Phosphate Holdings’ earnings tumble

MADISON — Phosphate Holdings Inc. reported third quarter 2009 earnings of $700,000, or $0.09 per diluted share of common stock, compared to earnings of $12.6 million, or $1.56 per diluted share of common stock for the same period in 2008.

Net losses for the nine months ended Sept. 30, 2009, were $10.7 million, or $1.40 per diluted share of common stock, as compared to earnings of $54.6 million, or $6.75 per diluted share of common stock, for the same period last year.

The company’s 2009 year-to-date results were materially impacted by inventory write-downs to net realizable value of approximately $10.4 million.

Net sales for the third quarter were $42.1 million, a 75 percent decrease from net sales of $171.6 million for the third quarter of 2008. The average sales price per short ton of DAP during the third quarter of 2009 was $267, a 74 percent decrease from the prior-year period average sales price of $1,045.

Net sales for the nine months were $139.1 million, a 66 percent decrease from net sales of $410 million for the nine months ended Sept. 30, 2008. The company incurred an operating loss of $17.3 million for the nine months, compared to operating income of $85.9 million for the prior-year period.

Robert E. Jones, CEO of Phosphate Holdings, said, “During our third quarter, phosphate market conditions were challenging. An anticipated robust fall application season failed to materialize due to a late harvest, adverse weather conditions and product pricing uncertainty. In the absence of prompt demand at the farm level, dealers and distributors have been reluctant to restock phosphate inventories because of the steep write-downs experienced as phosphate prices plummeted last winter. Based on weak demand, phosphate prices remained at depressed levels throughout our third quarter.”

During the third quarter, Phosphate Holdings took a scheduled maintenance turnaround, which idled one of its sulfuric acid plants for 16 days and the DAP and phosphoric acid plants for seven days. In addition, the company took an unscheduled seven-day turnaround in its other sulfuric acid plant to repair a water line common to both sulfuric acid plants and to perform limited catalyst and other maintenance work. Since the maintenance outages, the company has experienced unanticipated operational issues, primarily with the internals of the towers in the sulfuric acid plants. During the third quarter, the company produced 158,166 tons of sulfuric acid, a decrease of 55,815 tons from the second quarter level of 213,981. A portion of the sulfuric acid production shortfall was offset by purchased sulfuric acid. For the quarter, the company produced 150,031 short tons of DAP, as compared to 170,503 tons of DAP in the second quarter. Cost of sales per ton was negatively impacted by the declines in sulfuric acid and DAP production as fixed costs were spread over fewer produced tons.

In commenting on the 2010 industry outlook, Jones said, “The need to replenish nutrients in the U.S. farmer’s soil, the low levels of dealer and distributor DAP inventories, favorable crop economics and tight world grain stock yields optimism for 2010. Longer-term fundamentals also remain encouraging, as world demand for greater protein levels from improving diets will continue to drive demand for coarse grains. Fertilizer application rates must remain substantial to address this demand in the upcoming years.”

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