Q4 2024 CF Industries Holdings Inc Earnings Call
Good day ladies and gentlemen, and welcome to CF Industries full year and fourth quarter 2024 conference call. All participants will be in listen-only mode.
Do you have industries reported its results for the full year and fourth quarter of 2024. It yesterday afternoon on this call.
I'll discuss our outlook and then host a question and answer session.
Statements made on this call and in the presentation on our website that are not historical facts are forward looking statements.
These statements are not guarantees of future performance and involve risks uncertainties and assumptions that are difficult to predict therefore actual outcomes and results may differ materially from what is expressed or implied in any statements.
More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available on our website also you'll find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website now.
Speaker Change: Now, let me introduce Tony well.
Tony: Thanks, Martin and good morning, everyone yesterday afternoon, we posted results for the fourth quarter of 2024 in which we generated adjusted EBITDA of $562 million adjust.
Tony: Adjusted EBITDA for the full year was $2 $3 billion. This strong.
Tony: Performance enabled us to return $1 $9 billion to our shareholders through dividends and share repurchases in 2024, which is our highest level of capital returned in more than a decade.
Tony: The CF team is operating at a high level it would be.
Tony: Our strategic initiatives and most importantly, working safely.
Tony: Given our fully engaged employees, our low cost manufacturing system with the highest onstream factors in the industry.
Tony: Our expansive distribution and logistics network and very constructive nitrogen industry fundamentals, we are well positioned to continue our track record of generating superior free cash flow.
Tony: Enables the company to both grow and returned substantial capital to shareholders.
Tony: With that I'll turn it over to Chris to provide more details on our operating results and the status of key initiatives Chris. Thanks.
Chris: Thanks, Tony.
Chris: Production network operated extremely well through year end, we produced over 2.6 million tons of gross ammonia in the fourth quarter, which reflects a 100% ammonia utilization rate.
Chris: We finished the year with $9 8 million tons of gross ammonia production.
Chris: Our manufacturing network has continued to operate well to start 2025 and did not experience any significant disruptions from recent winter weather events, we expect to produce approximately 10 million tons of gross ammonia in 2025.
We are making good progress on our key strategic initiatives.
Chris: Completion of our carbon capture and sequestration project at or Donald symbol complex his insight.
Chris: Commissioning activities for the carbon dioxide dehydration and compression unit have begun alongside final construction activities.
Chris: We expect startup of carbon sequestration M 45, you shoot tax credit generation this year.
Chris: Our evaluation of a greenfield low carbon ammonia plant at our Bluepoint complex in Louisiana is also nearing completion as Greg will detail. Shortly we completed the feed study for an auto thermal reforming ammonia plant, marking a major milestone towards this strategic initiative.
Chris: We continue we continue to assess the project in light of our outlook for the global nitrogen supply demand balance customer requirements for carbon intensity and the regulatory environment.
Chris: We are working to complete the partnership structure.
We expect that our ownership of the project will range from 40% to 75% depending on the number of equity partners at the outset.
Chris: If we were to make a positive final investment decision at a 75% ownership level.
Chris: We believe we would have the option to sell down that level. If we chose to given ongoing discussions with other potential partners.
Chris: We continue to target the first quarter of 2025 for final investment decision.
Chris: With that let me turn it over to Bert to discuss the global nitrogen market.
Bert: Thanks, Chris.
Speaker Change: The industry has had a positive fourth quarter of 'twenty 'twenty four that is carrying over into 2025.
Speaker Change: Had a very strong fall ammonia application season, and have built a strong order book for all products as retailers and wholesalers, Larry and product tons, what they believe will be a good spring application season.
Speaker Change: We ended the year at lower than average inventory levels in our network and believe the North American channel is at low levels as well due to the lower than normal imports into North America.
Speaker Change: As we move into the fourth quarter global nitrogen market participants began to appreciate how much the global supply demand balance has tightened.
Speaker Change: Or was this more evident than India's inability to secure the volumes they targeted for the last two urea tenders.
Speaker Change: Given the high urea consumption in the country and lower than targeted production, we expect India to issue. Another tender later in the first quarter, just as northern hemisphere demand ramps up for spring.
Demand that we expect to be very strong.
Speaker Change: Whereas corn stocks and world corn stocks to use ratios, excluding China part of 13, and 30 year low respectively.
Speaker Change: Given the need to replenish global corn stocks of corn to soybean ratio of favorable to corn, we expect robust planted corn acres and strong nitrogen demand in the United States in 2025.
Speaker Change: Longer term, we expect the global nitrogen supply demand balance to tighten through the end of the decade.
Speaker Change: Capital availability long term feedstocks.
Speaker Change: And costs and global events have limited the number of new projects as a result projected new capacity growth is not keeping pace with demand growth for traditional fertilizer and industrial applications.
Speaker Change: We believe demand for low carbon ammonia furlough for new applications, such as power generation.
Speaker Change: Further tighten the global supply demand balance with that Greg will cover our financial performance. Thanks.
Speaker Change: For the full year 2024, the company reported net earnings attributable to common stockholders of approximately $1 2 billion or $6.74 per diluted share.
Speaker Change: EBITDA and adjusted EBITDA were both approximately $2 $3 billion.
Speaker Change: For the fourth quarter of 2024, the company reported net earnings attributable to common stockholders of approximately $328 million or $1.89 per diluted share.
Speaker Change: EBITDA was $582 million and adjusted EBITDA was $562 million.
Speaker Change: Net cash from operations was $2 $3 billion and free cash flow was approximately 1.4 of $5 billion, we continue to be efficient converters of EBITDA to free cash flow.
Speaker Change: Our cash flow to adjusted EBITDA conversion rate for the year was 63%, which far exceeds our peers as you can see on slide five.
Speaker Change: We returned approximately $1 $9 billion to shareholders. In 2024. This included $364 million in dividend payments and over $1 $5 billion in share repurchases for the year, we repurchased 18 8 million shares representing 10% of the outstanding shares at the beginning of 2020.
Speaker Change: Four.
Entering 2025, we had a little over $1 billion remaining on our current share repurchase authorization, which we intend to complete before its expiration in December.
Speaker Change: Based on market capitalization at the start of the year, we have the capacity to repurchase approximately 7% of our outstanding shares through the end of 2025.
Speaker Change: As Chris mentioned, we completed the feed study for a 1.4 million metric tons per year, ATR ammonia plant with carbon capture and sequestration technologies.
Speaker Change: The study estimates that the cost of a project with these attributes will be approximately $4 billion, which will be divided among the equity partners.
Speaker Change: At this level of capital investment within.
Speaker Change: With the incentives of carbon capture and ammonia price afford a $450 per metric ton, we'd expect to earn a return above our cost of capital.
Speaker Change: There was an additional $500 million required for scalable common infrastructure, which would be CF industries sole responsibility and could be leveraged for future growth at the blue planet complex.
Speaker Change: Should we move forward, we would expect the common infrastructure would also earn a rate of return above our cost of capital due to the payments from the ammonia plant owners for the use of the facilities.
Speaker Change: With that Tony will provide some closing remarks before we open up the call to Q&A.
Tony: Thanks, Craig before we move on to your questions I want to thank everyone at CF industries for their contributions in the fourth quarter and for the full year.
Tony: As a company we have a lot to look forward to in 2025.
Tony: From constructive global nitrogen industry dynamics to the startup of our first Ccs project and a final investment decision on our Bluepoint complex. We're excited for what's ahead.
Tony: Investing in our business to increase cash generation, while dramatically, reducing our share count has served our shareholders well.
Tony: As you can see on slide eight.
Tony: In the last decade since most of this team has been together running see US we have increased production capacity by almost 20%.
Tony: While reducing our shares outstanding by almost 30%.
Tony: What this drives has clearly shown on slide five of our deck and we have boxed the most relevant data.
Tony: And this is how we run our business to generate more free cash flow, while reducing our <unk>.
Tony: It is exactly this ratio that demonstrates the superiority of our business model.
Tony: In the very near term in this year of 2025, we have a couple of initiatives that will continue to build on this track record.
Tony: The 45 Q tax credits is expected to begin this year as we sequestered Cotwo Donaldson Bill.
Speaker Change: We will also complete our share repurchase authorization, which as Greg mentioned should take out enough. There another roughly 7% of our outstanding shares pro forma.
Speaker Change: Over the longer term, we expect investments in our network and low carbon ammonia production capacity will provide a robust growth platform for the company.
Speaker Change: Add to our cash generation and continued to drive that all important golden ratio shown on slide five creating substantial value for our long term shareholders.
Speaker Change: With that operator, we will now open the call to your questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys is there any time. Your question has been addressed and you'd like to withdraw. Your question. Please press Star then two at this time, well pause momentarily to assemble our roster.
Speaker Change: The first question comes from Joel Jackson with BMO capital markets. Please go ahead.
Hi, good morning.
Speaker Change: I wanted to ask you about your hedging are you talked about in the past couple of quarters that maybe you werent layering on as many.
Strips or hedging as you had passed what they can do quite well in Q4 to get ahead of the higher gas prices. We've now seen of course U S gas prices Serge If you talk about how open you are what your guys are like the Q1 Q2, and the rest of the year and you know.
Speaker Change: What we're seeing the more volatility Tony and team is this making you rethink your gas hedging strategy going forward. Thanks.
Bert: Hey, Good morning, Joel This is Bert and how we look at gas is how we look at the <unk>.
Bert: NAMIC nature of our business and it's just one reflection of that in terms of how we manage margin how we manage costs, how we manage capex gases substantial cost for us and we look at it holistically and so we have been much more in the cash market in 2024.
Bert: We do hedge front month for our gas contracts, but we've been much more opportunistic in 2020 for believing in the resource base that exists in North America for our system.
Bert: How we're looking at 2025 as we've approached it very similarly, where we were and have been hedging front month for our commitments and then just for the weather volatility of January and February as well and we anticipate that the gas team will continue to perform very.
Bert: Very well and positioned CF in a great place.
Bert: And Joel relative to the second half of your question I would just say we operate.
Bert: Vast vast majority of our production capacity and the best place on Earth to operate it which as you know North America with some of the largest resource most dependable.
Bert: Production and quickest to respond and so while we will continue to evolve our thinking around hedging and Burton and team kicked you continue to do that actively.
Bert: I think that the most important thing is where we built our plants.
Bert: And then if I can ask a second question.
Bert: Sure.
Bert: And arbitration I had last night and I'd like you to give me to comment on is you gave and I appreciate it and your sensitivity table that you do every year around now based on 2024 numbers, where you show you know what your EBITDA EBITDA level is integrated for different gas price realizations and different urea price realization it looks like when you.
Bert: Look at the 24 table versus twenty-three table on a similar volume of about 19 million times at any given cell in that grid, so any combination of Korea and gas prices.
Bert: Moving to EBITDA being maybe two or $300 million lower can you talk about what that means if it means anything yes. So so let me just describe how that grid is put together and it is not meant to be strictly speaking.
Speaker Change: Strike, Dave about what the future holds its based on last year's actual product price differentials between ammonia and urea urea and.
Speaker Change: Ammonium nitrate in the rest of the products and how they fit in there and so to the extent that in any given year, you see that differential between urea and.
Speaker Change: Say UA and move one direction or the other that's going to change kind of how that grid is.
Speaker Change: Is created because there is more or less value than across the system based on.
Speaker Change: Selling one ton of urea. So it's purely a heuristic, it's just a way to kind of sanity check the numbers, it's not a pinpoint estimate of where we're at to do that you'd really have to get into the details of where gas is really moving kind of across the network not just in the aggregate because of course, we're consuming the.
Speaker Change: As majority of our gas and the combination of.
Speaker Change: Henry hub and <unk>.
Speaker Change: And so you know what the other ones.
Speaker Change: What's the other pricing points trade at matters, but it's very specific to the.
Speaker Change: The year movements and the product movements and so you have to get a little more granular, but at the very high level that gives you kind of directional information of where it is and that's why it tends to move one year to the next it's strictly based on the previous year's differentials, Yes, Joe This is Kurt.
Speaker Change: The other thing I would add Tony you talked about the price and basically the relationship between each of the products, but additionally, since we are using a look back to 2020 for our cost structure is also the 'twenty 'twenty four cost structure and if you recall in Q1, we had pretty heavy maintenance events were at 115.
Speaker Change: And of the 17 ammonia plants needed maintenance and that was about $100 million to $150 million. So as Tony said, it's really indicative of what what's your could see for the year, but it is based off of our empirical data rather than what we expect for the go forward.
Speaker Change: Thank you.
Speaker Change: The next question comes from Chris Parkinson with Wolfe Research. Please go ahead.
Andrew: Hey, guys. Good morning, it's actually Andrew <unk> sitting in for Chris.
Speaker Change: How should the street think about 2025 cash conversion and the balance of uses between buybacks and then future Capex and then on top of that you know would you be able to talk about sort of the potential for long term off takes and conjunction with any bluepoint F. I D and how does that fit into the picture here as well.
Speaker Change: Andrew Thanks for the question, it's Greg I'll start and pass it over to Chris on the on the capital allocation for the year, we've outlined where our capex is expected to be.
Speaker Change: Over $500 million of our normal run that would obviously change if we went to a positive and we would update you on those numbers when we made that decision.
Speaker Change: On the capital allocation, we came into the year with a $1 billion 60 of share repurchase that we expect to get done by the end of the year and those would be our primary uses of cash don't expect any change in difference on our EBITDA conversion rate, we still expect to be a very very.
Speaker Change: Above our peer group on our ability to convert that EBIT out of free cash flow. So no change in that at all but we will update you on the Capex number when and if we make a positive and we've already laid out the share repurchase we expect to do for the year.
Speaker Change: Yeah, Andrew and in relation to our long term supply off take related to the Bluepoint project I think a lot of that is going to be dependent on where we end up from a partnership.
Speaker Change: Equity share piece, if we're at 75% that CF has as we go through as I mentioned, we are.
Speaker Change: Are having discussions with other global partners, who are interested in this particular facility with an offtake agreement that would happen there, but if we go with the 40% where we have the mitsui Jarrod in CF themselves a large portion of our product given that we purchased ammonia already for the year.
Speaker Change: K could find its way going to the U K and that that incremental amount that we would have for a long term off take contract would probably be smaller so a lot of it is going to be dependent on what is the final ownership structure that we'll know here in the next couple of weeks, but I would say back to Chris's point, there is a lot of interest.
Speaker Change: There and I think what you've seen is a bunch of these kind of people waiting in are making initial announcements and then getting cold feet and backing up has lagged a bit.
Speaker Change: Bit of pent up demand out there and so if we ultimately do go forward with a positive FID decision here I would expect there to be more than adequate demand for the production that we have left.
Speaker Change: The next question comes from Richard Garching Arena with Wells Fargo. Please go ahead.
Speaker Change: Great. Thanks for taking my question just.
Speaker Change: Yeah, just to follow up on the Bluepoint, obviously, a feed study completed negotiating with with the partners.
Speaker Change: There's still nothing determined yet but.
Speaker Change: Sounds like basically the the outlook.
Speaker Change: From a demand and end market perspective.
Speaker Change: You've found to be.
Speaker Change: Positive for.
Speaker Change: The projects, so I guess in terms of final.
Speaker Change: Yeah.
A decision.
Speaker Change: How much does the.
Speaker Change: The potential for 45 Q2 be changed I don't have any impact at all or is it really just a function of.
Speaker Change: Yep, marking down where you want to stay in terms of your equity stake.
Speaker Change: Whether it's 40% to 75% and then in terms of just all the.
Speaker Change: No final decisions with the partners.
Speaker Change: You know getting ratified.
Speaker Change: I think the big issue there, obviously, the 45 Q as a benefit to the to the project and the required.
Speaker Change: One price to earn above cost of capital return would go up if we didn't have a 45 Q, but theres nothing really that we're seeing you know on our end when when our government folks talk to.
Speaker Change: People in Washington that indicates to us that the 45 Q is in Jeopardy. I think if you know if you are banking on an EV subsidy or credit than you would have to think twice about it I think 45 Z in 45 the potentially.
Speaker Change: Potentially have a little more risk, but there's there's really been.
Speaker Change: No news from our perspective that jeopardizes the 45 Q. So we're pretty confident that that's going to stay in place and were making plans accordingly.
Speaker Change: But but but there's a lot of moving pieces out there.
Speaker Change: And Theres a lot of policy things that are that are uncertain at the moment.
Speaker Change: Of all the policy issues I think that one we feel probably the most certain of.
Speaker Change: And I do think.
Speaker Change: What what is kind of.
Speaker Change: That delay, but the process that we're going through is really.
Speaker Change: Dotting I's and crossing T's on all of the subsidiary contracts that go along with being able to actually build and move that thing forward. Its not so much with the partnership structure themselves because we feel really good about that as just kind of getting.
Speaker Change: All of the other you know EPC kind of stuff done.
Speaker Change: The next question comes from Lucas Belmont with UBS. Please go ahead.
Lucas Belmont: Hi, good morning.
Speaker Change: I'm just sort of continue on the prototype projects, so depending where you guys kind of come in there on that equity Ryan JP go ahead. It it could be quite it's pretty wide range from sort of $2 billion up to maybe three and a half or so.
Lucas Belmont: I think previously you sort of discuss the outlook there was <unk>.
Lucas Belmont: They will probably get delta of about four years and capital commitments more sort of back half weighted.
Lucas Belmont: Given given kind of the range youre putting out there now just wondering how you would look to kind of sum that would.
Lucas Belmont: Would you sort of add some more data in there.
Lucas Belmont: To do that I mean, it looks like potentially depending where I said about the process that you could do it.
Lucas Belmont: Our cash flow if you said it didn't have any repurchases anymore, but.
Lucas Belmont: Just wanted to kind of get your lightest latest thoughts on sort of how I.
Lucas Belmont: Is that progressing.
Lucas Belmont: Yes. Thanks for the question look it's Greg so when we look forward.
Lucas Belmont: And look at the commitment you are right. It is going to be determined by the size of the equity we have a commitment and where that ultimately ends up if you'd looked at it at the 40% and you thought about it over four years.
Lucas Belmont: And even including the common facilities is roughly about $500 million that we would need to create an addition.
Lucas Belmont: Even where we are in a free cash flow basis, and the investments that we tend to make within our network on a year to year basis, including the growth Capex that we put in.
Lucas Belmont: It's not dramatically larger, it's obviously larger but not dramatically larger so as we think about where we are from a capital standpoint, we've got $3 billion of debt. We've obviously got some of that coming due.
Lucas Belmont: Next year that we'll have to look into.
Lucas Belmont: But there's a bunch of options as we think about how we would fund it first starting with the cash that we have on the balance sheet and we go to cash from operations and to the extent we were mark to think about building. Some more security. There is a number of instruments, we could look at to Poland and we are in the process of evaluating that all right now.
Lucas Belmont: I think if you just look at last year we.
Lucas Belmont: We generated $1 4 billion of free cash and.
Lucas Belmont: We're going to spend $1 billion is as Greg said on or a little over on share repo that still leaves.
Lucas Belmont: Big chunk to be able to deploy against the other uses of cash and we ended the.
Lucas Belmont: The year with over $1 6 billion of cash on the balance sheet. So.
Lucas Belmont: Our uses of cash this year, even though we're going to buy a $1 billion of shares back out of the market is not going to dip very hard into R. R.
Lucas Belmont: Cash on the balance sheet and during this period of time.
Lucas Belmont: We have indications.
Lucas Belmont: The pricing environment today is stronger than it was a year ago, and so that portends very well for cash <unk> in 2025 for 2024.
Lucas Belmont: So I think all of that as a way of saying we think the.
Lucas Belmont: Our business model is kind of hitting.
Lucas Belmont: Really well and it.
Lucas Belmont: It gives us a lot of flexibility in terms of how do we think about about financing potential projects should we go forward.
Andrew Wong: The next question comes from Andrew Wong with RBC capital markets. Please go ahead.
Andrew Wong: Hey, good morning, Thanks for taking my questions.
So our long term focus for CF has been on increasing nitrogen production our participation per share over time, which has gone up pretty significantly.
When you look at Blue point, given the increase in Capex.
Andrew Wong: While the shares are roughly flat year over year right now like.
Andrew Wong: How would you compare the project versus potentially using that cash for more for buybacks in terms of raising that nitrogen per share metric and how does that factor into your decision on bluepoint, Yes, Andy.
Andrew Wong: Andrew I think throughout our.
Andrew Wong: This management team's time together you could have made that comment about anything that's gone on whether it was the acquisition of <unk> back in 2910.
Andrew Wong: Whether it was the construction of.
Andrew Wong: Our capacity expansion projects back in the 12 to 16 timeframe the acquisition of a third of medicine hat that we didnt own or the 15% of the verdict gross plant that was traded as an MLP.
Andrew Wong: Are those things you could have made that that same argument for and yet look at the share growth in terms of value. We've created over that period of time and so I think.
Andrew Wong: The general strategy and philosophy of if we can deploy capital in our core business and earn above the cost of capital rate of return.
Andrew Wong: And then for capital that is in excess of that we take down share count that is a winning formula and you know if you look at our 1357 10.
Andrew Wong: Year.
Andrew Wong: Saar against all of our competitive set we blow them out of the water. So it's just a it's a winning formula if we can.
Andrew Wong: <unk> be very focused deploy capital and things that we do better than anyone else, which is running ammonia plants.
Andrew Wong: I'm working on.
Andrew Wong: Perform better over the long run and that's how we're focused on running this company.
Speaker Change: Okay, Great and maybe just one more on bluepoint.
And then the commentary in the past with highlight how the project can make a good.
Speaker Change: And even now too can make a good risk adjusted return, even without an offtake or some sort of blew ammonia premium.
Speaker Change: And I understand Youre looking at Phi and you're still thinking that that's going to be the case, but.
Speaker Change: Capex has gone up quite significantly from the beginning of when we started seeing some of the numbers like last year like.
Speaker Change: Much.
Speaker Change: What's changed on that return profile of silence.
Speaker Change: Still the case.
Speaker Change: It's really based on where ammonia pricing is.
Speaker Change: And in the market and as Greg mentioned earlier.
Speaker Change: What we need is an ammonia price.
Speaker Change: <unk>.
Speaker Change: $4 50 per Mad so call it <unk> for short.
Speaker Change: And the average selling price we had in <unk>.
Speaker Change: Last year was above that and so we.
Speaker Change: Where the market is right now would support a project with an above the cost of capital rate of return.
Speaker Change: And we expect as Chris mentioned, the market to tightened rather than.
Speaker Change: Get get slack and so there's a lot about just industry fundamentals that we feel we're in the best place to.
Speaker Change: To really be able to exploit again, given our operating history with these kind of assets. The other thing I would say as Bert has done a great job of being out there working with customers on.
Speaker Change: The low carbon intensity or blue product coming out of Donaldson Bill that we're going to be generating here later this year and he is seeing an.
Speaker Change: The ability for the market to pay in.
Speaker Change: Premium on that so thats before we even get into the premium we're just saying we can.
Speaker Change: This project is.
Speaker Change: As an interesting investment for us before the premium.
Speaker Change: The other thing I would add this is Chris is that when we were looking at some of those capex numbers about a year ago. Those capex were based on that some more technology. So existing what we have in our plants. The ACR technology give us two different things one about 10% more in production, even just at nameplate than what we're producing.
Speaker Change: Our other units and then also 50% greater carbon capture.
Speaker Change: The 45 to that allows a significant benefit there so with those two additional pieces put in I would also say if <unk> been following CF long enough you would understand that we're a pretty conservative company and we model things straight so we haven't taken into account.
Speaker Change: Increased utilization rates, which we've been able to perform on not only assets, we built but assets. We've acquired Additionally, if there is any low carbon premium that Tony announce or suggested there and then lastly would be anything related to the C band that would give us.
Speaker Change: A bit of a fast mover advantage, where we would see additional margin and then lastly, I'd just add this new technology and what we'd be doing is why we have the partners. We have it's fostering new demand that just makes that balance that we believe is tight enough just with conventional ammonia all the tighter by the time this particularly.
Speaker Change: Plant comes online.
Speaker Change: Okay. Thank you very helpful.
Speaker Change: The next question comes from Chris <unk> with Oppenheimer. Please go ahead.
Speaker Change: Hi, Good morning, Thank you for taking the question.
Speaker Change: Wanted to ask a little bit more on some of the fundamentals for 2025.
Speaker Change: Typically your your expectation that things really remaining quite tight and the customer has changed or at least been fairly volatile over the last several weeks and I'm. Just wondering can you can you speak to what.
Speaker Change: What your expectations are in terms of the cost curve now with a potential resolution between U S and Ukraine on the table and then I have a follow up question.
Speaker Change: Yeah. Good morning, Chris This is Bert.
Speaker Change: We do see the fundamentals they have improved and they are improving.
Speaker Change: When you look at what has transpired globally, you do have a tight.
Speaker Change: Nitrogen balance and Thats driven by very healthy demand.
Speaker Change: In India, and Brazil, and a lot of secondary countries like secondary in terms of demand of urea, Australia, Argentina, South Africa, Thailand.
Speaker Change: Turkey have pulled more in 2024 than they have historically.
Speaker Change: And then you look at the tight corn balance that we've talked about for stocks to use ratios, whether thats domestic or globally and where we are.
It's very comparison to 2012 to 2013, where we saw very nice rally in the price of corn, that's driving acres and additional acres to corn and I would have said a couple of months ago. We would've expected 90 91 million acres of corn and today, we've talked about 93, but I would say that to the positive and every 1 million acres that comes in is just that.
Speaker Change: Additional nitrogen demand that has to be satisfied.
Speaker Change: And to date, we're behind in North America, we're behind on imports of urea of UA in and we're very close to the beginning spring application season that could begin as early as March and so that product has to be put into position for supply so tight North America tight globally.
Speaker Change: And the fundamentals of where we are with gas.
Speaker Change: <unk>.
Speaker Change: Europe production is down or some other 20% to 30% of it is and so you have a tight demand market for the products that use that Jim being corn you have a tight.
Speaker Change: Applied market with.
Speaker Change: Product needed in a number of places.
Speaker Change: India tender in the next couple of weeks it gets even tighter and so.
Speaker Change: So relative to the cost curve, then we're at $3 to $4 gas in North America and the world for.
Speaker Change: For LNG or of JK, Ameren, TTS being Japan, and Europe are at 14 to $15. So your cost curves you need to bid in very expensive tons to satisfy this global.
Speaker Change: Demand that's coming.
Speaker Change: And your last question about Russia and Ukraine.
Speaker Change: I would say it really doesn't matter right now Russian tons have been making it out throughout the last couple of years, even with sanction and I would just say, we certainly all hope for a resolution to the conflict ending the suffering and damage going on over there.
Speaker Change: Birch point all of the Russian production is making its way out into the global marketplace. So that doesn't change.
Speaker Change: And our expectation is it would take quite some time too.
Speaker Change: Get you know.
Speaker Change: Additional production, whether that be eastern Europe, or western Europe, or even Ukraine kind of back up and running and its going to Miss the first half of it the <unk>.
Speaker Change: Location season in the northern Hemisphere anyway, and so.
Bert: From our perspective, the first half while I wouldn't call. It baked yet is looking very positive based on the factors that Bert just highlighted there.
Bert: But we're certainly all hoping for for a peaceful resolution to that in other conflicts going.
Bert: Thank you for that color one one follow up question related to year end production and you did call out some of the maintenance costs last year. Some of the shut downtime that you experienced in Q1.
Bert: We should be thinking about here in the first quarter given some of the early year ice storms across the southeast.
Bert: How that will compare or influence your outlook. Thank you.
Bert: Yes, so as I.
Bert: And in the prepared remarks through Q1, so far the the manufacturing operations have been operating.
Bert: As well as they were in Q4, even with some of the significant weather events. Some of that is from the learnings that we had last year.
Bert: And just the team is doing an outstanding job at particular sites.
Bert: The 10 million ton gross ammonia number which is higher than the $9 8 million. We did this year is still our expectation for full year 2025.
Bert: Thank you.
Speaker Change: The next question comes from Stephen Byrne with Bank of America Securities. Please go ahead.
Speaker Change: Yes, Thank you Bert I'd like to hear.
Speaker Change: Your view on your order book through.
Speaker Change: Through the rest of the first quarter.
Speaker Change: And what that order book looks like for the second quarter, how would you compare it to.
Speaker Change: Historical levels as of mid February and does this reflect your views.
Speaker Change: We're being the U S being behind on imports.
Speaker Change: Yeah. Thanks for the question, Steve and we're pleased with our order book I think the team has done a great job.
Speaker Change: Of watching participating and layering in <unk>.
Speaker Change: Normally in this time of year, we try to be I would say most periods were one to two months sold or with orders on the books.
Speaker Change: This year had been a little bit different because of the positive anticipation that we saw with relative to the last question on a tight market.
Speaker Change: Some dynamics globally that are taking place.
Speaker Change: We positioned ourselves well and have been capturing as the market has escalated to what you've seen over the last eight weeks has been pretty amazing we've seen 100 dollar rally in urea at NOLA.
Speaker Change: From about 320 to 420, which has since stalled out but we believe.
Speaker Change: That youre going to see additional demand we're behind on imports as I said earlier and we believe you need to bring in seven to 800000 tonnes per month March April may to satisfy demand as well as domestic production to remain fully operating.
Speaker Change: And so as we look to Q2, we've got a lot of open orders to satisfy.
Speaker Change: And we will be executing that into the market in <unk>.
Speaker Change: Chris said earlier, our plants are operating at a 100% and were positioning product now for that eventual demand.
Speaker Change: So that gives you the Q1 Q2 outlook.
Speaker Change: Great. Good. Thank you and just wanted to follow up a little bit on the on the brownfield project diesel.
Speaker Change: Ammonia.
Speaker Change: Do you have any.
Speaker Change: Any idea when that actually could start up I'm not sure whether you are still in installation or whether you are in commissioning mode, but do you have a better idea of when that might start.
Speaker Change: More importantly, do you have do.
Speaker Change: Do you have an order book for that being the ammonia that you could be selling sometime this year.
Speaker Change: And does it not make some sense to wait for that to be on stream and to see.
Speaker Change: What demand really looks like when you have that product available before you commit to a deal on the Greenfield project.
Speaker Change: I think theres, a theres a bunch of questions in there.
Speaker Change: We'll start off with.
Speaker Change: How.
Speaker Change: The dehydration and compression plant coming one to call out and then what's the.
Speaker Change: Whats the premium or the demand profile look like in that at all.
Speaker Change: I'll finish up with the answer to the last one but.
Speaker Change: So Steve.
Speaker Change: Steve This is Chris So we're continuing we are not in commissioning yet so we're still in installation, but our expectation is that we will finish that.
Speaker Change: Here in second quarter.
Speaker Change: What we're looking at is that we are being commissioning and ready to begin sequestering it.
Speaker Change: Really second quarter first half second half of the year here as we look at that we continue to work with Exxon as they're evaluating different areas for their classics permit that they have in there given the flexibility they have with the <unk> pipeline. So all that continues to move well and so I would say.
Speaker Change: Hey.
Our estimation is by the second half of this year, we will have low carbon product that we can feed to Bert and his team at <unk>.
Speaker Change: Guarding the premium.
Been actively discussed.
Speaker Change: Discussing marketing and preparing for that whether that be ammonia or upgraded product.
Speaker Change: The first.
Speaker Change: Mover it looks to be industrial where we have a number of.
Speaker Change: Participants are customers desiring to have low carbon products in their system and then were working obviously agriculturally with our co op and retail customers to market a whole package to the farming community of how that can benefit their system and their carbon scores and so yes.
Speaker Change: I do believe there will be a premium and yes that product is coming for the back half of the year and final finally, Steve because of the success <unk> had in the level of interest that he has had.
Speaker Change: We don't need to wait until we're producing it we've already.
Speaker Change: <unk> got registration of interest for more parties and we have tons to be able to sell at this point and again, let me just remind you of the.
Speaker Change: Kind of the math on on the New project. So if its one 4 million tons and we get <unk>.
Speaker Change: At 50% share just say.
Speaker Change: A number.
Speaker Change: We're looking at 700000 as Chris mentioned, we're going to consume 350000 tons of that in our.
Speaker Change: Upgrade in plants in the U K, so we will have a.
Speaker Change: Low carbon.
Speaker Change: And product.
Speaker Change: In the UK with access to the European market that only leaves us $300 350000 tons left to go.
In terms of <unk>.
Speaker Change: Places to sell it and we have more than enough interest to be able to move that because we've already got expressions of interest that can consume the full 2 million tonnes coming out of D. Ville.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: The next question comes from Vincent Andrews with Morgan Stanley. Please go ahead.
Vincent Andrews: Thank you and good morning, everyone.
Speaker Change: Just on Bluepoint, if I could ask you Tony the $4 billion 500 million I assume that's the standard midpoint of theirs.
Speaker Change: Plus or minus 15% on that or is there something different about this and then is there any part of that that you think you can really lock in.
Speaker Change: Whether it's labor equipment, what have you to really sort of ring fence the.
Speaker Change: The risk around that that estimate.
Speaker Change: Moving too far in the wrong direction, yes.
Speaker Change: And thanks for the question.
Speaker Change: This is a little bit different than the mid point of the estimate.
Speaker Change: We sort of learned our lesson last time, when we began this project back in 2012, which was more or less the midpoint and then we saw escalation happened then and it was a painful process to have to.
Speaker Change: Get out there on conference calls and talk about it.
Speaker Change: Delays in overruns so.
I would call. This a number that we're putting forward to the marketplace that we feel highly confident in our ability to achieve.
Speaker Change: And theres quite a bit of contingency baked into that so if you. If you just think about the $4 billion for the plant itself.
Speaker Change: We are taking a different approach the previous projects or what I would call stick construction, where everything was individually built and in this approach we're doing more modular construction.
Speaker Change: We're large sections of the plant will be constructed overseas shift here and then they are basically positioned and put together.
Speaker Change: Because of that we can take almost $2 billion of the production and have it be lump sum fixed.
Speaker Change: In terms of these module construction, so the amount of kind of potential.
Speaker Change: Open to overrun is dramatically reduced in this instance relative to the way we approach. These in the past and then Theres other sections, whether it's the ammonia storage tanks of the docs or a variety of other things that we can convert into fixed fee.
Speaker Change: Arrangements as well so there's there's much less I would call at risk in that.
Speaker Change: Quote, which is why we're highly confident we can deliver the project.
Speaker Change: The only thing I would add to that is.
Speaker Change: On those last projects.
Speaker Change: Really cause the cost overrun was the labor expense and as Tony mentioned with process modules a lot of that labor percentage is going to be significantly lower than what we've seen in the past. So for instance on.
Speaker Change: On those particular projects. We may have had 5000 contractors on site at one point and this particular one maybe at peak, we would have 500, because so much of it would already be modular wise and that we feel comfortable with within that contingency. The other part I would say that is probably one of the primary differences just beyond.
Speaker Change: The experience of the team has been doing the last projects as we did a complete feed study. This time, we've been analyzing this for over two years, what would be the best technology.
Speaker Change: Understanding.
Speaker Change: Exactly how we would go about doing this if you think about the last project our speed to move as fast as we could we didn't even have a full feed studies on those particular, so I think the planning process.
Speaker Change: The reduction in actual construction labor.
Speaker Change: <unk>.
Speaker Change: Is going to be helpful. In this as well.
Okay, and just as a follow up on the 40 versus 75%.
Speaker Change: I mean, it sounds like you're very confident in terms of the demand outlook and so forth. So I'm just curious why why.
Speaker Change: Whats going to drive the Delta for you between the 40 and 75% I mean, one case you have complete control over the project and the other case you Don.
Speaker Change: So what is it what makes it in your best interest to bring it down to 40% versus just going out at 75%, Yes I think.
Speaker Change: To be perfectly honest, it's whether it's with one partner or two.
Speaker Change: <unk>.
Speaker Change: We have received very strong.
Speaker Change: Degree of confidence that it's going to be both partners and because we have been on this journey for such a long time, we've made a commitment to them that they are and if they want to be yet.
Speaker Change: And so.
Speaker Change: But you know that over the finish line until everyone signs on the dotted line and you make an announcement, but thats the different end at the end of the day part of what we're trying to do with this this first plant is to help spur development of new applications for clean ammonia because we think that's just good for our biz.
Speaker Change: In general good for the World from an environment standpoint.
Speaker Change: And having.
Speaker Change: Or people involved that are going to be direct to consumers and take this all the way to it.
Speaker Change: Two its final use.
Speaker Change: Yes, I think good in helping develop this marketplace and so we're.
Speaker Change: We're doing a little I would call primary demand stimulation by having these people participate with us.
Speaker Change: Thank you very much.
Speaker Change: The next question comes from Edlin Rodriguez with Mizuho. Please go ahead.
Edlin Rodriguez: Thank you and good morning, everyone. A quick one for me I think earlier you talked about the positive drivers for the nitrogen market.
Edlin Rodriguez: You see any risk at all that could have an impact on supply demand and prices like any concerns whatsoever with that.
Edlin Rodriguez: We should be thinking of.
Edlin Rodriguez: Yes. Thanks for the question that land and I always look at the risks and I always.
Probably say two items I'm, probably a nitrogen nerd when it comes to following the global markets user suppliers consumers and where thats going to go and how it's going to go and we model that out on a continual basis with what's going on in the world and feathering in geopolitical impacts and so where we are on the drivers it is.
Edlin Rodriguez: Strict supply and demand market today as we're quickly approaching northern hemisphere demand. We believe Europe is under supplied or the northern hemisphere. It over there and we believe northern North Americas, principally the United States is under supplied with the positive dynamic of the nitrogen consuming crops.
Edlin Rodriguez: Not only prices, increasing which is profitability to the farmer, which is then willingness to further utilize nitrogen capabilities for crop yields.
You have that dynamic that maybe a couple of years with the stocks to use ratios that we talked about earlier on corn and so there are always risks on on the up and downside or I'd say on the supply side with potential outages due to gas or geopolitical issues that we've seen in Ukraine or.
Edlin Rodriguez: <unk>.
Edlin Rodriguez: Just limits or and then it's economic.
Edlin Rodriguez: Do customers purchase at the right time right place when it's needed and are there spot differentials that take place and we believe that will happen in the United States with a different than normal differentials to NOLA to the Midwest to Canada have already expanded it may expand even more so we do see a positive first half.
Edlin Rodriguez: And as Tony said earlier, the second half.
We'll cross that bridge when we come to it.
Edlin Rodriguez: Okay. Thank you very much.
Edlin Rodriguez: Okay.
Speaker Change: The next question comes from Jeff Zekauskas with J P. Morgan. Please go ahead.
Speaker Change: Thanks very much.
Speaker Change: Still a little puzzled about sequestration of carbon dioxide from Donaldson.
Speaker Change: I don't think any anybody has been granted a class six permit to sequester carbon dioxide.
Speaker Change: And even if you are granted a class six permit.
Speaker Change: Then you have to build the well.
Speaker Change: So how is it that you can sequester carbon dioxide sometime in 2025 or by sequester do you mean enhanced oil recovery.
Speaker Change: Hey, Jeff This is Chris.
Speaker Change: Think in both instances, it's not as if there are things that are not moving in parallel you are correct. There would take some time for the well piece to be <unk>.
Speaker Change: <unk>.
However, most of the pipeline work towards the areas, where we're looking to sequester given some of the acquisition work that Exxon has done well.
Speaker Change: We believe that we will be able to.
Speaker Change: <unk> is always an opportunity. However, our agreement is for class six permitted wells. So one of the reasons. We went with Exxon is our confidence in the work that they've done not only at the sequestration points that they have listed themselves, but some of the partnerships that we're looking at as well.
Speaker Change: So we still feel confident that second half of the year.
Speaker Change: He will be sequestering.
Speaker Change: C O two from this Donaldson build project.
Speaker Change: Okay, and then as the second question.
Speaker Change: The value of CF industries coast up and down.
Speaker Change: I guess more recently it's come in.
Speaker Change: And it seems to be because people believe that the probability of there being a resolution in Ukraine.
Speaker Change: Higher.
Speaker Change: When you think overall longer period of time.
Speaker Change: And you think about what the gas price Europe might be or what nitrogen production in Russia might be.
Speaker Change: The case that for North American companies.
Speaker Change: Sort of a more peaceful globe.
Speaker Change: Is negative for profits and profitability over a longer period of time.
Speaker Change: Or do you think that it really doesn't matter and the market has it wrong.
Speaker Change: Yes, well I would start with the fact that as Bert mentioned product is getting out if you even look at what your Russian urea exports were this past year in 2024, they were up over 1 million tons from the prior year. So over 9 million tons were being exported.
Speaker Change: Similar to the Iran sanctions product is moving globally, which is moving to different locations and maybe at lower margins for those particular producers in that area as far as the European gas movement. If you look at Russia gas pre war and where they exist today gas is still flowing into euro.
Speaker Change: By a pipeline about four Bcf per day, and it's mainly going to those particular countries that are willing to take Russian gas post the resolution or even pre the resolution that would happen I think the availability of gas. The actual volume quantity has been sell by Europe, and it's been pretty remarkable how quickly.
Speaker Change: They were able to do that through LNG imports from the U S and from the Middle East as well so while we do see maybe some contraction that may have happened with TTS.
Speaker Change: As.
Speaker Change: If a cease fire were to be announced there's still that spread there and then I think you are talking about the timing in which that would occur. These plants as Bert mentioned, you have 25% of the ammonia production down already.
Speaker Change: What we've seen is continually as these turnarounds come up where you have $50 million maintenance decisions to make our expectation is that the plants that are down will not start back up in other plants will continue to come down so even post the resolution youre still going to have that short that we show in our earnings slides.
Speaker Change: In Europe for ammonia.
That's going to have to be sourced from other places around the globe.
Jeff Zekauskas: Jeff This is Bert and further comments to that.
Speaker Change: As.
Speaker Change: What Tony said earlier, the principal position of we want peace everywhere. There is no need to have a war and there is no need to be fighting over some of the things that are being fought over that's the tragedy, but moving forward and the Russian tons are making their way out to the market. They are fully supplied whether thats urea UAS the limb.
Speaker Change: It has been ammonia, which cris referenced even if there is declared.
Speaker Change: Ammonia is not going to be loaded out of usually anytime soon and maybe thats tayman, maybe thats the Baltic ports of Rus luger, okay that.
Speaker Change: Can happen.
Speaker Change: Maybe the Ukrainian tons come back up, but there werent that big of a supplier to the world.
Speaker Change: But you have to take a step back and remember this is a global market of 200 million tons of products. That's produced and demanded every year and we've had gas limitations in Europe gas limitations in Trinidad Egypt, Iran, and we've had product export limitations of China.
Speaker Change: There are different places in the World, where this is again back to the puts and takes to how we get to the markets that we get to.
Speaker Change: And it's not necessarily determinant by one company or country being sanctioned or inability to move and I again again Thats why I think the benefit of CF and our global look global reach and team and how we're able to execute against these continued changes.
Speaker Change: Sure.
Speaker Change: <unk> kind of both those things and in particular, what Chris said about once the European plants have been offline and curtailed for a period of time, they're not coming back I mean, we we had two manufacturing facilities two ammonia plants in the U K and we've talked long and hard about whether it was worth kind of the option value.
Speaker Change: Being able to bring them back online if.
Speaker Change: Gas costs in the UK came down and our conclusion was that.
Speaker Change: The cost of doing that.
Speaker Change: It was fairly high to maintain their ability to be brought back and even so the plan would still be operating on the third or fourth quartile as opposed to deploying capital in the U S where we've got <unk>.
Speaker Change: First quartile kind of cost structure and that was one of the reasons, we went kind of down the road.
Wagman and closing the U K.
Speaker Change: On your plants and so I think again it's.
Speaker Change: Where your plants are located and I'm really happy with with where ours are and on the volatility of our share price I mean, yes. It is unreasonably volatile for all kinds of reasons that I don't pretend to understand but what that does is it gives us the opportunity to be very opportunistic on our share repurchases.
Speaker Change: As Greg mentioned earlier coming into this year, we had a little over $1 billion to spend.
Speaker Change: And at that time, it was 7% the way the volatility is when we disproportionately buy on the dips.
Speaker Change: Probably do well better than that so it really does benefit our long term shareholders that there is that volatility because it allows us to opportunistically take shares for people that don't see.
Speaker Change: The fundamentals in the value of the way that we do.
Great. Thank you so much.
Speaker Change: The next question comes from Aaron catch rally with Aaron Berg. Please go ahead.
Aaron Berg: Hello, Thanks for taking my question.
Speaker Change: One on.
Speaker Change: Bluepoint and you clearly mentioned strong interest.
Speaker Change: And the asset and I remember the one 4 million.
Speaker Change: Thomas was the plant.
Speaker Change: Sure.
Speaker Change: Incremental to that divorce evaluation for them not to plant of at least 1 million tons.
Speaker Change: Mitsui. So maybe can you help me understand the announcement you made yesterday does it include potentially mid two as well and therefore you are not going to go ahead with the SEC.
Speaker Change: Plant, how do I relate this considering the comments you made on really strong demand.
Speaker Change: Does is it just the risk management approach, where you want to start maybe a little bit smaller how can I think about that thank you.
Speaker Change: Yes.
Speaker Change: So the.
Speaker Change: We are thinking about or you are thinking about two different plants. The first plant that we began to do the analysis around that we had.
Speaker Change: Ounces in conjunction.
Speaker Change: We were evaluating it with Mitsui was.
Speaker Change: Conventional steam methane reformer SMA plant very similar to our Donaldson build number six plant.
Speaker Change: And that's a bit of a smaller plant compared to the ATR the auto thermal reformer that Chris talked about today and Greg talked about today.
Speaker Change: And so.
Speaker Change: We were evaluating two different technologies and.
Speaker Change: In between those two technologies, we also brought.
Speaker Change: Mitsui is still part of the evaluation process and part of the partnership but <unk> has also joined as well and so what we've done is we've gone from at the time what was one partner looking at an <unk> of a little over 1 million tons or a $1 222 part.
Speaker Change: <unk> looking at an auto thermal reformer at $1 4 million so the.
Speaker Change: The <unk> are the kind of the smaller more conventional plant is not being actively considered at this time. It is really the auto thermal that we're focused on and that's with both <unk> and Mitsui as potential partners.
Speaker Change: Thank you very much.
Speaker Change: Okay.
Speaker Change: Ladies and gentlemen that is all the time, we have for questions for today I would like to turn the call back to Mark Jurassic for closing remarks. Thanks.
Speaker Change: Thanks for everyone for joining us and we look forward to seeing upcoming conferences.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.