LSB Industries (NYSE: LXU) reported Q3 revenue for the quarter came in at $75.5 million versus the consensus estimate of $79.78 million.

• Net sales of $75.5 million for the third quarter of 2019, compared to net sales of $79.8 million for the third quarter of 2018.
• Net loss of $30.8 million for the third quarter of 2019, compared to net loss of $26.1 million for the third quarter of 2018.
• Adjusted EBITDA(1) of $11.1 million for the third quarter of 2019, compared to $10.6 million for the third quarter of 2018, which include adjustments for certain legal fees incurred in both periods ($3.3 million and $1.9 million in 2019 and 2018, respectively).

“We delivered results in line with our expectations in our seasonally weakest third quarter,” stated Mark Behrman, LSB’s President and CEO. “Despite continued pressure on ammonia prices, our adjusted EBITDA increased as a result of lower natural gas prices, higher production and lower overall costs. Most importantly, we exited the quarter ready to capitalize on what we expect to be a strengthening end market environment over the next year.”

“Our facilities continued to perform well in the third quarter, with our ammonia plants averaging a collective 94% on-stream rate for the period. We’ve averaged a 94% on-stream rate for the last five quarters, consistent with our 2019 target, which reflects dedication to reliability and proactive maintenance by our operating management and personnel. We’ve made significant progress in this regard and expect to be able to achieve even higher on-stream rates going forward, ultimately making LSB a best-in-class chemical manufacturer. We successfully completed the turnaround at our El Dorado facility in August, and we are in process of restarting the ammonia plant at Pryor following the most extensive turnaround at that facility in our history. We expect this planned maintenance to yield overall improved production efficiency and reliability at both facilities, and we anticipate that the new urea reactor we installed, plus other urea upgrades, at our Pryor facility will increase our production of downstream products. Notably, with the maintenance work at El Dorado and Pryor behind us, we have no turnarounds scheduled at any of our facilities in 2020.”

“Product pricing was mixed in the third quarter. Net pricing per ton of HDAN and UAN increased by 13% and 4%, respectively. Agricultural ammonia decreased by 12%, largely due to the aforementioned inventory buildup in the domestic distribution channel. Pricing for industrial products reflected the continued weakening of the Tampa ammonia benchmark price, the relevant index used to price many industrial products. We continue to believe that as inventories are consumed, the Tampa ammonia benchmark price will recover.”

Mr. Behrman continued, “After a challenging 2019 for U.S. corn farmers, we believe that harvested acres and yields will be particularly weak. These factors already appear to have impacted the price of corn, which has risen in recent weeks. A likely decline in the stock-to-use ratio for corn should lead to an increase in planted acres in the spring 2020 planting season. This, coupled with the depletion of nutrients from the soil after months of heavy rains in the Midwest, suggests that we should have a relatively heavy pre-planting ammonia application in the coming weeks, subject to the weather. Looking ahead to the fourth quarter of 2019 and into 2020, we expect to generate improved financial performance driven by higher operating rates, increased ammonia demand, and rising prices. Increased demand for ammonia should decrease the current inventory buildup and allow the Tampa ammonia benchmark to rise, which we’ve seen over the last two months, benefitting our industrial business. Our outlook for a strengthening end market environment, along with our expectations for continued operating performance improvement and the absence of any turnarounds at our facilities in 2020, makes us optimistic about prospects for growth in adjusted EBITDA and free cash flow in the year to come.”

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