All Posts from May 14, 2012

K+S sells N business to EuroChem

News, News Briefs, Western

Kasel — Germany’s K+S Aktiengesellschaft has signed an agreement with EuroChem regarding the sale of K+S Nitrogen. The transaction, with an enterprise value of €140 million, is likely to be closed at the end of the second quarter. The effective economic date of the transfer is March 31, 2012. The sale is subject to a number of factors, including approval by the EU antitrust authority. For K+S, the sale will generate a book profit of around €70-80 million, depending on the net earnings of K+S Nitrogen generated by the time the transaction is closed, together with other effects. From now on, K+S Nitrogen will be stated as a “discontinued operation.” In financial year 2011, K+S Nitrogen generated revenues of €1,156.8 million and operating earnings EBIT I of €69.4 million. This fits into K+S Group plans to focus on its two main segments – Potash/Magnesium and Salt. It sold its COMPO fertilizer unit to Triton last year. K+S Nitrogen markets nitrogen fertilizers, with a focus on major customers in agriculture and special crops such as fruits, vegetables, and grapes. In addition to the fertilizers produced by EuroChem Antwerpen and delivered for it by BASF, K+S Nitrogen also markets the goods of other European fertilizer producers. The company is based in Mannheim, Germany, and employs about 180 people worldwide. EuroChem produces primarily nitrogen and phosphate fertilizers, as well as certain organic synthesis products and iron ore. It is vertically integrated, with activities spanning mining and natural gas extraction to production, logistics, and distribution. The company is currently developing two sizeable potash deposits in Russia with the Gremyachinskoe and Verkhnekamskoe greenfield projects.

Koch eyes major N expansion

Breaking Industry News

Koch Fertilizer said today that it has retained Black & Veatch, a global engineering, consulting and construction company, to help develop numerous projects to increase its North American production by more than two million tons annually through production enhancements and new capacity investments. Initial stages of these projects will focus on production enhancements within Koch Fertilizer’s nitrogen production facilities in Ft. Dodge, Iowa; Dodge City, Kan.; Beatrice, Neb.; Enid, Okla.; and Brandon, Manitoba.

“Undertaking these projects will allow us to better serve the needs of our customers. With crop production continuing to increase, the demand for fertilizer is also increasing,” said Steve Packebush, president of Koch Fertilizer.

Koch Fertilizer is also investing in its terminal distribution system. The business has several active projects, including adding an ammonia terminal in Conway, Kan., a dry and liquid fertilizer terminal in Stockton, Calif., and various other liquid and dry storage projects across the U.S. and Canada.

“Driven by rapid changes in technology and a shortened application period for fertilizer, we are proactively investing in our distribution network,” Scott McGinn, senior vice president for North America said. “We continue to focus on expanding our storage and distribution system to meet the supply demands of our customers and the market.”

Koch Fertilizer’s distribution system consists of more than 60 terminals within North America. A variety of products are moved through its distribution system, including ammonia, urea, liquid fertilizer, phosphate, potash, and sulfur-based products.

STC awards 800,000 mt in urea tender

Breaking Industry News

Sources report that India’s STC has issued awards to 10 companies for a total of 800,000 mt. Four more companies are still in talks with STC for an additional 200,000 mt.
 
The deals came after STC counter bid the traders at $535-$540/mt CFR based on the port of discharge. The original offers came in at $550-$567/mt CFR. Reportedly, the Arab producers are refusing to budge off their initial offers of $555-556/mt FOB.

Of the companies getting awards, many of them were offering Iranian tons either as the total of their offers or as part of a larger mix.

The purchase of 800,000 mt to 1 million mt is higher than industry sources were saying would be picked up in this round. STC has traditionally been a conservative buyer. The large quantity purchased, however is important. Sources report that India’s reserves of urea are drastically low.

For more details see the May 21 issue of Green Markets.

Urea

Black Sea, China, Eastern Cornbelt, Great Lakes, India, Market Watch, Middle East, Northeast, Northern Plains, Pakistan, Thailand, U.S. Gulf, Urea, Western Cornbelt

U.S. Gulf: Compared with recent weeks, the urea barge market remained quiet. New granular trades for prompt were called $675-$690/st FOB, with claims that if you really wanted a barge you could pull $670/st FOB. This is in line with expectations that prices will significantly erode for forward barges. Nothing new was reported on prills.

Eastern Cornbelt: Most sources continued to quote the granular urea market at $740-$750/st FOB regional terminals to the dealer, but some Illinois sources said deals could be had at slightly lower numbers on a spot basis for limited volumes. An Indiana contact pegged the market solidly at the $750/st FOB mark in his location last week.

Western Cornbelt: Sources pegged the granular urea market at $730-$750/st FOB Western Cornbelt terminals last week, with most touting the market at the $740/st FOB level or higher. While some sources maintained that the Catoosa, Okla., urea market was still firm at $725-$735/st FOB, other said the market there had slipped to $715-$720/st FOB in the wake of softer NOLA barge prices.

Northern Plains: Urea remained in tight supply in the Northern Plains, with one Minnesota source describing inventories as “a few loads available here and there.” The market was quoted at $720-$750/st FOB in the region, with delivered tons pegged in the $765-$770/st range in North Dakota. Those prices reflected a slight drop from last report.

Great Lakes: Wisconsin sources pegged the granular urea market in a broad range at $740-$770/st FOB, depending on location. Michigan contacts tagged the dealer market at $750-$775/st FOB, with the low at Burns Harbor, Ind., and the upper end FOB Webberville, Mich.

Northeast: Pennsylvania sources tagged the granular urea market in the $704-$710/st FOB range last week, depending on location. Rains came to much of the Northeast region last week, dropping 1-5 inches across New England, up to two inches in western Pennsylvania, and 1-2 inches on Maryland’s eastern shore. The moisture was badly needed in Maryland and Delaware, where both states experienced their driest January-April period on record.

India: Sources report STC was not too happy with the results of the May 8 tender.

The lowest offer came from Titanium at $535/mt CFR, about $150/mt higher than what IPL paid just a few weeks ago. The average price of all the offers comes in $30/mt higher over the final IPL price.

The offer from Titanium put STC in a box. Had their offer been closer to the rest of the pack – in the $550s/mt CFR – STC could have purchased up to 1 million mt. Now, with Titanium at $535/mt CFR and the next lowest offer at $552/mt CFR from Swiss Singapore, STC may have to try to convince the Indian government that it will need permission to run a two-tier award.

But first it is trying to get others to match the Titanium offer. Area traders are skeptical it will work.

Results of the tender follow on pg. 6-7.

Sabic sent its regrets. Sources confirm that the turnarounds from the Saudi producer, combined with its contracts, left the company with no tons to offer. The offers from the Arab producers came as no surprise. In the run-up to the tender, many in the industry expected to see prices of $555/mt FOB. And indeed, the three producer
companies that did offer set their prices at $555-$556/mt FOB. Traders carrying Middle East tons backed up that level with offers around $557/mt FOB.

The closing of the tender was pushed back from the original issue date of May 4. In the original tender call, STC said it would not consider offers containing Iranian tons. As the May 4 deadline approached, the company saw a run-up in prices from Yuzhnyy to the Arab Gulf

USDA says corn and wheat production up, but prices down

News

In its latest World Agricultural Supply and Demand Estimates (WASDE) report released on May 10, USDA said corn production for 2012/13 is projected at a record 14.8 billion bushels, up 2.4 billion from 2011/12. USDA attributed the boost to a projected 5.1 million acre increase in harvested area, an early start to planting and emergence, and higher expected yields, which are projected at a record 166 bushels/acre – 2 bushels above the 1990-2010 trend.

The season-average farm price for corn is projected at $4.20-$5.00 per bushel, down sharply from the 2011/12 record projected at $5.95- $6.25 per bushel. USDA said that despite the lowest expected carry-in in 16 years, corn supplies for 2012/13 are projected at a record 15.7 billion bushels, up 2.2 billion from 2011/12. Total U.S. corn use for 2012/13 is projected up 9 percent from 2011/12 on higher feed and residual disappearance, increased use for sweeteners and starch, and larger exports. Projected corn use for ethanol is unchanged on the year as weak gasoline consumption limits domestic blending opportunities, USDA said.

Citing abundant domestic supplies, lower prices, and higher expected China demand, USDA said corn exports for 2012/13 are projected 200 million bushels higher than in 2011/12. U.S. corn ending stocks for 2012/13 are projected at 1.9 billion bushels, up 1 billion bushels from the current year projection. Projected corn ending stocks for 2011/12 were raised 50 million bushels to 851 million, with lower expected June-August feed and residual disappearance.

USDA’s outlook for the 2012/13 U.S. wheat crop is also for larger supplies, heavier use, and lower prices. All wheat production is projected at 2,245 million bushels, up 12 percent from last year’s weather-impacted crop and the highest since 2008/09. The all wheat yield, projected at 45.7 bushels per acre, is up 2 bushels from last year, but 0.6 bushels below the 2010/11 level. U.S. wheat supplies for 2012/13 are projected at 3,133 million bushels, up 5 percent from 2011/12.

The season-average farm price for all wheat is projected at $5.50-$6.70 per bushel, down significantly from the record $7.25 per bushel projected for 2011/12.

The forecast for 2012/13 winter wheat production is up 13 percent to 1.69 billion bushels, with a record yield of 47.6 bushels/acre projected, up 1.4 bushels from last year. USDA attributed the yield and production increases to a recovery for the hard red winter wheat crop in the Central and Southern Plains after last year’s drought. Hard red winter wheat production, projected at 1.03 billion bushels, is up a full 32 percent from 2011.

USDA said the large year-to-year increase in winter wheat production and attractive prices for wheat relative to corn are expected to raise summer wheat feeding. Total U.S. wheat use for 2012/13 is projected up 8 percent year-to-year on higher expected domestic use and exports. U.S. wheat exports for 2012/13 are projected at 1,150 million bushels, with larger supplies, more competitive prices, and an early expected start to this year’s harvest opening the door to higher demand for U.S. wheat during the coming months.

Global wheat supplies for 2012/13 are projected 2 percent lower on the year, as a 23.8 million ton reduction in foreign production offsets the increase in U.S. output. U.S. ending wheat stocks are projected at 735 million bushels for 2012/13, down 33 million from 2011/12 and 241 million below 2009/10.

The WASDE report projects soybean production at 3.205 billion bushels, up from the 2011 crop as higher yields more than offset lower harvested area. Harvested soybean area is projected at 73 million acres, and soybean yields are projected at 43.9 bushels/acre, up 2.4 bushels from 2011. With beginning stocks projected at 210 million bushels, 2012/13 soybean supplies are projected at 3.43 billion bushels, up 4 percent from 2011

Central Garden 2Q income off 32 percent

California, News, News Briefs

Walnut Creek, Calif. — Central Garden and Pet reported a 32 percent drop in net income for the second quarter ending March 24, 2012, to $21.6 million ($0.45 per diluted share) from the year-ago $31.8 million ($0.51 per share). Sales were off only 4 percent, to $466.9 million from $485.7 million. The company said short-term execution issues hindered the company’s ability to fully meet demand. The company reiterated that it expects results in the second half to be better than the first half. “Strong early demand for some of our products occurred at the same time we were consolidating some of our plants and distribution facilities,” Gus Halas, Central president and CEO, told analysts. “This, along with other supply issues, resulted in execution glitches that delayed fulfilling orders for some customers. I am confident that the operational issues we encountered are temporary in nature, and we are addressing them as fast as possible.” The company said it does not believe it lost any customers as a result of the delays, which were particularly in the garden segment. The company said since the beginning of the fiscal year it has closed one manufacturing plant and five warehouses, meeting its earlier goals. It has also downsized another distribution center. It expects to close another two or three facilities during the remainder of the year, and take some $120 million in costs out of the company over the next few years. Wall Street was not too happy with the company’s results, with shares dropping 10 percent to a $9.71 close on May 3 after the results were released. Six-month income was $8.7 million ($.0.18 per share) on sales of $769 million, down 62 percent from the year-ago $22.7 million ($0.37 per share) on sales of $767.4 million.

Leaks impact Orica 1Q

Ammonia, News, News Briefs

Melbourne — Orica Ltd. reported a 4 percent drop in net profit after tax for the first quarter ending March 31, 2012, to A$253.3 million from the year-ago $263.8 million. Revenues were up 12 percent, to $3.29 billion from the year-ago $2.95 billion. Ammonia and related leaks at the Kooragang Island facility cost the company some $90 million of operating income during the quarter. Orica said the ammonia plant successfully returned to production in February, and the company continues to work on improving its engagement with the community. Globally, Orica said ammonium nitrate volumes were up 8 percent on strong demand in Australia, Asia, Latin America, and the Nordics, which more than offset weaker demand in the U.S., which was impacted by lower demand for coal due to the mild winter. In other news, Orica said its new ammonium nitrate plant in Bontang, Indonesia, started production in April.

Acquisition costs lower Chemtrade 1Q earnings

Eastern Canada, News, News Briefs

Toronto — Chemtrade Logistic Income Fund’s acquisition of Marsulex Inc. in 2011 served to boost its revenues in the first quarter, but charges due to the deal lowered income. First-quarter net income was C$4.2 million ($0.10 per diluted unit) on revenues of $227.9 million, down from the year-ago $13.4 million ($0.41 per unit) on revenues of $169.6 million. Revenues also benefited from increased volumes and higher sulfuric acid prices. Earnings were impacted by higher levels of depreciation and amortization from the acquired assets, as well as a non-cash loss of $8.6 million from the appreciation of Chemtrade’s convertible unsecured subordinated debentures. Finance costs were also higher.

Scotts sales up, earnings not

Midwest, News, News Briefs

Marysville, Ohio — Scotts Miracle-Gro Co. net sales were up 4 percent in the second quarter ending March 31, 2012, to $1.17 billion, up from the year-ago $1.13 billion;
however, net income was off 28 percent to $127.2 million ($2.05 per diluted share), compared to the year-ago $177.6 million ($2.63 per share). Adjusted EBITDA was off 11 percent, to $236.7 million from $267.3 million. “We are well positioned as we conclude the peak weeks of the lawn fertilizer season and move into the peak of gardening activity,” said Jim Hagedorn, Scotts chairman and CEO. “We have seen strong consumer engagement across the U.S. whenever the weather has cooperated, as evidenced by the 20 percent increase in consumer purchases for the second quarter.” Hagedorn said the company is on track to deliver full-year sales growth of 6-8 percent and earnings per share of $2.65-$2.85. He stressed to analysts that the company makes all of its money in the second half of the year, and that the company is ahead of internal targets. Six-month earnings were off 51 percent, to $53.3 million ($0.88 per share) on sales of $1.38 billion from the year-ago $109.7 million ($1.66 per share) on sales of $1.36 billion. Adjusted EBITDA was off 21 percent, to $152.1 million from $192.3 million. Wall Street was not impressed. Scotts shares fell 16.1 percent to close at $46.14 on May 8, the day of the earnings announcement, to a four-month low. It closed May 7 at $55.00. The company said demand in the last two weeks in March was “explosive,” and Hagedorn said the company was “barely hanging on” in order to meet demand. He said the company incurred some higher than expected distribution expenses to meet the early spike in demand. The company also saw disproportionate growth of some of its lower margin products, like mulch. He said the first week of May was the second biggest week in company history.

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