CF Industries Profit Drops On Lower Sales, Margins, Yet Tops Street

(RTTNews) - Fertilizer producer CF Industries Holdings Inc. (CF), Tuesday reported a lower fourth-quarter profit, as Nitrogen and phosphate prices slumped with margins under pressure, partly offset by one-time derivative gains. Nonetheless, results for the quarter topped Wall Street estimates.

Shares of the company were up about 3 percent in after-hours trade on the New York Stock Exchange.

During the quarter, sales at the company's key Nitrogen segment slumped 47 percent from last year, on lower prices, partly offset by an increase in volumes. Gross margin dropped 40 basis points due to lower sales and higher natural gas costs.

Phosphate sales dropped 42 percent and gross margin sank by 13 percent. The segment was impacted by lower global demand, notably from India.

CF Industries noted that 2013 was marked by weak nitrogen prices due to oversupply and soft demand in key agricultural regions.

Deerfield, Illinois-based CF Industries posted fourth-quarter net income to stockholders of $326 million or $5.71 per share, compared with $471 million or $7.40 per share last year.

On average, 21 analysts polled by Thomson Reuters expected earnings of $4.49 per share for the quarter. Analysts' estimates typically exclude special items.

Results for the recent quarter included non-cash derivative gains of $0.67 per share, largely related to natural gas derivatives. The prior-year had one-time gains of $0.13 per share.

Sales for the quarter slid 10 percent to $1.33 billion from $1.5 billion last year. Fifteen analysts expected sales of $1.24 billion for the quarter.

The company plans to raise up to $1.5 billion in new long-term debt and continue to execute Nitrogen capacity expansion projects. For 2014, CF Industries expects capital expenditures of about $2.5 billion.

In October, CF Industries agreed to sell its phosphate business to Mosaic Co. (MOS) for $1.4 billion. The deal was part of agreements including a long-term contract to supply Mosaic with ammonia from its Donaldsonville, Louisiana nitrogen complex, and a deal to provide ammonia to Mosaic from the company's Point Lisas Nitrogen Ltd. joint venture.

Recently, CF Industries entered into long-term ammonium nitrate supply deals with Orica International Pte. Ltd. and Nelson Brothers LLC. Orica provides commercial explosives and blasting systems for the mining and infrastructure markets while Nelson Brothers makes mining explosives products.

Under the terms of the deals, CF Industries will supply between 700,000 and 800,000 tons of industrial grade ammonium nitrate and ammonium nitrate solution annually for at least a decade starting January 2017. The agreements will help CF Industries absorb most of the production capacity from its Yazoo City nitrogen plant in Mississippi.

In January, rival Potash Corp. of Saskatchewan, Inc. (POT, POT.TO) reported a fall in fourth-quarter profit, reflecting price declines in all three major product categories, most notably in potash.

CF stock closed Tuesday at $226.19, down $5.46 or 2.36%, on a volume of 2.3 million shares on the NYSE. In after hours, the stock gained $6.66 or 2.94% at $232.85. In the past year, the stock has traded in the range of $169.33 - $249.10.