This quarter is VERY understated versus what "market prices" for potash now bear as the company was selling potash (70% under previously negotiated contracts it appears) at average $325; some market pricing is double that now.
- Intrepid Potash, Inc. (NYSE:IPI - News), the successor entity to Intrepid Mining LLC, today announced first-quarter 2008 results with net income of $33.1 million, compared to last year’s first quarter net income of $6.4 million and exceeding full-year 2007 net income of $29.7 million.
- On a pro forma basis, assuming a 38.5 percent effective tax rate and the pro forma diluted current share count of 74.8 million common shares for Intrepid, pro forma net income per share would have been $0.27 per share in the first quarter of 2008 as compared to $0.05 per share in the first quarter of last year.
- During the first quarter, Intrepid produced 224,000 short tons of potash, a 3 percent increase over the 218,000 short tons produced during last year’s first quarter. First and fourth quarter production typically exceeds second and third quarter production as a result of the evaporation cycle at our solar facilities that occurs primarily in the spring and summer months.
- Intrepid sold 213,000 short tons of potash in the first quarter at an average FOB the mines or net sales price of $295 per ton as compared to 209,000 short tons at an average FOB price of $178 per short ton during the first quarter of 2007. Intrepid reports tons and per ton price and cost data in short tons; converting our $295 per short ton price to metric tonnes (“tonne”) would be the equivalent of a $325 per tonne first quarter average FOB price. The $117 per short ton increase in selling price was achieved despite having committed approximately 70 percent of our first quarter sales volumes at guaranteed prices that were primarily negotiated in September 2007, before the significant increases in potash pricing.
- Our posted price for red granular FOB Carlsbad has increased progressively in each month of 2008 from $317 per short ton at the end of 2007 to $357, $397, $417, $503, $532, and $582 per short ton for January through June, respectively. We estimate that every $10 per ton increase in the price of potash will have a pro forma annual earnings impact of approximately $0.07 per share. (quite staggering when you think about that level of increase)
No position (yet)
7 comments:
That looks good. Any idea if the stock is currently overvalued? I ask that because I see that the stock hasn't gapped up after what seems to be a good news. What am I missing?
The problem is, it should of traded around mid $30s after IPO but since it came public during the heights of the fertilizer craze it was hyped up to $50
Its a rich valuation but right now without more data on its future quarters - i.e. how much of their future production is already locked in versus open to market pricing its hard for me to tell. Thats the reason I have held off buying at this point - I will listen to the conference call tonight and see if they give better guidance on what they expect for average selling price. If its something in the $400s/$500s in Q3-Q4 etc - there should be lots of upside. If they already contracted a lot at $200s/$300s then not as much.
With the information I have it is impossible for me to tell the upside to earnings.
Even if they have contracted, it will roll off. The valuation was awfully expensive when it IPO'ed. I cant remember exactly what it was, but I remember thinking - wow.. that's rich! I'll look into the quarter.. what I'm hoping to see, is that they actually did contract at the lower price, and that the stock does in fact reflect that. So it should get the boost from rolling off. But somehow, I think the stock has already priced in the full extent of future production at high prices. (at least, without looking at the numbers - just a hunch - because of the huge premium)
If I understood correctly, they have a 3 month lag between the price they get and the market price. At the beginning of a quarter they fix the price for 70% of the production and sell the remaining 30% on the spot market. This policy will not change in the future (same spot exposure looking forward). For me that means that there is indeed some potential here.
Hi James,
Where did you get that info? Even if the 70% if fixed but they price it at the beginning of the quarter that would be very bullish. Source?
I listened to the call and got the same info as James. They repeated it several times in fact...there is a lag of about 3-4 months between the contract price and the spot price for that particular quarter.
Essentially they lock-in contracts for the quarter ahead by 3 months. So in this latest Q, they said they locked-in their contracts prices in September 2007 for shipments to customers to be made during the January - March (Q1) period. Going by this time-frame, their recognized contract price on that 70% should reflect Potash prices as they were in December-January. I havent been able to find specific historical pricing info on Potash, any ideas?
Thank you guys, that is extremely bullish. I was worried they were under 6 month or 12 month type of contracts. A 3 month lag is nothing.
If you want to see historical, just click on the label tag for Mosaic, or Potash - its been basically straight up.
Post a Comment