While the Alberta flood might just be one of Canada’s most expensive natural disasters, leading fertilizer company CF Industries Holdings, Inc. (CF - Analyst Report) had on Jun 21 temporarily shut its nitrogen fertilizer complex at Medicine Hat, Alberta, Canada as a precautionary measure.
Medicine Hat is Canada’s largest nitrogen fertilizer complex. It produces anhydrous ammonia and urea. The complex ships approximately 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, which draws river water for plant’s operations, is near the bank of River South Saskatchewan and within the area that is threatened by high water levels.
CF Industries’ decision to temporarily halt productions is to protect the plant and the equipments in the pump house. CF Industries will inform its customers about when the company plans to re-start productions and deliveries from the plant.
CF Industries, which is among the prominent players in the fertilizer industry along with Potash Corp of Sakatchewan Inc. (POT - Analyst Report), Agrium Inc. (AGU - Analyst Report) and CVR Partners, LP (UAN - Snapshot Report), 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 short-term Zacks Rank #3 (Hold).