CF Industries Holdings, Inc. · NYSE:CF
CF Industries — Q1 2017 Earnings Presentation
29 slides from CF Industries's earnings presentation, May 3, 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, and adjusted net earnings per diluted share, and, on a segment basis,
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 CF Well Positioned for Industry Recovery 11-21 Capital Allocation and Structure 22-23 Appendix 24-29 Cover Page: Donaldsonville Urea Conveyer Belt
Slide 4: Overview of Financial Results
Overview of Financial Results Donaldsonville Urea Warehouse
Slide 5: First quarter 2017 results
First 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 Q1 net loss of $23 million, or ($0.10) per diluted share. Q1 adjusted net earnings of $11 million, or $0.05 pe
Slide 6: Financial results – first quarter 2017
Financial results – first quarter 2017 Depreciation and amortization (excluding corporate) related to property, plant and equipment was $193 million for the three months ended March 31, 2017, and $136 million for the three months ended March 31, 2016 See slide 25 for reconciliation of adjusted net e
Slide 7: Items affecting comparability of financial results by line item
Items affecting comparability of financial results by line item Three months ended March 31, 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) $ 205 $ 128 $ 146 $ 91 Unrealized net mark-to-market loss
Slide 8: Change in depreciation and amortization (D&A) by segment – 2014 to projected 2017
Change in depreciation and amortization (D&A) by segment – 2014 to projected 2017 CF’s D&A by Segment: 2014 Actuals and Projected 2017 Run Rate $ Millions Includes D&A related to corporate PPE, loan cost amortization, and equity investment amortization CF’s purchase of Yara’s 50% ownership of GrowHo
Slide 9: Adjusted Gross Margin by Segment
Unrealized loss on natural gas derivatives 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 Seg
Slide 10: CF Well Positioned for Industry Recovery
Port Neal Nitrogen Complex CF Well Positioned for Industry Recovery
Slide 11: Market outlook: Chinese marginal producers and North American spring demand
Chinese Marginal Producers: Continued Rising Costs and Decreased Production Changing Global Trade Flows North American Spring Demand Outlook Positive Market outlook Anticipate strong demand for nitrogen during spring application, driven by ~90 million acres of corn expected to be planted in the U.S.
Slide 12: Chinese urea exports responding to market dynamics
Chinese urea exports responding to market dynamics Rolling 12-Month Chinese Urea Exports and Urea Pricing Million Metric Product Ton (Left Axis); Urea Price $/Metric Ton (Right Axis) Source: Fertecon, Profercy, CRU Chinese urea exports increased during 2013 and 2014 as global urea pricing remained n
Slide 13: Significant urea shutdowns have been observed in China
Significant urea shutdowns have been observed in China Shutdowns reported on a full year, nameplate basis Observed temporary shutdowns includes plants that have been reported by Baiinfo to be in shutdown. See slide 17 for list of plants Confirmed temporary shutdowns include plants that have reported
Slide 14: 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 Sources: Fertecon, CRU, CFMW, Baiinfo, Fert.cn, Industry Publications, CF analysis 3% Growth: 5.3M 2% Growth: 3.5M See slide 16 fo
Slide 15: Projected new global urea plants (2017-2021)
Projected new global urea plants (2017-2021) Subtotals rounded to nearest 100k Sources: Fertecon, CRU, CFMW, Baiinfo, Fert.cn, Industry Publications, CF analysis Country Company City/Province Feedstock Capacity – K Metric Product Tons(1) Year of Addition Bolivia Epihara Carrasco Natural Gas 700 2017
Slide 16: Assumed urea plant closures
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 17: Plants excluded from CF's view of new global capacity (2017-2021)
Plants excluded from CF’s view of new global capacity (2017-2021) that CRU included in their forecast Subtotals rounded to nearest 100k Sources: Fertecon, CRU, CFMW, Baiinfo, Fert.cn, Industry Publications, Industry Sources, Industry Participants, CF analysis Country Company City/Province Feedstock
Slide 18: 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 19: 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 20: 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 21: Capital Allocation and Structure
Port Neal Urea Load Out Capital Allocation and Structure
Slide 22: 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 23: Appendix
Appendix Donaldsonville Ammonia
Slide 24: Non-GAAP: reconciliation of Net (Loss) Earnings and EPS to Adjusted Net Earnings
Non-GAAP: reconciliation of Net (Loss) Earnings and EPS to Adjusted Net Earnings and Adjusted EPS Three months ended March 31, In millions 2017 2016 Q3 2017 EPS Impact 2015 Q3 2016 2016 Q3 2016 EPS Impact 2015 Q3 Net (loss) earnings/EPS attributable to common shareholders(1) $ (23) $ (0.10) $ 26 $ 0
Slide 25: Non-GAAP: reconciliation of Net (Loss) Earnings to EBITDA and Adjusted EBITDA
Non-GAAP: reconciliation of Net (Loss) Earnings to EBITDA and Adjusted EBITDA EBITDA is defined as net (loss) earnings attributable to common stockholders plus interest expense (income)-net, income taxes, and depreciation and amortization. Other adjustments include the elimination of loan fee amorti
Slide 26: Non-GAAP: 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 Loss on Natural Gas Derivatives Depreciation and Amortization(2) 2016 Q3 Adjusted Gross Margin(3) 2015 Q3 Ammonia 2016 Q1 $ 63 $ 7 $ 21 $ 91 2017 Q1 17 17 44 78 Urea 2016 Q1 60 6 25 91 20
Slide 27: 2017 urea price range forecast at the US Gulf; 2018 projected higher
2017 urea price range forecast is ~$210-245 per ton at the US Gulf; 2018 projected higher 2017 Monthly Delivered U.S. Gulf Urea Cost Curve(1)(2) Y-axis: USD/short ton, X-axis: Monthly Production Capacity at 95% Operating Rate, million short tons Assumptions on demand growth, exchange rates, coal, ga
Slide 28: 2017 cost curve assumptions
Location Source 2015 2016 2017F Henry Hub NYMEX 2.63 2.51 3.07 TTF ICE 6.42 4.49 5.47 WEU-Russia Oil Index 7.30 4.35 5.37 Brent Crude NYMEX 54 44 55 Thermal SX Coal / 49 51 68 Anthracite Powder Woodmac 83 78 86 Anthracite 124 115 113 RMB/USD Bloomberg 6.28 6.63 6.85 USD/EUR Bloomberg 1.11 1.11 1.10
Slide 29: 2017 cost curve assumptions
2017 cost curve assumptions Location Source 2015 2016 2017F Gas Prices ($/MMBtu) Henry Hub NYMEX 2.63 251 3.07 TIF ICE 6.42 4.49 5A7 WEU-Russia Oil Index 7.30 435 5.37 Oil ($/Bbl) Brent Crude NYMEX 54 44 55 China Coal ($/tonne) Thermal SX Coal / 49 51 68 Anthracite Powder Woodmac 83 78 86 Anthracite
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