Why Did CF Industries’ Shipment Segment Grow?
Earlier in this series, we discussed how CF Industries’ (CF) shipments impacted its sales. We saw that the overall shipments grew as much as 11% YoY (year-over-year). However, the growth had a limited impact on the company’s sales.
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Shipment growth by segments
Out of the five segments above, the shipments for UAN (urea ammonium nitrate) fell as much as 11% YoY to 1.6 million tons. According to CF Industries, the shipments fell YoY due to unfavorable weather conditions in North America, which pushed back the purchases.
In contrast, the remaining four segments helped push the overall shipments higher during 2Q17. The ammonia segment’s shipments grew 32% YoY to 1.2 million metric tons. The granular urea shipments grew as much as 26% YoY to 1.2 million metric tons.
According to CF Industries, the higher ammonia and urea shipments YoY were due to an increase in its production capacity, which left the company with more product to sell.
Ammonium nitrate shipments also grew as much as 19% YoY to 0.54 million tons, while the other segments’ shipments grew 17% to 0.5 million tons during the same period.
Companies like CF Industries, PotashCorp (POT), CVR Partners (UAN), and Agrium (AGU) expanded their capacities over the years when the fertilizer prices supported higher margins. As a result, there was excess capacity, which squeezed these producers’ (NANR) margins.
In the next part, we’ll discuss CF Industries’ margins in more detail.