Good morning, and welcome to the Icahn Enterprises LP Q2 20 21 Earnings Call with Jesse Lynn, General Counsel Erez Gacadjian, President and CEO and David Willets, Chief Financial Officer. I would now like to hand the call over to Jesse Lynn, who will read the opening statement.
Thank you, operator. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward looking statements we make in this presentation, including statements regarding our future performance and plans for our businesses and potential acquisitions. Forward looking statements may be identified by words such as expects, anticipates, intends, plans, believes, seeks, estimates, will or words of similar meaning and include, but are not limited to statements about the expected future business and financial performance of Icahn Enterprises, LP and its subsidiaries. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors that are discussed in our filings with the Securities and Exchange Commission, including economic, competitive, legal and other factors, including the severity, magnitude and duration of the COVID-nineteen pandemic. Accordingly, there is no assurance that our expectations will be realized.
We assume no obligation to update or revise any forward looking statements should circumstances change, except as otherwise required by law. This presentation also includes certain non GAAP financial measures. A reconciliation of such non GAAP financial measures to the most directly comparable GAAP financial measures can found in the back of this presentation. I'll now turn it over to Aras Kakejian, our Chief Executive Officer.
Thanks, Jesse. Good morning, and welcome to the Q2 2021 Icahn Enterprises earnings conference call. Joining me on today's call is David Wilitz, Chief Financial Officer. I will begin by providing some brief highlights. David will then provide an in-depth review of our financial results and the performance of our business segments.
We will then be available to address your questions. For Q2 2021, we had net loss attributable to Icahn Enterprises of $136,000,000 or $0.53 per LP unit compared to net income of $299,000,000 or $1.36 per LP unit in the prior year period. The quarterly net loss was primarily driven by interest expense on our senior unsecured notes and income taxes offset in part by gains in our investment segment. Adjusted EBITDA attributable to Icahn Enterprises for Q2 2021 was $192,000,000 compared to $696,000,000 for Q2 of 2020. Our investment funds had a positive return of 1.4 percent for Q2 of 2021 compared to 11.7% for Q2 of 2020.
The positive performance was driven by net gains in certain long equity positions, primarily in the energy industry, offset in part by net losses in our short index and short single name equity positions. Adjusted EBITDA attributable to Icahn Enterprises at our Energy segment decreased by $10,000,000 to $49,000,000 for Q2 of 2021 compared to $59,000,000 in the prior year period. Our petroleum business was positively impacted by higher throughput volumes and increased product cracks offset by exorbitant RINs pricing. Our fertilizer business continues to benefit from strong pricing for both Ammonia and UAN. Net sales and service revenues for our automotive segment was $637,000,000 for Q2 of 2021.
We continue to see our automotive service business revenues return to pre pandemic levels. As a reminder, Icahn Automotive Group continues to push forward with a multiyear transformational plan to restructure operations and improve profitability, which is illustrated by the reduction in losses in Q2 to the prior year quarter. We have substantially completed the legal separation of our automotive service business from our aftermarket parts Business, which will position the service business for new growth and value enhancing opportunities. In April of 21, Icahn Enterprises issued $455,000,000 of 5.25 percent senior unsecured notes due in 2027. The proceeds were used to repay the remaining $455,000,000 principal amount of 6.25 percent senior unsecured notes due in 2022.
For the 6 months ended June 30, 2021, indicative net asset value increased by $956,000,000 to $4,500,000,000 compared to $3,550,000,000 as of December 31, 2020. We closed the quarter with cash and investments in the funds of over 6,900,000,000 Finally, the Board declared a $2 quarterly distribution payable in either cash or additional units. With that, let me turn it over to David.
Thank you, Eris. I'll begin by briefly reviewing our consolidated results and then highlight the performance of our operating segments and comment on the strength of our balance sheet. For Q2 'twenty one, for the 3 months ended June 30, we had a net loss attributable to Icahn Enterprises of $136,000,000 compared to net income of $2.99 in the comparable prior year period. For Q222, adjusted EBITDA attributable to Icahn Enterprises was $192,000,000 compared to $696,000,000 in the prior year period. I'll now provide more detail regarding the performance of our individual segments on the next pages.
In our Investment segment, we had net income attributable to Icahn Enterprises of $68,000,000 for Q2 'twenty one. The investment funds had a positive return of 1.4 percent for Q2 2021 compared to a positive return of 11.7% in the comparable prior year period. Long positions had a positive performance attribution of 6.6% in Q2 2021, while short positions and other had a negative performance attribution of 5.2%. Since inception in November 2004 Through the end of Q2 'twenty one, the investment funds gross return is approximately 91.3% or 3.9% annualized. The investment funds had a net long notional exposure of 5% at the end of Q2 'twenty one compared to a net short exposure of 19% at the end of Our investment in the funds was approximately $4,700,000,000 as of June 30, 2021.
And now on to our Energy segment. In Q2 'twenty one, our Energy segment reported net sales of $1,800,000,000 compared to $675,000,000 in the prior year period. Consolidated adjusted EBITDA was $102,000,000 for Q2 'twenty one compared to $109,000,000 in Q2 'twenty. The total throughput was approximately 217,000 barrels in Q2 'twenty one compared to 156,000 barrels in Q2 'twenty. The Q2 'twenty one refining margin per throughput barrel was $6.72 compared to $10.43 in the prior year.
While increased crack spreads and volumes contributed to the improvement in refining margins, higher RINs expenses offset much of the benefit. CVR's previously announced renewable diesel project is under review pending improved feedstock market pricing, while process design engineering for a pretreatment unit continues. CVR Partners reported Q2 'twenty one adjusted EBITDA of $51,000,000 compared to $39,000,000 for Q2 'twenty. Corn planting and prices are attractive and are driving increases in fertilizer prices and demand. Now turning to our Automotive segment.
Q2 2021 net sales and service revenues for Icahn Automotive Group were $637,000,000 an increase of $50,000,000 from the prior year period. Q2 'twenty one adjusted EBITDA, which excludes the losses associated with closed and closing parts stores, was $25,000,000 compared to a loss of $6,000,000 in the prior year period. Icon Automotive continues to push forward with a multiyear transformational plan to restructure the operations and improve profitability. Service revenues increased due to the reduced impact of COVID-nineteen pandemic, and this was offset in part by store closures related to the transformation plan, which declined for Q2 'twenty one when compared to the prior year period. Now turning to our Food Packaging segment.
Q222 net sales increased by $2,000,000 or 2 percent and adjusted EBITDA attributable to Icahn Enterprises was $14,000,000 for Q2 'twenty one compared to $13,000,000 for Q222. Net sales increased due to price and product mix and the favorable effects of foreign exchange. And now on to our Metals segment. Q2 'twenty one net sales increased by $119,000,000 and adjusted EBITDA increased by $15,000,000 compared to the prior year period. Volumes and prices continue to be strong driven by high demand from steel mills.
And now on to our Real Estate segment. Q2 'twenty one net operating revenues increased by $2,000,000 compared to prior year. Adjusted EBITDA for the quarter was a loss $2,000,000 compared to earnings of $10,000,000 in the prior year period. Revenue from our real estate operations for both Q2 2021 and Q2 2020 were substantially derived from sales of residential units and rental operations. Now turning to our Home Fashion segment.
Q2 'twenty one net sales increased by $14,000,000 compared to the comparable prior year period. Sales to hospitality customers recovered due to the reduced impact of COVID-nineteen pandemic. West Point's adjusted EBITDA was $1,000,000 for both Q2 'twenty one and Q2 'twenty. Now turning to our Pharma segment. We started to consolidate the results of VIVUS beginning December 2020 within our new Pharma segment.
Q2 'twenty one net operating revenues were $19,000,000 and adjusted EBITDA was $5,000,000 Now I'll discuss our liquidity position. We maintain ample liquidity at the holding company and at each of our operating subsidiaries to take advantage of attractive opportunities. We ended Q2 'twenty one cash, cash equivalents, our investment in the investment funds and revolver availability totaling approximately 7,500,000,000 Our subsidiaries have approximately $645,000,000 of cash and $579,000,000 of undrawn credit facilities to enable him to take advantage of attractive opportunities. In summary, we continue to focus on building asset value and maintaining ample Operator, can you please open up the call for any questions?
Thank Our first question comes from the line of Dan Fannon with Jefferies. Your line is open.
Thank you. Good morning. My first question is just on the fund and the positioning and how you guys are thinking about the current investment backdrop. I believe your investment in the fund is $4,700,000,000 as you stated, but I think if I heard correctly, dollars 6,900,000,000 is the total in terms of available or cash? I just want to make sure the liquidity or kind of how the it seems like there's more, I guess less investments in the fund, more conservatism based on I think some of the numbers I heard.
Thanks for the question, Dan. The actual $6,900,000,000 number includes cash at the holding company level. So the amount of Investment in the funds has not changed. It's at 4.7 as we as you highlighted. You asked about positioning of the fund In this current backdrop, we obviously are taking a look at the kind of valuations That we're parsing through.
Clearly, we are trying to pick our spots. The fund is positioned at a Sorry, net long of 5%. That's consisting of 24% net long in the equity book And about an 18% net short in the credit book. Hopefully that answers your question. Yes, that
is helpful. And On the just the returns for the Q2, the short position is driving the, I think, 5.2% Of the traction and performance. But you also mentioned other I guess, as we think about just the Positioning, is there illiquid or other things outside of just normal securities, because I don't think I recall you using the term other outside of Just the short positioning, if there is something else that we should think about when that you guys are doing in the portfolio?
The other is actually quite de minimis. It's just expenses. I wouldn't have much attribution to that. Got it. Got it.
Okay.
And then just lastly is You think across your businesses and the environment where you highlighted certain like the auto where you're seeing things improve, Is there portions of your business or as you look across that are still lagging pre pandemic that You are still waiting for kind of the more return to normalcy or are taking longer than others. If you could just kind of dissect a bit the various segments that are maybe kind of returning faster versus others that might still be lagging behind?
Yes. Well, look, I think for the most part, we're seeing pretty good rebound in our portfolio companies in terms of pre pandemic level In fact, in the auto services business, we're seeing the business perform at a pre pandemic level. But one of the things we do see across the Portfolio still, the supply chain lags, that combined with some degree of inflation The pressure that we see across the portfolio. I think those are all pandemic, still pandemic related. In fact, in some of our more international related businesses, we're seeing some issues Around shipping and containers, getting access to them and things like that.
So the supply chain is still clogged up quite a bit. And that's a common thing that we're seeing. So hopefully, when that clears up, we'll see even better performance. But for the most part, I think what we're seeing in our portfolio is a pretty good rebound to pre pandemic levels.
Great. Thanks for answering my questions.
Thank you. Our next question comes from the line of Bruce Monrath with Northeast Investors. Your line is open.
Hi, and thanks for hosting the call. I'd love to pick up on that actually with regard on the cost question with regard to this case. And you mentioned price, mix, FX, all favorable, and that's great. So there must have been a cost issue because the overall 100 percent EBITDA was a little bit lower. So it seems like it's a little bit of a rerun of 2018.
And I guess my question is on pricing. Are your customers benefiting from price protection or what's the outlook for catching up on the cost side, if I'm diagnosing it right, please.
Well, I think you have 2 things going on in this case. 1 is, This case actually performed even better during the pandemic. For whatever reason, the shutdown in place This environment created significantly better demand. So performance last year was quite good compared to most of the portfolio. But the other thing that you're seeing in this case is definitely some price pressure in terms of raw material costs and supply chain costs.
The business is in the process of applying price increases and surcharges to offset that. Those are all in place And underway as we speak.
Could I just buy sometimes I think in the past it has been an annual issue with customers. Are you saying I'm pleased that is that current, is that in place, is that for now and 3Q, 4Q type things or is it waiting until the New Year? Thank you.
This is David. I think the short version is we're just seeing a typical lag between supplier price increases and our ability to share those price increases with our customer. Customers have generally been pretty open and aware that there are significant price increases out there in the market. So we are taking a look on a quarter by quarter basis at raising prices where it makes sense respecting our customers. But there will be a time lag as our prices catch up to what the market inflation has been on our cost base.
Okay. Thank you.
Thank you. You're welcome.
Thank you. Our next question comes from the line of Chris Morel with Retail Investor. Your line is
open. Yes. Hi. Thanks. Good morning and thanks for the call guys.
So Really, two questions in and around the dividend. So can you just tell us how the dividend is funded through time? And then How do you want us to think about dividend sustainability? Is it economic sensitivities? Is it investment return Just give us a sense of kind of how you want us to think about that.
Well, we've got plenty of cash On the books, as you can imagine. So we're funding the dividend is not necessarily an issue for us whatsoever. We do like our current capital allocation policy. As you know, we just approved a $2 dividend for the quarter, which has been consistent with relatively past practices. And I think we intend on continuing that at least at this point in time unless things change.
Our next question comes from the line of Robert Spogood with Ritz Investments. Your line is open.
Yes. Concerning that dividend, Carl Icahn owns most of the stock in the company. And you've given the option of Taking stock instead of cash. So I don't think you would be paying out as much as $2 of every share that you have out. Is Carl Icahn in the past and as far as you know for the taking stock instead of cash On the dividend?
Well, Carl Icahn has been consistently taking stock in lieu of cash With the exception of a particular quarter last year. So we at this point in time and as indicated To date, that's been his practice. And we intend to believe that that will be the practice going forward unless things change.
So his ownership of the company is being increased greatly every time there's one of these dividends Paid out and the company is not paying out this tremendous dividend in cash. Is that a fair statement?
I think your statement your question is whether or not he's taking dividends increases his ownership in the company. I think that's an accurate statement.
All right. And further, he made a statement on May 27. He's been pretty bearish on the dollar. And he made a statement about cryptocurrency. And I was taken aback by that because At that time, the cryptocurrency was about $53,000 for the Bitcoin.
And he said some Bad things about the American dollar. And I hope he didn't buy any of it. He's going to put about $1,000,000,000 Do you have any information about whether he's invested in these cryptocurrencies since May 27 Before that?
I think what Carl indicated on that call was that he is Much like we look at all kinds of different investment opportunities, cryptocurrency is a topical subject and one that we're evaluating among others. At this point in time, I don't have any other comments. Other than that, we don't actually comment on any particular investment thesis.
He's been pretty negative on the market last Beginning of this year and he's got a lot of good investments that he does buy in companies. Is he still basically He basically runs the company anyway. Is he still basically negative? What percentage are you guys short in the market?
I think what we indicated is we're at net long 5%, which is consistent of a 24% net long position on equities and a 18% net short position on our credit book. So I think you could maybe overall call our position relatively neutral at this point in time.
Okay. I mean the market is running like tremendously in a bull market and he's always been a great investor and he's always found great investments. But he's moved to Florida and it's a big turnover in the company. Now you have new people running the company and some people are starting to say that Carl Icahn is getting on and look at that dividend. I mean, what do you have to say about that dividend When the stock is trading at $58 and paying an $8 dividend, there aren't too many companies doing something like that.
Well, we definitely have a high dividend yield and that's one of the factors that makes the stock attractive. So I think you're highlighting that fact.
Okay. What is our book value right now? That's the last question I'll ask. Thank you for taking My questions, I appreciate it. But what is the book value of our company now?
It's so hard to figure out. I mean, Carl Icahn is A fighter for stockholders and we have stock in several 100 companies and we have a lot of trouble trying to figure out What's going on in this company? So what is the book value of the company?
The book value, and you See this today in the 10 Q is $3,700,000,000
Divided by the shares, how much is that coming out to per share?
Yes, I think you can do the math.
Okay. All right. I appreciate it. Thank you very much.
Thank you. Our next question comes from the line of Andrew Byrd with Post Advisory Group. Your line is open.
Thank you. Hey, guys. Just a couple of housekeeping questions. With respect to automotive, The EBITDA that you guys report, nice increase from a $6,000,000 loss to a $25,000,000 gain. But I think you said that Excluded closed store loss.
Can you quantify what the closed store loss was and was that all non cash loss or was any of that Cash to
closing. So in terms of two questions. One is what do we think the actual loss for the closed store is and then how much of that was cash? I think when you take a look at our adjustments, This is a heavy transformation program, but effectively the total cost to close the stores, The severance and continue the transformation is approximately $67,000,000 this year. We view those as one time costs That obviously don't repeat once we finish the transformation.
In terms of the cash, the cash is a little misleading simply because You have to record the expenses well in advance of when you actually pay the cash down and write inventory down. So we'd expect the cash to continue over the course of The next 2 to 3 quarters, but to approximate the $67,000,000 as we wrap things up. Does that help?
Yes, the $67,000,000 was year to date. Do you happen to have the comparable numbers 2Q 'twenty one versus 2Q 'twenty? I believe you said that The amounts are coming down.
Yes. So the comparable numbers for 2020 were approximately $44,000,000
That's year to date or quarter?
It will be 6 months ended 2020.
Do you happen to have the 2Q numbers or can you follow-up on that offline?
One second.
2020 2Q was 24,000,000
And the same figure for this year?
It would be 43.
These figures are in the adjusted EBITDA. They're in the adjusted EBITDA reconciliation in our package, if you need any more
I'll go back and look at that. I didn't realize it was in there, so I apologize on that. And then the loss in real estate for EBITDA, Given the relatively flat revenue numbers, what's driving that?
I think what you have in the real estate Portfolio in particular is we have a triple net leased property in Atlanta that was a single tenant lease, Fully leased up until last year. We're in the process of turning that into a multi tenant property this year. There were some delays as a result of COVID, but we're back on track in terms of getting core tenants in place. So there's some timing lag associated with that process, but we're in the process of Repositioning our portfolio building.
Okay, great. And then lastly, with respect to investments, there's a question Earlier on crypto. To the extent Carl does start getting involved in it one way or the other, When you guys report, will that end up being factored into the net equity or the net credit Portion of how you're going to be reporting things, if you were to be start getting along that or would it end up being a separate line altogether?
I think if we actually get into crypto to your point and have it in as a significant investment, we'll actually consider identifying that as other, I imagine at this point in time.
Okay, fantastic. Thank you, guys.
Thank you. I'm showing no further questions in the queue. I would now like to turn the call back over to management for closing remarks.
Thank you, operator, and thanks everyone for your questions. We are looking forward to Following up with you on our Q3 update coming up. Up until that time, we wish you have a Happy morning and a good rest of the day. Thanks a lot.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.