CF Industries Holdings, Inc. Q4 FY2024 earnings call

• Tony Will noted that CF Industries had strong fourth quarter and full-year adjusted EBITDA, returned significant capital to shareholders, and the team is operating well with safe practices.
• Chris Bohn discussed production results: over 2.6 million tons of gross ammonia in Q4 2024 with 100% utilization, 9.8 million tons for the year, expecting ~10 million tons in 2025. Strategic initiatives: carbon capture and sequestration project at Donaldsonville nearing completion, greenfield low-carbon ammonia plant at Blue Point with FEED study completed for an ATR ammonia plant.
• Bert Frost highlighted the positive fourth quarter and start of 2025 in the global nitrogen market, strong order book, low inventory levels, tight global supply-demand balance, especially in India and for corn demand driving nitrogen needs.
• Greg Cameron detailed financial performance, cash flow conversion, share repurchases, and the FEED study for the ATR ammonia plant with carbon capture, estimating project cost and additional infrastructure needs.

For the fourth quarter of 2024, CF Industries reported adjusted EBITDA of $562 million. For the full year 2024, adjusted EBITDA was $2.3 billion. Net earnings attributable to common stockholders for the full year 2024 were approximately $1.2 billion, or $6.74 per diluted share. In the fourth quarter of 2024, net earnings attributable to common stockholders were approximately $328 million, or $1.89 per diluted share. Net cash from operations was $2.3 billion, and free cash flow was approximately $1.45 billion in 2024. The company returned approximately $1.9 billion to shareholders in 2024, including $364 million in dividends and over $1.5 billion in share repurchases.

• Expect to produce approximately 10 million tons of gross ammonia in 2025.
• Carbon capture and sequestration project at Donaldsonville expected to start up and generate 45Q tax credit in 2025.
• Intend to complete the share repurchase authorization, which should take out another roughly 7% of outstanding shares pro forma.
• Target first quarter of 2025 for final investment decision on the greenfield low-carbon ammonia plant at Blue Point, with ownership ranging from 40% to 75% depending on equity partners.

• Gas price volatility which impacts costs and margins.
• Geopolitical issues affecting global nitrogen supply, such as uncertainties in Ukraine and Russia impacting production and exports.
• Regulatory uncertainties, although the 45Q tax credit for carbon capture is currently seen as relatively certain but other policy issues remain uncertain.

Q: Joel Jackson asked about hedging and the sensitivity table showing EBITDA changes based on gas and urea prices.

A: Bert Frost and Tony Will responded that they hedge front month for gas contracts, are opportunistic in 2024, and the sensitivity table is based on previous year's product price differentials, not a pinpoint estimate of future performance.

Q: Chris Parkinson asked about 2025 cash conversion and Blue Point offtakes.

A: Greg Cameron said capital allocation includes over $500 million in normal CapEx, expects to complete share repurchase by year-end, and Chris Bohn mentioned offtake potential depends on partnership equity share, with strong interest in the project.

Q: Richard Garchitorena asked about the Blue Point final decision and 45Q impact.

A: Tony Will stated 45Q is seen as relatively certain, and the process is about dotting eyes and crossing t's on subsidiary contracts for the project.

Q: Lucas Beaumont asked about funding the Blue Point project.

A: Greg Cameron said it will be determined by equity commitment, using cash on balance sheet, cash from operations, and evaluating debt options; Tony Will noted strong free cash flow and flexibility in financing.

Q: Andrew Wong asked about Blue Point vs buybacks and return profile.

A: Tony Will said deploying capital in core business to earn above cost of capital, then using excess for share repurchases is a winning formula; Chris Bohn mentioned ATR technology provides more production and carbon capture benefits.

Q: Kristen Owen asked about 2025 fundamentals and Blue Point brownfield project.

A: Bert Frost discussed tight nitrogen balance, corn acres driving demand, and Chris Bohn said the dehydration compression plant installation expected to finish in Q2, with low-carbon product available in back half of 2025 and strong interest in it.

Q: Stephen Byrne asked about Blue Point project details and blue ammonia order book.

A: Chris Bohn said dehydration compression plant commissioning expected in second half of 2025, with strong interest and orders for low-carbon product; Tony Will noted no need to wait for production to have registration of interest.

Q: Vincent Andrews asked about Blue Point project cost risk.

A: Tony Will said the project uses modular construction reducing cost overruns risk, and Chris Bohn added lower labor expense with modularization.

Q: Edlain Rodriguez asked about nitrogen market risks.

A: Bert Frost discussed supply and demand risks, including potential outages and economic factors, but sees positive first half.

Q: Jeff Zekauskas asked about carbon sequestration permit and market peace impact.

A: Chris Bohn said carbon sequestration expected in second half of 2025 with Exxon's work, and Tony Will noted a more peaceful globe may have some impacts but product still moves globally and CF benefits from share price volatility for repurchases.

Q: Aron Ceccarelli asked about Blue Point plant options.

A: Tony Will explained they are focused on the auto thermal reformer ammonia plant with JERA and Mitsui, and the smaller SMR plant is not actively considered now