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CF Industries (CF) Misses on Q2 Earnings, Revenues Beat

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CF Industries (CF - Free Report) reported a roughly 37 % fall in its profit for second-quarter 2014 to $312.6 million or $6.10 per share from $498.2 million or $8.38 per share a year ago. Earnings per share missed the Zacks Consensus Estimate of $6.46.

Sales slipped around 14% year over year to $1,472.7 million in the quarter, but exceeded the Zacks Consensus Estimate of $1,322 million.



Segmental Performance

Sales from the Nitrogen Segment fell 5% year over year to $1449.4 million in the quarter as lower average selling prices more than offset an increase in tons of product sold. Gross margin slid 31% to $588.7 million due to lower selling prices, a spike in natural gas costs and increased cost absorption due to unscheduled down time including about $20 million related specifically to the Woodward, OK complex.  

Ammonia sales volume increased 33% year over year to 1,112,000 tons due to favorable weather conditions that led to a prolonged agricultural application window and higher industrial sales, partly resulting from the supply deal with The Mosaic Company (MOS - Free Report) .

However, granular urea sales volume decreased 4% due to lower inventory availability. Urea ammonium nitrate (UAN) sales volume decreased 6% to 1,526,000 tons due to strong ammonia and urea shipments along with reduced UAN production.

Ammonia average selling prices decreased 23% year over year to $544 per ton due to high global supply and the impact of high North American ammonia inventories in 2014.


In Mar 2014, CF Industries sold its phosphate business to Mosaic for $1.4 billion to focus on its core nitrogen fertilizer products. The company recognized revenues in the reported quarter from sales of phosphate inventory that remained in its distribution system after closing the sale.


CF Industries exited the quarter with cash and cash equivalents of $2.2 billion, up around 16% from $1.9 billion as of Jun 30, 2013. Long-term debt jumped 48% year over year to $4.6 billion.

CF Industries completed its  $3 billion share repurchase program with the repurchase of 3.1 million shares during the quarter for $756.8 million. The company completed the authorization before its termination date of Dec 31, 2016.  CF Industries announced that it will buy back an additional $1 billion worth of shares through Dec 31, 2016, as a part of its strategy to return excess cash to shareholders.


During the quarter, CF Industries’ board of directors approved a 50% increase in the company’s quarterly cash dividend from $1.00 to $1.50 per share.


CF Industries expects to benefit from a number of factors supporting its growth and potential to generate sustainable cash flows. A rise in global population, transition toward higher protein diets and continued use of crops as a source of renewable fuels are increasing the need for grain and plant nutrients.

The company expects over 90 million acres of corn to be planted in 2015 and expects robust nitrogen demand during the second half of 2014.

CF Industries also made significant progress on its two capacity expansion projects during the reported quarter, which will increase its annual nitrogen production capacity by 25% when the plants come on-line (expected in 2015 and 2016). The company anticipates total capital expenditures of roughly $2.2 billion in 2014 (down from previous expectation of $2.5 billion), of which, $1.7 billion has been earmarked for capacity expansion projects.

CF Industries is a Zacks Rank #3 (Hold) stock.

Some other stocks worth considering in the fertilizer industry include Potash Corp. of Saskatchewan Inc. and Yara International ASA . Both of them hold a Zacks Rank #2 (Buy).

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