UPDATE 2-CF Industries raises dividend, sets share buyback

Wed Aug 6, 2014 5:25pm EDT

(Adds details of profit drop, sales)

By Rod Nickel

Aug 6 (Reuters) - U.S. fertilizer producer CF Industries on Wednesday reported a 37 percent drop in second-quarter profit and said it would boost its dividend and buy back $1 billion worth of shares.

Deerfield, Illinois-based CF, the world's second-biggest producer of nitrogen fertilizer, this year has faced higher costs for natural gas - a key input in nitrogen fertilizer production - and lower prices for its biggest-selling products, pinching its margins.

Longer term, CF expects global population growth and a move to higher protein diets to drive demand for more grain and generate cash for the company. It said it would boost its quarterly dividend by 50 percent to $1.50.

Net earnings fell to $312.6 million, or $6.10 per share, from $498.2 million, or $8.38 per share, a year earlier.

Net sales for the company dropped 14 percent to $1.47 billion.

Analysts had on average expected CF to earn $6.71 a share on sales of $1.344 billion, according to Thomson Reuters I/B/E/S.

CF's net sales of nitrogen fertilizers for the quarter totaled $1.4 billion, down 5 percent from a year earlier.

The company's average selling price for ammonia fell 23 percent during the quarter to $544 per ton, while the price of UAN (urea ammonium nitrate) dropped 12 percent year over year to $299 per ton. Ammonia sales volume jumped 33 percent to 1.1 million tons, because of high inventories weighing down prices and favorable weather conditions allowing farmers to apply fertilizer to fields.

CF said it expected strong ammonia demand for the autumn, the other busy season for U.S. fertilizer use.

In March, CF Industries sold its phosphate business to fellow U.S. fertilizer producer Mosaic Co for $1.4 billion to focus on its core nitrogen fertilizer products.

The company is carrying out a $3.8 billion expansion of nitrogen fertilizer production sites in Louisiana and Iowa, and said the projects are on time and on budget. (Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Steve Orlofsky)

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