Cf Industries Holdings, Inc. · NYSE:CF
Cf Industries — Q1 2018 Earnings Presentation
33 slides from Cf Industries's earnings presentation, May 2, 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: Donaldsonville pipe rack 4 Safe Harbor Statement/Note Regarding Non-GAAP Financial Measures 2-3 Overview of Financial Results 5-7 Emerging Global Tradeflows 8-18 Capital Allocation and Strategy 19-25 Appendix 26-34
Slide 4: Overview of Financial Results
DEF loading at Donaldsonville Overview of Financial Results
Slide 5: First quarter 2018 results
First quarter 2018 results • • • • Q1 net earnings of $63 million, or $0.27 per diluted share Q1 EBITDA of $302 million and Q1 adjusted EBITDA of $296 million(1) Cash and cash equivalents of $936 million on the balance sheet as of March 31, 2018 The company completed the purchase of all publicly tra
Slide 6: Financial results - first quarter 2018
Financial results - first quarter 2018 (1) Depreciation and amortization was $193 million for the three months ended March 31, 2018, and $205 million for the three months ended March 31, 2017 (2) See appendix for reconciliation of EBITDA and adjusted EBITDA (3) (4) Includes the cost of natural gas t
Slide 7: Emerging Global Tradeflows
Donaldsonville urea storage Emerging Global Tradeflows
Slide 8: Market overview
Market overview • Global urea prices expected to remain above 2017 levels even after the traditional seasonal reset at the end of the second quarter The price of natural gas per MMBtu at TTF in Europe was 32% higher in March 2018 compared to March 2017 and the price per metric ton of anthracite coal
Slide 9: Expected net new capacity additions growth post 2017
Expected net new capacity additions growth post 2017 CF Projected Global Net Urea Capacity Additions(1) Thousand Product Metric Tons below projected global demand 20,000 15,000 10,000 5,000 - 2015 2016 2017 2018 2019 2020 2021 (1)See appendix for details of the 2017-2021 projected additions and assu
Slide 10: Nitrogen fertilizer imports into North America beginning to decline
Nitrogen fertilizer imports into new production increases North America Offshore Urea Imports North America are beginning to decline as North America Offshore UAN Imports Million Tons Million Tons 10 5.0 9 4.5 8 4.0 7 3.5 6 3.0 5 5 2.5 4 2018 through February .2 4 2.0 3 1.5 3 2 1.0 1 0.5 - - Jul Aug
Slide 11: Consistent global nitrogen demand growth
Consistent global nitrogen Total Nitrogen Consumption 2002-2017(1) demand growth Million Nutrient Metric Tons Expected global demand growth driven by: 180 Overall 15-yr CAGR=2.2% • Global population expected to increase 1% per annum Global GDP expected to increase 2-2.5% per annum, increasing person
Slide 12: U.S. and Canada remain a significant importer of nitrogen
U.S. and Canada combined products Total U.S. and Canada Import Volume(1) remain a significant importer of nitrogen Million Nutrient Tons – Calendar Year 12 10 8 6 4 2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F (1)U.S. imports, including from Can
Slide 13: 2018 estimated cost curve
2018 estimated cost curve 2018 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: 17.1 MM ST Avg $400 Monthly nge 300 t 200 100 (N.G.) 0 Lithuania 5 Indonesia India 5 South 10 20 America America
Slide 14: 2018 cost curve assumptions
2018 cost curve assumptions Gas Prices ($/Mmbtu) Notes: Market prices updated as of 10/3/17; Coal prices as of September 7, 2017 * 2017E represents assumptions from November 2016 forecasted cost curve 15 Annual Average Energy Cost LocationSource2017E*2018F Henry HubNYMEX3.073.03 TTFICE5.476.01 WEU-R
Slide 15: Chinese participation in global urea supply is changing
Chinese participation in global urea supply is changing as domestic production and Rolling 12 Month Urea Exports vs. Prices Million metric product tons, USD per metric ton (r-axis) exports decline China Urea Reported Operating Rates CFMW Reported Data* 18 16 14 12 10 8 6 4 2 - 450 400 350 300 250 20
Slide 16: CF serves a global market from strong North American base
CF serves a global market from strong North American base – Unit train – France – Morocco – Switzerland Source: IFDC (1) Excludes Chinese state owned enterprise JAMG and Indonesian consortium PT Pupuk 17 …with outstanding domestic and export logistical capabilities. •Product shipped via all modes: –
Slide 17: Best North American distribution capabilities with a global reach
Best North American distribution capabilities with a global reach Rycroft Vanscoy Medicine Hat Brandon Ability to export to mainland Europe Ritzville Grand Forks Velva Billingham Glenwood Ince Pine Bend Spencer Courtright Port Neal Blair Fremont Aurora Albany Seneca Kingston Garner Huntington Frankf
Slide 18: Capital Allocation and Strategy
Yazoo City plant Capital Allocation and Strategy
Slide 19: CF's Capital Allocation Philosophy
CF’s Capital Allocation Philosophy • • Commitment to investment grade over the long term 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 with a historical bias towards share repurch
Slide 20: Increasing shareholders participation in the business per share
Increasing shareholders participation in the business by continuing to increase nutrient tons per share CF Industries’ Nitrogen Volumes and Shares Outstanding Annual Nitrogen Equivalent Tons per 1,000 Shares Outstanding Million shares Outstanding (5) 40 400 35 350 30 300 25 250 20 200 15 150 10 100
Slide 21: CF's Strategy
CF’s Strategy A leading chemical company with superior shareholder returns over the cycle Vision We feed the crops that feed the world; we produce building blocks for a better life Mission Corporate strategy Leverage core capabilities to optimize and grow the world’s most advantaged nitrogen and che
Slide 22: Core Organizational Capabilities
Core Organizational Capabilities Leader in the safe and responsible production, storage and handling of chemicals, achieving best in class performance • Achieved industry leading recordable injury rate of 0.67 (industry average: 2.2), our lowest rate since going public, while being the largest nitro
Slide 23: Core Organizational Capabilities
Core Organizational Capabilities High performance culture, focused on safety, ethics and compliance, creating a world-class, scalable corporate platform • • SG&A among the lowest in the industry at $10 per product ton or 4.6% of sales (2017) Highly scalable corporate platform as product tons increas
Slide 24: Appendix
Donaldsonville control room Appendix
Slide 25: CF is well positioned for expected pricing recovery
CF is well positioned for expected pricing recovery 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 Ind
Slide 26: Non-GAAP: reconciliation of Net Earnings (Loss) to EBITDA and Adjusted EBITDA
Non-GAAP: reconciliation of Net Earnings (Loss) to EBITDA and Adjusted EBITDA (1) (2) (3) For the three months ended March 31, 2018, amount includes $22 million related to CFN and $4 million related to TNCLP Loan fee amortization is included in both interest expense-net and depreciation and amortiza
Slide 27: 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 28: Non-GAAP: reconciliation of Cost of Sales to Controllable Cost of Sales
Non-GAAP: reconciliation of Cost of Sales to Controllable Cost of Sales and Controllable Cost of Sales per ton 61 (260) 176 derivatives (1)Includes the cost of natural gas that is included in cost of sales during the period under the first-in, first-out inventory cost method (2)Includes realized gai
Slide 29: Non-GAAP: reconciliation of Capital Expenditures to Ongoing Maintenance
Non-GAAP: reconciliation of Capital Expenditures and Capital Capital Expenditures Expenditures per per ton ton to Ongoing Maintenance (63)% sales ton $ 15.69 $ 32.55 $ 41.70 $ 32.24 $ 24.41 nitrogen sales ton (36)% expenditures per nitrogen sales ton 31 In millions 2017 2016 2015 2014 2013 Capital e
Slide 30: Expected net new capacity additions post 2017
Expected net new capacity additions demand growth post 2017 CF Projected Global Gross Urea Capacity Additions(1) Thousand Product Metric Tons slightly below projected global 25,000 20,000 15,000 Enid(3) Sub-Saharan 10,000 Africa 5,600 3% Growth: 5.3M 2% Growth: 3.5M 5,000 2017-2021 Total 19,300 Gran
Slide 31: Projected new global urea plants (2017-2021)
Projected new global urea plants (2017-2021) 19,300 Grand Total (1)Subtotals rounded to nearest 100k Sources: Fertecon, CRU, CFMW, Baiinfo, Fert.cn, Industry Publications, CF analysis 33 Country Company City/Province Feedstock Capacity – K Metric Product Tons(1) Year of Addition Bolivia Ebihara Carr
Slide 32: Urea plants in permanent and temporary shutdown
Urea plants in permanent and temporary shutdown Subtotal China Hubei Yihua Xishui Anthracite Lump Baiinfo Nov, 2016 110 N/A (1) (2) (3) For those plants in observed temporary status, initial report date of Aug 2016 or prior 2017 permanent shutdown Announced intention to close plant * Represents new
Slide 33: Urea plants in permanent and temporary shutdown
Urea plants in permanent and temporary shutdown o Fan (O26 > = ‘se 3 Plants included in [ai rtd rt closure forec 7010 5 ome fan me ‘S 7,220\ Tons Cone Foren rv me © 2017-202 = fa hae = 2017-2021 oo Feacn red 0 oe fan a e on fea ae = = Sa = = faa eet 2B = Fact tr 2 pis ir’ a0 7 ‘ ra cone ie Carros De
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