Cf Industries Holdings, Inc. · NYSE:CF
Cf Industries — Investor Presentation (August 2007)
45 slides from Cf Industries's investor presentation, Aug 8, 2007
Slide 1: CF Industries
CF Industries “We Will Become A Leading Global Marketer, Producer And Supplier Of High-Quality, Low-Cost Fertilizer Products And Services, Creating Sustained Value For Shareholders, Customers And Employees.” CF Industries Holdings, Inc. NYSE: CF August 2007
Slide 2: For CF Industries Today
For CF Industries Today . . . Tony Nocchiero Senior Vice President and Chief Financial Officer Steve Wilson Chairman and Chief Executive 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: The "Investable Idea" for CF Industries
The “Investable Idea” for CF Industries In an environment of strong worldwide demand for agricultural and fertilizer products, CF Industries has the strengths and flexibility to capitalize on that demand
Slide 5: Key Competitive Strengths Serving Fertilizer Markets
Key Competitive Strengths Serving Fertilizer Markets World-scale manufacturing facilities Strategically located, flexible distribution system Long-standing customer relationships Leading positions in key U. S. Corn Belt states (30% nitrogen, 17% phosphate) Forward Pricing Program (FPP) Talented, exp
Slide 6: Nitrogen – World Class And Flexible
Nitrogen – World Class And Flexible Two of North America’s largest nitrogen complexes: efficient and operated with a “continuous improvement” philosophy Unique “make versus buy” capability in nitrogen: Donaldsonville Nitrogen Complex can import product to supplement or replace production Ability to
Slide 7: Phosphate
Phosphate A balanced, productive phosphate business, with a strong phosphate rock reserve position Capacities of rock mine and fertilizer plant are matched 25 years of proven reserves, with 15 years fully permitted Experience blending varying grades of phosphate rock
Slide 8: Industry Leading Flexibility in Distribution
Industry Leading Flexibility in Distribution One of the industry’s largest networks of terminals and warehouses, many with access to multiple transportation modes Ability to serve Midwestern ammonia terminals and urea warehouses from either Medicine Hat or Donaldsonville Donaldsonville Nitrogen Comp
Slide 9: Industry Leading Flexibility in Distribution
Industry Leading Flexibility in Distribution In-market storage capacity is approximately 1.2 million tons for nitrogen and 300,000 tons for phosphate A leading player in the Corn Belt states Our ammonia distribution network can empty completely in ten days Phosphate shipped by rail or barge domestic
Slide 10: Value of Ammonia Distribution System
Value of Ammonia Distribution System Source: FMB Group June 2003 - Current MW – Gulf $ Spread @ Record Level Ammonia Price ($/short ton) 200 250 300 350 400 450 500 J J04 J J05 J J06 J J07 Price MW NH3 Gulf of Mexico
Slide 11: Effective Margin Protection And Risk Management Capabilities
Effective Margin Protection And Risk Management Capabilities Forward Pricing Program (FPP) eliminates natural gas risks and locks in margins on its nitrogen orders In Q2 ’07, 70 percent of nitrogen and 43 percent of phosphate volume was under company’s FPP Hedging natural gas on FPP orders results i
Slide 12: Impressive 2007 Results
Impressive 2007 Results Strongly outperformed FC Mean in Q2 Q2 net sales rose 23% over Q2 2006 to $848.9 million Q2 gross margin increased 75% to $177.6 million Q2 net earnings more than doubled to $93.6 million* – $1.65 per diluted share (vs. FC mean of $1.50) * Included mark-to-market loss of $36.
Slide 13: A Robust Second Half Outlook
A Robust Second Half Outlook Farmers expected to realize strong cash flow from 2007 harvest Corn prices should support strong fertilizer application this fall Another 90 million acre corn year projected in ’08
Slide 14: Demand Growth Is A Global Phenomenon
Demand Growth Is A Global Phenomenon Source: USDA Rest of World EU China U.S. Asia ex-China Growth: 1.5% Growth: 3.6% MM Metric Tons Coarse grain consumption Wild cards: China, world economic growth, energy prices 0 200 400 600 800 1000 1200 90 92 94 96 98 00 02 04 06 08 10 12 14
Slide 15: Ethanol Drives U.S. Corn Demand
Ethanol Drives U.S. Corn Demand Billion Bushels (green bars) Source: USDA, Doane % of Corn Production (orange line) 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 1995 1997 1999 2001 2003 2005 2007 2009 0% 5% 10% 15% 20% 25% 30% 35%
Slide 16: Growth In U.S. Corn Demand Is Accelerating
Growth In U.S. Corn Demand Is Accelerating Billion Bushels Source: USDA We are in a demand-driven environment for coarse grains: Ethanol Rising standards of living especially in India and China Growth: 1.6% Growth: 4.9% 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 91 93 95 97 99 01 03 05 07 09 Exports Et
Slide 17: Farm Level Corn Prices Should Remain Strong
Farm Level Corn Prices Should Remain Strong Source: USDA Marketing Year (Year Beginning September 1) 1990-2005 Average = $2.26 ($/bu) Demand supports season average corn prices of $3.00 – $3.50 vs. recent $2.00 1.00 1.50 2.00 2.50 3.00 3.50 4.00 90 92 94 96 98 00 02 04 06
Slide 18: Strong Corn Revenue Supports Fertilizer Demand
Strong Corn Revenue Supports Fertilizer Demand $ Billion Source: USDA, Doane & CF Industries Million Acres 0 10 20 30 40 50 60 90 92 94 96 98 00 02 04 06 08 10 12 14 60 65 70 75 80 85 90 95 100 Corn Acres Corn Revenue to Farmers
Slide 19: Outlook for U.S. Fertilizer Demand for N & P
Outlook for U.S. Fertilizer Demand for N & P (Million Nutrient Tons) N Source: CF Industries Fertilizer Years Continued growth in demand for U.S. corn Increased acreage Strong prices Higher yields Fertilizer demand long-term is expected to be fueled by: 0.0 5.0 10.0 15.0 20.0 91 93 95 97 99 01 03 05
Slide 20: Demand-Driven Environment Supported Strong Pricing
Demand-Driven Environment Supported Strong Pricing (World Nitrogen Price Index: Average 1998 = 100) Source: FMB Group January 1998 – Current Price Index 0 50 100 150 200 250 300 350 400 J98 J99 J00 J01 J02 J03 J04 J05 J06 J07 NH3 Urea
Slide 21: World Nitrogen Market Is Tighter Than Previous Cycles
World Nitrogen Market Is Tighter Than Previous Cycles (World Nitrogen Surplus) Calendar Years Source: Fertecon, CF Industries Although excess capacity comes on stream shortly, surplus is not expected to match peaks of previous two cycles Million tonnes 0 2 4 6 8 10 12 14 90 92 94 96 98 00 02 04 06 0
Slide 22: Globalized Natural Gas Pricing Could Drive Out Marginal Players
Globalized Natural Gas Pricing Could Drive Out Marginal Players In Eastern Europe Calendar Years Source: Industry Forecasts, Fertecon $/MMBtu High natural gas cost in Eastern Europe could put a floor under the world market 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 2005 2006 2007 2008 2009 2010 We
Slide 23: Ammonia Cost Delivered to U.S.
Calendar Years Source: Industry Forecasts, Fertecon U.S. Cost Ukraine Russia $ per Tonne Middle East Trinidad Ammonia Cost Delivered to U.S. 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 2005 2006 2007 2008 2009 2010
Slide 24: World Phosphate Market Has Also Tightened Dramatically
World Phosphate Market Has Also Tightened Dramatically Over The Last Year Source: FMB Group DAP (price$/ton) Rebound in demand in the U.S. and Latin America combined with continued demand growth in Asia Reduced U.S. production and low producer inventory going into the ‘07 fall season June 2001 - Cur
Slide 25: World Phosphate Fertilizer Demand Outlook
World Phosphate Fertilizer Demand Outlook Source: USDA, Doane Calendar Years We are in a demand-driven environment Capacity additions should be modest until end of decade, keeping balance tight by historical standards MM Tonnes P205 Growth: 1.8% Growth: 3.4% 0 10 20 30 40 50 96 97 98 99 00 01 02 03
Slide 26: Strategic Themes
Strategic Themes Size: Become a larger entity Risk Profile: Diversify sources of cash operating income Customer Focus: Pursue a multi-channel distribution strategy that systematically provides the optimal cost/service balance to each end user customer segment
Slide 27: Strategic Themes
Strategic Themes Supply Base: Invest in supply sources to serve growth markets Distribution/Logistics: Strengthen our gateway position through the U.S. Gulf Continuous improvement: Continually seek ways to improve our operations and management processes
Slide 28: Specific Strategic Initiatives: Gasification Project
Specific Strategic Initiatives: Gasification Project Gasification/ammonia complex at Donaldsonville Nitrogen Complex Reduce our dependence on North American natural gas Conversion of substantial portion of complex from natural gas to low-cost feedstock of petcoke/coal blend Increase operational flex
Slide 29: Significant Differentials Expected To Continue
Significant Differentials Expected To Continue History Projections Source: EIA 2007 2005 $ per MMBtu 0 1 2 3 4 5 6 7 8 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 Natural Gas Coal
Slide 30: Specific Strategic Initiatives: Uranium Recovery
Uranium recovery installation at Plant City Phosphate Complex Extracted from phosphate fertilizer production Key is procuring long-term supply contracts with utilities Economic returns promising Specific Strategic Initiatives: Uranium Recovery
Slide 31: Ammonia/UAN Joint Venture in Trinidad
Ammonia/UAN Joint Venture in Trinidad Further natural gas risk diversification plus added UAN and ammonia Site issues in Trinidad have delayed decision Specific Strategic Initiatives: Trinidad Project
Slide 32: Continuous Improvement Opportunities
“Continuous improvement” opportunities Debottlenecking opportunities at Plant City Phosphate Complex Natural gas efficiency improvements at Donaldsonville Nitrogen Complex Improved throughput at distribution facilities Specific Strategic Initiatives
Slide 33: The "Investable Idea" for CF Industries
The “Investable Idea” for CF Industries In an environment of strong worldwide demand for agricultural and fertilizer products, CF Industries has the strengths and flexibility to capitalize on that demand
Slide 34: Appendix
APPENDIX
Slide 35: A Strong Corn Belt Market Share
U.S. market shares for fertilizer year 2005: 24% nitrogen 12% phosphate A leading player in Corn Belt* states in fertilizer year 2005: 30% nitrogen 17% phosphate *ND, SD, NE, KS, MN, IA, MO, IL, OH & IN A Strong Corn Belt Market Share
Slide 36: Flexible Distribution Network Well Situated to Serve Corn Belt States
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 Flexible Distribution Network Well Situated to Serve Corn Belt States
Slide 37: World-Scale Manufacturing – Donaldsonville, LA
World-Scale Manufacturing – Donaldsonville, LA Largest nitrogen fertilizer complex in North America Produces ammonia, urea, and UAN
Slide 38: World-Scale Manufacturing – Medicine Hat, AB
World-Scale Manufacturing – Medicine Hat, AB Largest nitrogen fertilizer complex in Canada, #3 in North America Produces ammonia and urea
Slide 39: World-Scale Manufacturing – Central Florida
World-Scale Manufacturing – Central Florida Hardee County – rock mine with 25 years of reserves* Plant City Complex – one of the largest, integrated DAP/MAP complexes in U.S Port of Tampa – access to domestic and international markets *16 fully permitted
Slide 40: 2006 Stock Performance
2006 Stock Performance Negative hurricane forecast “No-Show” hurricanes Corn optimism $25.64 $22.85 $20.01 $17.07 $15.57 $15.84 $14.26 $17.15 $17.30 $17.00 $18.45 $17.02 $12.00 $14.00 $16.00 $18.00 $20.00 $22.00 $24.00 $26.00 $28.00 01/06/06 01/13/06 01/20/06 01/27/06 02/03/06 02/10/06 02/17/06 02/2
Slide 41: 2007 YTD Stock Performance
2007 YTD Stock Performance $29.29 $31.56 $39.58 $36.56 $40.80 $41.81 $38.55 $41.11 $44.30 $54.96 $62.98 $67.08 $55.26 $53.71 $63.68 $59.89 $60.06 $47.87 $46.31 $42.38 $42.12 $40.23 $43.08 $34.35 $26.59 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 $55.00 $60.00 $65.00 $70.00 1/5/2007 1/12/2007 1/
Slide 42: Forward Pricing Program
Forward Pricing Program > 52% N and 42% 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 produc
Slide 43: Appendix Two: Continuous Improvement
Appendix Two Continuous Improvement 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 199
Slide 44: Steady Efficiency Improvements at Donaldsonville
Steady Efficiency Improvements at Donaldsonville * Representative of complex’s four ammonia plants Appendix Two Continuous Improvement 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
Slide 45: EBITDA Reconciliation
EBITDA Reconciliation of net earnings (loss) to EBITDA: * Six months ended December 31, Twelve months ended December 31, (in millions) 2007 2006 2005 2006 2005 2006 2005 Net earnings (loss) 150.8 $ 18.0 $ 65.2 $ 15.3 $ (104.2) $ 33.3 $ (39.0) $ Interest income - net (8.1) (3.5) 2.8 (6.1) (3.4) (9.6)
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