Ciner Resources LP Announces Fourth Quarter and Year Ended 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 fourth quarter ended December 31, 2020.
Fourth Quarter and Year Ended 2020 Financial Highlights:
- Net sales of $103.4 million decreased 17.5% over the prior-year fourth quarter; year-end net sales of $392.2 million decreased 25.0% over the prior-year.
- Soda ash volume produced and sold decreased 0.3% and 14.8%, respectively, over the prior-year fourth quarter; year-end soda ash volume produced and sold decreased 17.2% and 19.5%, respectively, over the prior-year primarily due to lower demand due to the COVID-19 pandemic.
- Net income of $12.7 million decreased $10.0 million over the prior-year fourth quarter; year-end net income of $26.9 million decreased $74.7 million over the prior-year. Net income for the year ended December 31, 2020 was significantly impacted by lower demand due to the COVID-19 pandemic.
- Adjusted EBITDA of $21.8 million decreased 31.4% over the prior-year fourth quarter; year-end Adjusted EBITDA of $61.6 million decreased 54.5% over the prior-year. Adjusted EBITDA for the year ended December 31, 2020 was significantly impacted by lower demand due to the COVID-19 pandemic.
- Earnings per unit of $0.300 for the quarter decreased 45.5% over the prior-year fourth quarter of $0.550; year-end earnings per unit of $0.580 decreased 76.4% over the prior-year. Net income attributable to the Partnership for the year ended December 31, 2020 was down due to significantly lower net income due to the COVID-19 pandemic.
- Net cash provided by operating activities of $2.3 million decreased 93.5% over the prior-year fourth quarter; year-end net cash provided by operating activities of $54.7 million decreased 47.3% over the prior-year.
- Distributable cash flow of $5.6 million decreased 39.1% over the prior-year fourth quarter; year-end distributable cash flow of $17.0 million decreased 69.0% over the prior-year due to lower net cash provided by operating activities for the year ended December 31, 2020 which was significantly impacted by the global COVID-19 pandemic.
- The distribution coverage ratio was N/A and 1.35 for the three months ended December 31, 2020 and 2019, respectively; and 2.50 and 2.00 for the years ended December 31, 2020 and 2019, respectively.
Oğuz Erkan, CEO, commented: “Our results in the fourth quarter reflected a continued improvement in soda ash markets, highlighted by sequential revenue and adjusted EBITDA growth of 5% and 49%, respectively from the third quarter. Global soda ash demand, which saw dramatic declines during the peak of COVID-19 related shutdowns, continued to normalize in the quarter. Improved demand supported strong production levels totaling 686 thousand tons in the fourth quarter, which was in line with Q4 of 2019. Our industry continues to recover from the pandemic, and we are prepared to participate in a sustained recovery going forward.
“As we endured the economic fallout from the COVID-19 pandemic, our year-end financial results understandably declined as compared to our record 2019 performance. Net sales of $392 million in 2020 declined 25% from 2019 and adjusted EBITDA of $62 million fell 55% from the prior year. Amid the challenges faced in 2020, our business performed admirably, reacting quickly to preserve liquidity and reducing operating and capital costs where prudent. The commitment of our workers cannot be overstated as our team diligently adhered to new safety protocols and several optimizing measures in our production plan, operating costs, and distribution strategy, all while also managing the operational complexity involved with our exit from ANSAC.
“We continue to actively develop our export operations to capitalize on new opportunities post-ANSAC and look forward to new and brighter horizons in 2021, with a continued focus on a strong production profile, maintaining ample liquidity, and capital planning for our capacity investments in the coming years. We will also continue to evaluate on a quarterly basis our ability to resume a distribution, as we monitor the market trajectory in 2021.
“Lastly, I continue to be extremely proud of our team’s dedication to safety. Safe operations are our most important operating tenet and getting our employees home safely every day will always be our number one priority.”
|
Financial Highlights |
Three Months Ended |
|
Year Ended |
||||||||||||||||||
|
(Dollars in millions, except per unit amounts) |
2020 |
|
2019 |
|
% Change |
|
2020 |
|
2019 |
|
% Change |
||||||||||
|
Soda ash volume produced (millions of short tons) |
0.686 |
|
|
0.688 |
|
|
(0.3) |
% |
|
2.279 |
|
|
2.752 |
|
|
(17.2) |
% |
||||
|
Soda ash volume sold (millions of short tons) |
0.592 |
|
|
0.695 |
|
|
(14.8) |
% |
|
2.222 |
|
|
2.759 |
|
|
(19.5) |
% |
||||
|
Net sales |
$ |
103.4 |
|
|
$ |
125.4 |
|
|
(17.5) |
% |
|
$ |
392.2 |
|
|
$ |
522.8 |
|
|
(25.0) |
% |
|
Net income |
$ |
12.7 |
|
|
$ |
22.7 |
|
|
(44.1) |
% |
|
$ |
26.9 |
|
|
$ |
101.6 |
|
|
(73.5) |
% |
|
Net income attributable to Ciner Resources LP |
$ |
6.0 |
|
|
$ |
11.2 |
|
|
(46.4) |
% |
|
$ |
11.7 |
|
|
$ |
49.6 |
|
|
(76.4) |
% |
|
Earnings per Common Unit |
$ |
0.30 |
|
|
$ |
0.55 |
|
|
(45.5) |
% |
|
$ |
0.58 |
|
|
$ |
2.46 |
|
|
(76.4) |
% |
|
Adjusted EBITDA(1) |
$ |
21.8 |
|
|
$ |
31.8 |
|
|
(31.4) |
% |
|
$ |
61.6 |
|
|
$ |
135.4 |
|
|
(54.5) |
% |
|
Adjusted EBITDA attributable to Ciner Resources LP(1) |
$ |
10.6 |
|
|
$ |
16.1 |
|
|
(34.2) |
% |
|
$ |
30.1 |
|
|
$ |
67.5 |
|
|
(55.4) |
% |
|
Net cash provided by operating activities |
$ |
2.3 |
|
|
$ |
35.4 |
|
|
(93.5) |
% |
|
$ |
54.7 |
|
|
$ |
103.8 |
|
|
(47.3) |
% |
|
Distributable cash flow attributable to Ciner Resources LP(1) |
$ |
5.6 |
|
|
$ |
9.2 |
|
|
(39.1) |
% |
|
$ |
17.0 |
|
|
$ |
54.9 |
|
|
(69.0) |
% |
|
Distribution coverage ratio (1) |
N/A |
|
1.35 |
|
|
N/A |
|
2.50 |
|
|
2.00 |
|
|
25.0 |
% |
||||||
|
(1) See non-GAAP reconciliations |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Three Months Ended December 31, 2020 compared to Three Months Ended December 31, 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 |
|
Percent |
||||||
|
Net sales (Dollars in millions): |
|
2020 |
|
2019 |
|
|||||
|
Domestic |
|
$ |
55.7 |
|
|
$ |
49.3 |
|
|
13.0% |
|
International |
|
47.7 |
|
|
76.1 |
|
|
(37.3)% |
||
|
Total net sales |
|
$ |
103.4 |
|
|
$ |
125.4 |
|
|
(17.5)% |
|
Sales volumes (thousands of short tons): |
|
|
|
|
|
|
||||
|
Domestic |
|
264.7 |
|
|
213.7 |
|
|
23.9% |
||
|
International |
|
326.8 |
|
|
480.9 |
|
|
(32.0)% |
||
|
Total soda ash volume sold |
|
591.5 |
|
|
694.6 |
|
|
(14.8)% |
||
|
Average sales price (per short ton): |
|
|
|
|
|
|
||||
|
Domestic |
|
$ |
210.43 |
|
|
$ |
230.70 |
|
|
(8.8)% |
|
International |
|
$ |
145.96 |
|
|
$ |
158.24 |
|
|
(7.8)% |
|
Average |
|
$ |
174.81 |
|
|
$ |
180.54 |
|
|
(3.2)% |
|
Percent of net sales: |
|
|
|
|
|
|
||||
|
Domestic sales |
|
53.9 |
% |
|
39.3 |
% |
|
37.2% |
||
|
International sales |
|
46.1 |
% |
|
60.7 |
% |
|
(24.1)% |
||
|
Total percent of net sales |
|
100.0 |
% |
|
100.0 |
% |
|
|
||
|
Percent of soda ash volume sold: |
|
|
|
|
|
|
||||
|
Domestic volume |
|
44.8 |
% |
|
30.8 |
% |
|
45.5% |
||
|
International volume |
|
55.2 |
% |
|
69.2 |
% |
|
(20.2)% |
||
|
Total percent of soda ash volume sold |
|
100.0 |
% |
|
100.0 |
% |
|
|
||
Consolidated Results
Net sales. Net sales decreased by 17.5% to $103.4 million for the three months ended December 31, 2020 from $125.4 million for the three months ended December 31, 2019, primarily driven by a decrease in soda ash volumes sold of 14.8% due to lower international demand for the three months ended December 31, 2020, as well as a decrease in average sales prices of 3.2%. The decrease in sales prices was primarily driven by a decrease in domestic and international pricing during the three months ended December 31, 2020. The overall decrease in soda ash volumes sold was primarily driven by the decrease in international demand due to the COVID-19 pandemic. However, the Partnership experienced an increase in domestic sales volume primarily driven by recovery from declines in the previous quarters and new customers.
Cost of products sold. Cost of products sold, including depreciation, depletion and amortization expense and freight costs, declined to $84.2 million for the three months ended December 31, 2020 compared to $97.2 million for the three months ended December 31, 2019, primarily due to lower production and sales volume impacted by the COVID-19 pandemic for the three months ended December 31, 2020.
Selling, general and administrative expenses. Our selling, general and administrative expenses increased 20.9% to $5.2 million for the three months ended December 31, 2020, compared to $4.3 million for the three months ended December 31, 2019. The increase was driven primarily by an increase in employee compensation costs compared to the fourth quarter of 2019 as we continued building our infrastructure for international sales, marketing, and logistics.
Operating income. As a result of the foregoing, operating income decreased by 41.4% to $14.0 million for the three months ended December 31, 2020, compared to $23.9 million for the three months ended December 31, 2019.
Net income. As a result of the foregoing, net income decreased by 44.1% to $12.7 million for the three months ended December 31, 2020, compared to $22.7 million for the three months ended December 31, 2019.
Year Ended December 31, 2020 compared to Year Ended December 31, 2019
The following table sets forth a summary of net sales, sales volumes and average sales price, and the percentage change between the periods.
|
|
|
Year Ended |
|
Percent |
||||||
|
Net sales (Dollars in millions, except average sales price): |
|
2020 |
|
2019 |
|
|||||
|
Domestic |
|
$ |
208.8 |
|
|
$ |
207.0 |
|
|
0.9% |
|
International |
|
183.4 |
|
|
315.8 |
|
|
(41.9)% |
||
|
Total net sales |
|
$ |
392.2 |
|
|
$ |
522.8 |
|
|
(25.0)% |
|
Sales volumes (thousands of short tons): |
|
|
|
|
|
|
||||
|
Domestic |
|
940.9 |
|
|
874.5 |
|
|
7.6% |
||
|
International |
|
1,281.0 |
|
|
1,884.6 |
|
|
(32.0)% |
||
|
Total soda ash volume sold |
|
2,221.9 |
|
|
2,759.1 |
|
|
(19.5)% |
||
|
Average sales price (per short ton): |
|
|
|
|
|
|
||||
|
Domestic |
|
$ |
221.92 |
|
|
$ |
236.71 |
|
|
(6.2)% |
|
International |
|
$ |
143.17 |
|
|
$ |
167.57 |
|
|
(14.6)% |
|
Average |
|
$ |
176.52 |
|
|
$ |
189.48 |
|
|
(6.8)% |
|
Percent of net sales: |
|
|
|
|
|
|
||||
|
Domestic sales |
|
53.2 |
% |
|
39.6 |
% |
|
34.3% |
||
|
International sales |
|
46.8 |
% |
|
60.4 |
% |
|
(22.5)% |
||
|
Total percent of net sales |
|
100.0 |
% |
|
100.0 |
% |
|
|
||
|
Percent of soda ash volume sold: |
|
|
|
|
|
|
||||
|
Domestic volume |
|
42.3 |
% |
|
31.7 |
% |
|
33.4% |
||
|
International volume |
|
57.7 |
% |
|
68.3 |
% |
|
(15.5)% |
||
|
Total percent of soda ash volume sold |
|
100.0 |
% |
|
100.0 |
% |
|
|
||
Consolidated Results
Net sales. Net sales decreased by 25.0% to $392.2 million for the twelve months ended December 31, 2020 from $522.8 million for the twelve months ended December 31, 2019, primarily driven by a decrease in soda ash volumes sold of 19.5% and a decrease in average sales price per short ton of 6.8% primarily due to the COVID-19 pandemic. The decrease in sales prices was driven by a decrease in domestic and international pricing during the twelve months ended December 31, 2020. Contributing to the decrease in net sales was a decline in international pricing, which continued the trend that began in the fourth quarter in 2019. The overall increase in domestic soda ash volumes sold was primarily driven by the domestic market not being as adversely impacted by COVID-19 as the international market.
Cost of products sold. Cost of products sold, including depreciation, depletion and amortization expense and freight costs, decreased by 13.7% to $338.1 million for the twelve months ended December 31, 2020 from $391.9 million for the twelve months ended December 31, 2019, primarily due to lower sales volumes for the twelve months ended December 31, 2020 as a result of a decline in demand due to the COVID-19 pandemic.
Selling, general and administrative expenses. Our selling, general and administrative expenses decreased 8.8% to $21.7 million for the twelve months ended December 31, 2020, compared to $23.8 million for the twelve months ended December 31, 2019. The decrease was primarily due to decreases in sales and marketing expenses and professional fees and contracted services during the twelve months ended December 31, 2020 as a result of decreased travel and deferring most non-essential costs due to the global COVID -19 pandemic for the twelve months ended December 31, 2020 compared to the twelve months ended December 31, 2019.
Operating income. As a result of the foregoing, and primarily lower net sales that were led by lower demand and lower average net price, operating income decreased by 69.7% to $32.4 million for the twelve months ended December 31, 2020, compared to $107.1 million for the twelve months ended December 31, 2019.
Net income. As a result of the foregoing, net income decreased by 73.5% to $26.9 million for the twelve months ended December 31, 2020, compared to $101.6 million for the twelve months ended December 31, 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 |
|
Year Ended |
||||||||||||
|
(Dollars in millions) |
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||
|
Capital Expenditures |
|
|
|
|
|
|
|
||||||||
|
Maintenance |
$ |
6.2 |
|
|
$ |
10.7 |
|
|
$ |
22.9 |
|
|
$ |
20.5 |
|
|
Expansion |
0.2 |
|
|
6.3 |
|
|
14.5 |
|
|
37.6 |
|
||||
|
Total |
$ |
6.4 |
|
|
$ |
17.0 |
|
|
$ |
37.4 |
|
|
$ |
58.1 |
|
|
Operating and Other Data: |
|
|
|
|
|
|
|
||||||||
|
Ore grade(1) |
85.7 |
% |
|
86.6 |
% |
|
86.6 |
% |
|
86.6 |
% |
||||
|
Ore to ash ratio(2) |
1.56: 1.0 |
|
1.50: 1.0 |
|
1.60: 1.0 |
|
1.51: 1.0 |
||||||||
|
(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. |
|||||||||||||||
|
(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. |
|||||||||||||||
During the year ended December 31, 2020, capital expenditures decreased $20.7 million compared to the year ended December 31, 2019 primarily due to the decrease in expansion capital expenditures since the co-generation facility construction costs were largely absorbed in the year ended December 31, 2019 with construction of the facility being complete in the first quarter of 2020. Maintenance capital expenditures increased 11.7% during the year ended December 31, 2020, which was primarily to both adequately maintain the facility’s physical assets and improve its operational reliability.
We continue to develop plans and execute the early phases for a potential new Green River Expansion Project. 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 until we have more clarity and visibility into the ongoing impact of the COVID-19 pandemic on our business.
FINANCIAL POSITION AND LIQUIDITY
As of December 31, 2020, we had cash and cash equivalents of $0.5 million. In addition, as of December 31, 2020, we had approximately $122.5 million ($225.0 million, less $102.5 million outstanding) of remaining capacity under our Ciner Wyoming Credit Facility. As of December 31, 2020, the Partnership had approximately $9.0 million ($10.0 million, less $1.0 million outstanding) available for borrowing under the Partnership’s credit facility (the “Ciner Resources Credit Facility”). As of December 31, 2020, our leverage and interest coverage ratios, as calculated pursuant to the credit agreement for the Ciner Wyoming Credit Facility and the Ciner Resources Credit Facility, were 2.15: 1.0 and 11.43: 1.0, respectively.
As previously disclosed in the Partnerships Form 8-K on March 11, 2021, in February 2021, the Partnership and Ciner Wyoming (the “Company”) were informed that an event of default (the “Ongoing Event of Default”) arose under the facilities agreement and certain related finance documents, pursuant to which WE Soda Ltd. (“WE Soda”) and Ciner Enterprises Inc. (“Ciner Enterprises”), as borrowers (the “borrowers”), KEW Soda Ltd., as parent, and certain related parties and other beneficial owners of the Partnership and the Company, as original guarantors, (as original guarantors and together with the borrowers, the “Ciner Obligors”) are parties (as amended and restated or otherwise modified, the “Facilities Agreement”). In response, the Company sought to amend its existing credit agreements, and the Partnership sought to repay and terminate its existing credit agreement to prevent the possibility of a default (a “Possible Default”) thereunder if the lenders under the Facilities Agreement chose to foreclose on certain equity interests of the Partnership’s and the Company’s beneficial owners (the “Equity Foreclosure Remedy”). Absent these actions, the exercise of the Equity Foreclosure Remedy would have resulted in a change of control under the Ciner Wyoming Credit Facility, Ciner Resources Credit Facility and Ciner Wyoming Equipment Financing Arrangement (collectively the “Credit Agreements”), which would be an event of default thereunder and would have provided the lenders under the Credit Agreements with certain rights, including declaring the outstanding debt under the Credit Agreements to be immediately due and payable. Further, the timing of our expansion projects may be impacted by certain performance ratios requirements of the Ciner Obligors under the Facilities Agreement. Based on the Ciner Obligors’ applicable ratios at December 31, 2020 the Partnership’s expansion capital expenditures are prohibited until the Ciner Obligors’ applicable ratios are at specified levels pursuant to the Facilities Agreement.
CASH FLOWS AND QUARTERLY CASH DISTRIBUTION
Cash Flows
Cash provided by operating activities decreased to $54.7 million during the twelve months ended December 31, 2020 compared to $103.8 million of cash provided during the twelve months ended December 31, 2019, primarily driven by $26.9 million of net income during the twelve months ended December 31, 2020, compared to $101.6 million of net income during the twelve months ended December 31, 2019. The $24.2 million decrease in working capital used by operating activities was primarily due to the $8.5 million decrease in due from affiliates for the twelve months ended December 31, 2020, compared to a $24.9 million increase for the twelve months ended December 31, 2019, which increase was primarily due to an increase in due from affiliates as a result of the timing of our funding of pension benefits offered and administered by Ciner Resources Corporation (“Ciner Corp”) for the Partnership and its subsidiary, Ciner Wyoming LLC (“Ciner Wyoming”).
Cash provided by operating activities during the twelve months ended December 31, 2020 was offset by cash used in investing activities of $42.2 million for capital expenditures and cash used in financing activities during the twelve months ended December 31, 2020 of $26.9 million. The decrease in cash used in financing activities during the twelve months ended December 31, 2020 was due to distributions paid of $27.9 million, net borrowings of $241.9 million, and net repayments of $240.7 million during the twelve months ended December 31, 2020, compared to distributions paid of $63.7 million, net borrowings of $102.0 million and net repayments of $71.5 million during the twelve months ended December 31, 2019. The increase in net borrowings during the twelve months ended December 31, 2020 was primarily related to funding of capital expenditures and to provide greater liquidity flexibility for operations.
Quarterly Distribution
Our general partner has considerable discretion in determining the amount of available cash, the amount of distributions and the decision to make any distribution. Although our partnership agreement requires that we distribute all of our available cash quarterly, there is no guarantee that we will make quarterly cash distributions to our unitholders or at any other rate, and we have no legal obligation to do so.
In an effort to achieve greater financial and liquidity flexibility during the COVID-19 pandemic, on August 3, 2020, each of the members of the board of managers of Ciner Wyoming approved a suspension of quarterly distributions to its members. In addition, effective August 3, 2020, in connection with the quarterly distribution for the quarter ended June 30, 2020, each of the members of the board of directors of our general partner approved a suspension of quarterly distributions to our unitholders.
Each of the board of managers of Ciner Wyoming and the board of directors of our general partner approved the continuation of the suspension of quarterly distributions to the members of Ciner Wyoming and our unitholders, as applicable, for each of the quarters ended September 30, 2020 and December 31, 2020 in a continued effort to achieve greater financial and liquidity flexibility during the COVID-19 pandemic. In March 2021, the board of managers of Ciner Wyoming approved a special $8.0 million distribution to, amongst other things, provide the Partnership with funds to retire the Ciner Resources Credit Facility.
Management and the board of directors of our general partner will continue to evaluate, on a quarterly basis, whether it is appropriate to reinstate a distribution to our unitholders, which will be dependent in part on our cash reserves, liquidity, total debt levels and anticipated capital expenditures.
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, could 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 and market 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 until we have more clarity and visibility into the ongoing impact of the COVID-19 pandemic on our business. The timing of the new Green River Expansion Projects as well as any other expansion capital expenditures may be impacted by certain performance ratios requirements of the Ciner Obligors’ Facilities Agreement. Based on the Ciner Obligors’ applicable ratios at December 31, 2020 our expansion capital expenditures are prohibited until the Ciner Obligors’ applicable ratios are at acceptable levels pursuant to the Facilities Agreement.
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. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. It has spread throughout the world, and significant numbers of infections have been reported, including in the United States and markets to which our products have historically been exported. Governmental jurisdictions in the United States and globally have taken various actions to reduce the transmission of COVID-19, which has resulted in disruption in the national and global economic and financial markets. Since late December 2020, the vaccines for COVID-19 have become more widely available in the United States and globally.
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.
Contacts
Investor Relations
Ed Freydel
Vice President, Supply Chain & Finance
(770) 375-2323
[email protected]
