February 19, 2014
CF Industries reports 10% decline in Q4 2013 sales
CF Industries Holdings, Inc. reported fourth quarter 2013 earnings before interests, taxes, depreciation and amortisations of (EBITDA) of US$643.0 million and net earnings attributable to common stockholders of US$325.8 million, or US$5.71 per diluted share.
Net sales in the fourth quarter of 2013 were US$1.3 billion, down 10% from US$1.5 billion in the same period last year. Full year 2013 EBITDA was US$2.7 billion and net earnings attributable to common stockholders was US$1.5 billion, or US$24.74 per diluted share, compared to EBITDA of US$3.3 billion and net earnings attributable to common stockholders of US$1.8 billion, or US$28.59 per diluted share, for 2012.
Nitrogen prices were down significantly for the full year 2013 compared to 2012 due to weaker demand in important agricultural regions and higher global supply. Global nitrogen prices found a floor in October as represented by US Gulf urea prices of around US$285 per tonne. Prices moved in a narrow band until rebounding in December to around US$330 per tonne. Increases in urea and urea ammonium nitrate (UAN) prices coincided with the close of the low export tariff season for Chinese urea producers and growing recognition of low nitrogen industry inventories in several agricultural regions.
Idled production due to nitrogen prices being below the cash costs of producers in areas such as Eastern Europe and production issues in several areas such as Algeria, Egypt, Iran, Pakistan and Trinidad also contributed to a tightening global supply and demand balance. While producers in Ukraine stand to benefit from a reduction in the cost of natural gas from Russia, Chinese producers utilising anthracite coal continue to be the basis for world urea floor prices.
Even with global urea prices during the second half of the year declining to the estimated break-even economics of marginal producers, CF Industrieswas able to generate a significant level of EBITDA thanks to the structural advantage provided by low cost North American natural gas and the company''s extensive network of plant and logistical assets. The company made progress during and subsequent to the quarter on several key priorities oriented toward maximising the value of the business. The company announced strategic agreements with the Mosaic Company including an agreement to sell the phosphate business for US$1.4 billion and a long-term ammonia supply contract. Subsequent to the quarter end, the company also announced a long-term agreement with Orica to supply ammonium nitrate products.
The long-term outlook for CF Industries is positive as a number of factors support the company''s growth and cash generation potential. Global population growth, higher protein diets and use of crops as a source of renewable fuels all are driving demand for more grain. The limited ability to bring into production additional arable land globally requires increased yields. The need for increased yields drives demand for nitrogen fertiliser, the nutrient that must be applied every year to promote plant growth.
The company expects after-tax proceeds of roughly US$1.0 billion following the close of the sale of the phosphate business to the Mosaic Company in the first half of 2014. The company also intends to raise up to US$1.5 billion of additional long-term debt in early 2014. These new borrowings, in addition to cash from operations and proceeds from the sale of the phosphate business, will fund the company''s capital expenditures, working capital, dividends and additional share repurchases.
For 2014, the company expects total capital expenditures of approximately US$2.5 billion. This consists of US$2.0 billion for the capacity expansion projects and US$0.5 billion of sustaining and other capital expenditures. These amounts exclude the phosphate business.