Cf Industries Holdings, Inc. · NYSE:CF
Cf Industries — Q2 2022 Earnings Presentation
22 slides from Cf Industries's earnings presentation, Aug 1, 2022
Slide 1: 2022 First Half and Second Quarter Financial Results
2022 First Half and Second Quarter Financial Results August 1, 2022 NYSE: CF
Slide 2: Safe harbor statement
Safe harbor statement All statements in this presentation by CF Industries Holdings, Inc. (together with its subsidiaries, the “Company”), other th an those relating to historical facts, are forward - looking statements. Forward - looking statements can generally be identified by their use of terms
Slide 3: 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, free cash flow, and free cash flow yield, which are non - GAAP financial measures, provide
Slide 4: First half highlights
4 First half highlights (1) Average cost of natural gas excludes the $112 million gain on net settlement of certain natural gas contracts with suppliers in February 2021 (2) See appendix for reconciliations of EBITDA and adjusted EBITDA to the most directly comparable GAAP measures (3) Represents ca
Slide 5: Continued execution of projects to support global transition to a clean energy economy
5 Continued execution of projects to support global transition to a clean energy economy 2020 2021 2022 2023 2024 Announced commitment to clean energy economy focused on green and blue ammonia production and carbon reduction goals - Reduce total CO 2 equivalent emissions by 25% per ton of product by
Slide 6: CF North American ammonia capacity utilization versus peers
6 (1) Data taken from the December 17, 2021 CRU Ammonia Database (2) Represents CF Industries’ historical North American production and CRU’s capacity estimates for CF Industries (3) Calculated by removing CF Industries’ annual reported production and capacity from the CRU data for all North America
Slide 7: Financial results – second quarter and first half 2022
7 Financial results – second quarter and first half 2022 (1) See appendix for reconciliations of EBITDA and adjusted EBITDA to the most directly comparable GAAP measures (2) Includes the cost of natural gas used for production and related transportation that is included in cost of sales during the p
Slide 8: Strengthening global nitrogen outlook
8 Strengthening global nitrogen outlook Global nitrogen price dynamics Global nitrogen supply/demand Global energy differentials Global nitrogen supply/demand balance to remain tight for the foreseeable future Grain stocks - to - use ratios for 2022/23 forecast to be similar to 2021/22 sustaining gl
Slide 9: Low stocks-to-use ratios drive higher grain values
9 Low stocks - to - use ratios drive higher grain values, expected to require several growing seasons to replenish (1) Crop futures prices represent Marketing Year (September – August) average daily settlement of the front month future contracts f or 2010/11 through 2021/22; 2022/23 represents forwa
Slide 10: Higher natural gas prices in Europe and Asia have widened spreads to North America
10 Sharply higher natural gas prices in Europe and Asia have widened spreads to North American benchmark prices Global Energy Price 2019 - 2022F USD/ tonne North American Production Margin Advantage (1) 0 5 10 15 20 25 30 35 40 45 50 2019 2020 2021 2022 Henry Hub natural gas TTF natural gas Chinese
Slide 11: Chinese supply constraints continue to limit volumes available for trade in 2022
11 Chinese supply constraints, including export inspections, continue to limit volumes available for trade in 2022 Sources: Industry Publications, CF analysis 0 1 2 3 4 5 6 2017 2018 2019 2020 2021 2022F Historic Urea Exports and Potential 2022 Jan - Jun Jul - Dec Million metric t ons Export restric
Slide 12: India and Brazil have consistent long-term demand growth, rising urea imports
12 India and Brazil have consistent long - term demand growth, which has led to rising urea import demand (1) Brazil domestic production in 2020 is comprised solely of 2019 inventory carryover Source: CRU Urea Market Forecast as of May 6, 2022, India DOF, FAI, Trade Data Monitor, industry publicatio
Slide 13: Capital management
13 Capital management Capital structure and allocation Clean energy initiatives Capital expenditures Committed to maintaining investment grade ratings through the cycle Repurchased ~6.6 million shares for $590 million during 1H 2022, including ~5.4 million shares for $490 million during Q2 2022 Comp
Slide 14: Nitrogen capacity and share count history
14 2.6 6.0 (1) 6.0 6.1 6.6 (2) 6.6 7.0 (3) 8.1 (4) 8.1 8.2 (5) 8.2 8.2 8.2 8.2 All N production numbers based on year end figures per 10 - K filings. (1) Beginning in 2010 includes capacity from Terra Industries acquisition (2) Beginning in 2013 includes incremental 34% of Medicine Hat production to
Slide 15: CF Industries' Free Cash Flow and Shares Outstanding
15 Annual Free Cash Flow (in millions) CF Industries’ Free Cash Flow and Shares Outstanding as of Year - end and Quarter - end Shar es Outstanding (in millions) 0 50 100 150 200 250 300 350 400 -$2,000 -$1,000 $0 $1,000 $2,000 $3,000 $4,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Slide 16: Equity appears undervalued given high free cash flow yield
16 14.2 9.8 8.7 8.6 6.0 3.4 2017 2018 2019 2020 2021 Q2 2022 LTM 2017 - 2021 average ratio EV/Adj. EBITDA (2)(3) Equity appears undervalued given high free cash flow yield 10.3% 9.7% 8.9% 9.0% 14.7% 20.7% 2017 2018 2019 2020 2021 Q2 2022 LTM 2017 - 2021 average yield Free Cash Flow Yield (1) (1) Rep
Slide 17: Appendix
Appendix
Slide 18: CF Industries EBITDA sensitivity table
18 CF Industries EBITDA sensitivity table Table illustrates the CF Industries business model across a broad range of industry conditions $50/ton urea realized movement implies ~$750M change in EBITDA on an annual basis (1) Based on 2019 sales volumes of approximately 19.5 million product tons, 2019
Slide 19: Reconciliation of net earnings to EBITDA and adjusted EBITDA
19 Non - GAAP: reconciliation of net earnings to EBITDA and adjusted EBITDA (1) Loan fee amortization is included in both interest expense – net and depreciation and amortization In millions Q2 20 22 Q2 2021 1H 20 22 1H 2021 Net earnings $ 1,339 $ 317 $ 2,390 $ 492 Less: Net earnings attributable to
Slide 20: Reconciliation of net earnings to EBITDA and adjusted EBITDA, continued
20 Non - GAAP: reconciliation of net earnings to EBITDA and adjusted EBITDA, continued (1) Loan fee amortization is included in both interest expense – net and depreciation and amortization (2) Represents expense incurred due to the deferral of certain plant turnaround activities as a result of the
Slide 21: Reconciliation of net earnings to EBITDA and adjusted EBITDA, continued
21 Non - GAAP: reconciliation of net earnings to EBITDA and adjusted EBITDA, continued (1) For the year ended December 31, 2019, amount relates only to CF Industries Nitrogen, LLC (CFN). For the years ended December 31, 2018, and 2017 , amount includes CFN and Terra Nitrogen Company, L.P. (TNCLP), a
Slide 22: Reconciliation of cash from operations to free cash flow and yield
22 Non - GAAP: reconciliation of cash from operations to free cash flow and free cash flow yield In millions , except percentages , share price, and ratios FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Q2 2022 LTM Cash provided by operating activities $ 1,631 $ 1,497 $ 1,505 $ 1,231 $ 2,873 $ 4,447 C apit
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