Press release·02/20/2025 20:31:39

CVR Partners Reports Strong Financial Performance Despite Challenges

CVR Partners, a leading North American nitrogen fertilizer company, has released its financial results for the year ended December 31, 2024. The partnership’s operating income and net income were $90.4 million and $60.9 million respectively, demonstrating its resilience in the face of a volatile market environment.

Overview of Financial Performance

For the year ended December 31, 2024, CVR Partners’ net sales were $525.3 million, down from $681.5 million in the previous year. This decrease was primarily due to unfavorable pricing conditions and lower sales volumes for the partnership’s key products, ammonia and urea ammonium nitrate (UAN).

Ammonia sales prices fell 16% year-over-year, while UAN prices declined 20%. This was driven by lower natural gas prices, which reduced input costs and led to an overall decrease in market prices. Additionally, total product sales volumes were unfavorable, decreasing due to reduced production volumes resulting from planned and unplanned outages at the partnership’s facilities.

Despite the revenue decline, CVR Partners was able to maintain strong profitability. Cost of materials and other direct operating expenses (exclusive of depreciation and amortization) decreased to $104.1 million and $214.2 million respectively, driven by lower feedstock costs and favorable utility expenses. This, combined with disciplined cost management, helped offset the impact of lower sales prices and volumes.

Operational Highlights

One of the key operational metrics for CVR Partners is ammonia utilization rate, which measures the actual tons of ammonia produced divided by capacity. In 2024, the consolidated ammonia utilization rate decreased to 96% from 100% in the prior year, primarily due to a 14-day planned outage at the Coffeyville facility and other minor unplanned outages.

The partnership’s production volumes also reflected the impact of the outages, with gross ammonia production declining to 836,000 tons in 2024 from 864,000 tons in 2023. Net ammonia available for sale remained flat at 270,000 tons, as the partnership was able to maintain its ammonia upgrade capabilities.

CVR Partners continues to focus on improving the reliability and efficiency of its facilities. In 2024, the partnership installed additional oxygen equipment at the Coffeyville facility to enhance the reliability of the third-party air separation plant that supplies critical inputs. These types of investments are aimed at minimizing disruptions and maintaining high utilization rates.

Market Dynamics and Outlook

The nitrogen fertilizer industry is heavily influenced by global supply and demand factors, as well as the cost and availability of key feedstocks like natural gas and pet coke. In 2024, natural gas prices declined significantly from the elevated levels seen in 2022, leading to a reduction in nitrogen fertilizer prices.

However, the partnership believes the long-term fundamentals for the U.S. nitrogen fertilizer industry remain intact. Factors such as increasing global population, decreasing arable land per capita, and sustained demand for corn and soybeans as biofuel feedstocks are expected to support continued strong demand for nitrogen-based fertilizers.

The partnership is also closely monitoring the regulatory and geopolitical landscape, which can have significant impacts on the industry. Recent changes in U.S. environmental regulations and ongoing global conflicts have introduced uncertainty, and CVR Partners is positioning itself to navigate these challenges.

One key initiative the partnership is pursuing is the potential to utilize natural gas as an optional feedstock at its Coffeyville facility, in addition to the current pet coke gasification process. If successful, this project could provide the Coffeyville facility with greater flexibility to optimize its feedstock mix and production costs.

Strengths and Weaknesses

CVR Partners’ key strengths include its position as a low-cost producer, with the ability to leverage its pet coke gasification technology and potential natural gas flexibility at the Coffeyville facility. The partnership’s focus on safety, reliability, and environmental stewardship also positions it well in the industry.

However, the partnership’s financial performance remains vulnerable to volatility in commodity prices and market conditions. The decline in sales prices and volumes in 2024 demonstrates the cyclical nature of the nitrogen fertilizer business. Additionally, the partnership’s reliance on planned and unplanned facility outages, which can disrupt production, is a potential weakness.

Outlook and Conclusion

Looking ahead, CVR Partners’ management remains cautiously optimistic about the future. While the partnership expects continued market volatility, the long-term fundamentals for nitrogen fertilizers appear favorable. The partnership’s strategic initiatives, such as the potential natural gas project, and its focus on operational excellence are expected to support its competitiveness and profitability.

Overall, CVR Partners has demonstrated its ability to navigate a challenging market environment, leveraging its operational strengths and disciplined cost management to deliver solid financial results. The partnership’s commitment to safety, reliability, and environmental responsibility positions it well for the future, despite the inherent volatility in the nitrogen fertilizer industry.