CF Industries’ (CF) profitability for 2Q17 fell year-over-year, which isn’t surprising given that the company’s segment margins significantly contracted year-year-year, as we discussed in the earlier part of this series.
During 2Q17, CF Industries’ (CF) overall gross margins fell steeply year-over-year from 46.5% to 15.3%. Lower price realization continued to be the concerning theme for CF Industries much like it has been for PotashCorp (POT), Mosaic (MOS), and Agrium (AGU).
The adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margins also contracted year-over-year to 27% year-over-year from 30.2%. These results trickled down to the company’s bottom line as well. During 2Q17, CF Industries’ net margins were almost flat compared to 4.1% in the corresponding quarter a year ago in 2Q16.
North America (MOO) continues to remain a net importer of nitrogen fertilizers, and imports to the region pressured North American players. The negative impact from higher imports resulted in lower price realizations. Some producers continue to sell at significantly lower costs, which pretty much ate away the margins of established companies such as CF Industries. As the global nitrogen producers ration their production capacities, investors must closely watch how prices move.
You can track weekly prices on Market Realist’s Agricultural Fertilizers page.