DEERFIELD, Ill.- CF Industries Holdings, Inc. (NYSE: CF), a leading global fertilizer and chemical company, today announced results for its first quarter ended March 31, 2020.
Highlights
First quarter net earnings of $68 million(1), or $0.31 per diluted share; EBITDA(2) of $314 million; adjusted EBITDA(2) of $318 million
Trailing twelve month net cash from operating activities of $1,491 million, free cash flow(3) of $912 million
Company operations and logistics capabilities have not experienced pandemic-related disruptions to date
Ongoing focus on protecting health and well-being of employees during COVID-19 pandemic
Lowest 12-month rolling average recordable incident rate in company's history as of March 31, 2020
Gross ammonia production of 2.7 million tons, second highest quarterly volume in company history
Company record first quarter granular urea and diesel exhaust fluid sales volumes
'The CF team is performing exceptionally well in a very difficult and uncertain environment created by the COVID-19 pandemic,' said Tony Will, president and chief executive officer, CF Industries Holdings, Inc. 'We are operating safely, achieving high asset utilization rates and reliably supplying our customers as we enter the peak spring demand period in North America and the United Kingdom. Our unwavering focus on protecting the health and well-being of our employees will support our ability to continue to operate strongly. This will serve us well as we meet the anticipated high demand for nitrogen in North America this spring.'
Operations Overview
To this point, CF Industries' operations, which are designated as part of the 'critical infrastructure' in each country in which it operates, have not been disrupted by the COVID-19 pandemic, and the company has continued to operate safely and efficiently. As of March 31, 2020, the company's 12-month rolling average recordable incident rate was 0.34 incidents per 200,000 work hours, the lowest level ever recorded by the company. Gross ammonia production for the first quarter of 2020 was approximately 2.7 million tons, which is the second highest quarterly volume in company history.
(1)
Certain items recognized during the first quarter of 2020 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.
CF Industries is actively managing and responding to the COVID-19 pandemic, focusing on protecting the health and well-being of employees and contractors at its locations. The company has taken, and continues to add, precautionary measures across its network to limit potential exposure to the virus. These include shift schedule changes, changes to loading and shipping procedures, social distancing, remote work arrangements for non-operational employees, temperature screening, maintaining a close contact log for employees, self-quarantine logs, requiring face coverings onsite, restricting visitor access, enhanced cleaning protocols and travel restrictions for employees. Since the onset of the pandemic, CF has only had a very small number of employees test positive for COVID-19, which has not affected the company's ability to maintain safe staffing levels. All of the employees who tested positive have fully recovered and have returned to work.
Additionally, the company has been in constant contact with its transportation partners to understand their preparations and contingency plans for the pandemic. It has also engaged customers regularly to offer flexible solutions to ensure their nitrogen requirements are met. The company believes the fertilizer supply chain is operating efficiently.
Financial Results Overview
For the first quarter of 2020, net earnings attributable to common stockholders were $68 million, or $0.31 per diluted share; EBITDA was $314 million; and adjusted EBITDA was $318 million. These results compare to 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.
Net sales in the first quarter of 2020 were similar to the first quarter of 2019. Average selling prices for the first quarter of 2020 were lower than the first quarter of 2019 across all segments due to increased global supply availability as lower global energy costs drove higher global operating rates. This was mostly offset by higher sales volumes across all segments for the first quarter of 2020 compared to the first quarter of 2019.
Cost of sales for the first quarter of 2020 were slightly lower than the first quarter of 2019 due to lower realized natural gas costs and lower maintenance costs, offset by the impact of higher sales volumes.
In the first quarter of 2020, the average cost of natural gas reflected in the company's cost of sales was $2.61 per MMBtu compared to the average cost of natural gas in cost of sales of $3.68 per MMBtu in the first quarter of 2019.
Capital Management
As of March 31, 2020, the company had cash and cash equivalents of $753 million on the balance sheet. This included $500 million in borrowings under its $750 million revolving credit facility, which was drawn in March to ensure the company had sufficient liquidity should credit markets not function properly due to the COVID-19 pandemic. Subsequent to quarter end, the company repaid the borrowings in full due to confidence in the stability of and ready availability of liquidity in credit markets and strong nitrogen fertilizer business conditions.
Capital expenditures in the first quarter of 2020 were $67 million. The company anticipates that capital expenditures for the full year of 2020 will be in a range of $350 to $400 million. This is lower than its previous estimate of $400 to $450 million due to certain activities likely to be deferred as a result of the COVID-19 pandemic.
The company repurchased approximately 2.6 million shares for $100 million during the first quarter of 2020. Since the share repurchase authorization was announced in February 2019, the company has repurchased approximately 10.2 million shares for $437 million.
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 2020 is approximately $40 million.
Market Outlook
In the near-term, CF expects positive global nitrogen demand driven by an increase in nitrogen-consuming planted corn and coarse grain acres in North America in 2020 compared to 2019. The company anticipates 92-94 million acres of corn will be planted in the U.S. in 2020, below the U.S. Department of Agriculture's March forecast of 97 million acres. The company believes its forecast is supported by favorable planting conditions across most of North America, farm-level income support such as crop insurance and pandemic-related government payments, and the strongest movement of ammonia for spring fertilizer application from the CF system in any April since 2015.
Global nitrogen requirements have been underpinned by demand for urea imports to India and Brazil. India executed its first urea tender of 2020 in late March and issued its second tender in late April. Urea tender volumes in India in 2020 may ease from 2019's record high based on less favorable growing conditions and new domestic urea capacity. Demand for urea imports to Brazil is expected to be higher in 2020 compared to 2019, as domestic urea production is projected to remain shut down throughout the year.
CF continues to monitor the impact of the COVID-19 pandemic on near-term global nitrogen supply and demand. Announced outages due to the pandemic include certain nitrogen facilities in India and France. Additionally, new nitrogen capacity under construction may experience labor and equipment issues related to the pandemic that delay project completion and commissioning. The company believes nitrogen demand for industrial applications, such as explosives and emission abatement, have been affected by the COVID-19 pandemic. The company expects this to extend through the remainder of the year as current economic activity remains low due to efforts to slow the spread of COVID-19. There is also uncertainty regarding the factors that influence farmers' planting decisions in 2021, such as ethanol demand, feed demand, exports, and potential governmental policy responses to these factors.
The company expects North American nitrogen production facilities to remain at the low-end of the global nitrogen cost curve for the foreseeable future due to their access to low-cost North American natural gas. Additionally, the company projects that Chinese anthracite coal-based nitrogen complexes will remain the global marginal urea producer and thus set the global price. Forward energy curves suggest the cost advantage per metric ton of urea for North American producers in 2020 should remain well over $100 compared to Chinese anthracite-coal based producers despite lower global energy costs. This is approximately 20-35 percent higher than the cost advantage realized in 2016 and 2017. The company believes this cost advantage, along with its high-performing team, consistently high operating rate and distribution and logistics capabilities, will continue to support its substantial cash generation capability.
Consolidated Results
(1)
Included in cost of sales in our consolidated statements of operations.
(2)
Included in other operating-net in our consolidated statements of operations.
(3)
Represents proceeds related to an insurance claim at one of our nitrogen complexes. Consists of $8 million related to business interruption insurance proceeds and $2 million related to property insurance proceeds.
(4)
Included in income tax provision (benefit) in our consolidated statement of operations.
See full release at:
http://www.snl.com/IRW/file/4533245/Index?KeyFile=403896468
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.
CF INDUSTRIES HOLDINGS, INC. 
