Cf Industries Holdings, Inc. · NYSE:CF
Cf Industries — Q2 2017 Earnings Presentation
32 slides from Cf Industries's earnings presentation, Aug 2, 2017
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, adjusted EBITDA, adjusted net earnings, adjusted net earnings per diluted share, controllable cost of sales,
Slide 3: Table of contents
Table of contents Safe Harbor Statement/Note Regarding Non-GAAP Financial Measures 2-3 Overview of Financial Results 5-10 Emerging Global Tradeflows 11-20 Capital Allocation and Structure 21-23 Appendix 24-32 Cover Page: Port Neal Nitrogen Complex
Slide 4: Overview of Financial Results
Overview of Financial Results Courtright IR Scans
Slide 5: Second quarter 2017 results
Second quarter 2017 results See slide 25 for reconciliation of adjusted net earnings and adjusted net earnings per diluted share See slide 26 for reconciliation of EBITDA and adjusted EBITDA Controllable cost of sales is defined as cost of sales adjusted for natural gas costs, realized and unrealize
Slide 6: Financial results – second quarter 2017
Financial results – second quarter 2017 Depreciation and amortization related to property, plant and equipment was $217 million for the three months ended June 30, 2017, and $181 million for the three months ended June 30, 2016 See slide 25 for reconciliation of adjusted net earnings and adjusted ne
Slide 7: Items affecting comparability of financial results by line item
Items affecting comparability of financial results by line item Three months ended June 30, In millions, pre-tax amounts 2017 Pre-Tax 2016 Q3 2017 After-Tax 2015 Q3 2016 Pre-Tax 2016 Q3 2016 After-Tax 2015 Q3 Depreciation and amortization(1) $ 217 $ 137 $ 181 $ 114 Unrealized net mark-to-market loss
Slide 8: Adjusted Gross Margin by Segment
Unrealized gain on natural gas derivatives(3) Segment adjusted gross margin Adjusted Gross Margin by Segment(1) $M See slide 27 for a reconciliation of adjusted gross margin to gross margin, the most directly comparable GAAP measure Represents depreciation and amortization included in cost of sales
Slide 9: CF cost of sales comparison
CF cost of sales comparison In $ millions Represents the portion of cost of sales consisting of natural gas costs, realized and unrealized losses (gains) on natural gas derivatives, and depreciation and amortization See slide 28 for a reconciliation of controllable cost of sales to cost of sales, th
Slide 10: Emerging Global Tradeflows
Medicine Hat Nitrogen Complex Emerging Global Tradeflows
Slide 11: Market outlook
Global Supply Availability North American Outlook Adjusting Global Tradeflows Market outlook Challenged nitrogen pricing through 2017 into 2018 as global marketplace continues to adapt to recent significant capacity increases Marginal producers in China are supplying less product to global marketpla
Slide 12: Global nitrogen trade flow notable changes: 2012-2016
Global nitrogen trade flow notable changes: 2012-2016(1) Sources: Fertecon, CRU, Industry Publications, CF Industries; All numbers based on metric nutrient tons Million metric nutrient tons (MMT) Represents 2016 ammonia production, represented as metric nutrient tons Change in metric nutrient ton pr
Slide 13: Expected net new capacity additions well below projected global demand growth post 2017
Expected net new capacity additions well below projected global demand growth post 2017 CF Projected Global Gross Urea Capacity Additions(1) Thousand Product Metric Tons See slide 31 for details of the 2017-2021 projected additions See slide 32 for details of the 2017-2021 assumed closures The Enid
Slide 14: Nitrogen fertilizer imports into North America are beginning to decline
Nitrogen fertilizer imports into North America are beginning to decline as new production increases North America Offshore Urea Imports Million Tons North America Offshore UAN Imports Million Tons Source: TFI, USDOC, Genscape Five Year Range 2016 2017 Five Year Range 2016 2017 Note: June 2017 data p
Slide 15: CF is impacted by the seasonality of nitrogen fertilizer demand
CF is impacted by the seasonality of nitrogen fertilizer demand Six year average sales price, sales volume, and adjusted EBITDA (2011-2016) Benchmark prices reflect NOLA granular urea and UAN and Tampa ammonia prices published by Fertecon EBITDA is defined as net earnings/(loss) attributable to comm
Slide 16: Consistent global nitrogen demand growth
China India Other Asia North America Europe Latin America Rest of World Total Nitrogen Consumption 2002-2017(1) (Million Nutrient Metric Tons) Industrial 15-yr CAGR =3.3% Overall 15-yr CAGR=2.2% Agricultural 15-yr CAGR =2.0% (1) 2002-2016 actuals, 2017F. CAGRs calculated as 2015-2017 average demand
Slide 17: U.S. and Canada combined remain a significant importer of nitrogen products
U.S. and Canada combined remain a significant importer of nitrogen products U.S. imports, including from Canada, average approximately 1.8 million tons more than the combined U.S. and Canada import total shown on the chart above Sources: USDOC, TFI, CF Total U.S. and Canada Import Volume(1) Million
Slide 18: CF has the premier North American network
CF has the premier North American network CF Industries is the largest nitrogen producer in North America with flexible production and output and outstanding domestic and export logistical capability Primarily a pure play nitrogen manufacturing company, focused on North America Largest production ba
Slide 19: Best North American distribution capabilities with a global reach
CF ammonia terminal CF ammonia and UAN terminal Donaldsonville Woodward Verdigris Port Neal Courtright Medicine Hat Yazoo City Terre Haute Mount Vernon Albany Kingston Mines Fremont Garner Pine Bend Peru Aurora Blair Brandon Cowden Frankfort Glenwood Grand Forks Huntington Palmyra Ritzville Rycroft
Slide 20: Capital Allocation and Structure
Truck Loading at Blair Distribution Facility Capital Allocation and Structure
Slide 21: CF's capital allocation philosophy
CF’s capital allocation philosophy Commitment to investment grade metrics over long term Pursue growth within strategic fairway, where returns exceed risk-adjusted cost of capital and investments are cash flow accretive on a per share basis Consistently return excess cash to shareholders in a timely
Slide 22: CF's financial maintenance covenant summary
CF’s financial maintenance covenant summary Senior secured and unsecured notes: The indentures governing CF’s secured and unsecured notes do not contain financial maintenance covenants Revolving credit facility: Maximum Total Secured Leverage Ratio: Total Secured Leverage Ratio (Total Secured Debt(1
Slide 23: Appendix
Appendix Donaldsonville Urea Warehouse
Slide 24: Reconciliation of Net Earnings and EPS to Adjusted Net Earnings and Adjusted EPS
Non-GAAP: reconciliation of Net Earnings and EPS to Adjusted Net Earnings and Adjusted EPS Three months ended June 30, In millions 2017 2016 Q3 2017 EPS Impact 2015 Q3 2016 2016 Q3 2016 EPS Impact 2015 Q3 Net earnings/EPS attributable to common shareholders(1) $ 3 $ 0.01 $ 47 $ 0.20 Selected Items i
Slide 25: Reconciliation of Net Earnings to EBITDA and Adjusted EBITDA
Non-GAAP: reconciliation of Net Earnings to EBITDA and Adjusted EBITDA EBITDA is defined as net earnings/(loss) attributable to common stockholders plus interest expense (income)-net, income taxes, and depreciation and amortization. Other adjustments include the elimination of loan fee amortization
Slide 26: Reconciliation of gross margin to adjusted gross margin
Non-GAAP: reconciliation of gross margin to adjusted gross margin In millions Gross Margin(1) 2016 Q3 Unrealized (Gain) Loss on Natural Gas Derivatives Depreciation and Amortization(2) 2016 Q3 Adjusted Gross Margin(3) 2015 Q3 Ammonia 2016 Q2 $ 206 $ (69) $ 19 $ 156 2017 Q2 87 6 49 142 Urea 2016 Q2 1
Slide 27: Reconciliation of cost of sales to controllable cost of sales
Non-GAAP: reconciliation of cost of sales to controllable cost of sales(1) $ Millions 2017 Q2 2016 Q3 2016 Q2 2015 Q3 Cost of Sales as reported $ 952 $ 607 Natural gas costs 309 171 Realized net losses on natural gas derivatives 4 60 Unrealized net mark-to-market loss (gain) on natural gas derivativ
Slide 28: Nitrogen price and natural gas sensitivity
29 Source: CF Industries Note: Assumes that a $25 per ton change in urea price is equivalent to a $17.39 per ton change in UAN price, $18.47 per ton change in AN price and a $44.57 per ton change in ammonia price, including products sold by CF Fertilisers UK. Products sold under the CHS supply agree
Slide 29: Reconciliation of Net Earnings/(Loss) to EBITDA and Adjusted EBITDA
Non-GAAP: reconciliation of Net Earnings/(Loss) to EBITDA and Adjusted EBITDA In millions FY 2016 2015 Q3 Net earnings/(loss) attributable to common stockholders $ (277) Interest expense (income) – net 195 Income taxes (68) Depreciation and amortization 678 Less: other adjustments (133) EBITDA(1) $
Slide 30: Projected urea capacity additions 2017-2021
Country Company City/Province Feedstock Capacity – K Metric Product Tons(1) Year of Addition Bolivia Epihara Carrasco Natural Gas 700 2017 China Tonghua Chemical Co Jilin Anthracite powder 300 2017 China Henan Xin Lian Xin (XLX) Jiangxi Anthracite powder 600 2017 China Luxi Chem Shandong Anthracite
Slide 31: Urea plants in permanent and temporary shutdown
Country Company Feedstock Source Initial Report of Shutdown (1) Capacity – K Metric Product Tons Year of Assumed Closure China Cangzhou Dahua Group Natural Gas Fert.cn Apr, 2016 150 2017 China Asid Chemicals Ltd Anthracite Lump Fert.cn Jan, 2016 300 2017 China LTH (LuTianHua) Natural Gas Fert.cn Jan
Slide 32: Urea plants in permanent and temporary shutdown
Urea plants in permanent and temporary shutdown Capacity- Year of Initial Report of K Metric Assumed Country Company Feedstock Source Shutdown” Product Tons Closure Gina Cangou Dua Gaup Natal Gas Ferien gr 2016 10 2017 China Aid Cerca Lid Antec Lune Ferten an, 208 mo 217 China LTH faint) Natural Gas
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