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Edited Transcript of LXU earnings conference call or presentation 30-Jul-19 12:30pm GMT

Q2 2019 LSB Industries Inc Earnings Call

OKLAHOMA CITY Aug 2, 2019 (Thomson StreetEvents) -- Edited Transcript of LSB Industries Inc earnings conference call or presentation Tuesday, July 30, 2019 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Cheryl Maguire

LSB Industries, Inc. - Senior VP & CFO

* John Howard Diesch

LSB Industries, Inc. - EVP of Manufacturing

* Kristy Carver

LSB Industries, Inc. - Senior VP & Treasurer

* Mark T. Behrman

LSB Industries, Inc. - President, CEO & Director

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Conference Call Participants

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* Brian Lau;Sidoti & Company, LLC;Equity Research Associate

* James Philip Geygan

Global Value Investment Corp - VP Advisory

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Presentation

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Operator [1]

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Greetings and welcome to the LSB Industries Second Quarter 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I'd now like to turn the conference over to your host, Kristy Carver, Senior Vice President and Treasurer. Thank you, you may begin.

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Kristy Carver, LSB Industries, Inc. - Senior VP & Treasurer [2]

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Thank you, Matt. Good morning, everyone. Joining me on the call today are Mark Behrman, our Chief Executive Officer; John Diesch, our Executive Vice President of Manufacturing; and Cheryl Maguire, our Chief Financial Officer.

Please note that today's call will include forward-looking statements. And because these statements are based on the company's current intent, expectations and projections, they are not guarantees of future performance. And a variety of factors could cause actual results to differ materially.

As this call will include references to non-GAAP results, please reference the press release in the Investors section of our website, lsbindustries.com, for further information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results.

At this time, I'd like to go ahead and turn the call over to Mark for opening remarks.

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Mark T. Behrman, LSB Industries, Inc. - President, CEO & Director [3]

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Thank you, Kristy, and good morning, everyone. We're glad that you could participate in our call this morning and appreciate your interest in LSB Industries. Page 3 of the presentation provides highlights for the second quarter of 2019. We delivered a strong operating performance during the quarter. John will get into more detail on our plant operations momentarily, but I'll point out that our 3 ammonia plants averaged an on-stream rate of 94%, which was our fourth quarter in a row running at 93% or better.

In fact, for the past 4 quarters, we've averaged 94% on-stream rate across the 3 ammonia plants, which reflects the positive impacts of leadership changes and the investments in reliability we've made over the last few years.

Our significant improvement in plant performance as compared to the last several years' performance reflects the processes, procedures and culture of operational excellence that we've instilled throughout the company over the past 24 months. We owe much of the credit for this achievement to our employees at the plant level and their ongoing commitment to make LSB a best-in-class chemical manufacturer that is measured not only by strong operating rates but also by a strong environmental health and safety record. We thank them all for their continued efforts.

With respect to our financial results for the quarter, once again, inordinately wet weather was a factor in the second quarter. The good news is, we still posted very good results with revenues of $121.5 million and adjusted EBITDA of $30.5 million, up significantly from last year's second quarter and at the high end of the range Cheryl indicated in our last earnings call. Cheryl will provide more color later in the call.

Page 4 depicts the multiyear trends for fertilizer pricing and natural gas costs. As you can see, Southern Plains ammonia prices have dropped sharply over the past several months as a result of inventory buildup in the U.S. market. The extended period of wet weather through the region significantly reduced the amount of ammonia applied by corn farmers prior to planting, the main use of agricultural ammonia.

With that said, relative to the second quarter of 2018, pricing for both agricultural ammonia and UAN was higher during the second quarter of 2019 by 13% and 11%, respectively. HDAN pricing was modestly lower, down 2% from the same time last year due in large part to higher imports, which we believe is a temporary situation.

As you can see from the black line on the slide, on Slide 4, the Tampa ammonia price had a continuous decline since November last year when it hit $355 per metric ton. The decline in the Tampa ammonia price reflects elevated inventory levels that have been building up in a distribution channel since the fourth quarter of 2018 due to the weather impacts. Fortunately, for our agricultural business, ammonia pricing in the Southern Plains market hasn't been as soft as the Tampa price. We believe the Tampa price has hit a floor as pricing for August has rolled over July's price, and due to several factors that I'll discuss later, demand for ammonia should be strong in the fall.

Lastly, as many of you saw, we issued an additional $35 million in senior secured notes in June to fund several margin-enhancing projects we've identified. All of these projects meet or exceed our targeted hurdle rate of return and payback.

Obviously, the weather and its effects on our end markets are outside of our control. What is in our control is how we run our plants, and we were once again pleased with the operating rates across our 3 facilities. We have now averaged an approximate 94% on-stream rate for our ammonia plants for the last 4 quarters. That is not a coincidence.

Rather, I'm confident in saying that the many actions we've taken and significant investments we've made over the past several years have combined to deliver improved and consistent operating performance, and we are by no means done. We still have improvements to make to achieve our targeted on-stream rates.

The improved operating performance was further evidenced by the level of EBITDA we generated in the second quarter, the highest level of EBITDA generated by these plants in over 5 years, despite challenging conditions for fertilizer sales volumes and dropping industrial ammonia prices. While the weather always has an impact on our fertilizer business, the past fertilizer season included some of the worst weather in many years. We are increasingly confident that under more normal weather conditions, we can deliver significantly stronger profitability. I'll discuss our outlook for the balance of 2019 later in the call.

Now John will go into more detail about the performance of our plants in the second quarter, their current status and provide an update on our operational initiatives. John?

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John Howard Diesch, LSB Industries, Inc. - EVP of Manufacturing [4]

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Thank you, Mark, and good morning. I am pleased with our operating performance in the second quarter. The combined average on-stream rate of our ammonia plants for the second quarter was 94%, and as Mark mentioned, have averaged 94% for the past 4 quarters. With the upgrades and improvements that are being planned for this year's upcoming turnarounds, we are confident we'll be able to sustain and improve these on-stream rates for our ammonia plants as well as improve the reliability of our downstream plants.

The El Dorado ammonia plant is operating very well. We are planning a 14-day turnaround for August, which will include mainly inspections, heat exchanger cleaning and catalyst changes. We will then go to a 3-year cycle with the ammonia plant with the next turnaround planned for 2022.

We recently completed a successful turnaround in our DMW2 nitric acid plant in July, and we have turnarounds planned for our high-density ammonium nitrate plant in September and our sulfuric acid plant in October, where we'll be completing the installation of a new converter, which we expect to significantly increase the reliability of that plant by adding additional production capacity.

Our prior ammonia plant is also operating very well. We have been planning for an extensive turnaround at our prior plant, where we expect to materially improve our overall reliability of the facility. The turnaround will begin in mid-September and will include numerous catalyst changes, vessel and equipment inspections, electrical upgrades in urea and nitric acid in installation of a start-up flare in ammonia.

There are a number of projects in urea and nitric acid that will be installed during this turnaround that will improve the reliability and efficiency of those plants. The new urea reactor will be put in service when we restart after the turnaround, which we expect to significantly improve the reliability of that plant while adding additional production capacity. We are confident that we will come out of this turnaround with a significant improved reliability that we expect to lead to higher on-stream time.

The Cherokee ammonia plant is running very well. Like prior, we brought in outside expertise to review our urea operation to improve reliability -- operability of that plant. We expect this outside review to lead to recommendations of performance-improving projects that will be planned for completion in our next scheduled turnaround in 2021.

The Baytown nitric acid plant operated at 100% on-stream time in the second quarter. A turnaround is scheduled for late September; tie ends will be made for capacity project as well as to replace the expanded turbine case. We are in the midst of trading at all our plants as concentrating on communications at the supervisory level, particularly at shift change. We have also started leadership training from line supervision to plant manager levels. In addition, our maintenance procedures, operating procedures and the operating or maintenance training programs are all being overhauled or restructured for safety, efficiency and improved operating performance. The goal continues to run our plants best-in-class in the natures and chemical space.

Now I will turn the call over to Cheryl to discuss the financial results for the 2019 second quarter.

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Cheryl Maguire, LSB Industries, Inc. - Senior VP & CFO [5]

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Thanks, John, and good morning, everyone. Page 6 of the presentation provides a consolidated summary statement of operations for the second quarter of 2019 as compared to the second quarter of 2018. In reviewing our operations for the second quarter, total net sales in Q2 2019 increased 18% to $121.5 million from $103.2 million in Q2 2018.

In our Ag business, we experienced stronger sales volumes for ammonia and HDAN, which increased 118% and $0.37, respectively, quarter-over-quarter, whereas UAN volumes decreased 14%. UAN volumes during the quarter were impacted by weather and the resultant delayed planting. This was particularly the case for UAN volumes out of our Pryor facility as inordinately wet weather in Oklahoma ultimately resulted in a rail embargo, preventing a shipment of UAN out of our Pryor facility for 11 days, followed by another 5 to 7 days of further delay to clear the congestion in the system.

Additionally, we made the decision to forgo UAN production in favor of selling ammonia early in the quarter to capitalize on a window of opportunity of strong ammonia demand in the Southern Plains market, which is the primary market we serve out of our Pryor facility.

As Mark mentioned, agricultural net selling prices improved year-over-year with ammonia and UAN increasing 13% and 11%, respectively. HDAN net selling prices were down slightly year-over-year. Net sales into our industrial markets were higher than last year due to a material increase in industrial ammonia volume of 91%, resulting from higher production volume at our facilities. This was partially offset by a decline in the Tampa ammonia benchmark price.

Sales volumes related to mining applications were slightly lower versus the prior year. However, we are continuing to diversify our mining customer end-use markets to reduce the impacts of lower-coal production by focusing more sales efforts on the quarry and construction industry. Gross profit increased approximately $16.6 million as a result of higher overall net sales, improved on-stream rates and the lower gas costs in the second quarter versus the same time period last year.

During the second quarter of 2019, changes in tax laws were enacted by certain states, resulting in an income tax benefit of $5.7 million. The increase in the benefit was primarily due to the adjustments on the deferred tax assets and liabilities from the newly enacted state tax law changes.

Operating income and adjusted EBITDA for the second quarter of 2019 increased compared to the prior year period, primarily due to improved product sales resulting from higher year-over-year on-stream rates as well as our strategic placement of product in close proximity to our customers, enhancing logistics, enabling us to capitalize on demand quickly when the planting season started moving.

I will bridge EBITDA for you on Slide 7. Please refer to our reconciliation of non-GAAP measures beginning on Slide 14 for further information on noncash and onetime costs incurred during the period. To give further clarity on the results of the quarter, page 7 bridges our consolidated adjusted EBITDA for Q2 2018 of $17.8 million to adjusted EBITDA for Q2 2019 of $30.5 million. Sales volumes and fixed cost absorption improved to $12.9 million year-over-year due in large part to improved on-stream rates versus the same time period last year. Additionally, we were able to make up much of the sales volume we lost in the first quarter.

Lower natural gas prices contributed $1.3 million to EBITDA, as we had approximately 60% of our gas needs locked in coming into the quarter. Offsetting these favorable impacts, other costs were approximately $1.1 million higher than the second quarter of 2018, primarily driven by higher legal fees, as we continue to pursue recovery of damages caused by subcontractor work performed during the ammonia expansion at our El Dorado facility.

Net selling prices were down slightly year-over-year impacting EBITDA by approximately $0.4 million, as lower selling prices for industrial ammonia due to lower Tampa ammonia benchmark pricing, which decreased approximately $30 a metric ton to approximately $235 a metric ton in 2019 versus $265 a metric tons for the same quarter last year, largely offset higher net selling prices for our agricultural product.

We are pleased with our results with $30.5 million adjusted EBITDA, which is at the higher end of the range we indicated on our last earnings call, despite the challenging weather patterns for most of the quarter.

Turning to Page 8, we have outlined the gross profit margins for each of our markets. As mentioned last quarter, this presentation excludes depreciation, amortization and turnaround expenses and, therefore, should represent the true underlying cash margins of each market. We have reconciled this back to gross profit as presented on the financial statements on Slide 15.

Agricultural products gross profit grew from 11% in the second quarter of 2018 to 26% in the second quarter of 2019. This improvement was driven by higher sales volumes and selling prices for our agricultural product. Industrial and mining product's gross profit percentage remained steady at approximately 37% year-over-year. Higher production and sales volumes were offset by lower sales prices, primarily related to overall Tampa ammonia benchmark pricing for the second quarter versus the same quarter last year. Overall, industrial margins remain robust, despite a very low Tampa environment, while agricultural margins continue to recover from 2016 lows.

Looking forward to the third quarter of 2019, please turn to Page 9. This page illustrates the average Tampa ammonia price, our average net selling prices for UAN and HDAN and our average cost of natural gas for the third quarter of 2018 and compares that to the current Tampa ammonia price, the expected average selling prices for UAN and HDAN based on forward sales of product or current spot market sales prices and the current average natural gas prices we are paying or have hedged. Also shown is the estimated annual EBITDA impact to us of $10 per ton movement in the Tampa ammonia, UAN and HDAN prices based on 2019 volume outlook and $0.10 per MMBtu movement in natural gas prices. Keep in mind that due to seasonality, our quarters have significant variability, with the third quarter typically our lowest EBITDA quarter.

Tampa ammonia has continued to trend downward as a result of high inventory caused by overall -- for fall and spring agricultural ammonia applications, combined with weather, impacting the movement of ammonia from the Gulf region, which has resulted in a buildup of inventory in the U.S. ammonia distribution channel. That trend has continued in the third quarter with Tampa averaging approximately $215 a metric ton for July and August versus $315 a metric ton for the third quarter of 2018. UAN pricing is expected to be slightly higher, whereas HDAN pricing is expected to be somewhat lower.

Increased net imports for both products as compared to prior year has been a headwind. With respect to our natural gas feedstock cost, we have approximately 70% of our gas needs locked in for Q3 at approximately $2.40 per MMBtu. As a reminder, we are scheduled to undergo a 14-day turnaround at our El Dorado facility in August as well as a 30-day turnaround at our Pryor facility starting in mid-September.

Additionally, the NuStar ammonia pipeline that transports most of the ammonia that we sell out of our El Dorado facility will be down for maintenance for approximately 8 weeks. That work began in mid-July. Although this will impact sales volumes in the third quarter, we do expect to make up the sales volume in the fourth quarter.

So to sum up our view on the third quarter, given our planned turnarounds at El Dorado and Pryor as well as continued headwinds with the Tampa ammonia pricing at $100 per metric ton lower than the third quarter of last year, along with lower expected ammonia sales volume into the NuStar pipeline as a result of their 8 weeks of planned maintenance, we expect adjusted EBITDA for the third quarter of 2019 to be in line with the third quarter of 2018 and possibly slightly higher depending on pricing.

Moving to Page 10. We outline our free cash flow. Cash provided from operations for the first quarter of 2019 was approximately $20.3 million compared to $33.3 million for the same period of 2018. Operating cash flow includes a higher working capital draw as of June 30, which includes higher accounts receivable as a result of the delayed fertilizer application season.

In addition, we had higher payables related to accrued severance and higher overall gas cost coming into 2019 as well as a change in gas suppliers that led to a change in the timing of our payables. Capital expenditures predominantly related to reliability and maintenance investments were approximately $12.9 million for the first 6 months of 2019. Full year maintenance capital expenditures are expected to be approximately $35 million, of which $7.5 million relates to the sulfuric acid converter, which is financed.

Page 11 outlines our capital structure at the end of Q2 2019. We ended the quarter with $58 million in cash and over $47 million of availability on our revolving credit facility, giving us total liquidity of approximately $105 million. Additionally, our credit facility is undrawn. Excluding the proceeds raised through the issuance of $35 million of senior secured notes on June 18, 2019, total liquidity at the end of the second quarter would have been approximately $70.4 million.

As Mark mentioned earlier, we issued $35 million of tack-on debt to our existing senior secured notes with approximately $20 million earmarked to fund several margin enhancement opportunities, including loading and unloading improvements, tank storage and capital to facilitate gas plant opportunities. We expect these investments will result in approximately $7 million to $10 million of annual incremental EBITDA when fully completed, which we believe will be over the next 18 months.

Total outstanding debt at quarter end was approximately $457 million, including the unamortized discount and issuance cost associated with our debt. We also had outstanding preferred stock of approximately $227 million, including approximately $87 million in accrued and unpaid dividends.

Now I'll turn it back over to Mark to wrap up.

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Mark T. Behrman, LSB Industries, Inc. - President, CEO & Director [6]

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Thank you, Cheryl. Looking ahead to the second half of the year with less than expected planted corn acres and the lack of sufficient fertilizer applied on acres that were planted, impacting yields per acre, current corn prices have moved into the mid-$4 per bushel range. At those prices, industry sources anticipate that farmers will plant a significant amount of additional acres for the 2019-2020 planting season, which could mean a very heavy fall application season for ammonia, providing we don't see an early frost.

This could also result in a strong spring application season for all fertilizers. Given those dynamics, even with the planned turnarounds at our El Dorado and Pryor facilities that John and Cheryl discussed, along with whatever lingering impacts remain from the past 8 months of weather-related product inventory buildup in the distribution channel and any impact on product pricing, I anticipate that we will deliver improved profitability year-over-year during the second half of 2019 and into 2020.

Page 12 refers to our review of several potential investment opportunities that we've identified for the purpose of enhancing LSB's profitability. These are projects that fell well within our area of expertise, require limited capital and are low-risk and have estimated payback periods and internal rates of return that exceed our hurdle rates. As Cheryl mentioned, based on current pricing, we expect these investments to collectively yield annual incremental EBITDA in the $7 million to $10 million range when fully completed, which we believe will be within the next 18 to 24 months.

Page 13 outlines our business improvement initiatives that we discussed last quarter. Given our focus on the operating initiatives, which John outlined earlier, we expect our production facilities to continue to show improved operating performance, and we are targeting an average on-stream rate across all 3 of our ammonia plants of approximately 94% for the year, matching what we have averaged the last 4 quarters.

As discussed on the previous page, we continue to evaluate numerous opportunities to increase our sales volumes and expand our margins from new sales opportunities with both existing and potential customers as well as enhanced product flexibility.

Lastly, we continue our efforts to operate more efficiently and reduce cost through supply chain management. While we have reduced cost significantly over the last 2 years, we believe that there are still opportunities for improvement, and we are focused on capturing those in both the areas of procurement and logistics. Over the second half of 2019, we expect these initiatives to contribute to the improved financial results.

Finally, I will be attending the Jefferies Industrial Conference in New York on August 7, and Cheryl will be attending the Three Part Advisors' Midwest IDEAS Conference on August 29 in Chicago and the Sidoti Fall conference on September 25 in New York. We hope to see some of you at those events.

That concludes our prepared remarks, and we will now be happy to take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question here is from Brian Lau from Sidoti.

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Brian Lau;Sidoti & Company, LLC;Equity Research Associate, [2]

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I'm on for Joe Mondillo. First one, could you just talk about how you expect the potential increase in supply coming into the market with the Mississippi River waterways opening up and how that might affect pricing?

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Mark T. Behrman, LSB Industries, Inc. - President, CEO & Director [3]

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Well, I think it's affected pricing prior to that by artificially keeping prices down in the southern part of the U.S. low, so any ammonia, in particular, coming up from the Gulf or produced in the Gulf has really had a problem coming up during season. And therefore, you saw the big disparity between Gulf pricing and in-continent or Corn Belt, Southern Plains pricing.

I think with the rivers opening up, a lot of product -- some product got there to their destinations and to customers and farmers really late. I think we're still sitting with a lot of inventory within the system because product didn't get out in time to intended destinations.

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Brian Lau;Sidoti & Company, LLC;Equity Research Associate, [4]

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All right. And then also for the turnaround at the Pryor plant coming up, could you just remind us kind of what you're looking to do there? And how important that might be going forward?

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Mark T. Behrman, LSB Industries, Inc. - President, CEO & Director [5]

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Yes. I'll let John kind of give a little bit of detail. We don't generally go into too much detail on what we're doing at each of the plants, but...

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John Howard Diesch, LSB Industries, Inc. - EVP of Manufacturing [6]

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Yes, sure. Thanks, Brian. For the most part, most turnarounds are pretty consistent. You do a lot of inspections and cleanings and heat exchangers and things like I said in my remarks. Probably one of the biggest projects is the final tie ends or urea reactor, which we expect to improve urea capacity, allowing to increase UAN capacity as well as overall improvement reliability of that plant. I think that's probably the biggest project we have on the slate of activities.

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Mark T. Behrman, LSB Industries, Inc. - President, CEO & Director [7]

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Most of the work that we're doing really has been identified over the last year, 1.5 years, and it's really more to improve the reliability and the consistency of the operations of that plant.

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Brian Lau;Sidoti & Company, LLC;Equity Research Associate, [8]

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Okay. And then is there any way -- I know this might be tough to kind of quantify -- any additional percentage increase or decrease in on-stream rates and how that affects profitability? Or there are just too many moving parts there?

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Mark T. Behrman, LSB Industries, Inc. - President, CEO & Director [9]

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Yes. I think there's probably a lot of moving parts on -- a percentage of improved onstream time and what that means. I mean I would kind of point you back to the sensitivity table that we have within our investor presentation that shows you natural gas prices and Tampa ammonia prices as a proxy for the fertilizers. And you can see that down in the notes, the assumption there is that we run our Pryor plant at 95%, our Cherokee plant at 95%, and our El Dorado plant at 97%, and those are really our targets. And as I said, we're not quite there yet, but we're getting close.

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Brian Lau;Sidoti & Company, LLC;Equity Research Associate, [10]

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All right. And then last one from me, just on those CapEx projects recently announced, that 7 -- expected $7 million to $10 million in benefits. Do you think we should kind of see that slowly ramp up? Or is that going to be more back-end loaded once everything is completed in that 18- to 24-month window?

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Mark T. Behrman, LSB Industries, Inc. - President, CEO & Director [11]

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Yes, I do think it's probably back-end loaded. I mean we'll start to see some of that come through in the second half of next year. And so by the end of next year, maybe beginning of 2022, we'll have everything up and running. And then those figures are really on an annualized basis going forward.

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Operator [12]

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Our next question here is from JP Geygan from Global Value Investment Corp.

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James Philip Geygan, Global Value Investment Corp - VP Advisory [13]

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Margins in your agricultural segment, and I'm referring to gross margin, was really quite impressive. I think I heard you attributed this largely to fixed cost absorption on higher production volumes. Can you elaborate on that a little bit?

And then if we were to look at a more normalized environment where we didn't have the effects of weather, have you quantified internally what the quarter may have looked like?

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Cheryl Maguire, LSB Industries, Inc. - Senior VP & CFO [14]

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Sure, JP. I guess what I would say is the margins of our business are very much impacted by higher on-stream time, which we alluded to in the fixed cost absorption. The more you produce, the lower your fixed cost per ton is, so that certainly helped both the margins on the Ag side as well as the industrial side.

I think the biggest impact to the Industrial business was really that lower Tampa ammonia benchmark price. At $2.35, it's probably $70 lower than I think what we would have considered normal. So it would have added somewhere around $5 million to $7 million of additional EBITDA impact, which would have made the margins on the industrial business probably closer to 40%, 45% for the quarter.

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Mark T. Behrman, LSB Industries, Inc. - President, CEO & Director [15]

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Yes. I'd probably add that on the Ag side, the margins were about 26% that we presented. We would certainly be north of 30% and may be heading towards mid-30s on a margin basis.

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James Philip Geygan, Global Value Investment Corp - VP Advisory [16]

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Okay. You talked about a shift in your mining segment away from coal end markets and towards construction and other end markets. Can you elaborate on that and talk about how that might affect volumes in your mining segment?

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Mark T. Behrman, LSB Industries, Inc. - President, CEO & Director [17]

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Well, I think it's been somewhat of a conscious effort given what's really happened in the coal markets to try and work with our customers to diversify. Some of it's within our control and some, obviously, is not. It's just kind of the business that they bid on, but we're at the point now where if you look 5 years ago or so, we might have been at least half of our product going into coal end markets and might even be 60% or 65%. We're probably less than 20% today.

So we think that that's a more stable strategy given that the coal markets and coal production and mining are really declining. So I think the team's done a really good job in diversifying away from that. But at the end of the day, though, you really go where the business is. And so we've been lucky enough to really, I think, do a good job in servicing our customers. And we're sort of a supplier of choice. And so it's worked out well for us.

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James Philip Geygan, Global Value Investment Corp - VP Advisory [18]

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And finally, looking forward into 2020, where you have no plan to turnarounds, I believe, where product pricing will presumably be firmer on your agriculture market because of stronger corn pricing and then your industrial mining markets, presumably due to the higher Tampa pricing. You have to be feeling pretty good about your business. What might we expect from production volumes looking forward to 2020, either quantitatively or qualitatively compared to 2019 thus far?

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Mark T. Behrman, LSB Industries, Inc. - President, CEO & Director [19]

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Well, I mean I think it's a little early for us to be giving some outlook or guidance on 2020. I would tell you that with no turnarounds, you should see a significant amount more of production, right? This year, we're going to lose 30 days or so with Pryor. So you can figure out, we produce 650 to 700 tonnes a day of ammonia, and then we upgrade that to product. So you can do the math there, and we're missing -- we're going to lose 14, 15 days of ammonia production at Pryor. So -- at El Dorado, so that's 1,300, 1,350 a day times 14, 15 days. So we won't have -- we'll have that production next year.

On top of that, as I mentioned in my comments, I mean I think we're building a nice operating track record, 94% on average, but we're not there yet. So I would expect to see higher operating rates next year over this year. I mean that's the goal of really all the work that we've been doing and the extensive turnarounds that John talked about.

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Operator [20]

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This concludes the question-and-answer session. I'd like to turn the floor back over to management for any closing comments.

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Mark T. Behrman, LSB Industries, Inc. - President, CEO & Director [21]

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Well, I appreciate everyone's interest and thank you for getting on the call.

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Operator [22]

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This concludes today's teleconference. You may disconnect your lines at this time. Thank you, again, for your participation.