We are maintaining our Neutral recommendation on CF Industries.
Profit for the second quarter slid year over year on a double-digit
decline in sales, hurt by lower fertilizer pricing. Earnings missed
the Zacks Consensus Estimate while sales beat. 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 significant debt.
CF Industries Holdings Incorporated (CF), headquartered in
Deerfield, Illinois, is one of the largest manufacturers and
distributors of nitrogenous and phosphatic fertilizer products in
the world. The company's principal products in the nitrogenous
fertilizer business are ammonia, granular urea, urea ammonium
nitrate solution (UAN) and ammonium nitrate (AN). Its main products
in the phosphatic fertilizer business are diammonium phosphate
(DAP) and monoammonium phosphate (MAP).
CF Industries is a leading nitrogen fertilizer producer in North
America. Approximately 85% of its total sales in the year 2013 came
from the nitrogen business and the remaining 15% from the phosphate
fertilizer business. In the nitrogen business, CF Industries
operates two of the largest fertilizer complexes in North America,
one in Donaldsonville, Louisiana, U.S. and the other in Medicine
Hat, Alberta, Canada.
CF Industries is a major manufacturer of phosphate fertilizer
products. Its phosphate fertilizer manufacturing operations are
located in central Florida and consist of a phosphate fertilizer
chemical complex in Plant City, a phosphate rock mine, a
beneficiation plant and phosphate rock reserves in Hardee County
and a deepwater terminal facility in the port of Tampa.
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 The Mosaic Company (MOS) for $1.4 billion in cash
(including $200 million to fund CF Industries' asset retirement
obligation escrow). The company completed the sale in March
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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