Phosphate Holdings Inc. (PHI), which owns Mississippi Phosphates Corp., reported net income of $2.5 million ($.30 per diluted share of common stock) for the third quarter ending Sept. 30, 2010, compared to the year-ago earnings of $700,000 ($.09 per diluted share of common stock).
PHI CEO Robert Jones told analysts Nov. 11 that absent mechanical problems at its Pascagoula plant, EBITDA should have been $13 million instead of the $7.3 million that was achieved for the quarter. Year-ago EBITDA was $3.8 million. In the third quarters of 2010 and 2009, EBITDA was favorably impacted by litigation settlements, net of related costs, of $800,000 and $3 million, respectively.
Miss Phos began a $6.5 million turnaround Nov. 1 to take care of all known mechanical issues, according to Jones. All problems are expected to be fixed by the end of November, with the facility to run at normal operating rates starting in December. After the turnaround, Jones expects the plant to produce 2,000 st/d of DAP. Work will be done on both sulfuric acid plants, the DAP plant, and the phosphoric acid plant, which will get a new digester. Most of the downtime is in the sulfuric acid plants, with DAP already complete, according to Jones.
“We are pleased to report positive third-quarter results despite the significant carry-over impact of operational issues, which first arose during our second fiscal quarter,” said Jones. “In the face of steadily deteriorating instantaneous production rates, our operating and maintenance personnel at Pascagoula did an admirable job of keeping our sulfuric acid plants online. We also did a good job of controlling overall spending for the quarter. As a result of these efforts and improving market fundamentals, we were able to bounce back from a very difficult second fiscal quarter of 2010. Our third-quarter EBITDA of $7.3 million represents an increase of nearly $12 million over our second-quarter 2010 EBITDA level of negative $4.6 million.”
The November turnaround will impact production. “For the quarter, we are projecting DAP production of approximately 140,000 to 150,000 st,” said Jones.
“Shifting to the near-to-intermediate-term industry outlook,” Jones added, “the balance of 2010 and the first half of 2011 look promising. Since mid-summer, grain and other crop prices have increased substantially, driven by strong demand and lower expectations for the 2010 global harvest. This has created favorable expectations for crop economics, planted acreage, and fertilizer demand. During the fourth quarter to date, DAP prices have remained firm domestically, while international prices have strengthened. Given the current tight phosphate supply/demand balance in the U.S., the outlook for the 2011 spring planting season is positive.”
PHI said domestic sales have been at a premium, as much as $40/st. As a result this has attracted imports, and the company expects them to continue until the two prices converge. As for raw materials costs, PHI expects Tampa ammonia prices may see some softening in December, by as much as $25-$40/mt, whereas sulfur supplies remain tight, with suppliers again expected to seek higher prices in the first quarter. PHI said it will have sufficient sulfuric acid available to it through next June. The company is also confident of its phosphate rock supply, though it notes that changing market conditions may change that pricing.
As of Nov. 11, PHI said it has $3.5 million available under its revolver and $2.5 million in cash.
Total net sales for the third quarter of 2010 were $70.4 million, a 67 percent increase from total net sales of $42.1 million for the third quarter of 2009. The average sales price of DAP during the quarter was $455/st, a 70 percent increase from the prior-year period average sales price of $267/st. During the third quarter, the company sold 152,500 st of DAP, all into the domestic market.
The company recorded operating income of $3.9 million for the third quarter of 2010, compared to operating income of $900,000 for the prior-year period.
For the third quarter, the company’s sulfuric acid production was approximately 187,000 st, or 77 percent of originally planned levels. Reduced sulfuric acid production had a corresponding unfavorable impact on DAP production, which was approximately 156,000 st.
PHI reported nine-month net income of $211,000 ($.03 share) on sales of $192.5 million, compared to a year-ago loss of $10.7 million ($1.40 per share) on sales of $139.1 million. Nine-month operating income and EBITDA were $1 million and $9.9 million, versus the year-ago losses of $17.3 million and $9 million.