Phosphate Holdings Inc. (PHI) President Robert Jones told analysts Aug. 31 that had the company’s wholly-owned unit, Mississippi Phosphates Corp., been able to produce at planned levels, it would have achieved positive EBITDA of $2.3 million versus a negative EBITDA of $4.6 million. The company released results Aug. 26 (GM Aug. 30, p. 1).
Second-quarter acid production was put at 167,000 tons, or 66 percent, while DAP was 151,000 st, or 75 percent. Although PHI was able to produce some DAP as a result of purchasing about 30,000 tons of acid, the company explained the economics of bought acid at current prices as being at a cost of $126 per ton of DAP, versus only $46 for manufactured acid.
In addition to its acid woes, the company expensed $2.8 million in the second quarter on consulting and legal costs to aggressively address environmental issues raised by the U.S. Environmental Protection Agency and the State of Mississippi (GM June 21, p. 13). PHI said it is having constructive discussions and making meaningful progress on these issues.
While PHI is upbeat that it will make a profit in the third quarter, sulfuric acid plant problems will hang over its head until a planned turnaround for acid and DAP in November. Jones explained that this was the earliest it could take the turnaround due to necessary lead time for equipment and the contractor. Otherwise, it would do it sooner. “It is painful to see them underperforming in this market,” said Jones.
PHI said the second quarter was a “very tough quarter,” and that it absorbed much of the company’s liquidity cushion. As of June 30, 2010, PHI had a cash balance of about $3.1 million and borrowings under its revolving credit agreement of $8.1 million. However, it said it continues to aggressively manage its liquidity and believes that its current operations and available credit facilities should be adequate to meet the company’s financing needs for 2010.
PHI is projecting third-quarter DAP production at 155-165,000 st, which is above second quarter, but below capacity of about 200,000 st/y. It has not projected second-half production.
For the second half, PHI said preliminary results for July were very positive. PHI said the phosphate market is seeing tighter supplies and higher prices. It said the domestic market is currently seeing a $20 premium on DAP over export, and that those with tons are focusing on the domestic market.
James Perkins, vice president of sales and marketing, said market fundamentals show continued strength. He cited several factors, first among them high corn prices – $4.40/bushel for December 2010 and $4.46/bushel for December 2011. Perkins also said a record-setting corn harvest will leave the ground depleted of fertilizer and in need of replenishment, adding that farmers will have plenty of money to spend on fertilizer.
In addition, an early harvest widens the window for fall application.
Also, there are still a large number of tons to be shipped to India during the rest of the year.
On the raw materials side, PHI noted the recent increase in Tampa anhydrous ammonia ?Çô from $380/mt to $425/mt DEL – adding that tight sulfur supplies may lead to those numbers going up in the fourth quarter by $25-$30/lt from the current $95/lt at Tampa.
Asked whether higher DAP prices would soon meet demand destruction, Jones cited high wheat and corn prices, saying as long as those are going up, there will be no demand resistance.