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Intrepid Potash, Inc. (IPI) CEO Bob Jornayvaz on Q1 2022 Results - Earnings Call Transcript

May 03, 2022 4:19 PM ETIntrepid Potash, Inc. (IPI)16 Comments
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Intrepid Potash, Inc. (NYSE:IPI) Q1 2022 Earnings Conference Call May 3, 2022 12:00 PM ET

Company Participants

Evan Mapes - Investor Relations

Bob Jornayvaz - Co-Founder, Executive Chairman & Chief Executive Officer

Matt Preston - Chief Financial Officer

Brian Stone - President

Zachry Adams - Vice President of Sales & Marketing

Conference Call Participants

Alex Chen - BMO Capital Markets

Will Tang - Morgan Stanley

Josh Spector - UBS

Jason Ursaner - Bumbershoot Holdings


Thank you for standing by. This is the conference operator. Welcome to the Intrepid Potash, Inc. Q1 2022 Results Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions]

I would now like to turn the conference over to Evan Mapes, Investor Relations. Please, go ahead.

Evan Mapes

Good morning, everyone. Thank you for joining us to discuss Intrepid's first quarter 2022 results. With me on the call today are Intrepid's Co-Founder, Executive Chairman, and CEO, Bob Jornayvaz; and Intrepid's CFO, Matt Preston. Also available to answer questions during the Q&A session following our prepared remarks will be our President, Brian Stone; and our Vice President of Sales and Marketing, Zachry Adams.

Please be advised that our remarks today, including answers to your questions, include forward-looking statements as defined by US Securities Laws. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated.

These statements are based on the information available to us today, and we assume no obligation to update them. These risks and uncertainties are described in our periodic reports filed with the Securities and Exchange Commission, which are incorporated here by reference.

During today's call, we will refer to certain non-GAAP

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Comments (16)

The stock plummeted -45% in just two weeks after CEO and Chairman Jornayvaz Robert sold a lump sum of 0.1% of outstanding shares for $120 on April 19th. The market has turned its back on the typical method of selling highs, far from the CEO's shareholder-friendliness. The conference call was held without any measures for the share buyback or dividend that investors wanted. An insider's massive selling has the same effect as a rights offering. It's the same reason Amazon's stock continues to fall. Unfortunately, if IPI does not announce a share buyback or dividend plan as soon as possible, the share price is highly likely to return to $40. Even if potassium and trio fertilizers exceed $1,000 per ton, the chart is unlikely to recover from this negative governance structure.
Bumbershoot Holdings profile picture
@Seouler he hasn't sold any stock. The Form-4 filings from April 14th and 20th are for tax withholding.
@Bumbershoot Holdings Increased prices per ton for Q2. Volumes should be up/cost down H2. Nothing to dislike for now.
Bumbershoot Holdings profile picture
@kiwicarrotcake if MOP prices hold steady for the rest of the spring application season in NA and can stay in this range +/- through the fall '22 and into spring of next year... Intrepid would likely end FY'23 with ~$250m net cash. Even if someone believes that at that point all of the sanctioned tons from Russia/Belarus come back in the market and prices "crash" back to some much lower price level... shares would still be priced extremely low on normalized earnings in my opinion. Biggest "risk" to some extent is what Intrepid does with all the retained earnings... but believe management is going to be much more thoughtful from capital structure / allocation perspective this time around.
Why the drop? Maybe because they came across the transcript, above.

Here's a quote:

"...While fertilizer prices are higher than we've seen in quite some time, and we’re seeing, what I would call, a bit of DEMAND thoughtfulness, some might call it DESTRUCTION, owing above the high prices, but also due to certain buyers simply not being able to source their needed product, we think the underlying crop economics still support the application of fertilizers.

Moreover, and we think this is key, if we do see LOWER DEMAND AND LESS USE OF FERTILIZER THIS YEAR, a likely outcome would be lower crop yields, which would be negative for supply and offer support for crop prices, which in turn help ensure solid demand for fertilizers in quarters ahead..."
Bumbershoot Holdings profile picture
@L. that was a key message from the $NTR earnings call in terms of global supply/demand. Nutrien is estimating global potash shipments in a wider-than-normal range of 60m-65m tons, which would be down from ~70m tons last year. Intrepid doesn't drive the market; Bob is just reiterating that message.

"Nutrien is increasing its potash production capability to ~15Mmt in 2022 as financial sanctions and other restrictions imposed on Russia and Belarus are expected to significantly constrain supply."

Nutrien termed it "demand rationalization" on their call. Made it clear that it is an issue of availability, rather than affordability.
@Bumbershoot Holdings - Be that as it may, a term like "demand destruction" really focuses the attention of the analyst community like some shrill dog whistle.

I don't know if there were expectations of dividends or buybacks, and the whole commodity space (like so many other spaces) is suffering recently.

But the recent IPI SP losses stand out as particularly egregious, so I think it's something about the earnings call that was especially disappointing.
Bumbershoot Holdings profile picture
@L. I think it has a lot more to do with understanding how momentum trading works, than anything management said on the conference call.

The up trend faded (perhaps for good reason) as valuation inched closer to ~$1.5b and buy-hold investors started to fundamentally question whether that represents a full multiple / reasonable yield off what is perceived to be an up-cycle / near "peak" FCF result... the momentum reverses and the pendulum starts to swing the other way which leads to a major flush out... which then exacerbates selling on the downside since all that momentum trading is correlated to the same technicals, until those same original or a different set of "real" buy-hold fundamental investors start to come in again and question whether a company that is humming operationally and incredibly well positioned in the current environment is a bargain at an XX% FCF yield on those same near-term results... especially with a decent chance that the operational performance may stick around for a while (or even improve) given that it is a structural supply/demand imbalance.

I'd imagine we're getting close to the pendulum swinging back again. Same as it happened in March.
This is quite the post-earnings sell off. Interesting.
17144952 profile picture
This thing is going to over $200 soon, given global picture and string of international contracts already made at very elevated prices. Long IPI.
haoleboy1967 profile picture
@17144952 what’s the deal today - wow crazy drop
@haoleboy1967 Wondering the same thing myself. I was adding to my position throughout the day. 3.89 PE with no decline in the underlying demand/supply/income appears to be one of the best values in the market.
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