Cf Industries Holdings, Inc. · NYSE:CF
Cf Industries — Investor Presentation (September 2017)
36 slides from Cf Industries's investor presentation, Sep 11, 2017
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, adjusted EBITDA, adjusted net earnings, adjusted net earnings per diluted share, controllable cost of sales,
Slide 3: Table of contents
Table of contents Safe Harbor Statement/Note Regarding Non-GAAP Financial Measures 2-3 Company Overview 5-12 Emerging Global Tradeflows 13-19 Second quarter 2017 Financial Results 20-26 Appendix 27-37 Cover Page: Port Neal Nitrogen Complex
Slide 4: Company Overview
Truck Loading at Blair Distribution Facility Company Overview
Slide 5: CF Strategy: Optimize and grow the world's most advantaged nitrogen platform
6 CF Strategy: Optimize and grow the world’s most advantaged nitrogen platform to serve customers and create long term shareholder value Strategy and key focus areas Safe and reliable operations Optimize cost structure and reduce fixed costs Expand and evolve distribution and exports
Slide 6: CF serves a global market from strong North American base
CF serves a global market from strong North American base CF Industries is the largest nitrogen producer in the world with outstanding domestic and export logistical capabilities. Primarily a pure play nitrogen manufacturing company, focused on North America Largest production base and distribution
Slide 7: Best North American distribution capabilities with a global reach
CF ammonia terminal CF ammonia and UAN terminal Donaldsonville Woodward Verdigris Port Neal Courtright Medicine Hat Yazoo City Terre Haute Mount Vernon Albany Kingston Mines Fremont Garner Pine Bend Peru Aurora Blair Brandon Cowden Frankfort Glenwood Grand Forks Huntington Palmyra Ritzville Rycroft
Slide 8: Nitrogen price and natural gas sensitivity
9 Source: CF Industries Note: Assumes that a $25 per ton change in urea price is equivalent to a $17.39 per ton change in UAN price, $18.47 per ton change in AN price and a $44.57 per ton change in ammonia price, including products sold by CF Fertilisers UK. Products sold under the CHS supply agreem
Slide 9: Consistent capital allocation philosophy provides flexibility
Consistent capital allocation philosophy provides flexibility Commitment to investment grade metrics over long term Pursue growth within strategic fairway, where returns exceed risk-adjusted cost of capital and investments are cash flow accretive on a per share basis Consistently return excess cash
Slide 10: Total capital returned to shareholders since 2012 is more than twice net strategic investments
11 Total capital returned to shareholders since 2012 is more than twice net strategic investments Major Portfolio Actions Return of Excess Capital Action Year Business Growth / (Shrink) Expansion of Port Neal and Donaldsonville 2012 to 2016 5.2 Sale of equity interest in CF Industries Nitrogen, LLC
Slide 11: Dividend growth and yield
12 Dividend growth and yield Dividend per share & Annual Dividend yield range $/Dividend yield percentage *2017 figures annualized Source: Factset, Company filings In millions 2012 2013 2014 2015 2016 2017* Total Cash Dividend Payment $ 103 129 256 282 280 280 Total Shares Outstanding 323.5 296.0 25
Slide 12: Emerging Global Tradeflows
Medicine Hat Nitrogen Complex Emerging Global Tradeflows
Slide 13: Market outlook
Global Supply Availability North American Outlook Adjusting Global Tradeflows Market outlook Challenged nitrogen pricing through 2017 into 2018 as global marketplace continues to adapt to recent significant capacity increases Marginal producers in China are supplying less product to global marketpla
Slide 14: Expected net new capacity additions well below projected global demand growth post 2017
Expected net new capacity additions well below projected global demand growth post 2017 CF Projected Global Gross Urea Capacity Additions(1) Thousand Product Metric Tons See slide 33 for details of the 2017-2021 projected additions See slide 34 for details of the 2017-2021 assumed closures The Enid
Slide 15: Consistent global nitrogen demand growth
China India Other Asia North America Europe Latin America Rest of World Total Nitrogen Consumption 2002-2017(1) (Million Nutrient Metric Tons) Industrial 15-yr CAGR =3.3% Overall 15-yr CAGR=2.2% Agricultural 15-yr CAGR =2.0% (1) 2002-2016 actuals, 2017F. CAGRs calculated as 2015-2017 average demand
Slide 16: Nitrogen fertilizer imports into North America are beginning to decline
Nitrogen fertilizer imports into North America are beginning to decline as new production increases North America Offshore Urea Imports Million Tons North America Offshore UAN Imports Million Tons Source: TFI, USDOC Five Year Range 2016 2017 Five Year Range 2016 2017 2017 imports down 21% from 2016
Slide 17: U.S. and Canada combined remain a significant importer of nitrogen products
U.S. and Canada combined remain a significant importer of nitrogen products U.S. imports, including from Canada, average approximately 1.8 million tons more than the combined U.S. and Canada import total shown on the chart above Sources: USDOC, TFI, CF Total U.S. and Canada Import Volume(1) Million
Slide 18: Second Quarter 2017 Financial Results
Second Quarter 2017 Financial Results Courtright IR Scans
Slide 19: Second quarter 2017 results
Second quarter 2017 results See slide 28 for reconciliation of adjusted net earnings and adjusted net earnings per diluted share See slide 29 for reconciliation of EBITDA and adjusted EBITDA Controllable cost of sales is defined as cost of sales adjusted for natural gas costs, realized and unrealize
Slide 20: Financial results – second quarter 2017
Financial results – second quarter 2017 Depreciation and amortization related to property, plant and equipment was $217 million for the three months ended June 30, 2017, and $181 million for the three months ended June 30, 2016 See slide 28 for reconciliation of adjusted net earnings and adjusted ne
Slide 21: Items affecting comparability of financial results by line item
Items affecting comparability of financial results by line item Three months ended June 30, In millions, pre-tax amounts 2017 Pre-Tax 2016 Q3 2017 After-Tax 2015 Q3 2016 Pre-Tax 2016 Q3 2016 After-Tax 2015 Q3 Depreciation and amortization(1) $ 217 $ 137 $ 181 $ 114 Unrealized net mark-to-market loss
Slide 22: Segment adjusted gross margin
Unrealized gain on natural gas derivatives(3) Segment adjusted gross margin Adjusted Gross Margin by Segment(1) $M See slide 30 for a reconciliation of adjusted gross margin to gross margin, the most directly comparable GAAP measure Represents depreciation and amortization included in cost of sales
Slide 23: CF cost of sales comparison
CF cost of sales comparison In $ millions Represents the portion of cost of sales consisting of natural gas costs, realized and unrealized losses (gains) on natural gas derivatives, and depreciation and amortization See slide 31 for a reconciliation of controllable cost of sales to cost of sales, th
Slide 24: CF is impacted by the seasonality of nitrogen fertilizer demand
CF is impacted by the seasonality of nitrogen fertilizer demand Six year average sales price, sales volume, and adjusted EBITDA (2011-2016) Benchmark prices reflect NOLA granular urea and UAN and Tampa ammonia prices published by Fertecon EBITDA is defined as net earnings/(loss) attributable to comm
Slide 25: Appendix
Appendix Donaldsonville Urea Warehouse
Slide 26: Reconciliation of Net Earnings and EPS to Adjusted Net Earnings and Adjusted EPS
Non-GAAP: reconciliation of Net Earnings and EPS to Adjusted Net Earnings and Adjusted EPS Three months ended June 30, In millions 2017 2016 Q3 2017 EPS Impact 2015 Q3 2016 2016 Q3 2016 EPS Impact 2015 Q3 Net earnings/EPS attributable to common shareholders(1) $ 3 $ 0.01 $ 47 $ 0.20 Selected Items i
Slide 27: Reconciliation of Net Earnings to EBITDA and Adjusted EBITDA
Non-GAAP: reconciliation of Net Earnings to EBITDA and Adjusted EBITDA EBITDA is defined as net earnings/(loss) attributable to common stockholders plus interest expense (income)-net, income taxes, and depreciation and amortization. Other adjustments include the elimination of loan fee amortization
Slide 28: Reconciliation of gross margin to adjusted gross margin
Non-GAAP: reconciliation of gross margin to adjusted gross margin In millions Gross Margin(1) 2016 Q3 Unrealized (Gain) Loss on Natural Gas Derivatives Depreciation and Amortization(2) 2016 Q3 Adjusted Gross Margin(3) 2015 Q3 Ammonia 2016 Q2 $ 206 $ (69) $ 19 $ 156 2017 Q2 87 6 49 142 Urea 2016 Q2 1
Slide 29: Reconciliation of cost of sales to controllable cost of sales
Non-GAAP: reconciliation of cost of sales to controllable cost of sales(1) $ Millions 2017 Q2 2016 Q3 2016 Q2 2015 Q3 Cost of Sales as reported $ 952 $ 607 Natural gas costs 309 171 Realized net losses on natural gas derivatives 4 60 Unrealized net mark-to-market loss (gain) on natural gas derivativ
Slide 30: Reconciliation of Net Earnings/(Loss) to EBITDA and Adjusted EBITDA
Non-GAAP: reconciliation of Net Earnings/(Loss) to EBITDA and Adjusted EBITDA In millions FY 2016 2015 Q3 Net earnings/(loss) attributable to common stockholders $ (277) Interest expense (income) – net 195 Income taxes (68) Depreciation and amortization 678 Less: other adjustments (133) EBITDA(1) $
Slide 31: Projected global urea capacity additions 2017-2021
Country Company City/Province Feedstock Capacity – K Metric Product Tons(1) Year of Addition Bolivia Epihara Carrasco Natural Gas 700 2017 China Tonghua Chemical Co Jilin Anthracite powder 300 2017 China Henan Xin Lian Xin (XLX) Jiangxi Anthracite powder 600 2017 China Luxi Chem Shandong Anthracite
Slide 32: Assumed global urea capacity closures
Country Company Feedstock Source Initial Report of Shutdown (1) Capacity – K Metric Product Tons Year of Assumed Closure China Cangzhou Dahua Group Natural Gas Fert.cn Apr, 2016 150 2017 China Asid Chemicals Ltd Anthracite Lump Fert.cn Jan, 2016 300 2017 China LTH (LuTianHua) Natural Gas Fert.cn Jan
Slide 33: CF's financial maintenance covenant summary
CF’s financial maintenance covenant summary Senior secured and unsecured notes: The indentures governing CF’s secured and unsecured notes do not contain financial maintenance covenants Revolving credit facility: Maximum Total Secured Leverage Ratio: Total Secured Leverage Ratio (Total Secured Debt(1
Slide 34: 2017 urea price range forecast and US Gulf cost curve
2017 urea price range forecast is ~$210-245 per ton at the US Gulf; actual YTD range $163-255, average ~ $200(1) 2017 Monthly Delivered U.S. Gulf Urea Cost Curve(2) Y-axis: USD/short ton, X-axis: Monthly Production Capacity at 95% Operating Rate, million short tons (1) source: Green Markets weekly U
Slide 35: 2017 cost curve assumptions
Location Source 2015 2016 2017F Henry Hub NYMEX 2.63 2.51 3.07 TTF ICE 6.42 4.49 5.47 WEU-Russia Oil Index 7.30 4.35 5.37 Brent Crude NYMEX 54 44 55 Thermal SX Coal / 49 51 68 Anthracite Powder Woodmac 83 78 86 Anthracite 124 115 113 RMB/USD Bloomberg 6.28 6.63 6.85 USD/EUR Bloomberg 1.11 1.11 1.10
Slide 36: 2017 cost curve assumptions
2017 cost curve assumptions Location Source 2015 2016 2017F Gas Prices ($/MMBtu) Henry Hub NYMEX 2.63 251 3.07 TIF ICE 6.42 4.49 5.47 WEU-Russia Oil Index 7.30 4.35 5.37 Oil ($/Bbl) Brent Crude NYMEX 54 44 55 China Coal ($/tonne) Thermal SX Coal / 49 51 68 Anthracite Powder Woodmac 83 78 86 Anthraci
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