Cf Industries Holdings, Inc. · NYSE:CF
Cf Industries — Morgan Stanley Small Cap Executive Conference (June 2006)
51 slides from Cf Industries's conference presentation, Jun 14, 2006
Slide 1: The Assets, Financial Strength, and Flexibility to Create Long-Term Shareholder Value
The Assets, Financial Strength, and Flexibility to Create Long-Term Shareholder Value New York City June 15, 2006 CF Industries Holdings, Inc. NYSE: CF Presentation to Morgan Stanley Small Cap Executive Conference
Slide 2: Presenters Today
For CF Industries Holdings, Inc. Today David J. Pruett Senior Vice President, Operations Ernie Thomas Senior Vice President and Chief Financial Officer
Slide 3: Safe Harbor Statement
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 our historical information or current condition, are forward-looking st
Slide 4: Today's Presentation
Today’s Presentation An overview of CF Industries Our strengths in the marketplace The challenges we face Our current priorities
Slide 5: A Quick Look at CF Industries Holdings, Inc.
A Quick Look at CF Industries Holdings, Inc. Founded as a cooperative in 1946; completed IPO in August of 2005 A leading manufacturer/distributor of nitrogen and phosphate fertilizer U.S. market shares for fertilizer year 2004: 22% nitrogen and 15% phosphate
Slide 6: Industry Overview
Industry Overview Three key nutrients: Nitrogen (N) Phosphate (P) Potash (K) Global Fertilizer Consumption Total Tons 2004: 162MM Potash (K) Phosphate (P) Nitrogen (N) 17% 24% 59%
Slide 7: Long-Term Demand Drivers
Long-Term Demand Drivers 0 50 100 150 200 250 300 Corn Wheat Soybeans …While World Meat Consumption Is Increasing… MM Tonnes Developed Developing …Requiring More Corn to Feed More Livestock… Pounds per Acre World Population is Growing… MM Tons CAGR 2.7% Global Fertilizer Consumption (1) N P K N P K
Slide 8: Strengths and Flexibility
Strengths and Flexibility World-scale manufacturing facilities Modular configuration at Donaldsonville allows CF Industries to adjust nitrogen production to market conditions Strategically located, flexible distribution system The industry’s largest – ideally situated to serve Corn Belt customers Lo
Slide 9: Strengths and Flexibility: Forward Pricing, Financial Position
Strengths and Flexibility Forward Pricing Program An innovative margin risk management tool Strong financial position A necessary foundation for future strategic initiatives Experienced management team An effective blend of CF Industries and public company experience The assets, the financial streng
Slide 10: Key Business Issues
Key Business Issues The future of North American nitrogen production – and Donaldsonville The effects of capacity additions worldwide Reduced 2006 corn acreage The effectiveness of our Forward Pricing Program (FPP) The role of our phosphate operations
Slide 11: The Future of North American Nitrogen Production
The Future of North American Nitrogen Production – and our Donaldsonville Complex From a natural gas cost perspective, nitrogen production in North America is currently disadvantaged compared to some regions – although market access remains a critical plus We are working to reduce our dependence on
Slide 12: The Future of North American Nitrogen Production: Global Gas Market
The Future of North American Nitrogen Production – and our Donaldsonville Complex But the global natural gas marketplace is changing – for the better! Long-term developments offer promise, including availability of LNG, creation of a more global natural gas market, and use of alternative feedstocks
Slide 13: The Future of North American Nitrogen Production: Rising Gas Costs
The Future of North American Nitrogen Production – and our Donaldsonville Complex Rising natural gas costs aren’t just a North American phenomenon The gap between North American natural gas costs and those overseas has shown signs of narrowing, with U.S. producers not necessarily the high-cost suppl
Slide 14: The Future of North American Nitrogen Production: Donaldsonville Advantages
The Future of North American Nitrogen Production – and our Donaldsonville Complex In an improved natural gas environment, Donaldsonville’s size, flexibility, location, and productivity can be even greater benefits Additional advantages: ‘Make versus buy’ capability Access to river and ammonia pipeli
Slide 15: The Effects of Capacity Additions Worldwide
The Effects of Capacity Additions Worldwide Total of approximately 5 million tons of new nitrogen capacity (primarily urea) due in 2006 and 2007, but little planned after that Overall planned additions are less than those in previous cycle Thousand Tonnes Per Day Incremental New-plant Capacity (Excl
Slide 16: The Effects of Capacity Additions Worldwide: Phosphate and LNG
The Effects of Capacity Additions Worldwide Phosphate capacity is falling in North America, with little new worldwide capacity planned until end of decade LNG is emerging as an economic alternative to manufacturing fertilizer as means of monetizing stranded natural gas
Slide 17: Effects of Reduced 2006 Corn Acreage
Effects of Reduced 2006 Corn Acreage High pre-season fertilizer prices and low corn prices reduced planting USDA estimate: 3-4 million acre decline Our distribution network is concentrated in the sweet spot of U.S. Corn Belt
Slide 18: Effects of Reduced 2006 Corn Acreage: Crop Prices
Effects of Reduced 2006 Corn Acreage Smaller ’06 crop could bring better balance to world grain stocks and better crop prices in ’07 USDA predicts $2.45 (per bushel) midpoint in 2006/07, versus $2.00 this year
Slide 19: Effects of Reduced 2006 Corn Acreage: Ethanol
Effects of Reduced 2006 Corn Acreage Ethanol is a future positive Planted acres are down in 2006* Million Acres Billion Bushels But, total U.S. demand continues to grow* And, ethanol is driving growth!** Source: * USDA ** National Corn Growers Assoc. & USDA Billion Bushels 60 70 80 90 2003 2004 2005
Slide 20: The Future of our Forward Pricing Program
The Future of our Forward Pricing Program Q1 FPP bookings for nitrogen were below those of a year ago But, even in a difficult environment, we still sold half our nitrogen fertilizer under the program! Customers find value in this program, including assured delivery of a time-sensitive product The p
Slide 21: The Role of our Phosphate Operations
The Role of our Phosphate Operations Different market dynamics than nitrogen – and a source of diversification U.S. a major phosphate exporter North American phosphate capacity is shrinking Phosphate production uses much less natural gas We are well positioned in phosphate: with a 26-year rock suppl
Slide 22: Current Priorities
Current Priorities Reduce our dependence on North American natural gas Maintain our financial strength Develop longer-term, cohesive strategic plan Identify strategic opportunities to exploit our financial strength
Slide 23: Reducing Our Dependence on North American Natural Gas
Reducing Our Dependence on North American Natural Gas Complete evaluation of joint venture in Trinidad project agreement with local government is complete next steps: engineering, financing, and other agreements Pursue petroleum coke project at Donaldsonville technology is proven ideal technology fi
Slide 24: Financial Priorities
Financial Priorities Add value for stockholders Maintain financial strength and liquidity throughout the business cycle Generate capital for strategic investments Target capital structure: 20%-25% gross leverage
Slide 25: Q2 Update
Q2 Update Application season began later than ’05 April through mid-June saw typical fertilizer movement Q2 numbers due July 27
Slide 26: The 'Investable Idea'
The ‘Investable Idea’ In this environment, we view CF Industries’ assets, strengths, and flexibility as key strategic benefits We came through hurricane–induced difficulties in excellent financial shape We don’t underestimate the near-term challenges, but we believe CF Industries is well positioned
Slide 27: Appendix
APPENDIX Fertilizer industry Overview Pages 27-28 CF Industries Overview and Data Pages 29-35 CF Industries’ Distribution Network Pages 36-42 CF Industries’ Forward Pricing Program Page 43 CF Industries’ Market Share Page 44 CF Industries’ Management Team Page 45 Natural Gas and LNG Data Pages 46-50
Slide 28: Industry Overview
Industry Overview Three key nutrients: Nitrogen (N) Phosphate (P) Potash (K) Global Fertilizer Consumption Total Tons 2004: 162MM Potash (K) Phosphate (P) Nitrogen (N) 17% 24% 59%
Slide 29: Long-Term Demand Drivers
Long-Term Demand Drivers 0 50 100 150 200 250 300 Corn Wheat Soybeans …While World Meat Consumption Is Increasing… MM Tonnes Developed Developing …Requiring More Corn to Feed More Livestock… Pounds per Acre World Population is Growing… MM Tons CAGR 2.7% Global Fertilizer Consumption (1) N P K N P K
Slide 30: Competitive Strengths
Competitive Strengths World-scale manufacturing facilities Strategically located, flexible distribution system Long-standing customer relationships Leading market positions Innovative risk management Strong financial position Experienced management team
Slide 31: Significant Scale Advantage
Significant Scale Advantage North American Nitrogen Fertilizer Facilities – By Capacity MM Tons Donaldsonville Medicine Hat 0.0 0.5 1.0 1.5 2.0 2.5
Slide 32: Assets and Flexibility in Nitrogen
Assets and Flexibility in Nitrogen Two of three largest North American nitrogen fertilizer complexes: Donaldsonville, Louisiana Medicine Hat, Alberta
Slide 33: CF Industries' Donaldsonville Complex
CF Industries’ Donaldsonville Complex North America’s largest: four ammonia plants, four urea plants and two UAN plants Operational, product and transport flexibility Flexibility, modularity and “make versus buy” capability to cope with high natural gas prices TODAY Modern, productive facility with
Slide 34: CF Industries' Medicine Hat Complex
CF Industries’ Medicine Hat Complex Joint venture is third largest nitrogen complex in North America: two ammonia plants and one urea plant Access to lower-cost AECO natural gas, as well as to markets in northern-tier U.S. and western Canada Average natural gas cost advantage $27 per ton of ammonia
Slide 35: Assets and Flexibility in Phosphate
Assets and Flexibility in Phosphate Modern, competitive mining, processing and shipping facilities in Central Florida Newest U.S. phosphate rock mine (Hardee County) One of largest U.S. integrated DAP/MAP complexes (Plant City) Ammonia terminal and warehouse/shipping complex at Port of Tampa
Slide 36: CF Industries' Central Florida Phosphate Operations
CF Industries’ Central Florida Phosphate Operations Strong (26 years) rock reserve position Produce DAP and MAP: fastest growing phosphate fertilizer products Access to domestic and export markets Diversification from nitrogen market and access to export markets TODAY Benefit from value of finite am
Slide 37: Assets and Flexibility in Distribution
Assets and Flexibility in Distribution 49 nitrogen and phosphate distribution facilities, strategically located primarily in midwestern grain-producing states Most can access multiple modes of incoming transportation, including pipeline, barge, rail and truck Access – thanks to Donaldsonville “make
Slide 38: Assets and Flexibility in Distribution
Assets and Flexibility in Distribution With 20 ammonia terminals, one of only three producers that can effectively provide ammonia (approximately one fourth of nitrogen fertilizer demand) to Corn Belt Locations are key advantage in regional markets Good mix of new and old customers Strong complement
Slide 39: Assets and Flexibility to Compete
Assets and Flexibility to Compete World-scale assets in nitrogen fertilizer, phosphate fertilizer and product distribution Significant flexibility / capability to anticipate changing market conditions Strong financial position We have strategic options in a changing industry
Slide 40: World-Scale Manufacturing – Donaldsonville, LA
World-Scale Manufacturing – Donaldsonville, LA #1 nitrogen fertilizer complex in North America Significant production flexibility Access to low-cost transportation by barge, pipeline and rail Deep-water dock Ammonia Urea UAN 2.3 1.7 2.7 2.3 1.7 2.7 Annual Gross Capacity MM Tons
Slide 41: World-Scale Manufacturing – Medicine Hat, AB
World-Scale Manufacturing – Medicine Hat, AB #1 nitrogen fertilizer complex in Canada, #3 in North America Access to attractive markets of western Canada and northern U.S. Supplied by lower-priced natural gas from Alberta Average advantage of $27/ton ammonia Ammonia Urea 2.3 1.7 1.3 0.8 Annual Gross
Slide 42: World-Scale Manufacturing – Central Florida
World-Scale Manufacturing – Central Florida Plant City Complex – one of the largest, integrated DAP/MAP complexes in U.S. Port of Tampa – access to domestic and international markets - Tons Phosphate Rock Sulfuric Acid 2.3 1.7 2.7 3.5 2.6 Phosphoric Acid DAP / MAP 1.0 2.0 Annual Gross Capacity MM
Slide 43: Strategically Located, Flexible Distribution Network
Strategically Located, Flexible Distribution Network Medicine Hat Nitrogen Complex Phosphate Plant Phosphate Rock Mine Ammonia Terminal and UAN Terminal Urea Warehouse Ammonia Terminal UAN Terminal WI IN MN IA MO NE OH ND IL SD Donaldsonville Plant City Hardee Low High KS MI
Slide 44: Forward Pricing Program
Forward Pricing Program >50% of nitrogen fertilizer sold under FPP in 2004 Challenge Natural gas and nitrogen fertilizer prices are highly volatile Solution Customers purchase product forward CF locks in margin by fixing natural gas costs Substantial customer deposit Margin certainty Improved produc
Slide 45: Leading Market Positions in North America
Leading Market Positions in North America Key Driver: Strategically located network of terminals and warehouses Market Share (2004 ) (%) Nitrogen Phosphate (%) 29% 22% 0 5 10 15 20 25 30 35 Total U.S. Ten Core States 20% 14% 0 5 10 15 20 25 Total U.S. Ten Core States
Slide 46: Experienced Management Team
Experienced Management Team Age Position Name 57 President, CEO and Chairman Steve Wilson 16 52 SVP and CFO Ernie Thomas 2 54 VP, Corporate Planning Steve Chase 31 54 VP, Raw Materials Procurement Phil Koch 3 55 VP, Supply and Logistics Fred Mugica 30 53 VP, Sales Monty Summa 9 55 VP, GM Donaldsonvi
Slide 47: Uncertainty Regarding Natural Gas Prices
Uncertainty Regarding Natural Gas Prices Natural Gas Henry Hub Spot Prices (Base Case and 95% Confidence Interval*)
Slide 48: Potential of LNG
Potential of LNG North American LNG i peeanaageien Terminals i Si tg ‘sot ne 1, 2006, capers ent pny tes Office of Energy Projects i iia ar
Slide 49: Uncertainty Regarding Global Natural Gas Prices
Uncertainty Regarding Global Natural Gas Prices Source: International Energy Agency – 2005 Handbook Natural Gas Prices for Industry in U.S. Dollars $ per MMBtu 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 2000 2001 2002 2003 2004 Poland Germany France Czech Republic Hungary UK US
Slide 50: The Potential of LNG
The Potential of LNG
Slide 51: Expand Domestic Supply
Expand Domestic Supply — “Lele = Cena Plting Ara ate Plains re ¥ MMS 35525 Eastern Gulf of Mexico and Sale 181 Arca a re 1) ops Se Ace Ping eBoy a | ‘rcs xfer Was De) — ovignal Ske 18 Aca Boundary +See Cis
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