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Ciner Resources LP Announces Second Quarter 2018 Financial Results

August 6, 2018

ATLANTA--(BUSINESS WIRE)--Aug 6, 2018--Ciner Resources LP (NYSE: CINR) today reported its financial and operating results for the second quarter ended June 30, 2018.

Second Quarter 2018 Financial Highlights:

Net sales of $109.9 million decreased 8.2% over the prior-year second quarter; year-to-date net sales of $231.1 million decreased 6.2% over the prior-year. Net income of $34.5 million, including a $25.9 million net litigation settlement, increased 97.1% over the prior-year second quarter; year-to-date net income of $55.4 million increased 38.8% over the prior-year. Adjusted EBITDA of $42.9 million, including a $25.9 million net litigation settlement, increased 67.6% over the prior-year second quarter; year-to-date adjusted EBITDA of $71.7 million increased 28.0% over the prior-year. Earnings per unit of $0.830 for the quarter increased 102.4% over the prior-year second quarter of $0.410; year-to-date of $1.340 increased 41.1% over the prior-year Quarterly distribution declared per unit of $0.567 remained flat compared to the prior-year second quarter as well as first quarter of 2018. Net cash provided by operating activities of $19.9 million increased 33.6% over prior-year second quarter; year-to-date net cash provided by operating activities of $57.2 million increased by 122.6% over the prior-year. Distributable cash flow of $19.6 million was up 81.5% compared to the prior-year second quarter. The distribution coverage ratio was 1.70: 1.00 and 0.94: 1.00 for the three months ended June 30, 2018 and 2017, respectively; and 1.43: 1.00 and 1.06: 1.00 for the six months ended June 30, 2018 and 2017.

Kirk Milling, CEO, commented: “Distributable cash flow was up over 80% in the quarter primarily driven from the settlement of our royalty rate litigation. Stripping out the impact of the settlement, production levels and operating results were both adversely impacted by unexpected repairs to one of our calcining furnaces encountered during a regularly scheduled outage in May. The negative impact to our operating results from this lost production more than offset the positive benefit we experienced from international prices rising 5.5% above 2017 levels.

“For the rest of 2018, we maintain a positive outlook for soda ash prices as supply and demand balances remain tight around the world. Combined with higher production levels and continued strength in our domestic business, we are poised to see positive improvement in our operating results over the 2 nd  half of the year.”

2018 Outlook:

We expect our total volume sold to be down 1% to 3% compared to the previous estimate of flat to up 2%. We expect domestic volume to increase by 125,000 to 150,000 short tons. We expect domestic pricing to be down 1% to 3%. We expect international prices to be up 2% to 4% compared to the previous estimate of up 1% to 3%.** Maintenance of business capital expenditures are planned to be in the range of $15 to $17 million compared to the previous estimate of $13 to $15 million. Expansion capital expenditures are planned to be in the range of $55 to $65 million.

** Excluding the change related to freight from CIDT sales in 2017.

Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

The following table sets forth a summary of net sales, sales volumes and average sales price, and the percentage change between the periods.

Consolidated Results

Net sales. Net sales decreased by 8.2% to $109.9 million for the three months ended June 30, 2018 from $119.7 million for the three months ended June 30, 2017, driven by a decrease in soda ash volumes sold of 10.2% primarily as a result of unexpected repairs to one of our calcining furnaces encountered during a regularly scheduled outage in May. The unit was successfully repaired and returned to operation. The decrease in volumes sold was partially offset by an increase in average sales prices of 2.3%. The increase in averages sales prices is primarily driven by a shift in our sales mix between domestic and international sales volumes compared to the prior year second quarter.

Cost of products sold. Cost of products sold, including depreciation, depletion and amortization expense remained relatively flat at $96.0 million for the three months ended June 30, 2018 compared to $95.5 million for the three months ended June 30, 2017. Our cost of products sold was primarily driven by a decrease in freight costs of 11.4% to $32.0 million for three months ended June 30, 2018, compared to $36.1 million for the three months ended June 30, 2017 due to a decrease in volumes sold, partially offset by an increase in employee compensation, medical claims, as well as higher professional fees, for the three months ended June 30, 2018 compared to the prior year second quarter.

Selling, general and administrative expenses. Our selling, general and administrative expenses increased 10.3% to $6.4 million for the three months ended June 30, 2018, compared to $5.8 million for the three months ended June 30, 2017. The increase was primarily driven by a higher expenses related to our Enterprise Resource Planning (“ERP”) implementation project.

Litigation settlement. During the three months ended June 30, 2018, we recognized $27.5 million ($25.9 million net of associated expenses) related to the settlement of an action initially filed against Rock Springs Royalty Company LLC (“RSRC”) in 2016, related to royalty overpayment under Ciner Wyoming’s mineral exploration license with RSRC. The case was settled on June 28, 2018.

Operating income. As a result of the foregoing and primarily the litigation settlement, operating income increased by 90.2% to $35.0 million for the three months ended June 30, 2018, compared to $18.4 million for the three months ended June 30, 2017.

Net income. As a result of the foregoing, net income increased by 97.1% to $34.5 million for the three months ended June 30, 2018, compared to $17.5 million for the three months ended June 30, 2017.

Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

The following table sets forth a summary of net sales, sales volumes and average sales price, and the percentage change between the periods.

Consolidated Results

Net sales. Net sales decreased by 6.2% to $231.1 million for the six months ended June 30, 2018 from $246.3 million for the six months ended June 30, 2017, driven by a decrease in soda ash volumes sold of 5.3% primarily as a result of unexpected repairs to one of our calcining furnaces encountered during a regularly scheduled outage in May. The unit was successfully repaired and returned to operation. The decrease in international sales prices was primarily driven by the absence of international sales to CIDT in 2018. During 2017, international average sales prices reflected the increase in freight costs driven by export sales volume to CIDT.

Cost of products sold. Cost of products sold, including depreciation, depletion and amortization expense and freight costs, decreased by 2.3% to $189.2 million for the six months ended June 30, 2018 from $193.6 million for the six months ended June 30, 2017, primarily due to a decrease in freight costs of 12.5% to $66.4 million for the six months ended June 30, 2018, compared to $75.9 million for the six months ended June 30, 2017. The decrease in freight costs was driven by no export sales volumes to CIDT during the six months ended June 30, 2018 compared to the prior year. The decrease in freight costs were partially offset by an increase in employee compensation, medical claims, as well as higher professional fees, for the six months ended June 30, 2018 compared to the prior year.

Selling, general and administrative expenses. Our selling, general and administrative expenses increased 17.4% to $12.8 million for the six months ended June 30, 2018, compared to $10.9 million for the six months ended June 30, 2017. The two primary drivers for the increase were higher selling and administrative fees relating to our affiliate, ANSAC, which directly correlates with the volume we sell to ANSAC, and higher expenses from our ERP implementation project.

Litigation settlement. During the six months ended June 30, 2018 we recognized $27.5 million ($25.9 million net of associated expenses) related to the settlement of an action initially filed against Rock Springs Royalty Company LLC (“RSRC”) in 2016, related to royalty overpayment under Ciner Wyoming’s mineral exploration license with RSRC. The case was settled on June 28, 2018.

Operating income. As a result of the foregoing and primarily the litigation settlement, operating income increased by 35.4% to $56.6 million for the six months ended June 30, 2018, compared to $41.8 million for the six months ended June 30, 2017.

Net income. As a result of the foregoing, net income increased by 38.8% to $55.4 million for the six months ended June 30, 2018, compared to $39.9 million primarily for the six months ended June 30, 2017.

CAPEX AND ORE TO ASH RATIO

The following table below summarizes our capital expenditures, on an accrual basis, and ore to ash ratio:

FINANCIAL POSITION AND LIQUIDITY

As of June 30, 2018, we had cash and cash equivalents of $20.9 million. In addition, we have approximately $79.4 million ($225.0 million, less $134.0 million outstanding and less standby letters of credit of $11.6 million) of remaining capacity under our revolving credit facilities. As of June 30, 2018, our leverage and interest coverage ratios, as calculated per the Ciner Wyoming Credit Facility, were 1.03: 1.0 and 27.87: 1.0, respectively.

CASH FLOWS AND QUARTERLY CASH DISTRIBUTION

Cash Flows

Cash provided by operating activities increased to $57.2 million during the six months ended June 30, 2018 compared to $25.7 million of cash provided during six months ended June 30, 2017, primarily driven by $13.9 million of working capital provided by operating activities during the six months ended June 30, 2018, compared to $28.3 million of working capital used in operating activities during the six months ended June 30, 2017. The $42.2 million increase in working capital provided by operating activities was primarily due to the $49.5 million decrease in due-from affiliates.

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