CF Industries (CF) reported a roughly 44% fall in its profit in third-quarter 2014 to $130.9 million or $2.62 per share from $234.1 million or $4.07 per share a year ago, hurt by a double-digit fall in its sales. Earnings per share missed the Zacks Consensus Estimate of $3.41.
Sales slipped 16% year over year to $921.4 million in the quarter and missed the Zacks Consensus Estimate of $930 million.
Segmental Performance
Sales for the Ammonia segment increased 9.8% year over year to $232.1 million. Ammonia sales volume increased on the back of higher industrial sales, mainly due to the supply agreement with Mosaic (MOS).
Sales from the Granular Urea segment increased 7.7% year over year to $199.6 million. Sales volume also increased due to healthy demand, mainly for wheat in the Southern Plains region.
Urea ammonium nitrate (UAN) segment sales edged down 0.2% from the prior-year quarter to $392.9 million. However, sales volume increased due to increased sales from the company’s large order book and its move pursue export opportunities to optimize system balance.
Other segment’s sales volume increased due to higher diesel exhaust fluid sales and strong late season agricultural demand for ammonium nitrate application. Net sales for the segment increased 12.4% to $96.8 million.
The Phosphate segment ceased to report results starting third-quarter 2014 due to the completion of sale of the remaining inventory during the previous quarter. The phosphate business was sold to Mosaic (completed in Mar 2014).
Financials
CF Industries exited the quarter with cash and cash equivalents of $2.7 billion, up around 17% from $2.3 billion as of Sep 30, 2013. Long-term debt jumped 48% year over year to $4.6 billion.
Outlook
CF Industries, a prominent fertilizer company along with Potash Corp. (POT) and Agrium (AGU), is optimistic about the fourth quarter of 2014 as well as 2015. The company expects strong nitrogen demand associated with 90 million acres of corn expected to be planted in 2015.
The company’s current low ammonia inventory coupled with planned turnaround activity and unplanned outages may affect its total availability for the fall season which is expected to restrict fourth-quarter ammonia sales volumes, excluding sales to Mosaic.
Strong North American demand for urea is expected for 2015, due to the significant corn and wheat acres expected to be planted next year, which is expected to result in price appreciation during the spring application season in 2015.
The demand outlook for North American consumption remains strong, which along with a continued balanced global nitrogen supply situation makes CF Industries optimistic about robust revenue generation in 2015.
CF Industries also made significant progress on its two capacity expansion projects during the reported quarter, which will increase its annual nitrogen production capacity and cash flow generation by 25% when the plants come on-line (expected in 2015 and 2016). The company anticipates total capital expenditures of roughly $2 billion in 2014, of which, $1.6 billion has been earmarked for capacity expansion projects and $0.4 billion for sustaining and other capital expenditures.
The company’s long-term plan is to invest in high-return projects and return excess cash to shareholders through dividends and share repurchase programs.
CF Industries currently carries a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment