Weaker DAP prices helped put Phosphate Holdings Inc. (PHI), the owner of Mississippi Phosphates Corp., into the loss column for the first quarter ending March 31, 2012. PHI reported a net loss of $1.1 million, compared to a net income of $16,000 in the year-ago quarter. PHI had an operating loss of $1.9 million versus a year-ago income of $53,000. First-quarter EBITDA was also down, at $2.6 million from the year-ago $3.8 million.
First-quarter sales were up 19 percent, to $92.6 million from the year-ago $77.6 million. The increase resulted from higher sales volumes, partially offset by lower average prices. During the quarter, the company sold 205,324 st of DAP at an average price of $448/st, up from the year-ago 140,968 st at $539/st. Some 120,016 st of DAP was sold into the international market during the first quarter.
“Phosphate market conditions during our first quarter were challenging,” said PHI CEO Robert Jones. “Dealer reluctance to stock inventories in advance of the spring planting season resulted in weak demand and declining DAP prices in the U.S. DAP prices per short ton (FOB NOLA) declined from approximately $560/st in early December 2011 to approximately $430/st by late February 2012. During the first quarter, international prices per metric ton (FOB U.S. Gulf) fell from approximately $600/mt to approximately $500/mt. Raw material prices also fell during the quarter, but not to the degree of the decline in DAP prices. As a result, margins were squeezed. Sulfur prices in the first quarter were posted at $172/lt (CFR Tampa). Ammonia prices began the first quarter at $555/mt (CFR Tampa) and closed the first quarter at $470/mt.
“Unquestionably the bright spot for the first quarter was our production rates for DAP and sulfuric acid,” added Jones. “Over the past year we have invested heavily in our plants. As a result of these investments, we are now realizing significant operational improvements. For the first quarter, DAP and sulfuric acid production were 206,996 st and 239,774 st, respectively. This represented our highest quarterly DAP production in 10 years and our highest sulfuric acid production since the first quarter of 2007. We currently expect DAP production for the second quarter of 2012 to approximate 180,000 to 195,000 st.”
Jones noted that PHI’s long-term phosphate rock agreement with Morocco’s OCP S.A. expires June 30, 2012. He said while no assurances would be given, he anticipates securing the company’s future rock requirements from OCP.
Jones remains upbeat going forward. “Agricultural fundamentals for the U.S. farmer remain very attractive. The United States has experienced favorable weather and the planted acreage rate is significantly ahead of the five-year average. Phosphate demand has been strong in the second quarter, and DAP prices have risen. Additionally, we look for the export market to bolster phosphate movement and pricing, with strong demand in India and South America.”
As of March 31, 2012, PHI has a cash balance of about $1.9 million and outstanding borrowings under its revolving credit agreement of $13 million. The company said it spent approximately $1.6 million on capital expenditures in first quarter 2012.