Fertilizer maker CF Industries looking offshore

Date:11-03-2011

Fertilizer producer CF Industries Holdings Inc is eyeing expansion outside the Western Hemisphere, possibly in the Middle East or Africa, its chief executive said on Wednesday.

A large expansion outside CF's base of operations in the United States could help it eclipse Norway's Yara International ASA as the world's largest producer of nitrogen fertilizer, the most important fertilizer farmers need to apply.

"We always have our ear to the ground, seeking opportunities to invest money," CF Chief Executive Steve Wilson told Reuters. "There are possibly opportunities offshore that could interest us."

The company has been generating large amounts of cash this year as high corn prices give farmers an incentive to plant more crops and use more fertilizer. Wilson expects corn prices to stay below $7 per bushel in 2012, low enough not to destroy corn demand, but high enough to encourage farmers to plant more.

As of Sept. 30, CF had $1.43 billion in cash. That was even after the company bought back $800 million of its own stock during the third quarter.

Iraq and the African continent hold the most promise for expansion, although each has its own challenges.

"Iraq has a huge amount of untapped natural gas, but today we don't have a security situation, infrastructure and legal framework that's required for passive investment to put a plant in a place," Wilson said.

Africa is "the last great, untapped marketplace," he said, but added that CF is "not looking in that direction now, but I would not rule something out."

Wilson's main rival, Yara CEO Jorgen Ole Haslestad, told Reuters earlier this year he is spending $20 million to build a port in Tanzania that will help expand a fertilizer delivery network throughout southern Africa.

Wherever CF decides to expand must have access to cheap natural gas, much like North America does now, Wilson said. Natural gas is one of the key building blocks for nitrogen fertilizer.

"It's no secret if you look at North Africa, you see difficulties in Egypt and Tunisia and places like that," he said. "The notion that somehow you can magically go and secure cheap natural gas safely and securely for 20 years is questionable."

CF, based in a Chicago suburb, has so far had a hard time expanding internationally.

In 2008, CF said it would spend $1 billion to build a large ammonia and urea fertilizer complex in Peru, with plans to start production by 2013. The project was delayed due to delays in the construction of a natural gas pipeline from Colombia.

Wilson said on Wednesday the project is now on the "back burner" and that CF is "not spending a meaningful amount of money" in Peru.

"We are watching what happens with the new (Peru) government," Wilson said.

Wilson also denied CF was for sale. Haslestad, the Yara CEO, said earlier this fall he was interested in trying to buy an American rival.

Yara failed last year to buy Terra Industries Inc, a large American fertilizer maker that eventually was bought by CF for nearly $5 billion.

"We're not in the (mergers and acquisition) business today," Wilson added.