Cf Industries Holdings, Inc. · NYSE:CF
Cf Industries — Investor Presentation (November 2014)
41 slides from Cf Industries's investor presentation, Nov 10, 2014
Slide 1: CF Industries Holdings, Inc. Investor Materials November 2014
CF Industries Holdings, Inc. Investor Materials November, 2014
Slide 2: Forward Looking Statements
Forward Looking Statements All statements in this communication, other than those relating to historical facts, are “forward-looking statements.” These forward-looking statements are not guarantees of future performance and are subject to a number of assumptions, risks and uncertainties, many of whi
Slide 3: Presenters
3 Dennis Kelleher SVP and Chief Financial Officer Tony Will President and Chief Executive Officer Bert Frost SVP – Sales and Market Development
Slide 4: Differentiated Investment Thesis
Differentiated Investment Thesis . Nitrogen remains attractive investment . Consistent long-term demand growth . North American gas: sustainable cost advantage . Focused on growing cash flow per share . Investing in high return growth projects . Significant share repurchase programs . Continue to gr
Slide 5: Attractive Farm Level Economics
0% 5% 10% 15% 20% 25% 30% $0 $200 $400 $600 $800 $1,000 $1,200 2005 2007 2009 2011 2013 2015F Total, Gross Value of Production (Revenue) Fertilizer as a Percent of Revenue 5 Corn economics consistently provide positive returns over variable costs and a premium to soybeans Attractive Farm Level Econo
Slide 6: Consistent Long-Term Demand Growth
6 . Global nitrogen demand growth is projected to continue near the prior decade’s rate at about 2.3% per year, or about 3 million nutrient tons a year . The annual nitrogen demand growth is equivalent to over 6 million product tons of urea or about 4-5 new plants each year (net of closures) . Indus
Slide 7: Rebound in Gas Storage Causing Decline in Prices
7 Rebound in Gas Storage Causing Decline in Prices Source: US Energy Information Administration (EIA) U.S. lower 48 states only, Bloomberg 300 500 700 900 1,100 1,300 1,500 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50 $8.00 1/16/14 3/16/14 5/16/14 7/16/14 9/16/14 Storage Deficit to 5-Year A
Slide 8: NYMEX Natural Gas Monthly Settlement Prices and CF Gas Cost
$2.00 $3.00 $4.00 $5.00 $6.00 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov 2014 NYMEX Natural Gas Monthly Settlement Prices CF Purchased Gas Cost(1): $5.24 Realized Derivatives (2) : ($0.90) CF Cost of Natural Gas: $4.34 1Q14 CF Purchased Gas Cost(1): $4.65 Realized Derivatives (2) : ($0.46) CF Cost
Slide 9: Sustainable Feedstock Cost Advantage
9 Sustainable Feedstock Cost Advantage Long-term stability predicted in North American natural gas prices Source: FERTECON, Bloomberg, CERA, CF Industries, NYMEX Henry Hub as of 11/3/2014 Shale vs. Conventional/Other Natural Gas Production ($/MMBtu) (BCF/Day) NYMEX Calendar Year Gas Price $3.50 $4.0
Slide 10: Projects Expected On-Stream by 2018
Projects Expected On-Stream by 2018 (Thousand Tons per Year, Announced) Company Location Gross Ammonia Tons Product Tons Notes Expected Timing Rentech Nitrogen East Dubuque, IL 70 Ammonia, Urea, DEF Debottleneck Completed 2014 U.S. Nitrogen/ Austin Powder Greene County, TN 68 143 AN (liquid) Ammonia
Slide 11: North America Expected to Remain a Net Importer
0 5 10 15 20 25 2010 2011 2012 2013 2014F 2015F 2016F 2017F 2018F 11 0 2 4 6 8 10 2010 2011 2012 2013 2014F 2015F 2016F 2017F 2018F Ammonia Urea UAN AN North American Offshore Nitrogen Imports (Million Nutrient Tons) Even with Expansions, North America Expected to Remain a Net Importer Source: USDOC
Slide 12: Nitrogen EBITDA Sustainably Advantaged
Nitrogen EBITDA Sustainably Advantaged Source: Company Filings (1) EBITDA breakdown by product based on gross margin % allocation by business segment as disclosed in company filings; Adjusted EBITDA for CF Industries (2) Based on May 31, 2011 fiscal year end financials 12 2,800 2,220 2,107 1,919 1,7
Slide 13: Excellent Execution
Excellent Execution Gross Margin as % of Sales Return on Equity(1) Return on Invested Capital(1) 51 46 40 27 24 22 27 22 19 43 38 35 26 24 24 0% 10% 20% 30% 40% 50% 60% 2012 2013 LTM 2012 2013 LTM 2012 2013 LTM 2012 2013 LTM 2012 2013 LTM CF Industries Agrium Mosaic PotashCorp Yara 54 49 43 16 13 11
Slide 14: Increasing Cash Flow Capacity Per Share
Increasing Cash Flow Capacity Per Share 14 2.6 3.6 6.2 0.5 6.7 1.7 8.4 40 45 50 55 60 65 70 75 0 1 2 3 4 5 6 7 8 9 2010 Pre- Terra Acquisition (1) Terra Acquisition CF and Terra Executed Growth (2) Current New Plants (4) Total 2016 CF Industries Nitrogen Volumes and Shares Outstanding Annual Capacit
Slide 15: Demonstrated Implementation of Capital Deployment Strategy
Rest of World North America 15 Value accretive share repurchases and track record of dividend growth $0.00 $0.30 $0.60 $0.90 $1.20 $1.50 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Quarterly Dividend History 2005 2006 2007 2008 20
Slide 16: Unparalleled Track Record of Creating Value for Shareholders
Unparalleled Track Record of Creating Value for Shareholders . CF Industries’ shares have significantly outperformed peers over multiple time periods 227% 103% 86% 8% (7%) (50%) (25%) 0% 25% 50% 75% 100% 125% 150% 175% 200% 225% 250% 50% 31% 31% (21%) (27%) (40%) (30%) (20%) (10%) 0% 10% 20% 30% 40%
Slide 17: Looking Forward: CF Expansion Projects Increase Capacity Over 25%
Capacity per 2013 10-K (1) (1) From 2013 SEC Form 10-K. (2) Total product tons of net ammonia, UAN, urea, and AN. 17 Looking Forward: CF Expansion Projects Increase Capacity Over 25% Gross ammonia tons increasing, leading to higher product tons available for sale Expansion Project Typical Production
Slide 18: Attractive Post Expansion Business Profile
18 Attractive Post Expansion Business Profile Significant cash flow available for shareholder value creation Nitrogen EBITDA Sensitivity to Natural Gas and Urea Prices Source: CF Industries Note: Based on 2013 actual Nitrogen EBITDA(1) of $2.6 billion. Basis for adjustment is an estimated 29% increa
Slide 19: For more information, please visit www.cfindustries.com
For more information, please visit www.cfindustries.com
Slide 20: Reconciliation of non-GAAP Measures – CF Industries
Reconciliation of non-GAAP Measures – CF Industries 21 We have presented Adjusted EBITDA, 2013 Nitrogen EBITDA, Adjusted EBITDA as a % of sales, Dividends & Share Repurchases as a % of Adjusted EBITDA and Dividends & Share Repurchases as a % of Equity Market Value because management uses these measu
Slide 21: Reconciliation of non-GAAP Measures – ROIC and ROE
Reconciliation of non-GAAP Measures – CF Industries 22 We have presented Return on Invested Capital (ROIC) and Return on Equity (ROE) because management uses these measures to track the company’s performance in comparison to its peers and believes that these are frequently used by securities analyst
Slide 22: Q3 Cost of Sales Reflective of Early Summer Gas Prices
$2.00 $3.00 $4.00 $5.00 $6.00 Jan Feb Mar Apr May Jun Jul Aug Sep Oct NYMEX Natural Gas Monthly Settlement Prices Q3 Cost of Sales Reflective of Early Summer Gas Prices 23 _________________ Jun–Jul 2014 Avg. = ~$4.51 Ammonia produced that was inventoried and then sold in Q3 (1) Includes the cost of
Slide 23: CF: Unmatched Asset Base
CF: Unmatched Asset Base 24 . 7 nitrogen production complexes with 6 million nutrient tons production capacity . Access to ammonia pipelines from US Gulf and Oklahoma provides lowest-cost option for transporting ammonia to distribution points . 82 distribution locations with over 1.3 million tons of
Slide 24: Cash Returned to Shareholders
Cash Returned to Shareholders Dividends & Share Repurchases as % of Adjusted EBITDA Dividends & Share Repurchases as % of Equity Market Value . $482 million of dividends since 2011 . $4.5 billion of share repurchases since 2011 . New $1 billion share repurchase program authorized in the third quarte
Slide 25: Corn Acreage Supporting Nitrogen Demand
26 Source: AAPFCO, CF Industries Fertilizer Year Nutrient Demand (Million Nutrient Tons) Corn Acreage Supporting Nitrogen Demand N P2O5 K20 Total 2010 12.3 4.1 4.5 20.9 2011 12.8 4.3 4.6 21.7 2012 13.4 4.4 4.6 22.4 2013 13.5 4.5 4.7 22.7 2014 13.0 4.4 4.7 22.1 2015 12.8 4.4 4.7 21.9 2016 13.0 4.4 4.
Slide 26: Favorable Economics Keep Ethanol Blending High
Favorable Economics Keep Ethanol Blending High 27 Ethanol is a competitive form of energy even when oil prices are low Brent Crude Week End Future Price ($/barrel) Source: EIA, USDA, CF Industries 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 50 75 100 125 Iowa Cash Corn Price ($/bushel) Ethanol Blender Econ
Slide 27: Global Production Outages Higher Than Usual
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 (000’s Product Tonnes) Reported Ammonia Outages Global Production Outages Higher Than Usual 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 (000’s Product Tonnes) Announced Urea Outages(1) (1) Excludes China Source: Fertecon, Industry Publications, CF Industri
Slide 28: North America Nitrogen Industry Capacity Changes
29 North America Nitrogen Industry Capacity Changes Source: IFDC, TFI North American nitrogen industry saw significant changes from 2001 to 2011: . The number of companies and production facilities declined substantially due to high gas costs and an extremely competitive agricultural commodity envir
Slide 29: North America Relies on Nitrogen Imports
46% 37% 2% 3% 12% Ammonia Urea AN Other UAN 30 38% 62% Imports Domestic Production . Offshore imports account for 38% of total North American nitrogen demand, or 8.8 million of the 23.6 million nutrient tons consumed . In recent years, offshore imports accounted for 30% to 35% of North American ammo
Slide 30: North American Production Costs Well Below Urea Floor Price
. The global nitrogen cost curve is driven by differences in feedstock costs . The monthly shipment range is calculated using major markets that represent two-thirds of global demand . The cost curve suggests urea floor prices in the range of $280 to $350 per tonne, fob port. Recent pricing supports
Slide 31: Other Announced Projects With No Construction Activity Yet
Other Announced Projects With No Construction Activity Yet Company Location Gross Ammonia Tons Product Tons Notes CHS Spiritwood, ND 850 Ammonia Ammonia, Urea, UAN $3 billion, Greenfield Eurochem Louisiana 800 Ammonia 1.2-1.4 MM Urea Under Study Midwest Fertilizer Corp./Fatima Mount Vernon, IN 800 A
Slide 32: Operating Rates Expected To Remain High
33 Source: FERTECON, CF Industries Calendar Year 50% 55% 60% 65% 70% 75% 80% 85% 90% 0 50 100 150 200 250 2000 2002 2004 2006 2008 2010 2012 2014F 2016F 2018F Capacity Production Op. Rate Op. Rate Ex-China World Urea Capacity & Utilization Operating Rates Expected To Remain High Million Tons Operati
Slide 33: Production Economics Support Natural Gas Price Assumptions
Koch 34 Production Economics Support Natural Gas Price Assumptions Expected demand growth can be met for $5/MMBtu or less through 2035 Source: Deloitte Center for Energy Solutions report for LNG Export Association, 2013 Aggregate U.S. Natural Gas Supply Curve, 2016-2035 . EIA’s forecast assumes dema
Slide 34: MLP Market Observations
MLP Market Observations 35 . MLP financing has a higher cost of capital than investment grade debt . Alerian MLP Index (1) yields at 5.60% . BBB Index (1) yields at 3.52% . Annual distributions to Westlake Chemical Partners LP public holders of $14.2 million imply a 5.0% interest rate on proceeds, w
Slide 35: Westlake vs. LyondellBasell Valuation Trends
36 6x 7x 8x 9x 10x Jan-14 Mar-14 Jun-14 Aug-14 Nov-14 WLK: 6.1x LYB: 6.4x 8/4 – WLKP closes IPO, pricing at $24 / unit 4/29 – WLK announces filing of WKLP IPO 7/23 – Oil:gas ratio peaks at 28.7x (1) (2.5x) (2.0x) (1.5x) (1.0x) (0.5x) 0.0x 0.5x 1.0x 1.5x 2.0x 2.5x Jan-14 Mar-14 Jun-14 Aug-14 Nov-14 (
Slide 36: Donaldsonville – November 2014
Donaldsonville – November 2014 37 Ammonia 3,640 TPD Urea 3,850 TPD UAN 5,050 TPD Urea Warehouse 90K Tons Ammonia Tank 30K Tons UAN Tank 50K Tons Urea Barge Dock
Slide 37: Donaldsonville – Ammonia Plant
Donaldsonville – November 2014 Ammonia Plant 38 Reformer Compressor Area Amine Tank CO2 Removal
Slide 38: Donaldsonville – Urea Melt Status
Donaldsonville – November 2014 Urea Melt Status 39
Slide 39: Port Neal – Site Overview
Port Neal – November 2014 Site Overview 40
Slide 40: Port Neal – Offsites and Utilities
Port Neal – November 2014 Offsites and Utilities 41 Air Receivers Demin Building Utility Control Room Storage Tent Lunch Tent Lime Silos Utility Pipe Rack Clarifier
Slide 41: Port Neal – Ammonia Plant
Port Neal – November 2014 Ammonia Plant 42 Urea Warehouse Ammonia Storage Tanks
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