Previously, we saw that gross margins of most agricultural fertilizer producers declined during 1Q16 YoY (year-over-year). While companies may have taken steps to reduce their costs, the EBITDA margins have also contracted over the quarter.
Let’s look at each of the companies in detail.
For the quarter ended March 2016, Terra Nitrogen’s (TNH) EBITDA margins topped out at 46.4%, which declined slightly YoY from 48.5%. CVR Partners (UAN) followed with EBITDA margins of 38.4%, compared to 41.4% in 1Q15. Both these companies exclusively produce nitrogen products such as ammonia and UAN (urea ammonium nitrate).
PotashCorp (POT) reported margins of 34.7%, which declined from 44% YoY while CF Industries’s (CF) margins dropped from 51% to 29% YoY. PotashCorp (POT) produces all three NPK (nitrogen, phosphorous, and potassium) fertilizers while CF only produces nitrogen fertilizers.
P and K producers suffer
Mosaic’s (MOS) margins declined from 25% to 16%. Intrepid Potash’s (IPI) EBITDA margins were negative because of a deficit. You may access some of the above companies through the SPDR S&P North American Natural Resource ETF (NANR), which invests about 13% of its portfolio in the agricultural chemicals sector.
Companies that saw margin expansion
Israel Chemicals (ICL) and Agrium (AGU) were the only two companies that reported margin expansion during the quarter. Agrium reported 16% margins, which increased from 15.6% YoY. CF Industries reported 10.7% in margins, which expanded from 5.3% YoY.
Next, we will compare EPS (earnings per share) and growth of the above companies.