Innophos Holdings Inc., a specialty phosphate producer based in Cranbury, N.J., reported increased sales for the year as well as reduced losses. It was the company’s first year as an independent public company. It reported a net loss of $5.5 million on sales of $579 million for the year ending Dec. 31, 2007, versus 2006’s loss of $32.8 million on sales of $541.8 million. Fourth-quarter net losses were $3.9 million on sales of $143.9 million, versus the year-ago loss of $24.7 million and $131.6 million.
The fourth quarter was negatively impacted by planned and unplanned outages at the Coatzacoalcos, Mexico, facility, with $5.4 million in maintenance costs, $4 million from reduced volumes, $1.1 million from raw material replacement costs, and $2.4 million in legal fees to comply with a sodium tripolyphosphate (STPP) document request due to an antitrust subpoena from the U.S. Department of Justice. The year-ago quarter had a $13.3 million unusual expense due to the termination of a management advisory agreement and the IPO.
Moving forward, Innophos expects production to be up with legal fees to be down, since the subpoena legal work is almost complete. Innophos told analysts that it believes there is no liability in the case and as a result has not accrued money for potential damages.
Innophos estimates the costs for its major raw materials, phosphate rock and sulfur, could go up 30 percent over 2007 levels within the next year.
Innophos also reports that New York State’s highest court unanimously affirmed indemnification judgments that Innophos had previously won against Rhodia S.A. in two lower courts. In a 7-0 ruling, the New York Court of Appeals upheld Innophos’s position that claims asserted by the Mexican National Waters Commission (CNA) for water extraction were “taxes” for which Innophos was entitled to be fully indemnified under a 2004 acquisition agreement. The ruling is not subject to further appeals.
Innophos acquired Rhodia’s North American phosphates business in August 2004. The pending CNA claims originated during the 1998-2002 period and total approximately $30 million plus interest and inflation charges since November 2004, when they were first lodged against Innophos’s Mexican affiliate. Those claims are on appeal to the Mexican Tax Court; the timing of a decision, which would be subject to further appeals in Mexico, is unknown. Innophos says the New York ruling establishes Rhodia’s financial responsibility for the outcome of the Mexican proceedings.