Cf Industries Holdings, Inc. · NYSE:CF
Cf Industries — Investor Day (August 2010)
117 slides from Cf Industries's investor day presentation, Aug 17, 2010
Slide 1: CF Industries Annual Investor & Analyst Day
Corporate Development Supply Chain Sales Finance Legal Operations Human Resources Dv Sc Sa Fi Le Op Hr CF Industries NYSE: CF Annual Investor & Analyst Day August 17, 2010
Slide 2: Overview
Overview Steve Wilson Chairman, President, and Chief Executive Officer
Slide 3: Agenda
Agenda 8:30 a.m. Steve Wilson Overview 8:50 a.m. Steve Furbacher Governance 9:00 a.m. Glen Buckley Markets 9:40 a.m. Bert Frost Sales & Marketing 10:15 a.m. Break 10:30 a.m. Phil Koch Supply Chain 10:50 a.m. Tony Will Operations 11:20 a.m. Tony Nocchiero Finance 11:35 a.m. Steve Wilson Review & Visi
Slide 4: Introduction
Introduction CF Industries is North America’s nitrogen bellwether with a strong presence in phosphates
Slide 5: Investment Thesis
Investment Thesis Strong agricultural markets Favorable natural gas environment Excellent market position Growing synergy realization Strong cash flow and debt reduction Proven execution by experienced management team
Slide 6: Investment Thesis: Strong Agricultural Markets
Investment Thesis: Strong Agricultural Markets Global Grain Production Source: USDA, FAS Harvested Area
Slide 7: Investment Thesis: Favorable Natural Gas Environment
Investment Thesis: Favorable Natural Gas Environment Source: PIRA Europe Contract Europe Spot Henry Hub Natural Gas Cost per MMBtu 2008 USD
Slide 8: Investment Thesis: Excellent Market Position
Investment Thesis: Excellent Market Position CF Industries #1 in N and #3 in P Extensive storage & transport N Mfg. in U.S. Gulf, Midwest, Western Canada Agrium Mfg. in Western Canada and Northern U.S. Large retail network Potash Corp. #1 in K and #2 in P 60% of N & 35% of P industrial Koch Industri
Slide 9: Global Nitrogen Fertilizer Consumers and Importers
Global Nitrogen Fertilizer Consumers and Importers 2007 – 2009 Average Source: FERTECON
Slide 10: Cumulative U.S. Ammonia Plant Closures vs. Natural Gas Prices
Cumulative U.S. Ammonia Plant Closures vs. Natural Gas Prices U.S. nitrogen production fell by over 40% by the end of Fertilizer Year 2005/2006 Sources: Blue, Johnson & Associates, Natural Gas Week, TFI 1985-1997 Average Natural Gas Cost of $1.90/MMBtu 0 1 2 3 4 5 6 7 8 9 0 5 10 15 20 25 30 1998 199
Slide 11: Global Phosphate Consumers and Exporters
Global Phosphate Consumers and Exporters 2007-2009 Average Source: FERTECON
Slide 12: Strategic Priorities
Strategic Priorities Operate effectively Integrate and realize synergies Reduce debt Optimize new platform Develop/execute growth strategy
Slide 13: Governance
Governance Steve Furbacher Lead Independent Director Retired President and COO of Dynegy Inc.
Slide 14: The Approach of the Board of Directors
The Approach of the Board of Directors Overriding role of the board is to look out for the best interests of stockholders All stockholders Balance short-term and long-term A proud record: highest total return to shareholders among peers since IPO
Slide 15: Principles that Guide Board's Decisions
Principles that Guide Board’s Decisions Build long-term shareholder value Ensure vitality of company for its customers, employees and other stakeholders Choose CEO, monitor his or her performance, prepare for orderly succession Review/critique/endorse corporate strategy Monitor company performance a
Slide 16: Composition of Board of Directors
Composition of Board of Directors 8 of 9 are outside directors 6 of 9 are independent Bill Davisson and John Johnson provide excellent industry insight Recuse themselves on related-party issues Both have announced their retirement as CEOs at year-end Outside Outside Independent Executive Chairman (G
Slide 17: Selection of Board Members
Selection of Board Members Primary selection criteria: Ability to contribute Integrity Currently planning for future retirements Guideline requires members over 72 years of age not stand for re-election Ensure ongoing strength of audit committee Important to balance skills, experience and independen
Slide 18: How the Board Functions
How the Board Functions Open, robust communication Amongst directors With CEO and management Independence Strong points of view (expressed respectfully) Frequent executive sessions (including independent-only sessions) Rigorous fact-based decision process Clear delineation between board oversight an
Slide 19: Markets
Markets Glen Buckley Chief Economist, Director, Agri-Business Analysis
Slide 20: U.S. NPK Fertilizer Demand Stronger than Expected
Source: AAPFCO, CF U.S. NPK Fertilizer Demand Stronger than Expected Fertilizer Year Basis N P K Total (000 Nutrient Tons) 2007 13,194 4,572 5,133 22,899 2008 12,561 4,247 4,660 21,468 2009 12,027 3,647 3,265 18,939 2010 Est. 12,812 4,185 3,963 20,960 2009–10 Change Percent 6.5% 14.8% 21.4% 10.7% Vo
Slide 21: Ammonia Highest Since 1994
Source: AAPFCO, DOC, TFI, CF Ammonia Highest Since 1994 March vs. Current Estimates of 2010 Fertilizer Year DA Application Record ammonia demand impacted both urea and UAN March '10 Current Change March '10 Current Change Ammonia 3,552 3,956 404 4,210 4,824 492 Urea 3,508 3,453 -55 7,626 7,506 -120
Slide 22: High Ammonia Demand Driven by Fall Carryover and Ideal Weather
High Ammonia Demand Driven by Fall Carryover and Ideal Weather (000 Tons NH3 Applied in Fertilizer Year 2010) Carryover Weather Loss NH3 Applied Weather Gain Initial Spring Expectations Carryover Source: TFI, DOC, CF
Slide 23: Fertilizer Year 2011 Starting Strong
Fertilizer Year 2011 Starting Strong Current Drivers Strong outlook for fall demand Corn acreage up 3+ million Surging wheat prices Downstream inventory extremely low Major buyers not yet stocked for fall
Slide 24: Jump in Wheat Prices Adding to the Strength
Jump in Wheat Prices Adding to the Strength (July 2011 – CBOT Close 8/13/10) Feb Mar Apr May Jun Jul Aug
Slide 25: Corn Futures Rebounding
Corn Futures Rebounding (December 2010 – CBOT Close 8/13/10) Feb Mar Apr May Jun Jul Aug
Slide 26: Corn Supply and Demand Balance
Marketing Years (Yr. Beg. – Sept. 1) (Million Bushels) USDA CF Est. Proj. Fct. 2008/09 2009/10 2010/11 2011/12 Planted Area 86.0 86.5 87.9 91.5 Harvested Area 78.6 79.6 81.0 83.6 Yield 153.9 164.7 165.0 167.5 Beginning Stocks 1,624 1,673 1,426 1,311 Production 12,092 13,110 13,365 13,998 Imports 14
Slide 27: Midwest – Too Hot and Too Wet
Source: High Plains Regional Climate Center Midwest – Too Hot and Too Wet! Departure from Normal (July 13th – July 26th) °F Percent Temperature Precipitation
Slide 28: Crop Budgets Clearly Favor Corn
Corn Soybeans Wheat Price ($/Bu) $3.80 $9.25 $5.10 Yield (Bu/Acre) 165.0 44.0 46.9 Revenue 627 407 239 Costs Fertilizer 100 18 42 Total Variable 280 135 115 Fixed Costs 139 123 113 Land Rent 121 111 57 Total 540 369 285 Returns Over: Variable Costs 347 272 124 Source: USDA, Green Markets, CF Crop Bu
Slide 29: Corn and Wheat Acreage Expected to Climb
Source: USDA, CF Corn and Wheat Acreage Expected to Climb (Million Acres) Marketing Year 2007 2008 2009 2010 2011 Change 2010-11 Corn 93.5 86.0 86.5 87.9 91.5 3.6 Soybean 64.7 75.7 77.5 78.9 77.0 -1.9 Wheat 60.5 63.2 59.1 54.3 56.0 1.7 Cotton 10.8 9.5 9.2 10.9 10.5 -0.4 4 Major 229.6 234.4 232.3 232
Slide 30: Fertilizer Demand Outlook: Best Since 2007
Source: AAPFCO, CF Fertilizer Demand Outlook: Best Since 2007 Fertilizer Year Basis N P K Total (000 Nutrient Tons) 2007 13,194 4,572 5,133 22,899 2008 12,561 4,247 4,660 21,468 2009 12,027 3,647 3,265 18,939 2010 Est. 12,812 4,185 3,963 20,960 2011 Fct. 13,189 4,419 4,666 22,274 2010–11 Change Perc
Slide 31: Midwest Ammonia Prices Rebounded Dramatically
Source: Green Markets Midwest Ammonia Prices Rebounded Dramatically ($ per Ton)
Slide 32: U.S. Ammonia Producer June Inventory at Lowest Level
Source: DOC, TFI, CF U.S. Ammonia Producer June Inventory at Lowest Level in Recent Memory (000 Tons)
Slide 33: U.S. Fall D.A. Ammonia Shipments Projected
Source: DOC, TFI, CF U.S. Fall D.A. Ammonia Shipments Projected at Second Highest Level in Ten Years (Million Product Tons) Fertilizer Year
Slide 34: U.S. Gulf Urea Prices Increased 25%
Source: Green Markets U.S. Gulf Urea Prices Increased 25% Since Early June ($ per Ton FOB)
Slide 35: U.S. Dry Urea Imports Will Need to Stay High
Source: DOC, TFI, CF U.S. Dry Urea Imports Will Need to Stay High in Order to Meet Demand (000 Tons) Fertilizer Year 2010–11 Change 2009 2010 2011 Volume Percent Supply Production 3,000 2,974 2,980 6 0.2% Beg. Inventory 239 172 200 28 Imports 5,751 6,181 6,230 49 0.8% Total Supply 8,991 9,327 9,410
Slide 36: World Urea Trade Balance Moving Long
Source: FERTECON, Profercy, CF World Urea Trade Balance Appears to Be Moving Long Through End of Year (000 Tonnes, Export Availability vs. Import Demand)
Slide 37: Urea Supply Could Be Offset by Production Outages
37 Source: Industry Publications, CF However, Could Easily Be Offset by Production Outages/Turnarounds (Million Product Tonnes of Urea) 2007 2008 2009 2010 2011
Slide 38: Ukraine Expected to Provide Floor Under Urea Market
Ukraine Expected to Provide Solid Floor Under the World and U.S. Urea Market (Implied U.S. Gulf Landed Cost $ per Short Ton) Source: FERTECON, Profercy, CF Natural Gas Scenarios - $ per MMBtu
Slide 39: UAN Gulf Barge Prices Sharply Higher
Source: Green Markets UAN Gulf Barge Prices Sharply Higher ($ per Ton – 32%)
Slide 40: U.S. UAN Market Driven by Tight Producer Inventory
Source: DOC, TFI, CF U.S. UAN Market Driven by Tight Producer Inventory (000 Tons – 32% Equiv., Fertilizer Year Basis)
Slide 41: U.S. UAN Fall Demand Expected to Add Support
41 Source: DOC, TFI, CF U.S. UAN Fall Demand Expected to Add Support to Prices (Million Tons – 32% Equiv.) Fertilizer Year Fall 2009 5.23 2010 5.08 2011 5.54 .10-11 9%
Slide 42: UAN Imports Need to Rebound to Meet Demand
Source: DOC, TFI, CF UAN Imports Need to Rebound Dramatically to Meet Projected Demand (000 Product Tons – 32% Equiv.) Fertilizer Year Change 2009 2010 2011 Volume Percent Supply Production 8,267 9,045 9,500 455 5.0% Beg. Inventory 807 741 550 -191 -25.8% Imports 1,605 1,699 2,400 701 41.3% Total Su
Slide 43: U.S. NOLA DAP Prices Up Since Early June
Source: FERTECON U.S. NOLA DAP Prices Up Substantially Since Early June ($ per Ton FOB)
Slide 44: U.S. DAP/MAP Producer Inventory Returns to Normal
Source: DOC, TFI, CF U.S. DAP/MAP Producer Inventory Returns to “Normal” – But Mostly Committed (000 Tons, Fertilizer Year Basis)
Slide 45: U.S. Producer DAP/MAP Shipments Expected to Recover
Source: DOC, TFI, CF U.S. Producer DAP/MAP Shipments Expected to Recover (MM Tons P2O5) Fertilizer Year 10.9%
Slide 46: Recovery in DAP/MAP Led by U.S. Demand
Source: DOC, TFI, CF Recovery in DAP/MAP Will Be Led by U.S. Demand (Million Tons P2O5) Fertilizer Year
Slide 47: Summary
47 Summary . Nitrogen – Markets expected to remain strong near term, particularly for ammonia and UAN. – Urea market could come under pressure in Q4 if world market goes long. However, Ukraine supply cost expected to provide a solid floor. . Phosphates – Supply/demand balance expected to remain extr
Slide 48: Sales & Marketing
Sales & Marketing Bert Frost Vice President, Sales and Market Development
Slide 49: Pro Forma Combined Sales Volume
Pro Forma Combined Sales Volume* 15.7 million product tons of capacity * Major Nitrogen and Phosphate products only Over 80 percent of CF’s sales are nitrogen products Capacity is greatest for UAN, at more than 6 million tons
Slide 50: Customer Segmentation
Customer Segmentation CF sells to all levels of the market chain Market Level Description Value to CF Ag Retail Sell direct to end user Storage capacity and distribution networks Good market intelligence Consistent buying patterns Ag Wholesale Sell to retailers and distributors High volume purchaser
Slide 51: Customer Segmentation 2009 Product Tons
Customer Segmentation 2009 Product Tons Ag is primary focus with industrial and export balancing out sales Wholesale Wholesale Retailer/ Other Ag Industrial Legacy Terra Wholesale Retailer/ Other Ag Industrial Export Legacy CF Industries Retailer/ Other Ag Industrial Export
Slide 52: Balanced Approach to Sales Pattern
Balanced Approach to Sales Pattern Percent of Total Sales Tons* * Average 2008-09 total N & P sales tons including Ag, Industrial & Export; excludes sales to Viterra (non-controlling interest holder of CFL). Ag business is year-round but more seasonal than industrial, peaking in spring and fall peri
Slide 53: Industrial Business
Industrial Business Industrial business is ratable with steady margins Major Areas of Industrial Business Industrial chemicals Chemical intermediates Ethanol producers Explosives producers Cattle feed Environmental Reduction in NOx emissions at stationary power plants Diesel Exhaust Fluid (DEF) Deve
Slide 54: Diesel Exhaust Fluid (DEF)
54 Diesel Exhaust Fluid (DEF) .EPA-mandated NOx Reduction – New emissions standard for commercial trucks effective Jan. 1, 2010 – All manufacturers except one using SCR technology, which requires regular doses of DEF (urea based) – U.S. demand expected to reach ~2.5 million tons of urea equivalent b
Slide 55: Strategic Access to Markets
U.S. Fertilizer Consumption Legacy CF Distribution Legacy CF Production Legacy Terra Production Legacy Terra Distribution Map also includes leased facilities. CF is strategically positioned to meet North American nitrogen and phosphate fertilizer demand Most of CF’s plants and distribution facilitie
Slide 56: Profit-Driven Opportunities
Profit-Driven Opportunities CF Nitrogen Sales Volume to Western Canada Focused on maximizing profitability by increasing sales close to facilities One example is growth in nitrogen sales from Medicine Hat into western Canada Building upon track record of maximizing profitability
Slide 57: Maximizing Profitability through Flexible Production
Maximizing Profitability through Flexible Production Urea Ammonia Upgraded Products DAP MAP Capability to adjust product sales mix to take advantage of market conditions Optimization Opportunities Nitrogen Phosphate UAN
Slide 58: CF Export Sales
CF Export Sales Tons (Millions) 5 Year Average Export capability provides flexibility
Slide 59: Global Reach
Global Reach KEYTRADE partnership provides access to global markets for both imports and exports CF exports around the world Mexico Panama France Turkey Canada Argentina Brazil Chile Colombia Ecuador Peru Uruguay India Pakistan China Vietnam
Slide 60: New Company – Expanded Ability to Serve Customers
New Company – Expanded Ability to Serve Customers One-stop shop for nitrogen products, including Ammonium Nitrate Sales organization, including regional team, aligned with customers Forward Pricing Program and PROMISE interface for customers In-market production and shortened supply lines The combin
Slide 61: Sales Organization
Sales Organization Serving customers and maximizing sales profitability through product focus
Slide 62: Supply/Demand Volatility Drives Need for Risk Management
Global commodity prices have experienced increased volatility Future timing of supply and demand growth may be uneven, leading to more volatility Supply/Demand Volatility Drives Need for Risk Management NOLA price per short ton Source: FERTECON DAP Urea
Slide 63: Risk Management/Pricing
Risk Management/Pricing Forward Pricing Program (FPP) Block sales Index sales Customer storage programs CF offers competitive pricing options, including the Forward Pricing Program
Slide 64: More Opportunities Available
More Opportunities Available Sales through all channels More complete information about the marketplace Ability to select preferred business/channel/timing Ability to store product in anticipation of rising prices
Slide 65: Early Synergy Wins
Early Synergy Wins Improved selling practices Supplying customers from closer location allows more profitable opportunities Offering delivered pricing increases predictability of delivery Adjusted (and consistent) invoice payment terms result in improvements in working capital Producer exchanges get
Slide 66: A Stronger Sales Presence
A Stronger Sales Presence A global leader in the nitrogen business and a major player in the global phosphate arena Diversified supplier selling to all levels of the market chain Direct access to domestic and global markets Premier service Flexible profit-driven focus
Slide 67: Agenda
Agenda 8:30 a.m. Steve Wilson Overview 8:50 a.m. Steve Furbacher Governance 9:00 a.m. Glen Buckley Markets 9:40 a.m. Bert Frost Sales & Marketing 10:15 a.m. Break 10:30 a.m. Phil Koch Supply Chain 10:50 a.m. Tony Will Operations 11:20 a.m. Tony Nocchiero Finance 11:35 a.m. Steve Wilson Review & Visi
Slide 68: Supply Chain
Supply Chain Phil Koch Vice President, Supply Chain
Slide 69: Supply Chain Functional Responsibilities
69 Supply Chain Functional Responsibilities . Raw Materials Annual Procurement* – Natural gas: ~265 BCF/year (730,000 MMBtu/day) – Sulfur: ~800,000 LT – Ammonia: ~400,000 ST . Transportation – Multiple modes enhance flexibility/efficiency . Supply/Demand Optimization – Combined company has dramatica
Slide 70: Natural Gas Consumption at Capacity
Natural Gas Consumption at Capacity Site MMBtu/day % of Total Courtright 40k 5.5% Donaldsonville 295k 40.5% Medicine Hat 120k 16.5% Port Neal 40k 5.5% Verdigris 120k 16.5% Woodward 57k 7.8% Yazoo City 55k 7.7% TOTAL 727k 100.0% PORT NEAL, IA 40,000 MMBtu/d COURTRIGHT, ON 40,000 MMBtu/d WOODWARD, OK
Slide 71: Natural Gas Procurement
Natural Gas Procurement One of the largest industrial consumers in North America Reliable, uniform, year-round consumption Near major gas production fields Risk management philosophy Match forward sales with fixed-price gas Use options and other hedging tools to preserve more participation when gas
Slide 72: U.S. Natural Gas Prices Attractive
U.S. Natural Gas Prices Attractive Supply in the U.S. has increased due to low-cost non-conventional drilling Storage remains near record levels and storage capacity has grown Gas is attractively priced in the U.S. relative to world markets, due partly to high contract pricing in Europe North Americ
Slide 73: Shale Gas Plays are a Game-Changer
Shale Gas Plays are a Game-Changer Source: U.S. Energy Information Administration
Slide 74: Transportation
Transportation CF Industries uses all modes of transportation to optimize logistics: Ammonia Pipelines: NuStar and Magellan Barges: Ammonia: 5 barges/31,000-ton capacity UAN: 6 barges/84,000-ton capacity Railcars: Ammonia: 1,193 UAN: 2,624 Hopper: 967 Other: 429 Truck
Slide 75: Enhanced Flexibility to Meet Customer Needs
Enhanced flexibility to meet customer needs PORT NEAL, IA Nitrogen COURTRIGHT, ON Nitrogen WOODWARD, OK Nitrogen VERDIGRIS, OK Nitrogen YAZOO CITY, MS Nitrogen DONALDSONVILLE, LA Nitrogen MEDICINE HAT, AB Nitrogen PLANT CITY, FL Phosphate Logistics Optimization
Slide 76: Brings CF Industries Closer to Customers
76 Brings CF Industries closer to customers Overlapping Distribution Points
Slide 77: Supply Chain Synergies are Exceeding Expectations
Supply Chain Synergies are Exceeding Expectations Identified meaningful opportunities to save costs and enhance margins shortly into the integration. Some examples: Eliminate overlapping UAN shipping lanes by serving customers closer to the product source Serve legacy Terra customers from CF ammonia
Slide 78: Eliminate Overlapping Shipping Lanes
1. Eliminate Overlapping Shipping Lanes Port Neal Previous CF Shipment Re-routed CF Shipment Previous Terra Shipment Re-routed Terra Shipment 120K tons Synergy value = $2M Supply Nebraska from Port Neal at ~$15/ton freight savings Previous Terra UAN shipments to Arizona Previous CF UAN shipments to
Slide 79: Serve Legacy Terra Customers from CF Ammonia Terminals
2. Serve Legacy Terra Customers from CF Ammonia Terminals 17K tons Synergy value = $1.6M Previous Terra shipments from Woodward served Drakesboro, KY by rail Supply Terra customer by pipeline from Donaldsonville, using CF’s terminal network at ~$94/ton savings Source: CF/Terra 2008-2009 shipments an
Slide 80: Potential Rationalization of Railcar and Barge Tow Fleets
3. Potential Rationalization of Railcar and Barge Tow Fleets Potentially reduce railcar fleet by ~10% Potentially reduce barge tow fleet by ~17% Total run-rate synergy value = $4 million Total run-rate synergy value = $6 million Source: CF/Terra 2009 railcar and barge contracts, CF/Terra interviews
Slide 81: Summary
Summary Enhanced company scale provides substantial supply chain optimization opportunities Integration is turning up significant synergies– both expected and unexpected
Slide 82: Operations
Operations Tony Will Vice President, Manufacturing and Distribution
Slide 83: Operating Philosophy
Operating Philosophy Focused on EHS Leadership and High Reliability / Up-time Hickey Branch Reclamation, Florida Fundamental belief that safety and environmental stewardship are a requirement of and will contribute to superior shareholder returns CF has an OSHA recordable incident rate that is half
Slide 84: Significant Operating Scale
Significant Operating Scale Nitrogen Operations 7 North American sites Annual capacity: 13.5 million product tons Joint venture operations in U.K. and Trinidad Phosphate Operations (Florida) Integrated ammonium phosphate fertilizer complex Phosphate rock mine and beneficiation plant Terminal and war
Slide 85: North America's Nitrogen Powerhouse
North America’s Nitrogen Powerhouse North American Nitrogen Capacities (000s Product Tons) 6,773 2,793 1,437 Note: Includes full year impact of Woodward UAN expansion and 100% of consolidated entities
Slide 86: Complementary Production Locations
Enhanced flexibility to meet customer needs DONALDSONVILLE, LA Nitrogen PORT NEAL, IA Nitrogen COURTRIGHT, ON Nitrogen WOODWARD, OK Nitrogen VERDIGRIS, OK Nitrogen YAZOO CITY, MS Nitrogen MEDICINE HAT, AB Nitrogen PLANT CITY, FL Phosphate Complementary Production Locations
Slide 87: Phosphate Operations Advantages
Phosphate Operations Advantages World scale operation 1 million tons of P2O5 annually 2 million tons DAP/MAP Fully integrated system Well-balanced operations (rock/beneficiation/ chemical plant capacity) Excellent location to serve domestic and export markets
Slide 88: CF Phosphate Operations: Uniquely Positioned For The Future
CF Phosphate Operations: Uniquely Positioned For The Future RCRA settlement with DOJ/EPA finalized Fully permitted gypsum stacking capacity at Plant City extends through mine life (>25 years)
Slide 89: CF Phosphate Operations: Uniquely Positioned For The Future
CF Phosphate Operations: Uniquely Positioned For The Future 13 years (plus 2 more) of fully permitted rock reserves at mine Permitting in process on additional 10 years of reserves Current lease at Port of Tampa through permitted reserve life (15 years), in process on extension through mine life (ad
Slide 90: CF Expansive Distribution Network
CF Expansive Distribution Network Ship product via pipeline, barge, rail and truck Expanded network provides significant flexibility to maximize margins Ability to hold production rather than sell as produced Lower cost resupply options Ammonia network: 7 plants, 21 terminals, 45 total tanks, 1.14 m
Slide 91: Integration Wins
Integration Wins Elimination of previously approved but not yet started capital projects that are unnecessary Team focused on knowledge sharing and adoption of “Best Practices” Controllable costs Conversion efficiency Turn-around frequency Increased flexibility of Donaldsonville facility Significant
Slide 92: Nitrogen Manufacturing System Plant Types
Nitrogen Manufacturing System Plant Types
Slide 93: Opportunity to Achieve Best in Class Performance Across Ammonia Plants
Opportunity to Achieve “Best in Class” Performance Across Ammonia Plants Potential cost savings ($/ton)
Slide 94: Opportunity to Achieve Best in Class Performance Across Ammonia Plants
Opportunity to Achieve “Best in Class” Performance Across Ammonia Plants Potential cost savings ($/ton)
Slide 95: Ammonia Plant Turnaround Optimization
95 Ammonia Plant Turnaround Optimization . Team focused on optimizing turnarounds – Days between turnarounds (interval frequency) – Cost per turnaround (maintenance and capital) – Down days per turnaround – Unscheduled down days over time (since turnaround) – Conversion efficiency over time (since t
Slide 96: Donaldsonville Opportunities
Donaldsonville Opportunities: About $6.5 million per year CO2 tie-in from Ammonia #5 $4.3 million/year Gas price for Ammonia #5 $600,000/year Contractor/supplier consolidation $1.3 million/year Water treatment and chemicals $300,000/year Flexibility in production mix Revenue opportunities
Slide 97: Procurement Opportunity: $15 million+ per year
97 Procurement Opportunity: $15 million+ per year . Product standardization, volume aggregation, vendor rationalization/price alignment . Organized commodity buying teams to focus on categories of large spend . Ammonia plant catalysts – $1.5 million - $2.0 million/year . Instrumentation and Electric
Slide 98: Summary
Summary New organization has considerable expertise and is sharing best practices Goal is “best in class” performance across all plants Significant size and scope of operations translates to greater flexibility and better margin opportunities Integration is turning up meaningful expected and unexpec
Slide 99: Finance
Finance Tony Nocchiero Senior Vice President and Chief Financial Officer
Slide 100: CF Industries 2010 Highlights
CF Industries 2010 Highlights First Half 2010 Completed acquisition of Terra and related debt and equity offerings Strong start to identification of integration synergies Good progress on paying down the term debt Delivered strong 1H 2010 operating results Second Half 2010 Implement synergy initiati
Slide 101: CF Industries Value Drivers: Natural Gas Cost Advantage
CF Industries Value Drivers Competitive Advantages Serving North American Market Over the Cycle Natural gas cost advantage vs. swing producer Approximately $2 per MMBtu vs. delivered cost to Ukrainian producer
Slide 102: CF Industries Value Drivers: Transportation Cost Advantage
102 CF Industries Value Drivers Competitive Advantages Serving North American Market Over the Cycle . Transportation cost advantage vs. swing producer – Ocean freight from Black Sea to U.S. Gulf
Slide 103: Estimated 5-10% Efficiency Advantage vs. Swing Producer
Estimated 5-10% efficiency advantage vs. swing producer CF Industries has a long history of continuous improvement CF Industries Value Drivers Competitive Advantages Serving North American Market Over the Cycle
Slide 104: Value Created by Ammonia Storage/Distribution
Value created by ammonia storage/distribution Premium for in-market staging to serve short agricultural application window CF Industries Value Drivers Competitive Advantages Serving North American Market Over the Cycle
Slide 105: Phosphate Advantage vs. Non-Integrated Producers
105 . Phosphate advantage vs. non-integrated producers – $28/short ton rock cost vs. ~ $130/short ton landed – 1.6 tons of rock per ton of DAP CF Industries Value Drivers Competitive Advantages Serving North American Market Over the Cycle
Slide 106: Impact on EBITDA: High Operating Leverage
Impact on EBITDA (Millions) Source: Product tons based on CF and Terra 10K filings for the year ended December 31, 2009 and 2010 Woodward, OK UAN expansion,. New Platform Retains Benefits of High Operating Leverage Volume Price Change EBITDA Selling Prices Ammonia 2.5 $10/ton $24.9 Urea 2.9 $10/ton
Slide 107: Financial Metrics and Credit Statistics
Financial Metrics and Credit Statistics ($Millions) Notes: Excludes $125 million related to auction rate securities LIBOR floor rate of 150 bps Includes note payable by Canadian Fertilizers Limited to minority interest , outstanding Terra 2017 notes and OID Aggressive Debt Pay Down Good Liquidity Po
Slide 108: Aggressive Debt Repayment and Net Debt Target
CF Industries is committed to maintaining a strong, flexible balance sheet through deleveraging, targeting net debt in the range of 1.0 to 1.5 times EBITDA Aggressive Debt Repayment $ billions Estimated Net Debt Position Sr Notes & Term Loan Q2 Payment Q2 Cash Balance Q2 Net Debt Note: (1) Net debt
Slide 109: Summary
Summary Maintain a strong and flexible balance sheet through deleveraging, targeting net debt in the range of 1.0 to 1.5 times EBITDA Exploit competitive advantages of North American manufacturing and distribution assets Capture identified annual synergies in excess of targeted range of $105 to $135
Slide 110: Review & Vision
Review & Vision Steve Wilson Chairman, President, and Chief Executive Officer
Slide 111: Accomplishments
Accomplishments Completed transformational acquisition Served customers in spring without gaps Identified synergies in excess of target Maintained favorable margin exposures Reduced net debt to $2.0 billion at 6/30
Slide 112: Strategic Priorities
Strategic Priorities Operate effectively Integrate and realize synergies Reduce debt Optimize new platform Develop/execute growth strategy North America’s nitrogen bellwether with a strong presence in phosphates
Slide 113: Investment Thesis
Investment Thesis Strong agricultural markets Favorable natural gas environment Excellent market position Growing synergy realization Strong cash flow and debt reduction Proven execution by experienced management team
Slide 114: CF Industries
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Slide 115: Non-GAAP Reconciliation – EBITDA
Non-GAAP Reconciliation – EBITDA EBITDA is defined as net earnings attributable to common stockholders plus interest income—net, income taxes, and depreciation, depletion and amortization. Loan fee amortization is subtracted in the calculation of EBITDA to adjust for amounts included in both interes
Slide 116: Non-GAAP Reconciliation – Net Debt
Non-GAAP Reconciliation – Net Debt Net Debt is defined as Total Debt plus Customer Advances less Cash and Cash Equivalents. We have presented Net Debt because management uses the measure to evaluate financial position and believes that it is frequently used by securities analysts, investors and othe
Slide 117: Safe Harbor Statement
Safe Harbor Statement Certain statements contained in this communication may constitute “forward-looking statements.” All statements in this communication, other than those relating to historical information or current condition, are forward-looking statements. These forward looking statements are s