Lsb Industries, Inc. · NYSE:LXU
Lsb Industries — Investor Presentation (March 2022)
35 slides from Lsb Industries's investor presentation, March 2022
Slide 1: LSB Industries Investor Presentation
LSB Industries Investor Presentation (NYSE: LXU) March 2022
Slide 2: Safe Harbor Statement
Safe Harbor Statement Forward Looking Statements ▪ Statements in this presentation that are not historical are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are subject to known and unknown risks, u
Slide 3: LSB at a Glance
LSB at a Glance Business Overview TTM 12/31/21 Revenue by Business(1) Adj. Gross Margins(2) ▪ LSB Industries, headquartered in Oklahoma City, OK, manufactures and sells chemical products for the agricultural, mining and industrial markets through its three production facilities strategically located
Slide 4: Investment Highlights
Investment Highlights Diversified Nitrogen Chemicals Business with differentiated end market positions Operational improvements resulting from over $1 billion of investments and ongoing continuous improvement initiatives Increased production capacity coupled with favorable demand and pricing environ
Slide 5: Who We Are
WHO WE ARE
Slide 6: LSB Industries – A Brief History
LSB Industries – A Brief History ▪ Founded by Jack Golsen in 1968 and grew as an industrial conglomerate focused on industrial 1968 products and climate control systems 1983 ▪ Acquired El Dorado, AR manufacturing facility (“El Dorado”) from Monsanto 1999 ▪ Acquired Cherokee, AL chemical manufacturin
Slide 7: Experienced Management Team Driving Growth
Experienced Management Team Driving Growth President and CEO of LSB Industries since 2018. He joined the MARK BEHRMAN company in 2014 and served as Executive Vice President and CFO President & Chief Executive Officer from 2015-2018. Prior to LSB, Mr. Behrman had over 35 years of financial and invest
Slide 8: Employee Safety Is Our Top Priority – Goal Zero
Employee Safety Is Our Top Priority – Goal Zero ▪ Our Safety focus continued in 2021 • Our Job Safety Analysis process Recordable & Lost Time Rate Trends and Cross Site Event learning 3 initiatives were enhanced in 2021 2.5 • 2021 full year total recordable 2 injury rate was 1.15 per 200,000- man ho
Slide 9: Strong Focus on Environmental, Social and Governance Issues
Strong Focus on Environmental ▪ Announced initial sustainability priorities via interactive Environmental, Social and document posted to https://lsbindustries.com/esg/ ▪ Installed control equipment to reduce nitrous oxide (N2O, a Governance Issues greenhouse gas) emissions by 98% at our El Dorado Ni
Slide 10: What We Do
WHAT WE DO
Slide 11: Upgrading Low-Cost Feedstock to Margin Enhancing Chemicals
Upgrading Low-Cost Feedstock to Margin Enhancing Chemicals LSB Products Sold to Market Am m onia (NH3) (storage, trucks, rail) Nitric Acid (storage, trucks, rail) Am m onium Nitrate Nitric Acid AN Solution Solution (ANS), HDAN, LDAN (storage, trucks, rail) Natural Urea-Ammonium Ammonia Nitrate (UAN)
Slide 12: Diversified Nitrogen Chemicals Business with Differentiated End Market Positions
Diversified Nitrogen Chemicals Business with Differentiated End Market Positions Key Products End Markets Application ▪ Urea ammonium nitrate ▪ Fertilizer for corn and other crops solutions (UAN) ▪ Primary nitrogen component in Agricultural ▪ Ammonium nitrate (AN) – High density prills nitrogen, pho
Slide 13: Sales Mix Provides Stability and Visibility Into Contract Pricing
Sales Mix Provides Stability and Visibility Into Contract Pricing TTM 12-31-21 Sales by Pricing Method ▪ Approximately one third of sales Contractual non-seasonal and priced pursuant to contract agreements, mitigating the impact of rising natural gas costs 34% TTM ▪ Contributes to margin stability 1
Slide 14: Market Outlook
MARKET OUTLOOK
Slide 15: Agricultural Market Overview
Agricultural Market Overview (1) ▪ Corn is currently trading above $7.00/bushel and is expected to remain at elevated levels over the 5 Year Corn Prices course of 2022 $8 – Rebound in the production of ethanol (~40% of $6 total annual U.S. corn use) as miles driven have $4 returned to near pre-pande
Slide 16: Significantly Higher Pricing vs. A Year Ago
Significantly Higher Pricing vs. A Year Ago Spot Prices One Year Ago March 18, 2022 Tampa Ammonia $1,135 / MT $445 / MT Urea $935 / ST $425 / ST (Southern Plains) UAN $625 / ST $330 / ST (Southern Plains) Ammonium Nitrate $785 / ST $400 / ST (Southern Plains) Natural Gas $4.87/MMBtu $2.45/MMBtu (NYM
Slide 17: Strong Industrial and Mining Fundamentals
Strong Industrial and Mining Fundamentals Industrial Mining ▪ U.S. Federal Reserve data indicates that new housing starts sit ▪ Production of construction aggregates has increased over the near 15-year highs and on a rolling twelve-month basis are at past decade driven by infrastructure repair, upgr
Slide 18: Recent Financial Performance & Capital Structure
RECENT FINANCIAL PERFORMANCE & CAPITAL STRUCTURE
Slide 19: LSB Consolidated Financial Highlights
LSB Consolidated Financial Highlights $ in millions YTD YTD 4Q 2021 4Q 2020 12/31/21 12/31/20 $556.2 $351.3 Sales increase driven by higher Sales $190.2 $88.9 pricing Higher selling prices partially Adjusted Gross $96.9 $14.2 $217.6 $81.0 offset by higher gas and other Profit (1) raw material costs
Slide 20: Two-Year Rolling Average Annual Ammonia Production
Two-Year Rolling Average Annual Ammonia Production (1) 800,000 790,000 780,000 770,000 Tons 760,000 2019 averages impacted by turnarounds at each location including an extensive 67-day 750,000 turnaround at our Pryor facility 740,000 730,000 720,000 2018 2019 2020 2021 Two-Year Period Ended 12/31 (1
Slide 21: Strong Bottom Line Improvement
Strong Bottom Line Improvement Adjusted EBITDA(1) $220 $200 $180 $160 $140 Expect continued $ millions growth$245 in adjusted $120 EBITDA in 2022 $191 $100 driven by strong product demand and $80 pricing, continued operational $60 improvements and $111 margin enhancement $40 $84 projects $69 $65 $67
Slide 22: Current Capital Structure
Current Capital Structure Senior Secured Notes Working Capital Revolver ▪ $700 million 6.25% ▪ $65 million (Prime + 50 bps) ▪ Due October 2028 ▪ Expires February 2024 ▪ No maintenance covenants ▪ Springing maintenance covenants when borrowing exceeds 90% of availability; no trigger point has occurre
Slide 23: Expanding Free Cash Flow Supports Investment in Growth
Expanding Free Cash Flow Supports Investment in Growth ▪ Financial flexibility bolstered by Free Cash Flow and Conversion % (1) ($Millions) substantial Free Cash Flow generated in $156 2021, augmented by senior note refinancing in Q4’21 and tack-on senior note offering in Q1’22 82% $41 $35 $33 ▪ Exp
Slide 24: Growth Strategy
GROWTH STRATEGY
Slide 25: 2022 Growth Initiatives
2022 Growth Initiatives • Advancing safety programs • Full year sold-out position already underway and in nitric acid implementing new ones • Investing $10-$15 million • Investing capital to Becoming Optimizing for margin enhancement promote safe, reliable projects to optimize operations and expand
Slide 26: Focused M&A Strategy
Key Areas of Focus: ▪ Nitrogen chemical facilities similar to what we currently operate that Focused M&A Strategy can provide us with: ➢ Geographic expansion With our recapitalized ➢ Product diversification balance sheet we have the ➢ Leverage of our existing flexibility to profitably ammonia produc
Slide 27: Low Carbon Ammonia Represents Sizeable Opportunity
Low Carbon Ammonia Represents Sizeable Opportunity As an existing ammonia producer, LSB is well positioned to lever its assets and knowledge to capitalize on potential blue and green ammonia opportunities. Blue Ammonia Green Ammonia ◼ CO 2 emissions from reforming or gasification ◼ Produced using ca
Slide 28: Ammonia Production Capacity Stretched to Near Limit
Ammonia Production Capacity Stretched to Near Limit Global Ammonia Production Capacity and Demand ▪ Global ammonia production capacity 240 90% utilization, at 80% is at a near maximum level, 220 85% and demand is expected to grow at an annual 200 Millions of Metric Tons 80% rate of ~2% for the next
Slide 29: Contact Us
Contact Us CORPORATE OFFICES LSB Industries, Inc. 3503 NW 63rd Street Oklahoma City, OK 73116 COMPANY REPRESENTATIVES Cheryl Maguire Chief Financial Officer 405.510.3524 cmaguire@lsbindustries.com Fred Buonocore, CFA Vice President of Investor Relations 405.510.3550 fbuonocore@lsbindustries.com 29
Slide 30: Appendix
APPENDIX
Slide 31: EBITDA Sensitivity Grid at $5.00/mmbtu Gas
EBITDA Sensitivity Grid at $5.00/mmbtu Gas Assumes average of benchmark pricing and natural gas cost over a year $ in millions Significant Earnings Power at Optimal Operating Rates Assumes price averages for entire year Average UAN Price/ST For A Year $ 500 $ 450 $ 400 $ 350 $ 300 $ 250 Average Tamp
Slide 32: EBITDA Reconciliation
EBITDA Reconciliation Three Months Ended Twelve Months Ended LSB Consolidated ($ In Thousands) December 31, December 31, 2021 2020 2021 2020 Net income (loss) $42,082 ($21,692) $43,545 ($61,911) Plus: Interest expense 11,760 12,606 49,378 51,115 Loss on extinguishment of debt 20,259 - 10,259 - Depre
Slide 33: EBITDA Reconciliation - TTM
EBITDA Reconciliation - TTM TTM TTM TTM Twelve Months Ended LSB Consolidated ($ In Millions) Sep 30, June 30, Mar 31, Dec 31, Dec 31, Dec 31, 2021 2021 2021 2021 2020 2019 Net income (loss) $ (20.2) $ (31.7) $ (55.7) $ 39.2 $ (61.9) $ (63.4) Plus: Interest expense 50.2 49.8 50.0 49.4 51.1 46.4 Loss/
Slide 34: Gross Profit Reconciliation
Gross Profit Reconciliation Three Months Ended Twelve Months Ended LSB Consolidated ($ In Thousands) December 31, December 31, 2021 2020 2021 2020 2019 Net sales Agricultural $101,979 $41,595 $264,502 $180,036 $187,641 Industrial and Mining 88,249 47,308 291,737 171,280 177,429 Total net sales $190,
Slide 35: EPS Reconciliation
EPS Reconciliation Three Months Ended Twelve Months Ended December 31, December 31, LSB Consolidated ($ In Thousands) except per share amounts 2021 2020 2021 2020 Net income (loss attributable to common stockholders $ 42,009 $ (31,573) $ (220,002) $ (99,419) Adjustments for Exchange Transaction: Div