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Phosphate Holdings loses $1.1M during first quarter

MADISON — Phosphate Holdings Inc. (PHI) reported a first quarter 2012 net loss of $1.1 million, compared to net income of $16,000 for the same period in 2011.

The company incurred an operating loss of $1.9 million for the first quarter of 2012, compared to operating income of $53,000 for the prior-year period. Earnings before interest, income taxes, depreciation, amortization and accretion (EBITDA) for the first quarter of 2012 were $2.6 million, compared to EBITDA of $3.8 million for the first quarter of 2011.

Net sales for the first quarter of 2012 were $92.6 million, a 19 percent increase over net sales of $77.6 million for the first quarter of 2011.

Robert E. Jones, CEO of PHI, said, “Phosphate market conditions during our first quarter were challenging. Dealer reluctance to stock inventories in advance of the spring planting season resulted in weak demand and declining DAP prices in the U.S. DAP prices per short ton (FOB, NOLA) declined from approximately $560 in early December 2011 to approximately $430 by late February 2012. During the first quarter, international prices per metric ton (FOB, U.S. Gulf) fell from approximately $600 to approximately $500. Raw material prices also fell during the quarter but not to the degree of the decline in DAP prices. As a result, margins were squeezed. Sulfur prices in the first quarter were posted at $172 per long ton (CFR, Tampa). Ammonia prices began the first quarter at $555 per metric ton (CFR, Tampa) and closed the first quarter at $470 per metric ton.

“Unquestionably the bright spot for the first quarter was our production rates for DAP and sulfuric acid. Over the past year we have invested heavily in our plants. As a result of these investments, we are now realizing significant operational improvements. For the first quarter, DAP and sulfuric acid production were 206,996 and 239,774 short tons, respectively. This represented our highest quarterly DAP production in 10 years and our highest sulfuric acid production since the first quarter of 2007. We currently expect DAP production for the second quarter of 2012 to approximate 180,000 to 195,000 tons.”

In addressing the industry outlook, Jones added, “Agricultural fundamentals for the U.S. farmer remain very attractive. The United States has experienced favorable weather and the planted acreage rate is significantly ahead of the five-year average. Phosphate demand has been strong in the second quarter and DAP prices have risen. Additionally, we look for the export market to bolster phosphate movement and pricing with strong demand in India and South America.”

PHI’s long-term phosphate rock supply agreement with OCP S.A. (OCP) expires June 30. While no assurances can be given, the company anticipates securing its future phosphate rock requirements from OCP.

As of March 31, 2012, the company had a cash balance of approximately $1.9 million and outstanding borrowings under its revolving credit agreement of $13 million. It spent approximately $1.6 million on capital expenditures in the first quarter of 2012.

In late 2010, the 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 will not hold an earnings call to discuss our first quarter 2012 financial results and will not otherwise discuss this strategic process. When the strategic process is completed, PHI intends to resume regular quarterly earnings calls.

PHI is a Delaware corporation and the sole stockholder of Mississippi Phosphates Corporation. Mississippi Phosphates Corporation is a Delaware corporation with its executive headquarters in Madison. Mississippi Phosphates Corporation owns and operates manufacturing facilities in Pascagoula, which produce diammonium phosphate, the most common form of phosphate fertilizer used as a source of phosphate on all major row crops.


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