) third-quarter 2013 adjusted earnings (excluding one-time items)
of $3.89 per share was down roughly 34% from the year-ago
earnings of $5.85 a share. However, it exceeded the Zacks
Consensus Estimate of $3.84.
Adjusted earnings exclude natural gas derivative losses and
foreign exchange related gains. Including one-time items, the
company earned $4.07 a share in the quarter, down roughly 36%
from $6.35 in the year-ago quarter.
Sales were down 19% to $1,097 million in the quarter from
$1,359.4 million in the prior year, and also missed the Zacks
Consensus Estimate of $1,146 million.
The decrease reflects lower fertilizer prices along with buyer
expectations that price will continue to slide.. Sales also
declined due competitive pressure arising from Chinese nitrogen
exports and a change in the selling price calculation method used
for products sold by Canadian Fertilizers Limited (CFL).
Costs and Margins
Cost of sales stood at $710.9 million in the reported quarter
versus $657.4 million in the year-ago quarter. Gross profit
decreased 45% year over year to $386.1 million in the quarter.
Selling, general and administrative expenses declined 13.4% to
$32.2 million from $36.5 million in the year-ago quarter. The
company reported an operating income of $385.4 million, down
42.2% from $667.1 million in the prior-year quarter.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) of $477.7 million in the quarter represents a 34% fall
from $729.1 million in third-quarter 2012. Despite a challenging
global fertilizer market and ground-level global nitrogen prices,
EBITDA reflects CF Industries' competitively strong position on
the global nitrogen cost curve.
Sales fell 20% year over year to $876.3 million in the third
quarter, due to lower volume and prices for major nitrogen
products as a result of weak global nitrogen market. Gross margin
declined 44% to $358.4 million due to lower revenues, higher
natural gas costs and a $6 million market-to-market loss on
natural gas derivatives. CF Industries sold 2.8 million tons of
nitrogen products during the third quarter of 2013 compared with
3 million tons in 2012.
Sales fell 16% year over year to $220.7 million. Gross margin
declined 56% to $27.7 million due to lower revenues. Volumes sold
in the quarter were 526,000 tons, up from 517,000 tons a year
Average selling price of diammonium phosphate (DAP) was $422
and that of monoammonium phosphate (MAP) was $416, a
year-over-year decline of 16.8% and 20.2%, respectively. The
decrease in average selling prices was attributable to greater
supply from Saudi Arabia and China, and lower global demand,
chiefly from India.
Cash and cash equivalents totaled $2.29 billion as of Sep 30,
2013, compared with $2.22 billion as of Sep 30, 2012. Long-term
debt stood at $3.1 billion as of Sep 30, 2013, compared with
$1.60 billion as of Sep 30, 2012.
On Oct 17, 2013, CF Industries' Board declared a dividend of
$1.00 per common share, payable to shareholders of record as of
Nov 15, 2013. This dividend will be paid on Nov 29 and represents
a 150% hike over the previous quarterly dividend of 40 cents.
Last month, CF Industries entered into various strategic
The Mosaic Company
). These agreements are expected to strengthen CF Industries'
nitrogen centric programs. CF Industries entered into a deal to
sell the entirety of its phosphate business to Mosaic for a cash
consideration of $1.4 billion. The company also entered into a
long-term agreement to supply Mosaic between 600,000 and 800,000
tons of ammonia per year from its Donaldsonville, La., nitrogen
complex beginning in 2017.
CF Industries also entered into an agreement to provide
ammonia to Mosaic from the company's Point Lisas Nitrogen Ltd.
(PLNL) joint venture following the close of the phosphate
CF Industries expects to benefit from a number of factors
supporting its growth and cash generation potential. Global
population rise, a shift toward higher protein diets and
continued use of crops as a source of renewable fuels are
increasing the need for grain and plant nutrients.
Though nitrogen demand outlook is positive, the amount of
nitrogen supply available, especially from Chinese producers, is
expected to restrict price opportunities over the remainder of
2013. CF Industries expects that 92 million acres of corn will be
planted in 2014, down from 2013.
For phosphates, the company expects to be active in the export
market as South America is predicted to be an area of solid
demand. Margins in the phosphate business should be helped by
lower input costs for ammonia and sulfur.
The company estimates capital expenditures for its recently
announced capacity expansion projects at Donaldsonville, La., and
Port Neal, Iowa, to be around $600 million in 2013. All other
capital expenditures are expected at roughly $500 million for the
year. For 2014, CF Industries anticipates total capital
expenditures to be in a range of $2.5 billion.
CHINA BLUECHEM (CBLUY): Get Free Report
CF INDUS HLDGS (CF): Free Stock Analysis
MOSAIC CO/THE (MOS): Free Stock Analysis
SCOTTS MIRCL-GR (SMG): Free Stock Analysis
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CF Industries currently carries a Zacks Rank #3 (Hold).
Other fertilizer companies worth considering are
China Bluechip ADR
The Scotts Miracle-Gro Company
). Both hold a Zacks Rank #1 (Strong Buy).