Earnings, Earnings, Earnings
LSB Industries, Arcelor Mittal, Valaris
Covering an active week of earnings for a number of our core holdings, I wanted to provide a quick note on each.
I was pleased to see profitability for LSB though it was down Q on Q and was far from a record-breaking year. The business paid down debt, saw an uptick in volume partially attributable to Ammonium Nitrate demand from Copper mining demand growth.
“Demand for copper is estimated to grow 75% to 56 million t/y by 2050 primarily due to the energy transition” Source
Copper demand growth is by no means the “catalyst” to drive this business to the $200-$250M of EBITDA I think it can generate on an annual basis. LSB continues to do intelligent things with its cash favoring buying back cheap debt.
On the Ag side, Corn continues to be depressed based on a misunderstanding of the current yield profile. Corn is expected to have a record year; however, there are reasons to believe this will not be the case. Partially due to some of the most fertile lands in the US spanning from the IA/IL boarder down to Tennesse not being planted due to excess rain fall. In those cases, soybean is being planted as it can handle more wet conditions or, it simply isn’t planted at all. We are past the point where insurance firms will cover the planting of corn stock so, no more will be planted to make up the difference.
I am very fond of this management team, I think the price to value is increasingly attractive, and we continue to add more overtime as the market beats down what we consider to be a “better” business.
