DEERFIELD, Ill. -- CF Industries Holdings Inc. today reported a first quarter 2010 net
loss attributable to common stockholders of $4.4 million, or $0.09 per
diluted share. This compares to earnings of $62.7 million, or $1.28 per
diluted share, in the first quarter of 2009. First quarter results
included $136.1 million in business combination costs, $123.0 million of
which was the termination fee that CF Industries paid to Yara
International ASA on behalf of Terra Industries Inc.
First Quarter Highlights
- Net loss attributable to common stockholders was $4.4 million, or $0.09 per diluted share, down from earnings of $62.7 million, or $1.28 per diluted share, in the 2009 first quarter.
- First quarter results included $136.1 million in business combination costs, $28.3 million gain on sale of common shares of Terra Industries, $11.2 million non-cash mark-to-market loss on natural gas derivatives and $2.7 million of Peru project development costs.
- Net sales were $502.4 million, down 26 percent from $680.6 million in the 2009 first quarter.
- Nitrogen segment volume was five percent lower than year ago reflecting lower urea application due to wet conditions in Texas and Oklahoma. Phosphate segment volume fell nine percent due to lower exports, offset partially by higher domestic sales volume.
- Company exported ammonia for the first time in recent history.
Outlook and Update
- The outlook is favorable for spring application season. U.S. planted corn acreage is projected to be nearly 89 million acres, more than 2 million acres greater than last year. Low beginning inventories and reduced import levels set stage for strong nitrogen and phosphate demand.
- Ideal weather through most of April drove high demand for pre-plant ammonia, helping CF Industries achieve record April ammonia sales volume since becoming a public company.
- CF Industries completed its acquisition of Terra Industries on April 15 and subsequently completed equity and debt offerings to repay the bridge loans and a portion of the term loans used to finance the acquisition.
- The integration of CF Industries and Terra is off to a good start.
Also included in first quarter results were $2.7 million of Peru project development costs, a $28.3 million gain on the sale of common shares of Terra Industries, and an $11.2 million non-cash mark-to-market loss on natural gas derivatives. Nearly all of the costs associated with the business combination and the Peru project are not deductible for income tax purposes. If these two items had not occurred in 2010, the company's annual effective income tax rate applicable to the first quarter would have been approximately 35.0 percent, rather than the 49.6 percent income tax rate actually applied in the first quarter.
Net sales were $502.4 million, down 26 percent from $680.6 million in the same period last year. Total sales volume decreased from 1.8 million tons in the 2009 first quarter to 1.7 million tons in 2010. Ammonia and urea ammonium nitrate solution (UAN) sales volumes increased 42 and 2 percent, respectively, over the year-earlier period, while urea and phosphate sales volumes decreased 18 and 9 percent, respectively.
"The first quarter is an important period for our customers to stock up for the spring application season. Lighter than normal stocking activity this year sets us up for tight conditions in the second quarter, which favor a producer with the storage capacity to enable it to capitalize on demand when it arises in the field," said Stephen R. Wilson, chairman and chief executive officer, CF Holdings, Inc. "Ideal planting conditions for ammonia application arrived in April, and we were ready to take advantage of it."
Domestic phosphate volumes were higher than last year, as the company favored domestic sales over exports due to superior margin opportunities.
CF Industries believes that the combination of high corn acreage, improved application rates, warm spring weather, low channel inventory and low import volume leads to a robust outlook for Midwest demand for nitrogen and phosphate fertilizers. Export demand for phosphate is expected to remain relatively strong through the quarter due to sizable shipping requirements to India and additional demand from Latin American and Asia, continuing the relatively tight international trade balance.
"Conditions are in place for an exceptionally strong spring season," indicated Wilson. "A drying trend in the Midwestern U.S. allowed us to drain most of our available ammonia storage throughout the region, and we're working hard to resupply as the season continues. Our extensive ammonia distribution network is set up to take full advantage of opportunities such as the one we saw in April. For the other products, we continue to believe that tight conditions will persist through the second quarter."
Excluding the operations of Terra, the company delivered more ammonia in April than in any other month since becoming a public company and approximately 170 percent of the previous five-year average for April. Ammonia shipments for the legacy Terra operations also were greater than for any other month over that time.
Forward prices for natural gas are now lower than the company's previous forecast. Second quarter 2010 sulfur costs for phosphate products are expected to be higher than the first quarter, but with downward pressure through the peak oil refining season.
SOURCE: CF Industries.