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Few Finer Than Ciner

By Robert Rapier on May 11, 2016

While MLPs have surged since February, fewer than a dozen have registered positive total returns for the trailing 12-month period. Only five have double-digit returns during that time. One of the MLPs from the latter category is a name that has never been mentioned in this column before — Ciner Resources (NYSE: CINR). You may be familiar with its previous incarnation, OCI Resources (OCIR), which in 2015 was sold to Atlanta-based Ciner Chemical Corporation.

Ciner is unique in the MLP sector as one of the world’s largest producers of natural soda ash. Soda ash is a key raw material used in the production of glass, chemicals and detergents. The partnership owns a controlling 51% interest in Ciner Wyoming, which is one of the largest producers of soda ash in the world, serving a global market from a facility in the Green River Basin. The facility mines trona, which is a sodium carbonate compound that is processed into either soda ash or baking soda. Wyoming has the world’s largest trona deposit, supplying about 90% of the nation’s soda ash. This mineral is Wyoming’s top export and is shipped to markets around the globe.

In the U.S., per capita consumption of soda ash is nearly 40 pounds per person per year. Global growth is projected to average 3.3% annually over the next decade. Ciner Resources produces about 4 million short tons of trona per year, and its estimated proven and probable trona reserves would last approximately 67 years at the recent production rate.

Ciner Resources has more than 80 domestic customers in industries making flat glass, container glass, detergents, chemicals, paper and other consumer and industrial products. Last year some 62% of domestic sales were made to customers with whom Ciner has done business for more than a decade.

Net sales of $486.4 million rose 4.6% in 2015, while adjusted EBITDA at $133.9 million was up 11.1% over the prior year. Earnings per unit of $2.58 increased 15.7% over the prior year. Distributable cash flow was $55.7 million, up 4.9% from 2014 and provided a distribution coverage of 1.27x.

Ciner declared a fourth-quarter distribution of $0.5575 per unit, an increase of 4.9% in a year’s time. Last week Ciner released first-quarter results, and reported a further 1.2% increase in the distribution from the immediately prior quarter, to $0.564 per unit. This most recent distribution translates into an annualized yield of 8.2%. The coverage ratio, however, fell to 1.11x for the quarter.

Should the distribution continue to grow, CINR’s general partner, Ciner Resource Partners LLC, does have incentive distribution rights (“IDRs”), paid according to the following schedule:

160511MLPIIcineridrs

Given the volatility of the energy space, this seemingly boring business line may provide an appealing alternative for MLP investors looking for stable income. It is one of only a handful of MLPs that escaped the carnage in the broader energy sector relatively unscathed, but it is unlikely to appeal to investors looking for more potential upside.  

(Follow Robert Rapier on Twitter, LinkedIn, or Facebook.)



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