Terra 1Q volumes up 27 percent, CF off 6 percent

Terra Industries Inc., just acquired by CF Industries Holdings Inc., ended its last full quarter as an independent company on a high note, with a 27 percent increase in sales volumes for the first quarter ending March 31, 2010, according to preliminary unaudited data filed with the Securities and Exchange Commission. By comparison, CF sales volumes for the quarter were off 6 percent. Both companies reported overall declines in revenues for the quarter. Net income was not released.

Terra first-quarter revenues are expected to be $409 million, 3 percent lower than the year-ago $420 million. This decline is primarily due to lower selling prices for ammonia, UAN, and AN. The prior year first-quarter selling price benefited from the orders that were committed to under higher prices during 2008. The decline in selling prices was partially offset by an increase in UAN and AN sales volumes of 34 percent and 76 percent, respectively. For the first quarter, natural gas unit costs, net of forward pricing gains and losses, decreased by approximately 27 percent from $7.37/mmBtu, compared to the year-ago $5.39/mmBtu.

CF expects first-quarter net sales to be approximately $502 million, 26 percent lower than the year-ago $681 million. Sales volumes are expected to be 1.7 million st, or a decline of 6 percent, as compared to the year-ago 1.8 million st. The decline in both net sales and sales volume is due to declines in both the nitrogen and phosphate segments.

Financial results for the first quarter of 2010 will be impacted by merger-related costs, including the $123 million termination fee that was paid by CF on behalf of Terra in connection with the termination by Terra of its prior agreement to be acquired by Yara International ASA; a $28 million gain on the sale of CF’s investment in shares of Terra common stock; and fees for professionals and advisors relating to the acquisition by CF of Terra.

In CF’s nitrogen segment, net sales are expected to be approximately $327 million, 28 percent lower than the $456 million in the first quarter of 2009. Sales volume in the nitrogen segment is expected to decline by 5 percent to 1.2 million st, compared to the 1.3 million st in the first quarter of 2009. Sales volume in the first quarter of 2010 declined as urea shipments fell, partially offset by increases in ammonia and UAN shipments. Pre-planting season sales volumes were impacted by cold and wet weather conditions in the first quarter. Average selling prices for all three nitrogen products are expected to be lower in the first quarter of 2010 compared to the first quarter of 2009, as the prior year period benefited from substantial sales volume that had been contracted under the Forward Pricing Program at earlier dates and higher prices. Average selling prices for all products in the first quarter of 2010 are expected to be higher than average selling prices in the fourth quarter of 2009. The weighted average cost of natural gas in the first quarter of 2010 declined by approximately 30 percent compared to the first quarter of 2009, from $7.33/mmBtu in 2009 to $5.13/mmBtu in 2010.

CF’s phosphate segment sales are expected to be approximately $175 million, 22 percent lower than the year-ago $224 million. Sales volumes are expected to have declined by 9 percent to 480,000 st, compared to the year-ago 527,000 st, as declines in DAP were only partially offset by increases in MAP shipments. Average selling prices for DAP and MAP are expected to be lower in the first quarter of 2010 versus the first quarter of 2009, but are expected to be higher than average selling prices in the fourth quarter of 2009.