AK Steel 4Q16 Earnings Call Notes

AK Steel Holding (AKS) CEO Roger Newport on Q4 2016 Results

Most industry sources are predicting a minor decline in automotive production

“As we look at 2017, most industry sources are predicting a minor decline in North American automotive production rates of about 1% to 3% compared to 2016, but this comes after the all-time record year of 2016. So even if such decline would indeed materialize, we would still anticipate another solid year in the automotive market. We remain focused on growing our core automotive business, and we expect some modest shift in products and customer mix as we transition also certain platforms and transition onto others.”

Electrical steel trade case loss

“In 2017, we will work with the new administration including to the Department of Commerce and the U.S. Trade Representative tasked with ensuring free and fair trade. Unfortunately, not all the recent steel-related trade cases have resulted in positive determinations. We are very disappointed that our appeal of the 2013 Grain-Oriented Electrical Steel or GOES trade case ruling was denied in late November. I believe that this case demonstrated some of the inherent weaknesses we previously had in our trade laws prior to the enhancement of the Leveling the Playing Field Act in 2016. Ultimately, an unleveled playing field will limit the amount of capital investments being made in this country. In the face of the negative determination in the GOES trade case, there has been added pressure on domestically produced electrical steel products caused by higher import levels. As a result, the only other domestic producer of electrical steel was forced to shut down their electrical steel operation and exit the market in 2016. This resulted in the loss of additional steel jobs in America. We believe the electrical steel situation is an issue of national security, needs to be addressed to ensure that the United States does not eventually become solely dependent on obtaining electrical transformers and/or their steel components from China or other foreign country for our critical electrical infrastructure. ”

Other countries are filling the void in stainless

” Although, we believe that the stainless trade case against China has had a positive impact on domestic market conditions, we are seeing some evidence of other countries now filling the China void, just as it also occurred with the carbon steel rate cases. However, one important distinction in our stainless businesses that the demand for our chrome based stainless products is driven primarily by the automotive market since we are not a major player in the commodity stainless arena.”

It’s not a surprise to see met coal prices moving back up

“What comment first on the met coal and then Kirk mentioned on AK, but met coal in general let’s say met coal most of the mining companies went bankrupt. So, they told you the pricing was pretty much at a floor. So, there was going to be some adjustment eventually in the market conditions just like we’ve seen in a lot of other commodities. Eventually, it has to correct itself so it’s a viable business. So, there was not a surprise to see coal starting to go back up.”

Cliffs Natural Resources 3Q16 Earnings Call Notes

C. Lourenco Goncalves

No more race to the bottom in iron ore prices

” In the third quarter, we witnessed some remarkable stability in iron ore pricing with the index trading within a tight range for the entire quarter. Once again, the analysts who predicted that iron ore prices would fall off a cliff were wrong. Wrong again. As I always say, iron ore is not your typical commodity as the vast majority of the supply is controlled by a small number of producers. For some time, iron ore prices were going down because a few executives in positions of power with the major iron ore producers were working very hard to drive these iron ore prices down. However, after the Boards of Directors of the Australian producers took action and all but one of these executives were let go from their respective jobs, these companies under new management are now generating better margins and more decent returns for their shareholders. No more race to the bottom. The Australian-Brazilian championship of stupidity is over. Check the box.”

Steel distributors are keeping their inventories dangerously low

“Back in our domestic U.S. market, the price of steel was not exciting during the quarter. We believe the recent weakness in steel prices is demand driven rather than supply driven. Our customers, the blast furnace steel mills, have remained disciplined. Unfortunately, the steel buyers, particularly the service centers, have decided to keep their inventories dangerously low, and as such their steel mill order books were weak. This being said, the illegally dumped steel from other countries no longer represent the type of threat we were worried about a few months ago.”

DRI fed EAFs are the future of steelmaking in this country

“Now with the steel industry in the United States readily moving toward a different method of production, we need to evolve again. I believe that DRI-fed EAFs is the future of steelmaking in this country, and Cliffs will play an active part on this process as well. We have made great progress on this so far, as at our Northshore mine, we have reduced and continue to produce DR-grade pellets for shipment to our client in Trinidad.”

Dumped steel is illegal stuff. We’re going to get the slowest guys

“At this point, dumped steel is illegal stuff. If you are a service center, your business model is based on buying illegal stuff, you are putting yourself in a situation that can be very, very dangerous for you, for your business and for yourself as an individual. We are getting evidence, and of course we are not going to hit a lot of people, we’re going to hit just two or three. You don’t need to – when you are running from a lion, you don’t need to be the fastest you just need to be faster than the other guys. So we’re going to get the slowest guy, one more or two, but this is coming.”

Service center inventories too low

” I see a lot of service centers working with inventories below two years. That’s crazy – two months, I’m sorry, two months. You can’t operate a service center business with inventories that low. Service centers are in the business of carrying inventory. If they don’t want to carry inventory, they’re in the wrong business. So as prices start to go back up, even the guys that are not doing anything illegal, they are exposing themselves to price appreciation that can be extremely bad. So these are the main things about the current situation in service centers. Service centers provoked the weakness of prices one more time.”

Don’t get distracted by this temporary weakness in prices in the US

“So don’t get distracted by this temporary weakness in prices in the US domestic market because these service centers that are working with less than three months of inventory, two months of inventory on hand, they will have to restock and I don’t see them to be able to even get all this – they need to restock all of them altogether, let alone to accommodate their typical double order, triple order that they do in situations like that. So we are going to see a price movement up here in the United States, and this price movement up can be pretty significant, pretty aggressive. And then things will slow down a little bit and then they will stabilize.”

Imported dumped steel is over, forget about it

“What we are now going to see next year in this domestic market is imported steel. Forget about it. That thing is over. That thing is over. Illegal dumped imported steel in this country is over for 2017. It doesn’t mean that prices will go to $1000 per ton, that’s not what I’m saying. But they will go back to the high $500, $600 mark. ”

You can be bullish but I can’t, because if I’m bullish and wrong I lose a lot of people a lot of money

“All right. So just one thing. I’m not bullish. You can be bullish. I can’t. Because if I’m bullish and I’m wrong, we are going to hurt a lot of people, a lot of investors. A lot of money will be lost, money that’s mine, money that’s not mine, from my investors. So I’m never bullish. I’m always very, very, very protective over our thing. That’s the reason we have been so successful because I play with a lot of caution – with a lot of cushion in our forecasts.”

Potash at Scotiabank Conference

Jochen Tilk – President and CEO, Potash Corporation

Merging with Agrium

“Agrium and Potash have embarked on a vision to be the new company to merge as a merger vehicle and we’ve been discussing this for a while. We started on ideas and concepts of operation synergies approximately a year ago, and as we talked about various products phosphate and then nitrogen evolved in the concept of what would be if we put these companies together. And what we present to you is really an exciting new company that would be the world’s largest crop nutrient company, and the third largest natural resource company in Canada.”

We have to create value

” It’s A, my firm belief and I’m very glad Chuck shares that. We take the future of our companies and our shareholders in a way that we have just some positive control over that. We have to create value. I mean sitting back and waiting and waiting the markets to change around you is not about creating value, its essentially just beings somewhat passive. I think Chuck and I said, can we create value by creating synergies, can we create strategic value, can we grow the company, and everything is a yes, yes, yes.”

Chuck Magro – President and CEO, Agrium

Market conditions have been tough

“So if you look at the market conditions today, and if you start with fertilizer, all there are below their historical average. And if you look at crop pricing there’s a similar trend, right. Corn, soybeans, you name your crop and most of them are at least at or below historical pricing levels. In crop chemistry, there’s been an increase in competition and you can see the consolidation happening in that pace and pricing are falling this year as well in crop chemistry. Just to given an example, glyphosate is down about 10% so far this year alone. And farmers are pulling back. So you can see the profitability of farmers, they are pulling back on, for example, some fungicide applications because it doesn’t spend well.”

Early harvest good for fertilizer

“The harvest is going to be early this year, which is helpful for fertilizer applications and we actually have some fertilizer going down in the south right now. We’ve had good moisture, which is very important, so we expect a very strong ammonia run this year. And speaking with our customers, we fully expect that the application rates for NP&K will be at normal rates for the fall season and certainly moving in to the spring.”

The new company will be third largest nitrogen producer in the world

“The new company, second largest nitrogen producer in North America, third largest in the world, and even at today’s market conditions, the new nitrogen business will generate a $100 a ton of cash. And then access to the best potash assets in the world. And again that’s a business that’s generating somewhere between $75 and $100 a ton of cash right now.”

DuPont 1Q16 Earnings Call Notes

DuPont’s (DD) CEO Ed Breen on Q1 2016 Results

Ag a source of strength

“Much of the quarter’s strength was due to Ag. Solid execution in Ag, our largest segment enabled a strong start to the North American corn season. I’m also very pleased with our results in this Safrinha season as we delivered strong volume growth. ”

Nicholas C. Fanandakis

Ag fundamentals have not changed

“In agriculture, the fundamentals have not changed since the outlook we provided in January. Net farm income is declining and season crop protection suppliers have abundant of inventory globally. Economists are currently forecasting lower global industrial production in key markets including the U.S., Central and Eastern Europe and China. China’s economic slowdown continues particularly with its industrial, real estate and financial sectors impacting the Asia-Pacific region.”

James C. Collins

A little early to talk about market share in corn. 30% planted but seeing volume increases

“It’s still early in the season to talk about full-year, we still have a lot to go and when I think about corn share now again, a little early to call share. Agree with you, no doubt we’re seeing volume increases in North America consistent with that USDA report on the 94 essentially million acres. We’re seeing volume growth based on our new technology and our teams are going to stay really focused. But like I said, it’s way too early to talk about seed share. As of today, we’re about 30% planted in North America. That is elevated. Normally we would be about 16% for this time of the year and again you saw some of that volume increase flow through in our first quarter, but we will see how things shake out around share for the full-year.”

If the weather is perfect and we get the 94m acres planted that are expected, it would continue to put pressure on prices

“Historically tough, planted acres doesn’t always equate to yield, we could still see some issues to summer especially during pollination where we know we can really take the top off of yield on any of those crops. So kind of like you, we’re in a wait and see mode, if the weather is perfect and we get 94 million acres, you are right we’ll continue to see commodity prices at that low end of – I would say what I’m calling the new normal range of that 320 to 420 kind of operating range. And that will continue to put stress on that farm income and keep farmers really focused on how do they get the most productivity off of everyone of their acres.”

Starbulk Carriers 4Q14 Earnings Call Notes

16m in EBITDA in 4Q

“Against a backdrop of weakening market conditions in the fourth quarter of 2014, the company recorded an adjusted net loss of $5.5 million and adjusted EBITDA of $16.6 million on net revenues of $45.6 million”

66 ship fleet

“Our fleet currently consists of 66 vessels on the water. We have taken delivery of 33 out of the total 34 vessels we acquired from Excel Maritime and expect to have the last vessels delivered to us by the end of this month.”

1Q is usually the seasonal high point for vessel supply

“The first quarter is the seasonally high-point of the year in terms of vessel supply due to high January vessel deliveries and the low-point in terms of demand or cargo availability as a result of poor weather conditions in the Northern Hemisphere. The Chinese New Year and maintenance taking place in major port and steel mills.

The first quarter of 2015 has become even more challenging in terms of supply and demand fundamentals as the continuing fall of commodity prices affected buying activity.”

Ship owners have been proactive in scrapping

“Ship owners have been very proactive when responding to negative demand developments. This year we are experiencing an encouraging strong response that has come in the form of vessel scrapping, converting, canceling and curtailing of the order. During the first two and a half months of 2015, we have identified almost 10 million deadweight that has already been scrapped and/or committed for demolition.”

We don’t think collapsing sentiment should be extrapolated

“During 2014, a number of medium term negative dry bulk fundamental developments took place such as Indonesian bauxite and nickel ore export ban; China’s coal import regulations and strong hydropower contribution to energy generation; reduced grain congestion in Brazil; and iron ore congestion in China; acceleration of iron ore imports from Australia displacing long haul iron ore from Brazil and reducing ton miles.

The combination of all these factors lead to a previously unanticipated freight rate correction across all vessel sizes that began in early December and painted a negative picture for the short-term and a collapsing sentiment which in our opinion should not be extrapolated.”

Raised capital

“we proactively raise $245 million of equity in January 2015 to fully fund the equity portion of our newbuilding program. Through this transaction we were also able to strength our balance sheet as we raise more than $100 million of funds in addition to our CapEx needs to support the company through in the least low point of the cycle.

Our current set of institutional shareholders Oaktree, Monarch, Angelo Gordon as well as my family and associates all invest into these equity raise as they all believe in the value of the platform and the prospect of Star Bulk.”

Seasonally strong ties between March and May and October to December

“usually there is two periods where the market is stronger, one is between mid-March and end of May and the other one is between mid-October and mid-December. This part of the year usually the market gets stronger because people are back from vacation and there is also the grain trade that increases. And therefore, I don’t think we are coasting down the bottom. I think we might see a more meaningful upturn. But, I think it’s going to be cyclical potentially this summer will be a bit challenging as again.”

There’s been extremely light ordering

“I think there is a realization that to be able to get there, we need to act and looking at 600,000 deadweight ordering for the first three months of this year is amazing, I have not seen this since 1990 happen.”

History of the 80s cycle

“Okay, similarities over supply, what happened in 1981-1982 was that there was a big congestion in Nigeria and that congestion actually was skipping 100s of vessels at their road for months. And that was misperceived as – and that might have went up a consequence and that was perceived as strong demand. It wasn’t strong demand. It was just a lot of congestion. And therefore, people ordered’

“think is that banks panicked. And they started selling vessels without regards to price. And that actually made prices of vessels go down – got down the drain. This however is never happened again after 1985. The banks always kept their cool and this is what’s happening now as well. So I think that this being frugal and looking forwards and doing things early enough. I mean we saw the problem in the first week of January and we raised $245 million. That was a good move and we did it first.”

Fluor 1Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“I think what we’re seeing specific to the United States is their need to get ahead of the curve because of cheap gas and, frankly, the resurging of manufacturing in the United States, which are both really good stories…We feel comfortable with the capacities that we have, both in terms of management and engineering talent, our supply chain capabilities, as well as the craft side. So I think our customers are recognizing the value that they see in our ability to deliver both in terms of cost and schedule. So I look at it as almost a perfect storm for us because we’ve really spent the time to invest in what we needed in order to take advantage of these programs and projects and win as much as we care to.”

[on tight labor markets] “I think that what we’re going to see is a circumstance where the traveler will come back. I think over the last decade or maybe 2 decades in the United States, we’ve seen a lack of willingness on the craft part to travel more than one state away. I think we’re going to see a change in that. And we’re already seeing people coming to us from 3 and 4 and 5 states away. They were ready to come to the Gulf Coast and work. ”

“I think most of what we’re looking at have a better-than-average chance of going forward over the next probably 4 quarters, both in terms of the ethylene and petrochemical side, the gas and liquids side and a growing optimism on LNG in Canada and in the Gulf Coast. So I see a pretty good collection of projects that are going to be awarded and announced basically on the schedule that we’re anticipating.”

“Well, I think over the next probably 3 quarters, we’re going to be burning significant revenue in the mining segment. That’s the normal burn-off. And as I mentioned in the prepared remarks, we’re just not filling it up with as much new awards on the same basis.”

“I think this is more of a structural deep breath [in the mining sector], driven by the commodity markets but also driven by the change in leadership. And even when I — I mean, it was seamless when I took over from Alan, but even at that, I took some time to think about where we were headed and the things that we needed to do and what those priorities were. And my expectation is the folks at Rio and the folks at BHP and the like are doing the same thing. So I think that just adds to the deepness of the breath, so to speak. But I don’t, by any means, think that there’s a long-term structural change in the market nor a significant long-term delay in capital spending.”

Diana Shipping 4Q12 Earnings Call Notes

This post is part of a series of posts called “Company Notes.”  These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.  The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call.  Other posts in this series can be found by clicking here.  Full transcripts can be found at Seeking Alpha.

“with ship building deliveries, gradually reducing in number, 2014 should see bulk carrier earnings improve. The problem with the sector, however, is that even though a decent level of demolition is expected this year, after 2013, there just aren’t enough vessels over 20 years old left to make serious inroads at least into the Capsize fleet.

Furthermore, things look worst for Panamaxes. The amount of new capacity coming on this year is difficult to see how demand for these ships and scrapping and to absorb the extra capacity. Based on statistics, Panamaxes will suffer from overcapacity for a while longer.

However, on a more positive note, MAR-ECO Shipping Research predicts that in the course of 2013 the stimulus-driven Chinese demand reported above would exceed supply growth of vessels. This may the market balance and offer confidence to both the market and the investor base especially during the second half of the year. Yet again, the risk from such a development if it comes to pass is that new building contracting could once again take off and push back any recovery in earnings and the asset values.

According to Howe Robinson, shipyards are hungry for work and are offering ships at the lowest price for a decade. There is no realistic prospect to derive in demand outpacing shipyard capacity for a long time, according to Howe Robinson. They predict that this fact alone will bring through a protracted return to the rate levels cycle. Instead, Clarksons anticipates after we will – something like a return to the long-term levels of earnings.

Approximately two years ago, we have unfortunately foreseen and publicly expressed the negative development we have been witnessing for the last 18 months or so. Admittedly, we were a bit early in our business. However, we have always mentioned in our call and presentation that it is impossible to predict the exact timing of the freight market downturn or, for that matter, upturn. And exactly for this reason – can support a steady schedule of activation through the down cycle at progressively more competitive prices. We continue to believe that the strategy of financing new acquisitions with cash and conservative borrowing will ensure the steady growth of our bulk carrier fleet without jeopardizing the financial strength and integrity of our balance sheet.

Sooner or later, the recession in shipping will end. That moment, we’ll find Diana Shipping with a modern, high-quality bulk carrier fleet, excellent prospects to generate cash and support the dividend for our shareholders, payments of which were interrupted years ago to beef up our balance sheet. This shows the support the acquisition strategy referred to above. Asset values will eventually also increase and we will ensure that we’ll take advantage of this through selective sales of assets.”

“So, the only real question that we have in our minds…is why not invest in small Handysize – between 20,000 and 30,000 tons. But that’s a different market … So, that sector is being underbuilt. There is no doubt about it. And we’d rather leave that sector to people who are more geared up in trading ships in that small-size range than we are. Our operation is set in a way that we are best in operating larger-bulk carriers.”

“I think that you have to understand that when the market is good, every ship is a good one, and when the market is bad, every ship is a bad one”

“we have discussed in the past that we strongly believe that market prevails and there is a reason why the newbuilding cost so much and the secondhand don’t cost so much, and everything is incorporated in the price”

Lyondell Basell Analyst Day Notes 3.13.13

This post is part of a series of posts called “Company Notes.”  These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.  The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call.  Other posts in this series can be found by clicking here.  Full transcripts can be found at Seeking Alpha.

“sustainable changes in supply/demand and therefore price environments of NGL, chemical chain…[will dominate our discussion]”

“exploration production companies enjoyed strong natural gas prices in 2008 — 2005 and 2008 on a full year basis, and that was the relative peak at least, in the current history. Next bubble is the midstream…MLPs…They have seen the peak of their value in 2007 and 2011…[the] chemical industry [has seen] decline into the trough of the cycle of ’08 and ’09…since ’09, it continuously coming up to the high end profit and so we are far from the peak of the cycle yet”

“when you look at $110 approximate oil out there and you’ve got $3.50 gas out there. Where do they meet? They meet in the export market, that’s where they meet, and that’s where we have competitive advantage. Going forward, if you look at it in 2008, and I really just touched upon that, overall this just highlights a little bit that we don’t think we’re in this up cycle. Yes, operating rates have been very high. Jim did show you what we’ve been operating close to 100%, which is great, and we believe that’s higher than where the industry’s at. But the industry as a whole has been running very high, in the upper 90s, mid to upper 90%. So really, when you look at it from a global standpoint, it’s really a tale of 2 cities. North America and the Middle East, 2 of the cost advantaged positions have done very well and have operated very well. If you try looking at Europe and Asia, not so well and those are the regions where our utilization rates have been somewhat anemic.”

“Sustainable U.S. ethane advantage is a great advantage. Everybody has the advantage. So what are we going to do to compete and be better than the next guy? So we’re executing cheaper, quicker. We’re going to capture that bubble. And as Jim said — I’m saying that lot because he’s right, we’re going to capture that and hopefully get these projects paid for before the other guys turn on the switch.”

“Polyethylene demand only grew by 1% from ’11 to ’12 in China. We’ve come to know Chinese demand growth for polyethylene to be at least at the pace with GDP, if not the multiple of GDP”

“We’ve shuttered 2.5 billion pounds of capacity in Europe.”

“You’ll see some LNG export happen. I suspect it will be fairly modest. I participated in LNG business in the past. And if you look at the global economics of that, as soon as methane prices start to rise a bit, you’ll see a production increase fairly rapidly in the dry gas plays, which will moderate that.”