Ciner Resources LP Announces Third Quarter 2020 Financial Results
ATLANTA–(BUSINESS WIRE)–Ciner Resources LP (NYSE: CINR) (“we”, “us, “our”, or the “Partnership”) today reported its financial and operating results for the third quarter ended September 30, 2020.
Third Quarter 2020 Financial Highlights:
- Net sales of $98.2 million decreased 28.4% from the prior-year third quarter; year-to-date of $288.8 million decreased 27.3% over the prior year. During the second and third quarters of 2020, the Partnership experienced a significant decline in sales volumes, production and pricing in response to COVID-19.
- Soda ash volume produced decreased 35.3% from the prior-year third quarter, and soda ash volume sold decreased 23.8% from the prior-year third quarter; year-to-date soda ash volume produced decreased 22.8% from the prior-year, and soda ash volume sold decreased 21.0% from the prior-year. During the second and third quarters of 2020, the Partnership experienced a significant decline in production volumes and demand in response to COVID-19.
- Net income of $5.4 million decreased $24.5 million from the prior-year third quarter; year-to-date of $14.2 million decreased $64.7 million over the prior year. Net income declined more than sales volumes, production, and pricing because a significant amount of our plant costs are not as efficient with these low productions levels and are not proportionally impacted by lower sales and production volume.
- Adjusted EBITDA of $14.6 million decreased 61.2% from the prior-year third quarter; year-to-date of $39.8 million decreased 61.6% over the prior year. During the second and third quarters of 2020, sales and production volumes decreased significantly as a result of COVID-19. Adjusted EBITDA declined more than sales and production because a significant amount of our plant costs are not as efficient with these low productions levels and are not proportionally impacted by lower sales and production volume.
- Basic earnings per unit of $0.11 for the quarter decreased 85.1% over the prior-year third quarter of $0.74; year-to-date basic earnings per unit of $0.28 decreased 85.3% over the prior-year.
- Net cash provided by operating activities of $21.2 million decreased 47.8% over prior-year third quarter; year-to-date of $52.4 million decreased 23.4% over the prior year.
- Distributable cash flow of $3.8 million decreased 76.5% compared to the prior-year third quarter; year-to-date distributable cash flow of $11.4 million decreased 75.1% over the prior year.
- The distribution coverage ratio was N/A and 2.35 for the three months ended September 30, 2020 and 2019, respectively; and 1.68 and 2.22 for the nine months ended September 30, 2020 and 2019, respectively. There were no distributions in the third quarter. Distribution coverage ratio declined as a result of decreased Adjusted EBITDA and net income during the year.
Oguz Erkan, CEO, commented: The third quarter marked an encouraging rebound for Ciner Resources, as improving market conditions led to strong sequential revenue growth. We’ve seen a considerable recovery in customer demand from second quarter levels, as idled or curtailed production has largely come back on-line. However, pricing levels, particularly in international markets, remained depressed as customers continue to work through elevated inventories, and the global economy continues to endure the impact of the Covid-19 pandemic.
We sold 540,000 tons in the third quarter of 2020, representing a 26% increase over the second quarter of 2020 but well below the record 709,000 tons sold in the third quarter of 2019. Overall, our sales translated to $14.6 million in adjusted EBITDA and $5.4 million in net income for the third quarter, a significant turnaround from the second quarter marks of $2.8 million and $5.4 million net loss, respectively. We continue to diligently manage our costs and cash expenditures in order to maintain strong liquidity and prudent leverage, repaying $27.5 million on our revolver in the quarter and ending the period at 1.7x debt to Adjusted EBITDA.
As we quickly approach the end of the year and our exit from ANSAC, we remain excited to take control of our export sales, utilizing our parent company’s existing distribution network and gaining better insight into key end markets and geographies.
I am proud of our team’s tireless efforts to keep our operations running smoothly and the commitment as always to the safety standards that make us successful during these extraordinary times.
|
Financial Highlights |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||||||||
|
(Dollars in millions, except per unit amounts) |
2020 |
|
2019 |
|
% Change |
|
2020 |
|
2019 |
|
% Change |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Soda ash volume produced (millions of short tons) |
0.460 |
|
|
0.711 |
|
|
(35.3) |
% |
|
1.593 |
|
|
2.064 |
|
|
(22.8) |
% |
||||
|
Soda ash volume sold (millions of short tons) |
0.540 |
|
|
0.709 |
|
|
(23.8) |
% |
|
1.630 |
|
|
2.065 |
|
|
(21.0) |
% |
||||
|
Net sales |
$ |
98.2 |
|
|
$ |
137.2 |
|
|
(28.4) |
% |
|
$ |
288.8 |
|
|
$ |
397.4 |
|
|
(27.3) |
% |
|
Net income |
5.4 |
|
|
$ |
29.9 |
|
|
(81.9) |
% |
|
$ |
14.2 |
|
|
$ |
78.9 |
|
|
(82.0) |
% |
|
|
Net income attributable to Ciner Resources LP |
$ |
2.3 |
|
|
$ |
14.8 |
|
|
(84.5) |
% |
|
$ |
5.7 |
|
|
$ |
38.4 |
|
|
(85.2) |
% |
|
Earnings per limited partner unit |
$ |
0.11 |
|
|
$ |
0.74 |
|
|
(85.1) |
% |
|
$ |
0.28 |
|
|
$ |
1.91 |
|
|
(85.3) |
% |
|
Adjusted EBITDA(1) |
$ |
14.6 |
|
|
$ |
37.6 |
|
|
(61.2) |
% |
|
$ |
39.8 |
|
|
$ |
103.6 |
|
|
(61.6) |
% |
|
Adjusted EBITDA attributable to Ciner Resources LP(1) |
$ |
7.2 |
|
|
$ |
18.5 |
|
|
(61.1) |
% |
|
$ |
19.5 |
|
|
$ |
51.4 |
|
|
(62.1) |
% |
|
Net cash provided by operating activities |
$ |
21.2 |
|
|
40.6 |
|
|
(47.8) |
% |
|
$ |
52.4 |
|
|
68.4 |
|
|
(23.4) |
% |
||
|
Distributable cash flow attributable to Ciner Resources LP(1) |
$ |
3.8 |
|
|
$ |
16.2 |
|
|
(76.5) |
% |
|
$ |
11.4 |
|
|
$ |
45.7 |
|
|
(75.1) |
% |
|
Distribution coverage ratio (1) |
N/A |
|
2.35 |
|
|
N/A |
|
1.68 |
|
|
2.22 |
|
|
(24.3) |
% |
||||||
|
(1)See non-GAAP reconciliations |
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|
|
|
|
|
|
|
|
|
|
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Three Months Ended September 30, 2020 compared to Three Months Ended September 30, 2019
The following table sets forth a summary of net sales, sales volumes and average sales price, and the percentage change between the periods.
|
|
|
Three Months Ended September 30, |
|
Percent Increase/(Decrease) |
||||||
|
(Dollars in millions, except for average sales price data): |
|
2020 |
|
2019 |
|
|||||
|
Net sales: |
|
|
|
|
|
|
||||
|
Domestic |
|
$ |
53.7 |
|
|
$ |
56.8 |
|
|
(5.5)% |
|
International |
|
44.5 |
|
|
80.4 |
|
|
(44.7)% |
||
|
Total net sales |
|
$ |
98.2 |
|
|
$ |
137.2 |
|
|
(28.4)% |
|
Sales volumes (thousands of short tons): |
|
|
|
|
|
|
||||
|
Domestic |
|
243.5 |
|
|
237.7 |
|
|
2.4% |
||
|
International |
|
296.8 |
|
|
471.3 |
|
|
(37.0)% |
||
|
Total soda ash volume sold |
|
540.3 |
|
|
709.0 |
|
|
(23.8)% |
||
|
Average sales price (per short ton):(1) |
|
|
|
|
|
|
||||
|
Domestic |
|
$ |
220.53 |
|
|
$ |
238.96 |
|
|
(7.7)% |
|
International |
|
$ |
149.93 |
|
|
$ |
170.59 |
|
|
(12.1)% |
|
Average |
|
$ |
181.75 |
|
|
$ |
193.51 |
|
|
(6.1)% |
|
Percent of net sales: |
|
|
|
|
|
|
||||
|
Domestic sales |
|
54.7 |
% |
|
41.4 |
% |
|
32.1% |
||
|
International sales |
|
45.3 |
% |
|
58.6 |
% |
|
(22.7)% |
||
|
Total percent of net sales |
|
100.0 |
% |
|
100.0 |
% |
|
|
||
|
Percent of sales volumes: |
|
|
|
|
|
|
||||
|
Domestic volume |
|
45.1 |
% |
|
33.5 |
% |
|
34.6% |
||
|
International volume |
|
54.9 |
% |
|
66.5 |
% |
|
(17.4)% |
||
|
Total percent of volume sold |
|
100.0 |
% |
|
100.0 |
% |
|
|
||
|
|
|
|
|
|
|
|
||||
|
(1) Average sales price per short ton is computed as net sales divided by volumes sold |
|
|
|
|
|
|
||||
Consolidated Results
Net sales. Net sales decreased by 28.4% to $98.2 million for the three months ended September 30, 2020 from $137.2 million for the three months ended September 30, 2019, primarily driven by a decrease in soda ash volumes sold of 23.8% due to lower international demand for three months ended September 30, 2020, as compared to the three months ended September 30, 2019. The decrease in soda ash volumes sold was primarily attributable to the decline in global demand as a result of the COVID-19 pandemic. Also contributing to the decrease in net sales was a decline in international pricing, which continued the trend that began in the fourth quarter of 2019. In addition, the Partnership increased domestic sales opportunities to offset lower international demand.
Additionally, during the three months ended September 30, 2020 the Partnership experienced an improvement in net sales of 28.9% to $98.2 million from $76.2 million as compared to the second quarter of 2020. Both the three month periods ended September 30, 2020 and June 30, 2020 were negatively impacted by COVID-19. The primary driver was an increase in volume in both our domestic and international sales.
Cost of products sold. Cost of products sold, including depreciation, depletion and amortization expense and freight costs, decreased by 14.0% to $86.6 million for the three months ended September 30, 2020 from $100.7 million for the three months ended September 30, 2019, which were primarily due to significant decreases in overall soda ash sales volumes and production in response to the COVID-19 pandemic.
Additionally, during the three months ended September 30, 2020 the Partnership experienced an increase in cost of products sold of 16.7% to $86.6 million from $74.2 million as compared to the second quarter of 2020. Both the three month periods ended September 30, 2020 and June 30, 2020 were negatively impacted by COVID-19. The primary driver was an increase in sales volume.
Selling, general and administrative expenses. Our selling, general and administrative expenses decreased 7.8% to $4.7 million for the three months ended September 30, 2020, compared to $5.1 million for the three months ended September 30, 2019. The decrease was driven primarily by decreased employee benefit expenses and travel expenses, partially offset by higher contracted services and professional services incurred over the same period.
Additionally, during the three months ended September 30, 2020 the Partnership experienced a decrease in selling, general and administrative expense of 21.7% to $4.7 million from $6.0 million as compared to the second quarter of 2020. Both the three month periods ended September 30, 2020 and June 30, 2020 were negatively impacted by COVID-19. The decrease was primarily driven by lower ANSAC fees, employee benefit expenses and lower professional services.
Operating income. As a result of the foregoing, operating income decreased by 78.0% to $6.9 million for the three months ended September 30, 2020 from $31.4 million for the three months ended September 30, 2019. During the third quarter of 2020, production and sales decreased significantly compared to the same period in 2019. Operating results have declined by a greater percentage than production and sales due to a significant amount of fixed plant costs that are not proportionally impacted by lower sales and production volume. In addition, certain costs are higher due to cost related to employee safety and retention during the COVID-19 pandemic.
Additionally, during the three months ended September 30, 2020 operating income increased 272.1% to $6.9 million from an operating loss of $4.0 million as compared to the second quarter of 2020. Both the three month periods ended September 30, 2020 and June 30, 2020 were negatively impacted by COVID-19. Operating results have increased by a greater percentage than production and sales due to a significant amount of fixed plant costs that are not proportionally impacted by higher sales and production volume.
Net income. As a result of the foregoing, net income decreased by 81.9% to $5.4 million for the three months ended September 30, 2020, from $29.9 million for the three months ended September 30, 2019.
Nine Months Ended September 30, 2020 compared to Nine Months Ended September 30, 2019
The following table sets forth a summary of net sales, sales volumes and average sales price, and the percentage change between the periods.
|
|
|
Nine Months Ended September 30, |
|
Percent Increase/(Decrease) |
||||||
|
(Dollars in millions, except for average sales price data): |
|
2020 |
|
2019 |
|
|||||
|
Net sales: |
|
|
|
|
|
|
||||
|
Domestic |
|
$ |
153.1 |
|
|
$ |
157.7 |
|
|
(2.9)% |
|
International |
|
135.7 |
|
|
239.7 |
|
|
(43.4)% |
||
|
Total net sales |
|
$ |
288.8 |
|
|
$ |
397.4 |
|
|
(27.3)% |
|
Sales volumes (thousands of short tons): |
|
|
|
|
|
|
||||
|
Domestic |
|
676.2 |
|
|
660.8 |
|
|
2.3% |
||
|
International |
|
954.2 |
|
|
1,403.7 |
|
|
(32.0)% |
||
|
Total soda ash volume sold |
|
1,630.4 |
|
|
2,064.5 |
|
|
(21.0)% |
||
|
Average sales price (per short ton):(1) |
|
|
|
|
|
|
||||
|
Domestic |
|
$ |
226.41 |
|
|
$ |
238.65 |
|
|
(5.1)% |
|
International |
|
$ |
142.21 |
|
|
$ |
170.76 |
|
|
(16.7)% |
|
Average |
|
$ |
177.13 |
|
|
$ |
192.49 |
|
|
(8.0)% |
|
Percent of net sales: |
|
|
|
|
|
|
||||
|
Domestic sales |
|
53.0 |
% |
|
39.7 |
% |
|
33.5% |
||
|
International sales |
|
47.0 |
% |
|
60.3 |
% |
|
(22.1)% |
||
|
Total percent of net sales |
|
100.0 |
% |
|
100.0 |
% |
|
|
||
|
Percent of sales volumes: |
|
|
|
|
|
|
||||
|
Domestic volume |
|
41.5 |
% |
|
32.0 |
% |
|
29.7% |
||
|
International volume |
|
58.5 |
% |
|
68.0 |
% |
|
(14.0)% |
||
|
Total percent of volume sold |
|
100.0 |
% |
|
100.0 |
% |
|
|
||
|
|
|
|
|
|
|
|
||||
|
(1) Average sales price per short ton is computed as net sales divided by volumes sold |
|
|
|
|
|
|
||||
Consolidated Results
Net sales. Net sales decreased by 27.3% to $288.8 million for the nine months ended September 30, 2020 from $397.4 million for the nine months ended September 30, 2019, primarily driven by a decrease in soda ash volumes sold of 21.0% due to lower international demand for the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019. The decrease in soda ash volumes sold were primarily attributable to the decline in global demand as a result of the COVID-19 pandemic beginning in April 2020. Also contributing to the decrease in net sales was a decline in international pricing, which continued the trend that began in the fourth quarter of 2019.
Cost of products sold. Cost of products sold, including depreciation, depletion and amortization expense and freight costs, decreased by 13.8% to $253.9 million for the nine months ended September 30, 2020 from $294.7 million for the nine months ended September 30, 2019, which were primarily due to significant decreases in overall soda ash sales volumes and production in response to COVID-19, which were partially offset by the increased cost due to usage not being effective with the decrease in production.
Selling, general and administrative expenses. Our selling, general and administrative expenses decreased 15.4% to $16.5 million for the nine months ended September 30, 2020, compared to $19.5 million for the nine months ended September 30, 2019. The decrease was driven primarily by decreased affiliate expenses and employee benefit expenses, as well as lower travel expenses and professional fees incurred during the nine months of 2020.
Operating income. As a result of the foregoing, operating income decreased by 77.9% to $18.4 million for the nine months ended September 30, 2020 from $83.2 million for the nine months ended September 30, 2019. During the nine months ended September 30, 2020, production and sales decreased significantly. Operating results have declined by a greater percentage than production and sales due to a significant amount of fixed plant costs that are not proportionally impacted by lower sales and production volume. In addition, certain costs are higher due to cost related to employee safety and retention during the COVID-19 pandemic.
Net income. As a result of the foregoing, net income decreased by 82.0% to $14.2 million for the nine months ended September 30, 2020, from $78.9 million for the nine months ended September 30, 2019.
CAPEX AND ORE METRICS
The following table summarizes our capital expenditures, on an accrual basis, ore grade and ore to ash ratio:
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|||||||||||
|
(Dollars in millions) |
2020 |
|
2019 |
|
2020 |
|
2019 |
|||||||
|
Capital Expenditures |
|
|
|
|
|
|
|
|||||||
|
Maintenance |
$ 6.5 |
|
$ 4.6 |
|
16.7 |
|
$ 9.8 |
|||||||
|
Expansion |
3.1 |
|
7.1 |
|
14.3 |
|
31.3 |
|||||||
|
Total |
$ 9.6 |
|
$ 11.7 |
|
31.0 |
|
$ 41.1 |
|||||||
|
Operating and Other Data: |
|
|
|
|
|
|
|
|||||||
|
Ore grade(1) |
86.9 % |
|
86.4 % |
|
86.8 % |
|
86.6 % |
|||||||
|
Ore to ash ratio(2) |
1.67: 1.0 |
|
1.53: 1.0 |
|
1.62: 1.0 |
|
1.51: 1.0 |
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|
(1)Ore grade is the percentage of raw trona ore that is recoverable as soda ash free of impurities. A higher ore grade will produce more soda ash than a lower ore grade. |
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|
(2)Ore to ash ratio expresses the number of short tons of trona ore needed to produce one short ton of soda ash and includes our deca rehydration recovery process. In general, a lower ore to ash ratio results in lower costs and improved efficiency. |
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During the nine months ended September 30, 2020, capital expenditures decreased $10.1 million as compared to the nine months ended September 30, 2019. The decrease was primarily driven by decreases in expansion capital expenditures because of the completion of our new co-generation facility, which became operational in March 2020. The decrease was partially offset by the continued increase of maintenance capital expenditures that began in the second half of 2019 at our Wyoming facility to both adequately maintain the facility’s physical assets and to improve its operational reliability.
FINANCIAL POSITION AND LIQUIDITY
As of September 30, 2020, we had cash and cash equivalents of $1.7 million. In addition, we have approximately $132.5 million ($225.0 million, less $92.5 million outstanding) of remaining capacity under the Ciner Wyoming Credit Facility. As of September 30, 2020, our leverage and interest coverage ratios, as calculated pursuant to the credit agreement for the Ciner Wyoming Credit Facility, were 1.64: 1.0 and 13.79: 1.0, respectively. As of September 30, 2020, our leverage and interest coverage ratios, as calculated pursuant to the credit agreement for the Ciner Resources Credit Facility, were 1.72: 1.0 and 13.09: 1.0, respectively. Our balance under the Ciner Wyoming Equipment Financing Arrangement at September 30, 2020 was $28.5 million ($28.3 million net of financing costs).
CASH FLOWS
Cash Flows
Operating Activities
Our operating activities during the nine months ended September 30, 2020 provided cash of $52.4 million, a decrease of 23.4% from the $68.4 million cash provided during the nine months ended September 30, 2019, primarily as a result of the following:
- $16.2 million of working capital provided by operating activities during the nine months ended September 30, 2020, compared to $31.4 million of working capital used in operating activities during the nine months ended September 30, 2019. The $47.6 million increase in working capital provided by operating activities was primarily due to the $15.1 million decrease in due-from affiliates for the nine months ended September 30, 2020 compared to a $30.0 million increase in due from affiliates for the nine months ended September 30, 2019 primarily related to incremental sales levels to ANSAC, as well as timing of collections and timing of our funding of pension benefit plans offered and administered by Ciner Corp; and
- a decrease of 82.0% in net income of $64.7 million during the nine months ended September 30, 2020, compared to $78.9 million for the prior-year period.
Investing Activities
We used cash flows of $28.4 million in investing activities during the nine months ended September 30, 2020, compared to $49.3 million used during the nine months ended September 30, 2019, for capital projects as described in “Capital Expenditures” above.
Financing Activities
Cash used in financing activities of $37.2 million during the nine months ended September 30, 2020 increased by 117.5% over the prior-year cash used in financing activities, largely due to repayments of the credit facility during the nine months ended September 30, 2020.
Green River Expansion Project
We continue to develop plans and execute the early phases for a potential new Green River Expansion Project that we believe will increase production levels up to approximately 3.5 million tons of soda ash per year. We have conducted the initial basic design and are currently evaluating and pursuing the related permits and detailed cost analysis pursuant to the basic design. This project will require capital expenditures materially higher than have been recently incurred by Ciner Wyoming. When considering the significant investment required by this expansion and the infrastructure improvements designed to increase our overall efficiency, combined with the COVID-19 pandemic’s negative impact on our financial results, we have re-prioritized the timing of the significant expenditure items in order to increase financial and liquidity flexibility and until we have more clarity and visibility into the ongoing impact of the COVID-19 pandemic on our business.
COVID-19
Public health epidemics, pandemics or outbreaks of contagious diseases could adversely impact our business. In December 2019, a novel strain of coronavirus (“COVID-19”) emerged in Wuhan, Hubei Province, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to many other countries and infections have been reported throughout the world, including the United States and markets to which our products have historically been exported. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. Since that time, governmental jurisdictions in the United States and globally have taken various actions to curb the spread of COVID-19, which has resulted in disruption in the national and global economic and financial markets.
Our Response to COVID-19
We continue to closely monitor the impact of the outbreak of COVID-19 and all governmental actions in response thereto on all aspects of our business, including how it impacts our customers, employees, supply chain, distribution network and cash flows. We have taken strong proactive steps to keep the safety of our team and their families as the priority. We are executing a comprehensive plan to help prevent the spread of the virus in our work locations and it appears to be having a positive impact. This plan includes multiple layers of protection for our employees including but not limited to social distancing, working from home for certain employees, splitting shifts, increased sanitation, restricted contractor and visitor access, temperature checks on all contractors and third-party vendors, travel restrictions, mask wearing requirements, and daily communication with our teams. We have conducted proactive quarantining and contact tracing from the early days of this pandemic and require self-reporting of any illness, in addition to a company doctor, weekly status meetings, tracking local resources, and industry wide efforts. We have also prepared, strong contingency plans for all our operations with specific actions based on absentee rates. While we have not utilized any such plans to date as they have not been needed, they are continuously refined in case needed. We anticipate a re-opening of society when the virus plateaus and diminishes, and we have completed re-entry plans to implement as they become appropriate. We are using data to guide our actions rather than firm dates, and our teams are kept up to date on these plans. Our focus prior to and during this pandemic has been the safety of our teams and this will continue to be our priority as we scale our operations back to normal as the data guides us to do so. We continue to actively monitor and adhere to applicable local, state, federal, and international governmental guideline actions to better ensure the safety of our employees.
The impact of COVID-19
In the first quarter of 2020, we started to see the impact of COVID-19 on our operations in the form of slowing global demand and downward pricing pressure and we began at that time to utilize the flexibility of our production assets to adjust to the COVID-19 uncertainties and our customers’ demands.
In the second quarter of 2020, the decline in demand adversely impacted our sales and production volume, and price per ton. We experienced an approximately 33% decline in production volumes and 36% decline in sales volumes when compared to our pre-COVID-19 production and sales levels in the quarter ended March 31, 2020, respectively, primarily as a result of utilizing the flexibility of our production assets to adjust to the COVID-19 uncertainties and our customers’ demands in the near- and mid-term.
Contacts
Ciner Resources LP
Investor Relations
Ed Freydel
Vice President, Supply Chain & Finance
(770) 375-2323
[email protected]
