Rentech Nitrogen Partners, L.P. (RNF)

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Rentech Nitrogen Partners LP (RNF)

Q4 2012 Earnings Call

March 19, 2013 12:00 PM ET


Julie Cafarella – VP, IR

Hunt Ramsbottom – CEO

Dan Cohrs – EVP and CFO

Marc Wallis – SVP, Sales and Marketing

John Diesch – President


Ted Drangula – Morgan Stanley

Brent Rystrom – Feltl

Lucas Pipes – Brean Capital

Matt Farwell – Imperial Capital

James Campbell



Welcome to the Rentech Nitrogen Partners Fourth Quarter and Year End 2012 Conference Call. My name is Larisa and I’ll be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

And I like to turn the call over to Julie Cafarella, Vice President of Investor Relations and Communications. Julie, you may begin.

Julie Cafarella

Thank you. Welcome to Rentech Nitrogen’s conference call for the 3 and 12 months ended December 31, 2012. During this call, Hunt Ramsbottom, CEO of Rentech Nitrogen will summarize the partnerships activities during the year and provide our financial outlook. Dan Cohrs, our Chief Financial Officer will give a financial review of the period. Also in the room with us today are other members of Rentech Nitrogen’s management team including John Diesch, President and Marc Wallis, SVP of Sales and Marketing who will be available for the question-and-answer session at the end of our prepared remarks.

Please be advised that certain information discussed on this conference call will contain forward-looking statements. They can be identified by the use of terminology such as may, will, expect, believe and other comparable terms. You are cautioned that while forward-looking statements reflect our good faith belief and best judgment based upon current information, they are not guarantees of future performance and are subject to known and unknown risks and uncertainties and risk factors detailed from time to time in the partnerships’ periodic reports and registration statements filed with the Securities and Exchange Commission.

The forward-looking statements in this call are made us of March 19, 2013 and Rentech Nitrogen does not undertake to revise or update these forward-looking statements, except to the extent that it is required to do so under applicable law.

In addition, today’s presentation includes various non-GAAP financial measures. The disclosures related to such non-GAAP measures including reconciliations to the most directly comparable GAAP financial measures are included in our 2012 fourth quarter and full year earnings press release that is available on our website.

Now, I would like to turn the call over to Hunt Ramsbottom, CEO of Rentech Nitrogen.

Hunt Ramsbottom

Good morning, everyone and thank you for joining us today. 2012 was a successful year for us. We delivered strong results generating $2.78 in earnings per unit and $3.30 per unit in cash distributions for the year, which exceeded our guidance.

Among our significant accomplishments for the year, the acquisition of the largest producer of synthetic ammonium sulfate in North American and the completion of the Urea/DEF expansion at the East Dubuque facility.

We expect the acquisition of the Pasadena Facility to be accretive to cash distributions beginning this year that provides growth opportunities and diversified products, markets, location and raw materials of the East Dubuque facility. The Urea/DEF product allows us to expand our product offerings at the East Dubuque facility to include high margin Diesel Exhaust Fluid and increases urea production capacity at the plant by 21,900 tons annually.

2012 results benefited from two months of contribution from the Pasadena Facility and from higher ammonia and UAN product prices at the East Dubuque facility. In addition, we locked in natural gas costs more than $1 lower per MMBtu than in 2011. Our ammonia and sulfur purchase averaged $658 and $154 per ton respectively at the Pasadena Facility.

Now taking a closer look at 2012, we secured a very strong spring 2012 forward book in September and October of 2011. In March of ‘12, we experienced an early onset of spring ammonia application due to warm dry weather. This shifted meaningful volumes ammonia deliveries into the first quarter, in the second quarter of 2012. Once we began to see the implications of the drought, we forward sold most of our 2012 UAN production by the end of the second quarter. With little ammonia left to sell as well, we selectively pre-sold our remaining ammonia tons throughout the rest of the year.

In November our market experienced good soil temperatures and moisture levels, which resulted in heavy ammonia fall application. In December we experienced an outage for approximately 15 days at the East Dubuque facility, which shut down production. As a result UAN sales volume declined in the fourth quarter as UAN shipments scheduled for the quarter shifted into the first quarter of 2013.

For the year we achieved on stream rates of over 90% at the East Dubuque facility despite unscheduled outages in the fourth quarter. The largest outage which occurred in December was due to a tube failure in a waste heat boiler in the ammonia plant at the facility.

We intend to replace the current boiler tube bundle with a larger bundle in the upcoming fall 2013 turnaround as part of our ongoing project to improve efficiency at the plant. These tubes need to be replaced approximately every 10 years and we purchased the tubes in anticipation of their replacements saving up several weeks of down time in December.

Our team at Rentech Nitrogen has done a great job with integrating the Pasadena facility. We’re optimizing the plant shipments in the regions where we see the highest setbacks, we continue to focus on increasing productivity and improving margins.

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