Terra Nitrogen Company, L.P. (TNCLP) (NYSE: TNH) today reported
net earnings of $98.7 million on net sales of
$126.7 million for the quarter ended June 30, 2016. This
compares to net earnings of $99.3 million on net sales of
$153.6 million for the 2015 second quarter. Net earnings
allocable to common units was $59.7 million ($3.22 per common
unit) and $61.3 million ($3.31 per common unit) for the 2016
and 2015 second quarters, respectively. Results for the second
quarter of 2016 included an unrealized net mark-to-market gain on
natural gas derivatives of $27.3 million compared to a gain of
$2.6 million in the second quarter of 2015. The derivative
portfolio at June 30, 2016 includes natural gas derivatives
that hedge a portion of 2016, 2017 and 2018 natural gas
purchases.
For the first six months of 2016, TNCLP reported net earnings of
$136.4 million on net sales of $234.7 million. This compares to net
earnings of $158.3 million on net sales of $280.2 million for the
first six months of 2015. Net earnings allocable to common units
was $86.4 million ($4.66 per common unit) and $98.8 million ($5.34
per common unit) for the first six months of 2016 and 2015,
respectively. Results for the first six months of 2016 included an
unrealized net mark-to-market gain on natural gas derivatives of
$25.0 million compared to a gain of $6.5 million for the
first six months of 2015.
Analysis of Results
Net sales for the second quarter of 2016 totaled
$126.7 million, compared to $153.6 million for the second
quarter of 2015, with lower average realized selling prices for
ammonia and UAN as well as decreased sales volumes of ammonia
partially offset by increased sales volumes of UAN. Ammonia and UAN
average selling prices were lower in the second 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 28
percent and ammonia sales volume decreased 11 percent in the second
quarter of 2016 compared to the second 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 higher UAN
production in the second quarter of 2016 compared to the second
quarter of 2015, which included plant turnarounds.
Comparing the second quarter of 2016 to 2015, TNCLP’s:
- Ammonia average selling prices
decreased by 27 percent and UAN average selling prices decreased by
26 percent;
- Ammonia sales volume decreased by 11
percent and UAN sales volume increased by 28 percent; and
- Realized natural gas cost per MMBtu
decreased by 4 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 half of 2016, capital expenditures were
$20.2 million as compared to $67.4 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 $30
million to $40 million.
TNCLP reported on August 3, 2016, the declaration of a cash
distribution for the quarter ended June 30, 2016, of $2.58 per
common unit payable August 31, 2016 to holders of record as of
August 15, 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) June 30,
December 31, 2016 2015 (in millions, except
for units) ASSETS Current assets: Cash and cash
equivalents $ 84.1 $ 106.4 Due from affiliates of the General
Partner 18.8 10.4 Accounts receivable 0.9 0.8 Inventories 5.7 10.7
Total current assets 111.3 128.3 Property, plant and equipment, net
306.8 307.0 Other assets 10.1 8.4 Total assets $ 428.2 $ 443.7
LIABILITIES AND PARTNERS' CAPITAL Current liabilities:
Accounts payable and accrued expenses $ 19.8 $ 23.5 Due to
affiliates of the General Partner 8.6 4.5 Other current liabilities
1.8 15.9 Total current liabilities 30.2 43.9 Other liabilities 4.2
12.8 Partners' capital: Limited partners' interests, 18,501,576
Common Units authorized, issued and outstanding 313.6 308.5 Limited
partners' interests, 184,072 Class B Common Units authorized,
issued and outstanding 2.4 2.3 General partner's interest 77.8 76.2
Total partners' capital 393.8 387.0 Total liabilities and partners'
capital $ 428.2 $ 443.7
TERRA NITROGEN COMPANY, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) Three months ended
Six months ended June 30, June 30, 2016
2015 2016
2015 (in millions, except per unit amounts) Net
sales: Product sales to affiliates of the General Partner $ 126.5 $
153.2 $ 234.4 $ 279.5 Other income from an affiliate of the General
Partner 0.2 0.2 0.3 0.3 Other income — 0.2 — 0.4 Total 126.7 153.6
234.7 280.2 Cost of goods sold: Materials, supplies and services
17.1 43.4 74.8 97.4 Services provided by affiliates of the General
Partner 6.9 6.5 14.1 14.1 Gross margin 102.7 103.7 145.8 168.7
Selling, general and administrative services provided by affiliates
of the General Partner 3.9 4.0 7.8 7.9 Other general and
administrative expenses 0.2 0.4 1.7 2.5 Earnings from operations
98.6 99.3 136.3 158.3 Interest income 0.1 — 0.1 — Net earnings $
98.7 $ 99.3 $ 136.4 $ 158.3 Allocation of net earnings: General
Partner $ 38.1 $ 37.1 $ 48.7 $ 58.0 Class B Common Units 0.9 0.9
1.3 1.5 Common Units 59.7 61.3 86.4 98.8 Net earnings $ 98.7 $ 99.3
$ 136.4 $ 158.3 Net earnings per Common Unit $ 3.22 $ 3.31 $ 4.66 $
5.34
TERRA NITROGEN COMPANY, L.P.
SUMMARIZED OPERATING INFORMATION Three
months ended Six months ended June 30,
June 30, 2016 2015 2016
2015 Sales volume (tons in thousands) Ammonia 112 126 203
221 UAN(1) 454 354 816 663 Average selling prices (per ton)
Ammonia $ 371 $ 505 $ 372 $ 503 UAN(1) 187 252 194 253
Natural gas costs (per MMBtu): Purchased natural gas costs(2) $
1.74 $ 2.46 $ 1.85 $ 2.64 Realized derivatives loss(3) 0.70 0.08
0.78 0.31 Natural gas costs $ 2.44 $ 2.54 $ 2.63 $ 2.95
_________________________________________________ (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 gains and 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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