Slide 1: Q3 2020 Earnings Presentation
Q3 2020 Earnings Presentation November 6, 2020 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements • This presentation contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally are identifiable by use of the words “may,” “believe,” “expect,” “intend,” “plan to,” “est
Slide 3: Health and Safety is Our Top Priority – Goal Zero
Health and Safety is Our Top Priority – Goal Zero We generated significant positive results with our enhanced operational safety procedures in 2020 • ~45% decrease in recordable safety incidents year-to-date September 2020 versus year-to-date September 2019 • Year-to-date, we have experienced no r
Slide 4: Q3 2020 Overview: Executing on Our Strategy Despite Headwinds
Q3 2020 Overview Executing on Our Strategy Despite Headwinds Increase in sales volumes quarter over quarter despite impact from COVID-19 • 19% increase in agricultural sales volumes including a 33% increase in UAN sales volumes • 13% increase in industrial and mining sales volumes including a 20%
Slide 5: Market Update
Market Update Agricultural US Ethanol Production (million barrels per day) US Ethanol production has continued to rise since bottoming out in late April Estimates of approximately 91.5 million acres of corn to be planted in 2021 coupled with positive farmers sentiment and improving weather condi
Slide 6: LSB Consolidated Financial Highlights
LSB Consolidated Financial Highlights Third Quarter 2020 ($s millions, except per share amounts) 3Q 2020 3Q 2019 Sales $74.0 $75.5 Sales down (2%): Volume +12%, Price (14%) Adjusted Gross Higher production and sales volumes and $16.3 $15.1 lower gas cost offset by lower selling prices Profit1
Slide 7: Third Quarter – 2020 vs. 2019
Third Quarter – 2020 vs. 2019 ($ in millions) UAN NH3 HDAN Other 1 COVID-19 Volume 1. Volume is net of higher railcar expenses and higher distribution fees related to higher sales volumes. 7
Slide 8: Underlying Business Continues to Improve
Underlying Business Continues to Improve ($ in millions) 74% increase 1 COVID-19 Lost Sales Volumes 1. Represents $10.4 million from lower selling prices net of $2.9 million from lower natural gas. 8
Slide 9: Consistent Industrial & Mining Margins While Agricultural Margins Tempered by Low Pricing
Consistent Industrial & Mining Margins While Agricultural Margins Tempered by Low Pricing Gross Profit Margin by Market (1) 40% 37% 35% 35% 30% 25% 20% 19% 15% 15% 10% 5% 0% Agricultural Industrial & Mining 2019 YTD Q3 2020 YTD Q3 • Agricultural margins impacted by lower selling prices, partially of
Slide 10: Remain Confident in Our Financial Position
Remain Confident in Our Financial Position Given the uncertainty around COVID-19 and the current low pricing environment, we continue to prudently manage our cash flow: • Total liquidity of ~ $78.4 million as of September 30, 2020 • Refinanced existing equipment loan adding ~ $18 million of cash • R
Slide 11: Illustrative EBITDA Impact Associated with Changes in Product & Feedstock Pricing
Illustrative EBITDA Impact Associated with Changes in Product & Feedstock Pricing (Based on 2020 Volumes) Selling Price Comparison Change in Selling Price Impact on EBITDA Q4 2019 Actual Q4 2020 Current/Expected Annual EBITDA Change 1 Average Selling Prices Average Selling Prices Impact UAN $161 / S
Slide 12: UAN Continues to Trade at a Discount to Urea on a Nitrogen Equivalent Basis
UAN Continues to Trade at a Discount to Urea on a Nitrogen Equivalent Basis UAN Ammonia Urea $700 $600 $500 $400 $ / ton $300 $200 $100 $- 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 UAN (N equivalent) Ammonia (N equivalent) Urea (N equivalent) $0.90 $0.80 $0.70 $0.60 $ / ton of N $0.50 $0.40
Slide 13: Increasing Global Energy Price Spreads
Increasing Global Energy Price Spreads International Natural Gas Benchmarks - Front Month ($/MMBtu) $11.00 1 NYMEX Henry Hub Dutch TTF UK NBP 2 1 2 $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 Nov-17 Feb-18 May-18 Aug-18 Nov-18 Feb-19 May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20 Nov-20
Slide 14: Strong Production Growth in 2020
Strong Production Growth in 2020 Ammonia UAN 900,000 500,000 800,000 Tons Tons 700,000 400,000 600,000 500,000 300,000 1 2017 2018 2019 2020 2016 2017 2018 2019 2020 1 HDAN Sulfuric Acid 350,000 150,000 140,000 300,000 130,000 Tons Tons 120,000 250,000 110,000 200,000 1 100,000 1 2016 2017 2018 2019
Slide 15: Positioned for Growth and Improved Financial Performance
Positioned for Growth and Improved Financial Performance Realizing returns from completed maintenance and upgrades in 2019 • Record urea production at our Pryor facility in Q3 2020 • On pace to reach 10-year high on sulfuric acid production • On track to reach record annual ammonia, UAN, HDAN, and D
Slide 16: Appendix
Appendix Isbindustries.com INDUSTRIES
Slide 17: EBITDA Reconciliation
EBITDA Reconciliation Three Months Ended Nine Months Ended LSB Consolidated ($ In Thousands) September 30, September 30, 2020 2019 2020 2019 Net loss ($20,402) ($30,794) ($40,219) ($35,703) Plus: Interest expense 12,554 12,007 38,509 34,309 Depreciation and amortization 17,700 17,975 52,903 52,511 B
Slide 18: Gross Profit Reconciliation
Gross Profit Reconciliation Three Months Ended Nine Months Ended LSB Consolidated ($ In Thousands) September 30, September 30, 2020 2019 2020 2019 Net sales Agricultural $31,986 $35,494 $138,441 $154,790 Industrial and Mining 41,983 40,001 123,972 136,384 Total net sales $73,969 $75,495 $262,413 $29
Slide 19: Consolidated EBITDA Sensitivity Analysis
Consolidated EBITDA Sensitivity Analysis ($ In Millions) Significant Earnings Power at Optimal Operating Rates Average Natural Gas Price Per MMBTU For A Year $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $350 $ 174 $ 162 $ 150 $ 138 $ 126 $ 114 Average Tampa Ammonia Price/MT For A Year $300 $ 142 $ 130 $ 118