CF Industries Holdings Inc Q1 2025 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Steve Byrne - Bank of America Securities - Analyst : You're only a couple of months away from having some blue ammonia to sell out of Beeville, do you have any offtake lined up for this as of yet?

Question: Steve Byrne - Bank of America Securities - Analyst : And I'm sure you're aware, also in Ascension Parish with Devil and your Blue Point project is the project that Airproxis trying to get on stream and they would like to either bring on a partner or just sell off the ammonia loop. And I'm just curious, is this a potential project that you might be interested in, you would be the only one that might be able to put that product into the NuStar pipeline if that opportunity for low carbon corn really develops down the road. Is that a truth and you also highlighted your view of tightening supply and demand in nitrogen through the end of the decade. So is this a potential project you might also get involved in?

Question: Richard Garchitorena - Wells Fargo - Analyst : Nice quarter. Just a question on Blue Point. Congrats on the close of JV. But just on the partnership stakes, JERA has an option to reduce your stakes before the end of the year. If you can just give us some clarity on some of the conditions there. And in terms of like what the potential in terms of changes in offtake for the other partners would be, if you took I guess, the remaining stake, taking you up to 60%, how would that impact sort of marketing the tons going forward, easy?

Question: Joel Jackson - BMO Capital Markets - Analyst : Tony, Bert team, maybe talk about the market. It has obviously been quite a hot spring market in the US for a really (inaudible) Maybe talk what you've seen, it seems like now we're starting to cool off, what your views are going into the spring and summer? Do you have a view on where fall-summer market be and you be able to capture in Q2 here, a lot of the surge or what does your book like?

Question: Joel Jackson - BMO Capital Markets - Analyst : And then on a different tact here, Tony, when you did do the FID about a month ago on Blue Point, it was obviously remains a very interesting macro and tariff environment. Just thinking about historical context, you see other golf producers, the capital inflation we saw on products a decade ago, early last decade, the problems with labor rates and getting good labor and what gets paid for it. How do you mitigate what could be very strong capital inflation or not? Like what can you do with your partners to make this so it's not going to really affect the level of buyback you can do in the next four years? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 3:00PM, CF.N - Q1 2025 CF Industries Holdings Inc Earnings Call

Question: Christopher Parkinson - Wolfe Research - Analyst : Great. So Tony, there has been a lot of debate around the intermediate to long-term cost curve, just given gas supply issues elsewhere in the world, geopolitics, so on and so forth. Can you just give us an update on how you're thinking about that as it relates to the nitrogen cost curve. You're -- and within that basically how you're thinking about free cash flow conversion and your ability not only to buy back shares, but also obviously fully facilitate the CapEx updates which you gave us today, which were roughly in line with our expectations.

Question: Christopher Parkinson - Wolfe Research - Analyst : Got it. And when we take a step back and we think about the ultimate return for Blue Point, presumably, we're looking at a site fee tax credits as well as the return on your proportion of what's produced. Can you kind of walk us through how we should be thinking about not only those baselines and what's locked in versus the variability of the tons? And then also presumably, you'll be selling some of those tons to yourself in the UK and getting a benefit there. So can you help us just conceptualize like the structure of how we should be forecasting that?

Question: Lucas Beaumont - UBS - Analyst : I just wanted to ask about tariffs. I just wanted to get your view on how you see that kind of impacting the various sort of nitrogen derivative markets in the US, I guess, over the near term to start with. And then if we look a bit further out 12 to 18 months to give trade flows, the chance to adjust. I mean would you expect to sort of see pricing uplift in the range of sort of where the marginal importer is, so at least kind of 10%? And do you think that could be reduced over time? Or how do you kind of see those factors playing out?

Question: Lucas Beaumont - UBS - Analyst : And then -- sorry. And then I just had a follow-up on Buy points. So I just wanted to kind of -- you called out a couple of other components there to the agreement I just sort of wanted to check. So you said it was like some bad service revenue components on the management of the facility. And then just with regard to sort of the credit side, I was assuming that would be split evenly based on the ownership percentage in the offtake as well. Is that right? Christopher Bohn - CF Industries Holdings Inc - Chief Financial Officer, Chief Operating Officer, Executive Vice President, Director Yes. So from the common facility standpoint, CF will be funding that. And that said, $550 million, that will be over the five-year period in which we'll receive a fee and payment that will more than cover the cost of capital and then some on that from our partners as we go forward. Related to the 45Q tax credit incentive associated with the carbon sequester there that will be spread throughout the JV and essentially go back on equity percentage terms.

Question: Andrew Wong - RBC Capital Markets - Analyst : Some (inaudible) on tariffs here. If the EU implemented tariffs on Russian product, what's your thought on how like UAN trade flows range? So could you see more Russia and UAN go into the US? And then maybe does it make more sense for the US. I understand that there's a benefit from the tariffs right now and other sources, but Russian doesn't a lot to the US on the UAN? Like does it make more sense to send it into Europe tariffs are at high and Russian product into Europe.

Question: Andrew Wong - RBC Capital Markets - Analyst : Okay. And then maybe just to clean ammonia pricing when you are discussing your potential customers. I'm just curious like what factors you talked about, are you talking about like energy content equivalent and then look at that from price -- equivalent pricing you -- for industrial users, you take like a merchant ammonia and then put a clean ammonia premium on it. You're building a new plant, the returns factor into those pricing conversations? Any of that detail would be great.

Question: Benjamin Theurer - Barclays - Analyst : One quick one is you saw news that the Chinese government setting an export window from May through September for urea as it relates to the potential quota to be similar to the 2023 level. So when we look through your materials, is that something that's basically as expected from you guys? Or is that meaningful from a negative perspective just as it goes out? And also if you could comment anything around the fact that the Chinese are restricting this to India, which seems to be a big purchase. And then I have a quick follow-up on gas markets. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 3:00PM, CF.N - Q1 2025 CF Industries Holdings Inc Earnings Call

Question: Benjamin Theurer - Barclays - Analyst : Okay. And then there has been noise that goes into different direction. Some say there might be US and Russia trying to work together to figure out the gas flow back to the European Union, what basically was cut with the invasion back a few years ago. But I always say that the European Union is considering a potential embargo actually on Russian gas. Have you seen or heard any news -- any comment that you have as to the expectations for that Russian gas into Europe? (technical difficulty) how would we want to think about this for the gas price in Europe.

Question: Jordan Lee - Goldman Sachs - Analyst : We are seeing a pretty strong divergence between urea and ammonia prices currently. In terms of the delta and margin between the two, can you talk about how it compares to history and how you expect that to play out going forward?

Question: Edlain Rodriguez - Mizuho Securities - Analyst : Guys, when you're looking at given the level of grain inventories crop prices, as you said, start to use ratio levels. Like how would you describe the current ad fundamentals like good, great, mix? And it could be either like globally or in the US? Like how would you describe the ag fundamentals right now?

Question: Jeffrey Zekauskas - JPMorgan - Analyst : Was the quarter in some ways, unusual offerable in that sequentially, your gas costs were up maybe $1.25 per MMBtu? And maybe sequentially, that's something like, I don't know, $130 million in cost inflation. And your cost of goods sold was up sequentially, maybe by about $90 million. Can you talk about the -- I get it, you sold a few more tons in the first quarter than you did in the fourth, and your price per ton was a little bit higher. But when you net it out, it seemed that the sequential change was a little bit larger than expected.

Question: Jeffrey Zekauskas - JPMorgan - Analyst : Okay. And in terms of your capital expenditures that are actually your own what might they be in 2026 or '27 ballpark exclusive of the monies that would come from --

Question: Jeffrey Zekauskas - JPMorgan - Analyst : Okay. And then where is the carbon dioxide going to be stored for Donald Sondville exactly? And who's going to store it?

Question: Vincent Andrews - Morgan Stanley - Analyst : It's a while away, but I'd be curious what your plan is in terms of how you're going to report Blue Point within your financials. Are you intending to just put it in the existing ammonia segment? Or is this an opportunity for some differentiation and maybe or maybe not including your other ammonia facilities have contracted volume that have sort of less volatility in their profitability through the cycle. How are you thinking of disclosing everything to us?

Question: Vincent Andrews - Morgan Stanley - Analyst : Okay. And as a follow-up, you're obviously in conversations both for the Blue Point product out of T Will and then ultimately, for Blue Point. What type of offtake agreements are you looking for? Do you feel the need to have them? Or is there some percent of the volume you'd like to have on them? What are the resort you just sort of open to anything at this point, given it's so far away. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 3:00PM, CF.N - Q1 2025 CF Industries Holdings Inc Earnings Call

Question: Joel Jackson - BMO Capital Markets - Analyst : Sorry for the follow-up. I think, Tony, I think you said that run rate sort of CapEx next year might be $750 million to $800 million. But when you look at your slide 11, I think, you add up the numbers, assuming $500 million maintenance, you get to something like $9 million to $950 million. Can you just clarify? Christopher Bohn - CF Industries Holdings Inc - Chief Financial Officer, Chief Operating Officer, Executive Vice President, Director Yes. Joel, I think what Tony was talking about, one was the CF portion. And what you should look at probably '25 and '26, we're going to have 10% to 15% each of those years of our total amount. So as I mentioned, we have $500 million that is our EHS and sustaining CapEx. And then incremental to that, you can kind of plan about circa $150 million over the next two years. It's really '27 and '28, as you're referencing the slide in our deck where you start to see a little bit larger, which would be a couple of hundred million dollars for CF coming out in '27 and '28 and then a light tail in '29 when the project comes online. So I -- I was going to say, so if you had to kind of bundle where we think we're going to be this year, it's about $650 million this year, probably slightly north of that next year, not by much, and then increasing in the '27, '28 period --

Question: Joel Jackson - BMO Capital Markets - Analyst : 40% Yes. $500 million maintenance, plus 40% of 15% and then 100% of 35%. Christopher Bohn - CF Industries Holdings Inc - Chief Financial Officer, Chief Operating Officer, Executive Vice President, Director Yes.