & Assistant Secretary at CVR Energy]

Thanks, Rob. Thank you.

[Operator]

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

[Mark Pytosh, CEO, President & Director of CVR GP LLC at CVR Partners]

Just wanted to say thanks to everybody who attended the call today and appreciate your interest in CVR Partners and look forward to talking to you about our first quarter results at the April. Thank you very much.

[Operator]

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

Participants

Executives

• Richard Roberts, Vice President of Financial Planning and Analysis and Investor Relations
• Mark Pytosh, CEO, President & Director of CVR GP LLC

Analysts

• Dane Neumann, EVP, CFO, Treasurer & Assistant Secretary at CVR Energy
• Brian Dirubbio, Managing Director at Baird
• Rob McGuire, Equity Research Analyst at Granite Research