Lsb Industries, Inc. · NYSE:LXU
Lsb Industries — Investor Presentation (May 2017)
34 slides from Lsb Industries's investor presentation, May 2017
Slide 1: Investor Presentation
Investor Presentation May 2017 1
Slide 2: Safe Harbor Statement
Safe Harbor Statement 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,” “estimate,”
Slide 3: Why LSB? Executing on Strategic Plan to Drive Growth and Enhance Shareholder Value
Why LSB? Executing on Strategic Plan to Drive Growth and Enhance Shareholder Value 1 Operates well-diversified Chemical Business with differentiated market positions 2 Over $1 Billion in capital invested in the last four years including transformative expansion at El Dorado Facility 3 Operational im
Slide 4: Business Overview
Business Overview 4 production facilities Sales Mix • El Dorado, Arkansas • Cherokee, Alabama • Pryor, Oklahoma Mining • Baytown, Texas A key strategy is Provides nitrogen based agricultural, mining and industrial Industrial 11% to optimize sales chemicals to North American market mix: industria
Slide 5: Diverse Products With Broad Application
Diverse Products With Broad Application Products Uses Competitors Urea ammonium nitrate Fertilizer for corn and other crops CF Industries Holdings Inc., PCS Agricultural solutions (UAN) Nitrogen Inc., Koch Industries Inc., Chemicals Rentech Inc., CVR Partners LP, imports 46% Ammonium nitrate
Slide 6: LSB’s Agricultural Distribution
LSB’s Agricultural Distribution Southern Pryor, UAN CVR, Distributors & Plains & Corn OK Ammonia Dealers Belt Transammonia, Cherokee, Eastern UAN The Andersons, AL Corn Belt CHS, Koch, et.al. Ag Centers Southern Plains, El Dorado, AN Distributors & South Central, AR Ammonia Dealers, Koch Midwest & W
Slide 7: Fully Operational Production Facilities in Highly Advantaged Locations
Fully Operational Production Facilities in Highly Advantaged Locations Facility El Dorado Cherokee Pryor Baytown Facility Location Arkansas Alabama Oklahoma Texas Year Acquired / Built 1983 1999 2000 2000 Ammonia Design Kellogg Kellogg Pritchard – Plant Area (Acres) 150 160 47 2 Site Area (Acres) 1,
Slide 8: Market Outlook
Market Outlook Agricultural Industrial and Mining Improvement in fertilizer pricing demand ahead of typical spring Industrial market – Trending slightly up in 2017. The auto and housing season. markets continue to look good for the coming year. Natural gas feedstock costs expected to remain relative
Slide 9: Chemical Commodities Feedstock & End Products 5-year Price Trend
Chemical Commodities Feedstock & End Products 5-year Price Trend $750 $6.50 $6.00 $650 $5.50 $5.00 $550 $4.50 $450 $4.00 $3.50 $350 $3.00 $2.50 $250 $2.00 $150 $1.50 Mar 12 Jul 12 Mar 13 Jul 13 Mar 14 Jul 14 Mar 15 Jul 15 Mar 16 Jul 16 Mar 17 Nov 12 Nov 13 Nov 14 Nov 15 Nov 16 UAN - Southern Plains
Slide 10: Nitrogen Upgrading Margins
Nitrogen Upgrading Margins (average monthly publication prices) $600 $500 Nitrate premium above urea $400 Value above ammonia USD/t $300 $200 Value above gas $100 $0 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 Natural Gas - Henry Hub (UREA Equivalent) Ammonia - Southern Plains (UREA Equivalent) UREA - Southe
Slide 11: Agricultural Chemicals – Attractive Medium to Long-Term Industry Fundamentals
Agricultural Chemicals – Attractive Medium to Long-Term Industry Fundamentals World situation North American situation Growing populations World grain usage continues to increase annually USDA stated an ~4% decrease in corn acres planted in 2017 Developing economies versus 2016 Changing di
Slide 12: LSB’s Operational Improvement Plan
LSB’s Operational Improvement Plan 12
Slide 13: We have made Significant Operational Improvements to Date
We have made Significant Operational Improvements to Date 1 Well-Positioned for Growth with Major Expansion Completed 2 Formalized Financial and Operational Goals and Objectives Implemented Operational Upgrades That Enhance Future Reliability and Performance 3 Across Facilities with a Focus on Impro
Slide 14: We are Committed to On-going Operational Stability
We are Committed to On-going Operational Stability We have taken several steps and invested significant additional resources to implement new operational preventative and predictive maintenance Key Operational Achievements New Resources Devoted to Operational Excellence Cherokee and Pryor ammoni
Slide 15: Unsatisfactory Equipment Performance
Overview of Reliability There are MANY reliability practices – they all boil down to keeping machinery producing as designed Reliability is summarized by the “P-F Curve,” which pulls PdM (Predictive Maintenance) tools together into a big picture Equipment P-F Curve (Potential Failure – Functiona
Slide 16: Where is LSB?
Where is LSB? Historically, each facility had their own reliability practices in place. Some practices were good, some not. Since 2014 we’ve been standardizing best practices across sites: Oil Sample Analysis and general KPI The Big Standardized to the same analytical lab with the same testing P
Slide 17: Improvements in Ammonia On-Stream Rates and Capacity Utilization across Facilities
Improvements in Ammonia On-Stream Rates and Capacity Utilization across Facilities... Cherokee % Av erage on-stream rate (Q1 ’14 – Q1 ’17): 95% 120 95 100 96 87 96 94 100 85 96 100 87 100 100 95 95 95 80 97 89 96 95 99 97 99 100 94 94 93 97 40 87 84 76 66 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Slide 18: El Dorado Plant Outlook is Favorable for the Foreseeable Future
...and Plant Outlook is Favorable for the Foreseeable Future Current status Going Forward Ammonia plant currently Heat exchanger replacements operating at full rate Optimize cost control and ensure the plant is on-stream 95%+ Ammonia Consistently producing above 1,300 tons / day No turnaro
Slide 19: Additional Operational Upside and Opportunity to Reduce Costs
Additional Operational Upside and Opportunity to Reduce Costs Key Opportunities Description Consolidate and centralize freight, including rail, truck and barge Maximize railcar usage and efficiency Expense Consolidate all purchasing of plant supplies and materials to negotiate lower overall co
Slide 20: Financial Overview
Financial Overview Lou Isbindustries.com INDUSTRIES
Slide 21: LSB Consolidated Financial Highlights
LSB Consolidated Financial Highlights First Quarter 2017 Three Months Ended March 31, ($ In Millions, Except EPS) 2017 2016 Change Net sales $123.3 $98.9 $24.4 Gross profit (loss) $11.6 ($6.2) $17.8 % of net sales 9.4% -6.3% 15.7% Selling, general and administrative expense $10.5 $10.9 ($0.4) % of n
Slide 22: First Quarter Actuals – Current Year vs. Previous Year
First Quarter Actuals – Current Year vs. Previous Year ($ In Millions) Q1 Q1 2017 Q1 2016 Normalized Total Consolidated Adjusted EBITDA $20.0 $8.3 Q1 2016 $8.3 $8.3 Net Sales Price Impact (12.7) - Net Sales Volume Impact 17.9 17.9 Other Cost EDC lower cost of make vs. buy 6.5 6.5 Q1 2017 $20.0 Norma
Slide 23: Capital Structure
Capital Structure $ In Millions 3/31/17 Cash $ 45.0 Senior Secured Notes 375.0 Working Capital Revolver ($44.9 mm of availability at 3/31/17) - Other Debt 49.2 Unamortized Discount and Debt Issuance Costs (6.9) Total Long-Term Debt, Including Current Portion, net $ 417.3 Series E and F Redeemable Pr
Slide 24: 2017 Outlook
2017 Outlook Sales Volume: Full Year 2017 Sales (tons) Agriculture: UAN 475,000 – 500,000 HDAN 260,000 – 280,000 Ammonia 95,000 – 105,000 Industrial, Mining and Other: Ammonia 200,000 – 225,000 LDAN and AN solution 140,000 – 160,000 Nitric Acid and Other Mixed Acids 90,000 – 110,000 Nitric Acid - Ba
Slide 25: 2017 Outlook (continued)
2017 Outlook (continued) Financial (Full Year): Variable Plant Expenses: Natural gas feedstock costs 30 – 32 mmbtu/ton of ammonia Electricity 7.5% – 9.0% of sales Catalyst expense (burnoff) 1.5% – 2.5% of sales Freight 5.0% – 7.0% of sales Other purchased products (primarily Ag Centers) 2.5% – 3.5%
Slide 26: Consolidated EBITDA Sensitivity Analysis
Consolidated EBITDA Sensitivity Analysis ($ In Millions) Significant Earnings Power at Optimal Operating Rates Natural Gas Price per mmbtu $2.50 $3.00 $3.50 $4.00 $4.50 Tampa Ammonia price per MT $450 $226 $214 $202 $190 $178 $400 $194 $182 $170 $158 $146 $350 $162 $150 $138 $126 $114 $300 $130 $118
Slide 27: Investment Highlights
Investment Highlights 1 Highly advantaged locations with logistical and distribution benefits 2 Positioned for long-term success following over $1 billion in capital investments over the last four years 3 Attractive timing in cycle – markets recovering from trough 4 EBITDA upside from improved plant
Slide 28: Appendix
Appendix Lou Isbindustries.com INDUSTRIES
Slide 29: EBITDA Reconciliation
EBITDA Reconciliation Three Months Ended March 31, LSB Consolidated ($ In Millions) 2017 2016 Net loss: ($6.0) ($14.9) Plus: Interest expense 9.4 1.4 Depreciation and amortization 17.6 11.0 Benefit for income taxes (1.3) (4.8) Income from discontinued operations - (0.8) EBITDA (1) $19.7 ($8.1) Consu
Slide 30: El Dorado Facility Overview
El Dorado Facility Overview NH3 (pipeline) HN03 Nitric Acid LDAN Air HNO3 AN Solution E2 Liquid NH3 Liquid NH3 NH3 Vapor SPHERS Liquid NH3 Air NH3 Truck Liquid NH3 Steam Ammonia NH3 Liquid NH3 Natural Gas Liquid NH3 CRYO STOR NH3 Truck CO2 Vapor CO2 Product Air H2S04 Sulfuric Acid NASSAC 99% HNO3 Su
Slide 31: Cherokee Facility Process Flow
Cherokee Facility Process Flow NH3 (storage, trucks, rail) Acid (storage, trucks, rail) ANS Nitric AN (pipeline to emulsion Acid Solution plant, storage, trucks, rail) Natural UAN Ammonia Gas UAN (storage, trucks, Plant (pipeline) rail, barge) CO2 Urea DEF (truck sales) CO2 Liquification CO2 (truck
Slide 32: Pryor Plant Basic Process Flow
Pryor Plant Basic Process Flow NH3 (storage, trucks, rail) Nitric AN Acid Solution Natural Gas Ammonia UAN UAN Plant (storage, trucks, rail) (pipeline) CO2 Urea CO2 CO2 Liquification (storage, trucks) 32
Slide 33: Notes
L5H Notes INDUSTRIES Isbindustries.com
Slide 34: Website: www.lsbindustries.com
LSB Industries, Inc. is headquartered in Oklahoma City and does business through its subsidiaries, with chemical plants in Texas, Arkansas, Alabama and Oklahoma and an engineered products distribution center in Oklahoma City. Investor Relations: Corporate Offices: Company Contact: 16 South Pennsylva