CF Industries quarterly earnings double on robust fertilizer sales
by Soo-kyung Seo
Jul 31, 2007
The Deerfield, Ill.-based chemical fertilizer producer and distributor reported its net earnings in the quarter ended June 30 jumped to $93.6 million, or $1.65 per diluted share, from $42.6 million, or 77 cents per diluted share, in the same period a year ago. The result exceeded analysts’ estimate of $1.50 per diluted share, according to Yahoo Finance.
The company said robust corn farming activities in the spring bolstered the sales of CF Industries’ fertilizers and led to the company’s big profit gains. U.S. farmers planted the largest corn crop since 1945, according to the U.S. Department of Agriculture.
“Our well-positioned inventories and flexible distribution system enabled us to deliver excellent results in the face of this rapidly changing business environment,” said Stephen R. Wilson, Chairman and CEO of CF Industries Holdings Inc.
The company’s net sales in the second quarter advanced 23 percent to $848.9 million from $688.7 million in the same period a year earlier. Total sales volume increased about 6.6 percent to 2.75 million tons in the quarter from 2.58 million tons in the same period a year earlier.
“Overall, things proceeded much better than I expected,” Morningstar Inc. analyst Ben Johnson said. “Corn-related [farming] activities, in particular, benefited the company a lot as corn farming is more nitrogen fertilizer intensive compared with other crops.” Nitrogen fertilizer is one of the company’s main products.
Average selling prices of all nitrogen and phosphate fertilizer products were 21 percent higher in the second quarter compared with a year ago, the company said.
A phosphate fertilizer price increase, in particular, reflected “improved fundamentals in domestic and world phosphate markets, and improved phosphate pricing more than offset a modest decline in volume,” the company said.
CF Industries' operating earnings nearly doubled to $159.4 million in the quarter from $85.3 million from last year.
Second-quarter results included $36.3 million in non-cash pre-tax unrealized losses, or 41 cents per diluted shares on an after-tax basis, from mark-to-market adjustments on natural gas derivatives associated with the company’s Forward Pricing Program (FPP), according to the news release.
CF Industries said it signed an agreement with Uhde Corporation of America to develop a gasification project to help reduce the company’s dependence on North American natural gas. The company could begin construction in the second half of 2009.
The company has also signed an exclusivity agreement with NUKEM Inc. “to explore the feasibility of developing and constructing a uranium recovery facility” at the company’s complex in Florida.
Amid speculation that the U.S. may add more nuclear power plants, “uranium demand could be an incremental profit opportunity for companies..involved in this type of project,” Johnson said. The gasification project would also put the company at a cost advantage in the global market, he added.
The company announced that it will pay the regular quarterly dividend of 2 cents per common share on August 31 to stockholders of record on August 15, 2007.
CF Industries’ stock closed Tuesday at $57.48, down 24 cents, or 0.42 percent from Monday’s close.
