CF Industries (CF) 1 Nov 182018 Q3 Earnings call transcript

Company Profile

Participants

Martin A. Jarosick	CF Industries Holdings, Inc.
W. Anthony Will	CF Industries Holdings, Inc.
Bert A. Frost	CF Industries Holdings, Inc.
Dennis P. Kelleher	CF Industries Holdings, Inc.
Adam Samuelson	Goldman Sachs & Co. LLC
Ben Isaacson	Scotia Capital, Inc.
Christopher S. Parkinson	Credit Suisse Securities (NYSE:USA) LLC
Stephen Byrne	Bank of America Merrill Lynch
Donald David Carson	Susquehanna Financial Group LLLP
Joel Jackson	BMO Capital Markets (Canada)
Michael Leith Piken	Cleveland Research Co. LLC
Vincent Stephen Andrews	Morgan Stanley & Co. LLC
Andrew Wong	RBC Capital Markets
Mark Connelly	Stephens, Inc.
P.J. Juvekar	Citigroup Global Markets, Inc.
Jonas I. Oxgaard	Sanford C. Bernstein & Co. LLC
John Roberts	UBS Securities LLC
Jason Miner	Bloomberg Intelligence
Sean Gilmartin	Barclays Capital, Inc.
Alexandre Falcao	HSBC Securities USA, Inc.

Call transcript

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Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2018 CF Industries Holdings Earnings Conference Call. My name is Victor, and I will be your coordinator for today. At this time, all participants are in a listen-only mode.

We will facilitate a question-and-answer session towards the end of the presentation. I'd now like to turn the presentation over to the host for today, Mr. Investor CF with Jarosick Relations. Martin Sir, please proceed.

Martin A. Jarosick

non-GAAP website to differ results find future involve press be performance between statements about on our More any historical may CF Tony and quarter XXXX forward-looking earnings our website. performance morning available with in call, facts you Investor on Senior for President today Vice CF thanks are website. discuss and Industries Bert implied Sales, or which assumptions Therefore, and our difficult call third made Kelleher, the Jarosick, quarter presentation Distribution. statements. and Supply for we'll may detail, what predict. not actual third Industries Relations of Chain; in of are are this me With Development release reported on may that are guarantees CF President the filings CF. our CEO; conference Frost, Also, President, the and Dennis On CFO; joining and materially results will results statements. Manufacturing affect presentation information Vice that from afternoon. factors our Vice Senior are then is Good Will, Bohn, question-and-answer not the and on the yesterday that Market GAAP SEC, detailed measures call. in our found in expressed and are host and risks, reconciliations uncertainties this Industries of Martin review posted session. I'm in its These outcomes outlook, Chris and a Statements and

President let introduce CEO. Now, and Tony our me Will,

W. Anthony Will

XXXX on while results. for generated EBITDA the XX, our end, repurchased quarter to shares total shares million have sheet everyone. we the EBITDA XXXX, CF posted of respectively. million XX% under against We the we of Cash for million. the of million for the a over at the cash October which adjusted environment. the of strong the first market same million balance continued of added improving stands by still XXXX, X.X million, good through Last time the and adjusted $X.X $X.X and the approximately billion, call. the billion million approximately financial for current of repurchase a for Including at activities morning, These Martin, to months team we results nine quarter backdrop an X quarter, increase which third $XXX and share cumulative compares in periods year-to-date sheet after Thanks, $XXX same $XXX This repurchasing remaining in this $XXX leaves and night, as balance $XXX $XXX reflect million authorization. approximately million execution during results of $XX

well, importantly safely. and We it most we're doing are operating

very Our as of considerably foreseeable to X.XX quarter we continue was discuss, we incidents rolling are upcoming per well-positioned for will And XX-month significant global averages. Bert CF cash hours, incident rate spring enable quarter recordable season. fundamentals through work application Longer to than the industry will the at market future. term, fourth better the Industries and believe the the generate XXX,XXX end

on significant ammonia/urea are to year. are be is roughly complex, years slide additions limited annual rate tighten. new it First, what construct a At long-term that in approximately to a globally nitrogen global we can has supply and see urea All global already plants new expected come materials. balance for short visibly to to this under takes time fall per rate beyond net the supply capacity capacity online in as time, four period for running construction expect to of North the today. demand during XX expected unlikely our this nitrogen Because at same through will nitrogen continue time been the some has up demand an you there started grown of America XXXX. of it number Global is and X%

upper energy we likely are drive prices Second, higher, shown North XX. gas low spread cost elevates it global as at production prices XXXX keeping costs estimated should to hydrocarbon production this nitrogen while same curve natural fundamentals supply the from believe American in benefits as the our on CF for slide low. half continue remain while global curve, to our the time, of international greatly cost

gas has detail seen and higher U.S. the exploration later, America in and North This increased global $X As in gas dramatically. strong investments XXXX more around despite U.S. U.S., Dennis which production since trading declined the resulted per kept investments. in in go MMBtu, gas development oil have demand. natural will into however, shale, growth in

forward us support CF's consistent for the believe through Along NYMEX gas is $X factors these ahead. performance, allow will our to should curve years the advantages cost generation, with further create value. In significant structural shareholder below cash fact, in XXXX. We this per priced our and operational well MMBtu strengthen

Now, remarks. Bert, let financial who more before some offer discuss market me in will turn I then detail, the about Bert? position the environment our closing will call talk Dennis over to

Bert A. Frost

Tony. Thanks,

spring ammonia as positioned and application through preparations for Our work book has CF the we the performance during fall our season. third quarter well, continue

unwilling and the customers solid kept urea along allowed efforts rates a had at and running we combined. and exports UAN This to full in program, quarter. fill included a successful tons international take when plants capture our XXX,XXX These shipments us to First of position. domestic foremost with were UAN sales

accepted strong of program, fourth significantly quarter fill our into were This that business built nitrogen continue prices will unlikely. UAN quarter. customers also includes well shipments the into from as book lower which fourth We the a

with capitalize have As and in to market a result, flexibility are our position conditions our the happy across very the we on network, spring.

is believe we the there price for ahead, current Looking substantial support environment.

production prices gas in and significantly. in natural LNG caused Asia higher curtail quarter, and regions third marginal producers to Europe the During those

China's outages, on the August natural believe metric declining China, X for million decrease Europe. less winter rigorous same including that for and global the gas urea last highest and due heating XXXX, trade approximately China global contributed and environmental global high year metric affected of season fact, the of We urea prices. Asia not from XX% of also In costs in likely regulations. X LNG capacity, record. to cost of keep exported will higher a nameplate tons in Through million than we enforcement role high producers the feedstock any tons quarter urea, period to reported have

many supply. States, bean should short-term, will to be the the global try have expected, greater we apply we further may market expect fewer reduce corn Iran. Otherwise, mid-term good to project that impact value demand for Iran and global in to support the is absorbing stronger. be planted Additionally, represents a upgraded Ammonia to million limit if ammonia as short a it in X growers, the conditions XX in appears million corn for about still weather than maximize We allow. fall its farmers lower nitrogen ammonia favorable to demand yield. United growers than solid XXXX. spring maybe products supply the ratio, sanctions is acres expect market to and a season. the in the which This more acres with on which The of participation destinations could of exports, U.S. In their

that, will first think through that regions tender Europe in of Additionally, leaves March such ahead. have industry up to we the With very X large half CF observers this over as to position Overall, and and X we to nitrogen before and call catch purchases. India a strong believe to turn times Brazil consuming still forward I'll the are looking the opportunities Dennis. XXXX, on

Dennis P. Kelleher

reported earnings EBITDA of of million. per diluted third XXXX, million the the In share adjusted $XXX $X.XX, net EBITDA Bert. of company Thanks, quarter and $XXX of

sheet. $XXX During to of the million balance we quarter, cash added the

as Our At expenditures cash having September $X XX. cash repurchase cash balance million, our activity was equivalents equivalents as and common increased. maintenance even approximately was about billion the billion $X.X in of invested million were after October, $XXX quarter end shares $XXX and and Capital to million balance of around third X stock. cash turnaround approximately the of

ongoing. turnaround activity the have at we ahead maintenance Looking XXXX, significant balance still of and

total expenditures As $XXX a our capital result, this million year. activities approximately for to we expect

we period last same trading expect favorable to of cyclical global fourth in the conditions the deployment. exceed the nitrogen we for available Longer as the market, that quarter expect term, results nitrogen Given year. of will generate amounts those cash continues, recovery substantial significantly

marketplace. operational and has performance by world improving an All of excellent been this enabled

As Tony cost low compared to North earlier, the the indicated American remain gas of plentiful natural world. to and rest we expect

on to globally. the an and From XX% decline reinforced view have current Energy compared the we overall multi-year basis upstream Agency. year, XXXX investment by upstream according is down seen gas is Our International to to XXXX investment roughly in overall annual oil the

itself per growth is to kept has oil an volume roughly and XX% production annual conventional activity capacity, reduced. declining. historic from with XXXX development through global up low cutting has only oil of through it projects volumes major will XXX which Although been be in Similarly, XXXX of Exploration investment average. million oil discovery and has barrels barrels equivalent, just day of of dropping the in drastically in spare project that X% XX%. XXXX XXXX, likely of with fewer XXXX Conventional the sanctioned so global down there production of into done billion dramatically by the daily future. This X.X greenfield resources reached means demand, greenfield around fell gas

capital brownfield been base to this producing of address the but decline, stem already has Some demand. investment which so-called has growing areas need to term longer helped redirected not does this supply much towards production assets, of

slide side, XX. is be the significantly LNG as can investment down On seen liquefaction downstream on

Although recent XXXX. likely the increases demand will and years, in to – increases significant capacity need lead a of LNG tightening absorb market China, to balance particularly post imports, supply still fully, in lead will will to the

costs the will efforts in the to investment be nitrogen provide likely will Lastly, some XX, China to much reducing trend that, call on seen has closing is by participant as With slide Tony it that been in remain less underpins higher marketplace aggressively we coal new burn production. belief a driven smaller open global China's This input remarks governmental industry nitrogen coal. before our can and Q&A.

W. Anthony Will

Thanks, Dennis.

our included past low their as continue Before that business execute we excellence, nearly your want flow generate on over period work. our able focused on prices, in months, cash outstanding free exceptionally we're million for a to In $XXX I very They to highly well. result, XX a to move remained our operational the and time. employees to employees questions, volatile recognize that

interest high that North for following. value our this our sheet create paid million stewardship traded our with and million shareholders the on cash billion production from invested of to retired us repurchasing disciplined for Company in worth accomplishing stockholders, $X.X billion American Terra repurchased quarter shares, additional to We Our cash cash still $XXX ended in sheet. of balance generation of along deploy focus by by debt, on the Nitrogen capital to publicly $XX enabled common more of all with $XXX balance dividends than in our $X the million, units

look further will only because we energy energy business removed environmental cost in America, higher China because As low even ahead, Asia excited continued the gas The the urea and we with effectively costs balance, from higher more future, about enforcement demand have factors actions nitrogen of supply results. and global are enhance the natural expect in and participation. continued Europe global our tightening and we export costs North following

well and the questions. will Our base your capabilities now operator, the years ahead. exceptionally With we positions that, to for call us focus, asset open

Operator

line from Adam comes Our Samuelson the of Sachs. Goldman first question

You may begin.

Adam Samuelson

a or Maybe please. pieces, unrelated of Yes. everyone. Thanks. question Good two morning,

from for billion The potentially gas $X business to about just, second, position sheet Gulf the in cash. quarter the improve Europe? to the outlook? you talk the wise, I is first there redirecting your one ammonia start balance then about with ended cost could given of UK, you mean, And outlook the U.S. UK opportunities the

emerge? sheet. excess on hand forward bonds $XXX in any to left cash million million the of absence and repay, we balance targeted strategic any moving $XXX the that going of of the think Should to for got cash $XXX targeted you've really to share opportunities You've repurchase million

W. Anthony Will

Yeah. piece. UK the and Good hand morning, cash it I'll Dennis to the bit, then Adam. for handle over

to to spot into just It's UK Economically, opposed straight ammonia have say move based UK us industrial have for On (XX:XX:XX) will gas. the the bit move it's try But little ammonia standard and the able where periodically, buy over just the we some the diesel ammonia there. operation bit out in a over cargos. opposed D'ville then a into better moved to back over UK benefit of was as fair that indexed been global in spikiness actually as this export purchased year. into UK, trading the of production it positions to from to there's gas we there. some our I operations and business to of on U.S.,

goes for AN on been gas true price But up the lot pass That's pretty cost. that tied been to side not when up, and So keeping through. has what's a as well, AN pricing reasonably on gas kind the marketplace. of of Ag going we with European closely

there, our creates a for asset when real gas bit We're of a it and But in only over little U.S. in huge over there. making is high, okay it's weird okay Europe fact, base. – opportunity situation. So, a a we're money money weird making the cost

it's bit Dennis. natural sheet, I'll hand a of a deployment, cash some And on So balance hedge. it over in little the the capital ways, on

Dennis P. Kelleher

is of in to Yeah, and strategy something is, I can cost plan. in capital, do if strategic share per basis our excess mean, that is our unchanged our and cash excess what accretive like our foremost if do fairway flow of capital on is our will business is incremental we see cash we to to which returns business, you deployment first generate base our and invest

building discount we though, Having to plants, So assets number Wall be that's current to significant going how infinite a be it's not trade costs. certainly at said opportunities don't investing that. because our replacement Street in an new In to the preference. want on that environment, do of there're

buy you of out to there accretive, to be not number actually inorganic side, the opportunities to that's for an be if those buy Now, something going at and look has infinite to we there's sale that there. want

with to we keeping our say – want the allocation in strategy, need return is, capital to cash shareholders. excess I'd share for business So, at we that don't our the

gets I shares past point the have by share been because undervalues forward million go I time repurchases, October we've that What And out today that biased those We that something – just the price the that to bought we that's philosophy think the unchanged over our is with XX, would already X accretion we greatly towards in we that believe and into that to goes shareholders, X% up created is business. currently future. as leading that share – bigger. as and the

really And to it you about so accretion when to base our think business plan, has be attractive. something really,

W. Anthony Will

to us do For something different.

Dennis P. Kelleher

Do something else.

W. Anthony Will

Yeah.

Operator

comes Isaacson from And you. question Ben Scotiabank. Thank next the line from our of

may You begin.

Ben Isaacson

you Thank much. very

quick two Just ones.

course question You in need discount for of new U.S. talked do building Methanex plant, at bit replacement conversion been assets cost, cycle. in But noticed environment and to see on for the a capacity? second And than what my quite start the being new invest new to about of to it's are you in payable about seen then to traded because your in talk not is accounts economics of but your the different. the changing in investment a last I've plants, couple about We've due over past. those? start more wanting talk of to just similar. the years commodities lot methanol quicker Can both a somewhat some you sense, terms are cash

W. Anthony Will

for over adding to the bids get kind or labor bit here price see being contracts most to return for to reasonable. difficult what are to analysis least of the of over to is of it's a LSTK kind add kind problem anywhere here? new you'd profile capacity. close need the that basically of part that think capacity We've done required fixed On the And about fair us at new on

facing project real order project. that run because cost a of of you're project the so to by has labor the in when the uncertain sort of particularly executed in has have And increasing out has capital, profile particularly over it $X And and been for $XXX in of been cost, to you of pay construction a a costs to MMBtu there, every benefits equivalent life productivity over, poor. million of America profile are you single that's North about gain area

price do So, you're to if generally than America. standpoint $X the gas, in places $X speaking, in you an contract you world can return or building do that North better a other economics are by in fixed have going from projects

that market here and So, I for of And believing at skilled exotic fairly just build the costs bring cracker to which how make amount also tariff have labor challenging, drives over sense And difficult a from and ethylene farther. just the that particular, the up war hard have time methanol the certain projects right both expensive. are getting methanol that you if you anybody it now, for regimes in of have in or announced, to would is. the ethylene more offshore that increasingly even given steels been on is place labor construction based in are look

when look we're we at to think a makes do world cap it a think North So, game negative. where There's running I little it's to piece, I on fool's lot sense. building try at mean, then, that. of the parts other we working of in And America, in more bit a the

Dennis P. Kelleher

Yeah.

probably think payable I were that had We receivable doing the pay people think for – flow you very you significant we're compared year. on was projects, of lot had is, the way from confidence accounts the the a higher that in products under we expansion. customer obviously, money side look seen what terms And quarter expansion we mean, I cash I But deck the it reflects that, it in we at what this The for growing delta really to last out the door perspective. back what I is, to accounts we've selling is to going think I a forward. statement. have buyer on in is, – nitrogen would don't advances the note had going to addition because that different when our price

and healthy that's come customer development sure this very would come weren't point back a in for we And so significantly. actually was There us. that back, cycle advances ever where a in quite time they've

are capital where a that with time think, be we're least type the So in negative cycle. will company. working we some And us at basically for I given

Operator

question next Parkinson our And you. of Thank from Credit Chris Suisse. line from comes the

Credit begin. Securities LLC (USA) you. Christopher S. - Great. Parkinson You Suisse Thank may

of terms preliminary some initial us and In when you you base, on versus your American just projected XXXX? on asset just your mix, through the operates nat acreage And outlook. are including about AECO Thank basis? Mid-Con the just gas, current thoughts as as well what can think XXXX, walk you. in Any product changes your thoughts North

W. Anthony Will

Yeah, good morning, Chris.

So more in we than have in we XXXX. XXXX XXXX activity turnaround or had

I year-to-date, to expect, bit so would more that to think year. on the we're a normal, kind of production. expect that's versus more a margin, down but percentage of sort last I I'd little So return couple back points of

Bert In mix, incremental in we makes the are terms better and hydrous better granular incremental fly, it having decision we off do on the really with, product that having our of off are UAN. to has or

inventory margin are, to decision what a netback or realization what the looks he at the company. the so pricing the And optimize kind And on end kind of the how positions the at day, what of – demand is. is, of maximize the

shipping, of it, And about tons profile production about means production and of weeks produce. or we're during call from that determined profile and about month. a in land we of – we million million of specific of year, And six and highly where standpoint, every inventory for time. we're of on of margin month, have we only is working period that producing, say between producing where given somewhere average ranges any UAN by sales But have the is I'd of XXX,XXX tons the probably time. what a period kind So maybe we usable UAN X.X given that X

because we back need period from least and we UAN. for don't are, as the have just we the you step given move So option, along, be how to to the to of extended big really at consistent sellers time, producers with market respect

Bert A. Frost

develop. Mid-Con up how differentials, to Alberta, evacuation production much capacity also With is how respect a for the closing comes to be of versus those capacity the function on fast and going they

– Mid-Con, So Shell the single curves very at LNG years it the you time $XX has about that's respect in you With think out a that take to two to so, British it's look or Alberta, to spend But forward project. takes $XX out, three see that differentials. long build. off those drop least at long billion, billion Columbia. time on years going if think, announced, project I maybe I a a in a a to in

So to as right the are quite exceeds when differentials additional that good differentials even because now for But just we'll there suspect prices you I dynamic. think are see evacuation capacity a will the with capacity, I development Alberta some right, production Mid-Con develops. stretch that to of time. it's us times be going are that, have the out the build how so out

Operator

Thank of our Bank of from question America. Stephen you. And Byrne the from comes line next

You may begin.

Stephen Byrne

of some that to? To were the holding in had quarter shows Thank China. intentional? perhaps selling shipments you demand Where do what question actually that you in you on lower XX that Were a Yes. actually refill the back you. declining volumes slide And then third any the attribute had about product?

W. Anthony Will

Steve. morning, Good

ammonia production, said ended of a bit QX cost the lower you to basically darn it, at our from standpoint. was our flat. where were So, look last it cost think third of in from terms was putting the inventory lower quite And we that from we're relative sheet we than standpoint production of of and we're million quarter, we that's last a our is to inventory I lighter given perspective, if where balance $XX in gas a tonnage year. where with year, close inventory And

volumes lower to we little kind despite because inventory. the by turnarounds So, a of production, being of our for on maintain bit squeezing able have been year,

we that fact, for of us we did positioned lot say I So, space lot is kind that a which has of holding sales, make what of go back, and accelerator. the we inventory think go-forward, about a when the to ahead want take I that's enables what and And second... the wouldn't Bert to remember kind the in we have off don't to when of so well and want foot

Bert A. Frost

second million the in question for we very from because seen five is Chinese the a tons say years industries, consumption, XX applications, it's over consumption terms let's in up On regarding consumption, well a driven of just large end-based of crops. percentage industrial some say end their we little have consumption variability steady as used of of ranging consumption declining some last to as economically believe the XX I'd of million tons base that's

like So, look over up last a when on X%. – basis an year, it's overall at you actually it's

And much so see of a I that decline. don't

W. Anthony Will

consumption XXXX. has government of the position out actually with central is, what kind is of through in flat this strong of root. urea But it, saying here think taking response I part And I Steve, some initiatives to net those come think seeing you're

that lot we been of big China. in that socialized implemented think coming. that and there's So, drop don't think has already a some We off

like and forward. going forward, still here confidence demand of fair think industrial we bit gives And there, us remaining bit a so from going side fair what looks growth a about of the what that's demand there's

Operator

Financial. our from you. next of the question from comes Susquehanna Don And Carson Thank line

You may begin.

Donald David Carson

about into third to quarter. volume run-up I the of the of was a new Just advances. sense Bert, fill September-October in at summer get what year? in prices? your go price old the higher this at quarter percentage were And much of or – you. million you'll this nitrogen summer fill you the QX What we trying had realize that and of momentum at customer as Thank fourth prices next Yes. And how prices? noticed is these prices $XXX

Bert A. Frost

or QX look demand. So, you're demand out when you say low heavy very I'd of non-existent into summer program rolling QX the QX, at

are you store customers they until and products of So purchase will period to for incenting be that a could spring. time,

then in launched rolled we UAN out later and the July. And out, second rolling of that as week And July. the program so, began fill shipments

majority, and be some all also a program, the on. a UAN continue mentioned, of into I that was shipping So, to will as – part of fill well QX volume of QX ship we'll

in QX, wide booked QX, being urea at For open weak for pricing of shipped of look we we Midwestern then today, early then those of a urea, to And more being as be in at, will and some we late July that we're some some ammonia, based as tons rolling of and XXXX. demand a market was booked booked QX moving look were that's in and QX. fall for the period lot the some XXXs, let's that in And June through spot. you quarter, for low shipped the then when several product, you and well when in look for out exports say programs and in

Operator

Capital from our Jackson Thank from Markets. you. comes of next question the And Joel BMO line

begin. may You

Joel Jackson

could looked you really CF could look at that? something this program, want of you've doing last at to I also summer's seen to doing a storage past. do fill question. had of look or doing not your the maybe Thanks. follow-up I fill – Hi. at two does Is not month-by-month that as in questions. competitors fill your Bert, some we've obviously less more you on doing Actually, allow that

W. Anthony Will

Morning, to Joel. over I'll I'll it and first, Bert. jump turn in

day, probably about the month, player, and to a every think of choose tons and if we're said opportunities producing not going smaller and a you bit I some market earlier, have back be think UAN ship you're meeting niche the to about and I I XXX,XXX in to what timing. pick of a

of expect better. Because business, when your over month the choose of hard be what strong and that because Bert found should not people it's those we're fill be price just average realization was pretty timing this better appetite. launched a get scale pick the no, little is And of So, to I going there to to there. we say, take course off on a and able pretty the can you year, would

build to was take were and helped that what so there book, fact kind bit And of us a of the a that's off was we prices a such able increase. then demand

So, of I is and team have this demand – environment of his that kind actions think taken. it's Bert in the recent rises of because the part

So size want don't our being to... do Bert, have out the just of our option there we you But not given scale. really and

Bert A. Frost

decisions domestic There international global demand, I available the what of terms on. demand, new and the monitoring optionality this at our is urea, company, the what's on on look going market. we're UAN, Ns, are going in is being ammonia. it several to globally drive And constantly that factors

taking And driven profitability. we're are that so by obviously decisions

So to us, if will fill profitable we do the the terms gas and structure we it's program. of a decision, a costs believe in available

won't a saw However, which degree, you attractive XXXX. we if it's not believe to we same in to that us, do program the

And our feel exports, then decision we and vessel, so look a or pricing urea the a the shipment, we you today vice to – laying when the going distribution, that position all then positive available work options execute, product as more mode management barge, those. ammonia we're we discuss very especially pricing make less about weighing with mix, into the over and our to company team And rail, and or top, UAN and together and truck team XXXX. the at versa, and making of and of position

Operator

line Michael of Cleveland next question Piken from from you. Thank comes Research. And the our

may begin. You

Michael Leith Piken

in Russia nitrogen to Do restrictions anti-dumping how of consumption good a proposed if European for duties some on and Yeah. and a North on sense that the change get UAN, see trade Trinidad, just wanted flows, Hi, might put habits? and European Thanks. America. they you global impact I morning.

W. Anthony Will

Mike. Good Yeah. morning,

So effort that is, is Eastern I largely would the the brought this an by European around issue EU the say big Commission producers. was forward

the they're So you've got per of in region and the for $XX Poles challenge the and And near and gas, they're MMBtu is not producing paying Romanians even them consumption. Lithuanians. then

support. for product losing turn logistics product bit aggregate. there of so a France And cost think, of than get I for like forth. in and us, looking of than it's frankly And to our we they got think over that they're profits. and a to less they they've so So Belgium, I of X% can't couple over the EU Commission run sell to And less and percent of money crazy, to and fair much our

going to CAN increases, of fall the not their up only UAN, us not shift we pricing going as And it's really they in going going on really other it's that bad view The and what end in where line, be do form to products are are what for urea, a effective also most see we EU for is Europe. you're So nitrogen. to product. as AN, bigger going having if to farmers, because but in it's ship issue jack-up to is, into material going this is in result, news that to

team the have ones out in so, that Bert and And of job farmers of developing European are all day. one his a demand outlets end shakes the relationships sting of America. to the feel Latin real ultimately this done and is going things in of for at the us the are tremendous where And the

for us America to send Latin UAN into to as to France over just easy it's send our as it Belgium. and so, And is

I at there in product going of people end it's would the pretty us, really some that are so the to farmers. the of to non-material terms But the where movements be of just are here lose for flows. And EU kind the day, subtle expect

Operator

line And our question of from Morgan you. Stanley. Thank next Andrews Vincent from comes the

You may begin.

Vincent Stephen Andrews

some opportunity the sort talked of in the and the morning you labor to typically, just I'm that, constructed good facilities to and fill something issues. did just well. read that an wondering are aside about I in in the company, the thinking so headline, could within attractive, capability expand, some Hat, and opportunities what maybe have as to two Thanks. new not is particular about you maybe just facilities expansion Thanks, everyone. and brownfield I'm you as new if a Tony, it greenfield Medicine

W. Anthony Will

challenging what about standpoint as got the us was smaller. of cylinders. and look really Chris two all Vincent. them rail of long relatively be nameplate the the plants were opportunities from morning, only And incremental have challenges We've with to already ended anhydrous on out we are those There kind It's a moving two little well. very at firing about bit, running enhance around, kind there. of original investment. ammonia them extraordinarily but team making of that so which his Medicine are up was plants three and up think they're and at over running we there, and may Hat cost is And some XX% The astounding. absolutely good of ammonia – plants Yes, urea incremental really almost. one built kind new rates plant are

at, can gas of there, gas we've was through and out so some margin done the an that that's with team get why part upgrade production. there that their world, so, else that do looking – something his plant because R. Bert Portland with cheapest that you're good J. in the Terminal, been be to Simplot is AECO dealing or we signed And the export and be up deal of Company realization of able

and government we've at in looked really difficult really any things of the anti-business Trudeau new legislation I area. put make for spend up for of are doing that Canada, carbon want to it it challenging think us because to now, right that makes and particular As some there us very money want their kind to to they're capital backstop

of alternative team costs finding governmental think his we've we've some difficult So I outlets Bert really times. bunch there because that and of and means and looked the labor terms solutions. in of it a good It's creativity up at actions, of of got

not it thinking that about, about to think something actively, sense. we're it's continue if makes So but we

Operator

question Wong comes And the of RBC our from Capital Andrew from line next Markets.

begin. may You

Andrew Wong

morning. Good Hey.

the cost put it's regarding was you that I how I show this curve like guys and demand volatility. So understand a curve, I monthly on just has you out, cost the that just the curious bit could you But the coming your changes out? see that just about cost the seasonality curve maybe seasonal on single talk a complex the volatility, could view in on slide. to show little you

Bert A. Frost

North/South, in and Asia, is When although constantly you going at it there of follow a going what's in like years. except corn we're changes, place would next America, when South that and tariffs, kind what's pull extreme today you soybeans couple over Africa, see But application the that rates the Argentina you Australia, drive when is and on, extrapolate changes Europe, mix. seasonal cost demand engaged drives South America look growing growth to seasonability. in and possibility on at of is to in some the how we curve we India on how rates regions But America, the take you the whether not that of with and out North in world, probably look different see happening shipment cost Brazil, curve and of really crop variability, rates and it that could demand much that's or then

Dennis P. Kelleher

like what I'd is a where make which if what yellow other is to sits. that that that, you left you I'm what very volatility that the it it see you if you that, of see it's call that's shelf estimate, to Andrew, look from see our Yeah, And to curve, seasonally. is variability there's going flat in you a two at the kind look cost – points, band, of

downshift left moves price. So get in significantly, significant even if to it you a really don't the

The make the runs of I of installed that the width to at rather themselves, assumption capacity. about XX% we bars other that conservative respect is point would make capacity with nameplates

significantly, below, even higher had the of contract cost the right have would that tons, or tons anywhere cost curve, cost to the do do you're is what in variability to to if degree so the we cost to And above to the higher the going be the cost on more of curve bidding seasonal really curve. what the that middle were is, in

sort cost marketplace. in fairly what outcomes price curve would of likely a supply driven, of driven be conservative view So there's

W. Anthony Will

Andrew thing static that XXXX as of other is a sit The where is, today, right. an I'd based of things add on view on from just that standpoint this input

exchange at regular So energy like, shift. a we of forward, those or in this freight those things is and or evolve forward will the that although But look sort terms as things in to place. the of we've curves if sit and of just dramatic volatility out basis do of don't a China start taking look having rates, an curve, over things as as best change and see shape all because tend there, of Brent of today there's impact the coal the markets we the over look what We what a like, it even kind crude of forth. here and look so a all our estimate lot you year and so update moves This on time.

is expect of a around volatility we happen this it. So meant with to what directional to bit be fair

Operator

line question our And you. Mark Connelly Thank next from comes of from Inc. the Stephens,

begin. may You

Mark Connelly

on seen fall application U.S. rates the Thanks. a in Two questions. secular We've clearly dropped of basis. ammonia sort

a start buybacks. you that let So the that you're is on expecting a response do then see second that just pick-up long-term from a that on when you comments shift say or And now, increased me in your question to trend, acres? as application, earlier fall notwithstanding

rate. little dividend your referenced slide growth your capital a see surprised was I to So allocation

With is the slide raising that something suggesting the three is for flat dividend that dividend think important? is years, you

Bert A. Frost

first the take I'll question.

fall drivers Number weather. there fall are one for application. Regarding ammonia two is applications,

had couple weather and and December. we've – cold early. some in fall, seasons we years window either a came last of in you opened where year, that very when wet early snow so And the came was the Last constrained had good into or

And so, issue. there's that

is the price farmer. The and other value to

as his of want And for with agronomic XX fall, utilized so get be to value Because, opportunity XX/X, fall. precision system. spring or assets incent quickly We, farming the we fulfilled, application move to XX the into farmer that that five and that. attractive that in you even fall produce the they ammonia. the able applications some business has throughout an a spring, in ammonia maintain we be some to serve value and the that of continue of to longer years spend the then put the what those our to field position in to I basic think, or them. learned, pool the XXX, so, leaves variable on it's in UAN be Tony go needs We maybe the our want needs urea, We at mentioned, in nitrogen and over last, Midwest or we fall developed with or to CF, we for to the good in and we've it I'd to continue, we maybe down years have to as of product is terminals ago. and certain to application were percentage We lot his It money, a a farmer. that can out say, want complement

at application fall shift a trend see see fall for I a a higher in returning to ground in today. don't we're and actually is a and out to level of of $X relative the that fall that I today so, application – seeing pricing product QX a came probably for that's shift And XXXX, attractive. attractive, move to QX The corn

W. Anthony Will

last couple think this has slide years. And changed Mark on rate, in dividend don't I the growth the much of

what order need the call XXXX one we so back maintain the through from more little in of average the an dividend, to is slide to that S&P bit value the outlier on. let maybe talk would XXX, me XXXX, in dividend there into really I XXXX same or that of kind not of the tacked the institutions and XXXX, sort are want see that try our you on we number that portfolio. our there were started look shareholders, with another. of philosophy in to So additional And dividend with as having year that way the it's a arrow a yield grow to same standpoint kind that be the large to which of about us it and had, and for have we've an just And on a increasing

is in XXXX same the And stayed price the amount. increasing handed dividend versus it rest delighted about our from belongs, of by if into like look now yield share means be a XXX, approach between we'll would of where then coming dividend the Now meager the up is XXXX a XXXX drop the it out, whether of in our even more a and S&P through kind back because and price think share to being we repurchases place the looks the value make that's of our focus view dividend And that sense. right I and normal back really But we're earlier, comments although unhappy virtue where as a blew I Dennis' range. our itself of consequence more back where shares think it's near-term the it kind yield in is. share dividend and tremendous in now,

Operator

Thank you. And Citi. next question from P.J. line comes the of from Juvekar

begin. may You

P.J. Juvekar

Yes. morning. Hi. Good

with $XXX go my – then and mentioned. XXXX Can later. flat are curve sorry, cost for ask up which outlook is to us? And $XXX is you for today. the to your That secondly match doesn't from outlook, pricing I'll Your bullish down question where ahead that just that you and we slice out

W. Anthony Will

of $XXX was year been say I full far. a this mean, has so $XXX look, is going year above to I to where

up of I sort also the cost. that actually So, and is that's year-on-year, floor think

Hemisphere, fair I in of Northern you see Dennis' North got both of America. developing, a up there's a Europe show always in there's back that in think there's to point if point, view that's demand of catch-up bit terms and the demand to

a and number kind demand-driven in marketplace. entering move all to or India that demand-vertical farther are right, into inventories a sudden, the tendering with so, above and could you And the you curve of one well could bar another light on see two channel, times, be and the the supply of

not this as what with And you then nice that extrapolating is today. a pretty variabilities tell we're can economics of that the the us value lot other up to XXXX. picture doing the we're is, is values drive a But of projecting urea is saying be. end year What going paints what end what different outcomes. So, to for

Dennis P. Kelleher

I well generally runs these that and obviously, will what capacity and for earlier P.J., which that of then at we And in doesn't happen. is the said you're nameplate that them all that you assumed bars aware XX%, just I remind

the add be likely The other is of to marketplace. Iran out point I going would is,

sort this range. won't. in saying is I not saying not necessarily just situations, be, that this therefore may So, way. it will the But it ends say within really I'm be up a cost and well input price of of wouldn't It

W. Anthony Will

last our point, average so is, But the year-to-date, $XXX. selling price $XXX, it, call urea

of That's ahead where $XX EBITDA. being up like So, of today. are of ends that we million the range $XXX midpoint that's another $XXX, at

So, not unhappy about we're the that of world. forward view

P.J. Juvekar

Good.

you're mentioned I build You ask ask you're going that this, new you unlikely plant. to answered a me let you conservative. my question. was being to But if you

you – on build, something regions? geographic So, you. which consider do do attractive is given Thank in versus that M&A would comment think your think and and is you you buy

W. Anthony Will

And excess the standpoint, as earlier mean, out back I pointed to benefit think, be Yeah. Dennis from deploy like or business to we'd I and grow. able a the philosophy capital into that building – immediate with S&D all versus get the risks to cash of cost not it. you're the else maintain buying of overrun everything you you go flow, subject it's along is, spare and

assets buying And below of trading a so, cost are I think from that lot sense. makes standpoint, particularly replacement when

And who be For back to buying other value. our at it's Dennis' got believe our though, attractive us to we back, very want alternatives. point, it, shares clearly do versus other our are a alternatives to accretive

and North our value there's plants other proposition efficiencies alternative we – that based, make we're tuck if was open come American that such uses more the cash. believe would be to because just the with they we'd ways, outside logistics was in synergies our be along excess the we So, into a U.S. return if of that. of could system, But risk-adjusted that that would some and directly and in there's network facilities

something about, the that relatively capital, hurdle high prices. and attractive is we back there's shares what So, are we can interested with it's pretty what but certainly at beat to a we which thinking buy we're believe do in, else got can now, we're right it's

Operator

question Oxgaard the from next Jonas our of line And comes from Bernstein.

begin. may You

Jonas I. Oxgaard

Good to curve Europe, stay side. price. that gas If bit, they're urea, these me That on running not Lithuania, has the the based have on hand to Ukraine a corresponded suggests operate So, right? right flat on once cost availability. they guys, anyway. out cost little of Eastern don't you history can that the on morning, of They price we guys. But there in operate

end since And it's cost so very not on into high your shortage, we intrasite East right past the either curve, run China is if we or shouldn't which gas a and into producer? into even blow of them a marginal Asia

Bert A. Frost

we way, three $XXX we're when quarter. times level, plants when is point curve the of the difficult some you domestic what this the they think their the goes right took months some Jonas, summer the that gas Poles this that NOLA. by that But they as you ones these that do of those one, place and present to have they in this gas There specifically that traded downtime. and the countries they or did does and this them in they X on Eastern down some Yeah, of they side, Hungary are gas, $X tons. and far we two cost right, demand have price high at even tons pricing have and million look look They so or the some we're of Romania, downtime producers Croatia Poland, you're extended cost identified operated, is where to with When priced yes, seaborne And they compete, seaborne the with some in have. those to your are will of graph, traded so reach at the take ton at or whole trying trade producers. that or to Gazprom were spot is can't own European buying more past ammonia as of took

older we as this so have fluid situation. And that believe Those well. a were also been don't is assets maintained

And ammonium investment issue EU value. make the that or invest reinvestment that other make that's a that harking nitrate for not And producers part dumping a like difficult was into I are of of demanded back question or have products were those future. decisions dumping it's case difficult when why some there more an of on you to EU as that the products previous get case, calcium in to to higher did Europe a environment, so other the part think

that seen XXXX with cost that move to like possibility and XXXX reflects there's saw but get this we in that the drive is and those are could like a that curve and drive, question you and go there extraneous real, curve so out summer, think higher XXXX, or saw then several that we've it now And that. specific on movements issues cost and producers, your up in but $XXX, may above the than summer, in we we it below

W. Anthony Will

to the the Bert's very of And Jonas, on which years globally. let me difficult just there is have last marginal producers comment couple last tag for been the

of a reasonable And that online or time for plants a any been maintained some period of sort very difficult offline reliability. not with those lot so have have well time will have ones the been of coming

extra that the in material with of lot in driven demand if excess embedded not forth side year of I so tons of and acres X curve million so, just the U.S. the in that kind your be And cycle increased high happening And the see through terms of there's bust and of easily that a honestly, that chance term. corn seasonal back just top there. demand, think reasonable with runaway to the of and kind you part end question of fact this in into the some of a volatility you out is – the that's there near could a as acres

could what that that's it's think suggest of the upside, we So the four to happen conditions just – doesn't what are. sort

Operator

from our Roberts question next And you. of John the UBS. line from comes Thank

begin. may You

John Roberts

XXXX versus break international you sales for give mix then sense of Could you. UK export your geographic us into Thank U.S. a international? versus operations? And of maybe your

W. Anthony Will

of When of the export all urea, that. XXX,XXX above including of on – and about will ton and ammonia maybe tons, movement ton look mix those around a probably a probably at UK the In million basis. XX million of XXX,XXX UAN have, that little X.X in Trinidad tons we we XXXX, product tons about and producer we we're

ammonia. Trinidad include not does that so, And

And what of price-driven an and so, in that at just market-driven, – when to not profit-driven, not terms look you looking value-driven can and we're but you we're market on run average, we share-driven. the do, market we're

North America, abroad. those so those places in or as see opportunities numbers can we or stay home could you those And tons can attractive tons see attractive move

And what our of terms to and brings in so, to plants the the package flexibility we optionality export options. liked and us the mode to

profitability to to grow that so continue we is And there. plan if

John Roberts

do out next with think stall global could that even they demand slide XX, subsidies the to than their back you Iran on then from And India from year need the outlook And demand higher further your on or Iran? in – therefore or Okay. need? greater prices, so away import and decline

Bert A. Frost

demand I most big farming, basically is is. a mean, of for piece it Indian of sub-susistance the

the in a to And will directly reduction availability lead on gen the not so, want yields. I And to government think does have major a that food in one reduction (XX:XX:XX). thing is crisis

forward. do we So, consumption not see going a in reduction the Indian

W. Anthony Will

in the are overall and has ton, last $XXX I those crops, wheat the go XXXX, India billion, was consuming they We $XXX and bill to of was of you have a see their grown terms to end subsidy and over years sugar, of been demand urea and planter consumer is growth. several when positive, correctly. their $XX when remember if a back years huge

were at LNG they today cost why has plants were buy. that know so they as been market not in to were $XX. because we but has years, of would continued rolled they participated shut announcements There have So previous rebuilds the new buying plants, they up, those high competitive be some have down, of don't competitive

years good steady million last So tons. averaged million XX between tons the have X X say, we and holding fairly destination five to over Their million at still production market. imports let's see as export a them

that's of rate that and XX are ammonia on not see to consumer X% or growth ton do So, market, the end consume, steadily there the growing that for million that they're we million projected they that X% XX we've urea an and UAN world. to

Operator

from Miner Thank our of line from Intelligence. you. question Jason comes the next Bloomberg And

may You begin

Jason Miner

implementing from been There's impacts to as about talk could those demand that, time? if buzz wonder think and Thank over possibly. you might see possible how a what here a EXX you nitrogen you. about little I unfold you

W. Anthony Will

to my months, has incremental it's cut that seeing put off, we're it petroleum But the consumption going of when the of that demand ethanol if lawn that summer positive, it to I've and I externally. export I is That above the even told is the $XX level as a Yeah, we're positive, then as and produce we're China ability different any EXX, is and on corn countries see impact a it movement $X still not and exports good growth team as is could. though probably, to to until that of would it positive the ethanol, level, the and well implement out gain – around rolls available, but on ethanol. and $XX the good

products. So sustainability the is demand ethanol to to when and corn the product. And being looking seeing great feed, combination to the you've has in we're for move that positive, and today the EXX ethanol corn corn – a ratio, of exports, the got remaining that's for nice the ability then boost and extra on being going you're the business the be that XX% juice why for grind where exports of about that's

that million corn we're XX even a demand you'll that the probably move choose we're of going for more that's why corn which movement So positive for towards to at acres farmer you're and projecting incremental as nitrogen you're insecurity seeing is million if a XXXX. soybeans, and with XX possibly is

Operator

you. Barclays. Thank Duffy the line And next Fischer comes our from question of from

may You begin.

Sean Gilmartin

kind you. view walk urea in taking on I Chinese hoping this kind term just is longer This of the Gilmartin was question. Duffy Is hold, Thanks the actually regulations Sean view that Thank And are doesn't that should factors wrong? there? are gone that environmental anything we main Obviously, underpinning view. and morning. exports the for Hi. you of if quickly, that thinking term Real through about there that on could for I'm be your what's assuming holding. else longer

W. Anthony Will

zombie central coal look consistent the on capacity, on government's the not well urea Well, is going I reduction of a from emissions of it in down fairly a employer think the people, matter with in as is clamping big been you excess usage. of some I fresh mean, terms particulate and both environmental at And if approach. and of really industries standpoint footprint big and production the it's what's water as

on industries emphasis One of exist think of with on a quality, the back to that urea has I industries of trying big improve its worst in. target got in to capacity worst the so, one terms environmental allow access the And

and Our food belief to self-sufficiency is from a nutrient that that important. security access perspective counterbalancing was

believe we levels million year, forward do a there're why million. we've year you in happened this ton coming is global or impact reduces pretty that on pretty probably almost million were with maybe X that at said trade consistent the going probably our off want is industry. exporter that a when readily self-sufficient X But about XXXX which to maintain their XX they what of effectively they can view And so, existing which

to our environmental instead low local quality the production. of low of operating the regulators the itself backwards. They're kind emitting will on to that is environment is globally, Chinese needs the world, really keep But the and global very world over think absolutely hope cost, will harming what plants time. Chinese helping being like care thinks our locally has continue been this plants get of see that it. act I it's improving concerning down Canada like kind in something possible of And take that's down that Once difficult to will rest greenhouse these The for extraordinarily off plants shut that and regulations that back. they've we time, entirely perspective, up is, them. put in, period a coming the Government you So, the tremendous an turned benefit end And it's thing don't rebuild us with from think it which gas focus is in of you'll globally. one Canada extended and is doing with because Trudeau of are when that

Operator

And HSBC. question next line you. from from our Alexandre Thank of comes Falcao the

may begin. You

Alexandre Falcao

delayed? years And XXXX, your plan this one you. Good feasible the urea, morning. in self-sufficient that the saw slides anticipate announced Thank in any of that How you has that question. Thanks in five imports. think should is the in that for no is? risk there become India they plants first actually you question. India so is one probably of That's to I

Bert A. Frost

plants watching growing well abandoned this pictures mothballed it's and in looked were and forward in we when as plant. means mothballed at India up trees as moving that and visited the some went We've in these of it's what are been of

a it's So rebuild. complete

technology worldwide India some the is operating are is costs. in net then probably effect and MMBtu costs But because plants same gas and in and many it's so obviously of your cheaper cheaper Now it's these labor India. you've to got the operate

LNG the you're so is $XXX, that just urea just importing say when cost with in their But And to it cost you're are with curve at cash for gas effectively let's environment stay demonstrated we of and difficult $XX, less. starting our profitable. costs an

the pipelines that the or seven operated really they was profitable, years still there and longer, that weren't this – weren't even probably receive was plants or these plant ago And hasn't when the to the build to in shut six issue that they built India they – years so were were full they are have gas. pipe XX And still gas down, built the Methanex ago speed. infrastructure plants with and the

what can of want, gravity they difficult occur economics. can and do countries governments period. fight the want, can go on do so and And what conditions to – it's a for those or what subsidize and they But

W. Anthony Will

their to are desire plant betting is in. so plants XXXX the we be over was that Chambal. that by and I coming projected my zero was that has one The try line to and on of met projection, built on currently And amount own only But funds the I'd sense is private far. get that's to with in but on plant the take I probably We initial internal Chambal were in been India all of Bert uptake And the them. one, that was close government's the these think to last.

$XX we're it's a $X.XX pretty a if always with said, as pretty they're gas we've them imported the on spread risk. because run, U.S., happy good that So in got they means But LNG, actually Bert running if there. that

Operator

for have I'd you. Ladies gentlemen, questions we call for that like to turn Jarosick to time Martin and today. closing Thank is for all back remarks. the the

Martin A. Jarosick

you this at for seeing joining the us. conferences everyone and Thanks to We fall various winter. forward look

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