Cf Industries Holdings, Inc. · NYSE:CF
Cf Industries — Merrill Lynch Ag Chemicals Conference 2008
47 slides from Cf Industries's conference presentation, Jun 5, 2008
Slide 1: CF Industries Holdings, Inc. Merrill Lynch Ag Chemicals Conference
Corporate Development Supply Chain Sales Finance Legal Operations Human Resources Dv Sc Sa Fi Le Op Hr CF Industries Holdings, Inc. NYSE: CF Merrill Lynch Ag Chemicals Conference June 5, 2008
Slide 2: For CF Industries Today
2 For CF Industries Today . . . Steve Wilson Chairman, President & CEO
Slide 3: Safe Harbor Statement
3 Safe Harbor Statement Certain statements contained in this presentation may constitute "forward-looking statements" within the meaning of federal securities laws. All statements in this presentation, other than those relating to historical information or current condition, are forward-looking stat
Slide 4: Today's Presentation
4 Today’s Presentation • A quick overview of CF Industries and its competitive strengths • Our view on ’08 plantings and fertilizer demand ... and their implications for ’09 • Our strategic initiatives to grow and diversify
Slide 5: A Quick Overview of CF Industries
5 A Quick Overview of CF Industries • A leading North American manufacturer and distributor of nitrogen and phosphate fertilizer • The two largest nitrogen fertilizer complexes in North America • A large, integrated phosphate operation in Central Florida, with excellent reserve position
Slide 6: A Quick Overview of CF Industries
6 A Quick Overview of CF Industries • Extensive Corn Belt based distribution system • Corn Belt* market share in fertilizer year 2006: – 26% nitrogen – 19% phosphate • Nitrogen marketed primarily in North America; typically export 20-25% of phosphate volume • Global growth platform via KEYTRADE acqu
Slide 7: Nitrogen – World Class and Flexible
7 Nitrogen – World Class and Flexible Existing Capacity Increasingly Valuable At Time When High Capital Costs Have Limited Nitrogen Supply Response Donaldsonville Medicine Hat
Slide 8: Nitrogen – World Class and Flexible
8 Nitrogen – World Class and Flexible Largest complex in Canada Largest complex in North America Serves Northern Tier U.S. markets Serves Corn Belt & other markets Ships to U.S. terminals by rail Access to multiple transport modes Cost advantage via AECO gas ‘Make versus Buy’ Flexibility 2 ammonia &
Slide 9: Natural Gas Pricing and Transportation Costs Are Changing Market Dynamics
9 Natural Gas Pricing and Transportation Costs Are Changing Market Dynamics 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0 500.0 2005 2006 2007 2008 2009 2010 2011 Calendar Years Source: Industry Forecasts, Fertecon U.S. Cost Ukraine (E. Europe) Russia $ per Tonne Middle East Trinidad East
Slide 10: Phosphate: 'Uncharted Waters'
10 Phosphate: ‘Uncharted Waters’ • CF Industries operates an integrated phosphate business in Central Florida • Phosphate rock mine and beneficiation plant are industry’s newest We Are 100% Self-Sufficient in Phosphate Rock
Slide 11: Phosphate: 'Uncharted Waters' – Rock Reserves
11 • Rock reserve position is strong, with 24 years of proven reserves – 15 of them fully permitted at 12/31/07 We Are 100% Self-Sufficient in Phosphate Rock Phosphate: ‘Uncharted Waters’
Slide 12: Phosphate: 'Uncharted Waters' – Plant City
12 • Plant City chemical plant has 2.1 million tons of DAP and MAP capacity • De-bottlenecking in ‘07 added approximately 60,000 more tons in ‘08 • Port of Tampa facilities provide access to export markets Phosphate: ‘Uncharted Waters’
Slide 13: India DAP Production Cost – Imported Rock
13 India DAP Production Cost – Imported Rock ($/Tonne) Source: Fertecon, FMB, Green Markets Skyrocketing Sulfur And Rock Prices Have Pushed Production Costs Up, Especially For Nonintegrated Producers Estimated Cost For Non-integrated Producer In India 0 100 200 300 400 500 600 700 J0 7 F M A M J J A
Slide 14: Industry Leading Flexibility in Distribution
14 Nitrogen Manufacturing Complex • Ammonia Terminal Ammonia Terminal & UAN Terminal UAN Terminal Urea & Phosphate Warehouse Industry Leading Flexibility in Distribution • One of the industry’s largest networks • In-market storage capacity is approximately 1.2 million tons for nitrogen and 200,000 t
Slide 15: Positioned in the 'Sweet Spot'
15 Positioned in the “Sweet Spot” U.S. Ethanol Biorefinery Locations Medicine Hat Nitrogen Complex Ammonia Terminal and UAN Terminal Urea Warehouse Ammonia Terminal UAN Terminal Low High Donaldsonv ille • Biorefineries in production (139) Biorefineries under construction (61) Source: Ren ewable Fuel
Slide 16: Value of Corn Belt Focus
16 Value of Corn Belt Focus Source: Green Markets January 2004 - Current Ammonia Price ($/short ton) Corn Belt prices reflect value of market access 200 300 400 500 600 700 800 J04 J J05 J J06 J J07 J J08 Price MW NH3 Gulf of Mexico
Slide 17: The 'Expected' '08 Scenario
17 The ‘Expected’ ’08 Scenario • Supply/demand balance for major crops is tight – globally • Add in strong – and sustained – new demand from biofuels • Prices for major crops have reflected the supply/ demand balance • Crop prices encouraged farmers to increase total acreage • To maximize profits, f
Slide 18: Weather Has Delayed Spring Planting
18 Weather Has Delayed Spring Planting Palmer Long-term Moisture Index Week End May 10,2007
Slide 19: Weather Has Delayed Spring Corn Planting
19 Weather Has Delayed Spring Corn Planting Source: USDA % of Crop Planted 0 20 40 60 80 100 7-Apr 14-Apr 21-Apr 28-Apr 5-May 12-May 19-May 26-May 2-Jun 2008 5-Yr. Avg. 2006 2007
Slide 20: The '08 Scenario
20 The ’08 Scenario • 86 million acres of corn would be down from 2007 but well above recent levels • Delayed corn planting probably limited acreage upside and reduced yields • Impact on overall nitrogen demand is still to be determined • But underlying long-term fundamentals remain strong
Slide 21: U.S. Corn Supply/Demand Scenario
21 U.S. Corn Supply/Demand Scenario (Billion Bushels) “Prices have to move higher to ration demand or corn falls below pipeline levels” Long-Term Trend vs. ’05-’07 Average Planting Prospective Estimate Marketing Years 2007/08 2008/09 2008/09 (Yr. Beg. - Sept. 1) Est. May Low Report Scenario Planted
Slide 22: World Coarse Grains Production & Consumption
22 World Coarse Grains Production & Consumption (MM Metric Tons) 750 800 850 900 950 1000 1050 1100 90 92 94 96 98 00 02 04 06 08 Source: USDA Consumption Production “Demand expected to outpace production for the 7th time in the last 9 years” Marketing Year
Slide 23: World Coarse Grain Stocks
23 World Coarse Grain Stocks (MM Metric Tons) 0 50 100 150 200 250 90 92 94 96 98 00 02 04 06 08 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% Source: USDA Marketing Year FAO Balanced Stock Position Ending Stocks Stocks-to- Use Ratio
Slide 24: Demand Growth Is a Global Phenomenon
24 Demand Growth Is a Global Phenomenon 0 200 400 600 800 1000 1200 90 92 94 96 98 00 02 04 06 08 10 12 14 Source: USDA Rest of World (3.2 %) EU (-1.3 %) China (2.6 %) U.S. (5.1%) Growth: 1.5% Growth: 3.6% MM Metric Tons Coarse Grain Consumption Wild cards: China, world economic growth, energy price
Slide 25: Growth in U.S. Corn Demand Has Accelerated
25 Growth in U.S. Corn Demand Has Accelerated Billion Bushels Source: USDA 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 91 93 95 97 99 01 03 05 07 09 Exports Ethanol Food & Industrial Feed Ethanol remains the big driver behind U.S. corn demand Vast potential for export growth is limited by current domest
Slide 26: Crop Prices Have Responded Strongly
26 Crop Prices* Have Responded Strongly *USDA Average Marketing Year Prices & Estimates $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 Corn $2.24 $4.25 $5.50 Wheat $3.35 $6.55 $7.35 Soybeans $5.64 $10.00 $11.25 2000 - 2006 2007 2008
Slide 27: Outlook for 2009 Fertilizer Demand
27 Outlook for 2009 Fertilizer Demand • Nitrogen - strong upside possible – Corn acreage could move above 93 million – Nitrogen application rates on corn could rebound due to strong corn prices – High nitrogen demand on corn could be partially offset by lower demand on other crops/pasture – Fall ’08
Slide 28: An Optimistic 'Present,' But What about The Future?
28 An Optimistic ‘Present,’ But What about The Future?
Slide 29: Global Platform for Marketing & Sourcing
29 • Acquisition of 50 percent of KEYTRADE, 3 million tonne per year global fertilizer trader • Markets in fertilizer in 65 nations • Acquisition provides established, extensive global platform to pursue growth and diversification • Presence in Perú and rest of Central & South America Specific Strat
Slide 30: Proposed Nitrogen Complex in Perú
30 • On November 19, CF Industries won bidding for natural gas pact in Perú • Proposed facility is world-scale nitrogen complex • Markets in region include Perú, Central & South America, and Mexico Specific Strategic Initiatives: Proposed Nitrogen Complex in Perú
Slide 31: Specific Strategic Initiatives: Uranium Recovery
31 Specific Strategic Initiatives: Uranium Recovery • Uranium recovery opportunity at Plant City Phosphate Complex – Extracted from phosphate fertilizer production – Key is procuring long-term supply contracts with utilities – Economic returns promising
Slide 32: Specific Strategic Initiatives: Gasification Project
32 Specific Strategic Initiatives: Gasification Project • Gasification/ammonia complex at Donaldsonville Nitrogen Complex – Reduce dependence on North American natural gas by converting substantial portion of complex to low-cost petcoke/coal blend – Increase operational flexibility – Evaluating alte
Slide 33: Discipline in Capital Deployment
33 Discipline in Capital Deployment • We have a strong balance sheet and continue to generate positive cash flow • We have demonstrated strong operational discipline in coping with challenging and volatile business environments • We are committed to demonstrating the same discipline in capital deplo
Slide 34: Positioned to Win
34 Positioned to Win • Worldwide demand for grain has created robust crop pricing and fertilizer demand • After a wet early spring, corn crop is in the ground • CF Industries is well positioned to capitalize on today’s opportunity
Slide 35: Save the Date: 2008 Analyst & Investor Day
35 Save the Date November 17 – 18, 2008 CF Industries 2008 Analyst & Investor Day Marriott Tampa Airport Tampa, Florida Watch for details . . . . .
Slide 36: @CFindustries
™ @CFindustries 7
Slide 37: Appendix
APPENDIX
Slide 38: Innovative Forward Pricing Program
38 Innovative Forward Pricing Program • Locks in assured supply and price for customers – and nitrogen margins – for CF Industries • Prices and margins reflect expectations for market conditions • Our forward prices for phosphate reflect higher sulfur and ammonia costs In Q1’s Rising Natural Gas Cos
Slide 39: Innovative Forward Pricing Program
39 > 52% N and 41% P sold under FPP in Q1 ‘07 Challenge • Natural gas and nitrogen fertilizer prices are highly volatile Benefits • Margin certainty • Improved production scheduling • Reduced inventory risk • Enhanced liquidity • Integration with customers Solution • Customers purchase product forwa
Slide 40: Continued Growth for Ethanol
40 Continued Growth for Ethanol • Margins for ethanol are positive, thanks to increased prices for ethanol and Distillers Dried Grains • U.S. Renewable Fuel Standard mandates 15 billion gallons of corn-based ethanol by 2015 • Capacity today is 7.9 billion gallons, with 5.6 billion more due to come o
Slide 41: Demand-Driven Environment Supported Strong Nitrogen Pricing
41 Demand-Driven Environment Supported Strong Nitrogen Pricing (World Nitrogen Price Index: Average 2002 = 100) 0 100 200 300 400 500 J02 J03 J04 J05 J06 J07 J08 NH3 Urea Source: FMB Group January 2002 – Current Price Index
Slide 42: World Nitrogen Capacity Growth to Exceed Demand
42 World Nitrogen Capacity Growth to Exceed Demand 2008 and 2009, but Balance Will Remain Tight 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 07 08 09 10 11 Capacity Increase Demand Increase Calendar Years Source: Fertecon, CF Industries MM tonnes
Slide 43: World Phosphate Market Is Tighter than Nitrogen
43 World Phosphate Market Is Tighter than Nitrogen 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 07 08 09 10 11 Capacity Increase Demand Increase Calendar Years Source: Fertecon, CF Industries MM tonnes of P2O5
Slide 44: East European Nitrogen Capacity and Exports
44 East European Nitrogen Capacity and Exports (000/Tonnes) Source: Fertecon, CF Note: Certain columns/rows may not “tie” due to “rounding” Nitrogen Capacity Ammonia Urea UAN AN Total N Lithuania 853 82 9 352 129 572 Bulgaria 929 16 25 0 94 135 Poland 2,446 123 58 200 51 432 Romania 2,276 25 437 200
Slide 45: Increased Productivity at Florida Phosphate Operation and Medicine Hat
45 Increased Productivity at Florida Phosphate Operation Natural Gas and Capacity Gains at Medicine Hat MMBtu of Natural Gas Per Ton 30.00 31.00 32.00 33.00 34.00 35.00 36.00 37.00 38.00 39.00 40.00 1980 1981 1982 1983 1984 1985 1986 1986 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2
Slide 46: Steady Efficiency Improvements at Donaldsonville
46 Steady Efficiency Improvements at Donaldsonville * Representative of complex’s four ammonia plants DONALDSONVILLE AMMONIA NO. 3 PLANT MMBTU/TON * 31.5 32.0 32.5 33.0 33.5 34.0 34.5 35.0 35.5 36.0 1980 1985 1990 1995 2000 2005 2010 YEAR MMBTU/TON Significantly less natural gas per product ton We A
Slide 47: Camisea Project General Description
CAMISEA PROJECT GENERAL DESCRIPTION pluspetrol Yeere Upstream + Gas Production and Processing (450 MMefd) 2 Lp + Liquids Fractionation & Distribution (GNLC) a Topping meni) * Gas Distribution Concession d + Area: Lima & Callao PAMPA MELCHORITA (Malvinas - Lima) ‘Transportation (TGP) + 750 Km Gas pip
CF Industries Holdings — Merrill Lynch Ag Chemicals Conference 2008 on 6ix