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CF Industries (CF) Q2 Earnings Miss Estimates, Sales Beat
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CF Industries (CF - Free Report) posted a profit of $47 million or 20 cents per share in the second quarter of 2016, a roughly 86.6% plunge from $352 million or $1.49 per share recorded a year ago.
Barring one-time items, earnings were 33 cents per share for the quarter, down from $1.61 per share recorded a year ago. The figure also missed the Zacks Consensus Estimate of 68 cents.
Sales fell roughly 13.5% year over year to $1,134 million in the quarter, but surpassed the Zacks Consensus Estimate of $1,087 million. Sales declined in the quarter due to reduced average selling prices across all segments, partly offset by higher sales volume, including the impact from the company's capacity expansion projects and the addition of CF Fertilisers UK.
Sales for the Ammonia segment plunged roughly 40.2% year over year to $358 million in the reported quarter. Ammonia sales volumes fell 38.8% to 0.87 million tons year over year. Average selling prices declined 27.3% to $411 per ton due to an increase in global nitrogen supply resulting from capacity additions along with lower energy and ocean freight costs.
Sales for the Granular Urea segment rose 13.7% year over year to $240 million. Sales volumes in this segment surged 62% to 0.97 million tons, backed by increased production as the new urea plant in Donaldsonville, LA came online. Average selling prices per ton for granular urea declined 29.8% to $247 per ton owing to higher global nitrogen supply, driven by capacity additions along with lower energy and ocean freight costs.
Sales in the UAN (urea ammonium nitrate solution) segment went down 9.1% year over year to $370 million. UAN sales volumes increased 21.8% to 1.83 million tons due to the company’s UAN plant in Donaldsonville, LA starting production in the first quarter as well higher demand resulting from favorable application conditions late in second-quarter 2016. Abundant global supply contributed to 25.5% lower pricing in the quarter.
Sales in the AN (ammonium nitrate) segment surged 87.5% year over year to $90 million. Sales volumes soared 102.2% due to the addition of CF Fertilizers UK sales. Average selling prices declined 7% year over year to $199 per ton.
The Other segment’s sales climbed 65.2% year over year to $76 million. Sales volumes were 92.8% higher in the reported quarter as a result of the acquisition of CF Fertilizers UK. Average selling prices declined 14.1% to $177 per ton due to higher global nitrogen supply.
Financials
CF Industries ended the second quarter of 2016 with cash and cash equivalents of $2,008 million, up roughly 147.9% year over year. Long-term debt was $5,540 million, up 20.6% year over year.
In Jul 2016, CF Industries amended its senior unsecured revolving credit agreement to reduce the size of the facility from $2 billion to the $1.5 billion in place prior to the announcement of the OCI transaction, and to raise the maximum total net leverage covenant from third-quarter 2016 through fourth-quarter 2017.
On Jul 31, 2016, the Board of Managers of CF Industries Nitrogen, LLC approved a distribution payment to CHS of roughly $75 million, which was paid on Aug 1.
Outlook
CF Industries, which is among the prominent fertilizer companies along with Potash Corporation of Saskatchewan Inc. , Agrium Inc. and The Mosaic Company (MOS - Free Report) , expects abundant nitrogen supply to continue weighing on global pricing as new ammonia, urea and UAN production come online in the second half of 2016.
The company remains optimistic about the demand outlook for the 2017 fertilizer season as major nitrogen-consuming markets are expected to see continued rise in product applications.
Additional urea and UAN production capacity in North America is slated to come on stream in the first or second quarter of 2017, with global capacity additions declining significantly thereafter. The company thus expects a continued challenging price environment through 2017, which will economically pressure high-cost producers, resulting in a reduction in exports, additional production curtailments and permanent shutdowns.
CF Industries currently carries a Zacks Rank #5 (Strong Sell).
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CF Industries (CF) Q2 Earnings Miss Estimates, Sales Beat
CF Industries (CF - Free Report) posted a profit of $47 million or 20 cents per share in the second quarter of 2016, a roughly 86.6% plunge from $352 million or $1.49 per share recorded a year ago.
Barring one-time items, earnings were 33 cents per share for the quarter, down from $1.61 per share recorded a year ago. The figure also missed the Zacks Consensus Estimate of 68 cents.
Sales fell roughly 13.5% year over year to $1,134 million in the quarter, but surpassed the Zacks Consensus Estimate of $1,087 million. Sales declined in the quarter due to reduced average selling prices across all segments, partly offset by higher sales volume, including the impact from the company's capacity expansion projects and the addition of CF Fertilisers UK.
Segment Review
Sales for the Ammonia segment plunged roughly 40.2% year over year to $358 million in the reported quarter. Ammonia sales volumes fell 38.8% to 0.87 million tons year over year. Average selling prices declined 27.3% to $411 per ton due to an increase in global nitrogen supply resulting from capacity additions along with lower energy and ocean freight costs.
Sales for the Granular Urea segment rose 13.7% year over year to $240 million. Sales volumes in this segment surged 62% to 0.97 million tons, backed by increased production as the new urea plant in Donaldsonville, LA came online. Average selling prices per ton for granular urea declined 29.8% to $247 per ton owing to higher global nitrogen supply, driven by capacity additions along with lower energy and ocean freight costs.
Sales in the UAN (urea ammonium nitrate solution) segment went down 9.1% year over year to $370 million. UAN sales volumes increased 21.8% to 1.83 million tons due to the company’s UAN plant in Donaldsonville, LA starting production in the first quarter as well higher demand resulting from favorable application conditions late in second-quarter 2016. Abundant global supply contributed to 25.5% lower pricing in the quarter.
Sales in the AN (ammonium nitrate) segment surged 87.5% year over year to $90 million. Sales volumes soared 102.2% due to the addition of CF Fertilizers UK sales. Average selling prices declined 7% year over year to $199 per ton.
The Other segment’s sales climbed 65.2% year over year to $76 million. Sales volumes were 92.8% higher in the reported quarter as a result of the acquisition of CF Fertilizers UK. Average selling prices declined 14.1% to $177 per ton due to higher global nitrogen supply.
Financials
CF Industries ended the second quarter of 2016 with cash and cash equivalents of $2,008 million, up roughly 147.9% year over year. Long-term debt was $5,540 million, up 20.6% year over year.
In Jul 2016, CF Industries amended its senior unsecured revolving credit agreement to reduce the size of the facility from $2 billion to the $1.5 billion in place prior to the announcement of the OCI transaction, and to raise the maximum total net leverage covenant from third-quarter 2016 through fourth-quarter 2017.
On Jul 31, 2016, the Board of Managers of CF Industries Nitrogen, LLC approved a distribution payment to CHS of roughly $75 million, which was paid on Aug 1.
Outlook
CF Industries, which is among the prominent fertilizer companies along with Potash Corporation of Saskatchewan Inc. , Agrium Inc. and The Mosaic Company (MOS - Free Report) , expects abundant nitrogen supply to continue weighing on global pricing as new ammonia, urea and UAN production come online in the second half of 2016.
The company remains optimistic about the demand outlook for the 2017 fertilizer season as major nitrogen-consuming markets are expected to see continued rise in product applications.
Additional urea and UAN production capacity in North America is slated to come on stream in the first or second quarter of 2017, with global capacity additions declining significantly thereafter. The company thus expects a continued challenging price environment through 2017, which will economically pressure high-cost producers, resulting in a reduction in exports, additional production curtailments and permanent shutdowns.
CF INDUS HLDGS Price, Consensus and EPS Surprise
CF INDUS HLDGS Price, Consensus and EPS Surprise | CF INDUS HLDGS Quote
CF Industries currently carries a Zacks Rank #5 (Strong Sell).
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