Why Intrepid Potash Is Tanking

Intrepid Potash Inc. (NYSE: IPI) reported its fourth-quarter financial results before the markets opened on Monday. The company had a net loss of $0.26 per share on $42.8 million in revenue, versus consensus estimates from Thomson Reuters of a net loss of $0.11 per share on revenue of $61.67 million. In the same period of last year, it posted EPS of $0.08 and $98.28 million in revenue.

The company sold 89,000 tons of potash in the fourth quarter for a full-year total of 587,000 tons, which is down 36% from 2014. Average net realized sales price per ton in the fourth quarter was $277, a 20% decrease year over year, and was $339 for 2015, up slightly from full-year 2014.

Intrepid’s Trio generated cash flow per ton of $126 in 2015, which was essentially flat compared with 2014.  Cash flow per ton in the 2015 fourth quarter was $65, down 57% from a year ago.

Bob Jornayvaz, executive chairman, president and CEO of Intrepid, commented:

The recent series of potash price reductions has created a more dynamic market than we’ve experienced in some time. The pricing pressure is reflected in our fourth quarter performance and has the potential to cause a breach in our loan covenants.  As a result, our auditors added going concern language to their audit opinion.

Jornayvaz continued:

In response to the current conditions, we have taken actions for the short term as well as continuing to execute on our long-term strategy.  We remain focused on improving EBITDA generation by selling more Trio while also lowering our potash cash operating costs through our conversion of the East facility.  The additional tests we ran in December and January support our confidence in completing the conversion in mid-2016.  In early 2016, we took actions to decrease our selling and administrative expenses by 20% from 2015 levels, and to improve our operating costs, including a 5% workforce reduction.

Cash flow from operations in 2015 was $22.7 million and capital expenditures totaled $46.0 million. On the books, cash and investments totaled $63.6 million at the end of the fourth quarter.

Shares of Intrepid Potash were trading down over 50% at $1.09 on Monday, with a consensus analyst price target of $3.20 and a 52-week trading range of $0.99 to $14.60.