Cf Industries Holdings, Inc. · NYSE:CF
Cf Industries — Q4 2021 Earnings Presentation
22 slides from Cf Industries's earnings presentation, Feb 16, 2022
Slide 1: 2021 Fourth Quarter and Full Year Financial Results
2021 Fourth Quarter and Full Year Financial Results February 15, 2022 NYSE: CF
Slide 2: Safe harbor statement
2 Safe harbor statement All statements in this presentation 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 suc
Slide 3: Note regarding non-GAAP financial measures
3 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, free cash flow, and free cash flow yield, which are non-GAAP financial measures, provide a
Slide 4: 2021 highlights
4 2021 highlights (1) FY 2021 Net earnings and EBITDA include pre-tax asset impairment charge of $521 million (2) See appendix for reconciliation of EBITDA and adjusted EBITDA (3) Represents cash provided by operating activities (cash from operations) less capital expenditures less distributions to
Slide 5: Leveraging expertise and asset base to accelerate the world's transition to clean energy
5 Leveraging expertise and asset base to accelerate the world’s transition to clean energy CF Industries is the largest and most efficient ammonia producer in the world Access to low-cost US natural gas Facilities located near carbon sequestration regions Extensive logistics and distribution capabil
Slide 6: CF's greater capacity utilization versus North American peers
6 (1) Data taken from the December 17, 2021 CRU Ammonia Database (2) Represents CF Industries historical North American production and CRU’s capacity estimates for CF Industries (3) Calculated by removing CF Industries’ annual reported production and capacity from the CRU data for all North American
Slide 7: Financial results – fourth quarter and FY 2021
7 Financial results – fourth quarter and FY 2021 (1) See reconciliations of EBITDA and adjusted EBITDA to the most directly comparable GAAP measures in the appendix (2) Includes the cost of natural gas used for production and related transportation that is included in cost of sales during the period
Slide 8: Strong global nitrogen outlook
8 Strong global nitrogen outlook Global supply and demand Regional nitrogen dynamics Global energy differentials Low global nitrogen inventory entering 2022 after a year of strong demand and lower production; high energy prices and export restrictions globally suggest supply will continue to be chal
Slide 9: Low stocks-to-use ratio drives higher grain values
9 Low stocks-to-use ratio drives higher grain values, expected to require at least two more growing seasons to replenish (1) Crop futures prices represent Marketing Year (September – August) average daily settlement of the front month future contracts for 2010/11 through 2020/21; 2021/22 represents
Slide 10: Sharply higher natural gas prices in Europe and Asia have widened spreads
10 Sharply higher natural gas prices in Europe and Asia have widened spreads to North American benchmark prices Global Energy Price 2019-2022F USD/tonne North American Production Margin Advantage(1) 0 5 10 15 20 25 30 35 40 45 2019 2020 2021 2022 Henry Hub natural gas TTF natural gas Chinese anthrac
Slide 11: India and Brazil have consistent long-term demand growth, rising import demand
11 India and Brazil have consistent long-term demand growth, which has led to rising import demand (1) Brazil domestic production in 2020 is comprised solely of 2019 inventory carryover Source: CRU Urea Market Forecast as of November 19, 2021, India DOF, FAI, Trade Data Monitor, industry publication
Slide 12: Capital management
12 Capital management Capital structure and allocation Clean energy initiatives Capital expenditures Repurchased ~7.5M shares in 4Q for $490 million and a total of ~18.8M shares for $977 million, effectively completing the $1B share repurchase authorization that expired on December 31, 2021 Board of
Slide 13: Ammonia production and share count history
13 2.6 6.0(1) 6.0 6.1 6.6(2) 6.6 7.0(3) 8.1(4) 8.1 8.2(5) 8.2 8.2 8.2 All N production numbers based on year end figures per 10-K filings. (1) Beginning in 2010 includes capacity from Terra Industries acquisition (2) Beginning in 2013 includes incremental 34% of Medicine Hat production to reflect CF
Slide 14: Free cash flow and shares outstanding
14 Annual Free Cash Flow (millions) CF Industries’ Free Cash Flow and Shares Outstanding as of Year-end Shares Outstanding (millions) (6) 0 50 100 150 200 250 300 350 400 -$2,000 -$1,500 -$1,000 -$500 $0 $500 $1,000 $1,500 $2,000 $2,500 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 202
Slide 15: Equity appears undervalued given high free cash flow yield
15 14.2 9.8 8.7 8.6 6.0 2017 2018 2019 2020 2021 2017-2020 average ratio EV/Adj. EBITDA(2)(3) Equity appears undervalued given high free cash flow yield 10.3% 9.7% 8.9% 9.0% 14.7% 2017 2018 2019 2020 2021 2017-2020 average yield Free Cash Flow Yield(1) (1) Represents annual free cash flow divided by
Slide 16: Appendix
Appendix
Slide 17: CF Industries EBITDA sensitivity table
17 CF Industries EBITDA sensitivity table Table illustrates the CF Industries business model across a broad range of industry conditions $25/ton urea realized movement implies ~$375M change in EBITDA on an annual basis (1) Based on 2019 sales volumes of approximately 19.5 million product tons, 2019
Slide 18: Non-GAAP: reconciliation of net earnings to EBITDA and adjusted EBITDA
18 Non-GAAP: reconciliation of net earnings to EBITDA and adjusted EBITDA (1) Loan fee amortization is included in both interest expense – net and depreciation and amortization (2) Represents expense incurred due to the deferral of certain plant turnaround activities as a result of the COVID-19 pand
Slide 19: Non-GAAP: reconciliation of net earnings to EBITDA and adjusted EBITDA, continued
19 Non-GAAP: reconciliation of net earnings to EBITDA and adjusted EBITDA, continued (1) For the year ended December 31, 2019, amount relates only to CF Industries Nitrogen, LLC (CFN). For the years ended December 31, 2018 and 2017, amount includes CFN and Terra Nitrogen Company, L.P. (TNCLP), as we
Slide 20: Gross margin variance to prior year
20 Gross margin variance to prior year Year ended 12/31/2020 Higher avg selling prices(1) Volume(1) Higher natural gas costs(2) Unrealized MTM on natural gas derivatives (3) Higher manufacturing, maintenance, and other costs Increase in purchased urea(4) Gain on net settlement of natural gas contrac
Slide 21: Gross margin variance to prior year, continued
21 Gross margin variance to prior year, continued Year ended 12/31/2020 Higher avg selling prices(1) Volume(1) Higher natural gas costs(2) Unrealized MTM on natural gas derivatives (3) Higher manufacturing, maintenance, and other costs Increase in purchased urea(4) Gain on net settlement of natural
Slide 22: Non-GAAP: reconciliation of cash from operations to free cash flow and free cash flow yield
22 Non-GAAP: reconciliation of cash from operations to free cash flow and free cash flow yield In millions, except percentages, share price, and ratios FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Cash provided by operating activities $ 1,631 $ 1,497 $ 1,505 $ 1,231 $ 2,873 Capital expenditures (473) (42
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