Cf Industries Holdings, Inc. · NYSE:CF
Cf Industries — Q3 2017 Earnings Presentation
35 slides from Cf Industries's earnings presentation, Nov 1, 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 (loss) earnings, adjusted net (loss) earnings per diluted share, controllable c
Slide 3: Table of contents
Table of contents Safe Harbor Statement/Note Regarding Non-GAAP Financial Measures 2-3 Overview of Financial Results 5-13 Emerging Global Tradeflows 14-23 Capital Allocation and Structure 24-26 Appendix 27-36 Cover Page: Yazoo City IGAN finishing train
Slide 4: Overview of Financial Results
Port Neal Urea Load Out Overview of Financial Results
Slide 5: Third quarter 2017 results
Third quarter 2017 results See slide 28 for reconciliation of adjusted net (loss) earnings and adjusted net (loss) 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
Slide 6: Financial results – third quarter 2017
Financial results – third quarter 2017 Depreciation and amortization related to property, plant and equipment was $226 million for the three months ended September 30, 2017, and $148 million for the three months ended September 30, 2016 See slide 28 for reconciliation of adjusted net loss and adjust
Slide 7: Items affecting comparability of financial results by line item
Items affecting comparability of financial results by line item Three months ended September 30, In millions 2017 Pre-Tax 2016 Q3 2017 After-Tax 2015 Q3 2016 Pre-Tax 2016 Q3 2016 After-Tax 2015 Q3 Depreciation and amortization(1) $ 226 $ 142 $ 148 $ 93 Unrealized net mark-to-market (gain) loss on na
Slide 8: Adjusted Gross Margin by Segment
Unrealized loss (gain) on natural gas derivatives(3) Segment adjusted gross margin Adjusted Gross Margin by Segment(1) $M See slide 10 for a reconciliation of adjusted gross margin to gross margin, the most directly comparable GAAP measure Represents depreciation and amortization included in cost of
Slide 9: Non-GAAP: reconciliation of gross margin to adjusted gross margin
Non-GAAP: reconciliation of gross margin to adjusted gross margin $ in millions (000s) $/ton Product Segment Gross Margin(1) 2016 Q3 Unrealized (Gain) Loss on Natural Gas Derivatives Depreciation and Amortization(2) 2016 Q3 Adjusted Gross Margin(3) 2015 Q3 Sales Volume by product ton Gross Margin pe
Slide 10: CF cost of sales comparison
Total Cost Cost per Ton CF cost of sales comparison Represents the portion of cost of sales consisting of natural gas costs, realized and unrealized losses (gains) on natural gas derivatives, and depreciation and amortization See slide 30 for a reconciliation of controllable cost of sales to cost of
Slide 11: SG&A is among the lowest of peer group and is declining on a per-ton basis
SG&A is among the lowest of peer group and is declining on a per-ton basis Total SG&A ($M) 170 174 140 Chemical peer Fertilizer peer Source: peer financial information as reported by Capital IQ for trailing twelve months ended 6/30/17 Peers: Agrium, Air Products and Chemicals, LyondellBasell, Mosaic
Slide 12: 2017 year-to-date cash position
2017 year-to-date cash position CF Cash & Cash Equivalents Receipt of federal tax refund in Q2 Cash position increased $72 million YTD excluding tax refund and voluntary pension contribution After covering: CAPEX of $290m Cash interest of ~$235m Cash dividend of $210m NCI Distributions of $125m ($ m
Slide 13: Emerging Global Tradeflows
Emerging Global Tradeflows Ince Manufacturing Facility
Slide 14: Market overview: global supply and demand, pricing dynamics
Global Supply and Demand North American Outlook Global Pricing Dynamics Market overview Q3 2017 saw a rapid rise in global urea prices from the unsustainable lows of Q2 Strengthening prices driven by lower Chinese exports, higher energy and production costs including European natural gas and higher
Slide 15: Expected net new capacity additions slightly below projected global demand growth post 2017
Expected net new capacity additions slightly below projected global demand growth post 2017 CF Projected Global Net Urea Capacity Additions(1) Thousand Product Metric Tons See slides 34-36 for details of the 2017-2021 projected additions and assumed closures 2% Growth - 5,000 10,000 15,000 20,000 20
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, Genscape Five Year Range 2017 Fertilizer Year 2018 Fertilizer Year Note: Solid fill
Slide 17: Consistent global nitrogen demand growth
China India Other Asia North America Europe Latin America Rest of World Total Nitrogen Consumption 2002-2017(1) 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 over 2000-2002 average demand S
Slide 18: 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 19: 2018 Monthly Delivered U.S. Gulf Urea Cost Curve
2018 Monthly Delivered U.S. Gulf Urea Cost Curve 2018 estimated cost curve 20 0 5 10 15 Appx. 2018 Price Range: $220-255 Source: Industry Publications, Fertecon, CRU, Integer, CF Does not include plants in temporary shutdown/mothball status Energy (N.G.) Other Cash Energy (Coal) Shipments: 17.1 MM S
Slide 20: 2018 cost curve assumptions
Location 2018F 2017E* Henry Hub 3.03 3.07 TTF 6.01 5.47 WEU-Russia 5.46 5.37 Brent Crude 56 55 Thermal 73 68 Anthracite Powder 116 86 Anthracite 135 113 RMB/USD 6.82 6.85 USD/EUR 1.21 1.10 USD/GBP Source NYMEX ICE Oil Index NYMEX SX Coal / Woodmac Bloomberg Composite Bloomberg Composite Bloomberg Co
Slide 21: 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 22: 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 23: Capital Allocation and Structure
Capital Allocation and Structure Yazoo City Nitrogen Complex
Slide 24: CF's capital allocation philosophy
CF’s capital allocation philosophy 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 to shareholders in a timely
Slide 25: CF delivered on four major commitments made in August 2016
CF delivered on four major commitments made in August 2016 Goals & Targets Complete and start up our expansion projects by the end of 2016 Reduce our annual CAPEX spending to less than $450 million in 2017 Reduce controllable expenses Delever by repaying $800 million of debt due in May 2018 Outcome
Slide 26: Appendix
Appendix Medicine Hat Nitrogen Complex
Slide 27: Non-GAAP: reconciliation of Net Loss and EPS to Adjusted Net (Loss) Earnings
Non-GAAP: reconciliation of Net Loss and EPS to Adjusted Net (Loss) Earnings and Adjusted EPS Three months ended September 30, In millions 2017 2016 Q3 2017 EPS Impact 2015 Q3 2016 2016 Q3 2016 EPS Impact 2015 Q3 Net loss/EPS attributable to common shareholders(1) $ (87) $ (0.37) $ (30) $ (0.13) Sta
Slide 28: Non-GAAP: reconciliation of Net (Loss) Earnings to EBITDA and Adjusted EBITDA
Non-GAAP: reconciliation of Net (Loss) Earnings to EBITDA and Adjusted EBITDA EBITDA is defined as net loss attributable to common stockholders plus interest expense- net, income taxes, and depreciation and amortization. Other adjustments include the elimination of loan fee amortization that is incl
Slide 29: Non-GAAP: 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 Q3 2016 Q3 2016 Q3 2015 Q3 Cost of Sales as reported $ 861 $ 678 Natural gas costs 270 169 Realized net losses on natural gas derivatives 10 11 Unrealized net mark-to-market (gain) loss on natural gas derivati
Slide 30: Nitrogen price and natural gas sensitivity
31 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 agree
Slide 31: Non-GAAP: 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 32: 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 33: 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 34: Urea plants in permanent and temporary shutdown
Urea plants in permanent and temporary shutdown Plants included in closure forecast: 7,080 K Tons 2017-2021 Chinese plants in observed temporary shutdown: 3,350 K Tons currently Country Company Feedstock Source Initial Report of Shutdown (1) Capacity – Year of Assumed Closure (2) K Metric Product To
Slide 35: Urea plants in permanent and temporary shutdown
Urea plants in permanent and temporary shutdown capacty— Int Report Kei Product Year of Assumed i oe Tans taha Gop atsaGn Foren A 28. =a oa od Ommeas atecielare Fetes Sm oan oe thi cata Nascar” Fata im a om Soa Has Fete Co Temi Fan 206 ‘2 BT owe tose Fete Co Trend Fatcn My 218 br oo veka etn Oo detr
CF Industries Holdings — Q3 2017 Earnings Presentation on 6ix