Rentech raises guidance on rising corn, low natural gas prices

August 13, 2012 |

In California, Rentech reported consolidated net income of $.04 per share driven by strong fertilizer product prices, lower prices for natural gas, and reduced R&D expenses in the alternative energy segment.

CEO Hunt Ramsbottom noted, “Rentech Nitrogen generated strong cash flow resulting in second quarter cash distributions of $1.17 per unit. Average prices for delivered products were up significantly from last year. Ammonia at $695 per ton was 9% higher. And UAN at $378 per ton was 21% higher than last year. Higher product prices and relatively low natural gas prices by historical standards contributed to gross margins of 65%, up significantly from 50% in the same quarter last year.”

Raymond James analyst Pavel Molchanov commented, “Since the IPO of Rentech Nitrogen Partners (RNF) last November, RTK shares have generally traded in parallel with RNF units – and thus inversely with natural gas prices – given that the parent company’s cash flow comes from its 61% ownership of the partnership. The epic 2012 drought in the Midwest has pushed corn prices to record levels and is also pushing nitrogen prices higher. Together with natural gas prices near ten-year lows, this has naturally bolstered fertilizer margins. As a result, Rentech Nitrogen has raised its guidance for cash available for distribution to more than $3.30 per unit – up from prior guidance of $2.86 per unit.”

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