Terra Nitrogen Reports Modest Q3 Results -- Sales Volume Down

November 8, 2012 05:30 AM

Terra Nitrogen Company, L.P. (NYSE: TNH) today reported net earnings of $131.8 million on net sales of $181.1 million for the third quarter ended September 30, 2012. This compares to net earnings of $128.4 million on net sales of $203.3 million for the 2011 third quarter. Outperformance could have been better, but sales volumes for ammonia and UAN lagged year-over.

The news comes as parent company CF Industries announces a 29% uptick in retail Urea prices and wide nitrogen production margins on soft natural gas.

TNH reported the declaration of a cash distribution for the quarter of $4.12 per common limited partnership unit payable November 29, 2012, to holders of record as of November 16, 2012.

Net sales for the 2012 third quarter totaled $181.1 million, compared to sales of $203.3 million for the 2011 third quarter. This decrease was due to lower ammonia and UAN sales volume and lower UAN average selling prices, which were offset partially by higher ammonia average selling prices. Ammonia and UAN sales volume declined as drought conditions impacted fertilizer application rates and UAN volume was also impacted by higher imports during the third quarter of 2012 as compared to the third quarter of 2011. The decrease in UAN selling prices was due to increased industry-wide supply in the marketplace compared to the same period last year. The increase in ammonia selling prices for the third quarter of 2012 as compared to 2011 was due to tight North American producer inventory and lower ammonia supply globally.

Compared to Q3 2011, TNH's average 2012 Q3 ammonia selling prices were up 14% but sales volume was down 8%; UAN average selling prices were down 8% and sales volume was down 5%; and Realized natural gas costs per mmBtu decreased by 27%.

With soft natural gas suppressing the price of production, an uptick in demand would go a long way toward TNH's bottom line. But with Indo-China opting out of this fall's nutrient shipments, North American nutrient prices could continue to fall as waning autumn demand strengthens inventory.

As of now (11:45 CT)...

TNH is one of only two inputs related stocks on the Inputs Monitor watchlist showing gains today. TNH opened the day today low at $225.73 and headed for the upside finding resistance at $231.98. Currently $3.38 higher on the day at $230.20.

CHS is the other input stock showing positive signs today, but a 15 point midmorning freefall has even this powerhouse stock seeking support. Currently up one-tenth of a point on the day at $30.96.

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