Sisecam Resources LP (NYSE: SIRE) (“we,” “us, “our,” or the “Partnership”) today reported its financial and operating results for first quarter ended March 31, 2022.
First Quarter 2022 Financial Highlights:
- Net sales of $163.4 million increased 27.9% from the prior-year first quarter. This increase is primarily attributable to the sales price increase in the international sales by 89.1% partly offset by 11.1% decrease in total sales volume for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The lower volume was due to the increase in the soda ash volume sold in the first quarter of 2021 primarily as a result of significant international sales volumes associated with the initial impact of direct sales to international customers subsequent to our December 31, 2020 ANSAC exit.
- Soda ash volume produced increased 4.6% from the prior-year first quarter, and soda ash volume sold decreased 11.1% from the prior-year first quarter. During the first quarter of 2021, the Partnership experienced an increase in international sales volume associated with the initial impact of direct sales to international customers subsequent to our December 31, 2020 ANSAC exit.
- Net income of $31.8 million increased $26.2 million from the prior-year first quarter. This increase is primarily attributable to the operating income increase resulting from the sales price increase.
- Adjusted EBITDA of $39.4 million increased 151.0% from the prior-year first quarter. This increase is primarily attributable to the operating income increase.
- Basic earnings per unit of $0.78 for the quarter increased 550% over the prior-year first quarter of $0.12.
- Net cash provided by operating activities of $7.7 million increased 220.3% over prior-year first quarter. The increase is primarily attributable to the increased net income in the first quarter of 2022.
- Distributable cash flow of $15.1 million increased 221.3% compared to the prior-year first quarter.
Ertugrul Kaloglu, CEO, commented: “I am excited to report a good start to 2022, highlighted by promising net income and adjusted EBITDA for the first quarter. This is also the first quarter for your new management team. I am pleased that the transition was seamless with our partners from Ciner and that we were able to produce such good results. As you know, SIRE is now part of the broader Sisecam Group. As a global player in all key areas of the glass industry, we believe this positioning provides SIRE with unique insights as it operates its soda ash business. In the first quarter, robust demand has driven a strong recovery in export pricing from levels seen in the height of the COVID-19 pandemic, as end markets for soda ash recovered to pre-COVID demand levels late last year. Global supply remains tight amidst the resurgence in economic activity, with Asian market pricing especially benefitting from lower exports from China due to strong Chinese demand.
“2022 represents another major step in our transition to a direct global exporter, as we replace a significant portion of our international sales to ANSAC with direct sales arranged by us. We’ve seen success thus far cultivating our own export customer and distributor network, and we intend to further capitalize on increased flexibility, market presence, and international relationships. International prices, which are subject to more fluctuation than our domestic business, translated to year-over-year profitability growth for our export sales in Q1 and are supported by our portfolio of multi-year contracted domestic sales that comprise approximately half of our business.
“Pricing strength in the first quarter of 2022 yielded revenue of $163 million and net income of $32 million, which increased 35% sequentially over the fourth quarter 2021. Adjusted EBITDA of $39 million grew 22% sequentially from Q4. Cash flow was impacted in the first quarter by a $25 million quarter-over-quarter increase in accounts receivable, which was largely a result of taking on new export sales at higher prices and the timing of collections.
“Global supply chain issues and the risk of an economic slowdown due in part to rapidly rising rates and severe inflation must be taken into consideration when assessing the current market environment. And while we believe that our low-cost production positions us to continue operating at capacity and generating strong cash flow, the downside risk to high export prices must be acknowledged, primarily if the supply-demand dynamic normalizes. Our management team is highly focused on maintaining a conservative balance sheet while managing the business in these more volatile markets to produce attractive returns to our investors.
“I want to thank all of our employees for their hard work and commitment to safety during the first quarter. As I begin my tenure with Sisecam Resources, I will continue to uphold the utmost priority of safe operations, which sets the foundation for our success.”
Three Months Ended March 31, 2022 compared to Three Months Ended March 31, 2021
The following table sets forth a summary of net sales, sales volumes and average sales price, and the percentage change between the periods.
Consolidated Results
Net sales. Net sales increased by 27.9% to $163.4 million for the three months ended March 31, 2022 from $127.8 million for the three months ended March 31, 2021, primarily driven by an increase in international average sales price of 89.1% because the prices are generally negotiated on a quarterly basis with improving supply and demand fundamentals recognized for soda ash in the global market and particularly in Asia. Domestic average price also increased by 5.5% due to customer mix, factoring in the overall annual market price increase as the market has experienced fundamental improvements. The sales price increases are partially offset by 11.1% decrease in total sales volume for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The lower volume was due to the increase in the soda ash volume sold in the first quarter of 2021 primarily as a result of significant international sales volumes associated with the initial impact of direct sales to international customers subsequent to our December 31, 2020 ANSAC exit. See “How We Evaluate Our Business – Net Sales” section for further information.
Cost of products sold. Cost of products sold, including depreciation, depletion and amortization expense and freight costs, increased by 7.5% to $123.9 million for the three months ended March 31, 2022 from $115.3 million for the three months ended March 31, 2021, which was primarily due to increases in freight cost, more specifically due to significant ocean freight cost increases impacted by recent global supply chain constraints as well as price increases in fuel.
Selling, general and administrative expenses. Our selling, general and administrative expenses increased 17.9% to $6.6 million for the three months ended March 31, 2022, compared to $5.6 million for the three months ended March 31, 2021. The increase was primarily due to more sales and marketing activities for the three months ended March 31, 2022 compared to three months ended March 31, 2021, as the overall economy continued to recover from the COVID-19 pandemic.
Operating income. As a result of the foregoing, operating income increased by approximately 377% to $32.9 million for the three months ended March 31, 2022 from a $6.9 million operating income for the three months ended March 31, 2021. The increase was due to higher net sales resulting from the higher average price for international customers.
Net income. As a result of the foregoing, net income increased by approximately 468% to $31.8 million for the three months ended March 31, 2022, from $5.6 million for the three months ended March 31, 2021. The increase was due to higher net sales resulting from the higher average price for international customers.
CAPEX AND ORE METRICS
The following table summarizes our capital expenditures, on an accrual basis, ore grade and ore to ash ratio:
In connection with the acquisition by Sisecam Chemicals USA Inc. (“Sisecam USA”) of 60% of Sisecam Chemicals Resources LLC, Sisecam USA, the new controlling owner, is evaluating all the expansion plans for the Partnership. As we evaluate investment opportunities, we intend to maintain our disciplined financial policy with a conservative capital structure.
CASH FLOWS
Cash Flows
Operating Activities
Our operating activities during the three months ended March 31, 2022 provided cash of $7.7 million, an increase of 220.3% from the $6.4 million cash used during the three months ended March 31, 2021, primarily as a result of the following:
- an increase of 467.9% in net income of $31.8 million during the three months ended March 31, 2022, compared to $5.6 million for the prior-year period; and
- an offset by $10.1 million more cash used in working capital during the three months ended March 31, 2022, compared to the three months ended March 31, 2021. The increase of the cash used in working capital period over period was primarily due to a higher inventory balance at March 31, 2022 based on forecasted higher demand in the short term as compared to the three months ended March 31, 2021.
Investing Activities
We used cash flows of $8.2 million in investing activities during the three months ended March 31, 2022, compared to $5.4 million used during the three months ended March 31, 2021, for capital projects as described in “Capital Expenditures” above.
Financing Activities
Cash provided by financing activities of $1.1 million during the three months ended March 31, 2022 decreased by 92.1% over the prior-year same period cash provided by financing activities, largely due to larger distributions to general partner and noncontrolling interest during the three months ended March 31, 2022 compared to the three months ended March 31, 2021.
COVID-19
The global impact of the COVID-19 and its variants (“COVID-19”) pandemic continues to evolve. We continue to closely monitor the impact of COVID-19 pandemic and all governmental actions in response thereto on all aspects of our business, including how it impacts our customers, employees, supply chain, distribution network and cash flows. The pandemic has affected our operational and financial performance to varying degrees and the extent of its effect on our operational and financial performance will continue to depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration, scope and severity of the pandemic (including due to recent or continuing variants such as Omicron), the actions taken to contain or mitigate its impact (including the distribution and effectiveness of vaccines and vaccine boosters), and the direct and indirect economic effects of the pandemic and related containment measures and government responses, among others. The production volumes in the three months ended March 31, 2022 were at pre-COVID-19 pandemic levels, which we consider to be production levels prior to the second quarter 2020. Soda ash demand in the U.S. as well as the global market has recovered to pre-pandemic levels since late 2021. There are select markets that continue to bear the impacts, however in most cases we see recovery taking place including areas where the demand was significantly negatively impacted for a prolonged period. The Partnership’s assessment of the future magnitude and duration of COVID, as well as other factors, may change and could result in changes in our accounting estimates and assumptions used to prepare our financial statements in conformity with generally accepted accounting principles in the U.S. GAAP.
For more such updates and perspectives around Digital Innovation, IoT, Data Infrastructure, AI & Cybersecurity, go to AI-Techpark.com.
