February 16, 2010 / 1:17 PM / 9 years ago

UPDATE 5-CF net, sales drop, sees strong spring; shares up

* Q4 EPS $1.04 vs. year-earlier $3.59

* Revenue falls 53 percent

* Yara-Terra deal may put pressure on CF-Agrium saga

* Shares rise 3.7 percent in afternoon trading (Adds Agrium comment; updates stock activity)

By Ernest Scheyder

NEW YORK, Feb 16 (Reuters) - CF Industries Holdings Inc (CF.N) reported sharply lower fourth-quarter profit and revenue on Tuesday, citing weak market conditions, but the fertilizer producer forecast a strong spring planting season, which helped send its shares up 3.7 percent.

The results came a day after Terra Industries Inc TRA.N — formerly the subject of a CF hostile takeover bid — said Norway’s Yara (YAR.OL) would buy it for $4.1 billion cash.

CF had offered nearly the same amount in cash and stock. [ID:nN14179782]

CF executives were “still digesting” the Yara-Terra news and declined to comment, they told investors on a conference call.

The Yara-Terra tie-up — cementing Yara’s position as the world’s largest nitrogen fertilizer producer — may put pressure on Canada’s Agrium Inc AGU.TO to boost its own hostile bid for CF.

That, along with the strong outlook for spring planting, helped to lift CF’s shares 3.7 percent to $104.18 in afternoon trading. The stock had risen as much as $106.98 earlier in the session.

Agrium has offered nearly $45 in cash, plus one Agrium share per CF share, or about $5.3 billion. [ID:nN23151086]

CF has maintained that the bid is “far from compelling.”

Agrium called the Yara-Terra combination “good news” on Tuesday, but said it continues to view its offer for CF as “very compelling.”

“I think Terra recognized that this is a global industry and being a small player in a global industry is tough, and that it makes more sense to be a part of a bigger global organization,” said Richard Downey, the head of investor relations at Calgary-based Agrium. “I think CF will also come to realize that over time.”

Agrium might not have a choice but to strengthen its bid if it does not want to not lose out on explosive growth in the industry, according to Dahlman Rose analyst Charles Neivert.

“It’s going to be hard for (Agrium) to get (CF) at the current price if that’s what they’re intent on,” Neivert told Reuters.


For spring planting, traditionally one of the busiest for the fertilizer industry, CF expects “strong” market conditions, in part because of more acres of corn being planted and the need to replenish soil nutrients.

The company also expects an “expanding margin environment” as selling prices rebound with demand.

“Demand came to life in late November, as purchasers began to focus on the spring season, which promises to be a strong one,” Chief Executive Stephen Wilson said on the conference call. “We’ve been looking forward to the strong market we’re now enjoying for some time.”

Grain and fertilizer prices peaked in mid-2008, but the global economic crisis and collapse in credit markets hurt fertilizer demand and pricing in 2009. Analysts also expect a major rebound in demand in 2010 as farmers rush to replenish their soil nutrient levels.


Deerfield, Illinois-based CF ended the fourth quarter with about $1.2 billion in cash and investments. Executives declined to say whether the company would use the funds for another acquisition offer. They said they would investigate “further distributions of cash” to stockholders.

For the fourth quarter, net income fell to $51.4 million, or $1.04 per share, from $190.1 million, or $3.59 per share, a year earlier.

Analysts on average expected earnings of $1.15 per share, according to Thomson Reuters I/B/E/S.

Revenue fell 53 percent to $506.7 million. Analysts expected $500.4 million.

During the period, volume rose in the company’s phosphate division and was flat in the nitrogen segment. However, sales, selling prices and margins plunged in both areas.

Nitrogen is considered the most important fertilizer for farmers, while phosphate is generally considered to be the second-most important.

CF blamed a late autumn harvest, which limited fertilizer application, for its quarterly results.

The earnings “were a little weak, but picked up steam at the end of the quarter,” Dahlman Rose’s Neivert said. (Reporting by Ernest Scheyder; Editing by Derek Caney, Maureen Bavdek and Robert MacMillan)

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