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CF Industries Holdings, Inc. Reports Full Year 2021 Net Earnings of $917 Million, Adjusted EBITDA of $2.74 Billion

Net Cash from Operating Activities of $2.87 Billion, Free Cash Flow of $2.17 Billion

Grain Prices, Industrial Recovery Support Continued Nitrogen Demand Strength

Global Supply-Demand Dynamics Underpin Substantial Cash Generation Outlook

DEERFIELD, Ill., February 15, 2022--(BUSINESS WIRE)--CF Industries Holdings, Inc. (NYSE: CF), a leading global manufacturer of hydrogen and nitrogen products, today announced results for the full year and fourth quarter ended December 31, 2021.

Highlights

  • Full year net earnings of $917 million(1), or $4.24 per diluted share, and EBITDA(2) of $2.17 billion, which include the impact of pre-tax non-cash impairment charges of $521 million related to the Company’s U.K. operations; adjusted EBITDA(2) of $2.74 billion

  • Fourth quarter earnings of $705 million(1), or $3.27 per diluted share, and EBITDA of $1.19 billion; adjusted EBITDA of $1.26 billion

  • Full year net cash from operating activities of $2.87 billion, free cash flow(3) of $2.17 billion, both Company records

  • Repurchased approximately 7.5 million shares for $490 million during the fourth quarter, effectively completing the $1 billion share repurchase authorization that expired December 31, 2021

  • The U.S. Department of Commerce (Commerce) made preliminary determinations in January 2022 that Russian urea ammonium nitrate (UAN) imports are dumped into the U.S. at margins ranging from 9.15% to 127.19%, and that Trinidadian UAN imports are dumped into the U.S. at a margin of 63.08%

"The CF Industries team delivered outstanding results in 2021 as strong global nitrogen demand, lower global operating rates and favorable energy spreads drove Company-record free cash generation," said Tony Will, president and chief executive officer, CF Industries Holdings, Inc. "We expect global nitrogen fundamentals to remain positive, underpinned by the need to replenish global grains stocks, increased economic activity and global energy dynamics. We are well-positioned to continue to drive strong cash generation, enabling us to invest in our clean energy initiatives, return substantial capital to shareholders and achieve our goal of $3 billion of gross debt by 2023."

Nitrogen Market Outlook

Management expects the global nitrogen supply and demand balance to remain tight for the foreseeable future and for the commercial environment to be highly favorable for producers in low-cost regions.

Global nitrogen inventory entering 2022 is believed to be low following a year of strong demand and lower production due to the impact of energy-related production curtailments and shutdowns in Europe, weather-related disruptions in North America and stagnant production levels in countries such as India. High energy prices in Europe and Asia, along with ongoing restrictions on exports of certain nitrogen products from Russia, Egypt, Turkey and China, suggest global nitrogen supply will continue to be challenged.

At the same time, management expects global demand for nitrogen to remain robust. The need to replenish global grains stocks continues to support high front month and forward prices for nitrogen-consuming crops. These crop prices support high levels of planting and incentivize fertilizer application. Additionally, increased economic activity continues to drive strong demand for diesel exhaust fluid for emissions abatement as well as ammonia, urea and nitric acid for industrial uses.

Energy differentials between Europe and Asia versus low cost regions remain significant. This has steepened the global nitrogen cost curve and increased margin opportunities for low-cost North American producers. Forward curves suggest that these favorable energy spreads will persist throughout 2022 and into 2023.

North America: Management projects corn plantings in the United States will be 91 to 93 million acres in 2022 based on positive economic returns for farmers and a robust fall ammonia application season. The Company believes that other nitrogen-consuming crops (wheat, cotton and canola) will be planted at high levels in 2022 as well. Industrial activity in the region continues to increase in line with economic activity, supporting further demand for nitrogen products.

India: Urea imports to India from April-December 2021 were approximately 2 million metric tons lower and domestic urea production was flat compared to the same time period in 2020. Published reports indicate that this lower-than-expected level of imports and domestic production has resulted in low urea inventory levels in India. A new urea tender for India was issued in January, and management expects India will tender regularly in the coming months to meet urea demand in the country, which is projected to remain strong.

Brazil/South America: Strong global corn prices coupled with drought conditions in Southern Brazil and Argentina, which has reduced production forecasts for the current first crop corn, support higher planted corn acres in 2022 and continued strong demand for nitrogen and urea imports.

Europe: A substantial supply of liquefied natural gas cargoes rerouted to Europe in January 2022 allowed energy prices in the region to moderate from record highs, though they remain elevated compared to the prior year. Forward curves for natural gas in Europe remain above historical norms, challenging producer profitability and likely resulting in continued lower operating rates in the region.

China: Urea exports from China are expected to be limited through at least the first half of 2022 as the Chinese government has implemented measures to discourage urea exports and promote the availability and affordability of fertilizers domestically. Additionally, published reports indicate that the Chinese government has issued supply contracts to build temporary reserves for summer application. It is estimated that over 1 million metric tons of urea could be accumulated for the country’s first-ever summer fertilizer reserve plan.

Operations Overview

The Company continues to operate safely and efficiently across its network. As of December 31, 2021, the 12-month rolling average recordable incident rate was 0.32 incidents per 200,000 work hours, significantly better than industry benchmarks.

Gross ammonia production for the fourth quarter of 2021 was approximately 2.5 million tons, and was approximately 9.3 million tons for the full year. Management expects gross ammonia production for 2022 will return to historical levels (9.5 to 10.0 million tons) based on normal operating conditions and a return to a typical level of planned maintenance activities.

Financial Results Overview

Full Year 2021 Financial Results

For the full year 2021, net earnings attributable to common stockholders were $917 million, or $4.24 per diluted share, and EBITDA was $2.17 billion, which include the impact of pre-tax non-cash impairment charges of $521 million related to the Company’s U.K. operations; adjusted EBITDA was $2.74 billion. These results compare to the full year 2020 net earnings attributable to common stockholders of $317 million, or $1.47 per diluted share; EBITDA of $1.32 billion; and adjusted EBITDA of $1.35 billion.

Net sales for the full year 2021 were $6.5 billion compared to $4.1 billion for 2020. Average selling prices for 2021 were higher than 2020 across all segments due to strong global demand as well as decreased global supply availability as higher global energy costs drove lower global operating rates. Sales volumes for 2021 were lower than 2020 due to lower supply availability from higher than typical maintenance activity, two significant weather-related production outages and production curtailments at the Company’s U.K. plants due to high natural gas costs.

Cost of sales for 2021 was higher compared to 2020 due to higher natural gas costs and higher maintenance costs, partially offset by the impact of lower sales volumes and the gain the Company recognized from the net settlement of certain natural gas contracts with suppliers during February 2021.

The average cost of natural gas reflected in the Company’s cost of sales was $4.21 per MMBtu(4) compared to $2.24 per MMBtu for 2020.

Fourth Quarter 2021 Financial Results

For the fourth quarter of 2021, net earnings attributable to common stockholders were $705 million, or $3.27 per diluted share; EBITDA was $1.19 billion; and adjusted EBITDA was $1.26 billion. These results compare to 2020 net earnings attributable to common stockholders of $87 million, or $0.40 per diluted share; EBITDA of $334 million; and adjusted EBITDA of $338 million.

Net sales in the fourth quarter of 2021 were $2.5 billion compared to $1.1 billion in 2020. Average selling prices for 2021 were higher than 2020 across all segments due to strong global demand as well as decreased global supply availability as higher global energy costs drove lower global operating rates. Sales volumes in the fourth quarter of 2021 were lower than 2020 due to lower supply availability from higher maintenance activity and production curtailments at one of the Company’s U.K. plants due to high natural gas costs.

Cost of sales for the fourth quarter of 2021 was higher compared to 2020 primarily due to higher natural gas costs and higher maintenance costs.

In the fourth quarter of 2021, the average cost of natural gas reflected in the Company’s cost of sales was $6.00 per MMBtu compared to the average cost of natural gas in cost of sales of $2.60 per MMBtu in 2020.

Capital Management

Capital Expenditures

Capital expenditures in the fourth quarter and full year 2021 were $132 million and $514 million, respectively. Management projects capital expenditures for full year 2022 will be in a range of $500-$550 million, which includes capital expenditures at the Company’s Donaldsonville, LA, Complex related to green and blue ammonia projects.

Share Repurchase Programs

The Company repurchased approximately 7.5 million shares for $490 million during the fourth quarter of 2021. Over the course of the program, the Company repurchased approximately 18.8 million shares for $977 million of the $1 billion share repurchase authorization that expired on December 31, 2021.

On November 3, 2021, the Board of Directors of CF Industries Holdings, Inc., authorized a new $1.5 billion share repurchase program. The program went into effect January 1, 2022, and runs through the end of 2024.

CHS, Inc. Distribution

On January 31, 2022, the Board of Managers of CF Industries Nitrogen, LLC (CFN) approved a semi-annual distribution payment to CHS Inc. (CHS) of $247 million for the distribution period ended December 31, 2021. The distribution was paid on January 31, 2022. Total distributions to CHS pertaining to 2021 were approximately $377 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 and green ammonia and other initiatives in development across the Company’s network. Construction of North America’s first commercial scale green ammonia project has commenced at the Company’s Donaldsonville Complex with completion expected in 2023. Additionally, the Company has begun activities related to the Board of Directors-approved projects to install carbon dioxide dehydration and compression equipment at the Donaldsonville and the Yazoo City complexes. These projects will enable the annual production of up to 1.25 million tons of low-carbon blue ammonia – ammonia produced with the corresponding CO2 byproduct removed through carbon capture and sequestration – from the Company’s existing network starting in 2024.

UAN Antidumping and Countervailing Duty Investigations

On June 30, 2021, CF Industries, through certain of its production facilities, filed petitions with Commerce and the U.S. International Trade Commission (ITC) requesting the initiation of antidumping and countervailing duty investigations on imports of UAN from Russia and Trinidad.

CF Industries, which is the largest producer of UAN in the United States, requested the investigations due to the harm the domestic UAN industry has experienced from dumped and unfairly subsidized UAN imports from Russia and Trinidad. CF Industries filed its petitions under U.S. antidumping and countervailing duty laws, which authorize Commerce to level the playing field for domestic industries injured by foreign imports that are dumped and unfairly subsidized.

On August 13, 2021, the ITC issued an affirmative decision in the preliminary phase of its antidumping and countervailing duty investigation of UAN imports from Russia and Trinidad. As a result of the ITC’s determination, Commerce conducted its own investigations of UAN imports from Russia and Trinidad. On January 27, 2022, Commerce issued preliminary determinations that Russian UAN imports are dumped (i.e., sold at less than fair value) into the U.S. at margins ranging from 9.15% to 127.19%, and that Trinidadian UAN imports are dumped into the U.S. at a margin of 63.08%. As a result of these determinations, Commerce imposed cash deposit requirements on imports of UAN from Russia and Trinidad, based on the preliminary dumping margins. Additional countervailing duty cash deposit requirements have been in place since Commerce’s preliminary determination in November 2021 that Russian UAN imports are unfairly subsidized at rates ranging from 9.66% to 9.84%, and that Trinidadian UAN imports are unfairly subsidized at a rate of 1.83%.

Under U.S. law, both Commerce and the ITC must make final affirmative determinations in order for Commerce to issue AD/CVD orders, which would remain in place for at least five years. Commerce and the ITC are expected to make final determinations in the summer of 2022. At this time, management cannot predict the outcome of the proceedings, including whether antidumping or countervailing duties will be imposed on imports from either country, or the rate of any such duties.

___________________________________________________

(1)

Certain items recognized during the full year and fourth quarter of 2021 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.

(4)

Average cost of natural gas excludes the $112 million gain the Company recognized from the net settlement of certain natural gas contracts with suppliers during February 2021.

Consolidated Results

Three months ended
December 31,

Year ended
December 31,

2021

2020

2021

2020

(dollars in millions, except per share

and per MMBtu amounts)

Net sales

$

2,540

$

1,102

$

6,538

$

4,124

Cost of sales

1,385

922

4,151

3,323

Gross margin

$

1,155

$

180

$

2,387

$

801

Gross margin percentage

45.5

%

16.3

%

36.5

%

19.4

%

Net earnings attributable to common stockholders

$

705

$

87

$

917

$

317

Net earnings per diluted share

$

3.27

$

0.40

$

4.24

$

1.47

EBITDA(1)

$

1,188

$

334

$

2,172

$

1,316

Adjusted EBITDA(1)

$

1,258

$

338

$

2,743

$

1,350

Tons of product sold (000s)

4,979

5,479

18,501

20,296

Natural gas supplemental data (per MMBtu):

Cost of natural gas used for production in cost of sales(2)

$

6.00

$

2.60

$

4.21

$

2.24

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

$

4.74

$

2.47

$

3.82

$

1.99

Average daily market price of natural gas National Balancing Point (United Kingdom)

$

29.96

$

5.29

$

15.50

$

3.20

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

$

43

$

6

$

25

$

(6

)

Depreciation and amortization

$

238

$

230

$

888

$

892

Capital expenditures

$

132

$

103

$

514

$

309

Production volume by product tons (000s):

Ammonia(3)

2,452

2,732

9,349

10,353

Granular urea

984

1,361

4,123

5,001

UAN (32%)

2,135

1,798

6,763

6,677

AN

390

583

1,646

2,115

_______________________________________________________________________________

(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 year ended December 31, 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. The Company has also announced steps to produce blue and green ammonia and market to external customers for its hydrogen content in clean energy applications. In addition, the Company upgrades ammonia into other nitrogen products such as urea, UAN and AN.

Three months ended
December 31,

Year ended
December 31,

2021

2020

2021

2020

(dollars in millions,

except per ton amounts)

Net sales

$

778

$

298

$

1,787

$

1,020

Cost of sales

487

241

1,162

850

Gross margin

$

291

$

57

$

625

$

170

Gross margin percentage

37.4

%

19.1

%

35.0

%

16.7

%

Sales volume by product tons (000s)

1,180

1,092

3,589

3,767

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

968

897

2,944

3,090

Average selling price per product ton

$

659

$

273

$

498

$

271

Average selling price per nutrient ton(1)

804

332

607

330

Adjusted gross margin(2):

Gross margin

$

291

$

57

$

625

$

170

Depreciation and amortization

71

43

209

176

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

13

2

7

(2

)

Adjusted gross margin

$

375

$

102

$

841

$

344

Adjusted gross margin as a percent of net sales

48.2

%

34.2

%

47.1

%

33.7

%

Gross margin per product ton

$

247

$

52

$

174

$

45

Gross margin per nutrient ton(1)

301

64

212

55

Adjusted gross margin per product ton

318

93

234

91

Adjusted gross margin per nutrient ton(1)

387

114

286

111

_______________________________________________________________________________

(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 2021 to 2020:

  • Ammonia sales volume decreased for the full year 2021 compared to 2020 due to lower supply availability from lower production.

  • Ammonia average selling prices increased for the full year 2021 compared to 2020 due to strong global demand as well as decreased global supply availability as higher global energy costs drove lower global operating rates.

  • Ammonia adjusted gross margin per ton increased for the full year 2021 compared to 2020 due to higher average selling prices and the gain the Company recognized from the net settlement of certain natural gas contracts with suppliers during February 2021, partially offset by higher realized natural gas costs and higher maintenance 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
December 31,

Year ended
December 31,

2021

2020

2021

2020

(dollars in millions,

except per ton amounts)

Net sales

$

662

$

333

$

1,880

$

1,248

Cost of sales

287

235

992

847

Gross margin

$

375

$

98

$

888

$

401

Gross margin percentage

56.6

%

29.4

%

47.2

%

32.1

%

Sales volume by product tons (000s)

1,018

1,346

4,290

5,148

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

468

619

1,973

2,368

Average selling price per product ton

$

650

$

247

$

438

$

242

Average selling price per nutrient ton(1)

1,415

538

953

527

Adjusted gross margin(2):

Gross margin

$

375

$

98

$

888

$

401

Depreciation and amortization

56

72

235

270

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

11

2

6

(2

)

Adjusted gross margin

$

442

$

172

$

1,129

$

669

Adjusted gross margin as a percent of net sales

66.8

%

51.7

%

60.1

%

53.6

%

Gross margin per product ton

$

368

$

73

$

207

$

78

Gross margin per nutrient ton(1)

801

158

450

169

Adjusted gross margin per product ton

434

128

263

130

Adjusted gross margin per nutrient ton(1)

944

278

572

283

_______________________________________________________________________________

(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 2021 to 2020:

  • Granular urea sales volume decreased for the full year 2021 compared to 2020 due to lower supply availability from lower production partially offset by purchased urea.

  • Urea average selling prices increased for the full year 2021 compared to 2020 due to strong global demand as well as decreased global supply availability as higher global energy costs drove lower global operating rates.

  • Granular urea adjusted gross margin per ton increased for the full year 2021 compared to 2020 due to higher average selling prices, partially offset by higher realized natural gas costs and higher maintenance 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,

2021

2020

2021

2020

(dollars in millions,

except per ton amounts)

Net sales

$

732

$

272

$

1,788

$

1,063

Cost of sales

360

274

1,119

949

Gross margin

$

372

$

(2

)

$

669

$

114

Gross margin percentage

50.8

%

(0.7

)%

37.4

%

10.7

%

Sales volume by product tons (000s)

1,838

1,888

6,584

6,843

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

582

594

2,075

2,155

Average selling price per product ton

$

398

$

144

$

272

$

155

Average selling price per nutrient ton(1)

1,258

458

862

493

Adjusted gross margin(2):

Gross margin

$

372

$

(2

)

$

669

$

114