LSB Industries (NYSE: LXU) reported Q4 EPS of ($1.30), $0.33 worse than the analyst estimate of ($0.97). Revenue for the quarter came in at $73.9 million versus the consensus estimate of $79.71 million.

Fourth Quarter Summary

• Net sales of $73.9 million for the fourth quarter of 2019, compared to $94.7 million for the fourth quarter of 2018.
• Net loss of $27.7 million for the fourth quarter of 2019 (or $18.0 million adjusted for non-cash write-down), compared to $13.0 million for the fourth quarter of 2018.
• Adjusted EBITDA(1) of $7.2 million for the fourth quarter of 2019, compared to $25.1 million for the fourth quarter of 2018 which include adjustments for certain legal fees incurred in both periods ($3.8 million and $1.8 million in 2019 and 2018, respectively).
• 91% average ammonia on-stream rate for the full year of 2019 versus 89% for the full year of 2018.
• Completed an extensive turnaround at our Pryor facility including the installation of a new, larger urea reactor and the installation of a new, larger sulfuric acid converter at our El Dorado facility.

“Our fourth quarter capped off a year of significant progress and challenges for LSB,” stated Mark Behrman, LSB Industries’ President and CEO. “Net sales and adjusted EBITDA were down relative to the same quarter last year due to weaker selling prices for both our agricultural and industrial products as well as lower overall sales volumes resulting primarily from an extensive planned turnaround at our Pryor facility and several unplanned outages, partially offset by lower natural gas prices.”

“Pricing was down for all of our major agricultural product categories during the fourth quarter reflecting a combination of factors including the continued oversupply of ammonia in our primary end markets, increased imports of some of our downstream products, and a late U.S. corn harvest which resulted in weaker than expected fertilizer demand for fall application.”

Mr. Behrman continued, “Regarding our plant operations, during the fourth quarter, we completed an extensive turnaround at our Pryor facility and made upgrades to our El Dorado facility that we expect to enhance their reliability and production volume going forward. Ammonia on-stream rates across our three facilities averaged 91% for 2019, which was below our expectations but was a continuation of our three-year trend of steady performance improvement and was an increase of more than 10 percentage points from 2016. We have seen good progress from our multi-faceted approach to increasing the reliability of our operations thus far and expect continued improvement in 2020 as we work to reach our long-term goal of 95% annual ammonia on-stream rates.”

“With respect to our outlook for 2020, we anticipate that agricultural and industrial selling prices for the first six months will continue to be impacted by the aforementioned factors impacting the agricultural market coupled with excess ammonia inventories weighing on the industrial market pricing. We do, however, expect to deliver significant increases in net sales and adjusted EBITDA for the year as we have no planned turnarounds this year, and we expect to take advantage of the increased production capacity of UAN and sulfuric acid that we added in 2019. Additionally, we have secured incremental sales opportunities in our industrial and mining business. Collectively, we project these factors will more than offset the challenging pricing environment for our products. As previously mentioned, we anticipate continued improvement in the operating performance of our facilities as a result of the maintenance and upgrades we completed in 2019. We also believe that demand from our agricultural markets will improve given industry forecasts for increased acreage of corn to be planted relative to 2019 allowing us to take advantage of our expanded production capabilities.” Mr. Behrman concluded, “In short, while our fourth quarter results were below our expectations headed into the period, we believe we have positioned LSB to deliver strong improvement in EBITDA and cash flow in 2020, which would be further enhanced by our ability to leverage any strengthening in ammonia and fertilizer prices that we anticipate will materialize during the year.”

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