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$CF 2Q15 Q&A: Isaacson of Scotiabank asked about 2017 market share for nitrogen consumption in North America. Tony answered, CF doesn’t look at market share; not a relevant measure. Based on everything under construction today, North America is going to continue to be an important marketplace bringing in about 25% of total nitrogen requirement.
$CF announced early tender results of the tender offer by its subsidiary CF Industries Inc. (CFI) to buy for cash CFI's 7.125% senior notes due 2020 and the increase by CFI in maximum aggregate of notes subject to tender offer from $200MM to $299.98MM. The aggregate of the notes that were validly tendered and not validly withdrawn is $565.92MM.
In China, $CF expects probably a $20-30 cost increase directly reflected in urea as coal prices have gone up even before winter. This combined with low-production capacity utilization puts production around 60-61MM metric tons. The company sees export market of 4-5MM metric tons and domestic market of around 56MM metric tons.
$CF said that compared to the 2Q starting point, prices, particularly for urea improved dramatically in August and September. Additionally, the company's team took advantage of rising prices and offshore demand to sell and ship about 300,000 product tons of more than expected.
$CF's urea ammonium nitrate solution sales volume for 3Q17 increased from last year, due to greater customer participation in summer UAN fill program. Ammonium nitrate sales volume increased due to increased demand from all major end uses of the product. Other segment volume rose on higher sales of DEF business.
$CF's Ammonia sales volume for 3Q17 increased from last year, due to additional production volume from the new capacity expansions at Donaldsonville and Port Neal Nitrogen Complexes. Granular urea sales volume increased on additional production volume from the new capacity expansion at Port Neal Nitrogen Complex.
$CF reported a wider loss in 3Q17 due to lower income tax benefit. Net loss widened to $87MM or $0.37 per share from $30MM or $0.13 per share last year. Net sales grew to $870MM from $680MM, on higher sales volumes. Adjusted loss per share was $0.39 per share compared to EPS of $0.13 a year ago.
Fertilizer maker $CF has elected John W Eaves, CEO of Arch Coal Inc, and Michael J Toelle, owner of T&T Farms, as the company’s independent directors. Eaves and Toelle are expected to stand for re-election by stockholders at next year’s AGM.
$CF received federal tax refunds of about $815MM due to carryback of certain federal tax losses from 2016 tax year to prior periods. These tax losses are primarily related to accelerated tax depreciation of its capacity expansion projects that were placed in service in 2016. $CF plans to use proceeds to fund payment of $800MM in debt due in 2018.
$CF said as it is a broadbased company with production and storage assets throughout the Corn Belt, it is able to see positive price realizations at its interior plants. As UAN is produced and consumed in few places, it is not easy to move around as urea. $CF expects to see a correction for UAN pricing later in 2017.
$CF exported a significant amount of product in 1Q17 versus last year. On ammonia, $CF exported to Belgium, Chile, Mexico, Morocco and South Korea for approx. 200,000 tons. On urea ammonium nitrate (UAN), $CF exported to Belgium, Brazil, Chile, Colombia, France, Ireland, Mexico and Peru for a total of about 270,000 tons.
$CF believes inventory levels were higher in China going into spring and these have been worked down. India saw a similar situation with being able to stay out of the market for 7 months using internal production and higher inventory levels. These inventories seem to have been worked off in many places worldwide.
$CF's new capital expenditures for 2017 are expected to be in the range of about $400-450MM for sustaining and other. Additionally, as of Dec. 31, 2016, and as of March 31, 2017, the company had about $183MM in costs accrued but yet unpaid for work completed in 2016 related to the capacity expansion projects.
$CF's sales volumes for 1Q17 were significantly higher compared to 1Q16 as increased supply available for sale met strong early season demand for ammonia and urea ammonium nitrate (UAN) in the Southern Plains and lower Midwest. Also, exports of ammonia and UAN were significantly higher year-over-year.
$CF slipped to a loss in 1Q17 from a profit last year, due to higher costs and expenses. Net loss was $23MM or $0.10 per share compared to a profit of $26MM or $0.11 per share last year. Net sales grew to $1.04Bil from $1.0Bil, as higher sales volumes were partially offset by lower average selling prices. Adjusted EPS decreased to $0.05 from $0.43.
$CF said that 2018 debt retirement of approx. $800MM will be largely funded by the federal and state tax refunds in 3Q17. A reduction in the corporate tax rate levels will benefit the bottom line, $CF said. The border tax will benefit $CF given its manufacturing presence in US and its capability to export products.