All Posts from February 13, 2012

Andersons reports record Plant Nutrient income

Midwest, News, News Briefs

Maumee, Ohio — The Andersons Inc. reported record operating income from its Plant Nutrient segment for the year ending Dec. 31, 2011, to $38.3 million on revenues of $691 million, compared to the prior year $30.1 million on revenues of $619 million. The company cited higher nutrient prices, which were partially offset by a decrease in volume. Plant Nutrient income for the fourth quarter, however, was off, at $2.5 million on revenues of $170 million from the year-ago $8.9 million on revenues of $159 million. The decline includes $4.7 million in charges due to the recording of a lower of cost or market inventory adjustment and asset impairment charges. “Clearly, both our full-year and fourth-quarter earnings were heavily influenced by the results within our agricultural businesses,” said CEO Mike Anderson. “The record full-year earnings in both our Grain and Plant Nutrient groups, and second best year in the Ethanol Group, is gratifying. Our 2011 Rail Group results improved significantly from the prior year as a result of improved economic conditions. In the last year we have demonstrated our commitment to growth by adding 1.7 million bushels of grain storage capacity, beginning construction on a grain shuttle loader facility in Nebraska, and acquiring two businesses in the Plant Nutrient Group – Immokalee Farmer Supply in Florida in October of 2011, and New Eezy Gro, an Ohio-based company, last week. We intend to continue to pursue our growth strategy in 2012 and beyond.” Company-wide, The Andersons reported net income attributable to the company at $95.1 million ($5.09 per diluted share) on revenues of $4.58 billion, compared to the prior year $64.7 million ($3.48 per share) on revenues of $3.39 billion. Fourth-quarter income was $21.7 million ($1.17 per share) on revenues of $1.3 billion, down from the year-ago $25.8 million ($1.39 per share) on revenues of $1.15 billion.

CVR to sell shares to pay for dividend

Breaking Industry News

CVR Energy Inc., a refiner and marketer of petroleum fuels and a majority owner of CVR Partners LP, a nitrogen fertilizer producer, announced today that its board of directors has approved a regular quarterly cash dividend of $0.08 per common share, the first of which will be paid following the end of the company’s first quarter on a date to be set by the board. The board reached its decision to initiate a regular quarterly dividend after an extensive review of the company’s financial performance and confidence in its future prospects and believes it is consistent with its continuing commitment to deliver long-term value for shareholders.

As part of that commitment, the board also intends to sell a portion of the company’s investment in CVR Partners to pay for a special dividend to shareholders and strengthen the company’s balance sheet. The board believes that a sale of a portion of the company’s interest offers the best opportunity to deliver significant value to shareholders in a reasonable time frame with minimal execution risk or structural impediments. The size, time and manner of the sale will be disclosed when the transaction is implemented.

“Given the projected cash generation of our refining business, the distributions we receive from our ownership in CVR Partners and our strong financial position, our board determined after careful review of all its strategic options that it was appropriate to return a meaningful amount of cash to our shareholders. We intend to introduce a regular quarterly cash dividend that is in-line with our refining peers and a special dividend funded from the sale of a portion of our interest in CVR Partners,” said Jack Lipinski, CVR Energy CEO. “We are proud of our performance, confident in our prospects and look forward to continuing our long-term strategy of providing outstanding returns for our shareholders.”

CVR Energy Inc. announced Jan. 13 that its board adopted a Stockholder Rights Plan with a 15 percent threshold and declared, in conjunction with that plan, a dividend of one preferred stock purchase right for each current share of the company’s outstanding common stock, which will be distributed to stockholders of record on Jan. 23, 2012 (GM Jan. 23, 2012). CVR owns a major stake in CVR Partners LP, which owns a nitrogen plant in Coffeyville, Kan.

The news came soon after billionaire investor Carl Icahn increased his stake in CVR to over 10 percent (GM Jan. 16, 2012). Icahn is known for his corporate takeovers.

Orica suspends ammonia plant restart

Breaking Industry News

Orica has suspended the restart of its ammonia plant at Kooragang Island because one part of the plant is not operating to a satisfactory level. Orica said that the community, employees and environment were at no point at any risk as a result of the issue.

During the restart of the plant, the part of the plant that removes carbon dioxide as a byproduct was not working properly. The restart was suspended and investigations into the cause of the issue have commenced.

Site Manager Sean Winstone said: “We have said all along that we will take whatever time is required to restart the plant safely, and that we want to be assured the plant will perform properly for the long term. We will now investigate and remedy the issue before again resuming the restart. Restarting a plant the size of Kooragang Island is a complex process and it is not uncommon for issues of this nature to occur.”

Vale agrees to potash lease with Petrobras

Brazil, News, News Briefs, Potash Muriate

Rio de Janeiro — Vale S.A. said Feb. 8 that its board of directors approved the signing of a leasing contract of potash assets and mining rights with Petróleo Brasileiro S.A. for a period of 30 years, allowing for the continuation of potash mining in Taquari-Vassouras and the development of the Carnalita project, in the state of Sergipe, Brazil. Vale said the leasing contract will ensure the extension of operations at Taquari-Vassouras, the sole potash producer in Brazil and one of only two producers in South America, finalizing the development of the Carnalita potash project – still subject to approval by Vale’s board and the study and development of other areas within the concession. Vale said the contract is aligned with its growth strategy of becoming one of the leading global players in the fertilizer industry.

Bunge fertilizer margins challenged

News, News Briefs, Northeast

White Plains, N.Y. — Bunge Ltd. reported that results from its fertilizer business were slightly lower in the fourth quarter due to a more challenging margin environment. Fertilizer earnings before interest and tax (EBIT) for the fourth quarter ending Dec. 31, 2011, were a negative $3 million on sales of $930 million, compared to the year-ago positive $1 million on sales of $731 million. Gross profit was $43 million, down from $62 million, while volumes were up at 1.75 million mt from the year-ago 1.68 million mt. For the year, fertilizer EBIT was a negative $1 million on sales of $3.15 billion, compared to the year-ago $2.34 billion and sales of $2.73 billion. The year-ago figure reflected the sale of major production assets to Vale S.A. Full-year gross profit was down slightly to $152 million from $155 million, while volumes dropped to 6 million mt from 7.71 million mt. Company-wide, Bunge reported net income attributable to Bunge of $942 million ($6.07 per diluted share) on sales of $58.7 billion for the year, compared to 2010’s $2.35 billion ($15.06 per share) on sales of $45.7 billion. Fourth-quarter net income was $254 million ($1.65 per share) on sales of $16.4 billion, versus the year-ago $301 million ($1.95 per share) on sales of $12.73 billion.

Magellan makes money off ammonia pipeline

Ammonia, Midwest, News, News Briefs

Tulsa — Magellan Midstream Partners LP reported a huge turnaround in margins from its ammonia pipeline for the year and quarter ending Dec. 31, 2011. For the year, operating margins were $7.3 million on revenues of $23.6 million, up from a prior year loss of $4.1 million on revenues of $14.9 million. Volumes moved up to 727,000 st from 2010’s 462,000 st. Extensive hydrotesting, which impacted movement, was done on the line in 2010, less so in 2011. Magellan said as early as the first quarter 2012, all segments of the system have now been tested to ensure the integrity of the pipeline system. The company continues to evaluate the sale of the pipeline and has entered into negotiations, though it cannot estimate the timing of an eventual sale. Fourth-quarter pipeline margins were $3.2 million on revenues of $6.2 million, up from the year-ago $1.75 million on revenues of $5.4 million. Volumes for the quarter were up at 181,000 st from the year-ago 164,000 st. Company-wide, Magellan reported annual net income of $413.6 million ($3.66 per diluted share) on revenues of $1.75 billion, up from 2010’s $311.6 million ($2.85 per share) on revenues of $1.56 billion. Fourth-quarter net income was $110.3 million ($.97 per share) on revenues of $486.9 million, up from the year-ago $87.9 million ($.78 per share) on revenues of $398.5 million.

The Week in Fertilizer Stocks

Fertilizer Stocks

The Week in Fertilizer Stocks

Producer Symbol Price Week Ago Year Ago
Agrium AGU 82.81 82.20 96.12
CF Industries CF 185.73 182.30 96.12
Intrepid Potash IPI 25.39 24.79 38.53
Mosaic MOS 56.00 57.11 84.52
PotashCorp* POT 45.87 47.26 60.36
Terra Nitrogen TNH 213.25 195.96 101.84
CVR Partners UAN 29.33 30.92 N/A
Distribution/Retail
Andersons Inc. ANDE 42.84 42.75 44.69
Deere & Co. DE 87.93 87.42 93.95
Scotts SMG 51.12 47.91 51.91
* represents three-for-one stock split

Higher SOP prices boost Compass fert results; tornado, light winter impact salt

News, Potash Muriate

Higher sulfate of potash prices in the fourth quarter and year ending Dec. 31, 2011, helped Compass Minerals offset lower volumes. Fourth-quarter prices were up 19 percent, while volumes were off 21 percent. The addition of Big Quill Resources in January 2011 also helped the Compass specialty fertilizer segment post a 9 percent increase for the fourth quarter, to $19.6 million on sales of $53.6 million, compared to the year-ago $17.9 million on sales of $56.6 million.

Fourth-quarter volumes were 85,000 st with an average price of $631/st, compared to the year-ago 107,000 st and $530/st, respectively.

For the year, fertilizer earnings were $77 million on sales of $209.6 million, up from the prior year’s $61.4 million and $187.5 million, respectively. Volumes fell to 344,000 st at an average price of $610/st from the year-ago 362,000 st and $518/st, respectively.

Going forward, Compass expects to sell 375,000 st of SOP in 2012, with 90,000 st of that in the first quarter. It expects prices to remain strong, within the $630/st average for the last two quarters. Fourth-quarter per-ton costs were put at $330/st, up from the fourth quarter’s $292/st. The company expects production costs to be higher by about $100/st in the second through fourth quarters of 2012 when compared to 2011 due to inefficiencies caused by low solar-evaporation harvest in the summer of 2011 and costs associated with purchases of mineral feedstock for SOP production.

Compass hopes production costs will improve by the end of 2012, due to a more typical evaporation season as well as the completion of Phase 1 and the initial pond-yield benefits of Phase II of its multi-phased expansion program. Due to these upgrades, it expects production costs to eventually drop to $225/st. The completion of Phase I has been delayed until the third quarter to avoid shutting down the plant for the final tie-in. In 2012, it expects to spend some $110 million on the expansion plans, with another $40 million to be spent to restore the Goderich, Ont., salt operations to pre-tornado capabilities. Goderich is currently operating at 85 percent capacity. Most of the latter will be covered by insurance. However, it estimates that the effects of the tornado will linger into first quarter 2012, impacting salt earnings by $20 million.

Company-wide, Compass was impacted by its salt business, which suffered due to the tornado that damaged its Goderich facility as well as a weak winter salt season, which cut fourth-quarter salt deicing volumes by 17 percent, with salt prices down slightly for the quarter. Company-wide, Compass reported fourth-quarter net earnings of $43.9 million ($1.31 per share) on sales of $306.1 million, down from the year-ago $61.1 million ($1.83 per share) on sales of $356.3 million. Net earnings excluding special items were $55.3 million ($1.65 per share), versus the year-ago $56.8 million ($1.70 per share).

For the year, Compass reported net income of $149 million ($4.45 per share) on sales of $1.1 billion, down slightly from the year-ago $150.6 million ($4.51 per share) on sales of $1.07 billion. Despite its weather woes, Compass said 2011 sales were the second highest in company history. Net earnings excluding special items were $160.4 million ($4.79 per share), versus the year-ago $146.3 million ($4.38 per share).

Going forward, should the winter not improve, Compass expects a soft environment for salt volumes and prices for next winter, with volumes being down and prices flat.

Nebraska area is set to require farmers use nitrification inhibitors

Midwest, News

One of the largest natural resource districts in Nebraska is poised to establish a new rule for fertilizing by requiring use of nitrification inhibitors in certain nitrogen applications, which would affect some 3,000 farming operations.

Acting on concerns over growing nitrate contamination in groundwater over the past few years, Upper Big Blue Natural Resources District is proposing to give farmers three fertilizer application options: 1. Anhydrous ammonia applied between Nov. 1 and Feb. 29 must also include a nitrification inhibitor; 2. Nitrogen fertilizer applied on or after March 1 and before planting at a rate greater than 150 pounds per acre must also include a nitrification inhibitor; or 3. Pre-plant nitrogen fertilizer applied on or after March 1 at a rate less than 150 pounds per acre does not require a nitrification inhibitor.

As an alternative to using a nitrification inhibitors, which delay the conversion of nitrogen fertilizers to the nitrate form and reduces nitrogen loss, Option #3 allows the farmer to apply a lower rate of fertilizer before planting, and then apply additional nitrogen if needed after planting, when an actively growing crop can utilize it.

District officials have sent out notices to 56,000 residents of a public hearing scheduled for March 1 at 1:30 p.m. in the York City Auditorium. They point out that several communities in the area have found it necessary to construct new wells to comply with state and federal drinking water standards. Some communities have built or are considering treatment plants. Many rural residents have also replaced wells or installed private water treatment systems.

Rod DeBuhr, district water department, said that nitrification inhibitors change the structure of bacterial counts in the soil so it slows down the conversion of ammonia nitrates. “The products are used with both liquid and granular fertilizers to slow down the process of the conversion, which occurs only when nitrogen is in a nitrate form,” he offered, adding that he understands that it would cost about $9 per acre for a typical application.

“Actually it’s a bigger issue than just how it affects the farmer. Groundwater contamination is affecting entire communities,” DeBuhr noted. “The only thing we’re asking is that producers try to use fertilizer responsibly. In most cases it saves fertilizer that isn’t washed away in the growing process.”

Since 1996, the NRD has required that farmers wait until Nov. 1 to apply anhydrous, and to wait until March 1 to apply other formulations of nitrogen fertilizer. In some parts of the district where groundwater nitrate is the highest, farmers are required by existing regulations to attend training classes, take soil samples, and calculate crop nitrogen needs.

Upper Big Blue, located to southeastern Nebraska, is one of 23 districts established in 1969 by the legislature that were granted the authority to enact rules and regulations within each district to conserve natural resources.

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