Company Announcements

 Operational Performance: Safety, Production and Sales Volume Records

Strong Global Demand, Rising Global Energy Prices Drive Positive Nitrogen Outlook

Continued Focus on Clean Energy as Long-Term Growth Platform

DEERFIELD, Ill.--(BUSINESS WIRE)--Feb. 17, 2021-- CF Industries Holdings, Inc. (NYSE: CF), a leading global manufacturer of hydrogen and nitrogen products, today announced results for its fourth quarter and year ended December 31, 2020.

Highlights

• Full year net earnings of $317 million⁽¹⁾, or $1.47 per diluted share; EBITDA⁽²⁾ of $1,316 million; adjusted EBITDA⁽²⁾ of $1,350 million
• Fourth quarter net earnings of $87 million, or $0.40 per diluted share; EBITDA of $334 million; adjusted EBITDA of $338 million
• Full year net cash from operating activities of $1,231 million, free cash flow⁽³⁾ of $748 million
• Lowest year-end rolling average recordable incident rate in Company history
• Company-record annual gross ammonia production of 10.4 million tons and company-record quarterly gross ammonia production of 2.7 million tons in the fourth quarter of 2020
• Company-record 20.3 million product tons sold
• Company to redeem remaining $250 million of Senior Secured Notes due December 2021

“Our team’s outstanding execution in 2020 produced multiple records for safety, production and sales volume, and delivered strong results in a challenging environment,” said Tony Will, president and chief executive officer, CF Industries Holdings, Inc. “Nitrogen industry dynamics entering 2021 are the most favorable we’ve seen in nearly a decade, as rising grain values and higher global energy prices are driving significant price appreciation for nitrogen products. We expect that these conditions will provide a very positive backdrop for the year.

“Longer term, we are focused on our clean energy strategy as a growth platform and continue to make progress on our initiatives. We see significant and growing interest from potential partners and customers in clean hydrogen and ammonia as a way to make real progress decarbonizing key industries. We believe we are uniquely positioned with our unparalleled asset base and technical knowledge to serve this developing demand.”

Operations Overview

CF Industries' operations are designated as part of the “critical infrastructure” in each country in which it operates and the Company continues to manage and respond actively to the COVID-19 pandemic. Since the onset of the pandemic, CF Industries has relied on its safety culture and a wide range of measures put in place across its network to limit potential exposure to the virus at its locations and enable continued safe production and distribution of products. As a result, there has been no known spread of the virus at the Company’s locations, positive COVID-19 tests among its employee population have not affected the Company’s ability to maintain safe staffing levels and operations have not been disrupted.

The Company continues to operate safely and efficiently. As of December 31, 2020, the 12-month rolling average recordable incident rate was 0.14 incidents per 200,000 work hours, the lowest level ever recorded by the Company and significantly better than industry benchmarks.

Gross ammonia production for the full year of 2020 was 10.4 million tons, and for the fourth quarter of 2020 was 2.7 million tons, both company records. CF Industries expects gross ammonia production in 2021 to be in a range of 9.5-10.0 million tons due to a higher number of planned maintenance activities than in 2020.

Full Year 2020 Financial Results Overview

For the full year of 2020, net earnings attributable to common stockholders were $317 million, or $1.47 per diluted share; EBITDA was $1,316 million; and adjusted EBITDA was $1,350 million. These results compare to full year of 2019 net earnings attributable to common stockholders of $493 million, or $2.23 per diluted share; EBITDA of $1,620 million; and adjusted EBITDA of $1,610 million.

Net sales in the full year of 2020 were $4.1 billion compared to $4.6 billion in the full year of 2019. Average selling prices for the full year of 2020 were lower than the full year of 2019 across all segments due to increased global supply availability as lower global energy costs drove higher global operating rates. Sales volumes in the full year of 2020 were 20.3 million product tons compared to 19.5 million product tons in the full year of 2019 due to greater supply availability from higher starting inventories and higher production compared to the prior year. The Company expects sales volumes to return to a range of 19-19.5 million product tons in 2021 due to lower year-end inventory than the year before and lower expected production due to a higher number of planned maintenance activities than in 2020.

Cost of sales for the full year of 2020 was lower than the full year of 2019 due to lower realized natural gas costs, partially offset by the impact of higher sales volumes.

In the full year of 2020, the average cost of natural gas reflected in the Company’s cost of sales was $2.24 per MMBtu compared to the average cost of natural gas in cost of sales of $2.74 per MMBtu in the full year of 2019.

Fourth Quarter 2020 Financial Results Overview

For the fourth quarter of 2020, net earnings attributable to common stockholders were $87 million, or $0.40 per diluted share; EBITDA was $334 million; and adjusted EBITDA was $338 million. These results compare to fourth quarter 2019 net earnings attributable to common stockholders of $55 million, or $0.25 per diluted share; EBITDA of $306 million; and adjusted EBITDA of $325 million.

Net sales in the fourth quarter of 2020 were $1.1 billion compared to $1.0 billion in the fourth quarter of 2019. Average selling prices for the fourth quarter of 2020 were lower than the fourth quarter of 2019 across most segments due to increased global supply availability as lower global energy costs drove higher global operating rates leading into the fourth quarter of 2020. Sales volumes in the fourth quarter of 2020 were higher than the fourth quarter of 2019 due to greater supply availability.

Cost of sales for the fourth quarter of 2020 was higher than the fourth quarter of 2019 due primarily to the impact of higher sales volumes and higher realized natural gas costs.

In the fourth quarter of 2020, the average cost of natural gas reflected in the Company’s cost of sales was $2.60 per MMBtu compared to the average cost of natural gas in cost of sales of $2.36 per MMBtu in the fourth quarter of 2019.

Capital Management

Capital expenditures in the fourth quarter and full year 2020 were $103 million and $309 million, respectively. The Company projects capital expenditures for full year 2021 will be in the range of $450 million, which reflects a return to a normal maintenance schedule and which includes investments in the company’s strategic initiatives related to the clean energy economy.

The Company did not repurchase shares during the fourth quarter of 2020. For the full year 2020, the Company repurchased 2.6 million shares for $100 million. Since the current share repurchase authorization was announced in February 2019, the Company has repurchased approximately 10.2 million shares for $437 million.

The Company’s wholly owned subsidiary CF Industries, Inc. has elected to redeem in full the entire outstanding $250 million 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. Based on market interest rates on February 12, 2021, the company estimates that the total amount for the redemption of the 2021 Notes will be approximately $258 million, including accrued interest.

CHS Inc. Distribution

On January 31, 2021, the Board of Managers of CF Industries Nitrogen, LLC (CFN) approved a semi-annual distribution payment to CHS Inc. (CHS) of $64 million for the distribution period ended December 31, 2020. The distribution was paid on February 1, 2021. Total distributions to CHS pertaining to 2020 were approximately $150 million.

Nitrogen Market Outlook

The global nitrogen pricing outlook for 2021 is significantly more positive compared to 2020, underpinned by higher commodity crop futures prices and substantially higher energy prices in Asia and Europe. These dynamics have driven strong global nitrogen demand and lower global nitrogen operating rates at the start of the year, tightening the global nitrogen market. As a result, the price per ton of a granular urea barge at New Orleans at the beginning of February 2021 was approximately 40 percent higher than the beginning of December 2020 and 60 percent higher than at the same point a year ago.

Global commodity crop near-term and futures prices have risen to their highest levels since 2014. Corn prices have increased significantly as lower yields in North America in 2020, poor growing weather in South America and strong demand for corn from China have resulted in the U.S. Department of Agriculture projecting the corn stocks to use ratio for marketing year 2020/21 at 10.6% in January 2021, its lowest level since 2013. These factors, along with U.S. government support for the agriculture industry, have resulted in strengthened farm economics and greater resources available to crop producers for 2021 crop inputs.

The Company projects that nitrogen-consuming coarse grain acres in North America will stay at or above 2020 levels despite an expected significant increase in soybean plantings as high crop prices and reduced prevent plant acreage in 2021 will result in higher overall planted acres in the year. The Company projects approximately 90-92 million planted corn acres in the United States in 2021. Demand for nitrogen should also be supported by higher canola plantings in Canada. Additionally, the Company expects demand in the region for industrial uses of nitrogen will rise with economic activity should the COVID-19 pandemic be brought under control through widespread vaccination.

Global nitrogen requirements are expected to remain robust throughout the year, driven by continued strong demand for urea imports from India and Brazil. Favorable weather in India has supported record urea tender volumes in 2019 and 2020. The Company projects urea tender volumes in India in 2021 to ease from record highs, but to be well above the five-year average of 6.5-7.0 million metric tons. The Company also believes that improved farm incomes and no active domestic urea production in Brazil will support demand for approximately 6.5 million metric tons of urea in 2021, similar to 2020.

In addition to strong global nitrogen demand, global nitrogen pricing has been supported by lower nitrogen supply availability entering 2021. Higher natural gas prices in Asia and Europe have significantly reduced margins for nitrogen producers in these regions compared to the industry’s marginal producer, which remains Chinese anthracite coal-based complexes. This has resulted in lower operating rates in Europe and Asia. Additionally, Chinese producers have reported lower operating rates due to higher costs for coal, increased environmental inspections and natural gas being diverted to meet heating needs.

Natural gas energy spreads between North America and Europe/Asia widened significantly at the end of 2020 into 2021. From July 2020 to December 2020, the Dutch TTF natural gas price and the Asian JKM liquefied natural gas price both increased approximately five times greater than the U.S. Henry Hub natural gas price. These wider spreads have steepened the global nitrogen cost curve, increasing margin opportunities for North American producers. Forward curves suggest that these energy spreads will persist throughout 2021.

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. Key initiatives in development include a green ammonia project at the Donaldsonville Nitrogen Complex and carbon dioxide sequestration and other carbon abatement projects across the Company's network to enable low-carbon ammonia production.

Green hydrogen and ammonia are expected to be critical contributors to the world achieving net-zero carbon emissions by 2050. Clean hydrogen demand is expected to grow exponentially, with industry experts projecting that hydrogen will meet approximately 20% of the world’s energy need by 2050, up from less than 1% today. Because ammonia is a highly efficient transport and storage mechanism for hydrogen as well as a fuel in its own right, demand for green and low-carbon ammonia is expected to increase significantly along with demand for clean hydrogen. As the world’s largest ammonia producer, the Company believes that its ammonia production and distribution network, along with its storage and transportation capabilities and technical expertise, is uniquely positioned to meet the anticipated demand for hydrogen and ammonia from green and low-carbon sources.

Ammonia Segment

CF Industries’ ammonia segment produces anhydrous ammonia (ammonia), which is the basic 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 low-carbon 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.

Comparison of 2020 to 2019 full year periods:

• Ammonia sales volume increased for the full year of 2020 compared to 2019 due to greater supply availability from higher production and higher beginning inventories entering the year.
• Ammonia average selling prices decreased for the full year of 2020 compared to 2019 due to increased global supply availability as lower global energy costs drove higher global operating rates.
• Ammonia adjusted gross margin per ton decreased for the full year of 2020 compared to 2019 due to lower average selling prices, partially offset by lower 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.

Comparison of 2020 to 2019 full year periods:

• Granular urea sales volume for the full year of 2020 was higher than in the full year of 2019 due to greater supply availability from higher beginning inventories entering the year and higher production.
• Urea average selling prices decreased for the full year of 2020 compared to 2019 due to increased global supply availability as lower global energy costs drove higher global operating rates.
• Granular urea adjusted gross margin per ton decreased for the full year of 2020 compared to 2019 due to lower average selling prices, partially offset by lower 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.

Comparison of 2020 to 2019 full year periods:

• UAN sales volume was similar for the full year of 2020 compared to 2019.
• UAN average selling prices decreased for the full year of 2020 compared to 2019 due to increased global supply availability as lower global energy costs drove higher global operating rates.
• UAN adjusted gross margin per ton decreased in the full year of 2020 compared to 2019 due to lower average selling prices, partially offset by lower 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.

Comparison of 2020 to 2019 full year periods:

• AN sales volume increased for the full year of 2020 compared to 2019 due to greater supply availability from higher beginning inventories entering the year.
• AN average selling prices for the full year of 2020 decreased compared to 2019 due to increased global supply availability as lower global energy costs drove higher global operating rates.
• AN adjusted gross margin per ton decreased for the full year of 2020 compared to 2019 due to lower average selling prices, partially offset by lower realized natural gas costs.

   

Other Segment

CF Industries’ Other segment includes diesel exhaust fluid (DEF), urea liquor, nitric acid and compound fertilizer products (NPKs).

Comparison of 2020 to 2019 full year periods:

• Other segment sales volume increased for the full year of 2020 compared to 2019 as higher sales of DEF and NPKs were offset by lower nitric acid sales.
• Other average selling prices for the full year of 2020 decreased compared to 2019 due to increased global supply availability as lower global energy costs drove higher global operating rates.
• Other segment adjusted gross margin per ton decreased for the full year of 2020 compared to 2019 due to lower average selling prices, partially offset by lower realized natural gas costs.

   

Dividend Payment

On February 3, 2021, CF Industries’ Board of Directors declared a quarterly dividend of $0.30 per common share. The dividend will be paid on February 26, 2021 to stockholders of record as of February 16, 2021.

Conference Call

CF Industries will hold a conference call to discuss its fourth quarter and full year 2020 results at 9:00 a.m. ET on Thursday, February 18, 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.

CF Industries is a leading global manufacturer of hydrogen and nitrogen products for clean energy, emissions abatement, fertilizer, and other industrial applications. We operate manufacturing complexes in the United States, Canada, and the United Kingdom, which are among the most cost-advantaged, efficient, and flexible in the world and an unparalleled storage, transportation and distribution network in North America. Our 3,000 employees focus on safe and reliable operations, environmental stewardship and disciplined capital and corporate management, driving our strategy to leverage and sustainably grow the world’s most advantaged hydrogen and nitrogen platform to serve customers, creating long-term shareholder value. 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 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 our expectations include, but are not limited to, the failure of cost competitive global renewable energy capacity to increase significantly; realization of technological improvements required to increase the efficiency and lower the costs of production of green and low-carbon ammonia; development and growth of end market demand and applications for low-carbon hydrogen and ammonia; government regulation, incentives, and initiatives; cost overruns; performance of third parties; permitting matters; and other unforeseen difficulties. Important factors that could cause actual results more generally to differ materially from those in the forward-looking statements include, among others, 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; 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 fertilizer producers; conditions in the United States, Europe and other agricultural areas; the volatility of natural gas prices in North America and Europe; 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; 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 cyber security; weather conditions; risks associated with changes in tax laws and disagreements with taxing authorities; the Company’s reliance on a limited number of key facilities; potential liabilities and expenditures related to environmental, health and safety laws and regulations and permitting requirements; future regulatory restrictions and requirements related to greenhouse gas emissions; risks associated with expansions of the Company’s business, including unanticipated adverse consequences and the significant resources that could be required; the seasonality of the fertilizer business; the impact of changing market conditions on the Company’s forward sales programs; risks involving derivatives and the effectiveness of the Company’s risk measurement and hedging activities; 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; risks associated with the Company’s Point Lisas Nitrogen Limited joint venture; acts of terrorism and regulations to combat terrorism; risks associated with international operations; and deterioration of global market and economic conditions.

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.