ITAFOS REPORTS STRONG Q2 AND H1 2021 RESULTS, RAISING FULL YEAR 2021 GUIDANCE AND ANNOUNCES CLOSING OF DEBT REFINANCING AND RELATED AMENDMENTS Q2 2021 Key Highlights revenues of $103.3 million adjusted EBITDA of $33.7 million
News Release
ITAFOS REPORTS STRONG Q2 AND H1 2021 RESULTS, RAISING FULL YEAR 2021 GUIDANCE AND
ANNOUNCES CLOSING OF DEBT REFINANCING AND RELATED AMENDMENTS
Q2 2021 Key Highlights
revenues of $103.3 million
adjusted EBITDA of $33.7 million
net income of $9.6 million
free cash flow of $25.4 million
H1 2021 Key Highlights
revenues of $193.5 million
adjusted EBITDA of $54.3 million
net income of $11.5 million
free cash flow of $40.1 million
Revised FY 2021 Guidance
increased adjusted EBITDA guidance to $110-120 million
tightened maintenance capex guidance to $22-25 million
tightened growth capex gui dance to $12-15 million
increased free cash flow guidance to $55-65 million
Refinancing Highlights
closed three-year, $205 mi llion secured term loan
repaid existing secur ed term credit facility
amended existing secured working capital facility at C onda to increase the commitment amount from $20 million
to $40 million and extend term
amended existing unsecu red and subordinated promissory note to cancel the remaining availability and extend
term
CEO Commentary
“We continued to deliver strong operational and financial performance during Q2 2021, resulting in H1 2021 adjusted
EBITDA at Conda of $61.9 million and $54.3 million on a consolidated basis,” said G. David Delaney, CEO of Itafos.
“Our H1 2021 consolidated results exceeded our previously issued H1 2021 guidance range of $45-50 million, reflecting
the continued strength of the agriculture and fertilizer market fundamentals along with our solid operational performance.
We expect these positive trends to continue and are raising our full year guidance for 2021 accordingly.”
“We are also pleased to announce that we have closed a refinancing of our existing secured term loan debt and
amendments to our primary remaining debt facilities. This refinancing extends the maturity of our debt at a lower interest
rate while providing flexibility to deleverage our balance sheet with the cash flows of the business.”
HOUSTON, TX – August 25, 2021 – Itafos Inc. (TSX-V: IFOS) (the “Company”) reported today its Q2 and H1 2021
financial and operational highlights. The Company’s financial statements and management’s discussion and analysis for
the three and six months ended June 30, 2021 are available under the Company’s profile at www.sedar.com and on the
Company’s website at www.itafos.com. All figures are unaudited in thousands of US Dollars except as otherwise noted.
The Company also announced today that it has closed a three-year $205 million secured term loan (the “Term Loan”).
The proceeds of the Term Loan were used to repay the Company’s existing secured term credit facility (the “Credit
Facility”) and to pay related transaction costs and fees. In connection with the closing of the Term Loan, the Company
also completed an amendment to its existing secured working capital facility at Conda (the “Conda ABL”) to increase the
TSX-V: IFOS
commitment amount from $20 million to $40 million and extend the term, among other modifications as detailed below.
Also in connection with the closing of the Term Loan, the Company completed an amendment to its existing unsecured
and subordinated promissory note (the “Promissory Note”) to cancel the remaining availability and extend the term,
among other modifications as detailed below.
Q2 and H1 2021 Market Highlights
DAP NOLA prices averaged $570/st in Q2 2021 compared to $270/st in Q2 2020, up 111% year-over-year driven by
strong agriculture and phosphate fertilizer market supply and demand dynamics. Similarly, DAP NOLA prices averaged
$537/st in H1 2021 compared to $271/st in H1 2020, up 98% year-over-year. Specific factors driving the year-over-year
improvements were as follows:
no significant phosphate fertilizer supply capacity addi tions, which resulted in continued drawdown of global
phosphate fertilizer inventory levels;
strong phosphate fertilizer demand underpinned by global co arse grains and oilseeds at multi-year low stocks-to-
use ratios and the highest prices in nearly a decade, supporting demand and fertilizer relative affordability; and
CVD orders confirmed by the US ITC on phosphate fertilizer imports to the US from Morocco and Russia.
Q2 2021 Financial Highlights
The Company’s revenues, adjusted EBITDA, net income and free cash flow were all up in Q2 2021 compared to Q2 2020
as follows:
revenues of $103.3 million in Q2 2021 compared to $62.1 million in Q2 2020;
adjusted EBITDA of $33.7 million in Q2 2021 compared to $11.3 million in Q2 2020;
net income of $9.6 million in Q2 2021 co mpared to $(20.8) million in Q2 2020; and
free cash flow of $25.4 million in Q2 2021 compared to $0.4 million in Q2 2020.
The Company’s total capex spend in Q2 2021 was $18.2 million compared to $3.0 million in Q2 2020 with the increase
reflecting the completion of a full scope turnaround at Conda during June 2021 compared to a reduced scope turnaround
in 2020.
H1 2021 Financial Highlights
The Company’s revenues, adjusted EBITDA, net income and free cash flow were all up in H1 2021 compared to H1 2020
as follows:
revenues of $193.5 million in H1 2021 compared to $137.5 million in H1 2020;
adjusted EBITDA of $54.3 million in H1 2021 compared to $10.5 million in H1 2020;
net income of $11.5 million in H1 2021 compared to $(39.1) million in H1 2020; and
free cash flow of $40.1 million in H1 2021 compared to $(7.5) million in H1 2020.
The Company’s total capex spend in H1 2021 was $21.0 million compared to $6.4 million in H1 2020 with the increase
reflecting the completion of a full scope turnaround at Conda during June 2021 compared to a reduced scope turnaround
in 2020.
June 30, 2021 Net Debt and Liquidity Highlights
As at June 30, 2021, the Company had net debt of $213.8 million compared to $233.9 million at the end of 2020 with the
decrease primarily a result of higher cash and cash equivalents, which was partially offset by in-kind interest related to the
Credit Facility and Promissory Note. The Company’s net debt as at June 30, 2021 was comprised of $34.9 million in cash
and $248.6 million in debt.
As at June 30, 2021, the Company had liquidity of $42.3 million comprised of $34.9 million in cash, $5.4 million in
Promissory Note undrawn borrowing base and $2.0 million in Conda ABL undrawn borrowing base.
Q2 2021 Operational Highlights
EHS
continued corporate-wide risk mitigatio n measures to address potential impacts to employees, contractors and
operations as a result of the COVID-19 pandemic resulting in no material impact on operations; and
sustained environmental, health and safety (“EHS”) exce llence, including no reportable environmental releases
and one recordable incident, which resulted in a consolidated TRIFR of 0.84.
Conda
completed a full scope plant turnaround at Conda during June 2021, including certain activities that had been
deferred following the Company’s decision to conduct a reduced scope plant turnaround in 2020 as part of
Company’s COVID-19 risk mitigation measures;
produced 107,517 tonnes in Q2 2021 compared to 13 4,391 tonnes in Q2 2020, down 20% year-over-year
primarily due to a full scope turnaround at Conda during June 2021;
generated revenues of $103,316 in Q2 2021 compared to $61, 948 in Q2 2020 with the increase primarily due to
higher realized prices and higher sales volumes;
generated adjusted EBITDA at Conda of $37,705 in Q2 2021 co mpared to $14,458 in Q2 2020 with the increase
primarily due to higher realized prices and higher sales volumes, which were partially offset by higher input costs;
recorded net income at Conda of $24,370 in Q2 2021 compared to $3,428 in Q2 2020 with the increase primarily
due to the same factors that resulted in higher adjusted EBITDA and lower depreciation and depletion, which
were partially offset by higher finance and income tax expenses;
completed a full scope plant turnaround, including certai n activities that had been deferred following the Company’s
decision to conduct a reduced scope plant turnaround in 2020 as part of Company’s COVID-19 risk mitigation
measures;
advanced activities related to the extension of Con da’s mine life through permitting and development of H1/NDR,
including progression of the NEPA EIS preparation and public engagement process;
advanced activities related to the optimizat ion of Conda’s EBITDA generation, including:
‐ continuation of the ramp up of MAP+ production and sales volumes,
‐ advancement of initiative to produce and sell HF SA, including advancement of detailed engineering,
design and procurement and advancement of a potential offtake agreement; and
‐ advancement of test work relat ed to the MgO reduction initiative to enhance SPA production and sales
volumes.
Other Segments
maintained the idling of Arraias following best practices;
maintained Farim at construction r eady state while optimizing costs; and
continued corporate-wide cost savings initiatives.
H1 2021 Operational Highlights
EHS
continued corporate-wide risk mitigatio n measures to address potential impacts to employees, contractors and
operations as a result of the COVID-19 pandemic resulting in no material impact on operations; and
sustained EHS excellence, including no reportable envir onmental releases and two recordable incidents, which
resulted in a consolidated TRIFR of 0.84.
Conda
completed a full scope plant turnaround at Conda during June 2021, including certain activities that had been
deferred following the Company’s decision to conduct a reduced scope plant turnaround in 2020 as part of
Company’s COVID-19 risk mitigation measures;
produced 252,708 tonnes in H1 2021 compared to 273,287 tonnes in H1 2020, down 7.5% year-over-year
primarily due to a full scope plant turnaround during June 2021;
generated revenues of $193,458 in H1 2021 compared to $132, 880 in H1 2020 with the increase primarily due to
higher realized prices, which were partially offset by lower sales volumes;
generated adjusted EBITDA at Conda of $61,869 in H1 2021 co mpared to $22,753 in H1 2020 with the increase
primarily due to higher realized prices, which were partially offset by lower sales volumes and higher input costs;
recorded net income at Conda of $39,134 in H1 2021 co mpared to $4,383 in H1 2020 with the increase primarily
due to the same factors that resulted in higher adjusted EBITDA and lower depreciation and depletion, which
were partially offset by higher finance and income tax expenses;
completed a full scope plant turnaround, including certai n activities that had been deferred following the Company’s
decision to conduct a reduced scope plant turnaround in 2020 as part of Company’s COVID-19 risk mitigation
measures;
advanced activities related to the extension of Con da’s mine life through permitting and development of H1/NDR,
including progression of the NEPA EIS preparation and public engagement process;
advanced activities related to the optimizat ion of Conda’s EBITDA generation, including:
‐ continuation of the ramp up of MAP+ production and sales volumes,
‐ advancement of initiative to produce and se ll HFSA, including completion of a concept study,
advancement of detailed engineering, design and procurement and advancement of a potential offtake
agreement; and
‐ advancement of test work relat ed to the MgO reduction initiative to enhance SPA production and sales
volumes.
Other Segments
maintained the idling of Arraias following best practices;
maintained Farim at construction r eady state while optimizing costs; and
continued corporate-wide cost savings initiatives.
Subsequent Events
Redomiciliation
On July 1, 2021, the Company completed a redomiciliation from the Cayman Islands to the US. The redomiciliation was
implemented as a continuation of the Company’s jurisdiction of incorporation from the Cayman Islands to the State of
Delaware. In connection with the redomiciliation, the Company changed its name from Itafos to Itafos Inc.
Refinancing
On August 25, 2021, the Company closed the Term Loan. The proceeds of the Term Loan were used to repay the Credit
Facility and to pay related transaction costs and fees. In connection with the closing of the Term Loan, the Company also
completed an amendment to the Conda ABL to increase the commitment amount from $20 million to $40 million and
extend the term, among other modifications as detailed below. Also in connection with the closing of the Term Loan, the
Company completed an amendment to the Promissory Note to cancel the remaining availability and extend the term,
among other modifications as detailed below.
Term Loan
The key terms of the Term Loan are as follows:
principal amount of $205 million;
term of three years;
interest rate of 8.25% per annum plus the London Interban k Offered Rate (“LIBOR”), subject to a floor of 1.00%,
with interest payments payable in cash on a quarterly basis;
amortization of 15% per annum with principal payments payable on a quarterly basis and a one-time principal
payment on or before 15 months after the closing date in an amount sufficient to reduce the outstanding principal
balance to $155 million or less; and
other terms, financial covenants, fees and cost re imbursements standard and customary for similar agreements.
Lenders to the Term Loan include a syndicate of lenders comprised of certain funds and accounts managed by Oaktree
Capital Management, L.P. The guarantors to the Term Loan include various subsidiaries of the Company (the
“Guarantors”). The Term Loan is secured by all assets of the Company and the Guarantors.
Amendment to Conda ABL
The key terms of the amendment to the Conda ABL are as follows:
commitment size increased from $20 million to $ 40 million;
term extended from August 7, 2023 to the earlier of Augu st 25, 2024 and 91 days before the maturity of the Term
Loan (if the Term Loan is outstanding on such date);
collateral expanded from accounts receivable, invent ory and cash pledged by Conda to include a second lien on
all other assets of the Company and the Guarantors; and
other modifications to conform terms and conditions with the Term Loan.
The Company’s wholly owned subsidiary, Itafos Conda LLC, originally entered into the Conda ABL with JPMorgan Chase
on August 7, 2020. Other key terms of the Conda ABL, including the interest rate, were not amended.
Amendment to Promissory Note
The key terms of the amendment to the Promissory Note are as follows:
commitment amount reduced from $36.0 million to $30.6 million, which cancelled the previously remaining
availability of $5.4 million;
term extended from payable on demand no earlier than si x months after the date on which the Credit Facility is
paid in full to payable on demand after the later of (i) August 25, 2024 or (ii) six months after the date on which the
Term Loan and the Conda ABL are paid in full and commitments under the Conda ABL are terminated; however,
if the obligations under the Term Loan and the Conda ABL are accelerated, then the Promissory Note would
become payable on demand;
interest rate per annum increased from 15% to 18% star ting on August 25, 2022 if the Company has not repaid at
least $20 million under the Promissory Note by such date;
amendment fee of 4% of the principa l amount payable in kind at closing;
exit fee of 4% payable in cash upon any payment of principal; and
other terms and cost reimbursements standa rd and customary for similar agreements.
The Company originally entered into the Promissory Note with CL Fertilizers Holding LLC (“CLF”) on September 11, 2019,
which was subsequently amended and restated on December 31, 2019.
CLF is a “related party” to the Company under Multilateral Instrument 61-101 – Protection of Minority Security Holders in
Special Transactions (“MI 61-101”) by virtue of its shareholding being in excess of 10% of the Company’s issued and
outstanding share capital. Accordingly, the entering into of the amendment to the Promissory Note constitutes a “related
party transaction” under MI 61-101. The transaction is exempt from (i) the formal valuation requirements under Section
5.4 of MI 61-101 pursuant to Subsection 5.5(b) of MI 61-101; and (ii) the minority approval requirements under Section 5.6
of MI 61-101 pursuant to Subsections 5.7(1)(a) and 5.7(1)(f).
Market Outlook
The Company expects the current global agriculture and phosphate fertilizer fundamentals to remain strong throughout
the remainder of 2021. Accordingly, the Company has increased its previously provided adjusted EBITDA and free cash
flow guidance for H2 and FY 2021 (see Financial Guidance below).
Specific factors the Company expects to influence the phosphate fertilizer markets are as follows:
no significant phosphate fertilizer supply capacity addi tions in 2021 due to voluntary postponement of project
schedules in recent years and delays related to the COVID-19 pandemic, resulting in continued drawdown of
global phosphate fertilizer inventory levels;
continued strong phosphate fertilizer demand underpinned by global coarse grains and oilseeds reaching multi-
year low stocks-to-use ratios and the highest prices in nearly a decade, the effects of which are expected to
continue beyond the current growing season; and
continued strong pricing and volume fundamentals in t he North American phosphate fertilizer markets reflecting
the solid demand fundamentals, depleted inventory levels and higher crop prices.
Financial Guidance
The Company has revised its guidance for 2021 as follows:
Actual Projected Projected
(in millions of US Dollars) H1 2021 H2 2021 FY 2021
Adjusted EBITDA $ 54 $ 55‐65 $ 110‐120
Maintenance capex 17 5‐8 22‐25
Growth capex 4 8‐11 12‐15
Free cash flow 40 15‐25 55‐65
The Company’s revised guidance for FY 2021 is explained as follows:
increased adjusted EBITDA guidance to $110-120 million (p reviously $95-105 million) to reflect the Company’s
view of expected higher H2 2021 prices at Conda, including the current DAP NOLA prices (100% of Conda’s MAP
is sold under a long-term offtake agreement with pricing indexed to DAP NOLA on an average three-month
trailing basis) and higher prices for SPA;
tightened maintenance capex guidance to $22-25 million (previously $20-25 million);
tightened growth capex guidance to $12-15 million (previously $12-17 million); and
increased free cash flow guidance to $55-65 million (previously $40-50 million) to reflect the increase in adjusted
EBITDA guidance and improved efficiencies in corporate structure following completion of the Company’s
redomiciliation from the Cayman Islands to the US, which are expected to be partially offset by higher expected
H2 2021 working capital requirements.
Business Outlook
The Company continues to execute on its strategy, which is focused on the following:
extending Conda’s current mine life through permitting and development of H1/NDR;
optimizing Conda’s EBITDA generation;
maintaining the idling of Arraias following best practices while evaluating strategic alternatives;
maintaining Farim at construction ready st ate while evaluating strategic alternatives;
maintaining the integrity of the concessions of S antana and Araxá while evaluating strategic alternatives;
advancing the wind down of Paris Hills and Mantaro; and
continuing corporate-wide cost savings initiatives.
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 busi ness with production capacity of approximately 550kt per
year of monoammonium phosphate (“MAP”), MAP with micr onutrients (“MAP+”), superphosphoric acid (“SPA”),
merchant grade phosphoric acid (“MGA”) and ammonium polyphosphate (“APP”) located in Idaho, US;
Arraias – a vertically integrated phosphate fertilizer bu siness with production capacity of approximately 500kt per
year of single superphosphate (“SSP”), SSP with micronutrients (“SSP+”) and approximately 40kt per year of excess
sulfuric acid located in Tocantins, Brazil;
Farim – a high-grade phosphate mine project located in Farim, Guinea-Bissau;
Santana – a vertically integrated high-grade phosphate mi ne and fertilizer plant project located in Pará, Brazil;
Araxá – a vertically integrated rare earth elements and niobium mine and extraction plant project located in Minas
Gerais, Brazil;
Paris Hills – a phosphate mine project located in Idaho, US (wind down in process); and
Mantaro – a phosphate mine project located in Junin, Peru (wind down in process).
The Company is a Delaware corporation that is headquartered 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 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 measures to assess performance. Non-IFRS measures are a
numerical measure of a company’s performance, that either include or exclude amounts 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 financial 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, ex traordinary, non-recurring and other items unrelated to
the Company’s core operating activities;
“Total capex” as additions to property, plant, and equipm ent and mineral properties adjusted for additions to asset
retirement obligations, additions to right of use assets, capitalized interest and technical studies;
“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 deferred financing costs; and
“Liquidity” as cash and cash equivalent s plus undrawn committed borrowing capacity.
Reconciliations of non-IFRS measures to the most directly comparable IFRS 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:
Coronavirus disease 2019 (“COVID-19”);
Countervailing duty (“CVD”);
Diammonium phosphate (“DAP”) New Orleans (“NOLA”); and
Environmental, Health and Safety (“EHS”)
Environmental Impact Statement (“EIS”);
Husky 1/North Dry Ridge (“H1/NDR”);
Hydrofluorosilicic acid (“HFSA”);
International Trade Commission (“ITC”);
Magnesium oxide (“MgO”);
National Environmental Policy Act (“NEPA”);
Total recordable incident frequency rate (“TRIFR”).
Forward-Looking Information
Certain information contained in this news release constitutes 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 occur in the future include, but are not limited to, statements
regarding estimates and/or assumptions in respect of the Company’s financial and business outlook and statements
regarding the closing of the Term Loan, the repayment of the Credit Facility; the amendment to the Conda ABL and the
amendment to the Promissory Note. 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 risks, uncertainties and other factors
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 materially 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 include, but are not limited
to, the duration and spread of the COVID-19 pandemic and its severity; uncertainties of estimates of capital and operating
costs and production 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 indebtedness; the
Company’s ability to advance capital raising objectives; fluctuations in foreign exchange or interest rates and stock market
volatility; the continued supply of sulfuric acid supply at Conda from its primary supplier and those risk factors set out in
the Company’s management discussion and analysis and other disclosure documents available under the Company’s
profile at www.sedar.com and on the Company’s website at www.itafos.com. Readers are cautioned that the foregoing 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 information and financial outlook information (together, “FOFI”) about
the Company’s prospective results of operations, including statements regarding expected adjusted EBITDA,
maintenance capex, growth capex and free cash flow. FOFI is subject to the same assumptions, risk factors, limitations
and qualifications 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 purposes. The Company and management believe that the FOFI has been prepared on a reasonable basis,
reflecting management’s reasonable estimates and judgements; however, actual 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 undertakes 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:
Itafos Investor Relations
www.itafos.com