Intrepid Potash faces uncertain future
CARLSBAD — Intrepid Potash faces an uncertain future as it prepares to release its earnings for the first quarter of the year on May 9.
The company, which employs 800 to 850 people in Eddy County, reported $524.8 million in net losses for 2015. For the year 2014, the Denver-based company had reported $5.8 million in gains.
"The recent series of potash price reductions has created a more dynamic market than we've experienced in some time," said Intrepid's Executive Chairman, President and CEO Bob Jornayvaz in a Feb. 29 news release on the losses. "The pricing pressure is reflected in our fourth quarter performance and has the potential to cause a breach in our loan covenants. As a result, our auditors added going concern language to their audit opinion."
The auditor's addition of "going concern language" means they are worried about Intrepid's ability to continue operating.
In January, the company modified its debt covenants and received an extension until May 13 to show they are steadying their financial situation. Lenders will not call the company's debt of $150 million during that time.
Intrepid also laid off 35 employees from its Carlsbad operations in January as part of a plan to cut 5 percent of their workforce.
"They're living on a bit of a month to month situation," said Chris Damas, the Ontario-based author of the BCMI Report financial newsletter.
The price of muriate of potash, the main product the Intrepid mines in Carlsbad produce, has plummeted in recent years due to an increased foreign supply from Russia and Canada and a strong U.S. dollar, Damas said.
According to Intrepid's fourth quarter report, average net realized sales price per ton in the fourth quarter was $277, a 20 percent decrease over the previous year.
The company plans to transition their East facility in Carlsbad to langbeinite-only production by mid-2016 in an effort to recover from their losses. Langbeinite, which Intrepid markets as Trio, sells for more on the market.
Trio was selling for $330 a ton during the fourth quarter of 2015.
"The main thing is to focus on the Trio conversion," Damas said.
Brian Frantz, senior vice president and chief financial officer of Intrepid Potash Inc., said they haven't released an estimate of how much the conversion will cost, but they will be spending a total of $22 million to $27 million on capital expenditures.
Even with all that effort, Damas said in the commodities business, it's tough to predict the future of a company.
The first quarter of the year is generally good for potash businesses, as farmers in the Midwestern U.S. begin to plant their fields, he said.
In addition, on Wednesday, Reuters reported that one of the largest potash companies in the world, Belarus-based Belaruskali, announced they will export up to 18 percent less potash in 2016 unless the demand increases.
Intrepid stock was at $1.28 a share as of Friday afternoon. Stock prices peaked in 2008 at $67.66 a share.
Frantz declined to comment further on the situation of the company as they are in a "quiet period" pending the release of quarter 1 results.
"I don’t think there’s any imminent corporate reorganization required," Damas said. "That should make your readers feel better."
Mosaic staying steady
The Mosaic Company, which employs around 420 people in Eddy County, has remained relatively strong throughout the downward spiral of potash prices.
The Mosaic Company reported 2015 net earnings of $1 billion, which it also reported for 2014. Their fourth quarter net earnings were $155 million in 2015, down from $361 million in the fourth quarter of 2014.
They reported gains during all four quarters of 2015.
Mosaic stopped muriate of potash production at its Carlsbad mine in July 2014. Currently, the Carlsbad mine produces langbeinite, which they market as K-Mag.
"Making strategic decisions around our operations and product mix allows us to respond well to the current demand and pricing situation in the potash industry," said Sarah Fedorchuk, Mosaic's senior director of public affairs for their potash operations, in an email. "The reality is all commodities are experiencing a great deal of ambiguity, not just potash. This is just part and parcel of being in a commodity business – it’s very cyclical."
Mosaic, based in Minnesota, will release their first quarter 2016 report on May 4.
Maddy Hayden can be reached at 575-628-5512.