Phosphate Holdings, Inc. (PHI), the owner of Mississippi Phosphate Corp., reported a 94.4 percent drop in net income for the third quarter ending Sept. 30, 2009, to $724,000 ($.09 per diluted share) on sales of $42.1 million, compared to the year-ago net income of $12.6 million ($1.56 per diluted share) and $171.6 million.
“During our third quarter phosphate market conditions were challenging,” said CEO Robert Jones. “An anticipated robust fall application season failed to materialize due to a late harvest, adverse weather conditions, and product pricing uncertainty. In the absence of prompt demand at the farm level, dealers and distributors have been reluctant to restock phosphate inventories because of the steep write-downs experienced as phosphate prices plummeted last winter. Based on weak demand, phosphate prices remained at depressed levels throughout our third quarter.”
PHI reported third-quarter operating income of $943,000 and EBITDA of $3.8 million, versus the year-ago $20.0 million and $22.5 million, respectively. Third-quarter 2009 was favorably impacted by a $3 million litigation settlement.
PHI said the average sales price for DAP during the quarter was $267/st, a 74 percent decrease from the year-ago $1,045/st. The company sold 155,109 st of DAP during the quarter, with 95,933 st (61.8 percent) moving into the export market.
PHI noted that during the third quarter it took a scheduled maintenance turnaround that idled one of its sulfuric acid plants for 16 days and the DAP and phosphoric acid plants for seven days. It also took an unscheduled seven-day turnaround in its other sulfuric acid plant to repair a water line common to both sulfuric acid plants and to perform limited catalyst and other maintenance work. Since these outages, PHI has experienced unanticipated operational issues, primarily with the internals of the towers in the sulfuric acid plants. Third-quarter sulfur acid production was 158,166 st, down 55,815 st from the second quarter’s 213,981 st. A portion of the acid shortfall was offset by purchased sulfuric acid.
Third-quarter DAP production was 150,031 st, down from the second quarter’s 170,503 st. PHI said cost of sales per ton was negatively impacted by the declines in sulfuric acid and DAP production as fixed costs were spread over fewer produced tons.
The company reported a net loss for the first nine months of $10.7 million ($1.40 per share) on sales of $139.1 million, versus the year-ago net income of $54.6 million ($6.75 per share) and $410.0 million. PHI had a nine-month operating loss of $17.3 million and negative EBITDA of $9.0 million, compared to the year-ago operating income of $85.9 million and EBITDA of $94.3 million.
As of Sept. 30, PHI had a cash balance of $1.1 million and borrowings under its revolving credit agreement of $8.3 million. PHI said it is aggressively managing its liquidity, and believes that its current operations and available credit facilities are adequate to meet its financing needs for 2009.
“The need to replenish nutrients in the U.S. farmer’s soil, the low levels of dealer and distributor DAP inventories, favorable crop economics, and tight world grain stock yields optimism for 2010,” said Jones. “Longer-term fundamentals also remain encouraging, as world demand for greater protein levels for improving diets will continue to drive demand for coarse grains. Fertilizer application rates must remain substantial to address this demand in the upcoming years.”