Nitrogen and phosphate fertilizer producer CF Industries Holdings Inc. (CF) Monday said its profit for the third quarter declined 18% from last year, as the year-ago quarter included one-time gains from mark-to-market adjustments on natural gas derivatives. The quarterly results fell short of analysts' expectations, negatively affected by lower price realizations and weak demand for all products. However, the company sees a reasonably good fall application season and solid spring demand in the future.
CF Industries' net earnings attributable to common stockholders were $38.5 million or $0.78 per share for the third quarter, down from $47.1 million or $0.82 per share in the prior year quarter. On average, 9 analysts polled by Thomson Reuters expected the company to report earnings of $1.02 per share for the third quarter. Analysts' estimates typically exclude special items.
Result for the quarter under review included $1.9 million in non-cash, pre-tax gains, or $0.02 per share on an after-tax basis, from mark-to-market adjustments on natural gas derivatives, compared to $251.0 million in non-cash, pre-tax losses, or $2.88 per share on an after-tax basis in the third quarter 2008.
The Deerfield, Illinois-based company's gross margin improved 3% to $124.0 million from $120.9 million in the year-earlier quarter.
Third quarter net sales dropped 58% to $430.1 million from $1.02 billion in the same quarter last year, hurt by lower price realizations for all products. Five analysts had a consensus revenue estimate of $438.03 million for the third quarter.
The third quarter sales total included $30 million in sales of previously purchased potash. There were no potash sales in the previous year.
Net sales from the Nitrogen Fertilizer Segment slipped 54% to $276.1 million from $599.1 million in the previous year quarter. Despite mixed market conditions, nitrogen segment volume declined 3% to 1.2 million tons for the quarter, as lower domestic sales were largely offset by exports.
The average price of natural gas at Henry Hub declined to $3.15/MMBtu from $9.02/MMBtu in the prior year quarter. At AECO, the average price of natural gas declined to $2.68/MMBtu from $7.56/MMBtu in the third quarter of 2008.
Phosphate Fertilizer segment's net sales for the third quarter plunged 63% to $154.0 million over a year earlier. Volume rose 9% to 497,000 tons from 457,000 tons in the year-earlier quarter, reflecting the sale of purchased potash.
The company realized an average price of $281 per ton for diammonium phosphate or DAP, down 70% from the prior year quarter.
Earlier this month, Agrium Inc. (AGU, AGU.TO) signed a deal with Terra Industries Inc. (TRA) to sell 50% of its Carseland nitrogen facility to Terra for about $250 million in cash, to meet Canadian regulatory requirements in connection with its offer to acquire CF Industries.
Under the terms of the Carseland deal, conditional on the closing of Agrium's bid for CF, Terra will pay Agrium about $250 million in cash for 50% of the Carseland facility, or nearly 340 thousand of urea and over 60 thousand tonnes of net ammonia on an annual basis and certain U.S. assets. The purchase price for the portion of Carseland is at a similar forward multiple to that which Agrium is offering for CF.
A possible merger between CF and Terra has been in the news since January 2009, when CF came up with a bid to acquire all of the outstanding shares of Terra for an estimated value of $2.1 billion. However, barely days after CF tabled its buyout bid, the company found itself the target of bigger rival Agrium. In February, Agrium offered to buy CF for about $3.6 billion.
Last month, CF sweetened its bid for Terra, under which CF will acquire Terra for 0.465 CF shares per Terra share. This proposal was also rejected by Terra later.
For the nine-month period of 2009, CF Industries' net earnings attributable to common stockholders was $314.2 million or $6.38 per share, compared to $494.5 million or $8.59 per share in the previous year period.
Net sales for the period decreased 26% to $2.10 billion from $2.85 billion in the prior year period.
Looking ahead, CF Industries said it is prepared for a reasonably good fall application season and solid spring demand due to attractive corn farming economics and needed restocking in the downstream fertilizer channels.
CF Industries closed Monday's regular trading session at $85.41, down $4.07 or 4.55% on a volume of 1.60 million shares. However, in the after-hours, the shares gained $1.44 or 1.68%.
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