CF Industries Holdings, Inc. Reports First Nine Months 2023 Net Earnings of $1.25 Billion, Adjusted EBITDA of $2.17 Billion

Low Nitrogen Channel Inventories Drive Strong North American Demand

Favorable Energy Spreads Underpin Solid Results

DEERFIELD, Ill., November 01, 2023--(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, 2023.

Highlights

  • First nine months 2023 net earnings of $1.25 billion(1), or $6.42 per diluted share, EBITDA(2) of $2.15 billion, and adjusted EBITDA(2) of $2.17 billion

  • Third quarter 2023 net earnings of $164 million, or $0.85 per diluted share, EBITDA of $372 million, and adjusted EBITDA of $445 million

  • Trailing twelve months net cash from operating activities of $2.86 billion and free cash flow(3) of $1.96 billion

  • Agreement with POSCO Holdings, Inc., to evaluate a joint venture to construct a low-carbon clean ammonia plant at CF Industries’ Blue Point Complex in Ascension Parish, Louisiana, United States, along with long-term low-carbon clean ammonia offtake into South Korea

  • Repurchased 1.9 million shares for $150 million during the third quarter of 2023

"The CF Industries team continues to execute well," said Tony Will, president and chief executive officer, CF Industries Holdings, Inc. "Global nitrogen industry fundamentals remain favorable and forward energy curves suggest attractive margin opportunities for the foreseeable future. As a result, we expect to continue to drive strong cash generation, underpinning our ability to create long-term shareholder value through disciplined investments in growth opportunities and returning substantial capital to shareholders."

Nitrogen Market Outlook

During the third quarter of 2023, robust global demand along with lower production due to global turnaround activity and continued challenging natural gas fundamentals in key regions, such as Europe and Trinidad, tightened the global nitrogen-supply demand balance, supporting an increase in global nitrogen prices late in the quarter. Management expects demand through the end of 2023 and into 2024 to remain strong, led by India and Brazil.

In the near-term, global supply and demand dynamics will be driven largely by these key regions:

  • North America: Low channel inventories and favorable farm economics supported strong nitrogen demand in North America during the third quarter of 2023. Management believes that the North American inventory position at the end of the third quarter for all nitrogen products remained below average due to lower import levels and higher export volumes year-to-date.

  • India: Urea demand in India is expected to remain stable, underpinned by robust agricultural production. Management expects that India will tender for urea frequently through the end of 2023 to replenish urea stocks following increased sales in recent months, lower imports year-to-date, and reported production outages at new facilities during the third quarter.

  • Brazil: Demand for urea in Brazil is expected to be strong through its growing season supported by high planted corn acres and healthy farm incomes. Urea imports through year-end and into the first quarter of 2024 are expected to be strong in order to meet forecast demand as imports through September were 7% lower than the prior year.

  • Europe: Approximately 25% of ammonia and 20% of urea capacity were reported in shutdown/curtailment in Europe as of late third quarter 2023. Management believes that production economics in Europe will remain challenging in the fourth quarter of 2023 and first quarter of 2024 due to higher forecast natural gas prices in the region. The Company continues to expect ammonia capacity production rates to be below normal in the region for the foreseeable future, with a corresponding higher-than-normal level of nitrogen imports to the region, with some facilities continuing to favor importing ammonia in order to manufacture upgraded products.

  • China: Urea exports from China during the third quarter of 2023 were approximately 1.8 million metric tons due to a high level of participation in India’s August 2023 urea tender. Participation in future India urea tenders by Chinese producers is expected to be significantly lower as the Chinese government reinstated measures to limit urea exports following an increase in domestic urea prices.

  • Russia: Exports of ammonia from Russia continue to remain lower compared to prior years due to geopolitical disruptions arising from Russia’s invasion of Ukraine and the resulting closure of the ammonia pipeline from Russia to the port of Odessa in Ukraine. Exports of other nitrogen products from Russia are at pre-war levels, with product pushed to countries willing to purchase Russian fertilizer, including Brazil and the United States.

Longer-term, management expects the global nitrogen supply-demand balance will remain positive, underpinned by resilient agriculture-led demand and forward energy curves that indicate a steep cost curve. Energy differentials between North American producers and marginal producers in Europe and Asia remain well above historical levels. Forward energy curves continue to suggest that these wider differentials will persist for an extended period. As a result, the Company believes the global nitrogen cost curve will remain supportive of significant 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, 2023, the 12-month rolling average recordable incident rate was 0.51 incidents per 200,000 work hours.

Gross ammonia production for the first nine months and third quarter of 2023 was approximately 7.0 million and 2.2 million tons, respectively. The Company expects that gross ammonia production for 2023 will be in a range of 9.0-9.5 million tons following the permanent closure of the ammonia plant at the Company’s Billingham Complex in the U.K.

Financial Results Overview

First Nine Months 2023 Financial Results

For the first nine months of 2023, net earnings attributable to common stockholders were $1.25 billion, or $6.42 per diluted share, EBITDA was $2.15 billion, and adjusted EBITDA was $2.17 billion. These results compare to first nine months of 2022 net earnings attributable to common stockholders of $2.49 billion, or $12.04 per diluted share, EBITDA of $4.30 billion, and adjusted EBITDA of $4.58 billion.

Net sales in the first nine months of 2023 were $5.06 billion compared to $8.58 billion in the first nine months of 2022. Average selling prices for 2023 were lower than 2022 due to higher global supply availability as lower global energy costs led to increased global operating rates. Sales volumes in the first nine months of 2023 were higher compared to the first nine months of 2022 as higher urea ammonium nitrate (UAN) and ammonia sales volumes were partially offset by lower ammonium nitrate (AN) sales volumes.

Cost of sales for the first nine months of 2023 was lower compared to the first nine months of 2022 due primarily to lower realized natural gas costs.

The average cost of natural gas reflected in the Company’s cost of sales was $3.90 per MMBtu in the first nine months of 2023 compared to the average cost of natural gas in cost of sales of $7.28 per MMBtu in the first nine months of 2022.

Third Quarter 2023 Financial Results

For the third quarter of 2023, net earnings attributable to common stockholders were $164 million, or $0.85 per diluted share, EBITDA was $372 million, and adjusted EBITDA was $445 million. These results compare to third quarter of 2022 net earnings attributable to common stockholders of $438 million, or $2.18 per diluted share, EBITDA of $826 million, and adjusted EBITDA of $983 million.

Net sales in the third quarter of 2023 were $1.27 billion compared to $2.32 billion in 2022. Average selling prices for 2023 were lower than 2022 due to higher global supply availability as lower global energy costs led to increased global operating rates. Sales volumes in the third quarter of 2023 were higher than 2022 as higher UAN and ammonia sales volumes were partially offset by lower granular urea sales volumes.

Cost of sales for the third quarter of 2023 was lower compared to 2022 due primarily to lower realized natural gas costs.

The average cost of natural gas reflected in the Company’s cost of sales was $2.54 per MMBtu in the third quarter of 2023 compared to the average cost of natural gas in cost of sales of $8.35 per MMBtu in the third quarter of 2022.

Capital Management

Capital Expenditures

Capital expenditures in the third quarter and first nine months of 2023 were $147 million and $311 million, respectively. Management projects capital expenditures for full year 2023 will be in the range of $450-$500 million.

Share Repurchase Programs

The Company repurchased 5.0 million shares for $355 million during the first nine months of 2023, which included the repurchase of 1.9 million shares for $150 million during the third quarter of 2023.

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 2023 is approximately $66 million.

Strategic Initiatives

Agreement to Purchase Waggaman, Louisiana, Ammonia Production Complex

On March 20, 2023, CF Industries Holdings, Inc. announced that it had signed a definitive asset purchase agreement with Incitec Pivot, Ltd. (IPL) for its ammonia production complex located in Waggaman, Louisiana. Under the terms of the agreement, CF Industries will purchase the Waggaman ammonia plant and related assets for $1.675 billion, subject to adjustment. The companies will allocate $425 million of the purchase price to a long-term ammonia offtake agreement to IPL’s Dyno Nobel subsidiary. CF Industries expects to fund the remaining $1.25 billion of the purchase price, subject to adjustment, with cash on hand.

The transaction remains subject to the receipt of certain regulatory approvals and other customary closing conditions. Management expects the transaction to close on December 1, 2023.

Clean Energy Initiatives Updates

CF Industries continues to execute strategic initiatives focused on advancing its clean energy growth platform and achieving its decarbonization commitments. This includes producing ammonia with the corresponding carbon dioxide (CO2) byproduct removed through carbon capture and sequestration, producing ammonia using hydrogen generated through an electrolysis process, and other decarbonization initiatives.

  • CF Industries-POSCO Evaluation of U.S.-based Low-Carbon Clean Ammonia Production and Long-Term Low-Carbon Clean Ammonia Offtake into South Korea: On September 14, 2023, CF Industries and POSCO Holdings Inc. (POSCO), South Korea’s largest steelmaker as well as a leader in energy trading and power generation, announced that the companies are evaluating a joint venture to construct a low-carbon clean ammonia plant at CF Industries’ Blue Point Complex in Ascension Parish, Louisiana, United States, along with long-term low-carbon clean ammonia offtake into South Korea. As part of their evaluation, CF Industries and POSCO will initiate a front-end engineering and design (FEED) study on autothermal reforming (ATR) ammonia production technology. Should the project move forward, POSCO expects to import low-carbon clean ammonia from the facility to South Korea to support decarbonization of POSCO's own and third-party coal-based power generation facilities. Additionally, POSCO intends to convert low-carbon clean ammonia into hydrogen in order to use low-carbon hydrogen in gas-based power plants and in the steel-making process itself.

  • Memorandum of Understanding (MOU) with JERA Co., Inc.: On January 17, 2023, CF Industries announced that it had signed an MOU with JERA Co., Inc., regarding the supply of up to 500,000 metric tons per year of clean ammonia beginning in 2027. The companies are evaluating a range of potential supply options, including an equity investment alongside CF Industries to develop a clean ammonia facility in Louisiana and a supplementary long-term offtake agreement.

  • Proposed Joint Venture with Mitsui & Co., Ltd. at CF Industries’ Blue Point Complex: CF Industries and Mitsui & Co., Ltd. (Mitsui) continue to progress the FEED study, which is being conducted with thyssenkrupp UHDE, for their proposed joint venture to construct an export-oriented blue ammonia facility in Louisiana. CF Industries and Mitsui expect to complete the FEED study in the fourth quarter of 2023, with a final investment decision (FID) on the proposed facility to follow. Construction and commissioning of a new world-scale ammonia plant typically takes approximately 4 years from FID.

  • MOU with LOTTE CHEMICAL Corporation: On February 27, 2023, CF Industries announced that it had entered into an MOU with LOTTE CHEMICAL Corporation to assess the joint development of and investment in a greenfield clean ammonia production facility in the U.S. and quantify expected clean ammonia demand in South Korea.

  • Donaldsonville Complex Carbon Capture and Sequestration Project: Engineering activities for the construction of a dehydration and compression unit at the Donaldsonville Complex continue to advance, all major equipment for the facility has been procured, and fabrication of the CO2 compressors is proceeding. Once in service, the dehydration and compression unit will enable up to 2 million tons of captured process CO2 to be transported and stored by ExxonMobil. Start-up for the project is scheduled for 2025, at which point CF Industries will be able to produce significant volumes of low-carbon ammonia.

  • Donaldsonville Complex Green Ammonia Project: The Donaldsonville green ammonia project, which involves installing an electrolysis system at the Donaldsonville Complex to generate hydrogen from water that will then be supplied to existing ammonia plants to produce ammonia, continues to progress. Fabrication and delivery of most major equipment is complete and installation of the new electrolyzer unit is in progress. Once complete, the project will enable the Company to produce approximately 20,000 tons of green ammonia per year that will have no CO2 emissions from the production of hydrogen.

___________________________________________________

(1)

Certain items recognized during the first nine months and third quarter of 2023 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,

2023

2022

2023

2022

(dollars in millions, except per share and per MMBtu amounts)

Net sales

$

1,273

$

2,321

$

5,060

$

8,578

Cost of sales

896

1,405

3,016

3,973

Gross margin

$

377

$

916

$

2,044

$

4,605

Gross margin percentage

29.6

%

39.5

%

40.4

%

53.7

%

Net earnings attributable to common stockholders

$

164

$

438

$

1,251

$

2,486

Net earnings per diluted share

$

0.85

$

2.18

$

6.42

$

12.04

EBITDA(1)

$

372

$

826

$

2,151

$

4,296

Adjusted EBITDA(1)

$

445

$

983

$

2,168

$

4,584

Tons of product sold (000s)

4,745

4,408

14,218

13,867

Natural gas supplemental data (per MMBtu):

Natural gas costs in cost of sales(2)

$

2.53

$

8.50

$

3.43

$

7.36

Realized derivatives loss (gain) in cost of sales(3)

0.01

(0.15

)

0.47

(0.08

)

Cost of natural gas used for production in cost of sales

$

2.54

$

8.35

$

3.90

$

7.28

Average daily market price of natural gas Henry Hub (Louisiana)

$

2.58

$

7.96

$

2.46

$

6.66

Unrealized net mark-to-market loss (gain) on natural gas derivatives

$

7

$

11

$

(65

)

$

(39

)

Depreciation and amortization

$

213

$

221

$

640

$

652

Capital expenditures

$

147

$

190

$

311

$

319

Production volume by product tons (000s):

Ammonia(4)

2,238

2,283

6,971

7,366

Granular urea

1,081

1,187

3,414

3,418

UAN (32%)

1,749

1,381

5,012

4,879

AN

416

358

1,104

1,162

_______________________________________________________________________________

(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. Excludes unrealized mark-to-market gains and losses on natural gas derivatives.

(3)

Includes realized gains and losses on natural gas derivatives settled during the period.

(4)

Gross ammonia production, including amounts subsequently upgraded on-site into granular urea, UAN, or AN.

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,

2023

2022

2023

2022

(dollars in millions, except per ton amounts)

Net sales

$

235

$

531

$

1,184

$

2,286

Cost of sales

214

353

797

1,075

Gross margin

$

21

$

178

$

387

$

1,211

Gross margin percentage

8.9

%

33.5

%

32.7

%

53.0

%

Sales volume by product tons (000s)

764

643

2,469

2,405

Sales volume by nutrient tons (000s)(1)

627

528

2,025

1,973

Average selling price per product ton

$

308

$

826

$

480

$

951

Average selling price per nutrient ton(1)

375

1,006

585

1,159

Adjusted gross margin(2):

Gross margin

$

21

$

178

$

387

$

1,211

Depreciation and amortization

39

35

117

119

Unrealized net mark-to-market loss (gain) on natural gas derivatives

2

4

(19

)

(6

)

Adjusted gross margin

$

62

$

217

$

485

$

1,324

Adjusted gross margin as a percent of net sales

26.4

%

40.9

%

41.0

%

57.9

%

Gross margin per product ton

$

27

$

277

$

157

$

504

Gross margin per nutrient ton(1)

33

337

191

614

Adjusted gross margin per product ton

81

337

196

551

Adjusted gross margin per nutrient ton(1)

99

411

240

671

_______________________________________________________________________________

(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 the first nine months of 2023 to the first nine months of 2022:

  • Ammonia sales volume for 2023 increased compared to 2022 due to greater supply availability from higher starting inventory.

  • Ammonia average selling prices decreased for 2023 compared to 2022 due to higher global supply availability as lower global energy costs led to increased global operating rates.

  • Ammonia adjusted gross margin per ton decreased for 2023 compared to 2022 due primarily 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.

Three months ended

September 30,

Nine months ended

September 30,

2023

2022

2023

2022

(dollars in millions, except per ton amounts)

Net sales

$

360

$

689

$

1,431

$

2,287

Cost of sales

226

394

775

1,024

Gross margin

$

134

$

295

$

656

$

1,263

Gross margin percentage

37.2

%

42.8

%

45.8

%

55.2

%

Sales volume by product tons (000s)

1,062

1,262

3,532

3,539

Sales volume by nutrient tons (000s)(1)

488

580

1,625

1,628

Average selling price per product ton

$

339

$

546

$

405

$

646

Average selling price per nutrient ton(1)

738

1,188

881

1,405

Adjusted gross margin(2):

Gross margin

$

134

$

295

$

656

$

1,263

Depreciation and amortization

66

79

216

213

Unrealized net mark-to-market loss (gain) on natural gas derivatives

2

4

(18

)

(4

)

Adjusted gross margin

$

202

$

378

$

854

$

1,472

Adjusted gross margin as a percent of net sales

56.1

%

54.9

%

59.7

%

64.4

%

Gross margin per product ton

$

126

$

234

$

186

$

357

Gross margin per nutrient ton(1)

275

509

404

776

Adjusted gross margin per product ton

190

300

242

416

Adjusted gross margin per nutrient ton(1)

414

652

526

904

_______________________________________________________________________________

(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 the first nine months of 2023 to the first nine months of 2022:

  • Granular urea sales volumes for 2023 approximated 2022 sales volumes.

  • Urea average selling prices decreased for 2023 compared to 2022 due to higher global supply availability as lower global energy costs led to increased global operating rates and new urea capacity came online.

  • Granular urea adjusted gross margin per ton decreased for 2023 compared to 2022 due primarily 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.

Three months ended

September 30,

Nine months ended

September 30,

2023

2022

2023

2022

(dollars in millions, except per ton amounts)

Net sales

$

435

$

736

$

1,650

$

2,727

Cost of sales

302

414

937

1,102

Gross margin

$

133

$

322

$

713

$

1,625

Gross margin percentage

30.6

%

43.8

%

43.2

%

59.6

%

Sales volume by product tons (000s)

1,954

1,644

5,425

5,098

Sales volume by nutrient tons (000s)(1)

616

519

1,710

1,610

Average selling price per product ton

$

223

$

448

$

304

$

535

Average selling price per nutrient ton(1)

706

1,418

965

1,694

Adjusted gross margin(2):

Gross margin

$

133

$

322

$

713

$

1,625

Depreciation and amortization

78

73

214

208

Unrealized net mark-to-market loss (gain) on natural gas derivatives

3

4

(18

)

(4

)

Adjusted gross margin

$

214

$

399

$

909

$

1,829

Adjusted gross margin as a percent of net sales

49.2

%

54.2

%

55.1

%

67.1

%

Gross margin per product ton

$

68

$

196

$

131

$

319

Gross margin per nutrient ton(1)

216

620

417

1,009

Adjusted gross margin per product ton

110

243

168

359

Adjusted gross margin per nutrient ton(1)

347

769

532

1,136

_______________________________________________________________________________

(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 the first nine months of 2023 to the first nine months of 2022:

  • UAN sales volumes for 2023 increased compared to 2022 sales volumes due to higher supply availability from higher production.

  • UAN average selling prices decreased for 2023 compared to 2022 due to higher global supply availability as lower global energy costs led to increased global operating rates.

  • UAN adjusted gross margin per ton decreased for 2023 compared to 2022 due primarily 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.

Three months ended

September 30,

Nine months ended

September 30,

2023

2022

2023

2022

(dollars in millions, except per ton amounts)

Net sales

$

114

$

180

$

377

$

656

Cost of sales

79

136

264

458

Gross margin

$

35

$

44

$

113

$

198

Gross margin percentage

30.7

%

24.4

%

30.0

%

30.2

%

Sales volume by product tons (000s)

414

363

1,157

1,227

Sales volume by nutrient tons (000s)(1)

141

124

396

419

Average selling price per product ton

$

275

$

496

$

326

$

535

Average selling price per nutrient ton(1)

809

1,452

952

1,566

Adjusted gross margin(2):

Gross margin

$

35

$

44

$

113

$

198

Depreciation and amortization

13

14

36

48

Unrealized net mark-to-market gain on natural gas derivatives

(1

)

(3

)

(18

)

Adjusted gross margin

$

48

$

57

$

146

$

228

Adjusted gross margin as a percent of net sales

42.1

%

31.7

%

38.7

%

34.8

%

Gross margin per product ton

$

85

$

121

$

98

$

161

Gross margin per nutrient ton(1)

248

355

285

473

Adjusted gross margin per product ton

116

157

126

186

Adjusted gross margin per nutrient ton(1)

340

460

369

544

_______________________________________________________________________________

(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 the first nine months of 2023 to the first nine months of 2022:

  • AN sales volume for 2023 decreased compared to 2022 due to lower supply availability from lower production.

  • AN average selling prices for 2023 decreased compared to 2022 due to higher global supply availability as lower global energy costs led to increased global operating rates.

  • AN adjusted gross margin per ton decreased for 2023 compared to 2022 due to lower average selling prices partially offset by the impact of using lower-cost imported ammonia for AN production in the U.K. and lower realized natural gas costs in North America.

Other Segment

CF Industries’ Other segment includes diesel exhaust fluid (DEF), urea liquor and nitric acid. The Company previously produced compound fertilizers (NPKs) only at its Ince manufacturing facility and closure of this facility has resulted in the discontinuation of this product line.

Three months ended

September 30,

Nine months ended

September 30,

2023

2022

2023

2022

(dollars in millions, except per ton amounts)

Net sales

$

129

$

185

$

418

$

622

Cost of sales

75

108

243

314

Gross margin

$

54

$

77

$

175

$

308

Gross margin percentage

41.9

%

41.6

%

41.9

%

49.5

%

Sales volume by product tons (000s)

551

496

1,635

1,598

Sales volume by nutrient tons (000s)(1)

108

99

321

313

Average selling price per product ton

$

234

$

373

$

256

$

389

Average selling price per nutrient ton(1)

1,194

1,869

1,302

1,987

Adjusted gross margin(2):

Gross margin

$

54

$

77

$

175

$

308

Depreciation and amortization

15

17

48

53

Unrealized net mark-to-market gain on natural gas derivatives

(7

)

(7

)

Adjusted gross margin

$

69

$

94

$

216

$

354

Adjusted gross margin as a percent of net sales

53.5

%

50.8

%

51.7

%

56.9

%

Gross margin per product ton

$

98

$

155

$

107

$

193

Gross margin per nutrient ton(1)

500

778

545

984

Adjusted gross margin per product ton

125

190

132

222

Adjusted gross margin per nutrient ton(1)

639

949

673

1,131

_______________________________________________________________________________

(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 the first nine months of 2023 to the first nine months of 2022:

  • Other sales volume for 2023 increased compared to 2022 sales volumes due primarily to higher DEF sales volumes partially offset by lower urea liquor sales volumes.

  • Other average selling prices for 2023 decreased compared to 2022 due to higher global supply availability as lower global energy costs led to increased global operating rates.

  • Other adjusted gross margin per ton decreased for 2023 compared to 2022 due primarily to lower average selling prices partially offset by lower realized natural gas costs.

Dividend Payment

On October 17, 2023, CF Industries’ Board of Directors declared a quarterly dividend of $0.40 per common share. The dividend will be paid on November 30, 2023 to stockholders of record as of November 15, 2023.

Conference Call

CF Industries will hold a conference call to discuss its nine month and third quarter 2023 results at 11:00 a.m. ET on Thursday, November 2, 2023. 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. With our employees 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 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 the financing, synergies and other benefits, and other aspects of the proposed transactions with Incitec Pivot Limited ("IPL"), 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 risk that regulatory approvals required for the proposed transactions with IPL are not obtained or that required approvals delay the transactions or cause the parties to abandon the transactions; the risk that other conditions to the closing of the proposed transactions with IPL are not satisfied; risks and uncertainties arising from the length of time necessary to consummate the proposed transactions with IPL and the possibility that the proposed transactions with IPL may be delayed or may not occur; the risk of obstacles to realization of the benefits of the proposed transactions with IPL; the risk that the synergies from the proposed transactions with IPL may not be fully realized or may take longer to realize than expected; the risk that the pendency or completion of the proposed transactions with IPL, including integration of the Waggaman ammonia production complex into the Company’s operations, disrupt current operations or harm relationships with customers, employees and suppliers; the risk that integration of the Waggaman ammonia production complex with the Company’s current operations will be more costly or difficult than expected or may otherwise be unsuccessful; diversion of management time and attention to issues relating to the proposed transactions with IPL; unanticipated costs or liabilities associated with the IPL transactions; 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 nitrogen 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, including the influence of governmental policies and technological developments on the demand for our fertilizer products; the volatility of natural gas prices in North America and the United Kingdom; weather conditions and the impact of adverse weather events; 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; the Company’s reliance on a limited number of key facilities; risks associated with cybersecurity; 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 management 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 ammonia projects; risks associated with expansions of the Company’s business, including unanticipated adverse consequences and the significant resources that could be required; and 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.

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

September 30,

Nine months ended

September 30,

2023

2022

2023

2022

(in millions, except per share amounts)

Net sales

$

1,273

$

2,321

$

5,060

$

8,578

Cost of sales

896

1,405

3,016

3,973

Gross margin

377

916

2,044

4,605

Selling, general and administrative expenses

68

66

213

203

U.K. long-lived and intangible asset impairment

87

239

U.K. operations restructuring

5

8

7

18

Transaction costs

11

27

Other operating—net

13

25

(19

)

33

Total other operating costs and expenses

97

186

228

493

Equity in (losses) earnings of operating affiliate

(36

)

20

(12

)

74

Operating earnings

244

750

1,804

4,186

Interest expense

39

46

115

369

Interest income

(45

)

(12

)

(115

)

(56

)

Loss on debt extinguishment

8

Other non-operating—net

(3

)

23

(8

)

24

Earnings before income taxes

253

693

1,812

3,841

Income tax provision

23

155

326

913

Net earnings

230

538

1,486

2,928

Less: Net earnings attributable to noncontrolling interest

66

100

235

442

Net earnings attributable to common stockholders

$

164

$

438

$

1,251

$

2,486

Net earnings per share attributable to common stockholders:

Basic

$

0.85

$

2.19

$

6.44

$

12.09

Diluted

$

0.85

$

2.18

$

6.42

$

12.04

Weighted-average common shares outstanding:

Basic

192.4

200.2

194.4

205.6

Diluted

192.9

200.9

194.9

206.5

CF INDUSTRIES HOLDINGS, INC.

SELECTED FINANCIAL INFORMATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

September 30,
2023

December 31,
2022

(in millions)

Assets

Current assets:

Cash and cash equivalents

$

3,254

$

2,323

Accounts receivable—net

417

582

Inventories

318

474

Prepaid income taxes

147

215

Other current assets

54

79

Total current assets

4,190

3,673

Property, plant and equipment—net

6,156

6,437

Investment in affiliate

32

74

Goodwill

2,089

2,089

Operating lease right-of-use assets

277

254

Other assets

799

786

Total assets

$

13,543

$

13,313

Liabilities and Equity

Current liabilities:

Accounts payable and accrued expenses

$

497

$

575

Income taxes payable

20

3

Customer advances

282

229

Current operating lease liabilities

101

93

Other current liabilities

26

95

Total current liabilities

926

995

Long-term debt

2,967

2,965

Deferred income taxes

882

958

Operating lease liabilities

179

167

Other liabilities

288

375

Equity:

Stockholders’ equity

5,723

5,051

Noncontrolling interest

2,578

2,802

Total equity

8,301

7,853

Total liabilities and equity

$

13,543

$

13,313

CF INDUSTRIES HOLDINGS, INC.

SELECTED FINANCIAL INFORMATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

Three months ended

September 30,

Nine months ended

September 30,

2023

2022

2023

2022

(in millions)

Operating Activities:

Net earnings

$

230

$

538

$

1,486

$

2,928

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization

213

221

640

652

Deferred income taxes

(20

)

(7

)

(73

)

(7

)

Stock-based compensation expense

10

10

29

32

Loss on debt extinguishment

8

Unrealized net loss (gain) on natural gas derivatives

7

11

(65

)

(39

)

Impairment of equity method investment in PLNL

43

43

U.K. long-lived and intangible asset impairment

87

239

Pension settlement loss

24

24

Gain on sale of emission credits

(3

)

(3

)

(39

)

(6

)

Loss on disposal of property, plant and equipment

3

1

4

1

Undistributed earnings of affiliate—net of taxes

(2

)

(7

)

(2

)

(10

)

Changes in:

Accounts receivable—net

(33

)

(6

)

165

(245

)

Inventories

(10

)

(32

)

130

(131

)

Accrued and prepaid income taxes

(109

)

(180

)

57

(168

)

Accounts payable and accrued expenses

22

(112

)

(116

)

111

Customer advances

273

440

53

(188

)

Other—net

(6

)

5

(35

)

69

Net cash provided by operating activities

618

990

2,277

3,270

Investing Activities:

Additions to property, plant and equipment

(147

)

(190

)

(311

)

(319

)

Proceeds from sale of property, plant and equipment

1

1

Distributions received from unconsolidated affiliate

4

Purchase of investments held in nonqualified employee benefit trust

(1

)

Proceeds from sale of investments held in nonqualified employee benefit trust

1

Purchase of emission credits

(9

)

Proceeds from sale of emission credits

3

3

39

15

Net cash used in investing activities

(144

)

(187

)

(271

)

(308

)

CF INDUSTRIES HOLDINGS, INC.

SELECTED FINANCIAL INFORMATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited) (continued)

Three months ended

September 30,

Nine months ended

September 30,

2023

2022

2023

2022

(in millions)

Financing Activities:

Payments of long-term borrowings

(507

)

Financing fees

(4

)

Dividends paid

(77

)

(80

)

(235

)

(227

)

Distributions to noncontrolling interest

(204

)

(372

)

(459

)

(619

)

Purchases of treasury stock

(150

)

(519

)

(355

)

(1,096

)

Proceeds from issuances of common stock under employee stock plans

5

1

106

Cash paid for shares withheld for taxes

(22

)

(23

)

Net cash used in financing activities

(431

)

(966

)

(1,070

)

(2,370

)

Effect of exchange rate changes on cash and cash equivalents

(8

)

(15

)

(5

)

(28

)

Increase (decrease) in cash and cash equivalents

35

(178

)

931

564

Cash and cash equivalents at beginning of period

3,219

2,370

2,323

1,628

Cash and cash equivalents at end of period

$

3,254

$

2,192

$

3,254

$

2,192

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

September 30,

2023

2022

(in millions)

Net cash provided by operating activities(1)

$

2,862

$

4,750

Capital expenditures

(445

)

(451

)

Distributions to noncontrolling interest

(459

)

(619

)

Free cash flow(1)

$

1,958

$

3,680

_______________________________________________________________________________

(1)

For the twelve months ended September 30, 2023 and 2022, net cash provided by operating activities and free cash flow includes the impact of $344 million and $147 million, respectively, in tax and interest payments made to Canadian tax authorities in relation to an arbitration decision covering tax years 2006 through 2011 and transfer pricing positions between Canada and the United States for open years 2012 and after. The Company has filed amended tax returns in the U.S. seeking refunds of related taxes paid.

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 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

September 30,

Nine months ended

September 30,

2023

2022

2023

2022

(in millions)

Net earnings

$

230

$

538

$

1,486

$

2,928

Less: Net earnings attributable to noncontrolling interest

(66

)

(100

)

(235

)

(442

)

Net earnings attributable to common stockholders.

164

438

1,251

2,486

Interest (income) expense—net

(6

)

34

313

Income tax provision

23

155

326

913

Depreciation and amortization

213

221

640

652

Less other adjustments:

Depreciation and amortization in noncontrolling interest

(21

)

(21

)

(63

)

(65

)