Phosphate Holdings Inc. (PHI), the owner of Mississippi Phosphates, reported a loss of $58.1 million ($7.59 per diluted share) for the fourth quarter ending Dec. 31, 2008, compared to the year-ago earnings of $11.2 million ($1.38 per share). Net losses for the year ended Dec. 31 were $3.5 million ($.46 per share), compared to the year-ago net income of $48.9 million ($6.04 per share).
PHI said the 2008 results were materially impacted by inventory write-downs to net realizable value. For the fourth quarter and year inventory write-downs were $84.8 million and $87.7 million, respectively.
Net sales for the fourth quarter were $35.8 million, a 49 percent decrease from the year-ago $70.6 million. The average sales price was $478/st, a 17 percent increase over the prior-year period average sales price of $410/st. The company incurred an operating loss of $90.5 million for the fourth quarter compared to year-ago operating income of $17.2 million. EBITDA for the fourth quarter was negative $88.5 million, compared to the year-ago positive EBITDA of $19.5 million.
Net sales for the year were $445.8 million, a 100 percent increase over 2007’s net sales of $222.4 million. Operating loss for the year was $4.5 million, compared to 2007 operating income of $40.1 million. EBITDA for the year was $5.9 million, a 93 percent decrease from 2007’s EBITDA of $85.7 million. Net income and EBITDA for the 2007 included hurricane-related insurance recoveries of $37.8 million.
“The fourth quarter of 2008 was an extremely challenging period for our company,” said CEO Robert Jones. “At the outset of the quarter, phosphate prices were near record levels and on Oct. 14, 2008, we filed a registration statement with the Securities and Exchange Commission in anticipation of an initial public offering of our stock. Shortly thereafter, we saw global phosphate demand vanish and DAP prices plummet. Our focus immediately shifted to intensively managing our financial liquidity in a very dormant phosphate market where our inventories were rapidly losing value. We utilized borrowings under our credit facilities, income tax refunds, and proceeds from several major sales transactions to sustain our operations.
“For the quarter, DAP prices (FOB, U.S. Gulf) declined by 67 percent from $1,215 per mt at Oct. 1, to $395 per mt at Dec. 31, 2008,” he added. “By quarter’s end, the record earnings of $54.6 million that we achieved during our first three quarters were more than offset by our huge fourth quarter loss and our proposed public offering had been indefinitely postponed.”
PHI said during the fourth quarter it operated at approximately 50 percent of capacity. Phosphate rock purchases were suspended from October 2008 through February 2009, and normal production levels were not resumed until late March 2009.
As a result of its fourth-quarter loss, PHI said it was in violation of a financial covenant under its loan agreement with PNC. On April 17, 2009, the loan agreement was amended (i) to waive the covenant violation and reset new covenants for 2009 and thereafter, (ii) to reduce maximum borrowing from $27 million to $17 million, (iii) to increase interest rates, and (iv) to extend maturity to March 31, 2012. As of March 31, 2009, there were no outstanding revolving advances under the facility and the company had approximately $6.3 million cash in hand.
“Fiscal 2009 is off to a slow start,” added Jones. “Prices remain depressed and demand lackluster. Uncertainties regarding the overall economy, the availability of credit, the direction of grain prices, current weather issues and the resolution of issues concerning high-cost fertilizer inventory in the supply chain cloud the near-term phosphate demand outlook. While it is difficult to predict when phosphate fertilizer demand fundamentals will normalize, we are confident they will.” He cited USDA’s forecast for 85 million acres of corn this year.
“While near-term uncertainties persist, the long-term fundamentals for global phosphate demand remain positive,” said Jones. “Phosphate fertilizers play a critical role in producing food for a growing world population with improving diets. This bodes well for our industry.”