February 21, 2012
CF Industries reports higher 2011 Q4 net earnings
The 2011 fourth quarter net earnings which are attributable to common stockholders of CF Industries Holdings increased to US$438.9 million or US$6.66 per diluted share, compared to earnings of US$200.3 million, or US$2.78 per diluted share, in the fourth quarter of 2010.
In a release on February 15, the Company noted that fourth quarter pre-tax results included US$49.7 million of non-cash mark-to-market losses on natural gas derivatives, which reduced after-tax earnings per diluted share by US$0.47.
Net sales in the fourth quarter were US$1.7 billion, 39% higher than the 2010 fourth quarter sales of US$1.2 billion due to higher realised selling prices. Total sales volume of 3.8 million tonnes was down 44,000 tonnes compared to the fourth quarter of 2010.
Fertiliser markets experienced normal seasonal demand softness in late November and into December. This effect was compounded by global economic uncertainty, especially in Europe, which led to steep declines in the prices of grains and crop nutrients. By the end of the quarter, grain and oilseed prices had rebounded due to very dry weather in Argentina and Brazil. Nitrogen and phosphate prices also found their respective floors and moved higher at the end of the year as the spring application and planting seasons approached.
CF Industries entered the fourth quarter of 2011 with a large order book for the quarter reflecting attractive forward prices contracted earlier in the year. These orders allowed the company to bridge the extended lull in demand and await patiently an expected rebound in prices due to low grain stocks and compelling farm economics. In addition to limiting the amount of low-priced business transacted, this approach also caused a draw-down in the forward order book and corresponding customer deposits.
Earnings attributable to common stockholders in 2011 totalled US$1.5 billion, or US$21.98 per diluted share, compared to US$349.2 million, or US$5.34 per diluted share, in 2010. Full-year pre-tax results included US$77.3 million of non-cash mark-to-market net losses on natural gas derivatives, a US$34.8 million impairment charge due to the permanent shutdown and removal of the methanol plant at the company''s Woodward, Oklahoma, nitrogen complex, US$34.5 million of gains on asset dispositions, US$24.3 million in business combination costs and US$1.2 million in Peru project development costs.
Teamwork, timely decision making, flexibility and previous investments in production and distribution capabilities helped company employees meet commitments to satisfy customer needs in 2011. Net sales rose 54%, from US$4.0 billion in 2010 to US$6.1 billion in 2011, with increases in both price and volume. For the year, CF Industries had capital expenditures of US$247.2 million.
During the fourth quarter of 2011, CF Industries shipped 3.3 million tonnes of ammonia, urea, urea ammonium nitrate solution (UAN), ammonium nitrate (AN) and other nitrogen products, about equal to the sales volume in the year-ago quarter. The full year 2011 marked the first time the company sold 13.0 million tonnes of nitrogen products in a year. Five of the company''s seven nitrogen production complexes in North America set annual production records in one or more of their plants.
Safety remains CF Industries'' highest priority. The company implemented a new programme in 2011 to identify record and resolve potential safety hazards before they result in an accident, and experienced 83 fewer lost work days than in the previous year.
At December 31, 2011, CF Industries'' cash, cash equivalents and short-term investments totalled US$1.2 billion. As previously announced, the company repurchased 0.9 million of its common shares in the month of October at an average price of US$127.32. These transactions brought the total amount repurchased under the US$1.5 billion programme, which was approved by the company''s board of directors in August 2011, to 6.5 million shares at a cost of US$1.0 billion. No further repurchases were performed.
EBITDA of US$870.6 million was a fourth quarter record. Operating cash flow of US$123.8 million reflected a US$621 million reduction in customer deposits that resulted from the company''s decision to shrink its forward order book rather than accept temporarily reduced forward prices for its products. Order activity since year-end has resulted in a solid and expanding order book and a growing customer deposit balance.
On February 3, CF Industries'' Board of Directors announced that it had declared the regular quarterly dividend of US$0.40 per common share. The dividend will be paid on February 29, to stockholders of record as of February 14. Management projects capital expenditures of approximately US$400 million in 2012, higher than 2011 because of an increased pace of planned maintenance and some capital spending in support of expansion plans at existing facilities, which the company announced in August 2011. Front-end engineering and design studies for expansion projects are in process and should lead to investment decisions in the second half of 2012.
CF Industries Holdings, through its subsidiaries, is a company focused on nitrogen and phosphate fertilizer manufacturing and distribution, serving both agricultural and industrial customers.