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    CF Industries Holdings Inc (CF)

    Business Description

    CF Industries Holdings, Inc. is a leading global manufacturer specializing in hydrogen and nitrogen products, with a mission to provide clean energy solutions to sustainably feed and fuel the world . The company operates the world's largest ammonia production network, which it is actively working to decarbonize to produce green and low-carbon hydrogen and nitrogen products for various applications, including energy, fertilizer, and emissions abatement . CF Industries' core product is anhydrous ammonia, which is either sold directly or upgraded into other nitrogen products such as granular urea, urea ammonium nitrate solution (UAN), and ammonium nitrate (AN) . The company also produces diesel exhaust fluid (DEF), urea liquor, nitric acid, and aqua ammonia, primarily for industrial customers .

    1. Anhydrous Ammonia - Serves as the core product, containing 82% nitrogen and 18% hydrogen, and is sold directly or used as a base for other nitrogen products.
    2. Granular Urea - Upgraded from anhydrous ammonia, used as a nitrogen-release fertilizer and in industrial applications.
    3. Urea Ammonium Nitrate Solution (UAN) - A liquid fertilizer product derived from ammonia, used for agricultural purposes.
    4. Ammonium Nitrate (AN) - Produced from ammonia, used in fertilizers and various industrial applications.
    5. Diesel Exhaust Fluid (DEF) - Manufactured for reducing emissions in diesel engines, primarily for industrial customers.
    6. Urea Liquor - A liquid form of urea used in various industrial processes.
    7. Nitric Acid - Produced for use in fertilizers and other industrial applications.
    8. Aqua Ammonia - A solution of ammonia in water, used in industrial and agricultural applications.

    Q2 2024 Summary

    Initial Price$83.50April 1, 2024
    Final Price$73.38July 1, 2024
    Price Change$-10.12
    % Change-12.12%

    What went well

    • Increasing demand for low-carbon ammonia across multiple sectors, including agriculture, industrial, and energy, positions CF Industries to capitalize on new markets and command premium pricing for its products.
    • Tightening global nitrogen supply due to European production challenges and expected natural tightening of supply-demand balance supports higher margins and favorable market conditions for CF Industries.
    • Operational excellence demonstrated by the Waggaman plant, operating at 10% above nameplate capacity with industry-leading efficiency, enhances CF Industries' production capacity and profitability.

    What went wrong

    • Trends of buyers deferring or delaying fertilizer purchases due to lower corn prices and farmer financial stress, which could negatively impact CF Industries' sales.
    • Lack of natural gas price hedging exposes CF Industries to potential price volatility, which could hurt margins if gas prices rise.
    • Past operational outages at the Waggaman plant required significant maintenance, and future outages could impact production and financial performance.

    Q&A Summary

    1. Capital Allocation Plans
      Q: How should we think about buybacks versus CapEx over the next 18 months?
      A: CF plans to continue significant share repurchases, with about $1.9 billion left in the current authorization, expected to complete by end of 2025. Annual CapEx is projected around $550 million, with potential incremental spending if new projects proceed. Even with investments in growth projects, CF expects to generate sufficient cash flow to fund both capital expenditures and share repurchases.

    2. Supply/Demand Tightening
      Q: Will low carbon ammonia demand tighten the overall nitrogen market?
      A: CF expects the nitrogen market to tighten as new demand, even without decarbonized products, is outpacing new construction. The increasing demand for low carbon ammonia across agricultural, industrial, and energy sectors will further tighten supply, supporting optimism about the future.

    3. Global Trade Dynamics
      Q: What's your view on India's and China's impact on nitrogen supply?
      A: India's domestic production has increased, reducing imports to 5–6 million tons in 2024, but it remains a significant importer. China's exports have declined to almost zero from previous levels of 3–5 million tons, removing significant supply from the global market and supporting current price structures.

    4. Asset Valuation
      Q: How do you view the value of your assets given recent transactions?
      A: Recent transactions suggest integrated ammonia plant valuations of around $3.75 to $4 billion. CF believes its assets are similarly valuable, offering sustainable free cash flow and positioning on the low end of the cost curve.

    5. Unlocking Shareholder Value
      Q: How can you unlock value and make investors see the light?
      A: CF will continue disciplined capital allocation, including significant share repurchases, having already reduced outstanding shares by 50%. Management believes ongoing buybacks and strong cash flow will ultimately reflect in a share price that matches the company's intrinsic value.

    6. New Project Timing
      Q: Any updates on timing for decisions on the new greenfield facility?
      A: Completion of the FEED study by year's end is the key factor. CF expects clarity on Japanese government support by mid-Q1, which, along with other potential partnerships, will inform the final investment decision.

    7. Efficiency of Waggaman Plant
      Q: How is the Waggaman integration and efficiency progressing?
      A: The Waggaman plant is operating at 10% above its nameplate capacity and is CF's most efficient facility, consuming under 30 MMBtu per ton of ammonia. CF is pleased with its performance and has not yet explored further debottlenecking.

    8. Buyer Behavior Changes
      Q: Are you seeing shifts in buyer marketing patterns?
      A: There's a trend of deferred purchases due to factors like lower corn prices and farmer financial stress. CF is proactively managing inventories and advancing programs to mitigate potential impacts.

    9. Termination of Mosaic Agreement
      Q: What are the implications of terminating the ammonia supply agreement with Mosaic?
      A: While CF exercised its right to terminate the agreement, it anticipates continuing as a significant supplier to Mosaic. Additional ammonia volumes are being marketed through exports and industrial contracts, providing CF with a more balanced portfolio.

    10. Impact of Gas Prices
      Q: How are gas prices and geopolitical tensions affecting you?
      A: CF benefits from lower Henry Hub gas prices due to robust North American production. Geopolitical events have tightened energy markets in Europe, supporting CF's competitive position as a low-cost producer.

    11. Carbon Capture Initiatives
      Q: Are you moving forward with other carbon capture projects?
      A: Following progress at Yazoo City, CF is working on carbon capture at Medicine Hat and considers Waggaman next. These initiatives align with CF's strategy to reduce carbon intensity and meet customer demand for low-carbon products.

    12. Blue vs. Green Ammonia
      Q: How do you view the viability of green ammonia versus blue ammonia?
      A: CF believes that while green ammonia has significant costs and energy requirements, achieving 65% to 95% carbon reduction with blue ammonia will lead the market today. Over time, as renewable energy sources expand, green ammonia may become more viable.

    13. Emission Credits Impact
      Q: Did the sale of emission credits benefit EBITDA in the quarter?
      A: Yes, CF sold $47 million of emission credits, benefiting EBITDA comparably to the prior year.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Ammonia4245252354951,679402409353
    Granular Urea6114603603921,823407457388
    UAN6675484354182,068425475406
    AN1591041141249711498106
    Other151138129146564122133117
    Phosphate--------
    Total Revenue2,0121,7751,2731,5716,6311,4701,5721,370
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    United States----4,856---
    Foreign----1,775---
    - Canada----607---
    - North America (excl. U.S. and Canada)----75---
    - United Kingdom----346---
    - Other foreign----747---
    North America1,6241,568996--1,2601,3661,085
    Europe and Other388207277--210206285
    Total Revenue2,0121,7751,2731,5716,6311,4701,5721,370
    KPIs - Metric / PeriodFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    **Sales Volume by Product Tons**4,5354,9004,7004,686-4,5244,8754,800
    **Sales Volume by Nutrient Tons**1,8982,1991,9802,188-1,9972,1562,115
    **Average Selling Price per Product Ton**$444$359$268$460-$325$322$286
    **Average Selling Price per Nutrient Ton**$444$819$809$561-$325$322$286
    **Gross Margin per Product Ton**$221$211$27$143-$71$150$88
    **Gross Margin per Nutrient Ton**$269$257$33$174-$86$183$107
    **Natural Gas Costs in Cost of Sales**$5.14$2.74$2.53$3.01-$2.73$1.90$2.10
    **Cost of Natural Gas Used for Production**$6.62$2.75$2.54$3.01-$3.19$1.90$2.10
    **Average Daily Market Price of Natural Gas**$2.68$2.12$2.58$2.74-$2.43$2.04$2.08
    **Gross Ammonia Production**2,4002,4002,2002,500-2,1002,6002,400

    Executive Team

    NamePositionStart DateShort Bio
    W. Anthony WillPresident and Chief Executive OfficerJanuary 2014W. Anthony Will has served as the President and CEO of CF Industries since January 2014. He previously held various positions within the company, including Senior Vice President of Manufacturing and Distribution. Before joining CF Industries, he was a partner at Accenture Ltd. and held executive positions at Sears and Fort James Corporation .
    Christopher D. BohnExecutive Vice President and Chief Operating OfficerFebruary 2024Christopher D. Bohn has been serving as the Executive Vice President and COO of CF Industries since February 2024. He was previously the Executive Vice President and CFO from September 2019 to July 2023. He joined CF Industries in 2009 and held various senior roles in manufacturing, distribution, and supply chain .
    Richard A. HokerVice President and Corporate ControllerNovember 2007Richard A. Hoker has served as the Vice President and Corporate Controller at CF Industries since November 2007. Before joining CF Industries, he held various financial management positions at Sara Lee Corporation and was part of the financial advisory services consulting group at Coopers & Lybrand LLP .
    Linda M. DempseyVice President, Public AffairsMarch 2020Linda M. Dempsey has served as the Vice President, Public Affairs at CF Industries since March 2020. Before joining CF Industries, she was the Vice President of International Economic Affairs for the National Association of Manufacturers and held a leadership role at the Emergency Committee for American Trade .
    Bert A. FrostExecutive Vice President, Sales, Market Development, and Supply ChainJuly 2023Bert A. Frost has served as the Executive Vice President, Sales, Market Development, and Supply Chain at CF Industries since July 2023. He joined CF Industries in November 2008 and previously worked at Archer Daniels Midland Company in various roles .
    Ashraf K. MalikSenior Vice President, Manufacturing and DistributionSeptember 2019Ashraf K. Malik has served as the Senior Vice President, Manufacturing and Distribution at CF Industries since September 2019. Before joining CF Industries, he was the Director of Manufacturing for GrowHow UK Limited and held positions at Terra Industries Inc. and ICI Plc .
    Susan L. MenzelExecutive Vice President and Chief Administrative OfficerJuly 2023Susan L. Menzel has served as the Executive Vice President and Chief Administrative Officer at CF Industries since July 2023. She was previously the Senior Vice President of Human Resources and held senior roles in human resources at CNO Financial Group, APAC Customer Services, Sears, and Montgomery Ward .
    Michael P. McGraneVice President, General Counsel and SecretaryJuly 2023Michael P. McGrane has served as the Vice President, General Counsel, and Secretary of CF Industries since July 2023. He was previously the Vice President, Chief Compliance Officer, and Assistant Secretary and worked as an attorney at Skadden, Arps, Slate, Meagher & Flom LLP .
    Gregory D. CameronExecutive Vice President and Chief Financial OfficerJune 2024Gregory D. Cameron joined CF Industries as the Executive Vice President and CFO in June 2024. Prior to joining CF Industries, he served as the CFO of Bloom Energy and has over 25 years of experience in finance organizations with General Electric (GE) .

    Questions to Ask Management

    1. With your continued emphasis on share repurchases as a strategy to unlock shareholder value amidst perceived undervaluation, are there alternative strategies you are considering to more effectively bridge the gap between your enterprise value and the market's recognition of your assets' worth?
    2. Given the substantial investments in carbon capture and sequestration projects and the high costs associated with green ammonia production, how confident are you that the demand for low-carbon ammonia, especially from the agricultural sector, will materialize at a scale sufficient to justify these expenditures?
    3. As you anticipate a solid fall application season despite tighter grower margins and potential shifts in crop planting from corn to soybeans, what specific measures are you taking to mitigate the risks associated with these market uncertainties on nitrogen demand?
    4. While the Waggaman facility operates at 10% above nameplate capacity and is your most efficient plant, what challenges do you foresee in further optimizing its performance, and how do you plan to leverage this asset to achieve additional efficiencies across your operations?
    5. Considering the significant capital allocated to your low-carbon initiatives and the potential risks of technological hurdles or policy changes affecting 45Q tax credits, how are you assessing the risk-return profile of these investments, and what contingency plans are in place if the expected market demand does not materialize?

    Share Repurchase Program

    Program DetailsProgram 1Program 2
    Approval DateNovember 3, 2021 November 2, 2022
    End Date/DurationCompleted Q2 2023 December 31, 2025
    Total Additional Amount$1.5 billion $3 billion
    Remaining AuthorizationNone $1.446 billion
    DetailsCompleted Active

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • Nutrien Ltd. - Primary competitor with North American operations .
    • Koch Fertilizer LLC - Primary competitor with North American operations .
    • N-7 LLC - A joint venture between OCI N.V. and Dakota Gasification Company, primary competitor with North American operations .
    • Yara International - Primary competitor with North American operations and also a competitor in the United Kingdom .
    • Origin Fertilisers - Competitor in the United Kingdom .
    • Ameropa - Competitor in the United Kingdom .
    • Thomas Bell & Sons Ltd. - Competitor in the United Kingdom .