Cf Industries Holdings, Inc. · NYSE:CF
Cf Industries — Credit Suisse Chemical and Ag Science Conference 2008
46 slides from Cf Industries's conference presentation, Sep 17, 2008
Slide 1: CF Industries Holdings, Inc. – Credit Suisse Chemical and Ag Science Conference
Corporate Development Supply Chain Sales Finance Legal Operations Human Resources Dv Sc Sa Fi Le Op Hr CF Industries Holdings, Inc. NYSE: CF Credit Suisse Chemical and Ag Science Conference 17 September 2008
Slide 2: For CF Industries Today
2 For CF Industries Today . . . Dave Pruett Senior Vice President, Operations
Slide 3: Safe Harbor Statement
3 Safe Harbor Statement Certain statements contained in this presentation may constitute "forward-looking statements" within the meaning of federal securities laws. All statements in this presentation, other than those relating to historical information or current condition, are forward-looking stat
Slide 4: Today's Presentation
4 Today’s Presentation • A quick overview of CF Industries and its competitive strengths • Our strong Q2 performance • Review of industry fundamentals in volatile financial markets • Our strategic initiatives to grow the company
Slide 5: A Quick Overview of CF Industries
5 A Quick Overview of CF Industries • A leading North American manufacturer and distributor of nitrogen and phosphate fertilizer • The two largest nitrogen fertilizer complexes in North America • A large, integrated phosphate operation in Central Florida, with excellent reserve position
Slide 6: A Quick Overview of CF Industries
6 A Quick Overview of CF Industries • Extensive Corn Belt distribution system • Corn Belt* market share in fertilizer year 2006: – 26% nitrogen – 19% phosphate • Nitrogen marketed primarily in North America; typically export 20-25% of phosphate volume • Global growth platform via KEYTRADE acquisitio
Slide 7: Nitrogen – World Class and Flexible
7 Nitrogen – World Class and Flexible 6.4 Million Tons of Existing Capacity Increasingly Valuable At Time When High Capital Costs Have Limited Nitrogen Supply Response Donaldsonville Medicine Hat
Slide 8: Phosphate: 'Uncharted Waters'
8 Phosphate: ‘Uncharted Waters’ • Integrated phosphate business in Central Florida • Phosphate rock mine and beneficiation plant are industry’s newest • Annual capacity: 2.1 million tons of DAP/MAP We Are 100% Self-Sufficient in Phosphate Rock
Slide 9: Phosphate: 'Uncharted Waters'
9 • Rock reserve position is strong, with 24 years of proven reserves – 15 of them fully permitted at 12/31/07 Phosphate: ‘Uncharted Waters’ We Are 100% Self-Sufficient in Phosphate Rock
Slide 10: India DAP Production Cost – Imported Rock
10 India DAP Production Cost – Imported Rock ($/Tonne) Source: Fertecon, FMB, Green Markets Skyrocketing Sulfur And Rock Prices Have Pushed Production Costs Up, Especially For Non-integrated Producers Estimated Cost For Non-integrated Producer In India 0 180 360 540 720 900 J07 F M A M J J A S O N D
Slide 11: India DAP Production Cost – Imported Rock
11 India DAP Production Cost – Imported Rock ($/Tonne) $195 $800 $137 $38 0 200 400 600 800 1000 1200 1400 Aug 06 Aug 07 TODAY Upgrading Ammonia Rock Sulfur Estimated Cost For Non-integrated Producer In India At $500 sulfur, advantage is $650+
Slide 12: Industry Leading Flexibility in Distribution
12 Nitrogen Manufacturing Complex • Ammonia Terminal Ammonia Terminal & UAN Terminal UAN Terminal Urea & Phosphate Warehouse Industry Leading Flexibility in Distribution • One of the industry’s largest networks • In-market storage capacity is approximately 1.2 million tons for nitrogen and 200,000 t
Slide 13: CF Industries 2nd Quarter Performance
13 CF Industries 2nd Quarter Performance Net Sales Net Earnings $1.16 billion $849 million 0 200 400 600 800 1000 1200 1400 2007 2008 $93.6 million $ 288.6 million 0 50 100 150 200 250 300 350 2007 2008 Record Net Sales & Earnings
Slide 14: A 'Snapshot' on September 17, 2008
14 A ‘Snapshot’ on September 17, 2008 • Financial markets – and fertilizer equities – are volatile • U.S. dollar is strengthening • Seasonal “lull” in fertilizer markets exacerbates uncertainty But Let’s Look At Industry Fundamentals
Slide 15: Fundamentals: Fall '08 Growth in U.S. Corn Demand Has Accelerated
15 Fundamentals: Fall ‘08 Growth in U.S. Corn Demand Has Accelerated Billion Bushels Source: USDA 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 91 93 95 97 99 01 03 05 07 09 Exports Ethanol Food & Industrial Feed Ethanol remains the big driver behind U.S. corn demand Vast potential for export growth is limited
Slide 16: Fundamentals: Fall '08 Demand Growth Is a Global Phenomenon
16 Fundamentals: Fall ‘08 Demand Growth Is a Global Phenomenon 0 200 400 600 800 1000 1200 90 92 94 96 98 00 02 04 06 08 10 12 14 Source: USDA Rest of World (3.2 %) EU (-1.3 %) China (2.6 %) U.S. (5.1%) Growth: 1.5% Growth: 3.6% MM Metric Tons Coarse Grain Consumption Wild cards: China, world econom
Slide 17: Fundamentals: Fall '08 Latest WASDE Suggests Tighter Corn Supplies
17 Fundamentals: Fall ’08 Latest WASDE Suggests Tighter Corn Supplies Ending Stocks Even Tighter! 1,018 1,133 Ending Stocks 12,645 12,745 Total Use 4,100 4,100 Ethanol Util. 13,663 13,878 Total Supply 12,072 12,288 MM Bu Production 152.3 155.0 Bu/Acre Yield 87.0 M 87.0M Planted Acreage September Aug
Slide 18: Fundamentals: Fall '08 10-Year Stock/Use Ratio
18 Fundamentals: Fall ’08 10-Year Stock/Use Ratio 0 5 10 15 20 25 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 %
Slide 19: Fundamentals: Fall '08 Crop Price 'Decline' Overstated
19 Fundamentals: Fall ’08 Crop Price ‘Decline’ Overstated Futures Prices Aren’t Farm Prices!
Slide 20: Nearby Corn Futures Prices vs. Avg. Farm Prices
20 Nearby Corn Futures Prices vs. Avg. Farm Prices $2.00 $4.00 $6.00 $8.00 $10.00 1/24/2008 2/21/2008 3/20/2008 4/17/2008 5/15/2008 6/12/2008 7/10/2008 8/7/2008 Futures Monthly Farm Avg. Source: CBOT/USDA 1998 – 2007 Average = $2.37
Slide 21: Fundamentals: Fall '08 Farm Economics Still Very Strong
21 Fundamentals: Fall ’08 Farm Economics Still Very Strong High Crop Prices Still Provide Robust Returns For Farmers Source: USDA, Doane, CF 2008 U. S. Average Farm Returns Corn S Avg. Yield 152.3 Price $5.50 Value of Production $840 Operating Costs $316 Total Costs $537 Return over Variable Cost $5
Slide 22: Fundamentals: Fall '08 Ethanol Isn't Disappearing
22 Source: Iowa State University – May 6, 2008 Fundamentals: Fall ‘08 Ethanol Isn’t Disappearing And cellulosic crops need nitrogen, too. U.S. Ethanol Biorefinery Locations
Slide 23: Fundamentals: Fall '08 New Capacity Shouldn't Depress Markets
23 Fundamentals: Fall ’08 New Capacity Shouldn’t Depress Markets 75% 80% 85% 90% 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Calendar Years Source: Fertecon, CF % Capacity Nitrogen Phosphate 70% 75% 80% 85% 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Slide 24: Fundamentals: Fall '08 U.S. Prices Still Lag World Markets
24 Fundamentals: Fall ’08 U.S. Prices Still Lag World Markets World/US Price Differentials Year Ago Today Ammonia Black Sea FOB ($/MT) 263 853 Ocean Freight 68 85 Black Sea Dlvd ($/MT) 331 938 Tampa Ref. ($/MT) 297 931 Tampa Less Blk Sea Dlvd ($/mt) -34 -7 Urea Middle East FOB ($/MT) 268 830 Ocean F
Slide 25: Fundamentals: Fall '08 Summary
25 Fundamentals: Fall ’08 Summary • Underlying grain demand still growing • Corn supply/demand balance tight and getting tighter • Crop prices still strong • Farm economics still very positive • Ethanol is here to stay • New capacity is manageable • U.S. key prices still lag world markets The Fundam
Slide 26: Outlook for 2009 Fertilizer Demand
26 Outlook for 2009 Fertilizer Demand • Nitrogen - strong upside possible – Corn acreage could move above 90+ million – Nitrogen application rates on corn could rebound due to strong corn prices – High nitrogen demand on corn could be partially offset by lower demand on other crops/pasture – Fall ’0
Slide 27: An Optimistic Present. What About The Future?
27 An Optimistic Present. What About The Future?
Slide 28: Global Platform for Marketing & Sourcing
28 • Acquisition of 50 percent of KEYTRADE, 3 million tonne per year global fertilizer trader • Markets in fertilizer in 65 nations • Acquisition provides established, extensive global platform to pursue growth and diversification • Presence in Perú and rest of Central & South America Specific Strat
Slide 29: Proposed Nitrogen Complex in Perú
29 • On November 19, CF Industries won bidding for natural gas pact in Perú • Proposed facility is world-scale nitrogen complex • Markets in region include Perú, Central & South America, and Mexico • Term sheet signed in July. Technology work begun with TECHNIP. Specific Strategic Initiatives: Propo
Slide 30: Specific Strategic Initiatives: Gasification Project
30 Specific Strategic Initiatives: Gasification Project • Gasification/ammonia complex at Donaldsonville Nitrogen Complex – Reduce dependence on North American natural gas by converting substantial portion of complex to low-cost petcoke/coal blend – Increase operational flexibility – Evaluating alte
Slide 31: Positioned to Win
31 Positioned to Win • Worldwide demand for grain has created robust crop pricing and fertilizer demand • After a wet early spring, corn crop is in the ground – could be lower yield than expected • ’08 acreage + yield could equal strong ‘09 • CF Industries is well positioned to capitalize on today’s
Slide 32: @CFindustries
™ @CFindustries
Slide 33: Appendix
APPENDIX
Slide 34: Innovative Forward Pricing Program
34 Innovative Forward Pricing Program • Locks in assured supply and price for customers – and nitrogen margins – for CF Industries • Prices and margins reflect expectations for market conditions • Our forward prices for phosphate reflect higher sulfur and ammonia costs In Q1’s Rising Natural Gas Cos
Slide 35: Innovative Forward Pricing Program
35 > 52% N and 41% P sold under FPP in Q1 ‘07 Challenge • Natural gas and nitrogen fertilizer prices are highly volatile Benefits • Margin certainty • Improved production scheduling • Reduced inventory risk • Enhanced liquidity • Integration with customers Solution • Customers purchase product forwa
Slide 36: Phosphate: 'Uncharted Waters'
36 • Plant City chemical plant has 2.1 million tons of DAP and MAP capacity • De-bottlenecking added approximately 60,000 more tons in ‘08 • Port of Tampa facilities provide access to export markets Phosphate: ‘Uncharted Waters’
Slide 37: Value of Corn Belt Focus
37 Value of Corn Belt Focus Source: Green Markets January 2004 - Current Ammonia Price ($/short ton) Corn Belt prices reflect value of market access 200 300 400 500 600 700 800 900 1,000 1,100 1,200 J04 J J05 J J06 J J07 J J08 J Price MW NH3 Gulf of Mexico
Slide 38: World Nitrogen Supply/Demand Balance Outlook
38 World Nitrogen Supply/Demand Balance Outlook 0 20 40 60 80 100 120 140 160 180 90 92 94 96 98 00 02 04 06 08 Capacity Production Calendar Years Source: Fertecon, CF MM Tonnes N “From 1998 through 2004 world capacity remained virtually flat”
Slide 39: Strong Grain Demand Set Stage for Robust '08
39 Strong Grain Demand Set Stage for Robust ‘08 World Coarse Grains Production & Consumption 750 800 850 900 950 1000 1050 1100 90 92 94 96 98 00 02 04 06 08 Source: USDA Consumption Production “Demand expected to outpace production for the 7th time in the last 9 years” Marketing Year (MM Metric Ton
Slide 40: Fundamentals: Fall '08 U.S. Corn Supply/Demand Scenario Still Bullish
40 Fundamentals: Fall ’08 U.S. Corn Supply/Demand Scenario Still Bullish (Billion Bushels) Ending inventory expected to remain at low levels –production increases will still be needed in 2009. USDA predicts strong yield despite late plantings and flooding in the Midwest Marketing Years Actual Proj.
Slide 41: Natural Gas Pricing and Transportation Costs Are Changing Market Dynamics
41 Natural Gas Pricing and Transportation Costs Are Changing Market Dynamics 0.0 100.0 200.0 300.0 400.0 500.0 600.0 2006 2007 2008 2009 2010 2011 Calendar Years Source: PIRA, CERA U.S. Cost Ukraine (E. Europe) Russia $ per Tonne Middle East Trinidad Eastern Europe has nearly 12 million tons of expo
Slide 42: Specific Strategic Initiatives: Uranium Recovery
42 Specific Strategic Initiatives: Uranium Recovery • Uranium recovery opportunity at Plant City Phosphate Complex – Extracted from phosphate fertilizer production – Key is procuring long-term supply contracts with utilities – Economic returns promising
Slide 43: East European Nitrogen Capacity and Exports
43 East European Nitrogen Capacity and Exports (000/Tonnes) Source: Fertecon, CF Note: Certain columns/rows may not “tie” due to “rounding” Nitrogen Capacity Ammonia Urea UAN AN Total N Lithuania 853 82 9 352 129 572 Bulgaria 929 16 25 0 94 135 Poland 2,446 123 58 200 51 432 Romania 2,276 25 437 200
Slide 44: Increased Productivity at Florida Phosphate Operation
44 Increased Productivity at Florida Phosphate Operation Natural Gas and Capacity Gains at Medicine Hat MMBtu of Natural Gas Per Ton 30.00 31.00 32.00 33.00 34.00 35.00 36.00 37.00 38.00 39.00 40.00 1980 1981 1982 1983 1984 1985 1986 1986 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2
Slide 45: Steady Efficiency Improvements at Donaldsonville
45 Steady Efficiency Improvements at Donaldsonville * Representative of complex’s four ammonia plants DONALDSONVILLE AMMONIA NO. 3 PLANT MMBTU/TON * 31.5 32.0 32.5 33.0 33.5 34.0 34.5 35.0 35.5 36.0 1980 1985 1990 1995 2000 2005 2010 YEAR MMBTU/TON Significantly less natural gas per product ton We A
Slide 46: • Insert map of Peru / Camisea Project General Description, page 23 of pdf
46 • Insert map of Peru / Camisea Project General Description, page 23 of pdf file. 4
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