CF Industries Holdings Inc. on May 7 reported net earnings for the first quarter ending March 31, 2010, of $6.2 million ($.09 per diluted share) on sales of $502.4 million, compared to the year-ago $83 million ($1.28 per diluted share) on sales of $680.6 million. However, the company did report a net loss attributable to shareholders of $4.4 million, versus the year-ago $62.7 million. CF reported preliminary sales figures in April (GM April 19, p.1), but not for earnings.
“The first quarter is an important period for our customers to stock up for the spring application season. Lighter than normal stocking activity this year sets us up for tight conditions in the second quarter, which favor a producer with the storage capacity to enable it to capitalize on demand when it arises in the field,” said Stephen Wilson, CF chairman and CEO. “Ideal planting conditions for ammonia application arrived in April, and we were ready to take advantage of it.”
Nitrogen gross margins were $97.3 million on sales of $327 million, down from the year-ago $169.4 million and $456.2 million. Nitrogen volumes were 5 percent lower than year ago, reflecting lower urea application due to wet conditions in Texas and Oklahoma. CF exported 53,000 tons of ammonia and UAN during the first quarter to Australia, Chile, and Mexico. The ammonia exports were the company’s first in recent history.
Average selling prices for nitrogen products were down from the year-ago quarter, but were significantly higher than fourth-quarter 2009 prices. First-quarter 2009 prices were favorably impacted by forward sales booked during 2008. For ammonia, the average selling price was $321/st, down from the year-ago $527/st, but up from $308/st in the 2009 fourth quarter. For urea, the average selling price was $306/st, down from $365/st in the year-earlier quarter, but up from $272/st in the 2009 fourth quarter. For UAN the average selling price was $205/st, down from $298/st in the first quarter of 2009, but up from $156 in the 2009 fourth quarter.
Nitrogen sales under the company’s Forward Pricing Program (FPP) totaled 400,000 st during the quarter, representing 33 percent of nitrogen sales volumes. In the 2009 first quarter, FPP sales of 533,000 tons accounted for 42 percent of segment sales.
Phosphate gross margins were $31.7 million on sales of $175.4 million, up from a year-ago loss of $7.1 million on sales of $224.4 million. Phosphate volumes fell 9 percent due to lower exports, offset partially by higher domestic sales volume.
Phosphate sales volumes were 480,000/st, with volume for DAP down 16 percent and for MAP up 29 percent compared to the year-earlier quarter. Domestic phosphate sales volumes increased by 14 percent from relatively low levels last year. Export sales volume of 91,000/st was 51 percent lower than the same period last year as the company focused this year on domestic markets, where phosphate fertilizer traded at a premium to international markets.
Average selling prices for phosphate products were lower than in the 2009 first quarter, but significantly higher than in the 2009 fourth quarter. For DAP, the average price was $361/st, compared to $418/st in the 2009 first quarter and $277/st in the 2009 fourth quarter. For MAP, the average selling price was $379/st, compared to $466/st in the 2009 first quarter and $309/st in the 2009 fourth quarter. Prices weakened in March, when competitors reached sales agreements with India at prices significantly below the then prevailing market, but found a floor at that level and started to rebound.
Phosphate sales under the company’s FPP totaled approximately 258,000 st during the 2010 first quarter, representing 54 percent of segment volume, up from 138,000 st sold or 26 percent of segment volume in the 2009 first quarter.
CF believes that the combination of high corn acreage, improved application rates, warm spring weather, low channel inventory, and low import volume leads to a robust outlook for Midwest demand for nitrogen and phosphate fertilizers. Export demand for phosphate is expected to remain relatively strong through the quarter due to sizable shipping requirements to India and additional demand from Latin American and Asia, continuing the relatively tight international trade balance.
“Conditions are in place for an exceptionally strong spring season,” indicated Wilson. “A drying trend in the Midwestern U.S. allowed us to drain most of our available ammonia storage throughout the region, and we’re working hard to resupply as the season continues. Our extensive ammonia distribution network is set up to take full advantage of opportunities such as the one we saw in April. For the other products, we continue to believe that tight conditions will persist through the second quarter.”
Excluding the operations of Terra, the company delivered more ammonia in April than in any other month since becoming a public company, and approximately 170 percent of the previous five-year average for April. Ammonia shipments for the legacy Terra operations also were greater than for any other month over that time.
As of March 31, 2010, FPP bookings for the remainder of 2010 stood at 1.1 million tons, compared to 1.2 million tons at a similar point in 2009.
Forward prices for natural gas are now lower than the company’s previous forecast. Second-quarter 2010 sulfur costs for phosphate products are expected to be higher than the first quarter, but with downward pressure through the peak oil refining season.