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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (68213)	8/2/2021 10:33:20 PM
From: Elroy	Read Replies (1) \| Respond to of 78476

The just completed quarter had these two non-recurring charges ....... $15m - Reserve for recapture of prior negative available cash $8m - Loss on extinguishment of debt The debt refinancing will save $4m in interest expense in future quarters. Those three items are $2.80 per unit in distributions which should appear in future quarters with the same sales volume and prices. Realized prices for fertilizer were terrible, and will hopefully be explained in the call tomorrow. UAN fertilizer has been above $260 for all of Q2, and ammonia has been above $550 for all of Q2. They sold UAN for $237/ton and ammonia for $403/ton. There is a section in the bottom of the press release labelled "Key Market Indicators". It says the market price of UAN at quarter end was $341 and ammonia $622. I think their sales prices should converge on those numbers over time, without a corresponding increase in operating costs. ------- So despite $27m in one time charges and selling for some reason significantly below current market prices, they paid out $1.72. When the charges go away that distribution goes to about $4.00, and when the sale price approaches the market price, it's easy to see a distribution over $5.00. I'm interested to hear why they sold fertilizer at such depressed prices in Q2 and whether their realized prices should approach market prices. But still, it remains too cheap as long as corn and fertilizer market prices are elevated like they are today. The units may decline tomorrow on the less than expected distribution, but the big question is why sales prices were so much below market prices. I really don't know the answer. The charges will not continue, the interest expense reduction will come in Q3, but will sales prices approach market prices? They should, one would think. But they were too low in Q2, that's for sure.