Re: Ok, for anyone interested in Income Investing, I''m curious why you WOU
Between Yahoo Finance, Nasdaq, and Seeking Alpha, we can see that UAN has had negative earnings #'s in ~4 out of the last 5 years (thru 2021) and they just reported a loss last quarter.
Hmmm, well OK, that sorta sounds bad. But.......as an MLP partnership, unit holders don't care about GAAP losses, we care about free cash flows. Although UAN may report a GAAP loss, a huge portion of the GAAP loss is non-cash depreciation on the two fertilizer factories (which are already built and paid for). So......although there may be a GAAP loss, if there is free cash flows the free cash flows to the unit owner.
Look at Q2 2022. They had net income of $11 per share. They paid $10 per share in distributions. In Q3 2022 (the recent quarter you reference) both plants were shut down for half the quarter for maintenance (which had been delayed due to the pandemic). Despite not operating for half the quarter, they still paid $1.70 in distributions. And I'm telling you they're going to pay $35 (or more) in 2023. Doesn't that matter more than past history?
As for the past five years of history, yes, losses in 2016-2020. Fertilizer prices were in an extended trough (UAN fertilizer averaged about $180/ton per year), AND UAN the partnership was debt laden.
Now, and going forward (for some period, who knows how long?) UAN fertilizer is about $500/ton, and UAN's debt load is changed from $645m at 9.25% to $550m at 6.125%.
If you buy UAN units now, you get to sell UAN fertilizer for $500/ton (~3x the price in the period you referenced) and pay $17m per year LESS in interest expense than the period you referenced.
As for large country governing parties declaring war on fertilizer, no one in the markets served by UAN is doing this. It happened in Sri Lanka, and they had a revolution. Something sorta similar is happening in Holland (not following it terribly closely), but UAN sells fertilizer in the midwest, not in Holland or Sri Lanka.
If crazy countries ban fertilizer, the price of corn is going to go up, significantly increasing demand for fertilizer among UAN's customers.
Your view seems to be that since the fertilizer industry had a drought and "fertilizer recession" from 2016 to 2020, you cannot invest in fertilizer in 2023. Does that make any sense? |
