Im just learning this company and the industry. I don't know how far I will go with this. Lots of questions, and only reading further will help with that. Here are some notes I have been taking.
October 21, 2005 Conference Call Notes
1. Discussed how their FL and LA facilities were designed for �Gulf weather conditions� 2. Steve Wilson, CEO called the natural gas pricing and Katrina as the perfect storm. 3. Claims to have the ability and flexibility to make �make versus buy decisions.� Wilson claims this is based on CF�s ability because of the access to international shipping ports and their extensive distribution system. 4. CF took advantage of two planned turnarounds in FL, as refineries were shut, and CF was curtailed anyway. Hence, should be ready to go for spring season. 5. Phosphate markets are strong and phosphate operations add diversification. I think JPM calculates Phosphate to be in the 32% of Revenue range. 6. Claims that country is now forced to focus on NG energy supply. Claims that Wilson is involved in Wash DC etc, promoting policy initiatives. 7. Buying production is not new and has been done before. Buys ammonia on a totally regular basis, to feed phosphate operation. 8. Wilson mentioned to read the prospectus, under �product production capabilities by product�. He said, �add them all up, basically we are running at half that product capability. 9. Wilson was asked about split of buy versus make, and August versus September. He answered by saying he did not know split and that �we are comfortable with the margins when we book them.� 10. Wilson claims that there is �no alternative to using nitrogen fertilizer.� 11. Wilson claims that there is a chess game going on between farmers and if prices of fertilizer can stay up where they are. It is known that inventory levels are low. This means that farmers do not have a lot of time to make their decision. Because of low inventory levels, farmers need to make a quicker decision than they have in the past. �There is anxiety across the market.�
12. Wilson would not discuss long term contracts, but did refer a questioner to read the prospectus again under �long term contracts and former co-operative owners and try to gauge it.� 13. Share count per Ernie Thomas, CFO is 55,072. 14. Thomas claims the following in regards to preferred shares, �There's a misunderstanding regarding the former preferred shares of the member owners. Those shares no longer exist. They were exchanged for common shares in CF Industries, Inc. as part of the transaction, the IPO transaction. And those shares were exchanged for cash and for shares in CF Industries Holdings. So, the preferred shares no longer exist. That's a mistake on Bloomberg. We're trying to correct that.�
October 21, 2005 Review of Investors update on Natural Gas Increase
1. NG is largest cost component of CF�s nitrogen fertilizer business segment. According to JPM report, Nitrogen is about 78% of total revenues. 2. FPP = Forward Pricing Program. 3. Claims that initiatives to increase purchases of fertilizer products, and reducing operating rates (�when appropriate�) in Donaldson, LA complex, along with rescheduling turnarounds at phosphate fertilizer operations in Central, FL and the FPP program, have helped CF mitigate the near-term impact of NG price escalation. 4. � Approximately 1 million tons, or 63 percent, of CF Industries' fertilizer sales in the third quarter of 2005 were booked under the FPP, versus a comparable total of approximately 700,000 tons, or 40 percent, of fertilizer sales in the third quarter of 2004.� 5. Noted that these initiatives are only good for short term pricing, as 2006 pricing and revenue stream remains cloudy. 6. expects Donaldson, LA to operate at 50% for remainder of 2005. Alberta plant operating as planned. Expects to be able to meet all commitments on shipping, etc. 7. Gross cash and ST Investments are at $315M. $250M credit facility remains undrawn. 8. Customer advances were $185M 9. Long-Term debt at $4.2M
1. "comfortable with margin". That may be the best news I've heard in a while on this stock. Why didn't he quantify this? I read this to mean, lower than usual, but not a disaster. 2. Long-term contracts - he should not have avoided this question, why didn't he quantify -- they know the answer. I read this to mean, this is hurting us bad and would prefer to not to discuss it since he'd prefer to not discuss more bad news.