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Yahoo Finance Plus CF Industries Holdings, Inc. Reports First Nine Months 2022 Net Earnings of $2.49 Billion, Adjusted EBITDA of $4.58 Billion
Strong Operational Performance and Wide Energy Spreads Drive Record Results
Company to Collaborate with ExxonMobil on Landmark Carbon Capture Project
Board Authorizes New $3 Billion Share Repurchase Program
DEERFIELD, Ill., November 02, 2022--(BUSINESS WIRE)--CF Industries Holdings, Inc. (NYSE: CF), a leading global manufacturer of hydrogen and nitrogen products, today announced results for the first nine months and third quarter ended September 30, 2022.
Highlights
First nine months net earnings of $2.49 billion(1), or $12.04 per diluted share, EBITDA(2) of $4.30 billion, and adjusted EBITDA(2) of $4.58 billion
Third quarter net earnings of $438 million(1), or $2.18 per diluted share, EBITDA(2) of $826 million, and adjusted EBITDA(2) of $983 million
Trailing twelve months net cash from operating activities of $4.75 billion, free cash flow(3) of $3.68 billion
Repurchased approximately 6.1 million shares for $532 million during the third quarter of 2022; new $3 billion share repurchase program authorized through 2025
Company entered into the largest-of-its-kind commercial agreement with ExxonMobil to capture and permanently store up to 2 million tons of CO2 emissions annually from its Donaldsonville Complex in Louisiana
Initiated front-end engineering and design study for proposed joint venture with Mitsui & Co. to construct a greenfield blue ammonia facility in Ascension Parish, Louisiana
"The CF Industries team continues to deliver outstanding results as we work safely, run our plants extremely well and leverage our distribution and logistics capabilities to serve customers in North America and around the world," said Tony Will, president and chief executive officer, CF Industries Holdings, Inc. "The conditions that have supported nitrogen prices for the last year - reduced global supply availability from lower operating rates due to high energy costs for marginal production in Europe and Asia - show no signs of abating. As a result, we expect the global nitrogen supply-demand balance to remain tight with attractive margin opportunities for low-cost producers further into the future."
Nitrogen Market Outlook
Management expects the global nitrogen supply-demand balance will remain tight into 2025 due to agriculture-led demand and forward energy curves that point to persistently high energy prices in Europe and Asia.
The need to replenish global grains stocks, which has supported high prices for corn, wheat and canola, continues to drive global nitrogen demand. Below-trend yields are expected in key growing regions, including the U.S., due to unfavorable weather during 2022, preventing any meaningful increase to global grains stocks this year. Management believes that it will take at least two more seasons at trend yield to fully replenish global grains stocks, supporting strong grains plantings and incentivizing nitrogen fertilizer application over this time period.
North America: High crop futures prices, along with healthy farm economics, are projected to support high corn and wheat planted acreage in 2023.
India: Management expects that India will tender for urea throughout the remainder of the year and into 2023 to fully meet increased demand as farmers maximize grain production.
Europe: Ammonia and upgraded fertilizer production curtailments in Europe have led to significantly higher nitrogen imports to the region in the second half of 2022. Imports of urea into Europe are well-above their typical pace in part to replace lower nitrate supply.
Global nitrogen supply availability remains constrained as high energy prices in Europe and Asia have led to substantial curtailments of ammonia production in these regions. During the third quarter of 2022, an estimated 60% of ammonia capacity in Europe did not operate. For facilities able to do so, production economics continue to favor importing ammonia to manufacture upgraded products.
China: Urea exports from China remain lower than prior years due to measures the Chinese government has implemented to promote availability and affordability of fertilizers domestically. Management continues to expect that full year urea exports from China will be in the range of 1.5-2 million metric tons, well below the three-year average.
Russia: Exports of ammonia from Russia are significantly lower in 2022 compared to prior years due to geopolitical disruptions arising from Russia’s invasion of Ukraine and related logistics bottlenecks. In contrast, exports of other nitrogen products from the country are at near-normal levels.
Forward energy curves suggest that production economics in Europe and Asia are likely to remain challenged for at least the next two years. Additionally, the forward curves point to an extended period of wide energy differentials between Europe and Asia and low-cost regions. As a result, the Company believes the global nitrogen cost curve will be steeper for longer, supporting increased margin opportunities for low-cost North American producers.
Operations Overview
The Company continues to operate safely and efficiently across its network. As of September 30, 2022, the 12-month rolling average recordable incident rate was 0.29 incidents per 200,000 work hours, significantly better than industry benchmarks.
Gross ammonia production for the first nine months and third quarter of 2022 was approximately 7.4 million tons and 2.3 million tons, respectively. The Company expects that gross ammonia production for 2022 will be in the range of 9.5 to 10.0 million tons.
Financial Results Overview
First Nine Months 2022 Financial Results
For the first nine months of 2022, net earnings attributable to common stockholders were $2.49 billion, or $12.04 per diluted share, and EBITDA was $4.30 billion, which include the impact of pre-tax impairment and restructuring charges of $257 million related to the Company’s UK operations; adjusted EBITDA was $4.58 billion. These results compare to the first nine months of 2021 net earnings attributable to common stockholders of $212 million, or $0.98 per diluted share and EBITDA of $984 million, which included the impact of pre-tax impairment charges of $495 million related to the Company’s UK operations; and adjusted EBITDA of $1.49 billion.
Net sales in the first nine months of 2022 were $8.58 billion compared to $4.00 billion in the first nine months of 2021. Average selling prices for the first nine months of 2022 were higher than the first nine months of 2021 across all segments due to decreased global supply availability, as higher global energy costs reduced global operating rates and geopolitical factors disrupted the global fertilizer supply chain. Sales volumes in the first nine months of 2022 were higher than the first nine months of 2021 due to greater supply availability from higher production in 2022 compared to 2021.
Cost of sales for the first nine months of 2022 was higher compared to the first nine months of 2021 due primarily to higher natural gas costs.
In the first nine months of 2022, the average cost of natural gas reflected in the Company’s cost of sales was $7.28 per MMBtu compared to the average cost of natural gas in cost of sales of $3.51 per MMBtu in the first nine months of 2021.
Third Quarter 2022 Financial Results Overview
For the third quarter of 2022, net earnings attributable to common stockholders were $438 million, or $2.18 per diluted share, and EBITDA was $826 million, which include the impact of pre-tax impairment and restructuring charges of $95 million related to the Company’s UK operations; and adjusted EBITDA was $983 million. These results compare to 2021 net loss attributable to common stockholders of $185 million, or a net loss of $0.86 per diluted share and EBITDA loss of $10 million, which included the impact of pre-tax impairment charges of $495 million related to the Company’s UK operations; and adjusted EBITDA of $488 million.
Net sales in the third quarter of 2022 were $2.32 billion compared to $1.36 billion in 2021. Average selling prices for 2022 were higher than 2021 across all segments due to decreased global supply availability, as higher global energy costs reduced global operating rates and geopolitical factors disrupted the global fertilizer supply chain. Sales volumes in the third quarter of 2022 were higher than 2021 due to greater supply availability from higher production as well as higher starting inventories in the third quarter of 2022 compared to 2021.
Cost of sales for the third quarter of 2022 was higher compared to 2021 primarily due to higher natural gas costs.
In the third quarter of 2022, the average cost of natural gas reflected in the Company’s cost of sales was $8.35 per MMBtu compared to the average cost of natural gas in cost of sales of $4.21 per MMBtu in 2021.
Capital Management
Capital Expenditures
Capital expenditures in the third quarter and first nine months of 2022 were $190 million and $319 million, respectively, which incorporates expenditures related to the Company’s clean energy initiatives, including the purchase of property on the west bank of Ascension Parish, Louisiana, to facilitate potential growth of blue ammonia production capacity. Management projects capital expenditures for full year 2022 will be in a range of $500 million.
Share Repurchase Programs
The Company repurchased approximately 12.7 million shares for $1.12 billion during the first nine months of 2022. As of September 30, 2022, the Company had completed approximately 75% of the $1.5 billion share repurchase authorization that went into effect January 1, 2022, and is effective through the end of 2024.
On November 2, 2022, the Board of Directors of CF Industries Holdings, Inc., authorized a new $3 billion share repurchase program. The program will commence upon completion of the current share repurchase program and runs through the end of 2025.
CHS Inc. Distribution
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 third quarter of 2022 is $106 million.
Clean Energy Initiatives
CF Industries continues to advance its plans to support the global hydrogen and clean fuel economy, which is expected to grow significantly over the next decade, through the production of blue ammonia (ammonia produced with the corresponding CO2 byproduct removed through carbon capture and sequestration) and green ammonia (ammonia produced from carbon-free sources).
Joint Venture with Mitsui & Co., Ltd.
CF Industries and Mitsui & Co., Ltd. have initiated a front-end engineering and design (FEED) study for their proposed joint venture to construct an export-oriented greenfield blue ammonia facility in Ascension Parish, Louisiana. The companies had previously signed a joint development agreement that provides the framework for the FEED study.
CF Industries and Mitsui have signed an agreement with thyssenkrupp UHDE to conduct the FEED study. Additionally, CF Industries acquired land during the third quarter of 2022 on the west bank of Ascension Parish, Louisiana, on which the proposed facility would be constructed should the companies agree to move forward. CF Industries and Mitsui expect to make a final investment decision on the proposed facility in the second half of 2023. Construction and commissioning of a new world-scale capacity ammonia plant typically takes approximately 4 years from that point.
Carbon Capture and Sequestration Agreement to Enable Blue Ammonia Production at Donaldsonville Complex
CF Industries has entered into the largest-of-its-kind commercial agreement with ExxonMobil to capture and permanently store up to 2 million tons of CO2 emissions annually from its Donaldsonville Complex in Louisiana. As previously announced, CF Industries is investing $200 million to build a CO2 dehydration and compression unit at the facility to enable captured CO2 to be transported and stored. Under the agreement, ExxonMobil will then transport and permanently store the captured CO2 in secure geologic storage it owns in Vermilion Parish, Louisiana. As part of the project, ExxonMobil has signed an agreement with EnLink Midstream to use EnLink’s transportation network to deliver CO2 to permanent geologic storage. Start-up for the project is scheduled for early 2025.
Donaldsonville Green Ammonia Project
The Donaldsonville green ammonia project, which involves installing an electrolysis system at Donaldsonville to generate carbon-free hydrogen from water that will then be supplied to an existing ammonia plant to produce green ammonia, continues to progress. Major equipment is being fabricated and site work has begun for installation of the new electrolyzer unit and integration into Donaldsonville’s existing operations. Once complete, the project will enable the Company to produce approximately 20,000 tons of green ammonia per year.
___________________________________________________ | |
(1) | Certain items recognized during the first nine months and third quarter of 2022 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. |
Consolidated Results
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||
(dollars in millions, except per share and per MMBtu amounts) | |||||||||||||||
Net sales | $ | 2,321 | $ | 1,362 | $ | 8,578 | $ | 3,998 | |||||||
Cost of sales | 1,405 | 922 | 3,973 | 2,766 | |||||||||||
Gross margin | $ | 916 | $ | 440 | $ | 4,605 | $ | 1,232 | |||||||
Gross margin percentage | 39.5 | % | 32.3 | % | 53.7 | % | 30.8 | % | |||||||
Net earnings (loss) attributable to common stockholders | $ | 438 | $ | (185 | ) | $ | 2,486 | $ | 212 | ||||||
Net earnings (loss) per diluted share | $ | 2.18 | $ | (0.86 | ) | $ | 12.04 | $ | 0.98 | ||||||
EBITDA(1) | $ | 826 | $ | (10 | ) | $ | 4,296 | $ | 984 | ||||||
Adjusted EBITDA(1) | $ | 983 | $ | 488 | $ | 4,584 | $ | 1,485 | |||||||
Tons of product sold (000s) | 4,408 | 3,784 | 13,867 | 13,522 | |||||||||||
Natural gas supplemental data (per MMBtu): | |||||||||||||||
Cost of natural gas used for production in cost of sales(2) | $ | 8.35 | $ | 4.21 | $ | 7.28 | $ | 3.51 | |||||||
Average daily market price of natural gas Henry Hub (Louisiana) | $ | 7.96 | $ | 4.27 | $ | 6.66 | $ | 3.52 | |||||||
Average daily market price of natural gas National Balancing Point (United Kingdom) | $ | 32.54 | $ | 15.98 | $ | 26.26 | $ | 10.63 | |||||||
Unrealized net mark-to-market loss (gain) on natural gas derivatives | $ | 11 | $ | (12 | ) | $ | (39 | ) | $ | (18 | ) | ||||
Depreciation and amortization | $ | 221 | $ | 203 | $ | 652 | $ | 650 | |||||||
Capital expenditures | $ | 190 | $ | 201 | $ | 319 | $ | 382 | |||||||
Production volume by product tons (000s): | |||||||||||||||
Ammonia(3) | 2,283 | 2,186 | 7,366 | 6,897 | |||||||||||
Granular urea | 1,187 | 987 | 3,418 | 3,139 | |||||||||||
UAN (32%) | 1,381 | 1,311 | 4,879 | 4,628 | |||||||||||
AN | 358 | 332 | 1,162 | 1,256 | |||||||||||
_______________________________________________________________________________ | |
(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. For the nine months ended September 30, 2021, 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. In addition, the Company upgrades ammonia into other nitrogen products such as urea, UAN and AN.
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||
(dollars in millions, except per ton amounts) | |||||||||||||||
Net sales | $ | 531 | $ | 344 | $ | 2,286 | $ | 1,009 | |||||||
Cost of sales | 353 | 262 | 1,075 | 675 | |||||||||||
Gross margin | $ | 178 | $ | 82 | $ | 1,211 | $ | 334 | |||||||
Gross margin percentage | 33.5 | % | 23.8 | % | 53.0 | % | 33.1 | % | |||||||
Sales volume by product tons (000s) | 643 | 690 | 2,405 | 2,409 | |||||||||||
Sales volume by nutrient tons (000s)(1) | 528 | 566 | 1,973 | 1,976 | |||||||||||
Average selling price per product ton | $ | 826 | $ | 499 | $ | 951 | $ | 419 | |||||||
Average selling price per nutrient ton(1) | 1,006 | 608 | 1,159 | 511 | |||||||||||
Adjusted gross margin(2): | |||||||||||||||
Gross margin | $ | 178 | $ | 82 | $ | 1,211 | $ | 334 | |||||||
Depreciation and amortization | 35 | 41 | 119 | 138 | |||||||||||
Unrealized net mark-to-market loss (gain) on natural gas derivatives | 4 | (4 | ) | (6 | ) | (6 | ) | ||||||||
Adjusted gross margin | $ | 217 | $ | 119 | $ | 1,324 | $ | 466 | |||||||
Adjusted gross margin as a percent of net sales | 40.9 | % | 34.6 | % | 57.9 | % | 46.2 | % | |||||||
Gross margin per product ton | $ | 277 | $ | 119 | $ | 504 | $ | 139 | |||||||
Gross margin per nutrient ton(1) | 337 | 145 | 614 | 169 | |||||||||||
Adjusted gross margin per product ton | 337 | 172 | 551 | 193 | |||||||||||
Adjusted gross margin per nutrient ton(1) | 411 | 210 | 671 | 236 | |||||||||||
_______________________________________________________________________________ | |
(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 2022 to 2021 first nine months periods:
Ammonia sales volume for the first nine months of 2022 was similar to the first nine months of 2021.
Ammonia average selling prices increased for the first nine months of 2022 compared to 2021 due to decreased global supply availability, as higher global energy costs reduced global operating rates and geopolitical factors disrupted the global fertilizer supply chain.
Ammonia adjusted gross margin per ton increased for the first nine months of 2022 compared to 2021 due to higher average selling prices, partially offset by 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 September 30, | Nine months ended September 30, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||
(dollars in millions, except per ton amounts) | |||||||||||||||
Net sales | $ | 689 | $ | 386 | $ | 2,287 | $ | 1,218 | |||||||
Cost of sales | 394 | 200 | 1,024 | 705 | |||||||||||
Gross margin | $ | 295 | $ | 186 | $ | 1,263 | $ | 513 | |||||||
Gross margin percentage | 42.8 | % | 48.2 | % | 55.2 | % | 42.1 | % | |||||||
Sales volume by product tons (000s) | 1,262 | 860 | 3,539 | 3,272 | |||||||||||
Sales volume by nutrient tons (000s)(1) | 580 | 396 | 1,628 | 1,505 | |||||||||||
Average selling price per product ton | $ | 546 | $ | 449 | $ | 646 | $ | 372 | |||||||
Average selling price per nutrient ton(1) | 1,188 | 975 | 1,405 | 809 | |||||||||||
Adjusted gross margin(2): | |||||||||||||||
Gross margin | $ | 295 | $ | 186 | $ | 1,263 | $ | 513 | |||||||
Depreciation and amortization | 79 | 58 | 213 | 179 | |||||||||||
Unrealized net mark-to-market loss (gain) on natural gas derivatives | 4 | (3 | ) | (4 | ) | (5 | ) | ||||||||
Adjusted gross margin | $ | 378 | $ | 241 | $ | 1,472 | $ | 687 | |||||||
Adjusted gross margin as a percent of net sales | 54.9 | % | 62.4 | % | 64.4 | % | 56.4 | % | |||||||
Gross margin per product ton | $ | 234 | $ | 216 | $ | 357 | $ | 157 | |||||||
Gross margin per nutrient ton(1) | 509 | 470 | 776 | 341 | |||||||||||
Adjusted gross margin per product ton | 300 | 280 | |||||||||||||
