Phosphate Holdings Inc. (PHI), the owner of Mississippi Phosphates Inc., reported a loss of $11.6 million ($1.51 per diluted share) on sales of $54.2 million for the first quarter ending March 31, 2009, compared to year-ago net income of $10.9 million ($.86 per share) and $67 million, respectively. Of sales, actual DAP sales were $52.9 million, versus the year-ago $61.6 million.
PHI said the first quarter was materially impacted by inventory write-downs of $9.3 million and recording unrealized losses on firm raw material purchase commitments of $6 million.
PHI had an operating loss of $18.3 million, down from the year-ago operating income of $10.9 million.
“The first quarter of 2009 was another difficult period for the company,” said PHI CEO Robert Jones. “Uncertainties regarding the overall economy, the availability of credit, the direction of grain prices, spring weather conditions and the high-cost fertilizer inventory in the supply chain all impacted both the movement and price of DAP. While we saw some product demand reappear mid-quarter, it was substantially limited to the export market, particularly, India.
“During the first quarter of 2009, approximately 83 percent of our DAP sales were into the international market,” continued Jones. “During the quarter, we operated our facilities at approximately 50 percent of capacity, with our principal goal of converting existing phosphate rock inventories into DAP in order to meet liquidity needs. We utilized borrowings under our credit facilities, income tax refunds and proceeds from a major sales transaction to sustain our operations. As of the date of this release (May 19, 2009), we have approximately $1.0 million in cash and no borrowings under our credit facility.
“During the first quarter of 2009, the company benefited from lower sulfur costs. However, these reduced costs were offset by rising ammonia cost. Sulfur costs settled (C&F Tampa) at zero in the first quarter of 2009, while ammonia prices increased from $125 per metric ton to $318 per metric ton. Since the end of the first quarter, DAP prices continue to decline from a level of approximately $375 per metric ton to $312 per metric ton (FOB U.S. Gulf).
“DAP prices and demand remain depressed and the U.S. spring season simply did not develop, and it appears that phosphate fertilizer applications will be down approximately 25 percent in the 2008/2009 fertilizer year, compared to prior-year applications,” said Jones. “Such a cutback in application rates will likely deplete soil nutrient levels requiring above-normal application rates in the 2009/2010 fertilizer year. We are continually evaluating opportunities to improve our liquidity position to ensure that we position ourselves for the inevitable rebound in phosphate demand and pricing. While near-term challenges persist, the long-term fundamentals for global phosphate demand remain positive.”