Rising Nitrogen Prices Supported by Increased
Global Energy Spreads
Positive Nitrogen Outlook Driven by Robust
Demand
Continued Progress on Clean Energy
Initiatives
CF Industries Holdings, Inc. (NYSE: CF), a leading global
manufacturer of hydrogen and nitrogen products, today announced
results for its first quarter ended March 31, 2021.
Highlights
- First quarter net earnings of $151 million(1), or $0.70 per
diluted share; EBITDA(2) of $398 million; adjusted EBITDA(2) of
$398 million
- Trailing twelve month net cash from operating activities of
$1.52 billion, free cash flow(3) of $1.05 billion
- Company completed redemption of remaining $250 million of
Senior Secured Notes due December 2021
- Engineering and procurement contract signed with thyssenkrupp
for electrolysis plant to supply green hydrogen for green ammonia
production at Donaldsonville
“The CF team delivered solid results in the first quarter as
increased global energy spreads and strong demand led to rising
nitrogen prices,” said Tony Will, president and chief executive
officer, CF Industries Holdings, Inc. “We experienced a number of
unusual negative impacts from weather and other factors that
created challenges during the quarter, but we navigated those
issues successfully in a way that mitigated a potentially negative
outcome.”
Operations Overview
The Company continues to operate safely and efficiently across
its network. As of March 31, 2021, the 12-month rolling average
recordable incident rate was 0.28 incidents per 200,000 work hours,
which is significantly better than industry benchmarks.
Gross ammonia production for the first quarter of 2021 was
approximately 2.5 million tons compared to 2.7 million tons for the
first quarter of 2020. During the quarter, winter weather events in
the United States disrupted the natural gas market, temporarily
restricting the availability of natural gas into several of the
Company’s manufacturing complexes, which resulted in lower gross
ammonia production. Plant outages generated higher costs for the
Company related to fixed cost write-offs and higher maintenance
expenses. The Company also experienced higher realized natural gas
costs compared to the first quarter of 2020.
During the severe weather-related disruption of the natural gas
market, management was informed that gas deliveries would be
curtailed and force majeure gas shut-offs were likely at several of
the Company’s facilities. Facing imminent shut-down of several
plants, management worked with its suppliers of natural gas to net
settle certain gas contracts the Company had in place. The net
settlement of the natural gas purchase contracts resulted in the
Company receiving prevailing market prices for the natural gas,
resulting in a gain of $112 million.
Management expects gross ammonia production in 2021 will be
approximately 9.5 - 10 million tons. This is lower than 2020
production due to a higher number of planned maintenance activities
this year and knock-on plant outages from the forced February
shut-downs due to natural gas availability issues.
“I am particularly proud of the way the CF team responded to the
challenging situation brought on by the lack of gas availability at
our plants. This would have been an extremely costly event had the
team not responded quickly, and effectively mitigated the higher
costs and lost production we were facing,” said Will.
First Quarter 2021 Financial Results Overview
For the first quarter of 2021, net earnings attributable to
common stockholders were $151 million, or $0.70 per diluted share;
EBITDA was $398 million; and adjusted EBITDA was $398 million.
These results compare to first quarter 2020 net earnings
attributable to common stockholders of $68 million, or $0.31 per
diluted share; EBITDA of $314 million; and adjusted EBITDA of $318
million.
Net sales in the first quarter of 2021 were $1.05 billion
compared to $971 million in the first quarter of 2020. Average
selling prices for the first quarter of 2021 were higher than the
first quarter of 2020 across most segments due to decreased global
supply availability as higher global energy costs drove lower
global operating rates. Sales volumes in the first quarter of 2021
were lower than the first quarter of 2020 due to lower supply
availability from lower production.
Cost of sales for the first quarter of 2021 was essentially flat
with the first quarter of 2020 on lower sales volume.
In the first quarter of 2021, the average cost of natural gas
reflected in the Company’s cost of sales was $3.22 per MMBtu(4)
compared to the average cost of natural gas in cost of sales of
$2.61 per MMBtu in the first quarter of 2020 due to higher natural
gas costs in the United Kingdom as well as higher daily gas prices
in North America due to severe winter weather.
Capital Management
Capital expenditures in the first quarter of 2021 were $71
million. Management projects capital expenditures for full year
2021 will be in the range of $450 million, which reflects a return
to a normal level of maintenance activities and includes
expenditures for the green ammonia project at the Donaldsonville
manufacturing complex.
The Company’s wholly owned subsidiary CF Industries, Inc.
redeemed in full all of the remaining $250 million outstanding
principal amount of its 3.400% Senior Secured Notes due December
2021 (the “2021 Notes”) on March 20, 2021, in accordance with the
optional redemption provisions provided in the indenture governing
the 2021 Notes. The total amount for the redemption of the 2021
Notes was $258 million, including accrued interest.
CHS Inc. (CHS) is entitled to semi-annual distributions
resulting from its minority equity investment in CF Industries
Nitrogen, LLC (CFN). The estimate of the partnership distribution
earned by CHS, but not yet declared, for the first quarter of 2021
is approximately $50 million.
Nitrogen Market Outlook
The global nitrogen pricing outlook remains positive, as low
global coarse grains stocks-to-use ratios and higher energy prices
in Europe and Asia have significantly tightened the global nitrogen
supply and demand balance. CF Industries believes these dynamics
are highly favorable for low-cost nitrogen producers and appear
sustainable into at least 2022.
Strong global coarse grains demand has brought major global
coarse grains stocks-to-use ratios to multi-year lows. This has
driven commodity crop near-term and futures prices to the highest
prices in nearly a decade, supporting strong demand for nitrogen
fertilizer to maximize yield. The Company projects that coarse
grains stocks will require more than one growing season to be
replenished.
In line with the global nitrogen demand outlook, CF Industries
expects strong nitrogen demand in North America. The Company
expects 90-92 million planted corn acres in the United States,
higher canola plantings in Canada and industrial use rising with
higher economic activity in 2021.
Nitrogen requirements in other key regions are expected to
remain robust throughout the year, driven by continued strong
demand for urea imports from India and Brazil. The Company projects
urea tender volumes in India this year will be well above the
five-year average of 6.5-7.0 million metric tons. The Company also
believes that improved farm incomes in Brazil will support demand
in 2021 at a similar level to 2020.
Energy prices in Europe and Asia have increased significantly
from the lows of 2020 and returned to sizable differentials
compared to Henry Hub natural gas prices in North America. This has
steepened the global nitrogen cost curve and increased margin
opportunities for low-cost North American producers. Forward curves
suggest that these energy spreads will persist throughout 2021 and
into 2022.
Clean Energy Strategy Update
The Company continues to advance its plans to support the global
hydrogen and clean fuel economy, which is expected to grow
significantly over the next decade.
In April, CF Industries signed an engineering and procurement
contract with thyssenkrupp to supply a 20 MW alkaline water
electrolysis plant to produce green hydrogen at the Company’s
Donaldsonville, Louisiana, manufacturing complex. Construction and
installation, which will be managed by CF Industries, is expected
to begin in the second half of 2021 and to finish in 2023. The cost
of the project is expected to fit within the Company’s annual
capital expenditure budget. CF Industries will integrate the green
hydrogen generated by the electrolysis plant into existing ammonia
synthesis loops to enable the production of 20,000 tons per year of
green ammonia. When complete in 2023, the Donaldsonville green
ammonia project will be the largest of its kind in North
America.
CF Industries also is developing initiatives related to carbon
dioxide sequestration and other carbon abatement projects across
the Company's network to enable net-zero carbon blue ammonia
production.
________________________________________________________________
(1)
Certain items recognized during the first
quarter of 2021 impacted our financial results and their
comparability to the prior year period. See the table accompanying
this release for a summary of these items.
(2)
EBITDA is defined as net earnings
attributable to common stockholders plus interest expense—net,
income taxes and depreciation and amortization. See reconciliations
of EBITDA and adjusted EBITDA to the most directly comparable GAAP
measures in the tables accompanying this release.
(3)
Free cash flow is defined as net cash from
operating activities less capital expenditures and distributions to
noncontrolling interest. See reconciliation of free cash flow to
the most directly comparable GAAP measure in the table accompanying
this release.
(4)
Average cost of natural gas excludes the
$112 million gain the Company recognized from the net settlement of
certain natural gas contracts with suppliers during February
2021.
Consolidated Results
Three months ended
March 31,
2021
2020
(dollars in millions, except
per share
and per MMBtu amounts)
Net sales
$
1,048
$
971
Cost of sales
759
767
Gross margin
$
289
$
204
Gross margin percentage
27.6
%
21.0
%
Net earnings attributable to common
stockholders
$
151
$
68
Net earnings per diluted share
$
0.70
$
0.31
EBITDA(1)
$
398
$
314
Adjusted EBITDA(1)
$
398
$
318
Tons of product sold (000s)
4,564
4,688
Natural gas supplemental data (per
MMBtu):
Cost of natural gas used for production in
cost of sales(2)
$
3.22
$
2.61
Average daily market price of natural gas
Henry Hub (Louisiana)
$
3.38
$
1.88
Average daily market price of natural gas
National Balancing Point (UK)
$
6.90
$
3.20
Unrealized net mark-to-market gain on
natural gas derivatives
$
(6
)
$
(12
)
Depreciation and amortization
$
204
$
211
Capital expenditures
$
71
$
67
Production volume by product tons
(000s):
Ammonia(3)
2,479
2,670
Granular urea
1,184
1,285
UAN (32%)
1,689
1,599
AN
475
515
_______________________________________________________________________________
(1)
See reconciliations of EBITDA and adjusted
EBITDA to the most directly comparable GAAP measures in the tables
accompanying this release.
(2)
Includes the cost of natural gas used for
production and related transportation that is included in cost of
sales during the period under the first-in, first-out inventory
cost method. Includes realized gains and losses on natural gas
derivatives settled during the period. Excludes unrealized
mark-to-market gains and losses on natural gas derivatives.
Excludes the $112 million gain on net settlement of certain natural
gas contracts with suppliers due to Winter Storm Uri in February
2021.
(3)
Gross ammonia production, including
amounts subsequently upgraded into other products.
Ammonia Segment
CF Industries’ ammonia segment produces anhydrous ammonia
(ammonia), which is the base product that the Company manufactures,
containing 82 percent nitrogen and 18 percent hydrogen. The results
of the ammonia segment consist of sales of ammonia to external
customers for its nitrogen content as a fertilizer, in emissions
control and in other industrial applications. The Company has also
announced steps to produce blue ammonia and market to external
customers for its hydrogen content in clean energy applications. In
addition, the Company upgrades ammonia into other nitrogen products
such as urea, UAN and AN.
Three months ended
March 31,
2021
2020
(dollars in millions,
except per ton
amounts)
Net sales
$
206
$
193
Cost of sales
80
173
Gross margin
$
126
$
20
Gross margin percentage
61.2
%
10.4
%
Sales volume by product tons (000s)
683
762
Sales volume by nutrient tons
(000s)(1)
560
625
Average selling price per product ton
$
302
$
253
Average selling price per nutrient
ton(1)
368
309
Adjusted gross margin(2):
Gross margin
$
126
$
20
Depreciation and amortization
36
39
Unrealized net mark-to-market gain on
natural gas derivatives
(2
)
(4
)
Adjusted gross margin
$
160
$
55
Adjusted gross margin as a percent of net
sales
77.7
%
28.5
%
Gross margin per product ton
$
184
$
26
Gross margin per nutrient ton(1)
225
32
Adjusted gross margin per product ton
234
72
Adjusted gross margin per nutrient
ton(1)
286
88
_______________________________________________________________________________
(1)
Nutrient tons represent the tons of
nitrogen within the product tons.
(2)
Adjusted gross margin, adjusted gross
margin as a percent of net sales and adjusted gross margin per
product ton and per nutrient ton are non-GAAP financial measures.
Adjusted gross margin is defined as gross margin excluding
depreciation and amortization and unrealized net mark-to-market
(gain) loss on natural gas derivatives. A reconciliation of
adjusted gross margin, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient
ton to gross margin, the most directly comparable GAAP measure, is
provided in the table above. See “Note Regarding Non-GAAP Financial
Measures” in this release.
Comparison of 2021 to 2020 first quarter periods:
- Ammonia sales volume decreased for the first quarter of 2021
compared to 2020 due to lower supply availability from lower
production.
- Ammonia average selling prices increased for the first quarter
of 2021 compared to 2020 due to decreased global supply
availability as higher global energy costs drove lower global
operating rates.
- Ammonia adjusted gross margin per ton increased for the first
quarter of 2021 compared to 2020 due to the gain the Company
recognized from the net settlement of certain natural gas contracts
with suppliers during February 2021 and higher average selling
prices, partially offset by higher maintenance costs and higher
realized natural gas costs.
Granular Urea Segment
CF Industries’ granular urea segment produces granular urea,
which contains 46 percent nitrogen. Produced from ammonia and
carbon dioxide, it has the highest nitrogen content of any of the
Company’s solid nitrogen products.
Three months ended
March 31,
2021
2020
(dollars in millions,
except per ton
amounts)
Net sales
$
399
$
337
Cost of sales
264
224
Gross margin
$
135
$
113
Gross margin percentage
33.8
%
33.5
%
Sales volume by product tons (000s)
1,320
1,381
Sales volume by nutrient tons
(000s)(1)
607
635
Average selling price per product ton
$
302
$
244
Average selling price per nutrient
ton(1)
657
531
Adjusted gross margin(2):
Gross margin
$
135
$
113
Depreciation and amortization
66
72
Unrealized net mark-to-market gain on
natural gas derivatives
(2
)
(4
)
Adjusted gross margin
$
199
$
181
Adjusted gross margin as a percent of net
sales
49.9
%
53.7
%
Gross margin per product ton
$
102
$
82
Gross margin per nutrient ton(1)
222
178
Adjusted gross margin per product ton
151
131
Adjusted gross margin per nutrient
ton(1)
328
285
_______________________________________________________________________________
(1)
Nutrient tons represent the tons of
nitrogen within the product tons.
(2)
Adjusted gross margin, adjusted gross
margin as a percent of net sales and adjusted gross margin per
product ton and per nutrient ton are non-GAAP financial measures.
Adjusted gross margin is defined as gross margin excluding
depreciation and amortization and unrealized net mark-to-market
(gain) loss on natural gas derivatives. A reconciliation of
adjusted gross margin, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient
ton to gross margin, the most directly comparable GAAP measure, is
provided in the table above. See “Note Regarding Non-GAAP Financial
Measures” in this release.
Comparison of 2021 to 2020 first quarter periods:
- Granular urea sales volume decreased for the first quarter of
2021 compared to 2020 due to lower supply availability from lower
production partially offset by 97,000 tons of purchased urea.
- Urea average selling prices increased for the first quarter of
2021 compared to 2020 due to decreased global supply availability
as higher global energy costs drove lower global operating
rates.
- Granular urea adjusted gross margin per ton increased for the
first quarter 2021 compared to 2020 due to higher average selling
prices and $32 million in net sales related to purchased urea,
partially offset by $33 million in cost of sales related to
purchased urea and higher realized natural gas costs.
UAN Segment
CF Industries’ UAN segment produces urea ammonium nitrate
solution (UAN). UAN is a liquid product with nitrogen content that
typically ranges from 28 percent to 32 percent and is produced by
combining urea and ammonium nitrate in solution.
Three months ended
March 31,
2021
2020
(dollars in millions,
except per ton
amounts)
Net sales
$
232
$
235
Cost of sales
230
193
Gross margin
$
2
$
42
Gross margin percentage
0.9
%
17.9
%
Sales volume by product tons (000s)
1,514
1,390
Sales volume by nutrient tons
(000s)(1)
476
436
Average selling price per product ton
$
153
$
169
Average selling price per nutrient
ton(1)
487
539
Adjusted gross margin(2):
Gross margin
$
2
$
42
Depreciation and amortization
56
52
Unrealized net mark-to-market gain on
natural gas derivatives
(2
)
(3
)
Adjusted gross margin
$
56
$
91
Adjusted gross margin as a percent of net
sales
24.1
%
38.7
%
Gross margin per product ton
$
1
$
30
Gross margin per nutrient ton(1)
4
96
Adjusted gross margin per product ton
37
65
Adjusted gross margin per nutrient
ton(1)
118
209
_______________________________________________________________________________
(1)
Nutrient tons represent the tons of
nitrogen within the product tons.
(2)
Adjusted gross margin, adjusted gross
margin as a percent of net sales and adjusted gross margin per
product ton and per nutrient ton are non-GAAP financial measures.
Adjusted gross margin is defined as gross margin excluding
depreciation and amortization and unrealized net mark-to-market
(gain) loss on natural gas derivatives. A reconciliation of
adjusted gross margin, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient
ton to gross margin, the most directly comparable GAAP measure, is
provided in the table above. See “Note Regarding Non-GAAP Financial
Measures” in this release.
Comparison of 2021 to 2020 first quarter periods:
- UAN sales volume increased for the first quarter of 2021
compared to 2020 due to higher supply availability from higher
production.
- UAN average selling prices decreased for the first quarter of
2021 compared to 2020 as a substantial volume of first quarter
shipments were priced in 2020 at a time of increased global supply
availability.
- UAN adjusted gross margin per ton decreased for the first
quarter of 2021 compared to 2020 due to lower average selling
prices and higher realized natural gas costs.
AN Segment
CF Industries’ AN segment produces ammonium nitrate (AN). AN is
used as a nitrogen fertilizer with nitrogen content between 29
percent to 35 percent, and also is used by industrial customers for
commercial explosives and blasting systems.
Three months ended
March 31,
2021
2020
(dollars in millions,
except per ton
amounts)
Net sales
$
105
$
116
Cost of sales
95
103
Gross margin
$
10
$
13
Gross margin percentage
9.5
%
11.2
%
Sales volume by product tons (000s)
438
547
Sales volume by nutrient tons
(000s)(1)
147
184
Average selling price per product ton
$
240
$
212
Average selling price per nutrient
ton(1)
714
630
Adjusted gross margin(2):
Gross margin
$
10
$
13
Depreciation and amortization
19
26
Unrealized net mark-to-market gain on
natural gas derivatives
—
(1
)
Adjusted gross margin
$
29
$
38
Adjusted gross margin as a percent of net
sales
27.6
%
32.8
%
Gross margin per product ton
$
23
$
24
Gross margin per nutrient ton(1)
68
71
Adjusted gross margin per product ton
66
69
Adjusted gross margin per nutrient
ton(1)
197
207
_______________________________________________________________________________
(1)
Nutrient tons represent the tons of
nitrogen within the product tons.
(2)
Adjusted gross margin, adjusted gross
margin as a percent of net sales and adjusted gross margin per
product ton and per nutrient ton are non-GAAP financial measures.
Adjusted gross margin is defined as gross margin excluding
depreciation and amortization and unrealized net mark-to-market
(gain) loss on natural gas derivatives. A reconciliation of
adjusted gross margin, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient
ton to gross margin, the most directly comparable GAAP measure, is
provided in the table above. See “Note Regarding Non-GAAP Financial
Measures” in this release.
Comparison of 2021 to 2020 first quarter periods:
- AN sales volume decreased for the first quarter of 2021
compared to 2020 due to lower supply availability from lower
production.
- AN average selling prices for the first quarter of 2021
increased compared to 2020 due to decreased global supply
availability as higher global energy costs drove lower global
operating rates.
- AN adjusted gross margin per ton decreased for the first
quarter of 2021 compared to 2020 due primarily to higher realized
natural gas costs, partially offset by higher average selling
prices.
Other Segment
CF Industries’ Other segment includes diesel exhaust fluid
(DEF), urea liquor, nitric acid and compound fertilizer products
(NPKs).
Three months ended
March 31,
2021
2020
(dollars in millions,
except per ton
amounts)
Net sales
$
106
$
90
Cost of sales
90
74
Gross margin
$
16
$
16
Gross margin percentage
15.1
%
17.8
%
Sales volume by product tons (000s)
609
608
Sales volume by nutrient tons
(000s)(1)
122
120
Average selling price per product ton
$
174
$
148
Average selling price per nutrient
ton(1)
869
750
Adjusted gross margin(2):
Gross margin
$
16
$
16
Depreciation and amortization
22
17
Unrealized net mark-to-market (gain) loss
on natural gas derivatives
—
—
Adjusted gross margin
$
38
$
33
Adjusted gross margin as a percent of net
sales
35.8
%
36.7
%
Gross margin per product ton
$
26
$
26
Gross margin per nutrient ton(1)
131
133
Adjusted gross margin per product ton
62
54
Adjusted gross margin per nutrient
ton(1)
311
275
_______________________________________________________________________________
(1)
Nutrient tons represent the tons of
nitrogen within the product tons.
(2)
Adjusted gross margin, adjusted gross
margin as a percent of net sales and adjusted gross margin per
product ton and per nutrient ton are non-GAAP financial measures.
Adjusted gross margin is defined as gross margin excluding
depreciation and amortization and unrealized net mark-to-market
(gain) loss on natural gas derivatives. A reconciliation of
adjusted gross margin, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient
ton to gross margin, the most directly comparable GAAP measure, is
provided in the table above. See “Note Regarding Non-GAAP Financial
Measures” in this release.
Comparison of 2021 to 2020 first quarter periods:
- Other segment sales volume was similar for the first quarter of
2021 compared to 2020.
- Other average selling prices for the first quarter of 2021
increased compared to 2020 due to decreased global supply
availability as higher global energy costs drove lower global
operating rates.
- Other segment adjusted gross margin per ton increased for the
first quarter of 2021 compared to 2020 due to higher average
selling prices, partially offset by higher realized natural gas
costs.
Dividend Payment
On April 28, 2021, CF Industries’ Board of Directors declared a
quarterly dividend of $0.30 per common share. The dividend will be
paid on May 28, 2021 to stockholders of record as of May 17,
2021.
Conference Call
CF Industries will hold a conference call to discuss its first
quarter 2021 results at 10:00 a.m. ET on Thursday, May 6, 2021.
This conference call will include discussion of CF Industries’
business environment and outlook. Investors can access the call and
find dial-in information on the Investor Relations section of the
Company’s website at www.cfindustries.com.
About CF Industries Holdings, Inc.
At CF Industries, our mission is to provide clean energy to feed
and fuel the world sustainably. Our employees are focused on safe
and reliable operations, environmental stewardship, and disciplined
capital and corporate management. We are on a path to decarbonize
our ammonia production network – the world’s largest – to enable
green and blue hydrogen and nitrogen products for energy,
fertilizer, emissions abatement and other industrial activities.
Our nine manufacturing complexes in the United States, Canada, and
the United Kingdom, an unparalleled storage, transportation and
distribution network in North America, and logistics capabilities
enabling a global reach underpin our strategy to leverage our
unique capabilities to accelerate the world’s transition to clean
energy. CF Industries routinely posts investor announcements and
additional information on the Company’s website at
www.cfindustries.com and encourages those interested in the Company
to check there frequently.
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, EBITDA per ton, adjusted EBITDA, adjusted
EBITDA per ton, free cash flow, and, on a segment basis, adjusted
gross margin, adjusted gross margin as a percent of net sales and
adjusted gross margin per product ton and per nutrient ton, which
are non-GAAP financial measures, provide additional meaningful
information regarding the Company’s performance and financial
strength. Management uses these measures, and believes they are
useful to investors, as supplemental financial measures in the
comparison of year-over-year performance. Non-GAAP financial
measures should be viewed in addition to, and not as an alternative
for, the Company’s reported results prepared in accordance with
GAAP. In addition, because not all companies use identical
calculations, EBITDA, EBITDA per ton, adjusted EBITDA, adjusted
EBITDA per ton, free cash flow, adjusted gross margin, adjusted
gross margin as a percent of net sales and adjusted gross margin
per product ton and per nutrient ton, included in this release may
not be comparable to similarly titled measures of other companies.
Reconciliations of EBITDA, EBITDA per ton, adjusted EBITDA,
adjusted EBITDA per ton, and free cash flow to the most directly
comparable GAAP measures are provided in the tables accompanying
this release under “CF Industries Holdings, Inc.-Selected Financial
Information-Non-GAAP Disclosure Items.” Reconciliations of adjusted
gross margin, adjusted gross margin as a percent of net sales and
adjusted gross margin per product ton and per nutrient ton to the
most directly comparable GAAP measures are provided in the segment
tables included in this release.
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 as “anticipate,” “believe,” “could,” “estimate,”
“expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” or
“would” and similar terms and phrases, including references to
assumptions. Forward-looking statements are not guarantees of
future performance and are subject to a number of assumptions,
risks and uncertainties, many of which are beyond the Company’s
control, which could cause actual results to differ materially from
such statements. These statements may include, but are not limited
to, statements about strategic plans and management’s expectations
with respect to the production of green and blue (low-carbon)
ammonia, the development of carbon capture and sequestration
projects, the transition to and growth of a hydrogen economy,
greenhouse gas reduction targets, projected capital expenditures,
statements about future financial and operating results, and other
items described in this communication.
Important factors that could cause actual results to differ
materially from those in the forward-looking statements include,
among others, the cyclical nature of the Company’s business and the
impact of global supply and demand on the Company’s selling prices;
the global commodity nature of the Company’s fertilizer products,
the conditions in the international market for nitrogen products,
and the intense global competition from other producers; conditions
in the United States, Europe and other agricultural areas; the
volatility of natural gas prices in North America and Europe;
weather conditions; the seasonality of the fertilizer business; the
impact of changing market conditions on the Company’s forward sales
programs; difficulties in securing the supply and delivery of raw
materials, increases in their costs or delays or interruptions in
their delivery; reliance on third party providers of transportation
services and equipment; risks associated with cyber security; the
Company’s reliance on a limited number of key facilities; acts of
terrorism and regulations to combat terrorism; risks associated
with international operations; the significant risks and hazards
involved in producing and handling the Company’s products against
which the Company may not be fully insured; the Company’s ability
to manage its indebtedness and any additional indebtedness that may
be incurred; the Company’s ability to maintain compliance with
covenants under its revolving credit agreement and the agreements
governing its indebtedness; downgrades of the Company’s credit
ratings; risks associated with changes in tax laws and
disagreements with taxing authorities; risks involving derivatives
and the effectiveness of the Company’s risk measurement and hedging
activities; potential liabilities and expenditures related to
environmental, health and safety laws and regulations and
permitting requirements; regulatory restrictions and requirements
related to greenhouse gas emissions; the development and growth of
the market for green and blue (low-carbon) ammonia and the risks
and uncertainties relating to the development and implementation of
the Company’s green and blue (low-carbon) ammonia projects; risks
associated with expansions of the Company’s business, including
unanticipated adverse consequences and the significant resources
that could be required; risks associated with the operation or
management of the strategic venture with CHS (the “CHS Strategic
Venture”), risks and uncertainties relating to the market prices of
the fertilizer products that are the subject of the supply
agreement with CHS over the life of the supply agreement, and the
risk that any challenges related to the CHS Strategic Venture will
harm the Company’s other business relationships; and the impact of
the novel coronavirus disease 2019 (COVID-19) pandemic, including
measures taken by governmental authorities to slow the spread of
the virus, on our business and operations.
More detailed information about factors that may affect the
Company’s performance and could cause actual results to differ
materially from those in any forward-looking statements may be
found in CF Industries Holdings, Inc.’s filings with the Securities
and Exchange Commission, including CF Industries Holdings, Inc.’s
most recent annual and quarterly reports on Form 10-K and Form
10-Q, which are available in the Investor Relations section of the
Company’s web site. It is not possible to predict or identify all
risks and uncertainties that might affect the accuracy of our
forward-looking statements and, consequently, our descriptions of
such risks and uncertainties should not be considered exhaustive.
There is no guarantee that any of the events, plans or goals
anticipated by these forward-looking statements will occur, and if
any of the events do occur, there is no guarantee what effect they
will have on our business, results of operations, cash flows,
financial condition and future prospects. Forward-looking
statements are given only as of the date of this communication and
the Company disclaims any obligation to update or revise the
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
CF INDUSTRIES HOLDINGS,
INC.
SELECTED FINANCIAL
INFORMATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
(unaudited)
Three months ended
March 31,
2021
2020
(in millions, except per share
amounts)
Net sales
$
1,048
$
971
Cost of sales
759
767
Gross margin
289
204
Selling, general and administrative
expenses
55
54
Other operating—net
(2
)
6
Total other operating costs and
expenses
53
60
Equity in earnings of operating
affiliate
11
3
Operating earnings
247
147
Interest expense
48
44
Interest income
—
(1
)
Loss on debt extinguishment
6
—
Earnings before income taxes
193
104
Income tax provision
18
13
Net earnings
175
91
Less: Net earnings attributable to
noncontrolling interest
24
23
Net earnings attributable to common
stockholders
$
151
$
68
Net earnings per share attributable to
common stockholders:
Basic
$
0.70
$
0.31
Diluted
$
0.70
$
0.31
Weighted-average common shares
outstanding:
Basic
214.9
216.0
Diluted
216.0
216.6
CF INDUSTRIES HOLDINGS,
INC.
SELECTED FINANCIAL
INFORMATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited)
March 31, 2021
December 31, 2020
(in millions)
Assets
Current assets:
Cash and cash equivalents
$
804
$
683
Accounts receivable—net
271
265
Inventories
379
287
Prepaid income taxes
11
97
Other current assets
24
35
Total current assets
1,489
1,367
Property, plant and equipment—net
7,492
7,632
Investment in affiliate
91
80
Goodwill
2,377
2,374
Operating lease right-of-use assets
249
259
Other assets
313
311
Total assets
$
12,011
$
12,023
Liabilities and Equity
Current liabilities:
Accounts payable and accrued expenses
$
451
$
424
Income taxes payable
5
—
Customer advances
341
130
Current operating lease liabilities
88
88
Current maturities of long-term debt
—
249
Other current liabilities
6
15
Total current liabilities
891
906
Long-term debt, net of current
maturities
3,713
3,712
Deferred income taxes
1,175
1,184
Operating lease liabilities
166
174
Other liabilities
396
444
Equity:
Stockholders’ equity
3,029
2,922
Noncontrolling interest
2,641
2,681
Total equity
5,670
5,603
Total liabilities and equity
$
12,011
$
12,023
CF INDUSTRIES HOLDINGS,
INC.
SELECTED FINANCIAL
INFORMATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(unaudited)
Three months ended
March 31,
2021
2020
(in millions)
Operating Activities:
Net earnings
$
175
$
91
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
204
211
Deferred income taxes
(12
)
(50
)
Stock-based compensation expense
8
7
Loss on debt extinguishment
6
—
Unrealized net gain on natural gas
derivatives
(6
)
(12
)
Unrealized gain on embedded derivative
—
(1
)
Loss on disposal of property, plant and
equipment
1
—
Undistributed earnings of affiliate—net of
taxes
(12
)
(4
)
Changes in:
Accounts receivable—net
(7
)
(12
)
Inventories
(88
)
(29
)
Accrued and prepaid income taxes
78
10
Accounts payable and accrued expenses
36
(47
)
Customer advances
211
120
Other—net
(16
)
8
Net cash provided by operating
activities
578
292
Investing Activities:
Additions to property, plant and
equipment
(71
)
(67
)
Insurance proceeds for property, plant and
equipment
—
2
Net cash used in investing activities
(71
)
(65
)
Financing Activities:
Proceeds from short-term borrowings
—
500
Payments of long-term borrowings
(255
)
—
Dividends paid on common stock
(65
)
(65
)
Distributions to noncontrolling
interest
(64
)
(88
)
Purchases of treasury stock
—
(100
)
Proceeds from issuances of common stock
under employee stock plans
7
3
Cash paid for shares withheld for
taxes
(10
)
(8
)
Net cash (used in) provided by financing
activities
(387
)
242
Effect of exchange rate changes on cash
and cash equivalents
1
(3
)
Increase in cash and cash equivalents
121
466
Cash and cash equivalents at beginning of
period
683
287
Cash and cash equivalents at end of
period
$
804
$
753
CF INDUSTRIES HOLDINGS, INC. SELECTED
FINANCIAL INFORMATION NON-GAAP DISCLOSURE ITEMS
Reconciliation of net cash provided by operating activities
(GAAP measure) to free cash flow (non-GAAP measure):
Free cash flow is defined as net cash provided by operating
activities, as stated in the consolidated statements of cash flows,
reduced by capital expenditures and distributions to noncontrolling
interest. The Company has presented free cash flow because
management uses this measure and believes it is useful to
investors, as an indication of the strength of the Company and its
ability to generate cash and to evaluate the Company’s cash
generation ability relative to its industry competitors. It should
not be inferred that the entire free cash flow amount is available
for discretionary expenditures.
Twelve months ended March
31,
2021
2020
Net cash provided by operating
activities
$
1,517
$
1,491
Capital expenditures
(313
)
(391
)
Distributions to noncontrolling
interest
(150
)
(188
)
Free cash flow
$
1,054
$
912
CF INDUSTRIES HOLDINGS, INC. SELECTED
FINANCIAL INFORMATION NON-GAAP DISCLOSURE ITEMS (CONTINUED)
Reconciliation of net earnings attributable to common
stockholders and net earnings attributable to common stockholders
per ton (GAAP measures) to EBITDA, EBITDA per ton, adjusted EBITDA
and adjusted EBITDA per ton (non-GAAP measures), as
applicable:
EBITDA is defined as net earnings attributable to common
stockholders plus interest expense—net, income taxes and
depreciation and amortization. Other adjustments include the
elimination of loan fee amortization that is included in both
interest and amortization, and the portion of depreciation that is
included in noncontrolling interest.
The Company has presented EBITDA and EBITDA per ton because
management uses these measures to track performance and believes
that they are frequently used by securities analysts, investors and
other interested parties in the evaluation of companies in the
industry.
Adjusted EBITDA is defined as EBITDA adjusted with the selected
items included in EBITDA as summarized in the table below. The
Company has presented adjusted EBITDA and adjusted EBITDA per ton
because management uses these measures, and believes they are
useful to investors, as supplemental financial measures in the
comparison of year-over-year performance.
Three months ended March
31,
2021
2020
(in millions)
Net earnings
$
175
$
91
Less: Net earnings attributable to
noncontrolling interest
(24
)
(23
)
Net earnings attributable to common
stockholders
151
68
Interest expense—net
48
43
Income tax provision
18
13
Depreciation and amortization
204
211
Less other adjustments:
Depreciation and amortization in
noncontrolling interest
(22
)
(20
)
Loan fee amortization(1)
(1
)
(1
)
EBITDA
398
314
Unrealized net mark-to-market gain on
natural gas derivatives
(6
)
(12
)
Loss on foreign currency transactions,
including intercompany loans
—
18
Property insurance proceeds(2)
—
(2
)
Loss on debt extinguishment
6
—
Total adjustments
—
4
Adjusted EBITDA
$
398
$
318
Net sales
$
1,048
$
971
Tons of product sold (000s)
4,564
4,688
Net earnings attributable to common
stockholders per ton
$
33.09
$
14.51
EBITDA per ton
$
87.20
$
66.98
Adjusted EBITDA per ton
$
87.20
$
67.83
_______________________________________________________________________________
(1)
Loan fee amortization is included in both
interest expense—net and depreciation and amortization.
(2)
Represents proceeds related to a property
insurance claim at one of our nitrogen complexes.
CF INDUSTRIES HOLDINGS, INC. SELECTED
FINANCIAL INFORMATION GROSS MARGIN VARIANCE TO PRIOR YEAR
The following table presents summary operating results by
business segment for the first quarter of 2021 and the major
drivers of the variance in net sales, cost of sales and gross
margin compared to the first quarter of 2020:
Variance due to the following
items:
First Quarter of 2020
Higher (Lower) Average Selling
Prices(1)
Volume(1)
Higher Natural Gas
Costs(2)
Unrealized MTM on natural gas
derivatives
Higher Manufacturing,
Maintenance and Other Costs
Purchased Urea(1)
Gain on Net Settlement of
Natural Gas Contracts
First Quarter of 2021
(dollars in millions)
Consolidated
Net sales
$
971
$
101
$
(56)
$
—
$
—
$
—
$
32
$
—
$
1,048
Cost of sales
767
—
(46)
48
6
63
33
(112)
759
Gross margin
$
204
$
101
$
(10)
$
(48)
$
(6)
$
(63)
$
(1)
$
112
$
289
Gross margin percentage
21.0%
27.6%
Ammonia
Net sales
$
193
$
30
$
(17)
$
—
$
—
$
—
$
—
$
—
$
206
Cost of sales
173
—
(13)
5
2
25
—
(112)
80
Gross margin
$
20
$
30
$
(4)
$
(5)
$
(2)
$
(25)
$
—
$
112
$
126
Gross margin percentage
10.4%
61.2%
Granular Urea
Net sales
$
337
$
66
$
(36)
$
—
$
—
$
—
$
32
$
—
$
399
Cost of sales
224
—
(22)
16
2
11
33
—
264
Gross margin
$
113
$
66
$
(14)
$
(16)
$
(2)
$
(11)
$
(1)
$
—
$
135
Gross margin percentage
33.5%
33.8%
UAN
Net sales
$
235
$
(23)
$
20
$
—
$
—
$
—
$
—
$
—
$
232
Cost of sales
193
—
12
14
1
10
—
—
230
Gross margin
$
42
$
(23)
$
8
$
(14)
$
(1)
$
(10)
$
—
$
—
$
2
Gross margin percentage
17.9%
0.9%
AN
Net sales
$
116
$
12
$
(23)
$
—
$
—
$
—
$
—
$
—
$
105
Cost of sales
103
—
(20)
8
1
3
—
—
95
Gross margin
$
13
$
12
$
(3)
$
(8)
$
(1)
$
(3)
$
—
$
—
$
10
Gross margin percentage
11.2%
9.5%
Other
Net sales
$
90
$
16
$
—
$
—
$
—
$
—
$
—
$
—
$
106
Cost of sales
74
—
(3)
5
—
14
—
—
90
Gross margin
$
16
$
16
$
3
$
(5)
$
—
$
(14)
$
—
$
—
$
16
Gross margin percentage
17.8%
15.1%
_______________________________________________________________________________
(1)
Selling price and volume impact of
granular urea purchased to satisfy customer commitments is
reflected in Purchased Urea column.
(2)
Higher natural gas costs include the
impact of realized natural gas derivatives.
CF INDUSTRIES HOLDINGS, INC. SELECTED
FINANCIAL INFORMATION ITEMS AFFECTING COMPARABILITY
During the three months ended March 31, 2021 and 2020, certain
items impacted our financial results. The following table outlines
these items and how they impacted the comparability of our
financial results during these periods. During the three months
ended March 31, 2021 and 2020, we reported net earnings
attributable to common stockholders of $151 million and $68
million, respectively.
Three months ended
March 31,
2021
2020
Pre-Tax
After-Tax
Pre-Tax
After-Tax
(in millions)
Unrealized net mark-to-market gain on
natural gas derivatives(1)
$
(6
)
$
(5
)
$
(12
)
$
(9
)
Loss on foreign currency transactions,
including intercompany loans(2)
—
—
18
14
Insurance proceeds(2)(3)
—
—
(10
)
(8
)
Loss on debt extinguishment
6
5
—
—
_______________________________________________________________________________
(1)
Included in cost of sales in our
consolidated statements of operations.
(2)
Included in other operating—net in our
consolidated statements of operations.
(3)
Represents proceeds related to an
insurance claim at one of our nitrogen complexes. Consists of $8
million related to business interruption insurance proceeds and $2
million related to property insurance proceeds.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210505006117/en/
Media Chris Close Director, Corporate Communications
847-405-2542 - cclose@cfindustries.com
Investors Martin Jarosick Vice President, Investor
Relations 847-405-2045 - mjarosick@cfindustries.com
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