CF Industries Holdings Inc., Deerfield, Ill., reported adjusted EBITDA of $1.95 billion for the second quarter ending June 30, besting the Bloomberg Consensus, the average estimate from major analysts, which was $1.87 billion. Year-ago adjusted EBITDA was $599 million.
CF missed analyst estimates on net income and net sales. Second-quarter net income was $1.17 billion ($5.58 per diluted share) on net sales of $3.39 billion, up from the year-ago $246 million ($1.14 per share) and $1.59 billion, respectively.
Analysts had net income at $1.3 billion and net sales at $3.5 million. Results for the quarter included pre-tax restructuring charges of $162 million related to the company’s U.K. operations, which included the permanent closure of its Ince facility (GM June 10, p. 1). The amount included both impairment charges and a charge for post-employment benefits.
Second-quarter gross margin was $1.4 billion, up from $1.09 billion. CF sold 4.84 million st during the quarter, down from the year-ago 5.17 million st.
“The CF Industries team delivered a strong operational performance and leveraged our manufacturing and logistics flexibility to drive outstanding results in the first half of 2022, despite weather-related challenges during the North American planting and fertilizer application season,” said Tony Will, CF President and CEO. “We continue to believe it will take several years to replenish global grains stocks, underscoring the critical role CF Industries plays supplying nutrients to farmers around the world during a period when marginal producers in Europe and Asia face production curtailments due to historically high natural gas prices.”
Bert Frost, CF Senior Vice President of Sales, Market Development, & Supply Chain, told analysts that CF achieved record average selling prices for all segments, even as poor weather affected the North American planting and application season.
“As we look ahead to the second half of the year, we believe the environment will remain favorable for our company,” he said. “European and Asian producers are facing extremely high natural gas costs, creating supply uncertainty at a time of resilient agricultural led demand. Last week, prices at the Dutch TTF natural gas hub exceeded $60/mmBtu. This would put ammonia production cost for efficient plants in Europe above $2,000/mt.” He added this is why we have seen several producers such as Yara International, BASF, and OCI curtail ammonia production.
On the demand side, Frost suggested another 3-4 million acres of corn may be planted in the U.S. next year.
Will reiterated to analysts CF’s desire to participate in the green energy aspects of low carbon ammonia, and he indicated a preference for greenfield projects going forward after having done several debottlenecks in the past. “It really makes more sense to invest in new capacity at this point than it does to continue to try and squeeze more out of what’s already there, because you end up hitting limits on heat exchangers and other things that end up with reliability problems,” said Will. While he said the company is very proud of its reliability and on-stream factor of its network, it is more likely to see CF doing new plants than debottlenecks at this time.
Six-month net income was $2.05 billion ($9.78 per share) on net sales of $6.3 billion, up from the year-ago $397 million ($1.83 per share) and $2.64 billion, respectively. Gross margin was $2.57 billion versus the year-ago $1.84 billion. Adjusted EBITDA was $3.6 billion, up from $997 million.
CF sold 9.46 million st during the first half, down from the year-ago 9.74 million st.
| Production (000 st) | 2Q-22 | 2Q-21 | YTD-22 | YTD-21 |
| Ammonia | 2,470 | 2,232 | 5,083 | 4,711 |
| Gran Urea | 1,157 | 968 | 2,231 | 2,152 |
| UAN 32 | 1,633 | 1,628 | 3,498 | 3,317 |
| AN | 399 | 449 | 804 | 924 |
| Ammonia | 2Q-22 | 2Q-21 | YTD-22 | YTD-21 |
| Net Sales ($/M) | 1,115 | 459 | 1,755 | 665 |
| Gross Margin ($/M) | 673 | 126 | 1,033 | 252 |
| Sales Volumes (000 st) | 1,035 | 1,036 | 1,762 | 1,719 |
| Avg Selling Price ($/st) | 1,077 | 443 | 996 | 387 |
| Gas Costs ($/mmBtu) | 7.05 | 3.25 | 6.79 | 3.24 |
| Gran Urea | 2Q-22 | 2Q-21 | YTD-22 | YTD-21 |
| Net Sales ($/M) | 833 | 433 | 1,598 | 832 |
| Gross Margin ($/M) | 473 | 192 | 968 | 327 |
| Sales Volumes (000 st) | 1,181 | 1,092 | 2,277 | 2,412 |
| Avg Selling Price ($/st) | 705 | 397 | 702 | 345 |
| UAN | 2Q-22 | 2Q-21 | YTD-22 | YTD-21 |
| Net Sales ($/M) | 976 | 434 | 1,991 | 666 |
| Gross Margin ($/M) | 633 | 138 | 1,303 | 140 |
| Sales Volumes (000 st) | 1,626 | 1,949 | 3,454 | 3,463 |
| Avg Selling Price ($/st) | 600 | 223 | 576 | 192 |
| AN | 2Q-22 | 2Q-21 | YTD-22 | YTD-21 |
| Net Sales ($/M) | 253 | 136 | 476 | 241 |
| Gross Margin ($/M) | 102 | 16 | 154 | 26 |
| Sales Volumes (000 st) | 436 | 501 | 864 | 939 |
| Avg Selling Price ($/st) | 580 | 271 | 551 | 257 |
| Other | 2Q-22 | 2Q-21 | YTD-22 | YTD-21 |
| Net Sales ($/M) | 212 | 126 | 437 | 232 |
| Gross Margin ($/M) | 110 | 31 | 231 | 47 |
| Sales Volumes (000 st) | 557 | 596 | 1,102 | 1,205 |
| Avg Selling Price ($/st) | 381 | 211 | 397 | 193 |