Phosphate Holdings Inc. (PHI) announced earnings of $100,000 ($.01 per diluted share) for the second quarter ending June 30, 2009, compared to year-ago $35 million ($4.32 per share). “The second quarter of 2009 was a period of weak domestic demand for phosphates,” said Robert Jones, PHI CEO. “Distributors and retailers with high-priced carryover fertilizer inventories were reluctant to reduce prices. As a result, near-term demand was negatively impacted as many U.S. farmers reduced or deferred their phosphate applications during the spring planting season. During the quarter, we saw U.S. Gulf DAP prices decrease from $313 per short ton at March 31, 2009, to $257 per short ton by quarter’s end.”
Second-quarter net sales were $42.7 million, a 75 percent decrease from the year-ago $171.5 million. The average sales price per short ton of DAP during the second quarter of 2009 was $275, a 74 percent decrease from the prior-year period average sales price of $1,049. During the second quarter, PHI sold 152,477 tons of DAP, with 73 percent moving into export markets. PHI had operating income of $0.1 million compared to the year-ago $55.0 million. Second-quarter earnings before interest, taxes, depreciation, and amortization and other non-cash charges (EBITDA) were $3 million, compared to the year-ago $57.9 million. Second-quarter 2009 inventory write-downs to net realizable value totaled approximately $1.1 million.
PHI posted a six-month net loss of $11.5 million ($1.50 per share), versus year-ago earnings of $42 million ($5.19 per share). First half of 2009 results were materially impacted by inventory write-downs to net realizable value of approximately $10.4 million.
Six-month net sales were $97 million, a 59 percent decrease from the year-ago $238.5 million. PHI incurred a six-month operating loss of $18.2 million, compared to the year-ago operating income of $65.9 million. Six-month EBITDA was a negative $12.8 million, compared to the year-ago positive $71.9 million.
As of June 30, 2009, PHI had a cash balance of approximately $400,000 and borrowings under its revolving credit agreement of $3.1 million. PHI said it continues to aggressively manage its liquidity and believes that its current operations and available credit facilities should be adequate to meet its financing needs for 2009.
“It appears that the distributors and retailers of phosphates have significantly reduced high-cost carryover inventories,” added Jones. “With low phosphate application rates in both the fall of 2008 and the spring of 2009, and continuing strong demand for agricultural commodities, we currently expect a healthy rebound in the demand for phosphates in the fall of 2009 and in 2010.”
In other news, PHI said on Aug. 27 that it entered into a new phosphate rock supply agreement, effective as of July 3, 2009, with Morocco’s OCP S.A. Under the deal, PHI agrees to purchase from OCP, on a take-or-pay basis, the rock requirements of its Pascagoula, Miss., plant. The rock price will be determined quarterly based on a negotiated formula that is based, in part, on related market prices. The term of the deal expires on June 30, 2012.
“This supply agreement is a testament to the strong long-term supply relationship the company has enjoyed with OCP and represents the culmination of an effort to bring stability to the company’s operations,” said Jones. “We believe this supply agreement provides a solid platform for our return to profitability.”