Damaged equipment hurts Phosphate Holdings’ performance

by MBJ Staff

Published: November 13,2011

Tags: agriculture, earnings, farmers, farms, fertilizer, income, manufacturing, publicly-traded companies, sales

MADISON — Phosphate Holdings Inc. reported a third quarter 2011 profit of $1.5 million, or $0.18 per diluted share of common stock, compared to earnings of $2.5 million, or $0.30 per diluted share of common stock, for the same period in 2010.

Total net sales for the third quarter of 2011 were $94.7 million, a 35 percent increase from total net sales of $70.4 million for the third quarter of 2010. The average sales price per short ton of DAP during the third quarter of 2011 was $578, a 27 percent increase from the prior-year period average sales price of $455.

During the third quarter, the fertilizer manufacturer sold 162,761 tons of DAP, with 112,120 tons moving into domestic markets and 50,641 tons moving into export markets. This represents a 7 percent increase over the 152,500 tons sold in the third quarter of 2010.

Robert E. Jones, CEO of Phosphate Holdings, said, “Our third quarter EBITDA of $6.6 million represents a 234 percent improvement over our second quarter 2011 EBITDA level of $2.0 million. During the third quarter of 2011, we produced 167,000 tons of DAP, which is the highest DAP production level since our second quarter of 2009.

“However, sulfuric acid production in one of our two sulfuric acid plants operated throughout the quarter at substantially reduced rates due to a damaged heat exchanger. As a result, approximately 27 percent of our third quarter DAP production was produced with purchased sulfuric acid. DAP produced with purchased sulfuric acid had much lower margins than DAP produced with internally generated sulfuric acid.

“On Oct. 21, 2011, we commenced a major maintenance turnaround, during which we addressed all known issues constraining sulfuric acid production. During the course of the turnaround, work was performed on both sulfuric acid plants as well as on the phosphoric acid and DAP plants. The turnaround was completed on Nov. 7, 2011, and, while no assurance can be given, we expect materially improved operating rates.

Downtime associated with these maintenance activities will adversely impact fourth quarter operations. We are projecting DAP production of approximately 150,000 to 160,000 tons in the fourth quarter.”

At the end of 2010, Phosphate Holdings’ board of directors appointed a special committee of independent directors to initiate a comprehensive review of strategic options. While this review is ongoing, the company announced it would not hold an earnings call to discuss the third quarter 2011 financial results and will not otherwise discuss this strategic process. When the strategic process is completed, the company said it intends to resume regular quarterly earnings calls.

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