All Posts from November 20, 2006

Agriliance 3Q, YTD fertilizer earnings and volumes off

Featured, News

Agriliance LLC reported a pretax loss of $8.1 million on sales of $633.6 million for the third quarter ending Sept. 30, 2006, according to co-owner Land O’Lakes Inc., in recent filings with the Securities Exchange Commission. This compares to a year-ago loss of $6.5 million on sales of $669.3 million.

LOL said Agriliance’s third-quarter fertilizer volumes were off 12 percent from the year-ago period, and pretax earnings decreased $3.3 million in that sector. Pretax earnings from Agriliance’s Southern retail business were $3.9 million lower than last year due to higher interest costs, competitive margin pressures, and devaluation for herbicide. Pretax earnings from its Northern retail business increased $2.6 million, primarily due to an increase in rebate income. Pretax earnings from the crop protection sector increased $3.1 million, primarily due to program timing.

Agriliance’s nine-month net earnings were off almost $30 million in the current year at $56.6 million on sales of $3.04 billion, versus the year-ago $86.2 million and $3.13 billion, respectively. YTD fertilizer volumes were off 15 percent and pretax earnings decreased $21 million, primarily due to lower margins because of the effect of falling energy prices on amounts realized for inventory and higher interest costs. Despite higher sales and margins, Southern retail pretax earnings were $1.6 million lower than last year due to increased interest costs. Northern retail pretax earnings were up $1.9 million, primarily due to an increase in rebate income. YTD crop protection sales decreased 3 percent due to continued valuation related to products losing patent protection, while pretax earnings increased $7.6 million due to an increase in rebate income and timing of sales programs.

LOL received $28.9 million in dividends from Agriliance for the year ending Dec. 31, 2005. Any dividends from Agriliance for 2006 are expected to be paid in the fourth quarter 2006 or first quarter 2007.

Industry sources were quick to speculate last week that changes in the Agriliance crop nutrient sales team (see page 10) likely correlated with the joint venture’s financial results.

Cheyenne AN plant to get $50 million expansion

Featured, News

Dyno Nobel Inc. confirmed last week that it plans a $50 million expansion of its existing explosives-grade ammonium nitrate plant near Cheyenne, Wyoming. Demand from Wyoming’s growing Powder River Basin coal industry is prodding the growth.

The company is expected to increase production by 50 percent, or approximately 150,000 st/y. Current capacity is listed as 322,000 st/y by the International Fertilizer Development Center, Muscle Shoals, Ala.

Plant Manager Doug Chandler told Green Markets the construction is expected to be complete in October 2007. The expansion will be on adjacent property, the former location of an MTBE facility. An existing nitric acid and ammonium nitrate prilling plant will be brought to the site from Florida. This will bring the number of nitric acid plants at the site to four. Chandler could not confirm more specific origin of the new plants, except that they are coming from Florida. Industry observers will note that the Nitram Inc. ammonium nitrate facility in Florida went out of business a few years ago (GM Archives).

No additional ammonia capacity will be added. The existing facility currently produces 530-540 st/d of ammonia. Chandler noted that the ammonia plant uses Wyoming natural gas, which is made into products to assist in the mining of Wyoming coal.

The upgrade will add 10-15 new employees. The location currently employs 110.

Uralkali expansion plans will help offset mine flooding

News

Existing expansion plans will help Uralkali get back to normal production levels by 2008, according to Uralkali Director General Vladislav Baumgertner, in an interview posted on the company’s website last week (www.uralkali.com). “Last year we produced 5.4 million mt,” said Baumgertner. “This year we initially expected to produce 5.6 million mt, and 6.2 million mt next year. Taking into account that mine No. 1 shutdown means losing up to 1 million mt of products in 2007, I guess, the product output will hardly exceed 5 million mt.” He went on to say that expansion projects will allow the company to reach 2005 levels in 2008 and 7 million mt in 2009.

Baumgertner hesitated to give a cost of the actual No. 1 damage; however, he did say that lost profits would be close to $30 million in 2006. To avoid a loss of income in 2007, he said the company would need to see a 15-20 percent increase in potash prices. Major contracts are again up for negotiations at the end of 2006. With less product on the market due to the flood, and another Russian producer, Silvinit, having supplies in the flood risk zone, potash producers are now optimistic about a price increase. Add to this annual demand growth of approximately 3 percent per year and the expectations for increased corn acres in North America in 2007.

In addition to upgrades and expansions at existing facilities, Baumgertner noted that the company has a license at another site – Ust-Yaivinski, where a new facility will be built. The new facility will be designed to produce up to 4 million mt/y. He said the company will have to speed up the process in view of the loss of mine No. 1. From the interview, it did not appear there was much hope of mine No. 1 being rehabilitated, at least any time soon.

Manitoba poised to impose strict phos limits

News Briefs, Phosphate

Winnipeg, Manitoba-Agriculture interests were consulted and offered recommendations before the provincial government made public plans for what may be the strictest regulations so far in Canada or the U.S. on the use of phosphorus fertilizer near rivers and lakes, according to the area’s largest general farm policy organization. Keystone Agricultural Producers (KAP) said the restrictions released Nov. 8 are generally consistent with the recommendations of agriculture and are the result of ongoing negotiations between the parties. However, KAP officials stated in a news release that despite some positive steps they remain very concerned that the provincial government has unfairly targeted agriculture, particularly the hog sector, as the primary focus of efforts to protect water quality. “The farming community was unaware of the freeze on development in the hog industry until it was put in place,” KAP asserted, and “is very concerned about the impact on Manitoba’s farm families, the agriculture industry and related agri-business sectors.” KAP said another outstanding issue will be the incentive programs the government must develop to assist in the transition to the new regulations. Starting in 2009, this newest phase of the province’s water protection plan, outlined by Conservation Minister Stan Struthers, will ban the application of lawn or agricultural fertilizers containing phosphorus within strict buffer zones along waterways. The buffer zones will range from three to 15 meters along rivers to 15 to 30 meters along lakes. The ban will apply to everyone, including homeowners, farmers, and golf course staff, and the use of manure will be regulated as well. Struthers said the phosphorus ban may eventually be extended to all homeowners, even those who live far from water.

LSB doubles 3Q earnings; chemical profits off

News Briefs

Oklahoma City-LSB Industries Inc. saw a surge in earnings and sales in the third quarter ending Sept. 30, 2006. However, they came from the company’s climate control business, not chemicals. Chemical sales were off slightly, with this attributable to agricultural sales. Most of the shortfall was offset by industrial chemical sales, which provide better margins and predictability, according to LSB. Third-quarter chemical operating income was down, at $2.2 million on sales of $60.8 million, compared to the year-ago $2.5 million and $62.2 million, respectively. Nine-month results remain ahead of last year at $8.8 million and $201.5 million, versus $6.9 million and $180 million. LSB-wide, third-quarter net income was $3.3 million ($.17 per diluted share) on sales of $123.8 million, compared to the year-ago $1.65 million ($.07 per share) and $105.2 million, respectively. Nine-month net income stands at $12.5 million ($.64 per share) on sales of $367.9 million, versus the year-ago $5.1 million ($.23 per share) and $301.4 million, respectively.

Southern States results up in Fiscal 2006

News Briefs

Richmond, Va.-Southern States Cooperative Inc. reported a net income of $6.36 million for the year ending June 30, 2006, compared to a 2005 loss of $7.67 million. Sales also moved up to $1.59 billion from $1.44 billion. Sales were up due to higher fertilizer prices, which in turn crimped fertilizer margins, as the cooperative bought fertilizer when it was more expensive. Higher prices also suppressed demand and impacted actual sales. While Southern States did meet profit projections for the year, it was able to reduce debt by $33 million to $106.7 million. Debt is reportedly down 71 percent since 2002. Southern States is in a process of diversifying, not relying totally on its core farm base, expanding its home-heating and equine markets.

Acquisitions help boost Marsulex results

News Briefs

Toronto-Prodded by recent acquisitions, Marsulex inc. reported increases of 57 percent and 58 percent in revenue and gross profits for the third quarter ending Sept. 30, 2006. Third-quarter net earnings were $2.6 million, gross profits $24.8 million, and revenues $68.3 million, versus the year-ago loss of $.9 million, profits of $15.7 million, and revenues of $43.4 million. Marsulex said all business segments generated increases in revenue and profits. Marsulex added that in late August the Fort McMurray, Alberta, facility began production of ammonium sulfate from slurry received from Syncrude. While the plant is still in the commissioning phase, initial product testing has produced satisfactory results. Nine-month net earnings were $8.5 million, gross profits $61.5 million, and revenues $180.2 million, versus the year-ago $1.8 million, $43.8 million, and $118.9 million, respectively.

OCP joins IPNI

News Briefs

Norcross, Ga.-Office Cherifien des Phosphates, also known as Groupe OCP, has joined the newly-formed International Plant Nutrition Institute (IPNI) as one of its founding members. OCP, a Moroccan phosphate producer, has the largest phosphate rock reserves in the world. IPNI, a new not-for-profit group (GM Nov. 6, p. 1) was formed to advance crop production, efficient and effective nutrient use, and environmental protection. It is funded by major producers of nitrogen, phosphate, potash, and sulfur.

KBR announces pricing of IPO

News Briefs

Houston-KBR, the engineering, construction, and services subsidiary of Halliburton (NYSE: HAL), has announced the pricing of its initial public offering of 27,840,000 shares of its common stock at $17.00 per share. The shares have been approved to trade on the New York Stock Exchange under the symbol “KBR.” KBR expects to receive approximately $441 million of proceeds from the offering, net of underwriting fees and estimated expenses. KBR intends to use the proceeds to repay indebtedness owed to subsidiaries of Halliburton. The offering is expected to close on November 20, 2006, subject to customary closing conditions. In addition, KBR has granted the underwriters an option to purchase up to an additional 4,176,000 shares to cover over-allotments, if any. After the IPO, Halliburton will remain the majority stockholder of KBR, with approximately 83 percent of KBR’s outstanding common stock (or 81 percent of KBR’s outstanding stock if the underwriters exercise their over-allotment option in full).

AN review includes COFANT, Ukrainian producers

Ammonium Nitrate, News Briefs, Ukraine

Washington, D.C.-As was reported in last week’s Green Markets, the U.S. International Trade Commission (ITC) on Nov. 6 voted unanimously to conduct a full five-year sunset review concerning the antidumping duty order on imports of ammonium nitrate from Ukraine (GM Nov. 13, p. 8). The ITC’s vote for a full review rather than an expedited one means the commission will now conduct a more lengthy hearing process and review questionnaires from the respondents in the case to determine if the revocation of the order would likely lead to the continuation or recurrence of material injury to domestic AN producers within a reasonably foreseeable time. Respondents include the Committee for Fair Ammonium Nitrate Trade, which represents domestic producers El Dorado Chemical Co. and Terra Industries Inc.; Ukrainian producer/exporters CJSC Severodonetsk Azot Assoc. and OJSC Azot, which account for a significant share of the production of ammonium nitrate in Ukraine; and the Trade and Economic Mission of Ukraine, Embassy of Ukraine to the United States of America. The antidumping duty order on imports of AN from Ukraine was instituted by the U.S. Department of Commerce on Sept. 21, 2001, after a contentious fight (GM July 23, 2001) between respondents in the case. At that time a 156.29 percent dumping duty was set, and COFANT members in addition to El Dorado included Air Products & Chemicals, LaRoche Industries, Mississippi Chemical, and Nitram Inc. Four Ukrainian companies were named in the original antidumping petition, including OJSC Azot, Stirol, J.S. Co. Rivneazot, and Severodonetsk State Manufacturing Enterprise.

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