CF reports lower first-quarter earnings

CF Industries Holdings Inc. on May 4 announced first-quarter EBITDA of $207 million and net earnings attributable to common stockholders of $26 million ($0.11 per diluted share), down significantly from last year’s first-quarter EBITDA of $486 million and net earnings of $231 million ($0.96 per diluted share). Adjusted EBITDA and adjusted net earnings for the first quarter were $300 million and $95 million, respectively, compared with $470 million and $220 million, respectively, in the year-ago quarter.

Net sales for the quarter increased to $1 billion from $954 million in last year’s first quarter, with the company citing increased sales volumes, the impact of CF’s capacity expansion projects, and the inclusion of CF Fertilisers UK (formerly GrowHowUK) in the company’s financial results.

These factors were partially offset by lower average realized prices across all segments, however. CF said first-quarter selling prices in North America were depressed during the low demand periods of January and February, but quickly rebounded through the end of the quarter as more robust demand developed due to the early arrival of spring.

“Selling prices were negatively impacted by greater nitrogen supply driven by global capacity additions, coupled with lower manufacturing and ocean freight costs, and softer global ammonia demand from industrial users including phosphate fertilizer production,” the company said. Cost of sales increased 46 percent in the first quarter compared to the year-ago quarter due primarily to the inclusion of CF Fertilisers UK, partially offset by lower realized natural gas costs.

“The fundamentals of our business remain strong despite challenging market conditions, and we are almost to the finish line with our capacity expansion projects,” said Tony Will, president and CEO. “The projects are expected to be fully on line later this year. These investments will increase our production capacity and corresponding cash flow by more than 25 percent.”

CF said its new ammonia plant at Donaldsonville, La., is now mechanically complete with pre-commissioning and commissioning activities taking place. The company’s new ammonia and urea plants at the Port Neal, Iowa, complex are expected to be mechanically complete by the end of the second quarter. CF expects to have total capital expenditures for 2016 in the range of $1.8-$2.0 billion, of which $1.3-$1.4 billion will be for capacity expansion.

CF also noted that CHS Inc. has begun purchasing products from CF at market prices as part of the strategic venture that commenced between the two companies in the first quarter. The estimate of the partnership distribution earned by CHS, but not yet disbursed, for the first quarter of 2016 is approximately $30 million.

Looking ahead, CF said nitrogen prices will remain under pressure due to new capacity coming online globally over the next 12 months. CF said it expects urea demand at the U.S. Gulf to continue to be relatively firm through the application season, however, with growers continuing to opt for corn over soybeans. CF projects 92 million planted corn acres in 2016, with possible upside given the favorable USDA survey for spring planting intentions.