CF Industries Holdings Inc. reported net income attributable to common shareholders of $105.1 million ($1.54 per diluted share) for the second quarter ending June 30, 2010, down from $213 million a year-ago. Second-quarter results included $113.7 million of business combination and integration costs, a $15.1 million non-cash market-to-market gain on natural gas derivatives, and $1.9 million in Peru project costs.
Second-quarter sales were up, at $1.31 billion from the year-ago $991 million.
CF said an early thaw in the Corn Belt led to the highest direct-application ammonia volume of any spring since 1994, and to record-low Midwest inventories of ammonia. Entering the second quarter, CF said it expected 2.4 million tons of ammonia to be sold for agricultural use in the U.S. However, due to ideal conditions, it now estimates that 3 million tons were applied. As a result, estimates for the fertilizer year ending June 30, 2010, are that 12.8 million nutrient tons of nitrogen were applied, versus an expected 12.4 million tons.
CF’s own ammonia sales volumes for the quarter were a whopping 1.19 million st, versus the year-ago 481,000 st. Average prices were down, however, to $380/st from the year-ago $696/st.
Second-quarter nitrogen gross margin was $367.5 million on sales of $1.12 billion, versus the year-ago $403.2 million on sales of $755 million. Tons sold moved up to 3.93 million st from 1.88 million st, which also reflects the acquisition of Terra Industries Inc.
Second-quarter phosphate gross margin was $29.3 million on sales of $185.1 million, up from the year-ago $23.8 million on sales of $236 million. Tons sold were down, to 459,000 st from the year-ago 674,000 st. CF noted that the year-ago period saw an unusually high number of phosphate exports, and it also included potash sales, which were discontinued in 2010.
Six-month net income was $100.7 million ($1.71 per share) on sales of $1.81 billion, down from the year-ago $275.7 million ($5.61 per share) on sales of $1.67 billion.
Six-month nitrogen gross margin was $464.8 million on sales of $1.45 billion, versus the year-ago $572.6 million on sales of $1.21 billion. Sales volumes were 5.13 million st, up from the year-ago 3.14 million st.
Six-month phosphate margins were $61 million on sales of $360.5 million, up from the year-ago $16.7 million on sales of $460.4 million. Tons sold were 939,000 st, down from the year-ago 1.2 million st.
CF expects a strong fall fertilizer season, citing an early harvest, expected large acreage in 2011, increasing application rates, and pricing momentum.
“We were patient though a challenging UAN market in the second quarter, and were rewarded for our patience in July,” said Stephen Wilson, CF chairman, president, and CEO. “At this point, we expect upward momentum in nitrogen to be sustained by the combination of low inventories, seasonal supply outages, solid demand – both domestically and internationally – and favorable relationships between natural gas prices in North America and other world markets.” Part of the reason for those low inventories were some 35,000 tons of UAN that CF exported in June. It said it has made arrangements for additional exports to four countries in the third quarter.
CF is also upbeat about second-half phosphates, saying it continues to maintain very low inventories, matching low levels observed in markets worldwide. It noted that India continues to require large phosphate volumes, restocking demand is emerging in South America, and demand drivers in Europe and North America are positive.