CF Industries Reports Short - Analyst Blog

CF Industries Holdings, Inc. (CF) posted a loss per share of 9 cents in the first quarter of fiscal 2010, down from the Zacks Consensus Estimate of $1.45 as net earnings per share. In the year-ago quarter, EPS was $1.28. The company reported a loss of $4.4 million against net earnings of $62.7 million in the first quarter of fiscal 2009.

Sales were $502.4 million in the quarter, a decline of 26% from $680.6 million in the corresponding quarter of the previous year based on the decrease in sales volume. Total sales volume dropped to 1.7 million tons from 1.8 million tons in the same quarter of 2010.
 
Nitrogen Fertilizer segment sales totaled $327 million, a decline of 28% from $456.2 million in the first quarter of 2009. Volumes dropped by 0.1 million tons to reach 1.2 million tons. Overall, average nitrogen selling prices remained depressed. The selling price for ammonia declined to $321 per ton, a fall of 39% year over year. The company exported 53,000 tons of ammonia in the quarter. For UAN, the selling price was down 31% year over year to $205 per ton.

CF Industries benefited from lower sales under its Forward Pricing Program (FPP), which increased its exposure to spot prices for natural gas. Nitrogen sales under the FPP totaled 400,000 tons during the quarter, representing a 25% decrease from first quarter of 2009.

Net sales in the Phosphate Fertilizer segment crashed 2% year over year to $175.4 million despite a 29% increase in volumes to 408,000 tons. The company realized an average price of $361 per ton for DAP (diammonium phosphate) 13.6% down from the prior year’s quarter. Prices for MAP (monoammonium phosphate) were down 18.7% and reached $379 per ton.

During the quarter, CF Industries’ Florida Phosphate Complex operated at 84% of its capacity. Phosphate sales under the FPP approximately came to 258,000 tons, up from 138,000 tons in the year-ago quarter.

As on March 31, 2010, the company’s cash, cash equivalents and short-term investments totaled approximately $1.0 billion from $0.9 billion at the end of the previous quarter. At the end of the first quarter, the company stands debt free.

CF Industries expects strong spring market conditions based on higher planted corn acreage and the need to replenish soil nutrients absorbed by last year's record crop. However, CF Industries is susceptible to higher natural gas costs. Thus, we reiterate our Neutral recommendation on the stock.

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