Rentech Retrenches

by Debra Fiakas CFA

Clean energy solution provider Rentech, Inc. (RTK:  NYSE) is scheduled to report second quarter 2012 results the first week in August.  Usually the seasonally strong period, this year the June quarter has shareholders sweating.  That is because the warm weather conditions sent farmers out into fields earlier than usual to prepare fields.  Orders for fertilizer products from Rentech’s East Dubuque, Iowa facility were coming even before the end of the March quarter.  The net effect was to pull sales forward.  The question now is whether June will now present a weak quarter.

Even though Rentech has positioned itself as a leading edge, renewable energy company, its principal product and primary revenue source is decidedly conventional.  The East Dubuque facility produces a variety of fertilizers such as ammonia, liquid and granular urea and nitric acid from natural gas.  Sales of fertilizer products account for 99.7% of total sales.

Profits from the fertilizer business help support Rentech’s alternative energy projects.  Rentech developed technologies for the gasification of biomass.  The company has a demonstration plant in Commerce City, Colorado. Rentech claims it is the largest synthetic transportation fuel plant in the U.S. capable of producing up to 10 barrels of fuel per day.  Rentech has integrated three different processes:  steam methane reforming, Rentech’s own biomass gasification and Fischer-Tropsch technologies. 

To be fair, Rentech does realize revenue in the alternative energy segment.  However, it is mostly from consulting work, licensing or occasional sales of fuel produced in the demonstration unit.