CF Industries Holdings Inc. reported first-quarter net earnings attributable to common stockholders of $883 million ($4.21 per diluted share) on net sales of $2.9 billion, compared with net earnings of $151 million ($0.70 per diluted share) on net sales of $1.0 billion in last year’s first quarter.
EBITDA for the quarter was $1.68 billion and adjusted EBITDA $1.65 billion, compared with $398 million last year. CF said its North American manufacturing network achieved record first-quarter gross ammonia, UAN, and diesel exhaust fluid (DEF) production volumes. Gross ammonia production was reported at 2.613 million tons; UAN at 1.865 million tons; granular urea at 1.074 million tons; and AN at 405,000 tons.
“We ran our plants extremely well during the first quarter and expanded our considerable logistics capabilities to help North American customers prepare for the spring fertilizer application season,” said Tony Will, CF President and CEO. “Global grains stocks remain extremely low, an issue that has become amplified because of Russia’s invasion of Ukraine. We think it will take at least 2-3 years to replenish global grains stocks.”
The first-quarter net earnings total missed the Bloomberg Consensus of $892 million, which averages the projections of major analytical firms, while net sales and adjusted EBITDA exceeded the average analyst projections of $2.56 billion and $1.4 billion, respectively (GM April 29, p. 25).
CF said average selling prices for the quarter were higher across all segments due to strong global demand and decreased supply availability, as higher energy costs drove lower operating rates and geopolitical factors disrupted the global fertilizer supply chain. In North America, CF said first-quarter sales volumes were higher than last year due to greater supply availability from higher capacity utilization rates.
Cost of sales for the first quarter was higher than last year, primarily due to higher natural gas costs. CF said the average cost of natural gas reflected in the company’s cost of sales in the first quarter was $6.48 per MMBtu, compared with $3.22 per MMBtu in 2021.
Capital expenditures in the first quarter were $63 million. CF projects capital expenditures for full-year 2022 to be in a range of $500-$550 million, which includes expenditures at CF’s Donaldsonville, La., Complex related to green and blue ammonia projects.
CF said it achieved its highest railcar utilization rate in over five years and highest volume of quarterly rail shipments of nitrogen in ten years. “Supply chain disruptions have developed in the second quarter, particularly related to rail service issues, that the company continues to manage,” CF said. CF noted that it has also chartering three times its typical volume of U.S.-flagged vessels to move UAN to the U.S. East and West Coasts.
CF said it expects planted corn acreage in the U.S. to total 91-93 million acres this year, above USDA’s March 31 Prospective Plantings estimate of 89.5 million acres. CF said it expects global nitrogen industry dynamics to remain strong for the foreseeable future, with robust global nitrogen demand coupled with tight global nitrogen supply and wide energy differentials between North America and marginal production in Europe and Asia.
“Production returns in 2022 on all crops are forecast to be historically high despite high input costs, and the company believes that prices will bid in more corn acres than the USDA planting intentions report from March,” CF said. “U.S. manufacturing and mining activity has remained positive, further supporting nitrogen demand in the region.”
CF said it expects India to tender on a regular basis during the year to meet its urea demands, with total urea imports projected at approximately 8 million mt in 2022, below recent record years. CF said it expects urea exports from China to be limited through at least the first half of 2022 due to China’s export ban, but the company believes some level of nitrogen exports will resume in the second half of 2022.
Urea consumption in Brazil is expected to remain strong in 2022, the company said, supported by high crop prices. CF noted that fertilizer tradeflows to Brazil will be among the most affected by the barriers to Russian exports. With Russia supplying more than 90 percent of the ammonium nitrate imported into Brazil in recent years, CF said it believes Brazilian buyers will substitute other nitrogen fertilizers for AN this year.
As for Europe, CF said natural gas prices remain elevated due in part to the Russian invasion of Ukraine and the uncertainty about gas flows from Russia. Forward curves for natural gas in Europe remain above historical norms, CF said, challenging nitrogen producer profitability and forcing European production into the position of global marginal producer.
CF said it redeemed $500 million in debt on April 21, 2022, lowering gross long-term debt to $3 billion, and repurchased approximately 1.3 million shares for $100 million during the first quarter of 2022. CF’s Board of Directors increased the quarterly dividend by 33 percent to $0.40 per share, a 33 percent increase over the previous dividend. The dividend will be paid on May 31, 2022, to stockholders of record as of May 16, 2022.
| Production (000 st) | 1Q-22 | 1Q-21 |
| Ammonia | 2,613 | 2,479 |
| Gran Urea | 1,074 | 1,184 |
| UAN-32 | 1,865 | 1,689 |
| AN | 405 | 475 |
| Ammonia | 1Q-22 | 1Q-21 |
| Net Sales ($/M) | 640 | 206 |
| Gross Margin ($/M) | 360 | 126 |
| Sales Volumes (000 st) | 727 | 683 |
| Avg Selling Price ($/st) | 880 | 302 |
| Gas Costs ($/mmBtu) | 6.48 | 3.22 |
| Gran Urea | 1Q-22 | 1Q-21 |
| Net Sales ($/M) | 765 | 399 |
| Gross Margin ($/M) | 495 | 135 |
| Sales Volumes (000 st) | 1,096 | 1,320 |
| Avg Selling Price ($/st) | 698 | 302 |
| UAN | 1Q-22 | 1Q-21 |
| Net Sales ($/M) | 1,015 | 232 |
| Gross Margin ($/M) | 670 | 2 |
| Sales Volumes (000 st) | 1,828 | 1,514 |
| Avg Selling Price ($/st) | 555 | 153 |
| AN | 1Q-22 | 1Q-21 |
| Net Sales ($/M) | 223 | 105 |
| Gross Margin ($/M) | 52 | 10 |
| Sales Volumes (000 st) | 428 | 438 |
| Avg Selling Price ($/st) | 521 | 240 |
| Other | 1Q-22 | 1Q-21 |
| Net Sales ($/M) | 225 | 106 |
| Gross Margin ($/M) | 121 | 16 |
| Sales Volumes (000 st) | 545 | 609 |
| Avg Selling Price ($/st) | 413 | 174 |