CVR Partners, LP (UAN): Business Model Canvas [10-2024 Updated]

In the competitive world of agriculture, CVR Partners, LP (UAN) stands out with its comprehensive business model designed to deliver value through high-quality nitrogen fertilizers. With a focus on strategic partnerships and operational excellence, UAN effectively serves a diverse clientele ranging from farmers to agricultural cooperatives. This blog post delves into the intricacies of their Business Model Canvas, revealing how they leverage key resources and activities to foster strong customer relationships and drive revenue. Read on to discover the elements that make UAN a pivotal player in the fertilizer industry.

CVR Partners, LP (UAN) - Business Model: Key Partnerships

Collaborations with CVR Energy for operational support

CVR Partners, LP maintains a robust operational relationship with its parent company, CVR Energy, Inc. This collaboration is crucial for leveraging shared resources and operational expertise. In 2024, CVR Partners reported an operating income of $11.0 million and a net income of $3.8 million for the third quarter, reflecting effective operational management supported by CVR Energy.

Relationships with suppliers for feedstocks like petroleum coke and natural gas

CVR Partners relies heavily on reliable suppliers for key feedstocks, primarily petroleum coke and natural gas, which are essential for its fertilizer production processes. For the three months ended September 30, 2024, the company utilized 133,000 tons of petroleum coke at an average cost of $44.69 per ton. Additionally, it consumed 2,082,000 MMBtus of natural gas at an average cost of $2.19 per MMBtu during the same period. The following table summarizes the feedstock usage and costs:

Feedstock Type	Quantity Used (in thousands)	Cost per Unit
Petroleum Coke	133	$44.69
Natural Gas	2,082	$2.19

Strategic alliances for distribution and transportation logistics

Effective distribution and transportation logistics are vital for CVR Partners to ensure timely delivery of its products to market. The company has established strategic alliances that facilitate these logistics, enhancing its supply chain efficiency. In the third quarter of 2024, CVR Partners reported net sales of $125.2 million, which included significant contributions from its distribution partnerships. The partnerships not only optimize transportation costs but also improve the overall reliability of supply to customers, thereby maintaining competitive pricing in the market.

CVR Partners, LP (UAN) - Business Model: Key Activities

Production of nitrogen fertilizer products

CVR Partners, LP operates two manufacturing facilities: the Coffeyville Facility in Kansas and the East Dubuque Facility in Illinois. These plants produce nitrogen-based fertilizers, namely ammonia and urea ammonium nitrate (UAN). For the three months ended September 30, 2024, gross ammonia production was 212,000 tons, down from 217,000 tons in the same period of 2023. Net available ammonia for sale decreased to 61,000 tons from 68,000 tons year-over-year. UAN production also declined to 321,000 tons from 358,000 tons in the previous year.

Production Metrics	Three Months Ended September 30	2024	2023
Gross Ammonia Produced (thousands of tons)	212	217
Net Ammonia Available for Sale (thousands of tons)	61	68
UAN Produced (thousands of tons)	321	358

Maintenance and optimization of manufacturing facilities

CVR Partners focuses on maintaining operational efficiency through regular maintenance and optimization of its facilities. In the first quarter of 2024, the Coffeyville Facility underwent a planned 14-day outage for maintenance, which impacted production volumes. Overall utilization rates for the three months ended September 30, 2024, were 97%, down from 99% in the same period of 2023. The total capital expenditures for maintenance during the nine months ended September 30, 2024, were approximately $40.4 million.

Facility Maintenance Metrics	Utilization Rate	2024	2023
Overall Utilization Rate (%)	97	99
Capital Expenditures (in millions)	$40.4	$41.4

Marketing and sales of ammonia and UAN products

CVR Partners markets and sells its ammonia and UAN products primarily on a wholesale basis across the United States. For the three months ended September 30, 2024, net sales amounted to $125.2 million, down from $130.6 million in the same quarter of 2023. This decline was attributed to unfavorable UAN sales volumes, which accounted for a revenue decrease of $11.4 million. The average sales price for UAN increased to $239 per ton in Q3 2024, up from $229 per ton in Q3 2023.

Sales Metrics	Three Months Ended September 30	2024	2023
Net Sales (in millions)	$125.2	$130.6
Revenue from UAN Sales (in millions)	$76.7	$86.3
Average Sales Price for UAN ($ per ton)	$239	$229

CVR Partners, LP (UAN) - Business Model: Key Resources

Two manufacturing facilities in Coffeyville, Kansas, and East Dubuque, Illinois

CVR Partners operates two primary manufacturing facilities: the Coffeyville Facility in Kansas and the East Dubuque Facility in Illinois. The Coffeyville Facility utilizes a pet coke gasification process to produce nitrogen fertilizers, while the East Dubuque Facility uses natural gas for ammonia production. As of September 30, 2024, the total property, plant, and equipment for CVR Partners was reported at approximately $714.99 million.

Skilled workforce with expertise in chemical production

The company employs a skilled workforce essential for the operation and maintenance of its chemical production facilities. The workforce is trained in various aspects of chemical engineering and production processes, ensuring efficient operations. As of September 30, 2024, CVR Partners reported a basic and diluted earnings per common unit of $0.36 for the third quarter of 2024, reflecting the importance of a competent workforce in driving operational efficiency.

Access to essential feedstocks and utilities

Access to key feedstocks is critical for CVR Partners' production processes. The Coffeyville Facility utilized 133,000 tons of petroleum coke at a cost of $44.69 per ton during the third quarter of 2024, while the East Dubuque Facility used 2,082 thousand MMBtus of natural gas at a cost of $2.19 per MMBtu. The following table summarizes the feedstock utilization and costs for both facilities for the three and nine months ended September 30, 2024.

Feedstock	Facility	Quantity Used (thousands)	Cost per Unit
Petroleum Coke	Coffeyville	133	$44.69
Natural Gas	East Dubuque	2,082 MMBtus	$2.19

In addition, for the nine months ended September 30, 2024, the total petroleum coke used was 395,000 tons at an average cost of $60.93 per ton, and the natural gas consumption was 6,443 thousand MMBtus at an average cost of $2.40 per MMBtu.

CVR Partners, LP (UAN) - Business Model: Value Propositions

High-quality nitrogen fertilizers that enhance crop yields

CVR Partners, LP produces nitrogen fertilizers, primarily UAN (urea ammonium nitrate) and ammonia, which are essential for enhancing crop yields. For the nine months ended September 30, 2024, the company reported net sales of $385.8 million, with UAN sales contributing $241.1 million and ammonia sales accounting for $83.9 million. The fertilizers produced are vital for farmers as they help improve the yield and quality of crops, particularly corn and wheat, which are significant crops in the U.S.

Competitive pricing influenced by feedstock costs

Pricing for CVR Partners' products is significantly influenced by the costs of feedstock, which include natural gas and petroleum coke. As of September 30, 2024, the cost of petroleum coke was $44.69 per ton, down from $84.09 per ton in 2023. Natural gas costs were reported at $2.19 per MMBtu, a decrease compared to $2.67 per MMBtu in the previous year. This reduction in feedstock costs has allowed CVR Partners to maintain competitive pricing in the market, thereby enhancing its value proposition to customers.

Commitment to safety and environmental responsibility

CVR Partners emphasizes a commitment to safety and environmental responsibility in its operations, which is crucial for gaining customer trust and complying with regulatory standards. The company engages in initiatives to minimize its environmental impact, including potential projects that allow flexibility in feedstock usage, thereby improving sustainability. This commitment is reflected in the company's operational standards and practices, ensuring that they meet industry regulations and customer expectations.

Product	Net Sales (in thousands)	Sales Volume (thousands of tons)	Pricing at Gate ($ per ton)
UAN	$241,080	76,735	$3,142
Ammonia	$83,875	24,614	$3,403
Urea Products	$21,635	8,137	$2,662
Total	$346,590	109,486	$3,167

For the three months ended September 30, 2024, CVR Partners reported a net income of $3.8 million, up from $0.7 million in the prior year, indicating improved operational efficiency and profitability. This financial performance underscores the effectiveness of its value propositions in meeting customer needs while maintaining competitive pricing and a strong commitment to safety and environmental standards.

CVR Partners, LP (UAN) - Business Model: Customer Relationships

Direct engagement with agricultural businesses and distributors

CVR Partners, LP maintains a strong focus on direct engagement with agricultural businesses and distributors. This strategy enables the company to tailor its offerings to meet the specific needs of its customer base, which primarily consists of farmers and agricultural cooperatives.

As of September 30, 2024, CVR Partners reported net sales of $125.2 million for the third quarter, down from $130.6 million in the same period in 2023. The primary products sold include UAN and ammonia, which are critical for fertilizer applications in agriculture.

Long-term contracts with key customers for stable revenue

CVR Partners emphasizes the importance of long-term contracts to ensure stable revenue streams. As of September 30, 2024, the company had approximately $8.6 million in remaining performance obligations for contracts with an original expected duration of more than one year. These contracts help mitigate risks associated with market volatility and allow the company to plan for production and inventory management effectively.

The long-term agreements also provide customers with predictable pricing and supply, which is crucial in the fluctuating agricultural market. For instance, the average price of UAN was $76.74 per ton in the third quarter of 2024, compared to $86.31 per ton in the same quarter of 2023.

Customer support and education on fertilizer application

CVR Partners invests in customer support and educational initiatives to enhance the effectiveness of fertilizer application. This includes providing resources on best practices for fertilizer use, which can lead to improved crop yields and sustainable farming practices.

The company’s commitment to customer education is reflected in its ongoing communication efforts and the provision of technical support. This approach not only strengthens customer relationships but also fosters loyalty and repeat business. For the nine months ended September 30, 2024, CVR Partners reported a net income of $42.6 million, down from $162.5 million in the same period in 2023, indicating the impact of fluctuating market conditions on profitability.

Metrics	Q3 2024	Q3 2023	Change
Net Sales (in millions)	$125.2	$130.6	-3.4%
UAN Sales Price (per ton)	$76.74	$86.31	-11.8%
Net Income (in millions)	$42.6	$162.5	-73.8%
Remaining Performance Obligations (in millions)	$8.6	N/A	N/A

CVR Partners, LP (UAN) - Business Model: Channels

Wholesale distribution to agricultural cooperatives and retailers

CVR Partners, LP primarily engages in wholesale distribution of nitrogen fertilizer products, including UAN (urea ammonium nitrate) and ammonia. The partnership sells its products to agricultural cooperatives and retailers across the United States, ensuring they reach the end farmers effectively. For the nine months ended September 30, 2024, the total net sales amounted to $385.8 million compared to $539.9 million for the same period in 2023, reflecting a significant decrease in both pricing and sales volume.

Product	Net Sales (9M 2024)	Net Sales (9M 2023)	Volume (thousands of tons)
UAN	$241.1 million	$354.4 million	964
Ammonia	$83.9 million	$116.0 million	191
Urea Products	$21.6 million	$23.1 million	N/A

Online platforms for product information and order management

CVR Partners leverages online platforms to provide customers with product information and facilitate order management. This digital approach allows for streamlined communication with customers, enhancing the overall purchasing experience. The company has increasingly focused on digital channels to manage customer relationships and optimize inventory levels, particularly in light of fluctuating demand and production challenges. This strategy aligns with ongoing trends in the agricultural sector, where efficiency and timely access to information are critical.

Direct sales through dedicated sales teams

The company employs dedicated sales teams to directly engage with customers, including agricultural cooperatives and retailers. These teams are responsible for building relationships and understanding customer needs, which is essential for tailoring products and services effectively. For the three months ended September 30, 2024, CVR Partners reported an operating income of $11.0 million, up from $8.1 million during the same period in 2023, indicating improved sales efficiency despite lower overall revenues.

Financial Metric	Q3 2024	Q3 2023
Operating Income	$11.0 million	$8.1 million
Net Income	$3.8 million	$0.7 million

CVR Partners, LP (UAN) - Business Model: Customer Segments

Farmers and agricultural producers

CVR Partners, LP primarily serves farmers and agricultural producers who utilize nitrogen fertilizers to enhance crop yield and quality. The United States Department of Agriculture (USDA) estimates that in spring 2024, farmers planted approximately 90.7 million acres of corn and 87.1 million acres of soybeans, indicating a strong demand for nitrogen products, particularly in corn production, which requires significant nitrogen input.

Agricultural cooperatives and distributors

Agricultural cooperatives and distributors play a crucial role in the supply chain for CVR Partners, LP. These entities purchase nitrogen fertilizers in bulk and distribute them to local farmers. In 2024, the total revenue from UAN sales was reported at $241.1 million, and ammonia sales contributed $83.9 million. This highlights the significance of cooperatives as intermediaries that facilitate the distribution of CVR's products to end-users.

Industries requiring nitrogen fertilizers for various applications

Beyond agriculture, CVR Partners also caters to various industries that require nitrogen fertilizers for applications such as industrial processes and environmental management. The total revenue from urea products amounted to $21.6 million for the nine months ended September 30, 2024. This indicates a diverse customer base that includes industrial users, thereby expanding the market for CVR Partners' nitrogen-based products.

Customer Segment	Key Metrics	Revenue Contribution (2024)
Farmers and Agricultural Producers	90.7 million acres of corn planted	UAN: $241.1 million
Agricultural Cooperatives and Distributors	Bulk purchasing and distribution	Ammonia: $83.9 million
Industries Requiring Nitrogen Fertilizers	Industrial applications	Urea Products: $21.6 million

CVR Partners, LP (UAN) - Business Model: Cost Structure

Significant costs associated with raw materials and feedstocks

The primary raw materials for CVR Partners, LP include petroleum coke and natural gas. For the three months ended September 30, 2024, the costs associated with these materials were as follows:

Raw Material	Quantity (thousands of tons/MMBtu)	Cost per unit ($)	Total Cost ($ millions)
Petroleum Coke	133	44.69	5.93
Natural Gas	2,082	2.19	4.56

For the nine months ended September 30, 2024, the costs were:

Raw Material	Quantity (thousands of tons/MMBtu)	Cost per unit ($)	Total Cost ($ millions)
Petroleum Coke	395	60.93	24.12
Natural Gas	6,443	2.40	15.43

Ongoing operational expenses for facility maintenance and labor

For the three months ended September 30, 2024, CVR Partners reported direct operating expenses (exclusive of depreciation and amortization) of $55.8 million, which includes facility maintenance and labor costs. For the nine months ended September 30, 2024, these expenses totaled $158.3 million.

Additionally, the depreciation and amortization expense for the same periods were:

Period	Depreciation and Amortization Expense ($ millions)
Three Months Ended September 30, 2024	24.7
Nine Months Ended September 30, 2024	64.1

Capital expenditures for facility upgrades and compliance

Capital expenditures for the nine months ended September 30, 2024 amounted to $40.4 million, which includes maintenance capital expenditures and reserves for future growth projects. For the three months ended September 30, 2024, capital expenditures were $10.8 million.

Future planned turnarounds and upgrades are expected to incur additional costs, although specific amounts have not been disclosed. The ongoing need for compliance with environmental regulations also represents a significant cost component.

Overall, the cost structure of CVR Partners, LP reflects a balance between raw material costs, operational expenses, and necessary capital investments to maintain and enhance production capabilities while ensuring compliance and efficiency.

CVR Partners, LP (UAN) - Business Model: Revenue Streams

Sales of ammonia and UAN fertilizers

For the three months ended September 30, 2024, CVR Partners reported net sales of ammonia at $24.6 million and UAN at $76.7 million. This represents a decline in UAN sales compared to $86.3 million during the same period in 2023 and an increase in ammonia sales from $22.5 million in 2023. For the nine months ended September 30, 2024, net sales totaled $83.9 million for ammonia and $241.1 million for UAN, down from $116.0 million and $354.4 million, respectively, in 2023.

Product	Q3 2024 Sales (in millions)	Q3 2023 Sales (in millions)	9M 2024 Sales (in millions)	9M 2023 Sales (in millions)
Ammonia	$24.6	$22.5	$83.9	$116.0
UAN	$76.7	$86.3	$241.1	$354.4

Revenue from long-term contracts with agricultural clients

As of September 30, 2024, CVR Partners had approximately $8.6 million in remaining performance obligations from contracts with an expected duration of more than one year. The revenue recognition from these contracts is expected to be $0.9 million by the end of 2024, $4.1 million in 2025, $3.2 million in 2026, and the remainder in 2027. The Partnership recognized $14.1 million in revenue during the nine months ended September 30, 2024 from such contracts.

Year	Expected Revenue Recognition (in millions)
2024	$0.9
2025	$4.1
2026	$3.2
2027	Remaining balance

Potential income from carbon capture initiatives and tax credits

CVR Partners is involved in carbon capture initiatives under the 45Q tax credit program. The Partnership has recognized revenue from carbon oxide sales, including noncash consideration received from the CO Contract, estimated at $46.0 million as of January 2023. Revenue from these initiatives is recognized over time based on the volumes measured at delivery. In the nine months ended September 30, 2024, other revenue, which includes carbon oxide sales, was reported at $12.3 million.

Source	Revenue (in millions)
Carbon oxide sales (9M 2024)	$12.3
Estimated value of CO Contract (Jan 2023)	$46.0

Article updated on 8 Nov 2024

Resources:

1. CVR Partners, LP (UAN) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of CVR Partners, LP (UAN)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View CVR Partners, LP (UAN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.