CF reports near six-fold increase in 3Q earnings; forward sales hit 3.5 million tons as of Oct. 25

CF Industries Holdings Inc. reported a near six-fold increase in earnings, to $86.5 million ($1.52 per diluted share) for the third quarter ending Sept. 30, 2007, versus the year-ago $7.3 million ($.13 per share). Sales, driven by higher nitrogen and phosphate prices, were up 46 percent, to $582.9 million from the year-ago $398.6 million. Actual volumes were off slightly.

“The sharp improvement in third quarter performance is a clear reflection of the optimism pervading U.S. agricultural markets today,” said Stephen Wilson, CF chairman and CEO. “Seasonally slow third quarter demand typically results in price pullbacks during the period. This year, it seems that the prospect of record farm income for 2007 and the optimistic outlook for next year’s spring planting, coupled with what appear to be low fertilizer inventories throughout the supply chain, lead many customers to begin locking in their fertilizer needs earlier than in the past. This helped produce continued pricing improvement for almost all our products, not just compared to last year, but also in relation to this year’s strong second quarter.”

These strong market factors also drove a sharp increase in the company’s Forward Pricing Program for the fourth quarter and 2008. CF reported that as of Oct. 25 it has booked 3.5 million tons under its Forward Pricing Program, up from only 939,000 tons for the year-ago period. Some 1.5 million of those FPP tons were scheduled to ship in the fourth quarter. This compares to a year-ago 794,000 tons. CF said the margins built into those forward orders reflect the upbeat outlook for nitrogen and phosphate for fall and spring.

“For corn, the current expectation is that 2008 could see a decline in acreage, but to levels we would still consider very good by historical standards,” said Wilson. To analysts, Wilson cited USDA Chief Economist Keith Collins’s recent outlook that corn acreage could decline 6-8 percent, to 87 million acres in 2008. Even with this potential decrease, according to Collins, 2008 corn acreage would still be 8-12 percent above the 1997-2006 average.

Wilson also noted that the potential decline in corn acreage could be offset by a crop price-induced increase in wheat acreage, as well as, to a lesser extent, increased acreage for sorghum. He noted that both wheat and sorghum use significant amounts of nitrogen.

CF said that the major planned five-week turnaround at the Medicine Hat nitrogen facility during the quarter was completed several days earlier than expected, and the start-up was smooth.

Nine-month net earnings are $237.3 million ($4.19 per share) on sales of $1.9 billion, versus the year-ago $25.3 million ($.46 per share) and $1.5 billion, respectively.