CF Industries Holdings (CF)

Q4 2010 Earnings Call

February 18, 2011 10:00 am ET

Executives

Richard Hoker - Principal Accounting Officer, Vice President and Controller

W. Will - Vice President of Manufacturing & Distribution

Terrell Huch - Senior Director of Investor Relations & Corporate Communications

Bert Frost - Vice President of Sales and Market Development

Stephen Wilson - Chairman, Chief Executive Officer and President

Analysts

Michael Piken - Cleveland Research

Don Carson - Merrill Lynch

Charles Neivert - Dahlman Rose & Company, LLC

Vincent Andrews - Morgan Stanley

Mark Gulley - Soleil Securities Group, Inc.

Ben Isaacson - Scotia Capital Inc.

Elaine Yip - Crédit Suisse AG

Brent Rystrom - Feltl and Company, Inc.

Mark Connelly - Credit Agricole Securities (USA) Inc.

Jeffrey Zekauskas - JP Morgan Chase & Co

Edlain Rodriguez - Gleacher & Company, Inc.

Horst Hueniken - Thomas Wiesel Partners

Presentation

Operator

Compare to:
Previous Statements by CF
» CF Industries Holdings CEO Discusses Q3 2010 Results - Earnings Call Transcript
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Good day, ladies and gentlemen, and welcome to the Q4 2010 CF Industries Results Conference Call. My name is Lacey, and I'll be your coordinator for today. [Operator Instructions] I would now like to turn the presentation over to your host for today's call, Mr. Terry Huch, Senior Director of Investor Relations and Corporate Communications. Please proceed.

Terrell Huch

Thank you, Lacey. Good morning, and thanks for joining us on this conference call for CF Industries Holdings, Inc. I'm Terry Huch, Senior Director of Investor Relations and Corporate Communications. And with me are Steve Wilson, our Chairman and Chief Executive Officer; Rich Hoker, our Vice President and Corporate Controller; Bert Frost, our Vice President of Sales and Marketing; and Tony Will, our Vice President of Manufacturing and Distribution.

CF Industries Holdings, Inc. reported its fourth quarter and full year 2010 results yesterday afternoon, as did Terra Nitrogen Company, L.P. On this call, we'll review the CF Industries results in detail and discuss our outlook referring to several of the slides that are posted on our website. At the end of the call, we'll host a question-and-answer session.

As you review the news releases posted on the Investor Relations section of our website at cfindustries.com, and as you listen to this conference call, please recognize that they contain forward-looking statements as defined by Federal Securities laws. All statements in the release and on this call other than those relating to historical information or current conditions are considered forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control and which could cause actual results to differ materially from such statements. These risks and uncertainties include those spelled out in the Safe Harbor statement included in yesterday's news release and the slides accompanying the call. Consider all forward-looking statements in light of those and other risks and uncertainties, and do not place undue reliance on any forward-looking statements.

Now let me introduce Steve Wilson, our Chairman and CEO.

Stephen Wilson

Thanks, Terry, and thank you all for joining us this morning. For the fourth quarter of 2010, CF Industries reported net income of $200 million or $2.78 per diluted share, compared to earnings of $51 million or $1.04 per share in last year's fourth quarter. Favorable fertilizer markets, good weather in North America, lower natural gas costs and of course, the addition of Terra, enabled us to deliver operating earnings of $435 million, a six-fold increase year-over-year. Operating related cash flow in the quarter was $560 million, which allowed us to continue to reduce our debt quickly. In addition to the benefits of our expanded operating platform, our results reflected the impact of high global crop prices, which support fertilizer demand in two ways. First, they provide upward pressure on planted area as corn, soybeans and other crops compete for acreage to ensure adequate supply to meet demand and rebuild stocks. Second, high crop prices improve farm profitability, making fertilizer more affordable and leading farmers around the world to use optimal amounts of plant nutrients. As you would expect, this has lifted global fertilizer demand and prices. Restrictions on exports of phosphate and nitrogen fertilizer from China have been important factors in world markets. The early start to the high export tariff season for fertilizer was part of a broad Chinese government initiative to slow exports of commodities that will be needed at home as demand continues to rise. This is an especially high priority for commodities that are energy intensive to produce. While we do expect China to return to being a major export of nitrogen and phosphates, the two-month extension of the tariff continues to have a meaningful impact on current global markets. And although the return of Chinese export taxes didn't reduce product availability significantly during the fourth quarter, the expectation that it would reduce total availability in export markets in 2011 was an important psychological factor supporting world prices in the fourth quarter.

Here in North America, fertilizer movement for the fall application season was excellent. As was the case in the spring of 2010, we had ideal weather for fall application, particularly for anhydrous ammonia. All of these factors contributed to a strong upward price movement for our products in the first half of the fourth quarter. Prices flattened out somewhat in November and December, but far from being a concern, that pause allayed some fears that we're in an unsustainable Ag commodity bubble similar to what we experienced in 2008. The persistent fertilizer market strength we've seen, coupled with attractive natural gas prices in North America, supports our view that this pricing and margin environment is likely to continue at least through the first half of 2011 and probably longer.

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