Ciner Resources LP Announces Second 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 second quarter ended June 30, 2020.
Second Quarter 2020 Financial Highlights:
- Net sales of $76.2 million decreased 41.3% from the prior-year second quarter; year-to-date of $190.6 million decreased 26.7% over the prior year. During the first half of 2020, the Partnership experienced a significant decline in sales volumes, production and pricing in response to COVID-19.
- Soda ash volume produced decreased 32.8% from the prior-year second quarter, and soda ash volume sold decreased 37.1% from the prior-year second quarter; year-to-date soda ash volume produced decreased 16.3% from the prior-year, and soda ash volume sold decreased 19.6% from the prior-year. During the first half of 2020, the Partnership experienced a significant decline in production volumes in response to COVID-19.
- Net (loss) income of $(5.4) million decreased $29.2 million from the prior-year second quarter; year-to-date of $8.8 million decreased $40.2 million over the prior year. Net (loss) income declined more than sales and production due to 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 $2.8 million decreased 91.5% from the prior-year second quarter; year-to-date of $25.2 million decreased 61.8% over the prior year. During the first half of 2020, while sales and production volumes decreased significantly as a result of the response to COVID-19. Adjusted EBITDA declined more than sales and production due to 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.
- (Loss) earnings per unit of $(0.17) for the quarter decreased 130.4% over the prior-year second quarter of $0.56; year-to-date earnings per unit of $0.17 decreased 85.5% over the prior-year.
- Net cash provided by operating activities of $14.5 million decreased 35.3% over prior-year second quarter; year-to-date of $31.2 million increased 11.4% over the prior year.
- Distributable cash flow of negative $1.4 million decreased 110.1% compared to the prior-year second quarter; year-to-date distributable cash flow of $7.6 million decreased 74.2% over the prior year.
- The distribution coverage ratio was N/A and 2.01 for the three months ended June 30, 2020 and 2019, respectively; and 1.12 and 2.15 for the six months ended June 30, 2020 and 2019, respectively.
Oguz Erkan, CEO, commented: “The second quarter of 2020 was a challenging one for our business, as we endured major impacts from the COVID-19 pandemic and a slowing global economy. Weakened demand for soda ash forced us to make unprecedented production cuts, as the global market quickly became oversupplied following the sudden and severe decrease in economic activity and widespread stay-home requirements.
In light of current market conditions and macroeconomic uncertainty, it’s important that we are prudent in maintaining our liquidity and ability to access capital to support our operations as well as closely monitor our leverage ratios. As a result, we have taken a number of steps to reduce both operating and capital costs as well as amending our credit facility. Despite these efforts we still had to make the difficult decision to suspend our distribution to ensure we maintain financial flexibility amid the current market volatility, with the intent to resume distributions as soon as prudently possible.
Despite the difficulties we face today, I am proud to announce our early exit from ANSAC which will now be effective December 31, 2020. This will allow us to have more direct control over our export sales and work collaboratively with our parent company to more efficiently reach our global customers.
Overall, we remain confident in the long-term fundamentals of our business and look forward to entering 2021 as an independent soda ash exporter. As we continue to make these transformational changes to our business, I want to also recognize our team for their continued commitment to safety protocols we have implemented in response to COVID-19 and ensuring employee health and safe operations remain our top priority. It is thanks to our people that we have avoided a significant disruption to our operations and maintain a bright future for our business.”
|
Financial Highlights |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||||||||||||
|
(Dollars in millions, except per unit amounts) |
2020 |
|
2019 |
|
% Change |
|
2020 |
|
2019 |
|
% Change |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Soda ash volume produced (millions of short tons) |
0.453 |
|
|
0.675 |
|
|
(32.8 |
)% |
|
1.133 |
|
|
1.353 |
|
|
(16.3 |
)% |
||||
|
Soda ash volume sold (millions of short tons) |
0.427 |
|
|
0.679 |
|
|
(37.1 |
)% |
|
1.090 |
|
|
1.356 |
|
|
(19.6 |
)% |
||||
|
Net sales |
$ |
76.2 |
|
|
$ |
129.8 |
|
|
(41.3 |
)% |
|
$ |
190.6 |
|
|
$ |
260.2 |
|
|
(26.7 |
)% |
|
Net (loss) income |
(5.4 |
) |
|
$ |
23.8 |
|
|
(122.7 |
)% |
|
$ |
8.8 |
|
|
$ |
49.0 |
|
|
(82.0 |
)% |
|
|
Net (loss) income attributable to Ciner Resources LP |
$ |
(3.3 |
) |
|
$ |
11.3 |
|
|
(129.2 |
)% |
|
$ |
3.4 |
|
|
$ |
23.6 |
|
|
(85.6 |
)% |
|
(Loss) earnings per limited partner unit |
$ |
(0.17 |
) |
|
$ |
0.56 |
|
|
(130.4 |
)% |
|
$ |
0.17 |
|
|
$ |
1.17 |
|
|
(85.5 |
)% |
|
Adjusted EBITDA(1) |
$ |
2.8 |
|
|
$ |
32.8 |
|
|
(91.5 |
)% |
|
$ |
25.2 |
|
|
$ |
66.0 |
|
|
(61.8 |
)% |
|
Adjusted EBITDA attributable to Ciner Resources LP(1) |
$ |
1.1 |
|
|
$ |
16.2 |
|
|
(93.2 |
)% |
|
$ |
12.3 |
|
|
$ |
32.9 |
|
|
(62.6 |
)% |
|
Net cash provided by operating activities |
$ |
14.5 |
|
|
22.4 |
|
|
(35.3 |
)% |
|
$ |
31.2 |
|
|
28.0 |
|
|
11.4 |
% |
||
|
Distributable cash flow (deficit) attributable to Ciner Resources LP(1) |
$ |
(1.4 |
) |
|
$ |
13.9 |
|
|
(110.1 |
)% |
|
$ |
7.6 |
|
|
$ |
29.5 |
|
|
(74.2 |
)% |
|
Distribution coverage ratio (1) |
N/A |
|
2.01 |
|
|
N/A |
|
1.12 |
|
|
2.15 |
|
|
(47.9 |
)% |
||||||
|
(1)See non-GAAP reconciliations |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Three Months Ended June 30, 2020 compared to Three Months Ended June 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 June 30, |
|
Percent Increase/ (Decrease) |
||||||
|
(Dollars in millions, except for average sales price data): |
|
2020 |
|
2019 |
|
|||||
|
Net sales: |
|
|
|
|
|
|
||||
|
Domestic |
|
$ |
44.2 |
|
|
$ |
48.0 |
|
|
(7.9)% |
|
International |
|
32.0 |
|
|
81.8 |
|
|
(60.9)% |
||
|
Total net sales |
|
$ |
76.2 |
|
|
$ |
129.8 |
|
|
(41.3)% |
|
Sales volumes (thousands of short tons): |
|
|
|
|
|
|
||||
|
Domestic |
|
195.3 |
|
|
198.7 |
|
|
(1.7)% |
||
|
International |
|
231.2 |
|
|
479.8 |
|
|
(51.8)% |
||
|
Total soda ash volume sold |
|
426.5 |
|
|
678.5 |
|
|
(37.1)% |
||
|
Average sales price (per short ton):(1) |
|
|
|
|
|
|
||||
|
Domestic |
|
$ |
226.32 |
|
|
$ |
241.57 |
|
|
(6.3)% |
|
International |
|
$ |
138.41 |
|
|
$ |
170.49 |
|
|
(18.8)% |
|
Average |
|
$ |
178.66 |
|
|
$ |
191.30 |
|
|
(6.6)% |
|
Percent of net sales: |
|
|
|
|
|
|
||||
|
Domestic sales |
|
58.0 |
% |
|
37.0 |
% |
|
56.8% |
||
|
International sales |
|
42.0 |
% |
|
63.0 |
% |
|
(33.3)% |
||
|
Total percent of net sales |
|
100.0 |
% |
|
100.0 |
% |
|
|
||
|
Percent of sales volumes: |
|
|
|
|
|
|
||||
|
Domestic volume |
|
45.8 |
% |
|
29.3 |
% |
|
56.3% |
||
|
International volume |
|
54.2 |
% |
|
70.7 |
% |
|
(23.3)% |
||
|
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 41.3% to $76.2 million for the three months ended June 30, 2020 from $129.8 million for the three months ended June 30, 2019, primarily driven by a decrease in soda ash volumes sold of 37.1% due to lower international demand for three months ended June 30, 2020, as compared to the three months ended June 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.
Cost of products sold. Cost of products sold, including depreciation, depletion and amortization expense and freight costs, decreased by 23.9% to $74.2 million for the three months ended June 30, 2020 from $97.5 million for the three months ended June 30, 2019, which were primarily due to significant decreases in overall soda ash sales volumes and production in response to the COVID-19 pandemic, 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 14.3% to $6.0 million for the three months ended June 30, 2020, compared to $7.0 million for the three months ended June 30, 2019. The decrease was driven primarily by decreased American Natural Soda Ash Corp. (“ANSAC”) services and employee benefit expenses, including lower medical and travel costs.
Operating (loss) income. As a result of the foregoing, operating (loss) income decreased by 115.8% to $(4.0) million for the three months ended June 30, 2020 from $25.3 million for the three months ended June 30, 2019. During the second quarter of 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 (loss) income. As a result of the foregoing, net (loss) income decreased by 122.7% to $(5.4) million for the three months ended June 30, 2020, from $23.8 million for the three months ended June 30, 2019.
Six Months Ended June 30, 2020 compared to Six Months Ended June 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.
|
|
|
Six Months Ended June 30, |
|
Percent Increase/ (Decrease) |
||||||
|
(Dollars in millions, except for average sales price data): |
|
2020 |
|
2019 |
|
|||||
|
Net sales: |
|
|
|
|
|
|
||||
|
Domestic |
|
$ |
99.4 |
|
|
$ |
100.9 |
|
|
(1.5)% |
|
International |
|
91.2 |
|
|
159.3 |
|
|
(42.7)% |
||
|
Total net sales |
|
$ |
190.6 |
|
|
$ |
260.2 |
|
|
(26.7)% |
|
Sales volumes (thousands of short tons): |
|
|
|
|
|
|
||||
|
Domestic |
|
432.7 |
|
|
423.1 |
|
|
2.3% |
||
|
International |
|
657.5 |
|
|
932.5 |
|
|
(29.5)% |
||
|
Total soda ash volume sold |
|
1,090.2 |
|
|
1,355.6 |
|
|
(19.6)% |
||
|
Average sales price (per short ton):(1) |
|
|
|
|
|
|
||||
|
Domestic |
|
$ |
229.72 |
|
|
$ |
238.48 |
|
|
(3.7)% |
|
International |
|
$ |
138.71 |
|
|
$ |
170.83 |
|
|
(18.8)% |
|
Average |
|
$ |
174.83 |
|
|
$ |
191.94 |
|
|
(8.9)% |
|
Percent of net sales: |
|
|
|
|
|
|
||||
|
Domestic sales |
|
52.2 |
% |
|
38.8 |
% |
|
34.5% |
||
|
International sales |
|
47.8 |
% |
|
61.2 |
% |
|
(21.9)% |
||
|
Total percent of net sales |
|
100.0 |
% |
|
100.0 |
% |
|
|
||
|
Percent of sales volumes: |
|
|
|
|
|
|
||||
|
Domestic volume |
|
39.7 |
% |
|
31.2 |
% |
|
27.2% |
||
|
International volume |
|
60.3 |
% |
|
68.8 |
% |
|
(12.4)% |
||
|
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 26.7% to $190.6 million for the six months ended June 30, 2020 from $260.2 million for the six months ended June 30, 2019, primarily driven by a decrease in soda ash volumes sold of 19.6% due to lower international demand for the six months ended June 30, 2020, as compared to the six months ended June 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 $167.3 million for the six months ended June 30, 2020 from $194.0 million for the six months ended June 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 18.1% to $11.8 million for the six months ended June 30, 2020, compared to $14.4 million for the six months ended June 30, 2019. The decrease was driven primarily by decreased affiliate expenses and employee benefit expenses, as well as lower professional fees incurred during the first half of 2020.
Operating income. As a result of the foregoing, operating income decreased by 77.8% to $11.5 million for the six months ended June 30, 2020 from $51.8 million for the six months ended June 30, 2019. During the first half of 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 $8.8 million for the six months ended June 30, 2020, from $49.0 million for the six months ended June 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 June 30, |
|
Six Months Ended June 30, |
|||||||||||
|
(Dollars in millions) |
2020 |
|
2019 |
|
2020 |
|
2019 |
|||||||
|
Capital Expenditures |
|
|
|
|
|
|
|
|||||||
|
Maintenance |
$ |
3.6 |
|
|
$ |
4.1 |
|
|
10.1 |
|
|
$ |
5.2 |
|
|
Expansion |
6.1 |
|
|
6.6 |
|
|
11.3 |
|
|
24.3 |
|
|||
|
Total |
$ |
9.7 |
|
|
$ |
10.7 |
|
|
21.4 |
|
|
$ |
29.5 |
|
|
Operating and Other Data: |
|
|
|
|
|
|
|
|||||||
|
Ore grade(1) |
86.7 |
% |
|
86.6 |
% |
|
86.7 |
% |
|
86.7 |
% |
|||
|
Ore to ash ratio(2) |
1.70: 1.0 |
|
1.49: 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 six months ended June 30, 2020, capital expenditures decreased $8.1 million as compared to the six months ended June 30, 2019. The decrease was primarily driven by decreases in expansion capital expenditures because of the completion of our new co-generation facility, which began operating 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 June 30, 2020, we had cash and cash equivalents of $17.3 million. In addition, we have approximately $105.0 million ($225.0 million, less $120.0 million outstanding) of remaining capacity under our revolving credit facility. As of June 30, 2020, our leverage and interest coverage ratios, as calculated pursuant to the credit agreement for the Ciner Wyoming Credit Facility, were 1.53: 1.0 and 17.61: 1.0, respectively.
CASH FLOWS
Cash Flows
Operating Activities
Our operating activities during the six months ended June 30, 2020 provided cash of $31.2 million, an increase of 11.4% from the $28.0 million cash provided during the six months ended June 30, 2019, primarily as a result of the following:
- $8.5 million of working capital provided by operating activities during the six months ended June 30, 2020, compared to $35.5 million of working capital used in operating activities during the six months ended June 30, 2019. The $44.0 million increase in working capital provided by operating activities was primarily due to the $26.4 million decrease in due-from affiliates for the six months ended June 30, 2020 compared to a $30.2 million increase for the six months ended June 30, 2019 primarily related to the timing of collections and lower sales to ANSAC; and
- a decrease of 82.0% in net income of $40.2 million during the six months ended June 30, 2020, compared to $49.0 million for the prior-year period.
Investing Activities
We used cash flows of $20.3 million in investing activities during the six months ended June 30, 2020, compared to $37.5 million during the six months ended June 30, 2019, for capital projects as described in “Capital Expenditures” above.
Financing Activities
Cash used in financing activities of $8.5 million during the six months ended June 30, 2020 decreased by 197.7% over the prior-year cash provided by financing activities, largely due to repayments of the credit facility during the six months ended June 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 recently 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 LLC (“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 are re-prioritizing 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 impact of the COVID-19 pandemic on our business.
Ciner Wyoming Credit Facility Amendment, Ciner Resources Credit Facility and Master Agreement
On July 27, 2020, each of the Ciner Wyoming Credit Facility and Ciner Resources Credit Facility were amended to among other things: (i) increase for a limited period certain restrictive debt covenants that require the maintenance of certain consolidated leverage ratio and consolidated interest coverage ratio at the end of each period, (ii) provide a tiered interest rate structure based on applicable covenant ratios and establish a 0.50% interest floor, (iii) effectuate changes to collateral restricted disbursements and, for the Ciner Wyoming Credit Facility, add a covenant to give security if consolidated leverage ratios are above certain levels. The Master Agreement was also amended to incorporate, among other things, the modified covenants set forth in the Second Ciner Wyoming Amendment related to the consolidated leverage ratios of Ciner Wyoming.
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 who can, splitting shifts, increased sanitation, restricted contractor and visitor access, temperature checks on all contractors and third-party vendors, travel restrictions, 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 and executed when needed, strong contingency plans for all our operations with specific actions based on absentee rates. While these were not necessary to implement, they are continuously refined in case needed. We have started to 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
The impact of COVID-19 on our operations during the second quarter 2020, in the form of slowing global demand and downward pricing pressure, had an adverse effect on our second quarter results. The decline in demand adversely impacted our sales and production volume in the second quarter and we expect it will continue pressuring sales volumes and demand in the near- and mid-term. In the second quarter, 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 and may see similar declines in the near- and mid-term. Our international demand has been impacted the most as different countries deal with different levels of the outbreak and shutdowns. In addition, our customers in the flat glass and in particular the automotive business have been significantly negatively impacted. At this time, we are unable to predict the ultimate impact that COVID-19 may have on our business, future results of operations, financial position, cash flows or ability to make distributions to unitholders. The extent to which our operations may be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning the severity of the outbreak and actions by local, state, federal or international government authorities to contain the outbreak or treat its impact. Furthermore, the impacts of a potential worsening of global economic conditions and the continued disruptions to and volatility in the financial markets remain unknown. While we have begun to see signs of recovery with some of our customers and industries, primarily in the form of government re-openings and increasing orders these recoveries are very fluid.
Contacts
Investor Relations
Ed Freydel
Vice President, Supply Chain & Finance
(770) 375-2323
[email protected]
