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The Week in Fertilizer Stocks

Fertilizer Stocks

The Week in Fertilizer Stocks

Producer Symbol Price Week Ago Year Ago
Agrium AGU 82.54 88.14 84.00
CF Industries CF 172.17 197.48 141.47
CVR Partners UAN 23.64 28.75 18.85
Intrepid Potash IPI 21.25 22.97 30.67
Mosaic MOS 48.90 52.33 71.15
PotashCorp* POT 40.97 43.19 54.15
Rentech Nitrogen RNF 23.69 29.36 N/A
Terra Nitrogen TNH 203.40 255.16 107.51
Distribution/Retail
Andersons Inc. ANDE 47.12 50.00 45.74
Deere & Co. DE 78.96 82.49 92.45
Scotts SMG 46.92 53.64 58.83
* represents three-for-one stock split

Agrium reports earnings drop; Retail sees record 1Q sales, EBITDA

Featured, News

Agrium Inc. reported a 9 percent drop in net income for the first quarter ending March 31, 2012, from the year-ago quarter. Net earnings were $155 million ($0.97 per diluted share) on sales of $3.63 billion, down from the year-ago $171 million ($1.09 per share) on sales of $2.95 billion.

First-quarter 2012 results included a pre-tax loss of $13 million ($0.06 per share) on natural gas and other hedge positions, and a pre-tax share-based payment expense of $64 million ($0.29 per share). Excluding these items, net earnings would have been $210 million ($1.32 per share) for the quarter.

“The benefits of Agrium’s strong global position across the agricultural value chain were evident once again this quarter, as our Retail business capitalized on one of the earliest starts to the North American spring season in history, achieving its highest ever sales and EBITDA for a first quarter,” said Agrium President and CEO Mike Wilson. “Agrium’s Wholesale results were the second highest on record for a first quarter, despite slow global demand for potash and phosphate this quarter.

“Crop prices remain well above historical levels, providing a strong economic incentive for growers to optimize use of all crop inputs in order to maximize their yields and profitability,” continued Wilson. “Favorable weather has enabled growers to get a very early start on spring planting and applications and we have seen strong movement of nutrients and other crop inputs, as some of Retail’s business was brought forward into the first quarter. The Wholesale operations are expected to benefit in the second quarter from rising nitrogen and falling North American natural gas prices.”

Retail gross profit was $427 million on sales of $2.45 billion, up from the year-ago $340 million on sales of $1.82 billion. EBITDA and EBIT were $101 million and $57 million, respectively, up from the year-ago $25 million and negative $15 million.

Retail crop nutrient sales were up 46 percent to $1.03 billion from the year-ago $707 million, while gross profit was up 35 percent, to $155 million from $115 million. Crop protection gross profit was $123 million on sales of $834 million, up from the year-ago $102 million on sales of $638 million. Seeds gross profit was also up, at $44 million on sales of $316 million from the year-ago $35 million on sales of $230 million.

Wholesale gross profit was down, at $359 million on sales of $1.075 billion from the year-ago $409 million on sales of $1.072 billion. EBITDA and EBIT were $362 million and $326 million, respectively, down from the year-ago $412 million and $377 million.

Nitrogen was the big money maker in the Wholesale group, with gross profit up 11 percent, to $167 million on sales of $384 million from the year-ago $151 million on sales of $334 million. The average margin per ton was up slightly, to $208/mt from $202/mt. Total nitrogen sales volumes were up 7.5 percent, to 805,000 mt from the year-ago 749,000 mt. Ammonia saw the biggest increase at 226,000 mt at an average price of $519/mt, compared to the year-ago 158,000 mt ($484/mt). Urea sales volumes were off 10 percent, to 271,000 mt ($542/mt) versus the year-ago 300,000 mt ($495/mt). Other nitrogens were up, at 231,000 mt ($359/mt) versus 208,000 mt ($343/mt).

Agrium noted that the Carseland, Alberta, urea plant was down for six weeks during the quarter so a heat exchanger could be replaced. This resulted in some 100,000 mt of lost production of urea and ESN, and represented an impact of $0.12 per share. The facility came back up March 23 and is running well.

Agrium expects to run its nitrogen units full out in the second quarter except for the Joffre, Alberta, ammonia plant, which is slated for a three-week turnaround starting the week of May 14.

The increase in nitrogen volumes came in North America,

Pryor woes impact LSB earnings; urea plant to be offline most of 2Q

Featured, Midwest, News, Urea

LSB Industries Inc. said May 9 that its maintenance-idled Pryor, Okla., urea plant will likely be down most of the second quarter, coming up by the end of June. The plant went down for unplanned maintenance in March, and on April 25 the company determined that the urea plant reactor’s stainless steel lining was non-repairable and had to be replaced. This replacement will take most of the second quarter.

“It’s extremely unfortunate that we experienced this failure at the height of the season for UAN,” Barry Golsen, LSB chairman and president, told analysts. “However, when you’re dealing with high-pressure vessels, high-temperatures, and corrosive materials, you cannot take any chances. Safety and soundness dictate the course of action.”

LSB operating income was $8.7 million lower in first-quarter 2012 than the year-ago quarter, including a $13.1 million ($2.1 million maintenance and repair costs; $8 million lost gross profit and absorption; $3 million embedded losses on firm sales commitments) negative impact of downtime as a result of the planned and unplanned downtime at Pryor.

Pryor had an operating loss of $1.1 million in the first quarter, compared to a year-ago income of $11.3 million.

During January, the facility was offline so a planned improvement project could be performed to increase anhydrous ammonia production levels. However, in March there was unplanned downtime at both the ammonia and urea plants. The ammonia plant was down only eight days, resuming production March 22 and producing 600 st/d, which has been sold into the market. Prior to its January upgrade, the ammonia plant was running at 500 st/d. The eventual goal is to get it to 700 st/d. Another turnaround is planned for the Pryor complex in the third quarter.

The repair undertaken at the urea plant began Feb. 27. The urea plant is needed to produce UAN and uses ammonia as a feedstock. As a result, the Pryor facility has not produced UAN since Feb. 27, 2012. LSB currently lists Pryor UAN capacity at 325,000 st/y.

In the meantime, LSB said that it recently received permits to expand ammonia production at Pryor by 60,000 st/y. Some of the work has already been done, and the company targets this production for the third or fourth quarters.

The Pryor downtime was partly offset by increases in agricultural and industrial sales volumes and margin in the rest of LSB’s Chemical segment.

LSB said its Cherokee, Ala., and El Dorado, Ark., plants ran and produced very efficiently during the quarter and continue to do so into the second quarter, benefiting from strong customer demand.

LSB second-quarter net income applicable to common shares was $14 million ($0.61 per diluted share) on sales of $190.2 million, down from the year-ago $20.6 million ($0.90 per share) on sales of $177.5 million. Operating income was $23.1 million, down from $34 million. EBITDA was $28.3 million, down from $38.9 million.

Chemical operating income was $20.3 million on sales of $124.2 million, compared to the year-ago $29.1 million on sales of $111.4 million. Gross profit was $24 million, down from $31.5 million. EBITDA dropped to $24.3 million from $32.6 million. The 11.5 percent overall sales increase included agricultural sales of $60.3 million, up from the year-ago $51.1 million. Industrial acid and other sales were up about 10 percent versus year-ago levels, while mining sales were about level due to lower demand for coal because of the warm winter.

Going forward, LSB said the current outlook for its Chemical unit is positive, with the market fundamentals for its fertilizer products favorable. It expects ag sales to be strong for the balance of 2012. It also expects an increase in industrial acid sales, though it says mining sales may be lower than 2011.

Results were also off at LSB’s Climate Control busi

Icahn wins majority stake in CVR; refineries, nitrogen plant to be sold

Featured, News

Billionaire investor Carl Icahn on May 7 announced that, as of 11:59 p.m., New York City time, on May 4, 2012, 48,112,317 shares of common stock of CVR Energy Inc. were validly tendered pursuant to the offer by his affiliates to acquire CVR for $30 per share plus a contingent value right (up to $7 per share). As all of the terms and conditions of the offer have been satisfied, Icahn’s affiliates have accepted for payment all of the tendered shares, which represent approximately 63 percent of all CVR shares held by shareholders unaffiliated with Icahn. Upon the purchase of these shares, to be concluded May 7, the Icahn group will own approximately 69 percent of CVR’s outstanding shares.

The deal values the company at $2.6 billion.

Icahn also announced May 7 that the subsequent offering period for the offer has commenced and will expire at 11:59 p.m., New York City time, on May 18, 2012. During the subsequent offering period, holders of CVR common stock who did not tender their shares during the initial offer period may tender their shares and receive the same consideration of $30 per share plus a contingent value right that was offered during the initial offer period. If Icahn achieves 90 percent or more of the shares after this round, he must cause a merger to take place in which all remaining outstanding shares will be converted into the right to receive the same consideration as in the tender offer ($30 per share in cash plus a contingency cash payment, or CCP), unless such holder chooses to exercise statutory appraisal rights.

If Icahn does not hold 90 percent or more of the outstanding shares at the conclusion of the subsequent offering period, those shares which have not been tendered will remain outstanding.

In accordance with the terms of the previously announced agreement between Icahn and CVR, upon the purchase of the tendered shares on May 7, seven members of CVR’s nine-member board of directors will be replaced automatically with seven individuals nominated by Icahn.

After consummation of the offer, Icahn says he will cause CVR to engage one or more independent, nationally recognized investment banking firms to conduct a 60-day sales process to encourage acquisition proposals from third parties. He said he would support any bona fide, all-cash offer received within this 60-day marketing period that results in all stockholders receiving a net amount of at least $35 per share. He said he may vote for lower bids, but will not be obligated to do so.

The CCP comes into effect if the company is sold for more than $30 per share. Stockholders can get up to another $7 per share.

In addition to two refineries – Coffeyville, Kan., and the recently acquired one at Wynnewood, Okla. – CVR owns 70 percent of nitrogen producer CVR Partners LP, which has a petroleum coke-based facility in Coffeyville, Kan. Current anhydrous ammonia capacity is 430,000 st/y, and UAN at 720,000 st/y. UAN capacity is being expanded to over 1 million st/y, with the completion expected in early 2013.

The Coffeyville refinery and nitrogen plants have been sold for considerable profit by subsequent owners. In 2010 (GM June 28, 2010), majority owners Kelso Investment Associates VII LP and Goldman Sachs Group Inc. put their majority stake up for sale of CVR Energy Inc. They had acquired it five years earlier for an estimated $700 million to $1 billion, with actual terms not disclosed (GM July 18, 2005, Oct. 2, 2006). Pegasus Partners II LP, which sold the company to Kelso and Goldman, had bought it from the bankrupt Farmland (GM March 8, 2004, June 27, 2005).

There were multiple views as to what Pegasus actually paid and Farmland received; however, initial court documents indicated $281 million, though later documents suggested less. Farmland’s bankruptcy trustee was to complain later that the company may have netted only $11 million in receipt

Sulfur

Market Watch, Sulfur, Tampa, Vancouver, West Coast

Tampa: Supply and demand remained in balance last week, although some smaller buyers were looking for additional supplies. However, that was not enough to alter the balance.

No transportation issues were found last week, but the potential of a Canadian Pacific rail strike still loomed.

The U.S. Department of Energy said last week that the weekly operating capacity rate for refineries increased 0.4 percent, from 86 percent to 86.4 percent. A year ago, the rate was 81.7 percent. However, because refineries were using more sweet crude than sour, the higher rate will not provide any significant increase in the amount of sulfur produced.

Vancouver: Spot prices for prill from Vancouver were running in the $180-$185/mt FOB range.

No new developments were reported after the 5,000 members of the Teamsters Canada Rail Conference voted 95 percent for a strike position after May 22. The union represents conductors, trainmen, yardmen, locomotive engineers, and traffic controllers at Canadian Pacific Railway. A strike would affect shipments to both Vancouver and the U.S.

West Coast: Prices for sulfur from the West Coast were also in the $180-$185/mt FOB range, and a vessel was scheduled to depart later this month.

Potash

Eastern Cornbelt, Great Lakes, Market Watch, Northeast, Northern Plains, Potash Muriate, U.S. Gulf, Western Cornbelt

U.S. Gulf: Recent barge trades continue to be quoted in the $480-$485/st FOB range. More sources agreed that NOLA supplies have significantly diminished. They pointed to reports that a large buyer snapped up several barges.

Eastern Cornbelt: Potash in the Eastern Cornbelt region was quoted at $510-$530/st FOB warehouses, depending on grade and location. That range reflected another slight drop from last report, with the low end reported by Illinois sources for red granular tons on a spot basis. One Illinois contact quoted rail-delivered tons at $521-$522/st to his location.

Western Cornbelt: Potash was pegged at $510-$530/st FOB Western Cornbelt warehouses, with the low quoted in Iowa on a spot basis. One Iowa contact said fill numbers for fall potash tons were circulating for as low as $485/st FOB, but that was not confirmed.

Northern Plains: Minnesota sources quoted the granular potash market at $515-$520/st FOB warehouses, with delivered tons reported in the $527-$542/st range in North Dakota. Based on recent business, the potash market FOB Saskatchewan mines had reportedly slipped to $480-$495/st, depending on grade, although producer list prices remained unchanged from summer 2011 postings in the $545-$557/st FOB range.

Great Lakes: Potash pricing was down from last report as well. Michigan sources quoted red granular potash at $530/st FOB and white granular at the $537/st FOB range out of warehouses in the state. Potash pricing in the Wisconsin market was tagged at $520-$530/st FOB.

Northeast: Granular potash was generally quoted at $535-$540/st FOB regional warehouses, with rail-delivered tons quoted at $545-$555/st in the Northeast.

Phosphates

Central Florida, Di-Ammonium Phosphate, Eastern Cornbelt, Great Lakes, Market Watch, Mono-Ammonium Phosphate, Northeast, Northern Plains, Pakistan, U.S. Exports, U.S. Gulf, Western Cornbelt

Central Florida: After getting far too much rain amid falling temperatures, some growers in New York changed their minds and began planting soybeans last week, instead of the corn they had planned to put in the ground. As a result, railcars were backing up at terminals, as dealers still had plenty of product to get rid of before they begin buying again in that area.

Meanwhile, phosphate producers were holding firm to their most recent price lists, and will rely more on export sales than the domestic markets. Still, some traders who normally buy from Central Florida were taking their business to terminals fed by the NOLA phosphate market to meet whatever needs they still had.

The Central Florida DAP price range was unchanged from the previous week at $475-$480/st FOB. CF Industries posted its list price at the $480/st FOB mark, and Mosaic was at $475/st FOB. MAP continued to sell at a $20/st premium to DAP in Central Florida, about the same difference as from traders, but was essentially unavailable in Central Florida.

PCS Sales, which produces MAP at its White Springs facility in North Florida, was selling at prices comparable to the market.

U.S. Gulf: Sales of NOLA DAP barges were slim last week and prices were scattered, but along the lines of the previous week’s range.

The number of NOLA phosphate barges available and already on the water was relatively low, but that was countered by the dwindling of the spring planting season. The big buyers made their moves during the past few weeks, which reduced the number significantly.

A few traders were taking barges to shore up their terminals and finish off what had already been contracted for by dealers. At least one was still in the buy/sell mode, but that kind of activity for prompt barges was tapering off.

For the most part, dealers were reluctant to buy this late in the season because most want as little as possible left in their bins by summer. Most think they will be able to get a better deal when they start buying for the fall season.

"It will take an event to get them (dealers) to start buying," said one trader. "I don’t know what that will be, but it will have to be something.”

That event will probably result from a new burst of activity in the export phosphate market, and Brazil would seem to be the most likely player.

Terminal prices were still in the $510-$535/st FOB range for DAP, and MAP was seeing little activity in most areas. The premium on the river for MAP over DAP was no longer in play, with activity now on the decline.

Crop prices were down across the board last week. Prices for 2012 corn futures fell from $5.295/bushel the previous week to $5.0625/bushel for December. The corn price for December 2013 was $5.2225/bushel, decreasing from $5.395/bushel the previous reporting period. Soybeans for November 2012 moved down to $13.58/bushel from $13.667/bushel the previous week, and beans for November 2013 decreased to $12.02/bushel from $12.35/bushel a week earlier. Wheat for July 2012 fell to $5.9775/bushel from $6.155/bushel the week before, and wheat for July 2013 was listed at $6.755/bushel last week, down from $6.96/bushel the previous week.

The prompt NOLA DAP barge price range for the week changed just slightly to $484-$500/st FOB from the previous week’s $485-$500/st FOB, which was not much of a difference. MAP prices were about the same as DAP last week. NOLA DAP barge prices for forward sales from June into September were in the $500-$510/st FOB range.

Eastern Cornbelt: DAP pricing was pegged at $520-$530/st FOB most warehouses in the Eastern Cornbelt, with MAP roughly $10/st higher. One Illinois source quoted summer fill DAP offers in the $515-$520/st FOB range last week.

Illinois sources said 10-34-0 was availa

Ammonium Sulfate

Ammonium Sulfate, Eastern Cornbelt, Great Lakes, Market Watch, Northeast, Northern Plains, Western Cornbelt

Eastern Cornbelt: Ammonium sulfate remained at $425-$445/st FOB in the region, with mid-grade referenced at the $415/st FOB level. Ammonium thiosulfate pricing was steady at $370-$380/st FOB in the Eastern Cornbelt.

Western Cornbelt: Granular ammonium sulfate was steady at $425-$445/st FOB in the Western Cornbelt. The ammonium thiosulfate market was tagged at $365-$385/st FOB in the region, with the low reported in western Iowa.

Northern Plains: Minnesota sources tagged the granular ammonium sulfate market at $440/st FOB. North Dakota sources said ammonium sulfate tons were hard to come by in early May, with some dealers pulling product from Minnesota for as high as $490/st DEL. Dakota Gasification’s April 23 list prices for ammonium sulfate included $435/st DEL in North Dakota, $440/st DEL in South Dakota, northern Minnesota, and eastern Montana, and $445/st DEL in Manitoba and Saskatchewan.

The ammonium thiosulfate market was quoted at $400/st DEL in North Dakota.

Great Lakes: Granular ammonium sulfate was pegged at the $445/st FOB level in Michigan and Wisconsin, with inventories described by one source as “pretty thin.”
Ammonium thiosulfate was pegged in the $370-$380/st FOB range in the region.

Northeast: Granular ammonium sulfate pricing had reportedly firmed to $415-$425/st DEL in the Northeast region, depending on location and supplier, with the upper end of that range also reporting FOB warehouses in Pennsylvania on a spot basis.

Ammonium Nitrate

Ammonium Nitrate, Market Watch, U.S. Gulf, Western Cornbelt

U.S. Gulf: As in the past few weeks, prompt AN barges that are on the water and ready to go are hard to find, and are still garnering a significant premium as high as $400/st FOB, according to sources. Those barges that are a week or two to loading were pegged at $360-$370/st FOB.

Western Cornbelt: The ammonium nitrate market remained firm at $480-$490/st FOB for limited tons in the Western Cornbelt region.

Nitrogen Solutions

Eastern Cornbelt, Great Lakes, Market Watch, Northeast, Northern Plains, U.S. Gulf, UAN, Western Cornbelt

U.S. Gulf: UAN barges were said to be quiet, with all of the real action occurring inland. Barge trades were called $385-$395/st ($12.03-$12.34/unit) FOB.

Eastern Cornbelt: Illinois sources pegged UAN-32 in the $330-$340/st ($13.44-$13.75/unit) range FOB terminals last week. In Indiana and Ohio, the UAN-28 market was quoted at $380-$385/st ($13.57-$13.75/unit), with reference prices pegged at the $395/st ($14.11/unit) FOB level in Ohio on a spot basis.

Western Cornbelt: An Iowa source said demand for UAN continued last week for both sidedress and preplant, depending on location. UAN-32 was quoted in the $425-$445/st ($13.28-$13/91/unit) range FOB regional warehouses, with both the high and low ends of the range reported in the Iowa market last week.

Northern Plains: UAN pricing was reported at $13.39-$13.91/unit FOB regional terminals to the dealer, with delivered UAN-28 pegged as high as $450/st ($16.07/unit) from Canadian shipping points to certain locations in North Dakota.

Great Lakes: UAN pricing was up significantly from last report in the Great Lakes region. The UAN-32 market was quoted at $430-$440/st ($13.44-$13.75/unit) FOB Wisconsin terminals, with rail-delivered tons tagged at the $450/st ($14.06/unit) level in southern Wisconsin. Michigan contacts pegged the UAN-28 market at $399/st ($14.25/unit) FOB Webberville, Mich., and $395/st ($14.11/unit) FOB Toledo, Ohio.

Northeast: Sources described the UAN market in the Northeast as quiet, with minimal interest in prompt tons as dealers wait for fields to dry. There will still be some sidedress demand in late May and early June, but, as one source put it, “nothing will happen until the farmer pulls the trigger. No one wants a repeat of summer 2009 to everyone going hand-to-mouth on tons to make sure they aren’t caught with any high priced inventory.”

UAN-30 was tagged at $375/st ($12.50/unit) FOB Baltimore, with UAN-32 quoted in the $394-$400/st ($12.31-$12.50/unit) FOB range, depending on supplier. Out of terminals in upstate New York, the dealer reference for UAN-32 was pegged at $432/st ($13.50/unit) FOB, while pricing out of the Savannah, Ga., market was pegged at the $375/st $11.72/unit) FOB mark.

Sources quoted offers for UAN-32 vessel tons as high as $410/mt CFR level, but speculated that tons could be purchased below the $400/mt CFR level “without a problem.”