Terra Nitrogen Company, L.P. (TNCLP) (NYSE: TNH) today reported
net earnings of $37.7 million on net sales of
$108.0 million for the quarter ended March 31, 2016. This
compares to net earnings of $59.0 million on net sales of
$126.6 million for the 2015 first quarter. Net earnings
allocable to common units was $26.7 million ($1.44 per common
unit) and $37.5 million ($2.03 per common unit) for the 2016
and 2015 first quarters, respectively. Results for the first
quarter of 2016 included an unrealized net mark-to-market loss on
natural gas derivatives of $2.3 million compared to a gain of
$3.9 million in the first quarter of 2015. The derivative
portfolio at March 31, 2016 includes natural gas derivatives
that hedge a portion of 2016, 2017 and 2018 natural gas
purchases.
Analysis of Results
Net sales for the first quarter of 2016 totaled
$108.0 million, compared to $126.6 million for the first
quarter of 2015, with lower realized selling prices for ammonia and
UAN and decreased sales volumes of ammonia partially offset by
increased sales volumes of UAN. Ammonia and UAN selling prices were
lower in the first quarter of 2016 due to greater nitrogen supply
driven by global capacity additions, coupled with lower
manufacturing and ocean freight costs, and softer global ammonia
demand from industrial users including phosphate fertilizer
production. UAN sales volume increased 17 percent and ammonia sales
volume decreased 4 percent in the first quarter of 2016 compared to
the first quarter of 2015. The increase in UAN sales volumes was
driven by greater supply availability in the current quarter
compared to the prior year's period. The increase in availability
resulted from a higher inventory entering the first quarter of
2016, as well as higher UAN production in the first quarter of 2016
compared to the first quarter of 2015.
In the first quarter of 2016, the company experienced an
unscheduled outage for maintenance on one of the facility’s two
ammonia plants, resulting in one-half of the complex's ammonia
capacity being shut down for approximately two months, and one-half
of the complex's UAN capacity being shut down for approximately one
month. Maintenance was completed and the affected ammonia plant was
restarted on March 17, 2016. In the first quarter of 2015, the
company had a planned turnaround of an ammonia plant and a UAN
plant, together representing approximately one-half of the
company's production capacity. The plants were both shut down for a
period of approximately two months during the first quarter of
2015.
Comparing the first quarter of 2016 to 2015, TNCLP’s:
- Ammonia average selling prices
decreased by 25 percent and UAN average selling prices decreased by
20 percent;
- Ammonia sales volume decreased by 4
percent and UAN sales volume increased by 17 percent; and
- Realized natural gas cost per MMBtu
decreased by 18 percent.
Cash Distribution
Cash distributions depend on TNCLP’s earnings as well as cash
requirements for working capital needs and capital expenditures. In
the first quarter of 2016, capital expenditures were
$13.8 million as compared to $47.8 million in 2015, with
the decrease primarily due to the large plant turnaround activities
in 2015 that did not recur in 2016. For the full year 2016, TNCLP
is expected to have capital expenditures in the range of $45
million to $55 million.
TNCLP reported on May 4, 2016, the declaration of a cash
distribution for the quarter ended March 31, 2016, of $1.51
per common unit payable May 31, 2016 to holders of record as
of May 16, 2016.
Cash distributions per common unit also vary based on increasing
amounts allocable to the General Partner when cumulative
distributions exceed targeted levels. With this distribution, TNCLP
cumulative distributions continue to exceed targeted levels.
This release serves as a qualified notice to nominees and
brokers as provided for under Treasury Regulation Section
1.1446-4(b). Please note that 100 percent of the Partnership’s
distributions to foreign investors are attributable to income that
is effectively connected with a United States trade or business.
Accordingly, the Partnership’s distributions to foreign investors
are subject to federal income tax withholding at the highest
effective tax rate.
About TNCLP
Terra Nitrogen Company, L.P. is a leading manufacturer of
nitrogen fertilizer products.
TNCLP is the sole limited partner of Terra Nitrogen, Limited
Partnership (TNLP), owner of the Verdigris, Oklahoma manufacturing
facility and related assets. Terra Nitrogen GP Inc., an indirect,
wholly-owned subsidiary of CF Industries Holdings, Inc., is the
General Partner of TNCLP and exercises full control over all of
TNCLP’s business affairs.
Forward-Looking Statements
All statements in this communication, other than those relating
to historical facts, are forward-looking statements. These
forward-looking statements are not guarantees of future performance
and are subject to a number of assumptions, risks and
uncertainties, many of which are beyond TNCLP’s control, which
could cause actual results to differ materially from such
statements. Important factors that could cause actual results to
differ materially from expectations include, among others:
- Risks related to TNCLP’s reliance on
one production facility;
- The volatility of natural gas prices in
North America;
- The cyclical nature of TNCLP’s business
and the agricultural sector;
- The global commodity nature of TNCLP’s
fertilizer products, the impact of global supply and demand on
TNCLP’s selling prices, and the intense global competition from
other fertilizer producers;
- Conditions in the U.S. agricultural
industry;
- Difficulties in securing the supply and
delivery of raw materials, increases in their costs or delays or
interruptions in their delivery;
- Reliance on third party providers of
transportation services and equipment;
- The significant risks and hazards
involved in producing and handling TNCLP's products against which
it may not be fully insured;
- Risks associated with cyber
security;
- Weather conditions;
- Potential liabilities and expenditures
related to environmental, health and safety laws and regulations,
and permitting requirements;
- Future regulatory restrictions and
requirements related to greenhouse gas emissions;
- The seasonality of the fertilizer
business;
- Risks involving derivatives and the
effectiveness of TNCLP’s risk measurement and hedging
activities;
- Limited access to capital;
- Acts of terrorism and regulations to
combat terrorism;
- Risks related to TNCLP’s dependence on
and relationships with CF Industries;
- Deterioration of global market and
economic conditions;
- Risks related to TNCLP's partnership
structure and control of TNCLP’s General Partner by CF
Industries;
- Changes in TNCLP’s available cash for
distribution to its unitholders, due to, among other things,
changes in its earnings, the amount of cash generated by its
operations and the amount of cash reserves established by its
General Partner for operating, capital and other requirements;
- The conflicts of interest that may be
faced by the executive officers of TNCLP’s General Partner, who
operate both TNCLP and CF Industries; and
- Tax risks to TNCLP's common unitholders
and changes in TNCLP’s treatment as a partnership for U.S. or state
income tax purposes.
More detailed information about factors that may affect TNCLP’s
performance may be found in its filings with the Securities and
Exchange Commission, including its most recent periodic reports
filed on Form 10-K and Form 10-Q, which are available through CF
Industries’ website. Forward-looking statements are given only as
of the date of this release and TNCLP disclaims any obligation to
update or revise the forward-looking statements, whether as a
result of new information, future events or otherwise, except as
required by law.
Terra Nitrogen Company, L.P. news announcements are also
available on CF Industries’ website, www.cfindustries.com.
TERRA NITROGEN COMPANY, L.P.
CONSOLIDATED BALANCE SHEETS (unaudited)
March 31, December 31, 2016 2015 (in
millions, except for units) ASSETS Current assets: Cash
and cash equivalents $ 48.2 $ 106.4 Due from affiliates of the
General Partner 23.4 10.4 Accounts receivable 2.4 0.8 Inventories
3.9 10.7 Total current assets 77.9 128.3 Property, plant and
equipment, net 313.4 307.0 Other assets 9.5 8.4 Total assets
$ 400.8 $ 443.7
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities: Accounts payable and accrued expenses $ 23.8 $
23.5 Due to affiliates of the General Partner 11.2 4.5 Other
current liabilities 19.5 15.9 Total current liabilities 54.5
43.9 Other liabilities 11.7 12.8 Partners' capital: Limited
partners' interests, 18,501,576 Common Units authorized, issued and
outstanding 281.9 308.5 Limited partners' interests, 184,072 Class
B Common Units authorized, issued and outstanding 1.8 2.3 General
partner's interest 50.9 76.2 Total partners' capital 334.6
387.0 Total liabilities and partners' capital $ 400.8
$ 443.7
TERRA NITROGEN COMPANY, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three months ended March 31, 2016
2015 (in millions, except per unit amounts)
Net sales: Product sales to affiliates of the General Partner $
107.9 $ 126.3 Other income from an affiliate of the General Partner
0.1 0.1 Other income — 0.2 Total 108.0 126.6 Cost of goods
sold: Materials, supplies and services 57.7 54.0 Services provided
by affiliates of the General Partner 7.2 7.6 Gross margin
43.1 65.0 Selling, general and administrative services provided by
affiliates of the General Partner 3.9 3.9 Other general and
administrative expenses 1.5 2.1 Net earnings $ 37.7 $
59.0 Allocation of net earnings: General Partner $ 10.6 $ 20.9
Class B Common Units 0.4 0.6 Common Units 26.7 37.5 Net
earnings $ 37.7 $ 59.0 Net earnings per Common Unit $ 1.44
$ 2.03
TERRA NITROGEN COMPANY, L.P.
SUMMARIZED OPERATING INFORMATION Three months
ended March 31, 2016 2015 Sales
volume (tons in thousands) Ammonia 91 95 UAN(1) 362 309
Average selling prices (per ton) Ammonia $ 373 $ 499 UAN(1) 203 254
Natural gas costs (per MMBtu): Purchased natural gas
costs(2) $ 1.99 $ 2.88 Realized derivatives loss(3) 0.89
0.63 Natural gas costs $ 2.88 $ 3.51
_________________________________________________
(1)
The nitrogen content of UAN is 32% by weight.
(2)
Represents the cost of natural gas purchased during the period for
use in production.
(3)
Represents realized losses on natural gas derivatives settled
during the period. Excludes unrealized mark-to-market gains and
losses on natural gas derivatives.
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Terra Nitrogen Company, L.P.Dan AldridgeDirector, Investor
Relations847/405-2530daldridge@cfindustries.com
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