LSB Industries reports loss, sees better days ahead

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OKLAHOMA CITY (JR) – LSB Industries on Friday reported a net loss from continuing operations for the third quarter of $33.8 million, compared with a net loss from continuing operations of $3.8 million for the first nine months of 2014.

Results for the quarter included an impairment expense of $39.7 million to write down the carrying value of the company’s working interest in natural gas properties. The adjusted net loss applicable to shareholders was $8.3 million, or 36 cents per diluted share.

Sales for the quarter totaled $157.7 million, down 7.8 percent from $171 million a year earlier.

Third-quarter sales for LSB’s chemical business totaled $80.6 million, down from $94.8 million for the third quarter of 2014. LSB reported a $55 million third-quarter operating loss from the chemical business, compared with an operating loss of $5.6 million a year earlier.

LSB has chemical plants in Pryor, Oklahoma; Cherokee, Alabama; and El Dorado, Arkansas.

Results for the chemical business were negatively affected by an unplanned outage at the Pryor facility, said interim CEO Daniel Greenwell.

Costs of an expansion project at the El Dorado chemical plant are higher than previously estimated , Greenwell said.

The estimated cost for the El Dorado expansion project is now estimated at $831 million to $855 million. As of Sept. 30, LSB had spent $564 million on the project.

“The primary reason for the further cost escalation relates to mechanical and piping labor cost increases versus earlier estimates,” he said. “Despite the increased cost estimate to complete our expansion project, the new nitric acid plant should be in production next week, and the ammonia plant remains on track to be in production early in the second quarter of 2016, which we expect to dramatically increase the profitability of the facility.”

LSB signed a three-year offtake agreement with Koch Fertilizer for all of the excess ammonia the new El Dorado ammonia plant is expected to produce, above that consumed by that plant for upgrade into other products.

“While the issues at both Pryor and El Dorado have constrained our financial performance for several quarters, we now expect increased reliability and more consistent production levels at Pryor in the quarters to come,” Greenwell said. “Pryor may continue to have periodic outages through the end of 2016 as we continue the plant modernization and critical maintenance activities, but with the upgrades completed since 2013, and the remaining improvements we have planned, we expect this facility to operate more consistently and profitably.”

Sales for LBS’s climate-control business during the third quarter totaled $75 million, up from $73.5 million a year earlier. Operating income from the climate-control business for the third quarter totaled $7.2 million, down from $8.4 million a year earlier.

The climate-control business manufactures residential climate-control products including water-source and geothermal heat pumps, hydronic fan coils, modular geothermal and other chillers and large custom air handlers at plants in Oklahoma City.

“Our climate-control business posted modest sales growth in the third quarter as a result of continued strong demand for our hydronic fan coils, large custom air handlers and engineering and construction services offset by a decline in sales of heat pumps for residential applications as the impact that sustained low natural gas prices has been having on demand for our residential geothermal HVAC systems,” Greenwell said.

LSB reported a net loss from continuing operations for the first nine months of 2015 of $26.7 million, compared with net income of $19 million for the first nine months of 2014.

Sales for the first nine months of the year totaled $534.2 million, down from $551.2 million a year earlier.