No bad stock

CF Industries Holdings, Inc.
CEO : Mr. W. Anthony Will

Quarterly earnings growth(YoY,%)

Period	Revenue	Operating Income	EPS	Release Date
2022 Q4	2.7% YoY	6.5%	32.8%	2023-02-16

Bert Frost says,

Global nitrogen market dynamics in 2022

• Feed grain prices driven to highest levels in a decade, supporting resilient demand for nitrogen in major agricultural production regions like North America, Brazil, and India.
• Lower demand and smaller subsistence-focused agricultural areas in Asia and Latin America due to historically high prices.
• Softer industrial demand in Europe and Asia due to higher prices and recession fears.
• High natural gas prices in Europe and Asia significantly curtailed production in those regions.
• Russia’s invasion of Ukraine triggered disruptions and a large realignment of trade flows.

Moderation of nitrogen market shock

• Global trade flows of natural gas and nitrogen adjusted and the world absorbed previously delayed urea capacity additions.
• A mild winter in the Northern Hemisphere resulted in higher natural gas stocks, lower natural gas prices and therefore, lower global nitrogen prices.
• Many agricultural buyers took a risk off just-in-time approach to purchasing, and declining global prices reinforced the wait-and-see approach.
• Retailers and wholesalers have started to step back into the market at attractive price levels, and significant demand is expected to emerge in North America in the coming weeks.

Long-term perspective on global nitrogen supply and demand balance

• Industry fundamentals continue to point to a tight global nitrogen supply and demand balance.
• Global grain stocks did not improve from last year’s growing season, and global coarse grain stocks use ratios remain low, supporting high global grain prices for longer.
• 92 million to 93 million acres of corn will be planted in the United States in 2023 along with strong wheat, cotton, and canola plantings across North America.
• Europe remains the marginal nitrogen producer in the industry, with producer profitability in the region continuing to be challenged.
• The marginal opportunity for CF Industries remains substantial.

Tony Will says,

Record Financial Achievement in Q4 2022

• CF Industries achieved a record full-year earnings and full-year free cash flow.
• The company made significant progress in decarbonizing its network and promoting low-carbon ammonia production.

Market Volatility and Short-Term Outlook

• CF Industries expects continued volatility in the global nitrogen market, affected by high energy prices, geopolitical events, and economic weakness.
• Typical spring demand in the Northern Hemisphere is expected to be weighted to the second quarter due to buyers’ wait-and-see approach to nitrogen procurement.
• CF Industries’ network is well-suited to navigate this type of environment, with in-market production, extensive storage and logistics capabilities, and export optionality.

Favorable Operating Environment and Long-Term Outlook

• Industry fundamentals remain strong, with resilient demand driven by the need to replenish global grain stocks and significant energy spreads between North America, Europe, and Asia.
• The demand for low-carbon ammonia as a clean energy source also emerges, which is favorable for CF Industries’ cost-advantaged network.
• The company expects to continue generating substantial free cash flow, enabling investment in growth and return of capital to shareholders.

Disciplined Investments and Share Repurchases

• CF Industries will focus on disciplined investments to decarbonize the network and accelerate low-carbon blue and green ammonia production.
• The company returned nearly 60% of its free cash flow to shareholders through share repurchases and dividends in 2022.
• CF Industries aims to leverage the $3 billion share repurchase program authorized by the board to further build on this track record and provide shareholders with increasing participation in the business.

Q & A sessions,

2022 Operational Performance and Outlook

• CF Industries had an outstanding 2022, with successful upgrade of their enterprise resource planning system completed on time and on budget.
• CFI expects to continue generating superior free cash flows due to operational focus, disciplined capital stewardship, positive market outlook, and strong return profile from clean energy initiatives.

Low-Carbon Ammonia Production and Sequestration

• The CO2 dehydration compression project at Donaldsonville will allow for the production of low-carbon ammonia in significant quantities by 2025.
• The agreement with ExxonMobil for transportation and permanent sequestration of the CO2 will sequester about 2 million metric tonnes of CO2 per year.
• CFI is discussing specifics such as equity investment from JERA and off-take agreements.
• The availability of the 45Q tax credit and global recognition of the value and scarcity of low-carbon ammonia is driving demand for the product.

Carbon Capture and Sequestration Opportunities

• CFI is in active discussions about finding solutions for vented CO2 at Yazoo City and Medicine Hat facilities, and evaluating opportunities for flue gas capture and recovery.

Pricing and Demand for Fertilizer

• Pricing for fertilizer has fallen due to factors such as higher prices curing high prices, demand deferral, and additional supply from various regions.
• CFI still sees a positive market going into Q2 with a good order book and is in a good position with $2.50 gas in Oklahoma and positive freight differential.

Impact of Governmental Actions on Fertilizer Demand in China

• Chinese governmental action to protect their farmers with export controls, inflation control mechanisms, and cost control mechanisms led to adequate nutrients being available for their farmers in 2022.