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Rentech Inc Reports Operating Results (10-Q)

August 09, 2012 | About:
10qk

10qk

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Rentech Inc (RTK) filed Quarterly Report for the period ended 2012-06-30.

Rentech, Inc. has a market cap of $469.4 million; its shares were traded at around $2.19 with and P/S ratio of 2.6.

Highlight of Business Operations:

Revenues from product shipments were approximately $70.6 million for the three months ended June 30, 2012 compared to approximately $74.4 million for the three months ended June 30, 2011. The decrease in revenue for the three months ended June 30, 2012 compared to the three months ended June 30, 2011 was primarily due to decreased sales volume for all products, except for nitric acid which remained unchanged, which was partially offset by increases in sales prices for all products. The decrease in sales volume for ammonia during the quarter ended June 30, 2012 compared to the three months ended June 30, 2011 was due to the fact that the Midwestern region of the United States experienced warmer weather than is typical in March 2012. This enabled farmers to prepare the soil with earlier application of ammonia fertilizer and shifted significant spring ammonia sales from the three months ended June 30, 2012 into the three months ended March 31, 2012. This also reduced the demand for UAN since more nitrogen was applied as ammonia during this longer ammonia application period. UAN sales volume also decreased because of the warm, dry weather, causing farmers to apply less UAN to the fields, due to the belief that UAN application would not be cost effective given soil and crop conditions. Revenues from product shipments were approximately $109.1 million for the six months ended June 30, 2012 compared to approximately $98.3 million for the six months ended June 30, 2011. The increase in revenue for the six months ended June 30, 2012 compared to the six months ended June 30, 2011 was primarily due to increased sales prices for all products and sales volume for ammonia, which was partially offset by decreased sales volume for UAN, liquid and granular urea and CO2.

The average sales price per ton for the three months ended June 30, 2012 increased by approximately 9% for ammonia and by approximately 21% for UAN, compared with the three months ended June 30, 2011. These two products comprised approximately 89% and 90% of the product sales for the three months ended June 30, 2012 and 2011, respectively. The average sales price per ton for the six months ended June 30, 2012 increased by approximately 9% for ammonia and by approximately 25% for UAN, compared with the six months ended June 30, 2011. These two products comprised approximately 86% and 87% of the product sales for the six months ended June 30, 2012 and 2011, respectively. Average sales prices per ton increased due to higher demand for the products caused by a combination of low levels of corn and fertilizer inventories and expectations of higher corn acreage in 2012.

Nitrogen Products Manufacturing. Cost of sales for product shipments was approximately $25.0 million for the three months ended June 30, 2012 compared to approximately $37.0 million for the three months ended June 30, 2011. The cost of sales for product shipments for the three months ended June 30, 2012 decreased from the prior comparable period primarily due to lower sales volume of all products, except for nitric acid, which remained unchanged, lower natural gas prices and lower sales commissions. We did not pay commissions to Agrium for most of April 2012. Our agreement with Agrium includes a $5.0 million cap on commissions for each contract year, which, for the contract year ending in April 2012, was met in late 2011. Also, in the prior year, a portion of ammonia we sold was purchased rather than produced by us. Although the purchased ammonia was sold at a profit, it increased our cost per ton of ammonia. Natural gas and labor costs comprised approximately 44% and 16%, respectively, of cost of sales on product shipments for the three months ended June 30, 2012, and approximately 49% and 11%, respectively, of cost of sales on product shipments for the three months ended June 30, 2011.

Cost of sales for product shipments was approximately $40.9 million for the six months ended June 30, 2012 compared to approximately $50.7 million for the six months ended June 30, 2011. The cost of sales for product shipments for the six months ended June 30, 2012 decreased from the prior comparable period primarily due to lower sales volume for UAN, liquid and granular urea and CO2, lower natural gas prices and lower sales commissions, partially offset by higher sales volume for ammonia. We did not pay commissions to Agrium from January 2012 through most of April 2012 as described above. Also, in the prior year, our cost per ton of ammonia increased as a result of the purchase of ammonia as described above. Natural gas and labor costs comprised approximately 47% and 15%, respectively, of cost of sales on product shipments for the six months ended June 30, 2012, and approximately 50% and 12%, respectively, of cost of sales on product shipments for the six months ended June 30, 2011.

Research and Development. These expenses are included in our alternative energy segment. We incur research and development expenses at our technology center in Commerce City, Colorado, where we operate the PDU and actively conduct work to further improve our technologies and to perform services for our customers. Research and development expenses decreased by approximately $3.9 million, or 49%, during the three months ended June 30, 2012 compared to the three months ended June 30, 2011. During the three months ended June 31, 2012, there was a decrease in costs related to the Rentech-ClearFuels Gasifier of approximately $5.9 million and sales and use taxes related to the PDU of approximately $0.3 million partially offset by a decrease in reimbursements of costs related to the Rentech-ClearFuels Gasifier from the Department of Energy, or DOE, of approximately $2.7 million and an increase in consulting services of approximately $0.1 million.

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