Ciner Resources LP

One of the gripes against most stocks is the lack of 100% payouts of earnings. The reinvested profits are left in the hands of management, and this very often fails to materialize in market value.

Limited partnerships are a breath of fresh air in that regard. However, there are specific attributes of limited partnerships, which foreign investors should beware – though distributions are generous, ALL partnership income is taxable – and withheld by the partnership at the highest effective tax rate, currently 37%. Further, partnerships can dilute existing partners by issuing additional units.

Ciner Resources LP (Ciner) is one of those limited partnerships listed on the NYSE. It is the world’s largest natural soda ash manufacturer (as opposed to synthetic). Its primary competitive advantage is the low cost of production from the Green river basin in Wyoming. The company’s ultimate parent is based in the UK and owned by Turkish interests.

It owns 51% of Ciner Wyoming, which conducts the mining operations. The non-controlling interest is held by NRP Trona LLC.

The mines have 2P reserves of 211.9m short tons of trona and estimates 115.5m short tons of soda ash. At production rates of 4m/year, reserves will last over 50 years.

It exports 60% of its sales via its parent’s membership in ANSAC. However, it’ll quit membership in December 2021 as it deems it can do better with its low-cost base - but Ciner’s share of future distribution costs is unknown.

Ciner generates about $500m in revenues and $130m in ebitda. Deducting maintenance capex of $20m, $5m in interest expense, and the share for minority interest leaves behind about $50m for the limited partners – translating to about $2.5 in earnings/unit.

Quarterly distributions fell from $0.567 per unit to $0.34 per unit in Q1 2019. However, this has been maintained in the most recent declaration on April 28^th.

Debt under a revolving credit facility amounts to $129.5m or just over a year’s cash flow, which is minimal. Ciner has over $100m in undrawn facilities.

The stock traded for $11.38 recently. This implies a trading multiple of 4.6x cash flows (21.6% yield) and a distribution yield of 12%. Applying the max withholding tax of 37% results in a net yield of 13.6%.

The company’s most recent borrowing rate is 2.479%. Comparatively, the stock yield represents a substantial margin of safety under present day conditions.