CF Industries Holdings Inc.
's (
CF
) second-quarter 2012 adjusted earnings (excluding one-time gains
and expenses) of $8.71 per share missed the Zacks Consensus
Estimate of $8.92.
After including one-time items, the company earned $9.31 a share
in the quarter, up 37.9% from $6.75 in the year-ago quarter. Lower
natural gas costs as well as share repurchases during the quarter
aided the results.
Total sales in the quarter amounted to $1,735.6 million, down 3.7%
from $1,801.7 million in the prior-year quarter. Sales missed the
Zacks Consensus Estimate of $1,933 million. Lower volumes and lower
phosphate product prices arising from soft global demand led to the
decline in sales. Total sales volumes decreased 7% year over year
to 4 million tons.
Costs and Margins
Cost of sales amounted to $692.3 million compared with $934.3
million in the year-earlier quarter. Gross profit increased sharply
by 20.3% to $1,043.3 million in the quarter. Selling, general and
administrative expenses increased 30.3% to $41.3 million from $31.7
million in the year-ago quarter. The company reported an operating
income of $1,005 million, up 19% from $844.7 million in the
prior-year quarter.
Segmental Performance
Nitrogen Segment:
Sales were flat year over year at $1.5 billion. Gross margins
spiked 27% to $992.9 million. Total sales volumes were 3.5 million
tons in the quarter compared with 3.8 million tons in the year-ago
quarter. The segment benefited from a huge supply of natural gas,
driven by an increase in production of North American shale gas.
The realized natural gas price in the quarter declined to $3.13 per
MMBtu from $4.32 a year ago, due to continued growth in North
American natural gas production, and high storage inventory.
Phosphate Segment:
Sales declined 22% year over year to $231.5 million. Gross margin
declined 41% to $50.4 million due to lower average selling prices
and sales volumes. Volumes sold in the quarter were 493 thousand
tons, down from 538 thousand tons a year ago, hurt by the start-up
of production of the company's new MAP-S product during the quarter
and building MAP-S inventory for future sale. The average selling
prices of diammonium phosphate (DAP) and monoammonium phosphate
(MAP) were $472 and $464, respectively, down 15% and 14.7%,
respectively, from the prior-year quarter.
Financial Position
Cash and cash equivalents totaled $1.38 billion as of June 30,
2012, compared with $1.21 billion as of December 31, 2011.
Long-term debt stood at $1.60 billion as of June 30, 2012, which
was almost in line with $1.61 billion as of December 31, 2011.
Outlook
CF Industries remains positive for the remainder of 2012 and
2013 based on high corn planting expectations for 2013, strong
global demand, tight domestic nitrogen supply and favorable natural
gas costs. The company expects capital expenditures to be around
$400 million in 2012.
CF Industries competes with
Agrium Inc.
(
AGU
) and
Potash Corp. of Saskatchewan Inc.
(
POT
). Currently, the company maintains a Zacks #3 Rank, which
translates into a short-term (1 to 3 months) "Hold" rating. We have
a long-term recommendation of "Neutral" on its shares.
AGRIUM INC (AGU): Free Stock Analysis Report
CF INDUS HLDGS (CF): Free Stock Analysis Report
POTASH SASK (POT): Free Stock Analysis Report
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