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CF Industries Reopening Alberta Plant - Analyst Blog

Posted: 7/2/2013 2:20:00 PM
Referenced Stocks: AGU;CF;MOS;POT

Leading fertilizer company CF Industries Holdings, Inc. ( CF ) is all set to resume its operations at its nitrogen fertilizer complex located in Medicine Hat, Alberta, Canada. Productions at the complex were temporarily halted from Jun 23 as a precautionary measure to avoid the flood that hit Alberta. The flood was considered to be one of the most catastrophic natural disasters in the history of Alberta.

Medicine Hat is Canada's largest nitrogen fertilizer complex. It produces anhydrous ammonia and urea. The complex ships roughly 1.5 million tons of fertilizer each year by rail and truck, serving northern tier U.S. Corn Belt states and western Canadian markets.

The Alberta complex is nearly 200 feet above the normal river level. However, the pump house containing equipments, which draws river water for plant's operations, is near the bank of River South Saskatchewan and within the area that was threatened by high water levels.

The pump house equipments have now been reinstalled and are ready to use. They were earlier relocated to higher ground levels to prevent them from the flood. CF Industries is now contacting its customers to inform them about the delivery status.

CF Industries, which is among the prominent players in the fertilizer industry along with Potash Corp of Sakatchewan Inc. ( POT ), Agrium Inc. ( AGU ) and The Mosaic Company ( MOS ), posted its first-quarter 2013 results on May 8. The company's adjusted earnings for the first quarter beat the Zacks Consensus Estimate. However, revenues fell at a double-digit clip on declines across nitrogen and phosphate businesses and missed expectations. CF Industries is optimistic about the second quarter based on higher grain prices.

CF Industries is benefiting from high global prices for commodities, declining natural gas costs in North America and a solid start to the domestic planting season. Moreover, the company has a strong cash flow profile, which allows it to return value to shareholders and invest in growth initiatives.

However, CF Industries faces intense pricing competition from both domestic and foreign fertilizer producers. It is also susceptible to cyclical and seasonal changes. Moreover, the prices of its products are highly sensitive to demand and supply. CF Industries is also exposed to volatility in raw material costs and has significant debt.

CF Industries currently retains a Zacks Rank #3 (Hold).

AGRIUM INC (AGU): Free Stock Analysis Report

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