CF Industries Holdings Inc Q3 2024 Earnings Call Summary

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

Question: Chris Parkinson - Credit Suisse. - Analyst : Credit Suisse, that was interesting. So tell you guys -- when I take a step back and look at the supply-demand dynamics, you've lowered supply out of China, Europe, some gas issues in Trinidad, Egypt, et cetera, et cetera. Demand is pretty solid. Tony, when you take a step back and look at the current dynamics in the 2025 and your prospective cash flow, versus, obviously, some uncertainty regarding US, LNG, departed LNG towards the end of the decade, how do you calibrate your own thought process in terms of allocating that capital in terms of look at cash prospectively generating over the next, let's say, in 6 to 12 months to basically build out your network for the rest of the decade. Just any thoughts there would be very helpful.

Question: Chris Parkinson - Credit Suisse. - Analyst : Got it. And just a quick follow-up. Once again, just taking a step back. The first quarter, obviously, you had some winter storms of third quarter, so obviously, hurricanes are at unavoidable times. When I look into 2025 and 2026, do you think turnaround activity will be the same level, slightly lower in terms of like how much more you have maximized profitability based on the current nitrogen price deck without all those outages and how we should think about that framework heading into next year?

Question: Steve Byrne - BofA Securities, Inc. - Analyst : Your press release provides this gross margin per nutrient tons for product. It's always very interesting. And the one that just jumps out is your DEF. And I was just curious whether what your view is on the outlook for DEF? And maybe more specifically, this problem that occurs with crystallization and so forth. Is that poor-quality DEF? Is that all DF? Does that affect you? And is there a resolution of that down the road?

Question: Steve Byrne - BofA Securities, Inc. - Analyst : Very good. And I'd like to ask a little bit about the Donaldsonville project that you're working with Exxon and with -- do you have any visibility on when they could get a classic injection well? Is that just an unknown? And does that prevent you from essentially lining up customers for this and/or do your customers need to invest on their own site, either for storage or to use it as a fuel. I'm just curious. If something if this moves forward in sometime in 2025, are you going to be in a position where you could start loading a marine ship in other words?

Question: Joshua Spector - UBS Investment Bank - Analyst : I was wondering if you could talk a little bit about current nitrogen dynamics. There were some comments the other day about warmer weather being an issue for ammonia applications in the US later in the quarter. and some comments that activity today is slow. I don't know if you had any different characterization of the market today. And when you talk about tighter inventory in North America, is that something we should expect to materialize in higher prices in the spring? Or do you have any different view about how that impacts the market? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 2:00PM, CF.N - Q3 2024 CF Industries Holdings Inc Earnings Call

Question: Joel Jackson - BMO Capital Markets Equity Research - Analyst : Just a couple of questions. First, a little short term, maybe dovetailing with this last question. Typically, you do more sales in Q4 than in Q3, I think in 5 years in a row of a higher Q4 than Q3. Any reason not to expect that this year?

Question: Joel Jackson - BMO Capital Markets Equity Research - Analyst : And then on the greenfield blue ammonia project that you're expecting the feed study done by the end of the year, any color you can give, maybe higher level, what you need to still to get this approved with your partners, capital running $3 billion or $4 billion, do you think that's still reasonable? Anything sort of pick up incremental in the last couple of months, to give us an idea of what we could expect early next year in some of your decision-making processes?

Question: Joel Jackson - BMO Capital Markets Equity Research - Analyst : Tony, if I could just fit one more in on that. I may have missed totally misunderstood that. But are you suggesting that the economics of the plant around $4 billion might be justifiable even if some of the clean ammonia math and benefits weren't there? I may have misunderstood that, if that's what you're trying to get at. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 2:00PM, CF.N - Q3 2024 CF Industries Holdings Inc Earnings Call

Question: Richard Garchitorena - Wells Fargo Securities - Analyst : First question on the nitrogen market outlook. You pointed out Chinese urea exports basically now expected less than 1 million tonnes this year. What do you think is going on there in terms of how the China government is thinking? Is this something that may be extended indefinitely and that supports your comments on the much more tighter outlook going forward? Maybe that's the first question.

Question: Richard Garchitorena - Wells Fargo Securities - Analyst : Great. And then as a follow-up, just on the clean energy projects, I was just curious, as you work through the FEED study and you look at the environment right now, what's your view in terms of the announced proposed capacity that's supposed to be coming out from various different companies and start-ups. The proposed capacity is supposed to be out there for clean ammonia. What do you think is the likelihood that maybe half that comes online in the quarter? Sorry, any high-level views on that?

Question: Benjamin Theurer - Barclays Bank - Analyst : Congrats on another very strong quarter. Just a quick follow-up. As you think about the ammonia segment and the strength that you had in the quarter, which kind of was a little bit of a surprise on the volume side, I think at least versus ours and consensus estimate. So how do you think about just segment itself, like not the fervor process, but the ammonia piece and the demand for that as you go into the fourth quarter. And maybe a little bit related to Joel's question, just like the revenue piece that then translates into 4Q and as you move into it. How much volume, can you actually produce and sell as ammonia now that you have Vagamon? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 2:00PM, CF.N - Q3 2024 CF Industries Holdings Inc Earnings Call

Question: Andrew Wong - RBC Capital Markets - Analyst : So today, if we look at Europe generally as the marginal cost producer, but we're also seeing some changes in that region. There's capacity that's maybe shutting down and that could reduce how much to contribute to that cost curve, but there's also C-band that gets implemented in 2026, which raises our cost position. So I'm just kind of curious how you think about Europe as that marginal cost producer as you kind of go forward and look out a couple of years from now?

Question: Andrew Wong - RBC Capital Markets - Analyst : Okay. That's really helpful in Europe. And then I guess -- and that kind of brings in another question on just how does that global cost look like 3- or 4 years from now with the changes in Europe, Chinese exports, impacts from clean ammonia given how the S&D looks like? Like how does that change? Because we've seen different changes in the past decade or so, like how does that look like 3 or 4 years from now?

Question: Vincent Andrews - Morgan Stanley - Analyst : Tony, I just wanted to follow up with you on the prospective blue ammonia facility and just get your latest thoughts in terms of what you're seeking in terms of terms. I recall you want to own at least 50% of it. But is anything changing in terms of how many partners you want to bring in both in terms of the amount of equity they would want to provide or do you have more of a willingness now maybe to fund it yourself, but just have offtake for a very large percentage of the plant? Or is there anything evolving in sort of your own thought process or what the other -- what the counterparties are interested in doing? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 2:00PM, CF.N - Q3 2024 CF Industries Holdings Inc Earnings Call

Question: Vincent Andrews - Morgan Stanley - Analyst : Okay. And just as a follow-up, how are you thinking about Henry Hub prices, not near much the next 12 months, but if you look out 12, 24, 36 months, you got all this LNG coming in the US. We've got electricity increasing demand-wise from data centers and everything else. Any thoughts there?

Question: Jeffrey Zekauskas - JPMorgan Chase & Co - Analyst : When you think about the Donaldsonville dehydration and compression unit, and the 45Q credits that you might get in '25, is your base case that the credits would come from enhanced oil recovery? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 2:00PM, CF.N - Q3 2024 CF Industries Holdings Inc Earnings Call

Question: Jeffrey Zekauskas - JPMorgan Chase & Co - Analyst : So I don't think Exxon Mobil has completed any permit filings in Louisiana just yet. So why are you -- and in Texas, you need EPA approval. And this is just for the permits itself. I mean there have been no Class 6 permits that have even been issued. Are you really so confident that you can achieve this in 2025, I would say, on the OR area?

Question: Jeffrey Zekauskas - JPMorgan Chase & Co - Analyst : Okay. And when you contemplate the building of a new blue ammonia facility, and you look at an ATR versus an SMR with flu gas capture. Are those very different costs? Like is there a, I don't know, a $1 billion difference between doing one or doing the other? Or is it much smaller?

Question: Edlain Rodriguez - Mizuho Securities USA - Analyst : Yes, sorry about that. Tony, a quick one for you. Can you talk about changes if any, you see informers or retailers' behavior given the more challenging applies we have now? And how has that changed go-to market behavior has changed accordingly?

Question: Edlain Rodriguez - Mizuho Securities USA - Analyst : Okay. That makes sense. And a related question. As we exit 2024 and enter in 2025, again, it seems like the way you talk about the outlook for Nate, that's very encouraging. Is there anything that concerns you at all like anything that makes you think keeps you wait?

Question: Dmitry Silverstein - Water Tower Research. - Analyst : Most of them have been answered, but I do want to follow up on the more near-term outlook for pricing. We've seen price comping down year-over-year in the first half of the year and then you reported a price increase here in the third quarter. How do you look at -- given the market dynamics and the tightness in the market that you identified and talk about what do you expect for pricing as you get into the 2025 negotiating season?

Question: Dmitry Silverstein - Water Tower Research. - Analyst : That's helpful. And then one final question. You mentioned the modest hurricane impact from Francine. I'm hoping that nothing else was impacted us as far as your operation is concerned with the -- I'm sorry, with the East Coast strike. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 2:00PM, CF.N - Q3 2024 CF Industries Holdings Inc Earnings Call Anything we should be thinking about in terms of cost deltas going forward as far as logistics cost, the barge traffic in the Mississippi is still kind of slow because of the low water levels after a couple of years of drought. Anything that we should be keeping in mind as we look towards 2025 on your gross margin line?