Guided by its nitrogen business, CF Industries Holdings Inc. reported record quarterly net earnings attributable to common stockholders of $606.3 million ($9.31 per diluted share), compared to the year-ago earnings of $487.4 million ($6.75 per share). Earnings were up 24 percent over the year-ago period. Second-quarter results included a $77.6 million non-cash pre-tax mark-to-market gain on natural gas derivatives, and $15.2 million of accelerated amortization of capitalized financing fees related to the termination of a prior credit facility. These impacted EPS by a plus $0.74 and a negative $0.14, respectively.
“A very favorable industry environment and excellent execution enabled us to realize the highest EBITDA, earnings, and earnings per share for any quarter,” said CF Chairman, President, and CEO Stephen Wilson. “Additionally, the first half of 2012 was the strongest in CF Industries’ history. The company successfully capitalized on robust crop nutrient demand and a favorable pricing environment to set first-half records for shipment, revenues, and profitability.”
Second-quarter EBITDA was $1.05 billion, up from the year-ago $889.2 million.
CF announced it has increased its plans to expand existing nitrogen plants to a $2 billion investment, up from an earlier $1-$1.5 billion. “We now anticipate spending approximately $2 billion between 2013 and 2016 on capacity expansion and product upgrade projects,” Wilson told analysts. “These projects, if all are approved and executed, could provide us with approximately 1 million additional gross tons of ammonia and 3.5 million tons of combined UAN and urea capacity. We expect that the bulk of these investments will be made from 2014 through 2016, and that meaningful amounts of additional ammonia capacity could come onstream beginning in 2015.
“The nature of these brownfield investments should enable us to bring additional product to market well before a greenfield complex could be permitted and constructed,” added Wilson. “We expect to announce some specifics of this program before year-end.”
While CF has looked at offshore nitrogen opportunities in the past, Wilson says North America is now its best strategy. “On a risk-adjusted basis, it’s hard for any offshore opportunity to come even close to the kind of brownfield opportunities that we have in front of us today.”
As for its additional tonnage from acquiring complete ownership of nitrogen producer Canadian Fertilizers Ltd. (GM Aug. 1, p. 1), which owns a major plant in Medicine Hat, Alberta, Wilson indicated the company expects to grow its presence within the Canadian market. “We’re going to be setting up a sales operation in that region and we look forward to developing relationships with customers who are interested in taking the product. And, we’ll be open for business and have the order book in hand.”
While second-quarter earnings were up, sales were off 4 percent, to $1.7 billion from the year-ago $1.8 billion, primarily due to lower phosphate volumes and prices.
Higher nitrogen prices partially offset the phosphate decline. Overall, total volumes decreased to 4.3 million tons from the year-ago 4 million, largely due to the early
application season, which pulled some spring demand into the first quarter. CF said lower phosphate prices resulted from lower global demand compared to last year, while higher nitrogen prices reflected strong spring demand and tight inventory levels throughout the North American distribution chain.
Second-quarter nitrogen gross margins were $992.9 million on sales of $1.5 billion, up from the year-ago $782.6 million on sales of $1.5 billion. Tons sold were down, at 3.53 million st from 3.77 million st. Volumes for all major nitrogens were down, but all product prices were up, except am