Thursday, fertilizer manufacturer Terra Industries Inc. (TRA) reported lower profit and revenue for the third quarter on price declines and drop in sales volume associated with lower demand due to economic uncertainty.
The Sioux City, Iowa-based company's third-quarter net income attributable to common stockholders dropped to $45.9 million or $0.46 per share from $164.9 million or $1.64 per share a year ago. On average, 10 analysts polled by Thomson Reuters estimated earnings of $0.52 per share for the quarter. Analysts' estimates typically exclude special items.
Revenues for the third quarter decreased to $347 million from $790.2 in the prior-year quarter. Analysts expected revenue of $348.85 million for the quarter.
Sales price declines contributed to 84% of the revenue decline while sales volume reductions decreased revenues by 16%. Lukewarm demand for agricultural and industrial nitrogen related to the overall economic uncertainty contributed to these factors.
Michael Bennett, chief executive officer of Terra, said, "We were particularly disappointed that urea ammonium nitrate, or UAN, prices remained unusually low relative to ammonia and urea prices over the quarter. Historically, UAN has commanded a premium and we believe the current relative price is a short term aberration. Volume driven competition in the third quarter drove domestic UAN prices to levels that enticed reluctant customers to take limited positions."
Income from operations for the quarter fell to $54.23 million from $209.46 million in the year-ago quarter.
For the nine-month period, Terra's net income attributable to common stockholders declined to $156.3 million or $1.57 per share from $467.2 million or $4.54 per share in the year-ago period. Revenues for the period slumped to $1.22 billion from $2.21 billion in the prior-year period.
The company revealed that it has hedged production costs for the next 12 months through forward purchase contracts for natural gas and has saved around $2 million, based on prices on September 30th, for products to be shipped by Terra in the fourth quarter and the first quarter of 2010.
Looking forward, the company foresees UAN demand to strengthen late in the fourth quarter and in the first quarter. Further, the company said it anticipates strong agricultural nitrogen demand as it expects buying interest and product shipment levels to improve. Terra also predicted strengthening of nitrogen selling prices and believes UAN prices will appreciate to compete in global markets.
The company declared a dividend of $0.10 per common share, payable on December 11th to holders of record as of November 23, 2009.
In a separate statement, the company said it has sent a letter to shareholders, urging them to reject nominees of CF Industries Holdings, Inc., which is seeking to advance its merger proposal. On January 15th, CF Industries had unveiled an unsolicited, all-stock bid for Terra for $2.1 billion.
TRA is gaining $0.30 or 0.84% and is trading at $35.81 on a volume of 1.05 million shares on the New York Stock Exchange.
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