Sarasota, Fla.-The owner of Florikan ESA (Environmentally Sustainable Agriculture) said his time-release fertilizer plant operating in an industrial park here “was very lucky to come out unscathed as we did” when a smoldering fire broke out around mid-day April 26. “We didn’t really have a fire,” insisted Jon Rosenthal. “We had a coating drum that was smoldering. There was no damage to the building and no injuries.” But the Sarasota Fire Department apparently had different ideas after being alerted by a half dozen Florikan employees working in the plant on a Sunday. Fire crews responded to a four-alarmer with all 27 units, and had departments in nearby towns on standby in case fires broke out the same time. Sarasota Fire Capt. Mary Boutieller told Green Markets that there were some evacuations of other buildings in the industrial park where Florikan’s 5,000 square foot factory is located, but the number was small because it was a Sunday. She said the workers were mixing fertilizer that has to be heated up to a certain temperature. Apparently things got out of hand in one of the hoppers, which overheated toward the back of the building. The sprinkler system activated to keep it under control until fire crews arrived and put out the rest of the smoldering material. “State environmental services along with EPA had to get involved to make sure nearby ponds were not contaminated,” Boutieller reported. An unidentified employee described the mess from activation of the building’s sprinkler system as worse than what had been caused by the fire. Hazmat crews were on the scene early in the week doing the cleanup. Rosenthal conceded that there was some local concern, but said he believed it was because of the homes not too far away. He added that operations were shut down for a couple of days, but everything is fine now and the plant is back in production with no real problems. Rosenthal said Florikan was coating with urea and an organic food grade dye, which may have caused the environmental concern. He said most of it flowed into a man-made retention pond that’s used for runoff or excess rainwater.
All posts by traceybg@gmail.com
Agrium, CF both claim victory in CF shareholder vote
CF Industries Holdings Inc. shareholders re-elected its three board members at its annual meeting in Deerfield, Ill., April 21 by wide margins. However, Agrium Inc., which had asked CF shareholders to withhold their support from the three directors as a sign of their support for an Agrium-CF merger, also claimed victory, saying some 20 percent of the shares were withheld.
In addition, CF shareholders also ratified the selection of KPMG LLP as the company’s independent registered public accounting firm for 2009 and approved the 2009 equity and incentive plan.
“Our stockholders have voted and the message is clear – our board of directors has received overwhelming support,” said Stephen Wilson, CF chairman, president and CEO. “The board and management team remain committed to delivering stockholder value and executing our long-term business strategy.”
Stephen Furbacher, David Harvey, and John Johnson were re-elected to serve as directors for three-year terms. Harvey and Johnson have both been on the board since August 2005, and Furbacher since July 2007.
KPMG served as the company’s independent registered public accounting firm for the year ended Dec. 31, 2008.
CF said that according to the preliminary count provided by its proxy solicitor there was more than an 80 percent vote for the 2009 equity and incentive plan, as well as for ratifying KPMG. In addition, there was more than an 80 percent vote for Furbacher and Harvey, and more than a 75 percent vote for Johnson. CF said the modest increase in the number of withhold votes is not significantly different from last year’s annual meeting.
Agrium looked at the vote differently. It said its proxy solicitor, Georgeson Inc., estimates that CF stockholders withheld an average of approximately 20 percent of shares voted for the re-election of the three incumbent CF directors. Agrium says this is approximately four times the average withhold vote percentage for S&P 500 companies, which is under five percent.
“We believe the significant percentage of votes withheld for the three CF directors sends a message to CF’s board that CF stockholders want them to engage with Agrium,” said Agrium President and CEO Mike Wilson. “We will meet with CF anytime and anywhere to discuss a mutually beneficial transaction for our respective stockholders.
“Agrium remains fully committed to acquiring CF and, as we have repeatedly stated, we would be prepared to increase our offer further if CF can demonstrate additional value.”
Agrium’s current offer is $35.00 in cash and one Agrium common share for each outstanding CF share.
Agrium CFO Bruce Waterman told an analyst meeting in Toronto April 20 that if withheld votes won 20 percent of the vote it would be a victory. Later, before the CF meeting, an Agrium spokesman told Green Markets that 20 percent would be an overwhelming indication of a victory. He said that 5 percent would still send CF a message that it should negotiate with Agrium. Agrium owns over 2 percent of CF shares.
In other news, Susquehanna Financial Group LLLP issued a report April 20 seriously doubting whether any of the fertilizer mergers would actually occur. The firm said Agrium and CF appear to be too far apart in terms of price, with Agrium vowing not to overpay. In addition, it noted that Terra’s board has successfully pushed back the date of its shareholder meeting, thereby delaying any chance by CF to elect three dissident board members to the Terra board.
On Wednesday, April 22, Agrium announced that it had withdrawn its Hart-Scott-Rodino (HSR) notification and will be refiling shortly in order to provide the Federal Trade Commission with additional time to conclude its review of the proposed transaction with CF without requiring the FTC to issue a second request. Agrium said it believes the FTC has narrowed the focus of its investigation, and that Agrium remains confident that the HSR waiting period will ultimately expire without any material effect to the transaction.
On April 23, CF announced that it had withdrawn its HSR in connection with Terra, with plans to refile. CF said it remains confident that the transaction will be approved in all relevant jurisdictions.
PotashCorp says firm potash prices, tax adjustment help offset slow sales
PotashCorp reported net income of $308.3 million ($1.02 per diluted share) on sales of $922.5 million for the first quarter ending March 31, 2009, compared to the year-ago $566.0 million ($1.74 per share) and $1.9 billion. The year-ago first quarter was a company record, and PotashCorp noted that the current quarter was the second-highest first quarter. The company said this was achieved largely on the strength of potash pricing, as sales volumes declined for all three nutrients and prices for nitrogen and solid phosphate fertilizer weakened substantially. Tax adjustments added $166.8 million to first-quarter earnings.
“The first quarter demonstrated the benefits of our potash strategy of matching supply to market demand, as well as our ability to remain profitable even during periods of demand deferral,” said PotashCorp President and CEO Bill Doyle. “While buyers have delayed purchases since the fourth quarter of 2008, the need for potash and other fertilizers cannot be denied. The fundamentals of our business remain extremely favorable, with historically low global grain stocks, supportive crop prices, depleting customer potash inventories and expectations of tight potash supply/demand dynamics for at least the next five years.”
Doyle sees a strong second half and an exceptional 2010.
First-quarter gross margins were $229.6 million, down from $856.0 million, with almost three quarters of the current total generated by potash.
While the company said that North American potash sales ground to a “virtual halt” in the first quarter, the industry should not wait for lower potash prices, according to Doyle. “We believe these expectations are misguided, as the fundamentals of potash globally are very different from the other nutrients,” said PotashCorp. “Despite the recent lull in demand, we believe the potash industry has changed from one that for decades had excess capacity to one that is expected to continue facing intermediate and long-term supply challenges. Potash supply is fundamentally tight and a surge in demand will necessitate increased capacity, which takes significant time and money to build.”
Doyle said the Indians would like to have $200/mt potash instead of $625/mt potash. “Well, that is not going to happen. But even if they were lucky enough to get their wish you have to be careful what you wish for, because if you had $200/mt potash, all potash expansion projects around the world would cease immediately.” Doyle said once demand returned there would be a severe shortage and the industry would not be talking $1,000/mt potash, but $2,000/mt.
“A dangerous game is unfolding around the world,” warned Doyle. “Fertilizer applications are being reduced at unprecedented levels, with our estimates for North American potash applications falling as much as 30-35 percent, phosphate by 20-25 percent and nitrogen by 5-10 percent. To put this in context, U.S. applications this fertilizer year are expected to be similar in total volume to the 1983 PIK (payment-in-kind) year, while farmers now need to generate 90 percent more production than in 1983 and will plant 25 million additional acres of corn, the most fertilizer-intensive crop. Clearly nutrient replenishment will suffer.
“There is no magical bail out for lost fertility in the soil bank,” he added. He said the company is getting estimates that due to reduced applications yield estimates are down 7-10 percent in Brazil and as much as 20 percent in Argentina.
Doyle said that in the global market some 12 million mt of potash has been idled, along with 10 million mt of phosphate and 11 million of nitrogen.
PotashCorp first-quarter potash gross margins fell to $166.6 million on sales of $269.2 million, versus the year-ago $514.6 million and $796.2 million, respectively. Sales volumes to North American customers declined 86 percent, while offshore volumes fell 78 percent. Only 500,000 mt were sold in the quarter, versus the year-ago 2.5 million mt. Potash shipments during the first nine months of the fertilizer year (July-March) were 44 percent less than the previous five year average.
PotashCorp noted that it took 39 mine shutdown weeks during the first quarter, reducing its total potash production to 1 million mt, or 59 percent quarter-over-quarter.
The company expects a more normal second half as the industry rushes to refill the pipeline. It said Brazil is beginning to rebuild inventories, and the company expects ramped-up shipments to Southeast Asia. In addition, it expects China and India to renew contracts by the end of the second quarter. Doyle expects negotiations to begin in earnest at the IFA Conference at the end of May. He is expecting China to import 5 million mt in 2009, and thinks they have about 3 million mt in inventory. He expects the country to rebound next year, taking as much as 12 million mt.
Phosphate gross margins were only $8.8 million on sales of $329.9 million, versus the year-ago $156.0 and $513.2 million, respectively. PotashCorp noted that with slower phosphate demand, the White Springs facility will remain curtailed though the first half.
“It’s like a monkey on a greased pole – the slide down is fast and hard to stop while every inch on the way up is a fight, even with favorable medium-term supply demand fundamentals for phosphate.”
Doyle said the price drop did not increase the demand for phosphate and nitrogen. “It only destroyed value for those companies that are producing those products. So we think, once again it’s been proven that dropping the price does not increase demand for fertilizer products.” Doyle said fertilizer is not like shoes. “If you have a half-price sale people might buy two pairs of shoes, but if you have a half-price sale for phosphate or nitrogen, they’re only going to buy that same ton of nitrogen or phosphate. It just doesn’t work any different and you’d think people would start to understand that after years and years of being in this business.”
Nitrogen gross margins were $54.2 million on sales of $323.4 million, versus the year-ago $185.4 million and $581.2 million, respectively. PotashCorp expects global nitrogen demand will weaken after the North American spring season and industrial demand will remain weak. It says one bright spot for North American production is lower natural gas prices, which should limit imports from offshore competitors.
PotashCorp is expecting second-quarter net income per share to be $1.00-$1.50, with full year ranging from $7.00-$8.00. It estimates full-year potash gross margin to be $2.5-$3 billion, and total shipments to be 6 million mt.
| Potash Sales Vol. mt 000 | 1Q-09 | 1Q-08 |
| North America | 133 | 967 |
| Offshore | 341 | 1,569 |
| Total | 474 | 2,536 |
| Potash Sales $ M | North America | 85.4 | 291.6 |
| Offshore | 168.0 | 432.0 |
| Other | 5.5 | 5.9 |
| Total | 258.9 | 729.5 |
| Potash Avg Price $/mt | ||
| North America | 639.91 | 301.36 |
| Offshore | 493.03 | 275.36 |
| Total | 534.35 | 285.28 |
| Phosphate Sale Vol. mt 000 | ||
| Fert.-Liquid Phosphate | 96 | 259 |
| Fert.-Solid Phosphate | 270 | 267 |
| Feed | 114 | 214 |
| Industrial | 116 | 192 |
| Phosphate Sales Total | 596 | 932 |
| Phosphate Sales $ M | ||
| Fert.-Liquid Phosphate | 44.1 | 94.9 |
| Fert.-Solid Phosphate | 92.6 | 176.3 |
| Feed | 68.5 | 95.5 |
| Industrial | 94.6 | 91.2 |
| Other | 3.5 | 15.2 |
| Net Phosphate Sales | 303.3 | 473.1 |
| Avg Phosphate Prices $/mt | ||
| Fert.-Liquid Phosphate | 457.62 | 365.97 |
| Fert.-Solid Phosphate | 342.75 | 659.64 |
| Feed | 603.39 | 446.90 |
| Industrial | 817.50 | 474.90 |
| Total Phos Avg | 503.25 | 491.12 |
| Nitrogen Sales mt 000 | ||
| Ammonia | 479 | 474 |
| Urea | 395 | 297 |
| UAN/Other | 386 | 555 |
| Total | 1,260 | 1,326 |
| Nitrogen Sales $ M | ||
| Ammonia | 90.9 | 240.6 |
| Urea | 121.6 | 131.9 |
| UAN/Other | 73.0 | 130.7 |
| Misc./purchased product | 10.2 | 50.1 |
| Total net sales | 295.7 | 553.3 |
| Nitrogen Avg Price mt | ||
| Ammonia | 189.74 | 507.43 |
| Urea | 308.10 | 444.17 |
| UAN/Other | 189.29 | 235.35 |
| Total | 226.69 | 379.47 |
Phosphate Holdings reports loss for 4Q, year
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.”
Seedway to pay $346k in refunds and fines
New York Attorney General Andrew Cuomo has announced an agreement with Seedway LLC, a seed production company that repeatedly mislabeled bags of seed in regards to type, purity, and germination rates and failed to comply with New York State’s seed certification requirements, which led to an artificial inflation of the price of the product. Under the settlement, Seedway, LLC will pay $246,000 in refunds to consumers who purchased mislabeled bags of seed, and $100,000 to the state in penalties and costs. This is the largest fine ever for a violation of Agricultural and Markets law in regard to seed sales.
Seedway is a wholly-owned unit of Growmark Inc., Bloomington, Ill.
“This matter involved a small quantity of small grain seed originating from the Mecklenburg facility,” said Seedway Chief Operating Officer Don Wertman in a letter to customers. “These issues are not illustrative of the bulk of Seedway’s operations and represented less than one percent of our business during the applicable period. No charges were ever filed against Seedway, and we self-reported the facts that lead to this inquiry to Ag & Markets soon after they became known to management in the summer of 2007.”
Seedway said it has already paid the penalties and costs to the Attorney General and will continue in good faith to try and identify end-consumers to make full restitution. Seedway has also agreed to implement an audited quality assurance program that will set a new standard in the seed industry, and provide needed safeguards to ensure the accuracy of future seed labeling.
According to Cuomo’s office, Seedway, located in Hall in Ontario County, produces commercial seed for use by farmers in New York and throughout the country. The state’s investigation revealed that between 2004 and 2007, Seedway sold approximately 22,000 fifty-pound bags of falsely labeled and improperly certified seeds to over 200 customers. The company wrongfully certified inferior seeds and labeled seed bags with incorrect classes and germination percentages. Employees at Seedway’s facility in Mecklenburg also fraudulently affixed seed bags with New York state inspection certificates when they were not actually inspected and certified. As a result of these inaccurate labels, consumers bought the seeds at higher prices than if they had been labeled correctly.
Bunge 1Q fertilizer earnings off 297 percent, cites aggressive price cuts by competitors
Bunge Ltd. moved into the loss column for fertilizer earnings before interest and tax (EBIT) at a negative $262 million, down 297 percent from the year-ago positive $133 million. Fertilizer gross profits fell 177 percent, to a negative $193 million from the year-ago positive $250 million.
The losses were attributed to lower selling prices, higher raw material and finished product inventory costs due to purchases made last year prior to the drop in international prices, and lower sales volumes compared to exceptionally strong volumes in the year-ago period. First-quarter results included an inventory write-down of $64 million.
Fertilizer net sales were off 41 percent, to $699 million from $1.2 billion. Volumes were off 23 percent, to 2.06 million mt from the year-ago 2.67 million mt.
“The start of 2009 was more challenging than expected,” said Alberto Weisser, Bunge chairman and CEO. “Retail fertilizer margins in Brazil suffered from aggressive price reductions by competitors, which drove sales prices below international levels. Additionally, global demand for soybean meal was soft. Despite this difficult start, our confidence in a recovery in our markets and a solid performance in the second half of the year remains strong.”
Weisser said Bunge is working through the higher-cost fertilizer inventory and that the supply of fertilizer products in the Brazilian retail channel has been reduced by approximately 30 percent since the end of 2008, approaching historical seasonal levels. He said both of these factors should improve margins as the year progresses. “Higher commodity prices, resulting from tighter global oilseed stocks, are supporting farmer economics, and should help stimulate sales of fertilizer products in the second half of the year when South America enters its next major planting season,” he added. He noted that the USDA has reduced its estimate for global soybean production by nearly 15 million mt, mainly due to weather-related production issues in South America.
Company-wide, Bunge had a first-quarter net loss of $176 million ($1.76 per share), down 155 percent from the year-ago net income of $322 million ($2.10 per share). Sales were down 26 percent, to $9.2 billion from $12.5 billion.
Due to the lower-than-expected first-quarter results and a more challenging near-term pricing environment in fertilizer, Bunge has revised its 2009 full year earnings guidance from $6.90-$7.60 per share to $4.90-$5.40 per share.
Haifa Chemicals halts potassium nitrate production
Haifa Chemicals has confirmed that it recently discontinued its potassium nitrate production, citing the lack of available potash at an agreeable price. Haifa traditionally sources its product from Israel Chemicals Ltd. (ICL). Haifa Chemicals says it has prepared considerable stocks to support all its customers and provide them with all their needs.
ICL rejected Haifa’s allegations, calling them populist and out of touch with reality. ICL noted that Haifa, which is one of the largest potassium nitrate producers in the world, if not the largest, benefited from the 2008 run-up in potash prices as it had a long-term contract with ICL in which it received a formula price derived from ICL’s lowest price to its largest customers. “As a result, the pricing formula in the agreement between Haifa Chemicals and ICL has lagged behind global prices by a considerable rate,” said ICL. “It is estimated that as a result of this price discrepancy, Haifa was able to save several hundreds of millions of shekels.
“All of a sudden, a realistic, fair commercial pricing formula of a commodity which for decades has been relying on the international markets’ potash prices and reflected in long-term contracts between ICL and Haifa Chemicals is being discarded as ‘unsuitable’ for Haifa Chemicals, which cynically and audaciously claims that the potash price demanded by ICL ‘prevents Haifa Chemicals from operating its facilities,'” said ICL.
ICL said Haifa’s plant shutdown is meant to create public pressure to obtain subsidies from a commercial entity on a raw material traded on the global commodity market, with its price being set by market forces. ICL said the true aim is to maximize profits by threatening to lay off employees. The Israeli press reported that some 800 people were impacted by Haifa’s decision.
“Haifa Chemicals’ claim that it can buy potash only from ICL is not only shameless impertinence but straightforward false,” said ICL. “ICL is just one of many potash producers around the world. Haifa Chemicals can import potash at any quantity from other potash producers in other countries and has even done so in the past.”
Terra reports 1Q net income of $30 M
Terra Industries Inc. reported net income of $30 million ($.30 per diluted share) on revenues of $419.7 million for the first quarter ending March 31, 2009, versus the year-ago $101.4 million ($.97 per share) and $574.7 million, respectively.
Terra said the drop in revenues was due primarily to lower ammonia selling prices and UAN and ammonium nitrate sales volumes. Ammonia prices decreased 27 percent, while UAN and AN prices remained substantially the same. Terra said the decrease in ammonia prices was due primarily to soft global industrial demand related to the economic downturn. UAN and AN volumes decreased by 32 and 30 percent, respectively, as customers continued to work off higher-priced inventory. Terra’s ammonia sales volumes increased by 5 percent. Declines in industrial ammonia sales volumes were more than offset by a healthy start to the 2009 pre-plant ammonia application season, as growers sought to make up for ammonia not applied in the fall. Terra also reported strong sales by Terra Environmental Technologies (TET).
First-quarter operating costs reflect the curtailment of ammonia production at the Donaldsonville and Woodward plants for much of the quarter. In addition, the Yazoo City plant performed a turnaround in February that is reflected in operating costs. The cost of these activities was an estimated $12.3 million pretax.
Terra expects the Woodward UAN expansion to be up next year and to have cost $105-$110 million. During the remainder of 2009, Terra expects turnarounds at Woodward and one-half of Verdigris, as well as the Courtright, Ont., urea plant.
Terra’s GrowHow UK joint venture curtailed ammonia production at its Billingham and Ince locations for much of the first quarter. Sales volumes were down by approximately 60 percent in the first quarter of 2009 due to lower demand.
Earnings from the Trinidad jv were $3.3 million.
“Terra’s first quarter results were consistent with the overall environment, which was characterized by slow demand for nitrogen products globally and a late start in many U.S. areas to the spring application season,” said Terra President and CEO Michael Bennett. “Natural gas prices have come down considerably, and although this decrease isn’t fully reflected in Terra’s first quarter results due to timing issues, if sustained it should benefit Terra in coming months.”
Citing USDA projections of 85 million acres of corn, Terra expects stronger earnings in the second quarter. It said UAN may again be a premium-value product as growers have faced wet weather conditions early in the season. However, Bennet told analysts he expects activity to be hand-to-mouth or truckload-to-truckload during the second quarter, adding that UAN may be 1 million short of demand this year. Looking forward, Terra said the fundamental drivers for the business remain positive.
| 1Q-09 Vol. | 1Q-09 Price | 1Q-08 Vol. | 1Q-08 Price | |
| Ammonia | 381 | 336 | 364 | 462 |
| UAN | 625 | 282 | 917 | 285 |
| Urea | 77 | 322 | 59 | 425 |
| AN | 168 | 267 | 240 | 274 |
| Nat. Gas | 7.37 mmBtu | 7.57 mmBtu |
CF reports 1Q net income down at $62.7 M; sales move up; phosphate exports double
CF Industries Holdings Inc. reported first-quarter income attributable to common stockholders of $62.7 million ($1.28 per diluted share), down from the year-ago $158.8 million ($2.76 per share). Net earnings were $83.0 million versus the year-ago $177.3 million.
Net sales were up, at $680.6 million from the year-ago $667.3 million.
“Our first quarter results demonstrate our ability to react quickly to changes in market conditions,” said CF Chairman and CEO Stephen Wilson. “Despite slow domestic shipments during the quarter and high industry inventory levels in the North American supply chain, both our net sales and volumes were up when compared to the year-earlier quarter. Realizing the difficult domestic market conditions early in the first quarter, we stepped up our actions to move product, particularly phosphate, into offshore markets.”
CF said it leveraged its Keytrade AG partnership to export phosphate to Brazil and India, as well as new markets such as Vietnam. Phosphate exports more than doubled during the quarter, to 187,000 st from the year-ago 81,000 st. Domestic sales were off at 340,000 st from 389,000 st. Overall, phosphate tons sold moved up to 527,000 st from 470,000 st.
Despite the uptick in volumes, phosphate gross margins were a negative $7.1 million on sales of $224.4 million, versus the year-ago positive gross margin of $73.7 million and sales of $229.5 million. The phosphate numbers included a $24.3 million inventory write-down on declines in potash selling prices.
CF’s Donaldsonville phosphate complex operated at 75 percent of capacity in the first quarter, though it entered 2009 at 40 percent.
First-quarter phosphate sales under the forward pricing program were 138,000 st, representing 26 percent of segment volume, down from 325,000 st sold, or 69 percent of segment volume in the year-ago quarter.
Nitrogen gross margins were $169.4 million on sales of $456.2 million, versus the year-ago $197.5 million and $437.8 million, respectively. Volumes for ammonia and urea were up 77 and 13 percent, respectively, while UAN was down 26 percent. CF’s two nitrogen complexes operated at 81 percent of capacity in the first quarter and were operating at 91 percent going into the second quarter, getting ready for the spring season.
Nitrogen sales under the FPP totaled 500,000 st during the quarter, representing 42 percent of nitrogen sales volumes. In the year-ago quarter, FPP sales were 900,000 mt, accounting for 75 percent of segment sales.
CF is very optimistic about the second quarter, saying it expects corn acreage to meet or exceed last year’s 86 million acres. Wilson said the company has seen promising levels of ammonia movement to date, and, weather permitting, anticipates a strong spring ammonia season. As with other fertilizer producers, CF said that looking ahead, the fundamentals that drive the industry are strong.
In other news, CF said anticipates signing a natural gas contract for the proposed facility in Peru during the second quarter. It expects its front end engineering and design (FEED) study on the project to be complete by the end of the year.
CF last week reported that its board of directors has declared a $0.10 per share dividend on its common stock for the second quarter. The dividend will be payable on June 1, 2009 to stockholders of record as of May 14, 2009.
| 1Q-09 Vol | 1Q-09 Price | 1Q-08 Vol | 1Q-08 Price | |
| Ammonia | 133 | 527 | 75 | 428 |
| Urea | 733 | 365 | 650 | 387 |
| UAN | 397 | 298 | 539 | 285 |
| Other Nitrogen | 2 | NA | 2 | NA |
| Natural Gas | ||||
| Donaldsonville | 8.09 | 8.42 | ||
| Medicine Hat | 5.99 | 7.68 | ||
| * Volumes are in 000 st; price is average sales price $/st; gas price is mmBtu. | ||||
Agrium exercises option with Hanfeng
Toronto-Hanfeng Evergreen Inc. said April 20 that it has received written notice from Agrium Inc. exercising its option with Hanfeng to purchase 50 percent of the outstanding shares of Hanfeng Slow Release Fertilizer (Canada) Co. Ltd. (Subco). The option was granted to Agrium in conjunction with Agrium granting Hanfeng a sulfur coated urea (SCU) license for use in China, and was included as part of the agreement in which Agrium became a 19.6 percent shareholder of Hanfeng in April 2007. Subco develops new SCU projects and joint venture opportunities in China. The exercise price will reflect Subco’s investment in SCU projects in China from April 18, 2007, until the exercise date, plus a commercial rate of interest. During the specified period, the holding company has established one 50,000 mt/y plant in partnership with a local urea producer under a jv structure in Shanxi, China. Hanfeng is the largest producer of slow- and controlled-release fertilizers in China.