August 5, 2010 / 9:37 PM / 9 years ago

UPDATE 1-CF Industries Q2 profit harmed by Terra costs

* Q2 adj EPS $2.73 vs. Street forecast $3.16

* Revenue up 32 percent to $1.3 billion

* Strong nitrogen sales; weak phosphate results

* Sees strong fall fertilizer season

* Shares down 3.3 percent after-hours

By Ernest Scheyder

NEW YORK, Aug 5 (Reuters) - Fertilizer producer CF Industries Holdings Inc (CF.N) posted a lower-than-expected profit on Thursday as integration costs for recently acquired rival Terra Industries TRAQP.PK drained profit, sending shares down more than 3 percent in after-hours.

The company spent more than $113 million during the period to integrate Terra, which it bought in March for more than $4.6 billion. Executives said the integration is on track and delivering the cost savings it had expected. [ID:nN07256392]

For the quarter ended June 30, the company posted net income of $105.1 million, or $1.54 per share, compared with $213 million, or $4.33 per share, in the year-ago period.

Excluding one-time items, the company posted profit of $2.73 per share. By that measure, analysts expected earnings of $3.16 per share, according to Thomson Reuters I/B/E/S. For a graphic of CF's earnings:

Revenue at the Deerfield, Illinois-based company rose 32 percent to $1.31 billion. Analysts expected revenue of $1.23 billion.

The results come the same day Russia banned wheat exports due to a drought, sending benchmark U.S. wheat prices and shares of fertilizer producers soaring. [ID:nN05144923]

Shares jumped in regular Thursday trading after the Russia news, though in extended trading after the results were posted the stock fell $2.80, or 3.3 percent, to $83.

CF’s nitrogen production capacity was nearly doubled by the Terra deal, and the product is now CF’s breadwinner. Nitrogen is the most important fertilizer that farmers need to apply, followed by phosphate and potash, which CF does not produce.

Sales of nitrogen products jumped 49 percent as volume, or the physical amount of product sold, and pricing both spiked.

CF said, though, that its phosphate sales fell 22 percent as higher selling prices could not eclipse a drop in volume.

The company said it expects a strong fall fertilizer application season due to an early harvest.

“We expect upward momentum in nitrogen to be sustained by the combination of low inventories, seasonal supply outages, solid demand, both domestically and internationally, and favorable relationships between natural gas prices in North American and other world markets,” Chief Executive Steve Wilson said in a statement.

Conditions in the phosphate markets, the company said, are “favorable for the second half of 2010.”

Reporting by Ernest Scheyder; editing by Gunna Dickson

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