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CF’s Margins Contracted in All Segments in 2Q17

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Segment margins

During 2Q17, CF Industries (CF) saw its gross margins fall in each of its segments except the AN (ammonium nitrate) segment. Of the four segments that saw a margin contraction, the Granular Urea and the UAN (urea ammonium nitrate) segment saw the worst quarters. Let’s look at segment margins in more detail below.

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Gross margins

The Granular Urea segment’s margins contracted from $122 per product ton to $24 per product ton year-over-year. The UAN segment’s margins also contracted significantly during the quarter to $38 from $173 per product ton in 2Q16.

Similarly, the Ammonia and the Other Nitrogen segments also saw their margins contract year-over-year. The Ammonia segment’s margins contracted by ~58% to $87 per product ton in 2Q17 from $206 per product ton during 2Q16. The Other Nitrogen Product segment’s margins also contracted ~50% to $13 per product ton from $26 per product ton in 2Q16.

The AN (ammonium nitrate) segment was the only one to see a margin expansion during the quarter. Its margins expanded year-over-year to $10 per product ton from flat margins in 2Q16.

While companies such as CF Industries, PotashCorp (POT), Agrium (AGU), and Terra Nitrogen (TNH) have taken measures to lower production costs to protect margins amid falling nitrogen prices, it hasn’t been enough. These companies continue to face pressure from weakness in the Agribusiness (MOO) environment.

Next, we’ll discuss overall profitability for CF Industries.

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