CF Industries Holdings Inc. reported second-quarter net earnings of $420 million ($2.30 per diluted share) and adjusted EBITDA of $752 million, down from $527 million ($2.70 per diluted share) and $857 million, respectively, in last year’s second quarter.
Net sales for the quarter were $1.57 billion, down from last year’s $1.78 billion but up from the average analyst estimate (Bloomberg Consensus) of $1.52 billion. CF cited lower average selling prices compared with last year, with lower ammonia, UAN, and ammonium nitrate sales volumes partially offset by higher urea volumes.
For the first half of 2024, net earnings were $614 million ($3.31 per diluted share) and adjusted EBITDA was $1.21 billion, down from $1.09 billion ($5.55 per diluted share) and $1.72 billion, respectively, in 2023. First-half net sales were $3.04 billion, down from $3.79 billion, while sales volumes were similar to the first half of 2023.
Cost of sales for the second quarter and first half were lower than last year due primarily to lower realized natural gas costs, partially offset by higher 1Q maintenance costs related to plant outages. The average natural gas cost was $1.90 per MMBtu in the second quarter and $2.53 per MMBtu in the first half, compared to $2.75 per MMBtu and $4.56 per MMBtu, respectively, in 2023.
Gross ammonia production for the first half and second quarter was approximately 4.8 million and 2.6 million tons, respectively, compared to 4.7 million and 2.4 million tons last year. The company expects gross ammonia production for the full year 2024 to be approximately 9.8 million tons.
Ammonia net sales for the quarter were $409 million, down 22% year-over-year and slightly under the average analyst estimate of $409.2 million. Ammonia sales volumes came in at 979,000 st, down 7% from last year but above the analyst estimate of 978,472 st, while the average ammonia selling price was $418/st, down 16% year-over-year and trailing the analyst estimate of $421.11/st.
Granular urea net sales for the quarter were $457 million, down slightly from $460 million last year but above the average analyst estimate of $398.8 million. Granular urea sales volumes were 1.25 million st, up 9.1% from last year and above the analyst estimate of 1.15 million st, while the average selling price of urea came in at $365/st for the quarter, down 9% from last year but above the analyst estimate of $346.88/st
UAN net sales were reported at $475 million for the quarter, down 13% from last year but above the $456.7 million average analyst estimate. UAN sales volumes came in at 1.75 million st, down 3.4% from last year and only slightly trailing the 1.76 million st analyst estimate, while the average UAN selling price was $272/st for the quarter, down 10% from last year but ahead of the analyst estimate of $259.31/st.
Ammonium nitrate (AN) net sales were $98 million for the quarter, down 5.8% from last year and trailing the analyst estimate of $109.8 million. AN sales volumes were 340,000 st, down 7.9% from last year and below the 378,766 st analyst estimate, while the average selling price was reported at $288/st, up 2.1% from last year but trailing the $289.47/st analyst estimate.
Capital expenditures in the second quarter and first half were $84 million and $182 million, respectively, and the company projects capital expenditures for the full year to be approximately $550 million.
CF repurchased 4.0 million shares for $305 million during the second quarter and 8.3 million shares for $652 million during the first half of 2024. On July 31, 2024, CF’s Board of Managers approved a semi-annual distribution payment to CHS Inc. of $165 million for the distribution period ended June 30, 2024. The distribution was paid on July 31, 2024.
CF said recent gas curtailments in Egypt and Trinidad, along with scheduled outages and urea export restrictions in China, have “supported global nitrogen pricing during a period of year that typically sees lower prices and low global shipments as demand shifts from the Northern Hemisphere to the Southern Hemisphere.”
CF said it believes nitrogen channel inventories in North America for all products are below average following strong urea and UAN demand this spring and higher-than-expected planted corn acres. It noted that UAN and ammonia fill programs “achieved prices above 2023 levels despite softening farm economics” due to falling corn and soybean prices.
CF said it believes urea consumption in Brazil in 2024 will be up 3% year-over-year, to more than 8.0 million mt, with urea imports to Brazil in the 7.0-8.0 million mt range this year. It anticipates an active urea import market into India during the second half of the year, with urea exports from China remaining limited.
The company said approximately 25% of ammonia and 30% of urea capacity in Europe was reported in shutdown/curtailment in early July 2024, with operating rates and overall domestic nitrogen product output expected to remain below historical averages over the long term, resulting in higher-than-average imports of ammonia and upgraded products into the region.
CF expects urea and ammonia exports from Russia to increase this year due to the start-up of new urea granular capacity and the completion of the country’s Taman port ammonia terminal in the second half of 2024.
“Over the medium-term, significant energy cost differentials between North American producers and high-cost producers in Europe and Asia are expected to persist,” CF said. “As a result, the company believes the global nitrogen cost curve will remain supportive of strong margin opportunities for low-cost North American producers.”
CF expects the global nitrogen supply-demand balance to tighten over the longer term, however, as global nitrogen capacity growth over the next four years fails to keep pace with expected global nitrogen demand growth of approximately 1.5% per year for traditional applications and new demand growth for clean energy applications.
CF highlighted several low-carbon strategic initiatives, and said it expects “greater clarity later in 2024 regarding demand for low-carbon ammonia, including the ammonia carbon intensity requirements of offtake partners as well as government incentives and regulatory developments in partners’ local jurisdictions.”