CF 3Q income off only 18 percent

CF Industries Holdings, Inc. reported only an 18 percent drop in net income attributable to shareholders for the third quarter ending Sept. 30, 2009, to $38.5 million ($.78 per diluted share) versus the year-ago $47.1 million ($.82 per share). Third-quarter sales were off 58 percent, to $430.1 million from the year-ago $1.02 billion.

“We are pleased with what we accomplished in a difficult industry environment this quarter,” said CF Chairman and CEO Stephen Wilson. “Domestic distributors and retailers remain hesitant to carry inventory because of the write-downs they experienced as prices fell last winter. Still, we achieved total sales volume that was about equal to the third quarter of last year.”

CF cited three factors to showcase its flexibility – increased exports of DAP, UAN, and urea in the third quarter; a de-emphasis on forward sales to take advantage of historically low natural gas prices; and production levels adjusted to market conditions. CF said total exports of 287,000 st during the quarter were the largest export volume for the third quarter in CF’s history as a public company.

Third-quarter nitrogen gross margins were $101.9 million on sales of $276.1 million, versus the year-ago loss of $70.5 million and sales of $599.1 million. The year-ago loss was attributed to large mark-to-market losses. Third-quarter volumes were off only slightly, to 1.24 million st from the year-ago 1.28 million st. Nitrogen sales under the company’s forward pricing program (FPP) were 400,000 st during the quarter, representing 36 percent of nitrogen volumes. Year-ago FPP sales were 75 percent of sales. CF nitrogen plants ran at 89 percent capacity in the third quarter, and entered the fourth at similar rates.

Third-quarter phosphate gross margins were $22.1 million on sales of $154 million, down from the year-ago $191.4 million and $421.7 million, respectively. Volumes were actually up, to 497,000 st from the year-ago 457,000 st. Phosphate sales under the FPP were 61,000 st during the quarter, representing 12 percent of sales, down from 237,000 st sold, or 52 percent for the year-ago quarter. Phosphate production capacity was 85 percent during the quarter, reflecting reduced rates in July. The plant began the fourth quarter at full planned rates.

Nine-month net earnings attributable to common stockholders was $314.2 million ($6.38 per share) on sales of $2.1 billion, versus the year-ago $494.5 million ($8.59 per share) and $2.85 billion.

Nine-month nitrogen margins were $674.5 million on sales of $1.49 billion, up from the year-ago $489 million and $1.89 billion. Volumes were 4.4 million st, down from 4.7 million st.

Phosphate nine-month margins were $38.8 million on sales of $614.4 million, down from the year-ago $373 million and $963.6 million. Volumes were up, at 1.7 million st from the year-ago 1.38 million st.

CF said it is prepared for a reasonably good fall application season (weather permitting) and solid spring demand due to attractive corn farming economics and needed restocking in the downstream fertilizer channels.

“Our view is that nitrogen and phosphate prices are unlikely to go much lower in the near term, and that UAN prices in particular are likely to rise,” Wilson told analysts. “But many customers have painful memories of inventory write downs they took last winter as fertilizer prices were falling. So while we wait for the domestic market to find its direction we’ll continue to be interested in the export opportunities.” Wilson said the best explanation he has for the lack of buying is that last year’s wounds have not healed.

Despite the late harvest, Wilson said it is still too early to write off the fall fertilizer season. “November is the key month, and if we happen to get good cooperation from the weatherman this could extend into early December.”

Wilson added that while making price comparisons with competitors is difficult, CF has reported higher average prices for the third quarter than any of its public company competitors who have reported on ammonia, UAN, and DAP.

CF said as of Sept. 30, company inventories for all products except urea were below year-ago levels. Also, FPP bookings for the remainder of 2009 and 2010 stood at 700,000 st, versus the year-ago 2.6 million st.

On Oct. 22, CF reported that its board had declared a $0.10 per share dividend on its common stock for the fourth quarter. The dividend will be payable on Nov. 30, 2009 to stockholders of record as of Nov. 16, 2009.