CF earnings top $372.7 M for 2007; 4Q was best ever

CF Industries Inc. reported net earnings of $372.7 million ($6.57 per diluted share) on sales of $2.76 billion for the year ending Dec. 31, 2007. This compares to 2006’s net income of $33.3 million ($.60 per share) and $2.03 billion.

The fourth quarter was the best one for CF since its IPO in August 2005. Net earnings were $135.4 million ($2.38 per share) on sales of $852.5 million, up from the year-ago $8 million ($.14 per share) and $526.4 million, respectively.

“I’m extremely pleased by the results we delivered for both the fourth quarter and the year,” said Stephen Wilson, CF chairman and CEO. “Strong domestic and international grain markets have produced exceptionally high global demand for fertilizer. Tightness in this demand-driven market pushed fertilizer prices sharply higher for all of our products. In this environment, effective execution of our operating and sales plans delivered our best-ever public company sales and earnings performance.

“The weather cooperated perfectly during the fall season, and the combination of good levels of fall fertilizer application and normal customer inventory stocking for the spring season helped us ship nearly 2.5 million tons of nitrogen and phosphate fertilizer during the fourth quarter, almost 170,000 tons more than in the year-earlier period.”

Nitrogen gross margins were $446.8 million on sales of $2.04 billion for the year, up from 2006’s $98.5 million and $1.52 billion, respectively. Tons sold during the year were 6.9 million versus 2006’s 6.3 million. Fourth-quarter margins were $153.1 million on sales of $630.7 million, versus the year-ago $31.8 million and $399.3 million, respectively. Tons sold during the quarter were 1.93 million, up from the year-ago 1.75 million.

Nitrogen tons sold under the Forward Pricing Program (FPP) totaled 1.53 million tons in the fourth quarter and accounted for 80 percent of segment sales. This was up substantially from 770,000 tons and 44 percent sold under the FPP in the year-ago quarter.

Phosphate gross margins for 2007 were $223.2 million on net sales of $714.8 million, compared to 2006’s $48.7 million and $511.0 million, respectively. Tons sold were 1.99 million, down slightly from 2006’s 2.09 million. Fourth-quarter margins were $82.9 million on sales of $221.8 million, versus the year-ago $11.1 million and $127.1 million. Tons sold were down slightly for the quarter, to 526,000 tons from the year-ago 537,000.

Phosphate sales under the FPP totaled 206,000 tons during the quarter, representing 39 percent of total phosphate volume. During the year-ago quarter, FPP sales were 64,000 tons, or 12 percent of phosphate sales.

“Looking to the spring planting season, the fundamentals that drove our strong 2007 performance look even better for the farm economy and the company,” said Wilson. CF noted that as of Feb. 5, 2008, FPP bookings for the remainder of 2008 stood at 2.6 million tons, compared to 1.9 million at the comparable time last year.

CF reported updates on several matters. During the fourth quarter it completed a turnaround on an ammonia plant at Donaldsonville, which included the installation of a distributed control system and improvements to reduce natural gas consumption. CF said its two nitrogen complexes operated at 96 percent capacity in the fourth quarter, while its Plant City Phosphate Complex ran at a rate of 102 percent.

CF noted that its term sheet for a natural gas contract to support a joint venture nitrogen plant in Trinidad expired Dec. 31, 2007. CF said the partners have asked for an extension, but have not heard back from the government. To date, finding a good site for the plant has been a problem.

CF says a study has been completed on a gasification plant for Donaldsonville, and that the cost was substantially higher than expected. As a result, CF is investigating alternative design configurations and technologies to improve the economics of the project.

CF is moving ahead with a proposed venture to build a nitrogen plant in Peru. It is negotiating the gas contract term sheet, evaluating sites, analyzing technology options, and working with the government on a variety of development matters.

CF and NUKEM Inc., its marketing partner in a proposed venture to supply uranium oxide (U308) to electrical utilities, are currently negotiating a partnership agreement to construct an extracting facility at the Plant City Phosphate Complex to produce 900,000 pounds of U308 annually from the plant’s phosphoric acid stream. However, CF notes that permitting and construction could require several years.