US multinational fertiliser manufacturer CF Industries (CFI) has reported lower second quarter earnings and revenues, despite record production volumes, as selling prices were depressed. Revenues were slightly higher for the first half.
The business made an EBITA of $275 million on sales of $1.12bn in the three months to June 30th, down from $329m and $1.13bn in Q2 2016. Production rose to 5.05m tonnes from the prior 4.56m tonnes, the first time the company has exceeded five million tons in a quarter.
At the six month stage, EBITA was $493m on sales of $2.16bn, from $536m and $2.14bn a year earlier. Product volumes totalled 9.79m tonnes (8.61m tonnes).
CFI’s Ammonium Nitrate segment, comprising the two UK AN plants and a facility in the US, saw sales increase to $112m from $90m in the latest quarter, with production at 539,000 tonnes (453,000 tonnes). At the half year, revenues were $237m, up from $205m at H1 2016, with output 1.11bn tonnes (1.01bn tonnes).
“The CF team delivered outstanding operational performance during the second quarter,” notes Tony Will, president and chief executive. “We ran our plants safely and at high utilization rates, sold record volumes and delivered cost efficiencies in the head office and across the manufacturing and distribution system. Our focus on execution is particularly critical during the current challenging market environment.”
The company expects nitrogen pricing to be “challenging” through the remainder of 2017 and into 2018 as the global marketplace continues to adapt to the significant capacity increases of recent years, which will see changes in global tradeflows. For example, marginal producers in China are supplying less product to the global marketplace.
In the longer term, CF expects global supply growth to slow. With a net 6.2m tonnes of nameplate urea capacity coming on stream in 2017 and 2018, the rate of new capacity growth is predicted to fall below the long-term annual nitrogen demand growth rate of approximately 2%, which will tighten the global supply and demand balance.