CF Industries Holdings Inc. reported a 76 percent decline in fourth-quarter net income, to $57.3 million ($1.04 per diluted share) on sales of $506.7 million, compared to the year-ago $239.9 million ($3.59 per diluted share) and $1.1 billion.
“The fourth quarter was a period of transition from weak to strengthening market conditions,” said Stephen Wilson, CF chairman and CEO. “The quarter was marked by a late harvest and a poor fall ammonia application season. But by the end of the quarter, stronger buying interest had returned, and prices had risen, reflecting the reality that the U.S. market needs to attract enough nitrogen fertilizer from world markets to meet strong expected demand in the spring of 2010.
“The company performed well through this transition period,” continued Wilson. “Our access to export markets and our disciplined approach in managing forward sales delivered good results in a dynamic market and has positioned us well for the 2010 spring planting season.” Wilson said CF exported some 274,000 tons of phosphate in the fourth quarter and 63,000 tons of UAN, the latter to Argentina and France.
Fourth-quarter nitrogen gross margins dropped to $109.7 million on sales of $352 million from the year-ago $281.3 million and $705.6 million. Tons sold, however, were down just slightly to 1.47 million st from 1.475 million st.
Nitrogen sales under the Forward Pricing Program (FPP) were 400,000 st, or 27 percent of nitrogen sales volumes, versus the year-ago 75 percent.
Fourth-quarter phosphate gross margins dropped to $16.4 million on sales of $154.7 million, down from the year-ago $79.4 million and $366.4 million.
Fourth-quarter phosphate FPP sales were 59,000 st (11 percent), down from 206,000 st (51 percent) sold in the year-ago quarter.
CF said it made a gain of some $28.3 million from the sale of its Terra Industries Inc. shares toward the end of the fourth quarter. Analysts continually quizzed CF in the earnings call regarding their thoughts on the just-announced Yara International ASA and Terra deal. CF deferred until it had further information.
Full-year net earnings were $448.5 million ($7.42 per share) on sales of $2.61 billion, versus 2008’s $801.5 million ($12.13 per share) and $3.92 billion.
Full-year nitrogen margins were $784.2 million on sales of $1.84 billion, up slightly from 2008’s $770.3 million and $2.59 billion. Tons sold were 5.85 million st compared to the year-ago 6.14 million st.
Full-year phosphate margins were $55.2 million on sales of $769.1 million, down from 2008’s $452.4 million and $1.33 billion.
As of Dec. 31, 2009, CF said its FPP bookings for 2010 stood at 1.3 million st, compared to the year-ago 1.4 million st.
“Fundamental drivers are in the sweet spot,” said Wilson. “The outlook for demand is robust, while domestic inventories of urea, UAN, and phosphates are relatively low across the marketing chain. This comes at a time of tight global supplies and a strengthening international market.” CF believes the UAN outlook is particularly strong. The company said first half UAN imports were the lowest since 2000. And CF said that while urea imports have rebounded recently, low levels during the first half of the fertilizer year and strong demand prospects for the spring should keep the urea balance in a tight position throughout the next two quarters. CF also expects India to return to the market, and believes China’s step-up in export taxes will help support the international market.
Wilson said the outlook is equally strong for phosphate, noting that prices received a boost in November when China unexpectedly entered the market as an importer. Production difficulties encountered by some participants and renewed interest from Latin America have reinforced upward pressure, which is further compounded by resurgent demand in the U.S. domestic market. As a result, he said, producer inventories are extremely low.
CF also cited lower natural gas prices, and told analysts that North America is in a period of persistently low gas prices relative to Europe. Prices remain relatively low despite the seasonal effect of colder weather. CF said that colder weather impacted its own nitrogen and phosphate production in the fourth quarter. The Donaldsonville complex had turnarounds of one ammonia, one urea, and one UAN plant during the quarter, and CF had trouble returning them to full production due to the weather. Nitrogen capacity in the quarter was 92 percent, down from the year-ago 99 percent. CF also curtailed Medicine Hat operating rates to control ammonia inventory. CF phosphate capacity was 94 percent in the fourth quarter, up from the year-ago 85 percent, when higher inventories forced shutdowns. Two phosphate maintenance projects had a difficult restart, also due to cold weather.
CF reported that while it has made significant progress on its proposed nitrogen complex in Peru, including the signing of a gas contract, the cost estimate from the recently completed Front-End Engineering and Design study (FEED) was higher than expected, making the business equation more challenging. CF said it will continue to evaluate a variety of options that improve the economics of the project.
| Sales Vols. 000 st | 4Q-09 | 4Q-08 | YR-09 | YR-08 |
| Ammonia | 305 | 362 | 1,083 | 1,079 |
| Urea | 662 | 616 | 2,604 | 2,617 |
| UAN | 494 | 493 | 2,112 | 2,405 |
| Other nitrogen | 9 | 4 | 52 | 40 |
| Avg Selling Prices $/st | 4Q-09 | 4Q-08 | YR-09YR-08 | |
| Ammonia | 308 | 653 | 514 | 560 |
| Urea | 272 | 480 | 302 | 462 |
| UAN | 156 | 352 | 232 | 321 |
| Natural Gas mmBtu | 4Q-09 | 4Q-08 | YR-09YR-08 | |
| Donaldsonville | 4.41 | 10.11 | 5.12 | 9.42 |
| Medicine Hat | 4.20 | 6.77 | 4.23 | 7.74 |
| Sales Vols. 000 st | 4Q-09 | 4Q-08 | YR-09 | YR-08 |
| DAP | 490 | 365 | 1,736 | 1,532 |
| MAP | 61 | 39 | 349 | 255 |
| Potash | 164 |
| Phosphate Domestic and Export Sales 000 st | 4Q-09 | 4Q-08 | YR-09 | YR-08 |
| Domestic | 277 | 226 | 1,274 | 1,263 |
| Export | 274 | 178 | 975 | 524 |
| Avg Selling Prices $/st | 4Q-09 | 4Q-08 | YR-09 | YR-08 |
| DAP | 277 | 906 | 321 | 760 |
| MAP | 309 | 903 | 348 | 646 |
| Potash | 548 |