UAP Holding Corp. reported that its fertilizer sales increased 44 percent for the first quarter ending May 27, 2007. Fert sales were $480.1 million, versus the year-ago $334.3 million. UAP said $30 million of the increase was due to sales from acquired businesses. The remainder came from increased volumes sold and an improvement in the per-ton selling prices. These were due to increased grower demand, as they switched from soybeans to corn and needed to replenish nutrients in the soil, said UAP.
Potash volumes led the way during the quarter, UAP President and CEO Kenny Cordell told analysts, up 40 percent, while nitrogen and phosphate volumes were each up 34 percent. UAP suspects growers shifted fert buying into the first quarter ending in May. UAP noted that some 75 percent of its annual sales occur in its first and second quarters.
Despite the good first-quarter fert volumes, UAP said June appears to be roughly flat with year-ago levels, due in part to heavy rains in Iowa, Illinois, and Missouri that have deterred sidedressing, though the activity can still happen.
Cordell said if there is any upside going into the fall, it should be fertilizer. He noted that this fall will follow two bad fall seasons, one of which included Hurricane Katrina. He expects to see a more normal fall this year, with stable pricing and strong grower financials. He said the overall outlook is terrifically optimistic.
Company-wide, net income rose 50 percent, to $87.7 million ($1.66 per diluted share), versus the year-ago $58.3 million ($1.11 per share). Sales were up 15 percent, to $1.6 billion from the year-ago $1.40 billion.
First-quarter seed sales were up 11 percent, at $358 million versus the year-ago $321.6 million. Sales from acquired businesses contributed about $28 million. The rest of the increase was mainly due to corn seeds, which saw a more than 40 percent increase in volumes. Cotton and soybean sales were off, as more folks switched to corn. Cordell told analysts that the big switch to corn in the South was a surprise, with acres going to corn from cotton almost on an acre-by-acre basis. He noted that Mississippi cotton acreage was off 50 percent. Overall, Cordell said many in the industry were surprised by the USDA 93 million acre of corn assessment that was released June 29.
Chemical sales were up only two percent, to $732 million from $714 million, with $50 million of this attributed to new acquisitions. Herbicide and fungicide sales were both up ?Çô particularly glysophate – due to increased use of glyphosate-tolerant corn. Insecticide sales were off due to the increased use of insect resistant corn to protect from corn rootworm.
UAP said it was narrowing its earnings guidance for fiscal 2008 to $1.60-$1.75 per diluted share from the $1.50-$1.75 given in April.
In fiscal 2007 UAP acquired new retail assets that accounted for $300 million in revenues, and it expects to match this number in fiscal 2008. While no acquisitions were made in the first quarter, the company expects them to be recorded in the second half. Cordell said grower consolidation expedites retail consolidation. In the meantime, the company did spend $4 million of its $8.8 million in first quarter capital expenditures on fertilizer for new construction in Alabama (GM June 18, p. 10), Ohio, and Washington.