Higher Year-Over-Year Urea, UAN and AN Prices Support Increased
Margins
Lower Volumes Driven by Wet, Cold Weather Delaying Spring Application
Season
Expect Strong Nitrogen Demand Through End of First Half 2019
DEERFIELD, Ill.--(BUSINESS WIRE)--
CF Industries Holdings, Inc. (NYSE: CF), a leading global fertilizer and
chemical company, today announced results for its first quarter ended
March 31, 2019.
Highlights
-
Net earnings of $90 million, or $0.40 per diluted share; EBITDA(1)
of $301 million; adjusted EBITDA(1) of $305 million
-
Repurchased approximately 1.5 million shares during the quarter under
the previously announced $1 billion share repurchase program
authorized through 2021
Overview of Results
CF Industries Holdings, Inc. today announced first quarter 2019 net
earnings attributable to common stockholders of $90 million, or $0.40
per diluted share; EBITDA of $301 million; and adjusted EBITDA of $305
million. As a result of a net incentive tax credit of $30 million
recognized during the quarter, the company’s first quarter 2019 net
earnings of $0.40 per diluted share included a $0.13 per share net
income tax benefit. These results compare to first quarter 2018 net
earnings attributable to common stockholders of $63 million, or $0.27
per diluted share; EBITDA of $302 million; and adjusted EBITDA of $296
million.
“The CF team’s strong execution, along with generally higher nitrogen
prices compared to the year before, helped CF deliver solid results in
the first quarter despite lower sales volumes driven by wet and cold
weather,” said Tony Will, president and chief executive officer, CF
Industries Holdings, Inc. “Looking ahead, we expect a compressed
planting season and transportation issues to create logistical
challenges in the Corn Belt over the next two months. We believe that
our in-region production and extensive transportation and distribution
network are tremendous advantages in this environment, enabling us to
reliably deliver products to our customers when and where they need it.”
|
________________________________________________________________
|
|
|
| (1) |
| 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. |
Operations Overview
CF Industries continued operating safely and efficiently. As of
March 31, 2019, the company’s 12-month rolling average recordable
incident rate was 0.60 incidents per 200,000 work hours.
Sales Overview
Net sales in the first quarter of 2019 were $1,001 million compared to
$957 million in the same period last year. The increase was primarily
due to higher average selling prices for granular urea, urea ammonium
nitrate (UAN) and ammonium nitrate (AN).
Total sales volumes for the first quarter were lower compared to the
same period in 2018 as an extended period of wet and cold weather in
North America delayed the spring application season, resulting in lower
UAN and ammonia sales volumes partially offset by higher granular urea
volumes, including higher exports, and higher AN sales volumes in the
United Kingdom.
Average selling prices for the first quarter of 2019 were higher
year-over-year across most segments due to a tighter global nitrogen
supply and demand balance than the prior period.
Cost of sales for the first quarter of 2019 increased slightly compared
to the first quarter of 2018 driven primarily by higher realized natural
gas costs and higher costs related to plant maintenance partially offset
by the impact of lower sales volume.
In the first quarter of 2019, the average cost of natural gas reflected
in the company’s cost of sales was $3.68 per MMBtu compared to the
average cost of natural gas in cost of sales of $3.33 per MMBtu for the
first quarter of 2018. The increase reflects the impact of inventory
sold during the quarter that was produced in the fourth quarter of 2018
when natural gas costs were higher.
Looking ahead, the company expects the cost of natural gas for 2019 to
be well below 2018 levels. During the first quarter of 2019, the average
cost of natural gas at Henry Hub in North America was $2.89 per MMBtu,
and the average cost of natural gas at the National Balancing Point in
the United Kingdom was $6.56 per MMBtu. This compares to the average
cost of natural gas at Henry Hub in North America of $3.02 per MMBtu,
and the average cost of natural gas at the National Balancing Point in
the United Kingdom of $8.20 per MMBtu in the first quarter of 2018.
Through the end of 2019, Henry Hub natural gas futures remain well below
$3.00, and below 2018 costs.
Market Overview
CF continues to expect strong nitrogen fertilizer demand in North
America during the first half of 2019. A favorable corn-to-soybean ratio
suggests an increase in corn plantings in the United States compared to
2018. Additionally, cold and wet weather in the fourth quarter of 2018
limited ammonia applications in the region, suggesting a nitrogen
deficit in many areas that will need to be made up by spring
applications of ammonia or upgraded products.
Cold and wet weather impacted the first quarter of 2019 and continued
into the second quarter, delaying spring fertilizer applications
throughout North America. More favorable weather since the middle of
April has allowed fieldwork and fertilizer applications to begin, with
corn plantings as of April 29, 2019, in the United States on pace with
2018.
Throughout the first quarter and into May, weather conditions also
caused significant disruptions to rail and barge transportation. CF
believes these logistical challenges will support strong in-region
nitrogen pricing through the spring application season.
Outside of North America, CF expects net urea exports from China in 2019
to be in a similar range to 2018, despite higher exports during the
first quarter of 2019. Demand for urea from India and Brazil should also
support the global market, with India issuing its third urea tender of
the year in late April and imports of urea to Brazil for the full year
2019 expected to increase due to the announced closure of two Petrobras
urea plants.
Geopolitical issues that may affect the global nitrogen market include
United States sanctions on Iran and UAN trade actions by the European
Union. Urea from Iranian producers remains available at a significant
discount to global prices due to the United States sanctions with few
regions of the world open to purchasing from that country. Iranian
producers will face additional challenges should the sanctions continue
due to the loss of access to technical expertise, replacement parts for
current plants and resources to support new construction. Provisional
duties on UAN imports to the European Union from Russia, Trinidad, and
the United States were announced by the European Union Commission in
April 2019 and are expected to be finalized in October 2019.
Capital Expenditures
Capital expenditures in 2019 are projected to be $400-$450 million.
Liquidity
As of March 31, 2019, the company had cash and cash equivalents of $671
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.
During the first quarter, the company repurchased approximately 1.5
million shares for $60 million.
During the first quarter of 2019, the company entered into an agreement
to sell its Pine Bend dry bulk storage and logistics facility in
Minnesota. In April of 2019, the sale closed and the company received
proceeds of $55 million.
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 first quarter of 2019 is approximately $47 million.
|
|
Consolidated Results | |
|
|
| Three months ended
March 31, |
| 2019 |
| 2018 |
| (dollars in millions, except per share and per MMBtu amounts) |
|
|
|
Net sales
|
$
|
1,001
| | |
$
|
957
| |
|
Cost of sales
|
781
|
| |
767
|
|
|
Gross margin
|
$
|
220
|
| |
$
|
190
|
|
|
Gross margin percentage
|
22.0
|
%
| |
19.9
|
%
|
| | |
|
|
Net earnings attributable to common stockholders
|
$
|
90
| | |
$
|
63
| |
|
Net earnings per diluted share
|
$
|
0.40
| | |
$
|
0.27
| |
| | |
|
|
EBITDA(1) |
$
|
301
| | |
$
|
302
| |
|
Adjusted EBITDA(1) |
$
|
305
| | |
$
|
296
| |
| | |
|
|
Tons of product sold (000s)
|
4,087
| | |
4,303
| |
| | |
|
|
Supplemental data (per MMBtu):
| | | |
|
Natural gas costs in cost of sales(2) |
$
|
3.70
| | |
$
|
3.32
| |
|
Realized derivatives (gain) loss in cost of sales(3) |
(0.02
|
)
| |
0.01
|
|
|
Cost of natural gas in cost of sales
|
$
|
3.68
| | |
$
|
3.33
| |
| | |
|
|
Average daily market price of natural gas (per MMBtu):
| | | |
| Henry Hub |
$
|
2.89
| | |
$
|
3.02
| |
|
National Balancing Point UK |
$
|
6.56
| | |
$
|
8.20
| |
| | |
|
|
Unrealized net mark-to-market loss (gain) on natural gas derivatives
|
$
|
2
| | |
$
|
(3
|
)
|
|
Depreciation and amortization
|
$
|
188
| | |
$
|
193
| |
|
Capital expenditures
|
$
|
80
| | |
$
|
68
| |
| | |
|
|
Production volume by product tons (000s):
| | | |
|
Ammonia(4) |
2,567
| | |
2,508
| |
|
Granular urea
|
1,306
| | |
1,151
| |
|
UAN (32%)
|
1,637
| | |
1,805
| |
|
AN
|
482
| | |
458
| |
|
_______________________________________________________________________________
|
| (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. |
Segment Results
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
March 31, |
| | 2019 |
| 2018 |
| | (dollars in millions, except per ton amounts) |
|
Net sales
| |
$
|
187
| | |
$
|
212
| |
|
Cost of sales
| |
166
|
| |
188
|
|
|
Gross margin
| |
$
|
21
|
| |
$
|
24
|
|
|
Gross margin percentage
| |
11.2
|
%
| |
11.3
|
%
|
| | | |
|
|
Sales volume by product tons (000s)
| |
606
| | |
664
| |
|
Sales volume by nutrient tons (000s)(1) | |
497
| | |
544
| |
| | | |
|
|
Average selling price per product ton
| |
$
|
309
| | |
$
|
319
| |
|
Average selling price per nutrient ton(1) | |
376
| | |
390
| |
| | | |
|
|
Adjusted gross margin(2):
| | | | |
|
Gross margin
| |
$
|
21
| | |
$
|
24
| |
|
Depreciation and amortization
| |
29
| | |
25
| |
|
Unrealized net mark-to-market gain on natural gas derivatives
| |
—
|
| |
(1
|
)
|
|
Adjusted gross margin
| |
$
|
50
|
| |
$
|
48
|
|
|
Adjusted gross margin as a percent of net sales
| |
26.7
|
%
| |
22.6
|
%
|
| | | |
|
|
Gross margin per product ton
| |
$
|
35
| | |
$
|
36
| |
|
Gross margin per nutrient ton(1) | |
42
| | |
44
| |
|
Adjusted gross margin per product ton
| |
83
| | |
72
| |
|
Adjusted gross margin per nutrient ton(1) | |
101
| | |
88
| |
|
_______________________________________________________________________________
|
| (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 first quarter periods:
-
Ammonia sales volume decreased for the first quarter of 2019 compared
to 2018 as applications were delayed in North America due to cold and
wet weather.
-
Ammonia average selling prices decreased for the first quarter of 2019
compared to 2018 due to lower volumes of ammonia for agricultural use
compared to the prior year.
-
Ammonia adjusted gross margin per ton increased for the first quarter
of 2019 compared to 2018 due in part to a lower cost for purchased
product from the company’s joint venture in Trinidad compared to the
prior year.
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
March 31, |
| | 2019 |
| 2018 |
| | (dollars in millions, except per ton amounts) |
|
Net sales
| |
$
|
343
| | |
$
|
264
| |
|
Cost of sales
| |
228
|
| |
189
|
|
|
Gross margin
| |
$
|
115
|
| |
$
|
75
|
|
|
Gross margin percentage
| |
33.5
|
%
| |
28.4
|
%
|
| | | |
|
|
Sales volume by product tons (000s)
| |
1,184
| | |
982
| |
|
Sales volume by nutrient tons (000s)(1) | |
545
| | |
452
| |
| | | |
|
|
Average selling price per product ton
| |
$
|
290
| | |
$
|
269
| |
|
Average selling price per nutrient ton(1) | |
629
| | |
584
| |
| | | |
|
|
Adjusted gross margin(2):
| | | | |
|
Gross margin
| |
$
|
115
| | |
$
|
75
| |
|
Depreciation and amortization
| |
66
| | |
59
| |
|
Unrealized net mark-to-market loss (gain) on natural gas derivatives
| |
1
|
| |
(1
|
)
|
|
Adjusted gross margin
| |
$
|
182
|
| |
$
|
133
|
|
|
Adjusted gross margin as a percent of net sales
| |
53.1
|
%
| |
50.4
|
%
|
| | | |
|
|
Gross margin per product ton
| |
$
|
97
| | |
$
|
76
| |
|
Gross margin per nutrient ton(1) | |
211
| | |
166
| |
|
Adjusted gross margin per product ton
| |
154
| | |
135
| |
|
Adjusted gross margin per nutrient ton(1) | |
334
| | |
294
| |
|
_______________________________________________________________________________
|
| (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 first quarter periods:
-
Granular urea sales volume increased for the first quarter of 2019
compared to 2018 from increased production at the company’s
Donaldsonville and Port Neal facilities due to production mix favoring
urea.
-
Urea average selling prices improved in the first quarter of 2019
compared to 2018 due to a tighter global nitrogen supply and demand
balance than the prior period.
-
Granular urea adjusted gross margin per ton increased for the first
quarter of 2019 compared to 2018 due primarily to higher average
selling prices partially offset by higher 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
March 31, |
| | 2019 |
| 2018 |
| | (dollars in millions, except per ton amounts) |
|
Net sales
| |
$
|
256
| | |
$
|
283
| |
|
Cost of sales
| |
195
|
| |
230
|
|
|
Gross margin
| |
$
|
61
|
| |
$
|
53
|
|
|
Gross margin percentage
| |
23.8
|
%
| |
18.7
|
%
|
| | | |
|
|
Sales volume by product tons (000s)
| |
1,268
| | |
1,669
| |
|
Sales volume by nutrient tons (000s)(1) | |
396
| | |
527
| |
| | | |
|
|
Average selling price per product ton
| |
$
|
202
| | |
$
|
170
| |
|
Average selling price per nutrient ton(1) | |
646
| | |
537
| |
| | | |
|
|
Adjusted gross margin(2):
| | | | |
|
Gross margin
| |
$
|
61
| | |
$
|
53
| |
|
Depreciation and amortization
| |
46
| | |
63
| |
|
Unrealized net mark-to-market loss (gain) on natural gas derivatives
| |
1
|
| |
(1
|
)
|
|
Adjusted gross margin
| |
$
|
108
|
| |
$
|
115
|
|
|
Adjusted gross margin as a percent of net sales
| |
42.2
|
%
| |
40.6
|
%
|
| | | |
|
|
Gross margin per product ton
| |
$
|
48
| | |
$
|
32
| |
|
Gross margin per nutrient ton(1) | |
154
| | |
101
| |
|
Adjusted gross margin per product ton
| |
85
| | |
69
| |
|
Adjusted gross margin per nutrient ton(1) | |
273
| | |
218
| |
|
_______________________________________________________________________________
|
| (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 first quarter periods:
-
UAN sales volume for the first quarter of 2019 decreased compared to
2018 as the application season was delayed due to cold and wet weather.
-
UAN average selling prices improved in the first quarter of 2019
compared to 2018 due to a tighter global nitrogen supply and demand
balance than the prior period.
-
UAN adjusted gross margin per ton increased for the first quarter of
2019 compared to 2018 due primarily to higher average selling prices
partially offset by higher 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
March 31, |
| | 2019 |
| 2018 |
| | (dollars in millions, except per ton amounts) |
|
Net sales
| |
$
|
127
| | |
$
|
100
| |
|
Cost of sales
| |
114
|
| |
74
|
|
|
Gross margin
| |
$
|
13
|
| |
$
|
26
|
|
|
Gross margin percentage
| |
10.2
|
%
| |
26.0
|
%
|
| | | |
|
|
Sales volume by product tons (000s)
| |
501
| | |
417
| |
|
Sales volume by nutrient tons (000s)(1) | |
166
| | |
140
| |
| | | |
|
|
Average selling price per product ton
| |
$
|
253
| | |
$
|
240
| |
|
Average selling price per nutrient ton(1) | |
765
| | |
714
| |
| | | |
|
|
Adjusted gross margin(2):
| | | | |
|
Gross margin
| |
$
|
13
| | |
$
|
26
| |
|
Depreciation and amortization
| |
22
| | |
18
| |
|
Unrealized net mark-to-market (gain) loss on natural gas derivatives
| |
—
|
| |
—
|
|
|
Adjusted gross margin
| |
$
|
35
|
| |
$
|
44
|
|
|
Adjusted gross margin as a percent of net sales
| |
27.6
|
%
| |
44.0
|
%
|
| | | |
|
|
Gross margin per product ton
| |
$
|
26
| | |
$
|
62
| |
|
Gross margin per nutrient ton(1) | |
78
| | |
186
| |
|
Adjusted gross margin per product ton
| |
70
| | |
106
| |
|
Adjusted gross margin per nutrient ton(1) | |
211
| | |
314
| |
|
_______________________________________________________________________________
|
| (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 first quarter periods:
-
AN sales volume increased for the first quarter of 2019 compared to
2018 due to an earlier start to spring AN applications in the United
Kingdom compared to the prior year.
-
AN average selling prices improved for the first quarter of 2019
compared to 2018 due to a tighter global nitrogen supply and demand
balance than the prior period.
-
AN adjusted gross margin per ton was lower for the first quarter of
2019 compared to 2018 as higher average selling prices were more than
offset by higher costs related to plant maintenance activities.
Other Segment
CF Industries’ Other segment includes diesel exhaust fluid (DEF), urea
liquor, nitric acid and compound fertilizer products (NPKs).
|
| Three months ended
March 31, |
| | 2019 |
| 2018 |
| | (dollars in millions, except per ton amounts) |
|
Net sales
| |
$
|
88
| | |
$
|
98
| |
|
Cost of sales
| |
78
|
| |
86
|
|
|
Gross margin
| |
$
|
10
|
| |
$
|
12
|
|
|
Gross margin percentage
| |
11.4
|
%
| |
12.2
|
%
|
| | | |
|
|
Sales volume by product tons (000s)
| |
528
| | |
571
| |
|
Sales volume by nutrient tons (000s)(1) | |
103
| | |
111
| |
| | | |
|
|
Average selling price per product ton
| |
$
|
167
| | |
$
|
172
| |
|
Average selling price per nutrient ton(1) | |
854
| | |
883
| |
| | | |
|
|
Adjusted gross margin(2):
| | | | |
|
Gross margin
| |
$
|
10
| | |
$
|
12
| |
|
Depreciation and amortization
| |
17
| | |
17
| |
|
Unrealized net mark-to-market (gain) loss on natural gas derivatives
| |
—
|
| |
—
|
|
|
Adjusted gross margin
| |
$
|
27
|
| |
$
|
29
|
|
|
Adjusted gross margin as a percent of net sales
| |
30.7
|
%
| |
29.6
|
%
|
| | | |
|
|
Gross margin per product ton
| |
$
|
19
| | |
$
|
21
| |
|
Gross margin per nutrient ton(1) | |
97
| | |
108
| |
|
Adjusted gross margin per product ton
| |
51
| | |
51
| |
|
Adjusted gross margin per nutrient ton(1) | |
262
| | |
261
| |
|
_______________________________________________________________________________
|
| (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 first quarter periods:
-
Other segment volume decreased for the first quarter of 2019 primarily
from lower supply availability of compound fertilizer products for
sale in the United Kingdom due to plant maintenance issues.
-
Other average selling prices decreased in the first quarter of 2019
compared to 2018 due to the mix of products sold.
-
Other segment adjusted gross margin per ton was unchanged for the
first quarter of 2019 compared to 2018.
Dividend Payment
On April 26, 2019, CF Industries’ Board of Directors declared a
quarterly dividend of $0.30 per common share. The dividend will be paid
on May 31, 2019 to stockholders of record as of May 15, 2019.
Conference Call
CF Industries will hold a conference call to discuss its first quarter
2019 results at 9:00 a.m. ET on Thursday, May 2, 2019. 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.
CF Industries is a leading global fertilizer and chemical company with
outstanding operational capabilities and a cost-advantaged production
and distribution platform. Our 3,000 employees operate world-class
manufacturing complexes in Canada, the United Kingdom and the United
States. We serve our customers in North America through an unparalleled
production, storage, transportation and distribution network. We also
reach a global customer base with exports from our Donaldsonville,
Louisiana, plant, the world’s largest and most flexible nitrogen
complex. Additionally, we move product to international destinations
from our Verdigris, Oklahoma, facility; our Yazoo City, Mississippi,
facility; our Billingham and Ince facilities in the United Kingdom; and
a joint venture ammonia facility in the Republic of Trinidad and Tobago
in which we own a 50 percent interest. 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, EBITDA as a percent of net sales, adjusted
EBITDA, adjusted EBITDA per ton, adjusted EBITDA as a percent of net
sales, 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. 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, EBITDA as
a percent of net sales, adjusted EBITDA, adjusted EBITDA per ton,
adjusted EBITDA as a percent of net sales, 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, EBITDA as a percent of net
sales, adjusted EBITDA, adjusted EBITDA per ton, and adjusted EBITDA as
a percent of net sales 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 strategic plans and statements
about future financial and operating results.
Important factors that could cause actual results to differ materially
from those in the forward-looking statements include, among others, 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 fertilizer products, the conditions in the
international market for nitrogen products, and the intense global
competition from other fertilizer producers; conditions in the U.S. and
European agricultural industry; the volatility of natural gas prices in
North America and Europe; 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 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; operating and financial restrictions imposed on the
Company by the agreements governing the Company’s senior secured
indebtedness; risks associated with the Company’s incurrence of
additional indebtedness; the Company’s ability to maintain compliance
with covenants under the agreements governing its indebtedness;
downgrades of the Company’s credit ratings; risks associated with cyber
security; weather conditions; risks associated with changes in tax laws
and disagreements with taxing authorities; the Company’s reliance on a
limited number of key facilities; potential liabilities and expenditures
related to environmental, health and safety laws and regulations and
permitting requirements; future regulatory restrictions and requirements
related to greenhouse gas emissions; risks associated with expansions of
the Company’s business, including unanticipated adverse consequences and
the significant resources that could be required; the seasonality of the
fertilizer business; the impact of changing market conditions on the
Company’s forward sales programs; risks involving derivatives and the
effectiveness of the Company’s risk measurement and hedging activities;
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; risks
associated with the Company’s Point Lisas Nitrogen Limited joint
venture; acts of terrorism and regulations to combat terrorism; risks
associated with international operations; and deterioration of global
market and economic conditions.
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. 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
March 31, |
| | 2019 |
| 2018 |
| | (in millions, except per share amounts) |
|
Net sales
| |
$
|
1,001
| | |
$
|
957
| |
|
Cost of sales
| |
781
|
| |
767
|
|
|
Gross margin
| |
220
|
| |
190
|
|
|
Selling, general and administrative expenses
| |
58
| | |
57
| |
|
Other operating—net
| |
4
|
| |
(21
|
)
|
|
Total other operating costs and expenses
| |
62
| | |
36
| |
|
Equity in earnings of operating affiliate
| |
7
|
| |
7
|
|
|
Operating earnings
| |
165
| | |
161
| |
|
Interest expense
| |
60
| | |
60
| |
|
Interest income
| |
(4
|
)
| |
(3
|
)
|
|
Other non-operating—net
| |
(1
|
)
| |
(1
|
)
|
|
Earnings before income taxes
| |
110
| | |
105
| |
|
Income tax (benefit) provision
| |
(8
|
)
| |
17
|
|
|
Net earnings
| |
118
| | |
88
| |
|
Less: Net earnings attributable to noncontrolling interests
| |
28
|
| |
25
|
|
|
Net earnings attributable to common stockholders
| |
$
|
90
|
| |
$
|
63
|
|
| | | |
|
|
Net earnings per share attributable to common stockholders:
| | | | |
|
Basic
| |
$
|
0.40
|
| |
$
|
0.27
|
|
|
Diluted
| |
$
|
0.40
|
| |
$
|
0.27
|
|
|
Weighted-average common shares outstanding:
| | | | |
|
Basic
| |
223.4
|
| |
233.9
|
|
|
Diluted
| |
224.6
|
| |
234.8
|
|
| | | | | |
|
|
|
| CF INDUSTRIES HOLDINGS, INC. |
| SELECTED FINANCIAL INFORMATION |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
|
|
|
| (unaudited) |
| |
| | March 31, 2019 | | December 31, 2018 |
| | (in millions) |
| Assets | | | | |
|
Current assets:
| | | | |
|
Cash and cash equivalents
| |
$
|
671
| | |
$
|
682
|
|
Accounts receivable—net
| |
264
| | |
235
|
|
Inventories
| |
446
| | |
309
|
|
Prepaid income taxes
| |
1
| | |
28
|
|
Other current assets
| |
30
|
| |
20
|
|
Total current assets
| |
1,412
| | |
1,274
|
|
Property, plant and equipment—net
| |
8,471
| | |
8,623
|
|
Investment in affiliate
| |
100
| | |
93
|
| Goodwill | |
2,360
| | |
2,353
|
|
Operating lease right-of-use assets
| |
285
| | |
—
|
|
Other assets
| |
314
|
| |
318
|
| Total assets | |
$
|
12,942
|
| |
$
|
12,661
|
| | | |
|
| Liabilities and Equity | | | | |
|
Current liabilities:
| | | | |
|
Accounts payable and accrued expenses
| |
$
|
432
| | |
$
|
545
|
|
Income taxes payable
| |
3
| | |
5
|
|
Customer advances
| |
301
| | |
149
|
|
Current operating lease liabilities
| |
85
| | |
—
|
|
Other current liabilities
| |
5
|
| |
6
|
|
Total current liabilities
| |
826
|
| |
705
|
|
Long-term debt
| |
4,700
| | |
4,698
|
|
Deferred income taxes
| |
1,135
| | |
1,117
|
|
Operating lease liabilities
| |
203
| | |
—
|
|
Other liabilities
| |
408
| | |
410
|
|
Equity:
| | | | |
|
Stockholders’ equity
| |
2,955
| | |
2,958
|
|
Noncontrolling interests
| |
2,715
|
| |
2,773
|
|
Total equity
| |
5,670
|
| |
5,731
|
| Total liabilities and equity | |
$
|
12,942
|
| |
$
|
12,661
|
| | | | | | |
|
| CF INDUSTRIES HOLDINGS, INC. |
| SELECTED FINANCIAL INFORMATION |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (unaudited) |
|
|
|
| Three months ended
March 31, |
| | 2019 |
| 2018 |
| | (in millions) |
| Operating Activities: | | | | |
|
Net earnings
| |
$
|
118
| | |
$
|
88
| |
|
Adjustments to reconcile net earnings to net cash provided by
operating activities:
| | | | |
|
Depreciation and amortization
| |
188
| | |
193
| |
|
Deferred income taxes
| |
14
| | |
29
| |
|
Stock-based compensation expense
| |
6
| | |
6
| |
|
Unrealized net loss (gain) on natural gas derivatives
| |
2
| | |
(3
|
)
|
|
Unrealized loss on embedded derivative
| |
1
| | |
—
| |
|
Loss on disposal of property, plant and equipment
| |
1
| | |
—
| |
|
Undistributed earnings of affiliate—net of taxes
| |
(8
|
)
| |
(3
|
)
|
|
Changes in:
| | | | |
|
Accounts receivable—net
| |
(28
|
)
| |
61
| |
|
Inventories
| |
(101
|
)
| |
(97
|
)
|
|
Accrued and prepaid income taxes
| |
24
| | |
(14
|
)
|
|
Accounts payable and accrued expenses
| |
(65
|
)
| |
(24
|
)
|
|
Customer advances
| |
152
| | |
65
| |
|
Other—net
| |
2
|
| |
(19
|
)
|
|
Net cash provided by operating activities
| |
306
|
| |
282
|
|
| Investing Activities: | | | | |
|
Additions to property, plant and equipment
| |
(80
|
)
| |
(68
|
)
|
|
Proceeds from sale of property, plant and equipment
| |
5
| | |
8
| |
|
Distributions received from unconsolidated affiliate
| |
—
| | |
4
| |
|
Other—net
| |
—
|
| |
1
|
|
|
Net cash used in investing activities
| |
(75
|
)
| |
(55
|
)
|
| Financing Activities: | | | | |
|
Financing fees
| |
—
| | |
1
| |
|
Dividends paid on common stock
| |
(67
|
)
| |
(70
|
)
|
|
Distributions to noncontrolling interests
| |
(86
|
)
| |
(59
|
)
|
|
Purchases of treasury stock
| |
(87
|
)
| |
—
| |
|
Issuances of common stock under employee stock plans
| |
2
| | |
2
| |
|
Shares withheld for taxes
| |
(4
|
)
| |
(1
|
)
|
|
Net cash used in financing activities
| |
(242
|
)
| |
(127
|
)
|
|
Effect of exchange rate changes on cash and cash equivalents
| |
—
|
| |
1
|
|
|
(Decrease) increase in cash and cash equivalents
| |
(11
|
)
| |
101
| |
|
Cash and cash equivalents at beginning of period
| |
682
|
| |
835
|
|
| Cash and cash equivalents at end of period | |
$
|
671
|
| |
$
|
936
|
|
| | | | | | | |
|
CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL
INFORMATION
NON-GAAP DISCLOSURE ITEMS
Reconciliation of net earnings attributable to common stockholders,
net earnings attributable to common stockholders per ton and net
earnings attributable to common stockholders as a percent of net sales
(GAAP measures) to EBITDA, EBITDA per ton, EBITDA as a percent of net
sales, adjusted EBITDA, adjusted EBITDA per ton and adjusted EBITDA as a
percent of net sales (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 interests.
The company has presented EBITDA, EBITDA per ton and EBITDA as a percent
of net sales 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
included in EBITDA as summarized in the table below. The company has
presented adjusted EBITDA, adjusted EBITDA per ton and adjusted EBITDA
as a percent of net sales 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
March 31, |
| | 2019 |
| 2018 |
| | (in millions) |
|
Net earnings
| |
$
|
118
| | |
$
|
88
| |
|
Less: Net earnings attributable to noncontrolling interests
| |
(28
|
)
| |
(25
|
)
|
|
Net earnings attributable to common stockholders
| |
90
|
| |
63
|
|
|
Interest expense—net
| |
56
| | |
57
| |
|
Income tax (benefit) provision
| |
(8
|
)
| |
17
| |
|
Depreciation and amortization
| |
188
| | |
193
| |
|
Less other adjustments:
| | | | |
|
Depreciation and amortization in noncontrolling interests(1) | |
(23
|
)
| |
(26
|
)
|
|
Loan fee amortization(2) | |
(2
|
)
| |
(2
|
)
|
|
EBITDA
| |
301
|
| |
302
|
|
|
Unrealized net mark-to-market loss (gain) on natural gas derivatives
| |
2
| | |
(3
|
)
|
|
Loss (gain) on foreign currency transactions including intercompany
loans
| |
2
| | |
(5
|
)
|
|
Costs related to acquisition of TNCLP units
| |
—
|
| |
2
|
|
|
Total adjustments
| |
4
|
| |
(6
|
)
|
|
Adjusted EBITDA
| |
$
|
305
|
| |
$
|
296
|
|
| | | |
|
|
Net sales
| |
$
|
1,001
| | |
$
|
957
| |
|
Tons of product sold (000s)
| |
4,087
| | |
4,303
| |
| | | |
|
| Net earnings attributable to common stockholders as a percent of
net sales | | 9.0 | % | | 6.6 | % |
| Net earnings attributable to common stockholders per ton | | $ | 22.02 | | | $ | 14.64 | |
| EBITDA as a percent of net sales | | 30.1 | % | | 31.6 | % |
| EBITDA per ton | | $ | 73.65 | | | $ | 70.18 | |
| Adjusted EBITDA as a percent of net sales | | 30.5 | % | | 30.9 | % |
| Adjusted EBITDA per ton | | $ | 74.63 | | | $ | 68.79 | |
| | | | | | | |
|
|
_______________________________________________________________________________
|
| (1) |
| For the three months ended March 31, 2019, amount relates only
to CFN, as we purchased the remaining publicly traded common units
of Terra Nitrogen Company, L.P. (TNCLP) on April 2, 2018. For the
three months ended March 31, 2018, amount includes $22 million
related to CFN and $4 million related to TNCLP. |
| (2) | | Loan fee amortization is included in both interest expense—net
and depreciation and amortization. |
| |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20190501006025/en/
Media
Chris Close
Director, Corporate Communications
847-405-2542
- cclose@cfindustries.com
Investors
Martin
Jarosick
Vice President, Investor Relations
847-405-2045 - mjarosick@cfindustries.com
Source: CF Industries Holdings, Inc.