Itafos (TSX VENTURE: IFOS) (the “
Company”)
reported today its Q2 2019 financial results and operational
highlights. The Financial Statements and Management’s Discussion
and Analysis for the quarter ended June 30, 2019 are available
under the Company’s profile at www.sedar.com and under the
Investors – Financial Statements page of the Company’s website,
www.itafos.com. All dollar values are in US Dollars.
“Our operational results were driven by continued strong
performance at Itafos Conda and advancement of the repurpose plan
at Itafos Arraias on schedule. Difficult global market conditions
globally impacted our financial results, which were otherwise in
line with expectations. Overall, we achieved several key milestones
during the quarter including record May MAP production at Itafos
Conda and securing a multi-year agreement with the OCP Group to
supply high quality phosphate rock to Itafos Arraias. Finally, we
remain focused on advancing our key development initiatives,
including extending the mine life of Itafos Conda and developing
our world-class phosphate rock project at Itafos Farim,” said
Mhamed Ibnabdeljalil, interim CEO of Itafos.
Financial Highlights
For the three and six months ended
June 30, 2019 and 2018, the Company’s financial highlights
were as follows:
(unaudited in thousands of US Dollars except for |
|
For the three months ended June 30, |
|
For the six months ended June 30, |
per share amounts) |
|
2019 |
|
|
2018 |
|
2019 |
|
2018 |
Revenues, net |
|
$ |
103,072 |
|
|
$ |
67,187 |
|
$ |
176,250 |
|
$ |
125,303 |
Operating income (loss) |
|
$ |
(14,079 |
) |
|
$ |
8,605 |
|
$ |
(20,089 |
) |
$ |
11,246 |
Net income (loss) |
|
|
(21,597 |
) |
|
|
4,736 |
|
|
(34,928 |
) |
|
56,060 |
Adjusted EBITDA |
|
|
(1,398 |
) |
|
|
12,120 |
|
|
(470 |
) |
|
21,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Maintenance capex |
|
$ |
11,861 |
|
|
$ |
20,045 |
|
$ |
17,047 |
|
$ |
21,790 |
Growth capex |
|
|
3,164 |
|
|
|
7,121 |
|
|
6,180 |
|
|
14,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share |
|
$ |
(0.15 |
) |
|
$ |
0.03 |
|
$ |
(0.25 |
) |
$ |
0.41 |
Fully diluted income (loss) per share |
|
$ |
(0.15 |
) |
|
$ |
0.03 |
|
$ |
(0.25 |
) |
$ |
0.41 |
For the three and six months ended June 30, 2019
and 2018, the Company’s financial highlights were explained as
follows:
- revenues were up year-over-year primarily due to higher MAP and
SPA sales volumes at Itafos Conda and revenue contributions from
Itafos Arraias during H1 2019, which had not achieved commercial
production during H1 2018;
- net income (loss) was down year-over-year primarily due to a
gain on the fair valuation of Itafos Conda and a gain from
investments in associates related to the GB Minerals Ltd.
Arrangement during Q1 2018;
- adjusted EBITDA was down year-over-year primarily due to
increased input costs at Itafos Conda and constrained production
due to implementation of the repurpose plan (the “Repurpose Plan”)
at Itafos Arraias during H1 2019, which had not achieved commercial
production during H1 2018;
- maintenance capex was down year-over-year primarily due to a
partial planned plant turnaround at Itafos Conda during H1 2019
compared to a full planned plant turnaround at Itafos Conda during
H1 2018; and
- growth capex was down year-over-year primarily due to the
capitalization of costs at Itafos Arraias during H1 2018 ahead of
achieving commercial production, which were partially offset by
growth capex primarily related to development of Itafos Farim
during H1 2019.
As at June 30, 2019 and December 31, 2018, the
Company’s financial highlights were as follows:
(unaudited in thousands of US Dollars) |
|
|
|
|
|
June 30,2019 |
|
|
December 31,2018 |
|
Total assets |
|
|
|
|
|
$ |
566,575 |
|
|
$ |
576,419 |
|
Total liabilities |
|
|
|
|
|
|
330,249 |
|
|
|
304,640 |
|
Net debt |
|
|
|
|
|
|
159,884 |
|
|
|
152,088 |
|
Total equity |
|
|
|
|
|
|
236,326 |
|
|
|
271,779 |
|
As at June 30, 2019 and December 31, 2018, the
Company’s financial highlights were explained as follows:
- total assets were down period-over-period primarily due to
decreases in receivables and inventory at Itafos Conda and
increases in depreciation of assets in service during H1 2019,
which were partially offset by an increase in property, plant and
equipment related to the application of IFRS 16 during H1
2019;
- total liabilities were up period-over-period primarily due to
increases as a result of the recognition of lease liabilities
related to the application of IFRS 16 and increases in long-term
provisions due to additions to asset retirement obligations at
Itafos Conda during H1 2019;
- net debt was up period-over-period primarily due to
paid-in-kind interest expense at corporate and additional equipment
financing at Itafos Conda during H1 2019; and
- total equity was down period-over-period primarily due to an
increase in deficit due to the net loss and a decrease in share
capital due to the repurchase of shares through the Normal Course
Issuer Bid during H1 2019.
Itafos Conda Highlights
Itafos Conda continued its strong operational
performance with overall production volumes up year-over-year. In
addition, Itafos Conda sustained environmental, health and safety
excellence with no reportable injuries or chemical releases.
Unusually cold and wet weather conditions across key growing
regions affected short-term fertilizer buying patterns in the US
and caused many growers to defer fertilizer purchases. These
developments have increased the fertilizer industry’s inventories
to near historic highs, putting significant downward pressure on
realized phosphate fertilizer prices in the short-term. SPA
production and sales were constrained due to finished product rail
car and sulfuric acid availability, which were impacted by weather
and logistical challenges and correspondingly resulted in a shift
to incremental MAP production. Margins were compressed
year-over-year primarily due to higher input costs, most notably
purchased sulfuric acid, ore and natural gas. The higher inputs
costs were related to sulfuric acid contract repricing in 2019,
higher ore feed costs driven by increased mining costs and a spike
in natural gas price driven by a supply disruption due to an
off-site pipeline explosion in late 2018. In addition, Itafos Conda
completed a partial planned plant turnaround during H1 2019 and a
full planned plant turnaround during H1 2018.For the three months
and six months ended June 30, 2019 and 2018, Itafos Conda’s
business highlights were as follows:
(unaudited in thousands of US Dollars except for |
|
For the three months ended June 30, |
|
|
For the six months ended June 30, |
|
volumes and prices) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Production volumes (t) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MAP |
|
|
92,248 |
|
|
|
80,814 |
|
|
|
191,003 |
|
|
|
173,684 |
|
SPA |
|
|
36,998 |
|
|
|
34,335 |
|
|
|
72,531 |
|
|
|
67,550 |
|
MGA |
|
|
581 |
|
|
|
— |
|
|
|
611 |
|
|
|
— |
|
APP |
|
|
21,107 |
|
|
|
11,938 |
|
|
|
26,534 |
|
|
|
11,938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales volumes (t) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MAP |
|
|
121,886 |
|
|
|
75,690 |
|
|
|
198,763 |
|
|
|
161,864 |
|
SPA |
|
|
34,195 |
|
|
|
32,342 |
|
|
|
67,639 |
|
|
|
58,497 |
|
MGA |
|
|
1,231 |
|
|
|
— |
|
|
|
1,261 |
|
|
|
— |
|
APP |
|
|
18,900 |
|
|
|
11,938 |
|
|
|
21,348 |
|
|
|
11,938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized price ($/t) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MAP |
|
$ |
402 |
|
|
$ |
427 |
|
|
$ |
415 |
|
|
$ |
415 |
|
SPA |
|
$ |
997 |
|
|
$ |
918 |
|
|
$ |
1,001 |
|
|
$ |
904 |
|
MGA |
|
$ |
555 |
|
|
$ |
— |
|
|
$ |
565 |
|
|
$ |
— |
|
APP |
|
$ |
472 |
|
|
$ |
432 |
|
|
$ |
472 |
|
|
$ |
432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MAP |
|
$ |
48,067 |
|
|
$ |
32,333 |
|
|
$ |
82,553 |
|
|
$ |
67,242 |
|
SPA, net |
|
$ |
34,082 |
|
|
$ |
29,696 |
|
|
$ |
67,715 |
|
|
$ |
52,903 |
|
MGA, net |
|
$ |
683 |
|
|
$ |
— |
|
|
$ |
712 |
|
|
$ |
— |
|
APP, net |
|
$ |
8,925 |
|
|
$ |
5,158 |
|
|
$ |
10,082 |
|
|
$ |
5,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
$ |
10,369 |
|
|
$ |
16,889 |
|
|
$ |
21,825 |
|
|
$ |
30,263 |
|
For the three and six months ended June 30, 2019
and 2018, Itafos Conda’s business highlights were explained as
follows:
- MAP production volumes were up year-over-year primarily due to
a shift to incremental MAP production as a result of SPA production
constraints during H1 2019 and shortened Q1 2018 related to
acquisition timing;
- MAP sales volumes were up year-over-year despite delayed spring
demand as a result of poor weather conditions during H1 2019
primarily due to the long-term MAP offtake agreement;
- MAP realized prices were down year-over-year primarily due to
pressure on DAP NOLA pricing as a result of challenging global
market conditions in H1 2019 as pricing under the long-term MAP
offtake agreement is linked to DAP NOLA;
- SPA production volumes were up year-over-year but below
expectations primarily due to SPA production constraints during H1
2019 and shortened Q1 2018 related to acquisition timing;
- SPA sales volumes were up year-over-year primarily due to
greater demand during Q1 2019 and shortened Q1 2018 related to
acquisition timing;
- SPA realized prices were up year-over-year primarily due to
favorable SPA market conditions relative to dry fertilizers during
H1 2019;
- revenues were up year-over-year primarily due to higher
year-over-year MAP and SPA sales volumes during H1 2019, which were
partially offset by lower year-over-year MAP sales pricing during
Q1 2019; and
- Adjusted EBITDA was down year-over-year primarily due to SPA
production constraints, challenging global market conditions as
well as higher ore, natural gas and sulfuric acid input costs
during H1 2019.
Itafos Arraias Highlights
The Company is focusing on implementing the
Repurpose Plan at Itafos Arraias to optimize its finished
fertilizer production with a multi-product portfolio of higher
grade SSP, micronutrient SSP and value-added premium PK compound
products. The Repurpose Plan is expected to significantly enhance
Itafos Arraias’ competitive positioning and profitability while
reducing its operational and environmental risk profile. To enable
the Repurpose Plan, the Company intends to procure higher grade
phosphate rock from third parties and, once operational, from
Itafos Farim. During Q2 2019, Itafos Arraias entered into a
multi-year contract to purchase higher grade phosphate rock from
the OCP Group, with the first delivery of rock expected during Q3
2019. In addition, Itafos Arraias purchased, received and processed
higher grade phosphate rock from other third parties during Q2
2019.
In addition, the Company has advanced other
aspects of the Repurpose Plan, including activities related to
third party phosphate rock logistics, site preparation and product
portfolio transition. Third party phosphate rock delivery is in
progress, new equipment is being commissioned and approvals have
been received to sell the new products. Also in connection with
advancing implementation of the Repurpose Plan, the Company idled
Itafos Arraias’ existing mines, tailings dam and the beneficiation
plant. Notwithstanding, Itafos Arraias will maintain all licenses
and permits in good standing and comply with existing
regulations.
Itafos Arraias’ production and sales volumes
increased quarter-over-quarter as a result of the implementation of
the Repurpose Plan. Brazilian buyers continued to curtail purchases
of locally produced phosphate fertilizer volume in favor of
imported product, taking advantage of US oversupply. Despite lower
MAP CFR Brazil prices, Itafos Arraias’ realized prices of SSP and
SSP+ remained strong, largely driven by the shift in selling of
higher grade SSP during Q2 2019 and a strong premium for
sulfur-based products. For the three and six months ended June 30,
2018, Itafos Arraias had not yet achieved commercial
production.
For the three and six months ended June 30,
2019 and 2018, Itafos Arraias’ business highlights were as
follows:
(unaudited in thousandsof US Dollars except for |
|
For the three months ended June 30, |
|
|
For the six months ended June 30, |
|
volumes and prices) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
2018 |
|
Production volumes (t) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SSP |
|
|
19,948 |
|
|
|
— |
|
|
|
26,511 |
|
|
— |
|
SSP+ |
|
|
32,055 |
|
|
|
— |
|
|
|
40,646 |
|
|
— |
|
Excess sulfuric acid |
|
|
10,600 |
|
|
|
— |
|
|
|
19,394 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales volumes (t) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SSP |
|
|
14,917 |
|
|
|
— |
|
|
|
22,050 |
|
|
— |
|
SSP+ |
|
|
27,310 |
|
|
|
— |
|
|
|
33,213 |
|
|
— |
|
Excess sulfuric acid |
|
|
10,600 |
|
|
|
— |
|
|
|
19,394 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized price ($/t) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SSP |
|
$ |
220 |
|
|
$ |
— |
|
|
$ |
202 |
|
$ |
— |
|
SSP+ |
|
$ |
250 |
|
|
$ |
— |
|
|
$ |
246 |
|
$ |
— |
|
Excess sulfuric acid |
|
$ |
113 |
|
|
$ |
— |
|
|
$ |
131 |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SSP, net |
|
$ |
3,290 |
|
|
$ |
— |
|
|
$ |
4,464 |
|
$ |
— |
|
SSP+, net |
|
$ |
6,825 |
|
|
$ |
— |
|
|
$ |
8,176 |
|
$ |
— |
|
Excess sulfuric acid, net |
|
$ |
1,200 |
|
|
$ |
— |
|
|
$ |
2,548 |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
$ |
(7,102 |
) |
|
$ |
(2,098 |
) |
|
$ |
(14,738 |
) |
$ |
(4,069 |
) |
For the three and six months ended June 30,
2019, Itafos Arraias’ business highlights were as follows:
- SSP and SSP+ production and sales volumes were lower than
expected primarily due to implementation of the Efficiency
Improvement Plan and subsequent implementation of the Repurpose
Plan during H1 2019;
- SSP and SSP+ realized prices remained strong primarily due to
the shift in selling higher grade SSP during Q2 2019 and strong
premium for sulfur-based products, despite challenging global
market conditions that impacted pricing for phosphate products
during H1 2019;
- excess sulfuric acid production and sales volumes were limited
by Itafos Arraias’ sulfuric acid plant turnaround, which was
successfully completed during Q1 2019 and an oversupplied market
during H1 2019 limited spot sales opportunities; and
- excess sulfuric acid realized prices were slightly lower than
expected due to an oversupplied market during H1 2019.
For the three and six months ended June 30, 2019
and 2018, Itafos Arraias’ business highlights were as follows:
- revenues were up year-over-year due to recognition of revenue
during H1 2019 whereas during H1 2018 Itafos Arraias had not yet
achieved commercial production; and
- Adjusted EBITDA was down year-over-year primarily due to
recognition of cost of goods sold during H1 2019 whereas during H1
2018 Itafos Arraias had not yet achieved commercial
production.
Outlook
The Company is executing its strategy by
focusing on:
- extending Itafos Conda’s current mine life through advancing
permitting of Itafos Paris Hills and Itafos Husky 1/North Dry Ridge
and other alternatives;
- optimizing Itafos Conda’s EBITDA generation potential;
- implementing the Repurpose Plan to optimize Itafos Arraias’
finished fertilizer production with a multi-product portfolio of
higher grade SSP, micronutrient SSP and value-added premium PK
compound products; and
- finalizing permitting, negotiating offtake agreements,
finalizing works contractors and procurement packages and securing
project financing for Itafos Farim; and
- maintaining the integrity of the concessions and evaluating
strategic alternatives for Itafos Santana, Itafos Mantaro and
Itafos Araxá.
Additional details are available under the
Company’s profile at www.sedar.com and on the Company’s website,
www.itafos.com.
About Itafos
Itafos is a vertically integrated phosphate
fertilizers and specialty products company with an attractive
portfolio of long-term strategic businesses and projects located in
key fertilizer markets worldwide. Itafos is managed by an
experienced and diverse team with extensive operations, commercial
and financial expertise. Itafos owns and operates Itafos Conda, a
vertically integrated phosphate fertilizer business with production
and sales capacity of approximately 550kt per year of monoammonium
phosphate (“MAP”), superphosphoric acid (“SPA”), merchant grade
phosphoric acid (“MGA”) and specialty products including ammonium
polyphosphate (“APP”) located in Idaho, US and Itafos Arraias, a
phosphate fertilizer business with production and sales capacity of
approximately 500kt per year of single superphosphate (“SSP”), SSP
with micronutrients (“SSP+”), premium PK compounds and excess
sulfuric acid located in Tocantins, Brazil. Itafos owns and is
developing Itafos Paris Hills, a high-grade phosphate mine project
located in Idaho, US, Itafos Farim, a high-grade phosphate mine
project located in Farim, Guinea-Bissau, Itafos Santana, a
vertically integrated high-grade phosphate mine and fertilizer
plant project located in Pará, Brazil, Itafos Mantaro, a large
phosphate mine project located in Junin, Peru and Itafos Araxá, a
vertically integrated rare earth elements and niobium mine and
extraction plant project located in Minas Gerais, Brazil.
For more information, or to join the Company’s
mailing list to receive notification of future press releases,
please visit the Company’s website, www.itafos.com.
Non-IFRS Financial Measures
The Company considers both IFRS and certain
non-IFRS measures to assess performance. Non-IFRS measures are a
numerical measure of a company’s performance, that either include
or exclude amounts that are not normally included or excluded from
the most directly comparable IFRS measures. In evaluating non-IFRS
measures, investors, analysts, lenders and others should consider
that non-IFRS measures do not have any standardized meaning under
IFRS and that the methodology applied by the Company in calculating
such non-IFRS measures may differ among companies and analysts. The
Company believes the non-IFRS measures provide useful supplemental
information to investors, analysts, lenders and others in order to
evaluate the Company’s operational and financial performance. These
non-IFRS financial measures should not be considered as a
substitute for, nor superior to, measures of financial performance
prepared in accordance with IFRS.
The Company defines:
- “EBITDA” as earnings before interest, taxes, depreciation,
depletion and amortization;
- “Adjusted EBITDA” as EBITDA adjusted for non-cash,
extraordinary, non-recurring and other items unrelated to the
Company’s core operating activities;
- “Total capex” as additions to property, plant and equipment and
mineral properties adjusted for additions to asset retirement
obligations, additions to right of use assets and capitalized
interest;
- “Maintenance capex” as that portion of total capex relating to
maintenance of ongoing operations of the Company;
- “Growth capex” as that portion of total capex relating to
development of growth opportunities of the Company;
- “Net debt” as debt and debentures less cash and cash
equivalents and short-term investments;
- “Realized price” as revenues, net divided by sales
volumes.
Forward Looking Information
Certain information contained in this news
release constitutes forward looking information. All information
other than information of historical fact is forward looking
information. The use of any of the words “intend”, “anticipate”,
“plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”,
“should”, “would”, “believe”, “predict” and “potential” and similar
expressions are intended to identify forward looking information.
This information involves known and unknown risks, uncertainties
and other factors that may cause actual results or events to differ
materially from those anticipated in such forward looking
information. No assurance can be given that this information will
prove to be correct and such forward looking information included
in this news release should not be unduly relied upon.
Forward looking information is subject to a
number of risks and other factors that could cause actual results
and events to vary materially from that anticipated by such forward
looking information. Although the Company has attempted to identify
important factors that could cause actual results to differ
materially from those contained in forward-looking statements,
there may be other factors that cause results not to be as
anticipated, estimated or intended. Factors that may cause actual
results to differ materially from expected results described in
forward-looking statements include, but are not limited to, those
risk factors set out in the Company’s Management Discussion and
Analysis and other disclosure documents available under the
Company’s profile at www.sedar.com. Readers are cautioned that the
foregoing list of risks, uncertainties and assumptions are not
exhaustive. The forward-looking information included in this news
release is expressly qualified by this cautionary statement and is
made as of the date of this news release. Itafos undertakes no
obligation to publicly update or revise any forward-looking
information except as required by applicable securities laws.
NEITHER THE TSX VENTURE EXCHANGE NOR ITS
REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE
POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR
THE ADEQUACY OR ACCURACY OF THIS RELEASE.
For further information, please
contact:
Itafos Investor Relationsinvestor@itafos.com
www.itafos.com
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