Nitrogen’s gross margins
Previously in this series, we looked at prices and shipments in the nitrogen segments of some of the biggest players in the agricultural fertilizer sector (SOIL). With average realized prices for nitrogen falling during 1Q17, let’s look at the companies’ nitrogen margins.
Terra Nitrogen tops in profitability
Overall gross margins for the above companies’ nitrogen segments averaged 26% as a percentage of segment sales. Terra Nitrogen (TNH) emerged on top with a gross margin of 39%. However, the company’s gross margins were slightly lower from 40% YoY (year-over-year).
Agrium (AGU) had a gross margin of 32%, which also contracted 6% YoY. For PotashCorp (POT), the nitrogen segment’s gross margins were 26% and rose 1% during this period. CF Industries’ (CF) gross margins for its nitrogen products averaged 10%, which fell as much as 11%—compared to a year ago.
CVR Partners (UAN) also reported a gross margin of 10%, which fell from 45% YoY. These companies faced a contraction in their margins as a result of falling nitrogen fertilizer prices. Lower fertilizer prices couldn’t be offset by a lower cost of production.
Overall, the gross margins for the above five companies fell from a median of 38% in 1Q16 to 26% in 1Q17.
Next, we’ll discuss how potash fertilizers performed.