We are retaining our Neutral recommendation on CF Industries.
Profit for the third quarter slid year over year on a double-digit
decline in sales. Both revenues and earnings missed Zacks Consensus
Estimates. CF Industries should benefit from favorable natural gas
costs in North America and a healthy start to the domestic planting
season. It remains on track with its capacity expansion projects.
The company also remains committed to boosting shareholder returns.
However, CF Industries continues to face pricing pressure. Higher
Chinese urea exports are expected to hurt nitrogen prices. The
company is also exposed to volatility in raw material costs and has
CF Industries Holdings Incorporated (CF), headquartered in
Deerfield, Illinois, is one of the largest manufacturers and
distributors of nitrogenous fertilizer and other nitrogen products
globally. The company's principal nitrogenous fertilizer products
are ammonia, granular urea, urea ammonium nitrate solution (UAN)
and ammonium nitrate (AN).
CF Industries is a leading nitrogen fertilizer producer in North
America. The company operates two of the largest fertilizer
complexes in North America, one in Donaldsonville, Louisiana, U.S.
and the other in Medicine Hat, Alberta, Canada. Roughly 85% of its
total sales in 2013 came from the nitrogen business while the
remaining 15% derived from the phosphate fertilizer business. The
company completed the divestment of its phosphate unit to The
Mosaic Company (MOS) in March 2014.
The Terra Acquisition
In April 2010, CF Industries finally acquired the long chased
after rival Terra Industries for $4.7 billion. With the
acquisition, the company has become the global leader in the
nitrogen fertilizer industry and has expanded geographically. In
the Terra acquisition, CF Holdings issued an aggregate of 9.5
million shares of its common stock and paid an aggregate of $3.7
billion in cash. The acquisition added the following new
Five nitrogen fertilizer manufacturing facilities located in
Port Neal, Iowa Courtright, Ontario Yazoo City, Mississippi
Woodward, Oklahoma and Donaldsonville, Louisiana, adjacent to the
CF Industries Donaldsonville facility.
A 75.3% interest in Terra Nitrogen Company, a publicly traded
limited partnership, which through its subsidiary Terra Nitrogen
Limited Partnership operates a nitrogen fertilizer manufacturing
facility in Verdigris, Oklahoma.
A 100% economic interest in the largest nitrogen fertilizer
complex in Canada (which it operates in Medicine Hat, Alberta
through Canadian Fertilizers Limited (CFL), a consolidated variable
A 50% interest in Point Lisas Nitrogen Limited, or Point Lisas,
an ammonia production joint venture located in Trinidad serving
international nitrogen markets.
A 50% interest in GrowHow UK Limited, a nitrogen products
production joint venture in the UK. The joint venture serves the
British agricultural and industrial markets.
A 50% interest in KEYTRADE AG (Keytrade), a global fertilizer
trading company headquartered near Zurich, Switzerland.
Disposal of Phosphate Business
CF Industries, in October 2013, signed a definitive agreement to
sell its phosphate mining and manufacturing business to fertilizer
producer Mosaic for $1.4 billion in cash (including $200 million to
fund CF Industries' asset retirement obligation escrow). The
transaction was closed in March 2014.
Under the deal, CF Industries disposed the Hardee County
phosphate rock mine, the Plant City phosphate complex, an ammonia
terminal, phosphate warehouse and dock at the Port of Tampa and the
site of the former Bartow phosphate complex to Mosaic. The
facilities acquired by Mosaic currently produce roughly 1.8 million
tons of phosphate fertilizer per year.
CF Industries and Mosaic also entered into a long-term ammonia
supply agreement, under which, the former agreed to supply ammonia
to Mosaic from its Donaldsonville, LA, nitrogen complex and its 50%
owned Point Lisas Nitrogen Ltd. (PLNL) facility in the Republic of
Trinidad and Tobago.
Under the Donaldsonville Ammonia Agreement, CF Industries will
supply between 600,000 and 800,000 tons of ammonia per year for up
to 15 years, which is expected to begin by 2017. The ammonia to be
supplied will be used for phosphate production and its price will
depend on the cost of natural gas delivered to Donaldsonville.
Pricing of ammonia, under the Trinidad ammonia agreement, will be
in sync with the existing agreement under which CF Industries
purchases ammonia from PLNL. CF Industries has commenced ammonia
shipments from its operations in Trinidad.
CF Industries Holdings, Inc. (CF): Read the Full
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