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CF Industries' Performance and Outlook after 2Q17

PART:
1 2 3 4 5 6 7 8 9 10
Part 7
CF Industries' Performance and Outlook after 2Q17 PART 7 OF 10

CF Industries’ Margins Have Contracted in 5 Years

CF Industries’ margins

In this part of the series, we’ll discuss how CF Industries’ (CF) margins trended over the years. Earlier, we saw that falling fertilizer prices had a significant impact on the company’s performance.

CF Industries&#8217; Margins Have Contracted in 5 Years

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Margin trend

In the above chart, you can see that the company’s margins have contracted in the past five years. In 2Q17, the company’s margins fell to 15% from 46% in 2Q16. The margins fell in all of CF Industries’ segments.

The gross margins for the granular urea segment contracted YoY (year-over-year) from 51% to 9% in 2Q17. The UAN segment’s margins contracted YoY from 47% to 13%, while the ammonia segment’s margins contracted YoY from 58% to 22.4%.

The ammonium nitrate segment was the only segment that experienced a YoY margin expansion from flat to 9% in the recent quarter.

These margin contractions were also visible in the EBITDA margins. They contracted YoY from 30% in 2Q16 to 27% in 2Q17.

We’ve seen margin contraction for players (MOO) like PotashCorp (POT), Mosaic (MOS), Agrium (AGU), and CVR Partners (UAN). So far, the margin contraction had a negative impact on the stock prices in 2017.

In the next part, we’ll discuss the earnings growth. It’s key to the stock price performance.

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