Oklahoma City’s LSB Industries reported a second quarter drop in net sales and net income, but leadership still considers the company had a solid cash flow. Company executives also believe the prices have stabilized following the instability and price hikes of two years ago.
Net sales were $140 million compared to $166 million a year ago and net income totaled $10 million, down from the $25 million in the second quarter of 2023. The adjusted EBITDA was $41 million, below the $47 million a year earlier.
“Our second quarter profitability improved sequentially due largely to improved pricing relative to the first quarter of this year. While selling prices were down compared to the second quarter of last year, the year-over-year pricing decline was much less significant than the declines experienced over the previous several quarters,” stated Mark Behrman, LSB Industries’ President and CEO.
“We view this as indicative of a stabilization of our markets after a period of downward volatility following the spike in nitrogen prices experienced in 2022.”
“Our second quarter was highlighted by our landmark agreement to supply Freeport Minerals with low carbon ANS (ammonium nitrate solution) for use in their copper mining operations, This agreement validates our belief that industrial customers will identify low carbon nitrogen products as a critical pathway toward achieving their decarbonization initiatives.”
LSB is in the process of beginning a Turnaround at the Pryor plant and preparing for a similar Turnaround at the Cherokee facility in the fourth quarter.
“When combined with the multiple smaller projects we have underway, we expect these Turnarounds to lead to increased reliability and incremental EBITDA and cash flow,” added Behrman.
He went to explain that LSB anticipates it will be able to start production of low carbon ammonia by early 2026 at its El Dorado carbon capture and sequestration project.
Market Outlook
- Industrial business remains stable reflecting:
- Steady demand for nitric acid supported by the strength of the U.S. economy and robust consumer spending levels
- Demand for ammonium nitrate (AN) bolstered by U.S. production of metals, including copper for data centers and electric vehicles, as well as quarrying/aggregate production for infrastructure upgrade and expansion
- Metals commodity prices are very supportive of maximizing production
- Ammonia market is healthy and pricing has been strong driven by:
- Healthy summer fill program, suggesting balanced U.S. supply-demand dynamics
- Extended turnaround at a large Saudi Arabian facility and natural gas curtailments in Trinidad and Egypt, limiting global supply
- Constrained ammonia imports into Europe from the Middle East due to the ongoing disruption of shipping through the Suez Canal
- Delayed startup of new production capacity
- UAN pricing remains solid due to:
- Low inventories in the distribution channel following the Spring application season
- Updraft from strong ammonia and, to a lesser extent, urea markets, both of which are benefiting from global supply constraints
- Corn futures prices have weakened as a result of:
- Increased stocks-to-use ratios
- USDA forecasts for U.S. corn acres planted in 2024 higher than historical average
- Potentially offsetting the above factors could be the impact of wet weather in certain growing regions resulting in reduced yields
Low-Carbon Ammonia Projects Summary
- Houston Ship Channel Blue Ammonia project with INPEX, Air Liquide and Vopak Exolum Houston
- 1.1 million metric ton per year blue ammonia plant utilizing blue hydrogen provided by Air Liquide/INPEX (JV)
- Pre-FEED is underway with expected completion in Q4’24
- FEED study expected to begin in Q1’25 with expected completion during Q4’25; final investment decision in Q1’26
- El Dorado Carbon Capture and Sequestration (CCS) Project with Lapis Energy
- Capture and sequester between 400,000 and 500,000 metric tons of CO2 per year, which would reduce our Scope 1 emissions by 25%, yielding between 305,000 and 380,0000 metric tons per year of low carbon ammonia
- Awaiting approval of Class VI permit to construct application by the EPA
- Focused on beginning operations in Q1’26
- 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 retrofitted with power unit using ammonia as a fuel during Q3’24
