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CF Industries Holdings, Inc. Reports Full Year 2019 Net Earnings of $493 Million, EBITDA of $1,620 Million

Strong Safety Focus and Operational Performance Drive Solid Results
Net Cash from Operating Activities of $1.5 Billion
Positive Outlook for North American Spring Demand and Longer-Term Industry Fundamentals

CF Industries Holdings, Inc. (NYSE: CF), a leading global fertilizer and chemical company, today announced results for its fourth quarter and year ended December 31, 2019.

Highlights

  • Full year net earnings of $493 million(1), or $2.23 per diluted share; EBITDA(2) of $1,620 million; adjusted EBITDA(2) of $1,610 million
  • Fourth quarter net earnings of $55 million(1), or $0.25 per diluted share; EBITDA of $306 million; adjusted EBITDA of $325 million
  • Full year net cash from operating activities of $1,505 million, free cash flow(3) of $915 million
  • Lowest year-end 12-month rolling average recordable incident rate in company’s history
  • Set company record for quarterly gross ammonia production in fourth quarter
  • Redeemed $750 million in debt, lowering long-term debt to $4.0 billion
  • Repurchased 1.9 million shares during the quarter

Overview of Results

CF Industries Holdings, Inc. today announced full year 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. These results compare to the full year 2018 net earnings attributable to common stockholders of $290 million, or $1.24 per diluted share; EBITDA of $1,429 million; and adjusted EBITDA of $1,403 million.

For the fourth quarter of 2019, net earnings attributable to common stockholders were $55 million, or $0.25 per diluted share; EBITDA was $306 million; and adjusted EBITDA was $325 million. These results compare to fourth quarter 2018 net earnings attributable to common stockholders of $49 million, or $0.21 per diluted share; EBITDA of $349 million; and adjusted EBITDA of $341 million.

"The CF team executed exceptionally well in 2019, achieving our lowest year-end recordable incident rate ever and delivering a 15 percent increase in adjusted EBITDA compared to 2018," said Tony Will, president and chief executive officer, CF Industries Holdings, Inc. "Our 2019 performance and our position on the low-end of the global nitrogen cost curve enabled us to generate more than $900 million in free cash flow, strengthen our balance sheet and increase shareholder participation in the underlying business. As a result, we delivered a one-year total shareholder return of 13 percent, which was the top performance in our fertilizer peer group."

________________________________________________________________

(1)

Certain items recognized during the full year and fourth quarter of 2019 impacted our financial results and their comparability to the prior year periods. 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 interests. See reconciliation of free cash flow to the most directly comparable GAAP measure in the table accompanying this release.

Operations Overview

CF Industries continued to operate safely and efficiently. As of December 31, 2019, the company’s 12-month rolling average recordable incident rate was 0.48 incidents per 200,000 work hours.

Gross ammonia production for the full year 2019 was approximately 10.2 million tons, and for the fourth quarter was approximately 2.7 million tons.

Sales Overview

Net sales for the full year of 2019 were $4.6 billion compared to $4.4 billion in 2018 due primarily to higher average selling prices across most major products. Net sales in the fourth quarter of 2019 were lower than the fourth quarter of 2018 due to lower selling prices across all major products compared to the prior year period, partially offset by higher sales volumes.

Total sales volumes for full year 2019 were comparable to both full year 2018 and 2017. Sales volumes for the fourth quarter of 2019 were higher compared to the prior year period due to higher ammonia and ammonium nitrate (AN) sales, partially offset by lower granular urea sales.

Average selling prices for the full year of 2019 were higher year-over-year across most major products due to a tighter global nitrogen supply and demand balance than the prior year period and logistical issues in North America that limited supply at some inland locations during the spring application season. Average selling prices for the fourth quarter of 2019 were lower than the fourth quarter of 2018 across all major products due to greater global supply availability as a result of higher global operating rates driven by lower global energy costs.

Cost of sales for the full year of 2019 and the fourth quarter of 2019 decreased compared to the prior year period primarily due to lower realized natural gas costs, partially offset by higher maintenance costs.

In 2019, the average cost of natural gas reflected in the company’s cost of sales was $2.74 per MMBtu compared to the average cost of natural gas in cost of sales of $3.16 per MMBtu in 2018. In the fourth quarter of 2019, the average cost of natural gas reflected in the company’s cost of sales was $2.36 per MMBtu compared to the average cost of natural gas in cost of sales of $3.24 per MMBtu in the fourth quarter of 2018.

Market Overview

CF believes that near-term global nitrogen demand will be positive as application seasons develop in different regions of the world. In North America, crop futures combined with an expected return to traditional planting conditions in North America continue to support an increase in nitrogen-consuming planted corn and coarse grain acres in 2020 compared to 2019.

Demand in India is expected to remain strong in 2020. In 2019, India tendered for a record 7.4 million metric tons of urea due to favorable growing conditions and strong consumption in the country. A new tender is expected in late March or early April. Urea tender volumes in India in 2020 may ease from 2019’s record high based on growing conditions and whether new domestic urea capacity increases total production, which has been affected by significant outages in existing facilities. Demand for urea in Brazil is expected to be positive in 2020, supported by lower domestic urea production.

Longer-term, the company expects that the global nitrogen market will tighten as industry fundamentals underpinning the global nitrogen cost curve continue to improve.

CF projects that global demand growth for nitrogen over the next four years will outpace net capacity additions given the limited number of facilities currently under construction around the world. The company also expects Chinese coal-based nitrogen complexes to remain the global marginal urea producer and thus set the global price. Net Chinese-produced urea exports are likely to be in a range of 2-3 million metric tons annually, with additional Chinese export tons possible if urea supply is needed worldwide and global nitrogen prices support positive margins for Chinese marginal urea producers.

Producers in North America are expected to remain on the low-end of the global cost curve due to access to low-cost North American natural gas. Forward energy curves suggest the cost advantage per metric ton of urea for North American producers should remain well over $100 compared to Chinese anthracite-coal based producers.

Capital Expenditures

Capital expenditures for the full year 2019 were $404 million. Capital expenditures in 2020 are estimated to be in the range of approximately $400 to $450 million.

Liquidity

As of December 31, 2019, the company had cash and cash equivalents of $287 million on the balance sheet, had no borrowings outstanding under its $750 million revolving credit facility and was in compliance with all applicable covenant requirements under its debt instruments.

The company is currently executing a $1 billion share repurchase program that is authorized through 2021. During the fourth quarter of 2019, the company repurchased approximately 1.9 million shares for $87 million. From February 2019, when the share repurchase authorization was announced, through December 31, 2019, the company has repurchased approximately 7.6 million shares for $337 million.

On November 13, 2019, the company completed the redemption of all of the $500 million outstanding principal amount of its 7.125% Senior Notes due May 2020. Additionally, on December 13, 2019, the company redeemed $250 million principal amount, representing 50% of the $500 million outstanding principal amount, of its 3.400% Senior Secured Notes due December 2021. As a result, the aggregate principal amount of CF Industries Holdings, Inc.'s outstanding long-term indebtedness was $4.0 billion at the end of 2019.

CHS Inc. Distribution

On January 31, 2020, the Board of Managers of CF Industries Nitrogen, LLC (CFN) approved a semi-annual distribution payment to CHS Inc. (CHS) of $88 million for the distribution period ended December 31, 2019. The distribution was paid on January 31, 2020. The total distribution to CHS pertaining to 2019 was approximately $188 million.

Consolidated Results

 

Three months ended
December 31,

 

Year ended
December 31,

 

2019

 

2018

 

2019

 

2018

 

(dollars in millions, except per share

and per MMBtu amounts)

Net sales

$

1,049

 

 

$

1,132

 

 

$

4,590

 

 

$

4,429

 

Cost of sales

822

 

 

890

 

 

3,416

 

 

3,512

 

Gross margin

$

227

 

 

$

242

 

 

$

1,174

 

 

$

917

 

Gross margin percentage

21.6

%

 

21.4

%

 

25.6

%

 

20.7

%

 

 

 

 

 

 

 

 

Net earnings attributable to common stockholders

$

55

 

 

$

49

 

 

$

493

 

 

$

290

 

Net earnings per diluted share

$

0.25

 

 

$

0.21

 

 

$

2.23

 

 

$

1.24

 

 

 

 

 

 

 

 

 

EBITDA(1)

$

306

 

 

$

349

 

 

$

1,620

 

 

$

1,429

 

Adjusted EBITDA(1)

$

325

 

 

$

341

 

 

$

1,610

 

 

$

1,403

 

 

 

 

 

 

 

 

 

Tons of product sold (000s)

4,983

 

 

4,723

 

 

19,538

 

 

19,329

 

 

 

 

 

 

 

 

 

Supplemental data (per MMBtu):

 

 

 

 

 

 

 

Natural gas costs in cost of sales(2)

$

2.37

 

 

$

3.30

 

 

$

2.75

 

 

$

3.15

 

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

(0.01

)

 

(0.06

)

 

(0.01

)

 

0.01

 

Cost of natural gas in cost of sales

$

2.36

 

 

$

3.24

 

 

$

2.74

 

 

$

3.16

 

 

 

 

 

 

 

 

 

Average daily market price of natural gas (per MMBtu):

 

 

 

 

 

 

 

Henry Hub

$

2.34

 

 

$

3.74

 

 

$

2.51

 

 

$

3.12

 

National Balancing Point UK

$

4.08

 

 

$

8.35

 

 

$

4.44

 

 

$

8.07

 

 

 

 

 

 

 

 

 

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

$

11

 

 

$

(2

)

 

$

14

 

 

$

(13

)

Depreciation and amortization

$

212

 

 

$

221

 

 

$

875

 

 

$

888

 

Capital expenditures

$

107

 

 

$

144

 

 

$

404

 

 

$

422

 

 

 

 

 

 

 

 

 

Production volume by product tons (000s):

 

 

 

 

 

 

 

Ammonia(4)

2,682

 

 

2,381

 

 

10,246

 

 

9,805

 

Granular urea

1,105

 

 

1,162

 

 

4,941

 

 

4,837

 

UAN (32%)

1,958

 

 

1,946

 

 

6,768

 

 

6,903

 

AN

543

 

 

376

 

 

2,128

 

 

1,731

 

_______________________________________________________________________________

(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 and related transportation that is included in cost of sales during the period under the first-in, first-out inventory cost method.

(3)

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.

(4)

Gross ammonia production, including amounts subsequently upgraded into other products.

Ammonia Segment

CF Industries’ ammonia segment produces anhydrous ammonia (ammonia), which is the company’s most concentrated form of nitrogen, containing 82 percent nitrogen. The results of the ammonia segment consist of sales of ammonia to external customers. In addition, ammonia is the "basic" nitrogen form that the company upgrades into other nitrogen products such as urea, UAN and AN.

 

Three months ended
December 31,

 

Year ended
December 31,

 

2019

 

2018

 

2019

 

2018

 

(dollars in millions,

except per ton amounts)

Net sales

$

266

 

 

$

250

 

 

$

1,113

 

 

$

1,028

 

Cost of sales

224

 

 

226

 

 

878

 

 

867

 

Gross margin

$

42

 

 

$

24

 

 

$

235

 

 

$

161

 

Gross margin percentage

15.8

%

 

9.6

%

 

21.1

%

 

15.7

%

 

 

 

 

 

 

 

 

Sales volume by product tons (000s)

968

 

 

720

 

 

3,516

 

 

3,135

 

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

795

 

 

590

 

 

2,884

 

 

2,571

 

 

 

 

 

 

 

 

 

Average selling price per product ton

$

275

 

 

$

347

 

 

$

317

 

 

$

328

 

Average selling price per nutrient ton(1)

335

 

 

424

 

 

386

 

 

400

 

 

 

 

 

 

 

 

 

Adjusted gross margin(2):

 

 

 

 

 

 

 

Gross margin

$

42

 

 

$

24

 

 

$

235

 

 

$

161

 

Depreciation and amortization

44

 

 

45

 

 

167

 

 

155

 

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

3

 

 

(1

)

 

4

 

 

(4

)

Adjusted gross margin

$

89

 

 

$

68

 

 

$

406

 

 

$

312

 

Adjusted gross margin as a percent of net sales

33.5

%

 

27.2

%

 

36.5

%

 

30.4

%

 

 

 

 

 

 

 

 

Gross margin per product ton

$

43

 

 

$

33

 

 

$

67

 

 

$

51

 

Gross margin per nutrient ton(1)

53

 

 

41

 

 

81

 

 

63

 

Adjusted gross margin per product ton

92

 

 

94

 

 

115

 

 

100

 

Adjusted gross margin per nutrient ton(1)

112

 

 

115

 

 

141

 

 

121

 

_______________________________________________________________________________

(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. The company has presented adjusted gross margin, adjusted gross margin as a percent of net sales and adjusted gross margin per product ton and per nutrient 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. 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 2019 to 2018 full year and fourth quarter periods:

  • Ammonia sales volume increased for the full year and fourth quarter of 2019 compared to 2018 due to greater supply availability as a result of increased production.
  • Ammonia average selling prices decreased for the full year and fourth quarter of 2019 compared to 2018 due to increased global ammonia supply availability as a result of higher global operating rates driven by lower global energy costs.
  • Ammonia adjusted gross margin per ton increased for the full year 2019 compared to 2018 due primarily to lower realized natural gas costs and lower costs related to plant turnarounds and maintenance, partially offset by lower average selling prices. Ammonia adjusted gross margin per ton was similar for the fourth quarter of 2019 compared to 2018.

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
December 31,

 

Year ended
December 31,

 

2019

 

2018

 

2019

 

2018

 

(dollars in millions,

except per ton amounts)

Net sales

$

239

 

 

$

345

 

 

$

1,342

 

 

$

1,322

 

Cost of sales

175

 

 

207

 

 

861

 

 

889

 

Gross margin

$

64

 

 

$

138

 

 

$

481

 

 

$

433

 

Gross margin percentage

26.8

%

 

40.0

%

 

35.8

%

 

32.8

%

 

 

 

 

 

 

 

 

Sales volume by product tons (000s)

969

 

 

1,119

 

 

4,849

 

 

4,898

 

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

446

 

 

515

 

 

2,231

 

 

2,253

 

 

 

 

 

 

 

 

 

Average selling price per product ton

$

247

 

 

$

308

 

 

$

277

 

 

$

270

 

Average selling price per nutrient ton(1)

536

 

 

670

 

 

602

 

 

587

 

 

 

 

 

 

 

 

 

Adjusted gross margin(2):

 

 

 

 

 

 

 

Gross margin

$

64

 

 

$

138

 

 

$

481

 

 

$

433

 

Depreciation and amortization

53

 

 

62

 

 

264

 

 

276

 

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

3

 

 

(1

)

 

4

 

 

(4

)

Adjusted gross margin

$

120

 

 

$

199

 

 

$

749

 

 

$

705

 

Adjusted gross margin as a percent of net sales

50.2

%

 

57.7

%

 

55.8

%

 

53.3

%

 

 

 

 

 

 

 

 

Gross margin per product ton

$

66

 

 

$

123

 

 

$

99

 

 

$

88

 

Gross margin per nutrient ton(1)

143

 

 

268

 

 

216

 

 

192

 

Adjusted gross margin per product ton

124

 

 

178

 

 

154

 

 

144

 

Adjusted gross margin per nutrient ton(1)

269

 

 

386

 

 

336

 

 

313

 

_______________________________________________________________________________

(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. The company has presented adjusted gross margin, adjusted gross margin as a percent of net sales and adjusted gross margin per product ton and per nutrient 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. 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 2019 to 2018 full year and fourth quarter periods:

  • Granular urea sales volume for the full year 2019 was similar to 2018. Granular urea sales volume decreased for the fourth quarter of 2019 compared to 2018 due to lower volumes of product available for sale as a result of planned maintenance activities and the company’s decision to build inventory in advance of the spring fertilizer application season.
  • Urea average selling prices increased for the full year 2019 compared to 2018 due primarily to a tighter nitrogen supply and demand balance than the prior year period and logistical issues in North America that limited supply at some inland locations during the spring application season. Urea average selling prices decreased in the fourth quarter of 2019 compared to 2018 due to greater global supply availability as a result of higher global operating rates driven by lower global energy costs.
  • Granular urea adjusted gross margin per ton increased for the full year 2019 compared to 2018 due to higher average selling prices and lower realized natural gas costs. Granular urea adjusted gross margin per ton decreased for the fourth quarter of 2019 compared to 2018 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.

 

Three months ended
December 31,

 

Year ended
December 31,

 

2019

 

2018

 

2019

 

2018

 

(dollars in millions,

except per ton amounts)

Net sales

$

336

 

 

$

342

 

 

$

1,270

 

 

$

1,234

 

Cost of sales

259

 

 

276

 

 

981

 

 

1,007

 

Gross margin

$

77

 

 

$

66

 

 

$

289

 

 

$

227

 

Gross margin percentage

22.9

%

 

19.3

%

 

22.8

%

 

18.4

%

 

 

 

 

 

 

 

 

Sales volume by product tons (000s)

1,927

 

 

1,933

 

 

6,807

 

 

7,042

 

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

607

 

 

610

 

 

2,144

 

 

2,225

 

 

 

 

 

 

 

 

 

Average selling price per product ton

$

174

 

 

$

177

 

 

$

187

 

 

$

175

 

Average selling price per nutrient ton(1)

554

 

 

561

 

 

592

 

 

555

 

 

 

 

 

 

 

 

 

Adjusted gross margin(2):

 

 

 

 

 

 

 

Gross margin

$

77

 

 

$

66

 

 

$

289

 

 

$

227

 

Depreciation and amortization

68

 

 

70

 

 

251

 

 

270

 

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

3

 

 

 

 

4

 

 

(4

)

Adjusted gross margin

$

148

 

 

$

136

 

 

$

544

 

 

$

493

 

Adjusted gross margin as a percent of net sales

44.0

%

 

39.8

%

 

42.8

%

 

40.0

%

 

 

 

 

 

 

 

 

Gross margin per product ton

$

40

 

 

$

34

 

 

$

42

 

 

$

32

 

Gross margin per nutrient ton(1)

127

 

 

108

 

 

135

 

 

102

 

Adjusted gross margin per product ton

77

 

 

70

 

 

80

 

 

70

 

Adjusted gross margin per nutrient ton(1)

244

 

 

223

 

 

254

 

 

222

 

_______________________________________________________________________________

(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. The company has presented adjusted gross margin, adjusted gross margin as a percent of net sales and adjusted gross margin per product ton and per nutrient 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. 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 2019 to 2018 full year and fourth quarter periods:

  • UAN sales volume for the full year 2019 decreased compared to 2018 due to lower supply availability from lower production due to higher granular urea production for most of 2019. Sales volume for the fourth quarter of 2019 was similar to the fourth quarter of 2018.
  • UAN average selling prices increased for the full year 2019 compared to 2018 due primarily to a tighter nitrogen supply and demand balance than the prior year periods and logistical issues in North America that limited supply at some inland locations during the spring application season. UAN average selling prices for the fourth quarter of 2019 were similar to the fourth quarter of 2018.
  • UAN adjusted gross margin per ton increased for the full year 2019 compared to 2018 primarily due to higher average selling prices and lower realized natural gas costs, partially offset by higher maintenance costs. UAN adjusted gross margin per ton increased in the fourth quarter of 2019 compared to 2018 due primarily to 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. AN is produced at the company’s Yazoo City, Mississippi; Billingham, United Kingdom; and Ince, United Kingdom, complexes.

 

Three months ended
December 31,

 

Year ended
December 31,

 

2019

 

2018

 

2019

 

2018

 

(dollars in millions,

except per ton amounts)

Net sales

$

117

 

 

$

97

 

 

$

506

 

 

$

460

 

Cost of sales

91

 

 

94

 

 

399

 

 

414

 

Gross margin

$

26

 

 

$

3

 

 

$

107

 

 

$

46

 

Gross margin percentage

22.2

%

 

3.1

%

 

21.1

%

 

10.0

%

 

 

 

 

 

 

 

 

Sales volume by product tons (000s)

519

 

 

416

 

 

2,109

 

 

2,002

 

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

175

 

 

141

 

 

708

 

 

676

 

 

 

 

 

 

 

 

 

Average selling price per product ton

$

225

 

 

$

233

 

 

$

240

 

 

$

230

 

Average selling price per nutrient ton(1)

669

 

 

688

 

 

715

 

 

680

 

 

 

 

 

 

 

 

 

Adjusted gross margin(2):

 

 

 

 

 

 

 

Gross margin

$

26

 

 

$

3

 

 

$

107

 

 

$

46

 

Depreciation and amortization

21

 

 

18

 

 

88

 

 

85

 

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

1

 

 

 

 

1

 

 

 

Adjusted gross margin

$

48

 

 

$

21

 

 

$

196

 

 

$

131

 

Adjusted gross margin as a percent of net sales

41.0

%

 

21.6

%

 

38.7

%

 

28.5

%

 

 

 

 

 

 

 

 

Gross margin per product ton

$

50

 

 

$

7

 

 

$

51

 

 

$

23

 

Gross margin per nutrient ton(1)

149

 

 

21

 

 

151

 

 

68

 

Adjusted gross margin per product ton

92

 

 

50

 

 

93

 

 

65

 

Adjusted gross margin per nutrient ton(1)

274

 

 

149

 

 

277

 

 

194

 

_______________________________________________________________________________

(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. The company has presented adjusted gross margin, adjusted gross margin as a percent of net sales and adjusted gross margin per product ton and per nutrient 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. 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 2019 to 2018 full year and fourth quarter periods:

  • AN sales volume for the full year and fourth quarter of 2019 increased compared to 2018 due primarily to increased demand in the United States.
  • AN average selling prices for the full year 2019 increased compared to 2018 due to a tighter global nitrogen supply and demand balance. AN average selling prices for the fourth quarter of 2019 decreased compared to 2018 due to greater global supply availability as a result of higher global operating rates driven by lower global energy costs.
  • AN adjusted gross margin per ton was higher for the full year and fourth quarter of 2019 compared to 2018 due primarily to 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).

 

Three months ended
December 31,

 

Year ended
December 31,

 

2019

 

2018

 

2019

 

2018

 

(dollars in millions,

except per ton amounts)

Net sales

$

91

 

 

$

98

 

 

$

359

 

 

$

385

 

Cost of sales

73

 

 

87

 

 

297

 

 

335

 

Gross margin

$

18

 

 

$

11

 

 

$

62

 

 

$

50

 

Gross margin percentage

19.8

%

 

11.2

%

 

17.3

%

 

13.0

%

 

 

 

 

 

 

 

 

Sales volume by product tons (000s)

600

 

 

535

 

 

2,257

 

 

2,252

 

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

117

 

 

104

 

 

444

 

 

439

 

 

 

 

 

 

 

 

 

Average selling price per product ton

$

152

 

 

$

183

 

 

$

159

 

 

$

171

 

Average selling price per nutrient ton(1)

778

 

 

942

 

 

809

 

 

877

 

 

 

 

 

 

 

 

 

Adjusted gross margin(2):

 

 

 

 

 

 

 

Gross margin

$

18

 

 

$

11

 

 

$

62

 

 

$

50

 

Depreciation and amortization

18

 

 

18

 

 

72

 

 

67

 

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

1

 

 

 

 

...