Cf Industries Holdings, Inc. · NYSE:CF
Cf Industries — Credit Suisse Basic Materials Conference 2015
40 slides from Cf Industries's conference presentation, Sep 17, 2015
Slide 1: Credit Suisse Basic Materials Conference
CF Industries Holdings, Inc. Credit Suisse Basic Materials Conference September 17, 2015
Slide 2: Forward-Looking Statements
Forward-Looking Statements 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
Slide 3: No Offer or Solicitation
No Offer or Solicitation This presentation is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction pursuant to or i
Slide 4: Differentiated Investment Thesis
Differentiated Investment Thesis Nitrogen remains attractive investment Consistent long-term demand growth Chinese anthracite-based production sets floor prices North American gas: sustainable cost advantage European gas prices declining with oil prices Focused on growing cash flow per share Investi
Slide 5: Recent Transactions Generate Significant Value Creation
Recent Transactions Generate Significant Value Creation 5 OCI Combination expected to generate ~$500M of after-tax annual run-rate synergies from optimization of operations, capital and corporate structure Global scale and logistics cost savings SG&A and corporate cost savings Combined company tax r
Slide 6: OCI Transaction is the Next Transformation for CF
OCI Transaction is the Next Transformation for CF 2005 IPO of CF Industries Significant upgrade in management capabilities Established world-class sales & marketing function Continued operational improvement, including de-bottleneck program Successful acquisition and integration of Terra Launched $4
Slide 7: The Premier Global Footprint
The Premier Global Footprint 7 North American operations leverage distribution network, reducing delivered costs One of Europe's largest nitrogen facilities combined with recently acquired GrowHow, benefiting from declining gas prices Beaumont (OCI Partners) and Natgasoline (once completed) will mak
Slide 8: Acquired OCI Businesses: Geleen, Wever, Beaumont, Distribution, Natgasoline
Geleen (Netherlands) Wever (US, Iowa) Beaumont (US, Texas) Global Distribution Natgasoline (US, Texas) % Acquired Ownership 100% 100% ~80% 100% 45% Production Capacity 1.2mstpa of gross ammonia 851kstpa of gross ammonia 375kstpa of gross ammonia 1.0mstpa of methanol ~2.9mstpa volume distributed 1.9m
Slide 9: Access To Highly Attractive, Adjacent Methanol Business
9 Access To Highly Attractive, Adjacent Methanol Business Ammonia and methanol production similar and synergistic Key global players produce both ammonia and methanol Large global market growing at ~7.5% Similar production processes and plants Leverages CF core capabilities in chemical production, s
Slide 10: CF Industries Production Capacity – Pro-Forma
10 CF Industries Production Capacity – Pro-Forma for GrowHow Acquisition and OCI Combination Proposed combination further builds out the scale of CF Industries, adding 4 new facilities to the existing 10-facility footprint CF’s presence in Europe is expected to be enhanced by adding Geleen, Netherla
Slide 11: Unparalleled Growth Pipeline
11 Unparalleled Growth Pipeline Note: Capacity for Beaumont and Natgasoline are included on a proportional basis. Includes 100% of GrowHow capacity and 50% of PLNL. Volume calculation includes Net Ammonia, UAN, Urea, CAN/AN, NPK, DEF, Melamine and Methanol. Expected Completion Date Q4 2015 Q1 2016 Q
Slide 12: CHS Equity Investment in CF Nitrogen
CHS will purchase an equity interest in CF Nitrogen for $2.8 billion Equity Investment Capacity (in 000’s) Net NH3 Urea UAN Other Total Pct. Donaldsonville 1,390 2,835 3,255 - 7,480 39.6% Port Neal 110 1,400 800 - 2,310 12.2% Woodward 140 25 820 - 985 5.2% Yazoo City - 20 160 1,075 1,255 6.6% Verdig
Slide 13: Effective Nitrogen Capacity Per Share Continues to Increase
Gross Nitrogen per share 11 17 24 30 38 38 37 37 Net Effective Nitrogen per share 7 11 16 20 25 25 30 30 CF Industries Continues to Increase Effective Nitrogen Capacity Per Share 13 CF Industries Effective Nitrogen Capacity and Shares Outstanding 1 Methanol tons converted to ammonia tons at 46:53, b
Slide 14: Additional Cash Available for Capital Returns and Growth
14 Additional Cash Available for Capital Returns and Growth Existing Dividend(3) Estimated Minority Distributions to CHS(4) Capital Expenditures Operating Cash Needs (5) Transaction Provides Significant Cash Available for Capital Allocation Priorities Total Sources: ~$15.0 – 16.5B CHS equity investm
Slide 15: Unparalleled Track Record of Creating Value
CF Industries has consistently produced strong shareholder returns across multiple time periods Market data as of 9/11/2015. Total shareholder returns reflect share price appreciation plus dividends reinvested into the security/index. Source: Bloomberg * Yara ADR’s trading in US dollars Five Years O
Slide 16: Best Of Breed Shareholder Returns
Rest of World North America 16 Best Of Breed Shareholder Returns Rank Company Total Shareholder Return(1) 1 Regeneron 5,885% 2 Priceline 5,525 3 Netflix 3,171 4 Alexion Pharma 2,401 5 Monster Energy 2,349 6 Green Mountain/Keurig 2,249 7 Apple 1,871 8 CF Industries 1,795 9 Perrigo 1,306 10 Skyworks S
Slide 17: [LOGO]
[LOGO]
Slide 18: CF Industries is a Leading Nitrogen Fertilizer Producer
CF Industries is a Leading Nitrogen Fertilizer Producer 18 North American Assets 2014 Sales by Ton 2014 Sales Dollar One of the largest manufacturers and distributors of nitrogen fertilizers and other nitrogen products in the world Core production and distribution facilities are concentrated in the
Slide 19: GrowHow is the Largest UK Fertilizer Manufacturer
19 Gross Annual Production Capacities (M short tons) Sales Volume Agricultural sales (70%) ammonium nitrate fertilizer NPK compounds fertilizer Industrial sales (30%) ammonia nitric acid Ince Manufacturing Plant & Head Office Billingham Manufacturing Plant Total Ammonia (gross) 0.9 AN 1.2 NPK 0.4 UK
Slide 20: Gas Hedges Are In Place Through 2017
Gas Hedges Are In Place Through 2017 21 NYMEX First Of The Month Settlement/Futures Prices (5) Hedged Prices Swaps with an average strike price of $2.92/MMBtu for an average of 9.4 million MMBtus per month for July-December, 2015. Collars with a floor price of $2.30/MMBtu and a ceiling price of $3.2
Slide 21: OCI Transaction Overview
OCI Transaction Overview 22 ~$500M of annual after-tax run-rate synergies Mid-to-high teens cash flow accretion for CF shareholders New CF will have increased scale to continue its highly successful capital allocation strategy Value Creation New CF to be led by existing CF management team New CF to
Slide 22: Transaction Funding Supports Long-Term Value Creation
Transaction Funding Supports Long-Term Value Creation 23 CF expects to maintain investment-grade credit ratings CF to assume approximately $2.0B of net debt located at the operating entities of the OCI businesses Consistent with CF target of 2.0x – 2.5x total debt / mid-cycle EBITDA leverage Bridge
Slide 23: Geleen, Netherlands Nitrogen Complex
Geleen, Netherlands Nitrogen Complex (Included in Transaction) Operational capacity: 1.2mstpa gross ammonia 385kstpa net ammonia 385kstpa UAN 1.6mstpa AN/CAN 220kstpa melamine Europe’s 2nd largest integrated nitrates fertilizer producer World’s largest melamine producer (2 plants) Two NH3 plants One
Slide 24: Wever, Iowa Greenfield Nitrogen Facility
25 Expected commissioning and production start-up in Q1 2016 ~$1.7B of capex has been spent to date, out of ~$2.0B of total estimated capex for the project $1.2B of capex spend has been financed by Midwest Disaster Area tax-exempt bonds (BB- rated) Iowa Fertilizer Company is a greenfield nitrogen fe
Slide 25: Beaumont, Texas Integrated Methanol and Ammonia
Source: AAPFCO, CF Industries, Statscan, OCI Management, company filings Beaumont, Texas Integrated Methanol and Ammonia 26 Integrated methanol and ammonia production facility located on the Texas Gulf Coast near Beaumont, Texas Facility previously owned by Terra Industries. Current CF Industries Po
Slide 26: Natgasoline Will Be One of the World's Largest Methanol Facilities
Natgasoline Will Be One of the World’s Largest Methanol Facilities 27 Progress to date Acquisition of land in Beaumont, Texas TCEQ (2) and EPA permits successfully received Air Liquide engineering and procurement is 64% complete (as of April 30 2015) Signed license and Basic Engineering Agreement wi
Slide 27: CHS Transaction Overview
CHS Transaction Overview 28 CHS will be entitled to purchase annually up to 1.7 million tons of UAN and urea at market prices from CF Nitrogen CHS’ supply agreement represents 8.9% of the CF Industries’ total production of 18.9 million product tons, not including the new capacity from the proposed c
Slide 28: Indicative Gross Margin Associated with CHS Investment
Indicative Gross Margin Associated with CHS Investment 29 FY2014 Six Months Ending 6/30/14 Six Months Ending 6/30/15 LTM Urea Segment Gross Margin (in millions) $397.9 $226.4 $230.7 $402.2 Urea Segment Sales Volume (‘000 tons) 2,459 1,255 1,216 2,420 CHS Contracted Urea Volume (‘000 tons) - - - 1,09
Slide 29: CHS Investment Metrics
CHS Investment Metrics 30 Supply Agreement Product Tons (000s) Nutrient Tons (000s) Indicative LTM Gross Margin(1) -Urea 1,095 504 $182 -UAN 580 186 $64 Total 1,675 689 $246 Metrics Associated with $2.8B Investment $1,672/ton $4,064/ton 11.4x See page 29 for reconciliation calculations, gross margin
Slide 30: The global nitrogen cost curve is driven by feedstock costs
The global nitrogen cost curve is driven by differences in feedstock costs The monthly shipment range is calculated using consuming regions that represent two-thirds of global demand The cost curve suggests urea floor prices in the range of $270 to $290 per short ton, fob port. Recent pricing suppor
Slide 31: Significant Portion of Chinese Production Costs Linked to U.S. Dollar
Due to mix of USD vs RMB-linked costs, each 1% change in the RMB has approximately a half-percent impact to the Chinese urea floor producers Energy costs (i.e. coal) are tied back to U.S. Dollar economics (China as a coal importer; seaborne coal denominated in USD) Other cash costs linked to yuan-de
Slide 32: Attractive Farm Level Economics
33 Corn economics consistently provide positive returns over variable costs and a premium to soybeans Attractive Farm Level Economics U.S. Farmer Anticipated Returns Source: USDA, Green Markets, CME, CF Industries Calendar Year; As of September 11, 2015 Source: USDA, Green Markets , CF Industries Ma
Slide 33: Stability In Planted Acres Translates To Stable Ag Demand
34 Stability In Planted Acres Translates To Stability In Near-Term Ag Demand Stable Near-Term Agricultural Demand North American Planted Acreage North American Nitrogen Agricultural Fertilizer Demand Fertilizer Year Calendar Year (Million Nutrient Short Tons) (Million Acres) Source: TFI, USDOC, FERT
Slide 34: Corn Acreage Supporting Nitrogen Demand
35 Source: AAPFCO, CF Industries Fertilizer Year Nutrient Demand (Million Nutrient Tons) Corn Acreage Supporting Nitrogen Demand Source: USDA, CF Industries Marketing Year of September 1 – August 30 U.S. Corn Acreage (Million Acres) N P2O5 K20 Total 2010 12.3 4.1 4.5 20.9 2011 12.8 4.3 4.6 21.7 2012
Slide 35: North America Relies on Nitrogen Imports
36 Offshore imports account for 38% of total North American nitrogen demand, or 9.0 million of the 24.0 million nutrient tons consumed In recent years, offshore imports accounted for 30% to 35% of North American ammonia use Offshore imports account for approximately 67% of urea fertilizer use For UA
Slide 36: Even with Expansions, North America Expected to Remain a Net Importer
37 North American Offshore Nitrogen Imports (Million Nutrient Tons) Even with Expansions, North America Expected to Remain a Net Importer Source: USDOC, CF Industries Fertilizer Year NA Nitrogen Demand CF OCI Koch, Agrium, PCS, Yara, Simplot, others(3) CF Dyno Nobel Other (2) Forecast Source: Fertec
Slide 37: Operating Rates Expected To Remain High
38 Source: FERTECON, CF Industries Calendar Year World Urea Capacity & Utilization Operating Rates Expected To Remain High Million Tons Operating Rates North American Nitrogen Shipments & Utilization Source: TFI, DOC, FERTECON, CF Industries Calendar Year Thousand Nutrient Tons Operating Rate 0% 20%
Slide 38: Projects Expected On-Stream by 2018
Projects Expected On-Stream by 2018 (Thousand Tons per Year, Announced) Source: CF Industries and Industry Publications 39 Company Location Gross Ammonia Tons (000) Product Tons (000) Type of Expansion & Notes Projected Startup OCI Beaumont, TX 40 Ammonia only Debottleneck Q1 2015 CF Industries Dona
Slide 39: Other Announced Projects With No Construction Activity Yet
Other Announced Projects With No Construction Activity Yet Source: CF Industries and Industry Publications (Thousand Tons per Year) 40 Company Location Gross Ammonia Tons Product Tons Notes Agrigen St. Charles, LA 800 Ammonia N/A $1.2 billion, Greenfield Agrium Kenai, AK 700 Ammonia 500 Urea Plant r
Slide 40: Looking Forward: CF Expansion Projects Increase Capacity Over 25%
Capacity per 2014 10-K (1) From 2014 SEC Form 10-K. Total product tons of net ammonia, UAN, urea, and AN. 41 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 Combine
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