Not only did Oklahoma City’s LSB Industries see a big gain in its fourth quarter 2022 sales and earnings, but the firm did equally well in the full year finances as it made record earnings.
“Our fourth quarter capped off the most profitable year in our company’s history,” stated Mark Behrman, LSB’s President and CEO.
Here’s how well the company did in the quarter: Net sales of $234 million compared to $190 million at the end of 2021 while adjusted EBITDA was $105 million compared to $90 million a year earlier.
Then there was cash flow in the fourth quarter—$86 million while capital expenditures were $13 million. During the quarter, LSB also repurchased nearly 5.6 million shares.
For the entire year, LSB had $902 million in net sales versus $556 million in all of 2021. Adjusted EBITDA jumped from $191 million in 2021 to $415 million last year.
Earnings per share soared from 85 cents in 2021 to $3.09 in 2022.
The company’s stock repurchase program of 13.2 million shares during the year was made with a $175 million effort.
“We continued to invest significantly in our manufacturing assets, completing major turnarounds at both our El Dorado and Pryor facilities and have already seen the benefits from those investments,” remarked Behrman.
“Lastly, with respect to our sustainability efforts, we launched our clean energy strategy, announcing a low carbon ‘blue’ ammonia project at our El Dorado facility and a zero carbon ‘green’ ammonia project at our Pryor facility.”
He said selling prices for LSB’s products remain above historical averages and the firm expects to see an increase in corn and wheat acres planted this spring.
” As such, we expect another year of strong profitability and cash flow.”
Nitrogen fertilizer prices moderated in recent months, largely reflecting a decline in European production costs coupled with the seasonal pause in demand that typically precedes the start of the spring planting season.
Despite these factors, nitrogen pricing remains significantly above 10-year averages and appears likely to remain above these averages for 2023 due to the following:
U.S. corn stock/use ratios are at their lowest levels in a decade. Key factors include the impact on global corn supplies of dry conditions in South America, the Western U.S. and parts of Europe during 2022. As a result, corn prices remain near 10-year highs suggesting that farmers will likely be incentivized to plant additional acres and maximize yield through the coming planting season in order to capitalize on the favorable economics. Subject to supportive weather LSB expects this to translate into strong demand and above historic average pricing for nitrogen fertilizers in the coming planting season.
Additionally, natural gas prices in Europe have dropped in recent months due to a reduction in demand primarily related to warmer than expected temperatures throughout the continent this winter and a reduction in industrial production. The drop in feedstock costs has enabled numerous European ammonia facilities to resume operations. Despite lower gas costs, natural gas costs in Europe remain significantly higher than those in the U.S. and European operators remain the marginal producers, with production costs substantially higher than those in the U.S.
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