ITAFOS REPORTS RECORD Q2 AND H1 2022 RESULTS, UPDATES FULL-YEAR 2022 GUIDANCE Q2 2022 Key Highlights revenues of $155.0 million adjusted EBITDA of $63.6 million net income of $44.3 million basic earnings of C$0.30/share
News Release
ITAFOS REPORTS RECORD Q2 AND H1 2022 RESULTS, UPDATES FULL-YEAR 2022 GUIDANCE
Q2 2022 Key Highlights
revenues of $155.0 million
adjusted EBITDA of $63.6 million
net income of $44.3 million
basic earnings of C$0.30/share
free cash flow of $41.3 million
H1 2022 Key Highlights
revenues of $304.9 million
adjusted EBITDA of $124.0 million
net income of $77.3 million
basic earnings of C$0.52/share
free cash flow of $95.7 million
June 30, 2022 Key Highlights
trailing 12 months adjusted EBITDA of $213.1 million
net debt of $146.2 million
net leverage ratio of 0.7x
Revised FY 2022 Guidance
adjusted EBITDA guidance of $210-230 million (maintained)
net income guidance of $100-1 05 million (previously $80-95 million)
basic earnings guidance of C$0.69-0. 72/share (previously C$0.55-0.65/share)
maintenance capex guidance of $18- 22 million (previously $15-23 million)
growth capex guidance of $18-21 million (previously $15-22 million)
free cash flow guidance of $150-165 million (maintained)
CEO Commentary
“We are pleased to report record performance during the second quarter and first half of 2022 in terms of safety and financial
results along with continu ed strong operational performa nce. Our trailing 12 months adjusted EBITDA of $213 million
represents a new Company record and has allowed us to make significant progress toward deleveraging our balance sheet,
resulting in a net leverage ratio of 0.7x at the end of the period,” said G. David Delaney, CEO of Itafos.
“For the quarter, we recorded $155.0 million of revenues a nd $63.6 million of adjusted EBI TDA on the back of continued
strong production out of our Conda facility and positive contributions from running our sulfuric acid plant at Arraias.”
“We have also updated our full-year guidance for 2022 to re flect the continued strength of the business and market
fundamentals. Finally, we remain focused on our key objective s, including extending Conda’s current mine life through
permitting and development of H1/NDR and evaluating strategic alternatives for our non-North American assets.”
HOUSTON, TX – August 11, 2022 – Itafos Inc. (TSX-V: IFOS) (the “Company”) reported today its Q2 and H1 2022 financial
and operational highlights. The Company’s financial statem ents and management’s discussion and analysis and annual
information form for the three and six months ended June 30, 2022 are available under the Company’s profile at
www.sedar.com and on the Company’s website at www.itafos.com. All figures are in thousands of US Dollars except as
otherwise noted.
TSX-V: IFOS
Q2 and H1 Market Highlights
DAP NOLA prices averaged $860/short ton (“st”) in Q2 2022 compared to $571/st in Q2 2021, up 51% year-over-year driven
by strong agriculture and phosphate fertilizer market supply and demand dynamics. Similarly, DAP NOLA prices averaged
$827/st in H1 2022 compared to $536/st in H1 2021, up 54% year-o ver-year. Specific factors driving the year-over-year
improvements in DAP NOLA were as follows:
Specific factors driving the year-over-year improvements in DAP NOLA were as follows:
limited supply additions;
global coarse grains and oilseeds at multi-year low stocks -to-use ratios supporting fertilizer relative affordability;
continued drawdown of inventory levels;
increased restrictions and controls on exports from China; and
disruptions to fertilizer and raw materials supply from Russ ia due to sanctions imposed by certain countries following
Russia’s invasion of Ukraine.
Q2 2022 Financial Highlights
The Company’s revenues, adjusted EBITDA, net income, basic earnings per share and free cash flow were all up in Q2
2022 compared to Q2 2021 as follows:
revenues of $155.0 million in Q2 2022 compared to $103.3 million in Q2 2021;
adjusted EBITDA of $63.6 million in Q2 2022 compared to $33.7 million in Q2 2021;
net income of $44.3 million in Q2 2022 compared to $9.6 million in Q2 2021;
basic earnings of C$0.30/share in Q2 2022 compared to C$0.06/share in Q2 2021; and
free cash flow of $41.3 million in Q2 2022 compared to $25.4 million in Q2 2021.
The increase in the Company’s Q2 2022 financial performance compared to Q2 2021 was primarily due to higher realized
prices at Conda, which were partially offset by higher input costs, and the restart of the sulfuric acid plant at Arraias.
The Company’s total capex spend in Q2 2022 was $16.0 million compared to $18.2 million in Q2 2021 with the decrease
primarily due to a shorter turnaround at Conda in 2022 compared to 2021, which was partially offset by activities related to
the initiative to produce and sell HFSA at Conda and maintenance ac tivities at Arraias related to the restart of the sulfuric
acid plant.
H1 2022 Financial Highlights
The Company’s revenues, adjusted EBITDA, net income, basic ear nings per share and free cash flow were all up in H1
2022 compared to H1 2021 as follows:
revenues of $304.9 million in H1 2022 compared to $193.5 million in H1 2021;
adjusted EBITDA of $124.0 million in H1 2022 compared to $54.3 million in H1 2021;
net income of $77.3 million in H1 2022 compared to $11.5 million in H1 2021;
basic earnings of C$0.52/share in H1 2022 compared to C$0.08/share in H1 2021; and
free cash flow of $95.7 million in H1 2022 compared to $40.1 million in H1 2021.
The increase in the Company’s H1 2022 financial performance compared to H1 2021 was primarily due to higher realized
prices at Conda, which were partially offset by higher input costs, and the restart of the sulfuric acid plant at Arraias.
The Company’s total capex spend in H1 2022 was $21.3 million compared to $21.0 million in H1 2021 with the increase
primarily due to activities related to the initiative to produ ce and sell HFSA at Conda and maintenance activities at Arraias
related to the restart of the sulfuric acid plant, which were partially offset by a shorter turnaround at Conda in 2022 compared
to 2021.
June 30, 2022 Highlights
As at June 30, 2022, the Company had trailing 12 months adjusted EBITDA of $213.1 million compared to $143.4 million
at the end of 2021 with the increase primarily due to the same factors that resulted in higher adjusted EBITDA in H1 2022.
Also as at June 30, 2022, the Company had net debt of $146.2 million compared to $217.7 million at the end of 2021 with
the decrease primarily due to principal payments under the Company’s secured term loan (the “Term Loan”) and Conda’s
secured working capital facility (the “Conda ABL”) higher cash and cash equivalents. The Company’s net debt as at June
30, 2022 was comprised of $61.5 million in cash and $207.7 million in debt (gross of deferred financing costs). For the six
months ended June 30, 2022, the Company repaid $47.6 million of debt, including $42.3 million of principal under the Term
Loan and $5.0 million cash drawn under the Conda ABL. As at June 30, 2022, the Company’s net leverage ratio was 0.7x
compared to 1.5x at the end of 2021.
As at June 30, 2022, the Company had liquidity of $68.7 million comprised of $61.5 million in cash and $7.2 million in Conda
ABL undrawn borrowing capacity.
Q2 2022 Operational Highlights
EHS
continued corporate-wide risk mitigation measures to address potential impacts to employees, contractors and
operations as a result of the COVID-19 pandemic, which resulted in no material impact to operations;
sustained EHS excellence, including no reportable envi ronmental releases and no recordable incidents, which
resulted in a consolidated TRIFR of 0.26, representing a new Company record; and
received a notice of violation (“NOV”) at Conda from the from the Idaho Department of Environmental Quality
(“DEQ”) related to a failed air stack emissions test in May 2021. Conda investigated and corrected the issues during
2021. The NOV was formally received from the DEQ in May 2022 and resolved in July 2022.
Conda
completed a scheduled plant turnaround at Conda and returned to full production capacity;
produced 80,297 tonnes P 2O5 at Conda in Q2 2022 compared to 67,835 tonnes P2O5 in Q2 2021 with the increase
primarily due to a shorter turnaround in 2022 compared to 2021;
generated revenues of $148,940 at Conda in Q2 2022 compar ed to $103,316 in Q2 2021 with the increase primarily
due to higher realized prices;
generated adjusted EBITDA at Conda of $66,716 in Q2 2022 compared to $37,747 in Q2 2021 with the increase
primarily due to the same factors that resulted in higher revenues, which were partially offset by higher input costs;
reached a settlement agreement related to shared environm ental and asset retirement obligations at Conda's Lanes
Creek mine;
purchased mining equipment at Conda in exchange for a note payable of $3,930;
advanced activities related to the extension of C onda's mine life through permitting and development of H1/NDR,
including progression of the NEPA EIS preparation and public engagement process; and
advanced activities related to the optimization of C onda's EBITDA generation, including beginning production and
sales of HFSA.
H1 2022 Operational Highlights
EHS
continued corporate-wide risk mitigation measures to address potential impacts to employees, contractors and
operations as a result of the COVID-19 pandemic, which resulted in no material impact to operations;
sustained EHS excellence, including no reportable env ironmental releases and one recordable incident, which
resulted in a consolidated TRIFR of 0.26, representing a new Company record;
received national recognition during the 87th North Amer ican Wildlife and Natural Resources Conference as the
BLM awarded the Conservation Leadership Partner Award to the Southeast Idaho Habitat Mitigation Fund, which
was developed and funded by Conda; and
received a NOV at Conda from the DEQ related to a fail ed air stack emissions test in May 2021. Conda investigated
and corrected the issues during 2021. The NOV was formally received from the DEQ in May 2022 and resolved in
July 2022.
Conda
completed a scheduled plant turnaround at Conda and returned to full production capacity;
produced 169,393 tonnes P 2O5 at Conda in H1 2022 compared to 157,191 tonnes P2O5 in H1 2021 with the increase
primarily due to a shorter turnaround in 2022 compared to 2021;
generated revenues of $296,470 at Conda in H1 2022 comp ared to $193,458 in H1 2021 primarily due to higher
realized prices;
generated adjusted EBITDA at Conda of $131,104 in H1 2022 compared to $61,869 in H1 2021 primarily due to
the same factors that resulted in higher revenues, which were partially offset by higher input costs;
reached a settlement with insurers on a business interrupti on claim related to the 2020 disruption in sulfuric acid
supply to Conda, which resulted in receipt of net insurance proceeds of $8,675;
reached a settlement agreement related to shared environm ental and asset retirement obligations at Conda's Lanes
Creek mine;
posted incremental letters of credit of $3,663 under t he Conda ABL as collateral for Conda's surety bonds that
guarantee Conda's obligations under existing operating and environmental permits;
purchased mining equipment at Conda in exchange for a note payable of $3,930;
advanced activities related to the extension of C onda's mine life through permitting and development of H1/NDR,
including progression of the NEPA EIS preparation and public engagement process; and
advanced activities related to the optimization of C onda's EBITDA generation, including beginning production and
sales of HFSA.
Q2 Other Highlights
produced 20,549 tonnes of sulfuric acid at Arraias in Q2 2022 compared to no production in Q2 2021;
generated adjusted EBITDA at Arraias of $405 in Q2 2022 co mpared to $(938) in Q2 2021 with the increase due
to the restart of the sulfuric acid plant;
continued evaluation of strategic alternat ives for non-North American assets; and
announced the appointment of Stephen Shapiro and Isai ah Toback to the Company’s Board of Directors. Mr.
Toback replaced Rory O’Neill as a nominee to the Company’s Board of Directors by its principal shareholder, CLF.
H1 2022 Other Highlights
produced 30,200 tonnes of sulfuric acid at Arraias in H1 2022 compared to no production in H1 2021;
generated adjusted EBITDA at Arraias of $(248) in H1 2022 compared to $(1,772) in H1 2021 with the reduced
deficit due to the restart of the sulfuric acid plant;
continued evaluation of strategic alternat ives for non-North American assets; and
announced the appointment of Stephen Shapiro and Isaiah Toback to the Company's Board of Directors. Mr.
Toback replaced Rory O'Neill as a nominee to the Company's Board of Directors by its principal shareholder, CLF.
Subsequent Events
Subsequent to June 30, 2022, the Company:
announced the appointment of Matthew O’Neill as CFO. Mr . O’Neill succeeds George Burdette who served as CFO
since April 2018; and
granted 82,230 restricted share unites (“ RSUs”) to management under its RSU plan.
Market Outlook
The Company expects the current strengt h in the global agriculture and phosphate fertilizer fundamentals to continue.
Accordingly, the Company expects continued strength in pricing and volume fundamentals in the phosphate fertilizer
markets with a moderate softening of prices during H2 2022 relative to H1 2022.
Specific factors the Company expects to support the continued strength in the global phosphate fertilizer markets during H2
2022 are as follows:
no significant supply capacity additions; and
reduced exports from China.
Specific factors the Company expects to influence the moderate softening of the global phosphate fertilizer markets during
H2 2022 relative to H1 2022 are as follows:
higher inventory levels;
softening crop prices;
moderated demand; and
increased supply from maximizi ng existing capacity run-rates.
The Company expects sulfur and sulfuric acid prices to dec rease globally due to increased refinery activity and softer
demand from phosphates and metals consumers.
Financial Outlook
The Company’s revised guidance for 2022 is as follows:
(in millions of US Dollars Actual Projected Projected
except as otherwise noted) H1 2022 H2 2022 FY 2022
Adjusted EBITDAi $ 124 $ 86‐106 $ 210‐230
Net income 77 23‐28 100‐105
Basic earnings (C$/share) 0.52 0.16‐0.19 0.69‐0.72
Maintenance capexi 13 5‐9 18‐22
Growth capexi 8 10‐14 18‐21
Free cash flowi 96 54‐69 150‐165
The Company revised its guidance for 2022 as follows:
adjusted EBITDA guidance of $210-230 million (maintained) to reflect the Company’s view of H2 2021 prices and
input costs at Conda, including the current DAP NOLA prices (100% of Conda’s MAP is sold under a long-term
offtake agreement with pricing index ed to DAP NOLA on an average three- month trailing basi s) and continued
production and sales of sulfuric acid at Arraias;
net income guidance of $100-105 million (increased from previous guidance of $80-95 million) to reflect tax
efficiencies resulting from the Company’s redomiciliation from the Cayman Islands to the US;
basic earnings guidance of C$0.69-0.72/share (increased fr om previous guidance of C$/0.55-0.65/share) to reflect
the revised net income guidance;
maintenance capex guidance of $18-22 million (ti ghtened from previous guidance of $15-23 million);
growth capex guidance of $18-21 million (tightene d from previous guidance of $15-22 million); and
free cash flow guidance of $150-165 million (maintained).
In preparing its revised guidance for 2022, the Company maintained is prior assumption for expected average DAP NOLA
during H2 2022 of $690-750/st.
Business Outlook
The Company continues to focus on the following key objectives to drive long-term value and shareholder returns:
improving financial and operational performance;
deleveraging the balance sheet;
extending Conda’s current mine life through permitting and development of H1/NDR;
evaluating strategic alternatives for non-North American assets; and
maintaining capital-lite investment approach.
About Itafos
The Company is a phosphate and specialty fertilizer company. The Company’s businesses and projects are as follows:
Conda – a vertically integrated phosphate fertilizer busin ess located in Idaho, US with production capacity as
follows:
- approximately 550kt per year of monoammonium phosp hate (“MAP”), MAP with micronutrients (“MAP+”),
superphosphoric acid (“SPA”), merchant grade p hosphoric acid (“MGA”) and ammonium polyphosphate
(“APP”); and
- approximately 27kt per year of hydrofluorosilicic acid (“HFSA”);
Arraias – a vertically integrated phospha te fertilizer business located in Toc antins, Brazil with production capacity
as follows:
- approximately 500kt per year of si ngle superphosphate (“SSP”) and SSP with micronutrients (“SSP+”); and
- approximately 40kt per year of excess sulfuric acid (220 kt per year gross sulfuric acid production capacity);
Farim – a high-grade phosphate mine project located in Farim, Guinea-Bissau;
Santana – a vertically integrated high-grade phosphate mine and fertilizer plant project located in Pará, Brazil; and
Araxá – a vertically integrated rare earth elements and niobium mine and extraction plant project located in Minas
Gerais, Brazil.
In addition to the businesses and projects described above, the Company also owns Paris Hills (Idaho, US) and Mantaro
(Junin, Peru), which are phosphate mine projects that are in process of being wound down.
The Company is a Delaware corporation that is headquartere d in Houston, TX. The Company’s shares trade on the TSX
Venture Exchange (“TSX-V”) under the ticker symbol “IFOS”. The Company’s principal shareholder is CL Fertilizers Holding
LLC (“CLF”). CLF is an affiliate of Castlelake, L.P., a global private investment firm.
For more information, or to join the Company’s mailing list to receive notification of future news releases, please visit the
Company’s website at www.itafos.com.
Non-IFRS Financial Measures
The Company considers both IFRS and certain non-IFRS me asures to assess performance. Non-IFRS measures are a
numerical measure of a company’s performance, that either include or exclude am ounts that are not normally included or
excluded from the most directly comparable IFRS measures. In evaluating non-IFRS measures, investors, analysts, lenders
and others should consider that non-IFRS measures do not have any standardized meaning under IFRS and that the
methodology applied by the Company in calculating such non-IFRS measures may differ among companies and analysts.
The Company believes the non-IFRS measures provide useful supplemental information to investors, analysts, lenders and
others in order to evaluate the Company’s operational and fi nancial performance. These non-IFRS financial measures
should not be considered as a substitute for, nor superior to , measures of financial performance prepared in accordance
with IFRS.
Non-IFRS measures included in this news release are defined as follows:
“EBITDA” as earnings before interest, ta xes, depreciation, depletion and amortization;
“Adjusted EBITDA” as EBITDA adjusted for non-cash, extr aordinary, non-recurring and other items unrelated to the
Company’s core operating activities;
“Trailing 12 months adjusted EBITDA” as Adjusted EBITDA for the current and preceding three quarters;
“Total capex” as additions to property, plant, and equipment and mineral properties adjusted for additions to asset
retirement obligations, additions to right of use assets and capitalized interest;
“Maintenance capex” as portion of total capex re lating to the maintenance of ongoing operations;
“Growth capex” as portion of total capex rela ting to development of growth opportunities;
“Cash growth capex” as growth capex less accrued growth capex;
“Free cash flow” as cash flows from operating activities , which excludes payment of interest expense, plus cash
flows from investing activities less cash growth capex;
“Net debt” as debt less cash and cash equivalents plus defer red financing costs (does not consider lease liabilities);
“Net leverage ratio” as net debt divided by trailing 12 months adjusted EBITDA; and
“Liquidity” as cash and cash equivalent s plus undrawn committed borrowing capacity.
Reconciliations of non-IFRS meas ures to the most directly comparable IF RS measures are included in the Company’s
management’s discussion and analysis available under the Company’s profile at www.sedar.com and on the Company’s
website at www.itafos.com.
Other Defined Terms
Other defined terms included in this news release are as follows:
Bureau of Land Management ("BLM");
Coronavirus disease 2019 (“COVID-19”);
Diammonium phosphate (“DAP”) New Orleans (“NOLA”);
Environmental, Health and Safety (“EHS”);
Environmental Impact Statement (“EIS”);
Husky 1/North Dry Ridge (“H1/NDR”);
National Environmental Policy Act (“NEPA”); and
Total recordable incident frequency rate (“TRIFR”).
Forward-Looking Information
Certain information contained in this news release constitute s forward-looking information. All information other than
information of historical fact is forward-looking information. Statements that address activities, events or developments that
the Company believes, expects or anticipates will or may occu r in the future include, but are not limited to, statements
regarding estimates and/or assumptions in respect of t he Company’s financial and business outlook are forward-looking
information. The use of any of the words “intend”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”,
“should”, “would”, “believe”, “predict” and “potential” and similar expressions are intended to identify forward-looking
information. This information involves known and unknown ri sks, uncertainties and other fa ctors that may cause actual
results or events to differ materially from those anticipated in such forward-looking information. No assurance can be given
that this information will prove to be correct and such forward-looking information included in this news release should not
be unduly relied upon.
Forward-looking information is subject to a number of risks and other factors that could cause actual results and events to
vary materially from that anticipated by such forward-looking information. Although the Company has attempted to identify
important factors that could cause actual results to differ ma terially from those contained in forward-looking statements,
there may be other factors that cause results not to be as anticipated, estimated or intended. Factors that may cause actual
results to differ materially from expected results described in forward-looking statements in clude, but are not limited to,
uncertainties of estimates of capital and operating costs and pr oduction estimates; the ability of the Company to meet its
financial obligations and minimum commitments, fund capital expenditures and comply with covenants contained in the
agreements that govern indebtedne ss; fluctuations in foreign exchange or intere st rates and stock market volatility; the
continued supply of sulfuric acid to Conda from its primary supplier and those risk factors set out in the Company’s annual
information form and other disclosure documents available under the Company’s profile on SEDAR at www.sedar.com and
on the Company’s website at www.itafos.com. Readers are cautioned that the foregoi ng list of risks, uncertainties and
assumptions are not exhaustive. The forward-looking information included in this news release is expressly qualified by this
cautionary statement and is made as of the date of this news release. The Company undertakes no obligation to publicly
update or revise any forward-looking information except as required by applicable securities laws.
This news release contains future oriented financial inform ation and financial outlook information (together, “FOFI”) about
the Company’s prospective results of operations, including statements regarding expected adjusted EBITDA, net income,
basic earnings per share, maintenance capex, growth capex and free cash flow. FOFI is subject to the same assumptions,
risk factors, limitations and qualificatio ns as set forth in the above paragraph. The Company has included the FOFI to
provide an outlook of management’s expectations regarding anticipated activities and results, and such information may
not be appropriate for other pur poses. The Company and management believe that the FOFI has been prepared on a
reasonable basis, reflecting management’s reasonable estimates and judgements; however, ac tual results of operations
and the resulting financial results may vary from the amounts set forth herein. Any financial outlook information speaks only
as of the date on which it is made and the Company underta kes no obligation to publicly update or revise any financial
outlook information except as required by applicable securities laws.
NEITHER THE TSX-V NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES
OF THE TSX-V) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS NEWS RELEASE.
For further information, please contact:
Matthew O’Neill
Itafos Investor Relations
713-242-8446