CVR Partners LP: Bullish 10%-Yielder Outpacing S&P 500?
April 7, 2025
CVR Partners’ Outlook Solid on Strong Q4 & 2024 Results
Spring is upon us, which will soon mean farmers putting fertilizer on their fields. While some people may not like the smell of fertilizer, it’s important because it helps crops grow. This is especially true for nitrogen fertilizers. It’s one of the reasons why crops like corn grow so quickly in colder climates. One interesting company that is responsible for helping farmers’ crops grow is CVR Partners LP (NYSE:UAN).
Why nitrogen?
The seventh element in the periodic table, nitrogen is essential for plant growth. While this element makes up around 78% of the air, in this form, it’s inert and insoluble, meaning that plants can’t use it. (Source: “Understanding Fertilizer in the World,” Fertilizer Canada, last accessed March 31, 2025.)
Fertilizer-makers like CVR Partners take nitrogen out of the air and combine it with hydrogen, usually from natural gas, to make the nitrogen compound ammonia. Ammonia is either applied directly in the soil as a nitrogen fertilizer or used as a building block to make other nitrogen fertilizers. This includes urea, ammonium sulfate, and other water-based, liquid nitrogen fertilizers.
What about costs?
Fertilizers typically represent about 15% of farmers’ cost structure. Nitrogen fertilizer is generally low on the cost curve for farmers.
On the topic of farming, the demand for corn is high in the U.S. because, in addition to corn on the cob, the crop has a large number of uses, including feed grain and fuel (ethanol).
The global outlook for nitrogen fertilizers appears to indicate a more stable supply, which could mean less price volatility. And this is where CVR Partners comes in.
America’s only petroleum-coke-based nitrogen fertilizer producer, CVR Partners LP (NYSE:UAN), is a limited partnership formed by CVR Energy, Inc. (NYSE:CVI) to own, operate, and grow its nitrogen fertilizer business. (Source: “Who We Are,” CVR Partners LP, last accessed March 31, 2025.)
CVR Partners’ nitrogen fertilizer manufacturing facilities, which are responsible for producing ammonia and urea ammonium nitrate (UAN) fertilizers, are located in Coffeyville, Kansas, and East Dubuque, Illinois.
Its Coffeyville operations represent the only plant in North America that uses the petroleum coke gasification process to make hydrogen, a key ingredient in the company’s manufacturing process. The East Dubuque nitrogen fertilizer plant uses natural gas as its feedstock to produce nitrogen fertilizer.
Reports Strong Q4 & 2024
For the fourth quarter ended December 31, 2024, CVR Partners announced that net sales slipped 1.5% on an annual basis to $139.5 million. Net income was up 83% at $18.2 million, or $1.73 per unit. (Source: “CVR Partners Reports Fourth Quarter and Full-Year 2024 Results,” CVR Partners LP, February 18, 2025.)
Operating income jumped 50% to $25.7 million. Earnings before interest, taxes, depreciation, and amortization (EBITDA) were $50.0 million, up more than 31% from $37.8 million in the same prior-year period.
For full year 2024, the company’s net sales fell 23% to $525.3 million. Net income came in at $60.9 million, or $5.76 per common unit. Its operating income was $60.9 million, while EBITDA were $179.0 million.
In the fourth quarter, CVR Partners’ fertilizer produced 210,000 tons of ammonia, of which 80,000 net tons were available for sale, while the rest (130,000 net tons) was upgraded to other fertilizer products.
During the quarter, the company produced a combined 205,000 tons of ammonia, of which 75,000 net tons were available for sale, while the remainder was upgraded to other fertilizer products.
In the fourth quarter of 2024, CVR Partners’ average realized gate prices declined four percent to $229.00 per ton, while ammonia improved three percent to $475.00 per ton.
For 2024, the company produced a combined 836,000 tons of ammonia, of which 270,000 net tons were available for sale. Its facilities also produced a combined 864,000 tons of ammonia, of which 270,000 net tons were available for sale.
In 2024, CVR Partners’ average realized gate prices declined 20% to $248.00 per ton, while ammonia fell 16% to $479.00 per ton.
Commenting on the results, Mark Pytosh, the company’s chief executive officer, said, “CVR Partners posted strong operating results for the 2024 full-year and fourth quarter, driven by safe, reliable operations and a combined ammonia production rate of 96 percent for the year.”
Distribution of $1.75 Per Unit Declared
When it comes to distributions, CVR Partners LP’s policy is to distribute all of the available cash it generates each quarter. This means that its payout will fluctuate due to factors such as operating performance, fluctuations in the prices of finished products, and maintenance capital expenditures.
As you can see in the red line in the chart below, CVR Partners’ distribution can really vary. In November 2024, UAN stock paid out $1.19 per unit, compared to May 2023, when it paid out $10.43 per unit. (Source: “Dividend History,” CVR Partners LP, last accessed March 31, 2025.)
Chart courtesy of StockCharts.com
Most recently, in March, UAN paid out $1.75 per unit, or $6.76 on an annual basis, for a current forward yield of 9.7%.
UAN Units Outpacing S&P 500
UAN units have taken an oversized hit, much like the broader market, on fears of what a global trade war will do to the economy. But the sell-off has been less pronounced…at least it has been compared to what’s happening with the S&P 500, Dow Jones Industrial Average, and Nasdaq—all three of which are deep in correction territory.
UAN units are up 5.1% over the last six months, but they’re down roughly six percent year to date and on an annual basis.
There’s certainly room for UAN units to grow, especially once the dust settles. CVR Partners’ units need to climb 158% to reach their April 2022 record high of $179.74 per unit.
The Lowdown on CVR Partners LP
CVR Partners LP helps feed Americans and provides unitholders with solid long-term capital appreciation and a reliable distribution.
Pytosh has noted that, in spite of challenging weather conditions during the fall application, nitrogen fertilizer demand was strong in the fourth quarter, with higher prices compared to the third quarter and strong shipments.
Looking ahead, Pytosh said, “With the recent rally in grain prices, market conditions look favorable for the spring planting season. Looking forward, we will continue to focus on the high utilization of our plants and the generation of free cash flow.”
We’ll have to see if management updates their guidance in light of the current global trade war.
This positive outlook could help juice CVR Partners’ units and distribution payouts over the longer term. And that’s good news for the 66 institutions that hold 45.26% of all outstanding UAN shares. The three biggest holders are Carl Icahn, Morgan Stanley, and UBS Group AG. (Source: “CVR Partners, LP (UAN),” Yahoo! Finance, last accessed March 31, 2025.)
