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Non-Tech : Is Terra Nitrogen Co. L.P. a good buy? (TNH)
TNH 83.960.0%Apr 2 5:00 PM EST
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To: william liao who wrote (72)10/21/1997 3:29:00 PM
From: jhild  Read Replies (1) of 91
 
I'm not sure things look as dark as the reaction here. After all sales are down only 8% for the 9 mo., though with some qualifications that are not insubstantial.

They have shifted production somewhat toward more profitable business. For the 9 months they have made lower sales of UAN by 20M, with the sales this qtr less by 8M. On the brighter side their 9 mo. Ammonia sales are up by 14M with a 4M increase this qtr. Urea seems to be a wash in terms of sales year to year, though more tons sold.

They actually shipped only 2% more tons overall and for the 9 months actually 80 tons less of product. (Before any chemists jump me on this I am sure that there are differences in the amount of gas required to make each ton of the different products. I am just roughing this out using the notion that total tons out is linearly related to total tons in.) So that would imply roughly that since cost of goods sold is about 20% higher for the qtr and 9 mo. that this is due to gas cost increases alone not so much purchase of additional gas. (I don't see any benefit here from gas futures profits.)

Of some concern to me is the increased inventory level, from 29M to 41M. This looks like 1/2qtr of sales. It looks like they could save money by taking a month off and coming back when the gas rates start their seasonal drop later in the winter.

So I guess that it is not a disaster, though it will drive away people expecting a greater return in dividends.
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