Cf Industries Holdings, Inc. · NYSE:CF
Cf Industries — Q3 2018 Earnings Presentation
28 slides from Cf Industries's earnings presentation, Oct 31, 2018
Slide 1: Safe harbor statement
Safe harbor statement All statements in this communication by CF Industries Holdings, Inc. (together with its subsidiaries, the “Company”), other than those relating to historical facts, are forward-looking statements. Forward-looking statements can generally be identified by their use of terms such
Slide 2: 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 and adjusted EBITDA which are non-GAAP financial measures, provide additional meaningful information regarding
Slide 3: Table of contents
Table of contents Cover Page: Rail at Verdigris 4 Safe Harbor Statement/Note Regarding Non-GAAP Financial Measures 2-3 Overview of Financial Results 5-7 Global Market Update 8-18 Capital Allocation and Structure 19-22 Appendix 23-28
Slide 4: Overview of Financial Results
Garner terminal Overview of Financial Results 5
Slide 5: Third quarter and first nine months 2018 results
Third quarter and first nine months 2018 results • Q3 net earnings of $30 million; EBITDA(1) of $308 million and adjusted EBITDA(1) of $300 million Nine month net earnings of $241 million; EBITDA(1) of $1,080 million and adjusted EBITDA(1) of $1,064 million CF added $294 million of cash to the balan
Slide 6: Financial results - third quarter and first nine months 2018
Financial results - third quarter and first nine months 2018 months 2017 (87) 241 (107) 30 stockholders (7) (11) 64 (3) natural gas derivatives (1) Depreciation and amortization was $233 million and $667 million for the three and nine months ended September 30, 2018, respectively, and $226 million a
Slide 7: Global Market Update
Donaldsonville loading dock Global Market Update 8
Slide 8: Global market overview
Global market overview • Global market fundamentals that drove global nitrogen prices higher during Q3 expected to persist through Q4 and into the first half of 2019 From Sep 2017 to Sep 2018 price per MMBtu at Dutch TTF hub was 63% higher, Asian LNG spot price was 66% higher and Chinese anthracite
Slide 9: Expected net new capacity additions below historic global demand growth
Expected net new capacity additions growth CF Projected Global Net Urea Capacity Additions(1) Thousand Product Metric Tons below historic global demand 20,000 15,000 10,000 5,000 2% Growth - (5,000) 2015 2016 2017 2018 2019 2020 2021 2022 (1)See appendix for details of the 2018-2022 projected additi
Slide 10: Global nitrogen demand
Global nitrogen demand Total Nitrogen Consumption 2003-2018(1) growth Million Nutrient Metric Tons 180 Expected global demand growth driven by: 160 • Global population expected to increase 1% per annum Global GDP expected to increase 2-2.5% per annum, increasing personal income 140 • 120 - 100 BRIC
Slide 11: Rising energy costs increasing CF production cost advantage
Rising energy costs (ex-North production cost advantage Global Energy Price 2016-2019F USD/MMBtu America) are increasing CF Energy Cost per ton of Ammonia* 2016-2019F USD/ton Henry Hub Natural Gas 14.00 400.00 12.00 350.00 10.00 300.00 8.00 250.00 6.00 200.00 4.00 150.00 2.00 100.00 - 50.00 2016 201
Slide 12: Global upstream oil and gas investment down ~40% compared to 2014
From 2016 through 2018, global down ~40% compared to 2014 upstream oil and gas investment • Global Investment in Upstream Oil and Gas USD billion 2017 exploration discovery volumes 6.8 Bboe, only 25% of 2000-2015 annual average 2015-2017 greenfield project resources sanctioned on average 50% lower t
Slide 13: Investment in LNG liquefaction and Chinese coal production much lower than peak
Investment in LNG liquefaction and Chinese coal production is much lower than recent peak World LNG Liquefaction Investment by Region USD (2017) billion 40 levels Bcm per year 700 600 • LNG liquefaction investment has decreased significantly since 2014, although the market will still need to absorb
Slide 14: 2019 estimated cost curve – based on October 2018 inputs
2019 estimated cost curve – based on October 2018 inputs 2019 Monthly Delivered U.S. Gulf Urea Cost Curve Y-axis: USD/short ton, X-axis: Monthly Production Capacity at 95% Operating Rate, million short tons Shipments: 16.5 MM ST Avg $400 Monthly Range 300 200 100 (N.G.) 0 Russia South Latin Southeas
Slide 15: 2019 cost curve assumptions – as of October 2018
2019 cost curve assumptions – as of October 2018 Gas Prices ($/Mmbtu) 76 Brent Crude NYMEX 56 73 Thermal 65 SX Coal / 6.82 7.05 RMB/USD Bloomberg Composite Notes: Market prices updated as of 10/24/2018; Coal prices as of 10/15/2018 * 2018E represents assumptions from November 2017 forecast cost curv
Slide 16: Global energy price increases since 2016 have increased nitrogen production costs outside North America
Global energy price increases since 2016 have increased nitrogen production costs outside North America 2016 and 2019 Monthly Delivered U.S. Gulf Urea Cost Curve Y-axis: USD/short ton, X-axis: Monthly Production Capacity at 95% Operating Rate, million short tons Shipments: 16.5 MM ST Avg $400 Lower
Slide 17: Rising global energy costs and reduced Chinese urea exports drive nitrogen price recovery
Rising global energy costs and reduced Chinese urea exports drive nitrogen price recovery Monthly Chinese Exports vs TTF Natural Gas and Brent Crude Oil Prices Million metric tons USD/MMBtu 20.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2.5 2.0 1.5 1.0 0.5 0.0 2014 2015 2016 2017 2018
Slide 18: Capital Allocation and Structure
Verdigris facility Capital Allocation and Structure 19
Slide 19: Capital Allocation
Capital Allocation • Pursue growth within our strategic fairway, where returns exceed the risk-adjusted cost of capital Consistently return excess cash to shareholders in a timely fashion through dividends and share repurchases • • CF repurchased ~3 million shares through October 31, 2018 for approx
Slide 20: Shareholder nitrogen participation per share continues to grow
Shareholder nitrogen participation per share continues to grow CF Industries’ Nitrogen Volumes and Shares Outstanding as of Year-end 2009 – 2018 Nitrogen per share CAGR: 14.7% Million shares Outstanding (6) Annual Nitrogen Equivalent Tons per 1,000 Shares Outstanding 40 400 35 350 30 300 25 250 20 2
Slide 21: Balanced Approach to Capital Allocation
Balanced Approach to Capital Allocation • Buybacks reduced shares outstanding by ~30% $1.20 $1.20 $1.20 $1.00 2012 2013 2014 2015 2016 2017 Total Shares Outstanding (in millions) 323.5 296.0 256.7 236.1 233.1 233.9 Source: Factset, Company filings. (1) Includes the effect of $150 million of share re
Slide 22: Appendix
Woodward complex Appendix 23
Slide 23: CF EBITDA sensitivity table
CF EBITDA sensitivity table Table illustrates the resiliency of CF Industries’ business model across a broad range of industry conditions EBITDA Sensitivity to Natural Gas and Urea Prices(1)(2) $ billions CF Realized North American Natural Gas Cost ($/MMBtu)(3) Source: CF Industries (1) The table wa
Slide 24: Non-GAAP: reconciliation of Net Earnings to EBITDA and Adjusted EBITDA
Non-GAAP: reconciliation of Net Earnings to EBITDA and Adjusted EBITDA months 2017 (41) (19) (92) (54) interests 30 (87) 241 (107) stockholders (20) (25) (66) (77) interests(1) (3) (7) (11) 64 natural gas derivatives 4 1 1 2 intercompany loans(3) - - - 7 accrual(5) (1) (4) (5) For the three months e
Slide 25: Non-GAAP: reconciliation of Net Earnings to EBITDA and Adjusted EBITDA
Non-GAAP: reconciliation of Net Earnings to EBITDA and Adjusted EBITDA (1)Loss on foreign currency transactions, including intercompany loans primarily relates to the unrealized foreign currency exchange rate impact on intercompany debt that has not been permanently invested (2)Represents an accrual
Slide 26: Projected new global urea plants (2018-2022)
Projected new global urea plants (2018-2022) Russia Russia China PJSC Metafrax TogliattiAzot Xiaoyi Nongmei Perm Togliatti Shanxi Natural Gas Natural Gas Coke-oven gas 580 730 300 2022 2022 2022 2,900 Subtotal (1) (2) (3) Subtotals rounded to nearest 100k New since last forecast Timing of start upda
Slide 27: Urea plants in permanent shutdown
Urea plants in permanent shutdown China Kuwait Additional assumed closures due to negative profits(2) PIC 1,850 1,000 2018 2018 Natural Gas ICIS Jan, 2016(3) Brazil Brazil China China China China China Petrobras S.A. (Camacari) Petrobras S.A. (Laranjeiras) China Guodian Corp Shaanxi Weihe Coal Chemi
Slide 28: Urea plants in permanent shutdown
Urea plants in permanent shutdown Plants included in closure forecast: 11.5 Million Tons 2018-2019 (9 esi ets ssn sans caressa aly ‘Stee Fete CFU as ete sty kan Fa OCF Int Repel Cay = oun company Facto ‘haloes Kite Pductone one Foss Terme ———Feten 26 0 One eset Th een waa © One 7 Tot fener yas ® one
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