Demand, prices down | Nitrogen, potash and phosphate sales all dipped, reducing earnings industry wide
REUTERS — Fertilizer companies Agrium, Mosaic and CF Industries all reported sharply lower third quarter profits last week and outlooks for weak results into next year.
Uncertainty in fertilizer markets, combined with a late North American growing season, caused many buyers to delay crop nutrient purchases, said Mike Wilson, Agrium’s chief executive officer.
As well, potash prices have sagged since a feud broke out between two major potash producers in the former Soviet Union this summer. Russia’s Uralkali OAO and Belarus’s Belaruskali had co-operated in an export cartel, but that association broke up, leading to an increased amount of potash hitting the market at lower prices.
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CF Industries said its results were weakened by buyer expectations that prices will fall further and competition from a high volume of Chinese nitrogen exports.
These various factors contributed to a 41 percent reduction in Agrium’s net earnings for the third quarter to $76 million, or 52 cents per share, compared with $129 million, or 80 cents per share, a year ago.
At Mosaic, net earnings for the third quarter fell 70 percent to $124 million, or 29 cents per share, from $417 million, or 98 cents per share, a year earlier.
At CF Industries, net earnings for the third quarter fell 42 percent to $234.1 million, or $4.07 per share, from $403.3 million, or $6.35 per share, a year ago,
At Agrium, wholesale sales of nitrogen, potash and phosphate de-creased by 24 percent to $752 million because of lower realized sales prices across all products and plant outages, the company said.
Mosaic sold less phosphate and potash during the quarter than it did a year earlier and at lower prices.
Its average price for diammonium phosphate for the quarter was $436 per tonne, down from $533 last year, and for potash was $342, down 24.5 percent from a year earlier.
CF Industries said the average price of its granular urea nitrogen fertilizer fell 28 percent to $338 per tonne.
Mosaic plans to run its potash mines below 65 percent of capacity overall in the fourth quarter, allowing for maintenance at its Esterhazy, Sask., mine, and will run its phosphate operations at about 80 percent of capacity.
Wilson said breakdowns and repairs at Agrium’s Redwater and Carseland nitrogen facilities in Alberta reduced product availability in the third quarter and will also affect fourth quarter sales volumes. The company will reduce fourth quarter earnings by about 20 cents per share, he added.
Mosaic CEO Jim Prokopanko said the company is potentially interested in buying other North American potash assets.
“We’re always interested in expand-ing top-line growth. At the right valuations, those kind of combinations might prove of interest,” he said Nov. 5 when asked about Mosaic’s potential interest in U.S. producer Intrepid Potash Inc. or a potash mine under construction in Saskatchewan by Germany’s K+S AG.
The following day, K+S said it was not looking for partners for its $4.1 billion Legacy potash mine.
“As we have stressed before, we are fully committed to this project and will be able to shoulder it on our own. We are not considering a sale or a partnership,” a K+S spokesperson said.
CF Industries said in late October that it would sell its phosphate business to Mosaic for $1.2 billion, allowing it to focus on its core nitrogen business. The deal increased Mosaic’s position as the world’s largest phosphate producer.
CF also agreed to a long-term ammonia supply agreement with Mosaic, strengthening CF’s confidence in its expansion at a nitrogen complex in Donaldsonville, Louisiana.
In October, Potash Corp reported a 45 percent drop in third quarter profits to $356 million.
