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Rentech Nitrogen Partners (RNF) announced their 4th quarter results early on March 19th. They have also announced guidance for 2013. Let me summarize the results below.

  • For 2012, gross margins were 50%, up from 43% in 2011. This was due to lower feedstock cost (low natural gas prices) and higher fertilizer prices.
  • Net income for 2012 was $107 million, or $2.78 per share. Post IPO income in 2011 was $11.3 million or $0.30 per share.
  • Distributions since the IPO have been $3.83 per share, with $0.53 coming from 2011. Distributions from 2012 come out to about $3.30 per share.
  • Revenue for 4th quarter 2012 came in at $92.4 million, which beat estimates. The additional revenue came from the newly acquired Pasadena facility.
  • Net income came in at $17.6 million, or $0.44 per unit, which dramatically misses expectations.

For 2013, RNF projects:

  • EBITDA of $129 million.
  • Cash Distribution of $101 million, or $2.60 per share.
  • They have sold 39% of their ammonia for $744 per ton
  • They have sold 41% of their UAN for $329 per ton
  • They have purchased 37% of their natural gas for $3.87 per MMBtu.

I wrote an article on October 1st, stating that lower 4th quarter earnings and distributions would drive these stocks lower and it was time to take profit then. Was I right? Yes I guess so, but the prices on October 1st, and on March 18th look like this.

Stock Ticker

Price on 10-1

Price on 3-18

2013 Proj. Distributions

Forward Yield

RNF

38.76

37.70

2.60

6.90%

UAN

26.26

24.82

2.15-2.45

9.27%

TNH

216.00

218.78

15.00

6.86%

Of course what we do not see from this chart is that RNF ran up to $49.18 on February 1st before its slide to today's levels. The other interesting part is that their projections for 2013 are lower than I expected, especially with the healthy prices they have commanded so far for their product. This appears to be due to an unplanned outage and natural gas prices that continue to creep higher. Also RNF has their outages here in late 2013, which will take a bite out of earnings.

I am putting my support behind CVR Partners (UAN). I believe they have significant advantages for 2013 - no planned maintenance outages, controlled pricing for feedstock via the pet coke, and some other information I'll list here below.

In their 4th quarter earnings report, UAN realized prices of $676 per ton of Ammonia and $274 per ton of UAN. RNF has already sold these forward for $744 and $329 respectively here for the Spring 2013. Since UAN serves a lot of the same general area, there should be an increase in their prices as well. May contracts for corn continue to increase in price, now over $7.20 a bushel. At the time of my last article for RNF, just a month ago, they were at $6.84 a bushel.

UAN predicted guidance of $2.15-2.45 per share for 2013, and with another expensive crop year, I would lean much closer to the high end of the guidance.

Conclusion: With the reduced distributions projected for RNF for 2013 coupled with slowly rising natural gas costs, I believe that UAN is the better value at today's prices. I also feel that with the current fertilizer prices, they can get closer to the higher end of their distribution. I know I stated before that I was waiting for an entry point on UAN of $22-23, but I'm going to open it up to $23-24.50, as I believe we will be in the 10% yield category at that price point.

Source: With Lower Expected Earnings For Rentech, CVR Partners Is The Fertilizer Stock You Should Own