SOURCE: Paragon Financial Limited

Paragon Financial Limited

October 10, 2012 08:20 ET

Rally in Natural Gas Prices Raises Costs of CF Industries and Agrium

The Paragon Report Provides Stock Research on CF Industries and Agrium

NEW YORK, NY--(Marketwire - Oct 10, 2012) - Companies in the Chemicals Industry dipped Monday after an analyst warned the recent surge in natural gas prices could have a negative impact on fourth quarter earnings results. Data from FactSet have shown natural gas prices have gained approximately 21 percent since the end of August. The Paragon Report examines investing opportunities in the Agricultural Chemicals Industry and provides equity research on CF Industries Holdings, Inc. (NYSE: CF) and Agrium Inc. (NYSE: AGU)(TSX: AGU).

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According to Citi Research analyst P.J. Juvekar natural gas makes up 60 to 80 percent of cash costs as it is used as a feedstock to make ammonia, and as a fuel to generate power for chlor-alkali or methanol. Since hitting a record low in mid-April natural gas futures have soared nearly 77 percent.

"If high gas costs are sustained, there could be some modest margin pressure starting in 4Q (fourth quarter), but this does not alter our positive view on nitrogen ahead of... corn planting season in the U.S. in 2013," he wrote.

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CF Industries is a global leader in manufacturing and distribution of nitrogen and phosphate products, serving both agricultural and industrial customers. For the second quarter of 2012 the company reported record quarterly EBITDA of $1,054.4 million compared to $889.2 million in the second quarter of 2011. Shares of the company have gained over 50 percent year-to-date.

Agrium is a major Retail supplier of agricultural products and services in North and South America, a leading global Wholesale producer and marketer of all three major agricultural nutrients. They are also a premier supplier of specialty fertilizers in North America through their Advanced Technologies business unit. The company reported second quarter 2012 retail sales increased by 12 percent to approximately $5.2-billion compared to the second quarter of 2011.

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