Cf Industries Holdings, Inc. · NYSE:CF
Cf Industries — Q3 2022 Earnings Presentation
24 slides from Cf Industries's earnings presentation, Nov 2, 2022
Slide 1: 2022 Third Quarter Financial Results
2022 Third Quarter Financial Results November 2, 2022 NYSE: CF
Slide 2: Safe harbor statement
Safe harbor statement All statements in this presentation by CF Industries Holdings, Inc. (together with its subsidiaries, the “Company”), other th an those relating to historical facts, are forward - looking statements. Forward - looking statements can generally be identified by their use of terms
Slide 3: Note regarding non-GAAP financial measures
Note regarding non - GAAP financial measures The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). Management believes that EBITDA, adjusted EBITDA, free cash flow, free cash flow to adjusted EBITDA conversion and free cash flow yield, whi
Slide 4: First nine months highlights
4 First nine months highlights (1) Average cost of natural gas for 9M 2021 excludes the $112 million gain on net settlement of certain natural gas contracts wit h s uppliers in February 2021 (2) See appendix for reconciliations of EBITDA and adjusted EBITDA to the most directly comparable GAAP measu
Slide 5: Financial results – third quarter and first nine months 2022
5 Financial results – third quarter and first nine months 2022 (1) See appendix for reconciliations of EBITDA and adjusted EBITDA to the most directly comparable GAAP measures (2) Includes the cost of natural gas used for production and related transportation that is included in cost of sales during
Slide 6: Strong free cash flow metrics show undervalued equity
6 Strong free cash flow metrics show undervalued equity Attractive free cash flow yield and free cash flow to adjusted EBITDA conversion rate suggest undervalued equity, supporting robust share repurchase program 10.3% 9.7% 8.9% 9.0% 14.7% 19.3% 2017 2018 2019 2020 2021 2022 Q3 LTM 2017 - 2021 avera
Slide 7: Nitrogen production capacity and share count history
7 2.6 6.0 (1) 6.0 6.1 6.6 (2) 6.6 7.0 (3) 8.1 (4) 8.1 8.2 (5) 8.2 8.2 8.2 8.2 All N production numbers based on year end figures per 10 - K filings. (1) Beginning in 2010 includes capacity from Terra Industries acquisition (2) Beginning in 2013 includes incremental 34% of Medicine Hat production to
Slide 8: Annual Free Cash Flow and Shares Outstanding
8 Annual Free Cash Flow (millions) CF Industries’ Free Cash Flow and Shares Outstanding as of Year - end and Quarter - end Shar es Outstanding (millions) 0 50 100 150 200 250 300 350 400 -$2,000 -$1,000 $0 $1,000 $2,000 $3,000 $4,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2
Slide 9: Low stocks-to-use ratios drive higher grain values
9 Low stocks - to - use ratios drive higher grain values; stocks expected to require two or more growing seasons to replenish (1) Crop futures prices represent Marketing Year (September – August) average daily settlement of the front month future contracts f or 2010/11 through 2021/22; 2022/23F repr
Slide 10: 2023 energy forward spreads similar to 2022
10 (1) Advantage per tonne based on annualized costs including settled feedstock prices through September 2022 and from October 2022 to December 2023 ba se d on forward curve and projections as of October 17, 2022; Coal MMBtu price includes efficiency factor of 1.3 (additional coal requires hy dro g
Slide 11: 2023 global delivered U.S. Gulf urea cost curve
11 …and 2023 global delivered U.S. Gulf urea cost curve suggests continued support above floor levels Source: Industry Publications, Woodmac , Bloomberg, CF
Slide 12: Energy cost and market price assumptions
12 Notes: Market prices updated as of 10/20/2022; Coal prices as of 10/03/2022 (1) 2022E represents assumptions from November 2021 forecast cost curve, published in the CF Industries 3Q 2021 Earnings presenta tio n (2) Observed values as of October 20, 2022; Chinese coal prices are September 2022 mo
Slide 13: Chinese supply constraints continue to limit volumes available for trade
13 Chinese supply constraints, including export inspections, continue to limit volumes available for trade Sources: Industry Publications, CF analysis 0 1 2 3 4 5 6 7 2017 2018 2019 2020 2021 2022F Historic Urea Exports and Potential 2022 Jan - Aug Sep - Dec Million metric t ons (MMT) Export restric
Slide 14: India and Brazil long-term demand growth drives urea imports
14 India and Brazil have consistent long - term demand growth, which has led to rising urea import demand (1) Brazil domestic production in 2020 is comprised solely of 2019 inventory carryover Source: CRU Urea Market Forecast as of August 5, 2022, India DOF, FAI, Trade Data Monitor, industry publica
Slide 15: Capital management
15 Capital management Capital structure and allocation Clean energy initiatives Capital expenditures Committed to maintaining investment grade ratings through the cycle Repurchased ~12.7 million shares for $1.12 billion during the first nine months of 2022 Company expects to fund blue/green ammonia
Slide 16: Tight global supply/demand balance into 2025
16 Tight global supply/demand balance into 2025 Global nitrogen price dynamics Global nitrogen supply/demand Global energy differentials Global nitrogen supply/demand balance to remain tight into 2025 due to agriculture - led demand and forward energy curves that point to persistently high energy pr
Slide 17: Continued execution of projects to support clean energy economy
17 Continued execution of projects to support global transition to a clean energy economy 2020 2021 2022 2023 2025 Announced commitment to clean energy economy focused on green and blue ammonia production and carbon reduction goals - Reduce total CO 2 equivalent emissions by 25% per ton of product b
Slide 18: CF North America ammonia capacity utilization advantage
18 (1) Data taken from the December 17, 2021 CRU Ammonia Database (2) Represents CF Industries’ historical North American production and CRU’s capacity estimates for CF Industries (3) Calculated by removing CF Industries’ annual reported production and capacity from the CRU data for all North Americ
Slide 19: Appendix
Appendix
Slide 20: CF Industries EBITDA sensitivity table
20 CF Industries EBITDA sensitivity table Table illustrates the CF Industries business model across a broad range of industry conditions $50/ton urea realized movement implies ~$750M change in EBITDA on an annual basis (1) Based on 2019 sales volumes of approximately 19.5 million product tons, 2019
Slide 21: Reconciliation of net earnings to EBITDA and adjusted EBITDA
21 Non - GAAP: reconciliation of net earnings to EBITDA and adjusted EBITDA (1) Loan fee amortization is included in both interest expense – net and depreciation and amortization In millions Q3 20 22 Q3 2021 9M 20 22 9M 2021 Q3 2022 LTM Net earnings (loss) $ 538 $ (91) $ 2,928 $ 401 $ 3,787 Less: Ne
Slide 22: Reconciliation of net earnings to EBITDA and adjusted EBITDA, continued
22 Non - GAAP: reconciliation of net earnings to EBITDA and adjusted EBITDA, continued (1) Loan fee amortization is included in both interest expense – net and depreciation and amortization (2) Represents expense incurred due to the deferral of certain plant turnaround activities as a result of the
Slide 23: Reconciliation of net earnings to EBITDA and adjusted EBITDA, continued
23 Non - GAAP: reconciliation of net earnings to EBITDA and adjusted EBITDA, continued (1) For the year ended December 31, 2019, amount relates only to CF Industries Nitrogen, LLC (CFN). For the years ended December 31, 2018, and 2017 , amount includes CFN and Terra Nitrogen Company, L.P. (TNCLP), a
Slide 24: Reconciliation of cash from operations to free cash flow and yield
24 Non - GAAP: reconciliation of cash from operations to free cash flow and free cash flow yield In millions , except percentages , share price, and ratios FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Q3 2022 LTM Cash provided by operating activities $ 1,631 $ 1,497 $ 1,505 $ 1,231 $ 2,873 $ 4,750 C apit
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