CF Industries Holdings, Inc. (CF) February 25, 2026 Conference Transcript

Welcome back, everybody. We'll get started. I'm sure people will continue to file in. With me today, we have Bert Frost, the EBP and Chief Commercial Officer of CF, and Martin Jurassic, BP, Treasury and Invest Relations. Bert, you know, you're stalwart here at the conference, so I don't know that I have to, like, fully introduce you here. I feel like most people are fairly aware of who you are. I didn't, you know, you don't have any presentations or anything like that. Martin, if you want to kind of lead off and maybe provide just a quick overview of 2025, the year as it was, and we can kind of pick it up from there, if that makes sense.

So 2025 was another strong year for CF. We had $2.9 billion of EBITDA, $1.8 billion of free cash flow, ran the assets at 97% utilization utilization and had really, really strong safety numbers. So all told, a really solid year of execution for the team.

Yeah, so maybe we start, obviously, just nitrogen markets easy enough.

It's pretty important for you.

Ammonia, right? On the call, you'd pointed some potential weakness given capacity expected. obviously startups are startups spreadsheet math is very easy to conceptualize a plant starting up but in reality often and always does take longer but as b of a that's been one of our concerns right if we look at the globally traded ammonia market so how do you see this playing out in the the short and the medium term as it relates to global ammonia and then i want to kind of hone in on the U.S. side, which you obviously have some very real structural advantages, and we can touch on that. But first, it seems like most of these plants are going to go international. So how do you see that kind of playing out here?

It is an interesting market, an interesting dynamic. I think what has happened over the years on the analyst side, there's been it's coming, it's coming, it's coming, and negative, negative, negative. But we've had a positive, positive, positive market where we've exceeded expectations each year since 2021 in terms of an ebitda performance or a free cash flow performance and so the ammonia market today is structurally strong and you have globally traded ammonia you have 200 million tons of ammonia demand per year only 15 to 17 million of that is globally traded on seaborne traded a lot of that's going to europe to backfill idle capacity or product that's not coming from russia as well as just for phosphate production in Morocco or imports into the United States. And so you have two dynamics taking place. You have idled capacity in Europe that's not fully operating. You have gas supply issues in Trinidad that's taken the nutrient plants and I think other plants that are constrained today. And so you have a supply-limited market and the expectation that this new capacity in the United States, Gulf Coast, and Woodside will be coming on. But we're three years now of waiting for some of that capacity to come on. And demand continues to grow, and we continue to supply some of that with our new low-carbon product as well as just participating in the market today's $600 to $700 a ton for ammonia on the globally traded market. And our cost today at $3 gas is about $120, $130. So it's very attractive for us today. And then you talk about why CF is differentiated in the ammonia market. It's our capability to store, well, let's say produce at a low cost, move that ton at a low cost through the pipeline and our barge system into our terminally system that's in the heartland of the United States and Canada as well as the most fertile ground in the world. and with high yielding corn you have a ready demand base for for the ammonia much of the ammonia that we produce as well as our industrial customers so how we see yes this capacity will come on eventually but we have a very strong and stable market today so woodside and in gulf coast ammonia two projects starting up basically along the u.s gulf you know if i had the ability

to move it to the corn belt i would but not everybody does and so when we think about your advantage with new star and that market like if ammonia globally comes under pressure does that spread to you like corn belt expand because you can't get the product there does it stay consistent or does it compress because you know they'll just i know maybe ammonia is not easy to put on rail but like will they just will the incentive be too strong to move it to the corn belt that the product will find a way and so when you when you look at how does ammonia move today you're right it's the pipeline but it's fully subscribed ourselves coke and others because you have to

have a destination to receive it so it's one point to produce it you have to have the ability to receive it we have that but again the pipeline's that capacity and so but would would that ton from Gulf Coast or Woodside make it to Iowa? Probably not in the context of just that structure that's in place and how we optimize it. But it's also with the differential between the Midwest and the world market, it's really a nitrogen calculation. So you have a farmer producer has options of urea, UAN, or ammonia. And so he or she is going to choose those options based on economics and so you have to stay it's a global economy and it's a globally traded ton of nitrogen so you have to stay within range and we do that on an economic basis but again we're a low-cost producer we have low-cost gas and low-cost capabilities to move our tons.

So as I think about this right because fundamentally you can't just like move ammonia into a urea loop right you have to have the on-site production of ammonia so you have the co to to make the urea if because on your earnings call i should say like there was some comments around potential softening in ammonia but urea remains fundamentally very strong and quite honestly the supply demand dynamics for urea are pretty favorable there's really not much new supply so how do we balance the view of maybe urea itself being fairly tight with a softer ammonia dynamics should it develop

is there that fungibility that creates softness or is it just not enough product on an end unit basis to do that well this is why generally you upgrade to your max potential because the value creation process of urea uan def or other products ammonium nitrate are are generally consistently above the value for ammonia however you know we produce 10 million tons of ammonia and then we upgrade about 5 million tons of urea about 7 million tons of uan and the remaining ammonia ton is a lot of that moves again into the midwest but we have the capabilities of midwest export and we have industrial contracts that are consistent 360 24 7 demand pulls and so that's how we balance the system so we're always looking at how do we optimize how do we profit and how do we uh leverage those capabilities and consistently where you will find is is we're upgrading to the maximum capability and then moving the ammonia sure um def talking about kind of upgrading a bit uh it's been a growth market for you as it relates to incremental investment uh when we talk to our trucking analyst the conversation amongst most the truckers is DEF consumption is expected to grow

I got a question from this from an investor yesterday and I like didn't have an answer for him so I figured I would just ask you we've also seen some commentary from farmers that given new like the policy around some of the Obama administration uh guidelines that are lapping might mean farmers don't have to use DEF is that like I I don't know like what what's your expectation around just DEF sales and as it relates to a growth engine for CF?

So DEF is diesel exhaust fluid, and it's really a market that didn't exist 15 years ago. In 2010, when we acquired the Terra assets, and DEF was one of the components that we purchased from the Cortright plant where they were producing it, it was in its infancy. And so you have a couple of things in parallel happening one of them is just the generation and of power units of trucks so as new equipment comes online initially the dosing rate was a certain percentage and as we've matured in this market from the equipment suppliers that had that dosing rate has increased and so the projections for dosing rates in the as the new units coming online and now and in the future for emissions control will be double or triple what they were 15 years ago so you just have a natural growth rate with that and then it's as new equipment has come into new applications like let's just use deer or or caterpillar for different applications that has also driven growth and so what the trump administration came out with recently on def for farming equipment is the frustration of a farmer if you're out in your field and your DEF runs out in your equipment that that can slow down the efficiency of the operating rate of that equipment while it's on the farm and so they want to give a more of a flex period to resupply that those that farming equipment in the future and so it's not that you don't use it because it's a very good DEF in in the operation of the diesel engine allows for higher burning and more efficient burning and so it's actually a very good product uh and and if you drive down the highway and don't see emissions

coming out of a truck you could thank def okay so we're we're excited it's a growth market we have invested and we will continue to invest as i think about maybe before i pivot like nitrogen demand in 26 25 was a was a strong year for sales obviously record corn crop in the u.s uh but we saw you know strong planted acreage in brazil we saw better um planted acreage in ukraine do you think the market can grow in 26 versus 25 um i guess perhaps an early winter will be helpful as it relates to stalled applications of ammonia moving into this

year but what do you expect for growth for this year the beautiful thing about our business is people like to eat yeah and so that drives consumption and so as diets improve and as diets have improved globally what you've seen in China over the last 20 years what we've seen in India over the last 10 years and then what you've seen in the acreage growth in in Brazil but what you've seen with governmental changes in Argentina growth and the 98 million acres of corn was planted in north america was a substantial change we didn't expect that we were projecting 93 95 million acres and so 98 was i think the highest since 2012 we do see positive uh growth one because the stocks to use ratios are adequate but not high you're having good demand for ethanol production and the export of the incremental ton of ethanol you have the uh the cattle herd at its lowest level in 75 years so cattle on feed are going to grow or and or cattle on feed for longer periods of time and the efficiency of cattle feeding does that so you require more more carbohydrates in that feed ration and so we do see positive dynamics globally for especially where we produce which is North America but globally as well. um to maybe look at global trade flows a little bit um cbam coming into effect

uh then theoretically maybe pause maybe not not but what do you make of the flirtations out of out of europe around cbam and what i mean can they really pause cbam but not also put a pause to their own domestic carbon tax because like that would implicitly kind of ruin their domestic industry wholesale but how do you how do you navigate that I mean it's maybe not as important because you're US based but like clearly as a commercial person who's looking at trying to capture the best value you can for product how do you navigate a market that's seemingly wishy

washy on like a pretty what has been a pretty vocal policy so back to it is a global market so as a global participant in that market you have to pay attention to these various oscillations that happen whether it's political or economic or structural and this is an issue c-band uh implementing without knowing exactly what is going to be implemented the cost has been very confusing for our european friends and we do supply uh product whether both ammonia and uan to europe and we have some very good customer uh positions that they have we have not been shipping uan uh since the start of 2026 because it's an unsure situation what is the actual cost how would that be paid and who will absorb that and so we're quite comfortable to move our tons domestically or other places but i think as this unfolds will it change will it be canceled will it be according to our european customers and friends it's it's yes it will it will be implemented yes it's going to be confusing and we have to get through 2026 to figure out that cost the good thing about cf is we have low carbon product available today and we're producing we will be producing in a few years even lower carbon 95 decarbonized which we will supply to the world and we think will be advantaged into

Europe with that product and just pivoting on onto that point with you outside of Europe you have seen regulatory clarity in other parts of the world so in Japan did move forward with the contract for difference for our partners so that you know they have you know their regulatory certainty for that project so it's going to evolve over time but as Bert mentioned we're in a great position we we're low cost producer we have the product and we've got all the options to send it anywhere in the world that that basically provides the best netback yeah and i want to touch a little bit on that next but i guess as i had heard you know similarly like product moving to europe now

is frozen because of this general uncertainty so what does that ultimately mean as it relates to how european supply demand plays out for this year this is just we'll figure it out and they'll get the product they need or there's i think the risk for this spring is that there there could be a short for that incremental ton that was not brought in um for for a period of time but then as we go into the back half of the year and the question marks around what is brought in the timing around that because generally we export june july august september october november tons to europe so i think we'll see and then as is inventory built by the European producers in anticipation of an

unknown so I think that it would be a difficult position today to be a European operator yeah yeah yeah clearly you know Yara is dealing with some existential stuff in that regard but to touch back on on Japan uh to your point happy to see that Jira and Mitsui were able to get the contract for difference because um then i think in that regard candidly your partnered very strong positionally for that but we've also seen some comments just given the capex inflation a lot of you know given through this these blue and green ammonia project budgets japan might be spread across or i should say the the amount of money they wanted to commit might be spread across fewer tons over time do you see this as a risk does that impact blue point two or three or because i know this is supposed to be an iterative project over time and do you expect that the commitment from your partners might change i think when we look at the uh the growth of ammonia demand of any color of any type we do see that that steady growth in uh in ammonia there's It's always gonna be a place for low carbon ammonia.

It will be the first product that people buy because of the low carbon attributes. And I think you are gonna see inflation and you have seen inflation in the cost to construct new capacity. For someone with a large installed base of world-class and low-cost assets, that's not necessarily a bad thing. and it's something that we'll continue to navigate as we look at potential further development on the Blue Point site. It'll be based on the demand and the economics as those two develop.

I think for us, we're really excited with the partners that we're with. Both Jerry and Mitsui are solid and have the offtake. This is all going to new demand and it doesn't exist today. So when you take the structure of 1.4 million tons, the 60% is going to Japan that is not entering the globally traded market. We also have a backstop for our 40% in the U.K. So the inbound calls and meetings regarding Blue Point Future is positive. And I agree with Martin.

The 95% decarbonized product, you're not going to see many of these green plants move forward. and so green being zero carbon it's just too high cost and it's a great idea until somebody has to pay for it and so for us at 95 percent decarbonized we have a lot of opportunity and options in front of us yeah and i the comments around the electrolyzer on the quarter i think speak to ultimately some of that but um i agree in blue point jira and mitsui are highly advantaged as relates to the access for for the Japanese market and kind of ultimately what is expected to be a pretty good sink for ammonia as we look at cogen and firing there 2030 kind of more of the framework for when blue point commissions which we agree should be a better market so as we look at this 15 to 17 million ton globally traded ammonia market what do you think 2030 looks like and is there a ramp there that's kind of consistent or is this going to be something that is maybe more of a back-end weighted demand profile as some of these other markets and ammonia ships or whatever come to the market as demand?

So I think, Matt, we can all agree it's going to be awesome. I'm all kidding aside, but I do think what we have been surprised with When we laid out some of the initial plans for how we viewed the market and shared them with the analyst side and the investor side was in 2020, 2021, we initially began our journey on the low carbon future was projecting what was going to happen in the market and the tightness at the end of the decade based on build out, based on demand, based on changes in the dynamics around low carbon. The surprising thing today is how tight the market is today. I think from the analyst side, from your side, it's been something negative is going to happen. It's going to happen, and it just doesn't happen. It's going to be China this year. That's going to be bad. China's not exporting to the capability that they were, and I don't think they're going to be. But it's this tightness of geopolitical upsets, whether last year was the Iranian-Israeli conflict or lack of gas for Egypt, the continued conflict in Russia and Ukraine, lack of gas in certain places like trinidad that is driving more structural places that used to have gas or used to operate aren't as much and we're in this a very high cost of new investment that is limiting of the 120 projects that were announced a handful are going to get built but they needed to be built just for future growth and demand and again of limits of where supply is today so we are in a positive market and we see that tightening coming earlier than we had

expected and then at the end of the decade probably tighter than even we had projected several years ago and as you you kind of hit on this a few separate times just capex inflation right um your neighbor neighbor but across the river right at darrow we're hearing about that it's tangible the capex budget gets revised up their plant is highly specific um but it's kind of the reality of doing business on the gulf coast and building plants in the u.s so how do you manage capex inflation and the risks around that and when you look at what should be ultimately is devised to be a pretty large complex how do you go about limiting the risks around that

So for us, it started with doing extensive feed studies to get more detailed engineering and more detailed estimates about what the costs would be. And then second, we went with a modular construction design for the ammonia plant, which is basically a turnkey. So the ammonia unit, which is probably half of the cost, is being constructed by technique offshore and shipped over in modules. and that's a fixed price contract. So that element of it has been capped and that does a couple of things. It reduces the amount of exposure to cost plus labor in the United States. It also separates the development of the site from the construction of the ammonia plant. So we don't have, instead of them being in sequence, they're in parallel. well, so we don't have to pay as much overtime and spend the money to accelerate the development of the infrastructure of the site to then stick build the plant piece by piece on site because the plant won't actually show up until 2028, so it gives us a lot more time to prepare the site to receive the plant and we'll continue to look at those other components and do fixed price uh contracts for tanks and other components that uh that are on the on the development of the

boot point site itself and i think one of the differences is this is what we do yeah this will be the third plant we have built in the last 10 years and we built uh and we're operating those plans the ones with the other two at 110 of capacity so we're good at the design we're good at working with our partners, we're good at estimating, like Martin said, planning and this is the core of what CF is about and so we are very confident in our ability to bring it in at budget.

Switching to Trinidad, I got a little bit of a flavor for this because I was talking to ken about this this morning new government in venezuela maybe that matters maybe it doesn't but if you were to think about the potential for gas moving from venezuela to trinidad and ken's comments like it's always in just in three years you know we've been waiting for for a while but as you assess that region does that change your longer term views around the profitability of that of that production base or is that too early to say what do you how do you gauge so we've been

active in in trinidad for 15 years yeah and i was on the board uh probably 10 years ago of plnl and it was in two to three years we're gonna have gas and we're now 10 years later and we don't have gas i think all of us on the island that are operating us coke yara pro man are facing difficulties and questions about what is the future what what can we count on what level of investment should we have or maintain uh for those assets our asset at PLNL has been a good asset over the years we value it but we obviously need gas and need commitments from the government and

from the NGP or not NGP NGC and uh we'll see how that unfolds I think Ken is you know was at the forefront of some of these decisions and we're going to have to have those discussions as well yeah i mean his comment was that in particular they are pushing for higher gas prices and you know sympathetic to the fact that trinidad has its own uh you know needs as a country but given the cost basis and the operation consistency of that region it it's hard to warrant gas price increases right and that's the stand that he's making so do you face kind of similar pressures in that market so we're we are under discussion with that group of what the future supply and contract obligations are and and but we're in the middle of it okay i don't understand that um gas cost right uh martin's i'll put you on this one um it's like three dollars and twenty cents It's an MMBTU in the fourth quarter. Very good. Lower than Nutrient, even, because then they have ACO, right? And so how were you able to do this? And then as we look at 1Q, I think we were surprised a bit to hear about the 550 kind of range for the first quarter. There's always volatility in gas markets. That's just the nature of your business. But, you know, how is hedging playing here? Because it's not something that we typically think of for CF outside of basis, regional basis. But how is the ebb and flow? How did you get so good in the fourth quarter? And then what happened in 1Q? And is there any bleed out into 2Q in that regard?

I think, you know, when you think about how we hedge gas, we do like to take care of the basis so that we switch it from smaller hubs down to Henry Hub, where it's easier to manage the risk. And then we do tend to lock in prices for gas that we're going to consume across the winter. And we do that in various ways over the years. And sometimes it's well in advance of winter, and sometimes it's much closer to the actual month of consumption. And that process yielded a really nice result in the fourth quarter. We're able to take advantage of the opportunities to hedge effectively and then see the settlements settle higher than that. And what you've seen so far in January and February, you're seeing higher NYMEX settlements. We had a winter storm that basically hit on top of a NYMEX settlement. And so those settlements are going to be higher. And we will do well, I'm sure we'll do well against those benchmarks. But over time, our objective with hedging is to minimize the negative shocks of these events. And so we tend to be somewhere around or in between what you've gotten with cash daily pricing or what you've gotten if you'd locked it in with the NYMEX settlement.

And Martin and I sit on the gas committee, but I have to give a shout-out to the team. Marty Melke is the guy who runs our gas group. But we view those, the product markets and the gas and the operations, they're all separate decision-making that come together as a whole. But we look at gas independently. We don't necessarily, if we're forward-sold, have to lock in the gas. And we do play a lot of the cash market during the year when that has been advantageous for us. But in terms of your reference to Q1, 2026, this volatility is the word. We had $70 gas at the Port Neal site and $90 gas on the daily at Courtright in Canada. So it has been incredibly volatile. And I think the team has done a very good job of understanding that, covering what Martin talked about, and being in the position that's good for CF.

I do want to open it up to anybody in the audience if you have any questions feel free to to raise your hand and jump in but um I did want to ask a little bit on the policy side and maybe this is I don't know maybe it is maybe it isn't outside your wheelhouse bird but if we were to think about the Trump administration right they've been keenly focused on farmer profitability farmer sentiment farmer affordability nitrogen is maybe in the middle of potash and phosphate from an affordability perspective right it's not the primary pain point but prices are high so what do you what do you get from the administration on that like are Are they actively in discussions with CF around capacity or tariffs or rebates? Is there any kind of discussion there? Is there any push? I mean, I know you weren't necessarily listed between your two U.S. or North American peers as it relates to price collusion, right? But it seems like the microscope is on nutrient companies and price. So does that resonate to CF at all?

A couple of things that you referenced resonates with me personally, as well as professionally in the company. We're a global market. And we're the largest producer of nitrogen in the world. And we're less than 5% of capacity. It's produced in Russia. It's produced in the Middle East. It's produced in China. It's produced in India. It's produced in the United States or North America. And all of those places have the capability to export. and so tons are moving all around and they're priced at at different uh for different products at different times but the price in india today is basically the price in nola and if india goes up nola goes up because we have to call that import ton we're an import dependent market and so we have to incentivize those tons to move and so it's uh and but in terms of fertilizer you need n p and k plus some s now in most most growing uh cultures and so the you know the the fertilizer market is integrated in in many different ways but i think the the point of your question is and the where the government is going is the farmer and we do think about the farmer and how one how can we help them to have the product in position to be a low-cost producer which we are a low-cost mover and supplier partnering with our retail friends uh the the co-ops and the the public uh retail suppliers to the farmer because we don't sell to the farmer directly and that whole chain has to work together to be efficient to be low cost and to make sure the product is in place at the time it's needed but it is a globally priced product yeah no i i know i know you do but i sometimes sometimes i wonder about the administration it gets separated are an isolated issue like in Iowa it's this. Well, pretty much you can do the freight. The price in Iowa equates back to the Middle East.

Is there any push for logistical improvements then domestically?

Like, do you see talk or within a policy perspective about pushing for new pipelines or relaxing some of the restrictions that impact our ability to source barges? so the work that's being done we're a a multi-mode company rail truck barge pipe vessel so we're moving product in any one of those five modes at any different time so what the corps of engineers does in terms of the lock work on the mississippi on the arkansas and the illinois very important we need to keep that barge cost and what the adms of the world do with moving grains and oil seeds down we're moving fertilizer right back up and so the pipeline the sunoco pipeline is now 40 or 50 years old if not more yeah and so proper maintenance of that the only existing ammonia pipeline is very important and then it's very difficult to move uh ammonia by rail so we almost don't do much of that but the rail systems are very important and so this whether the up hooks up with the ns or our work with the bn that that is a key component so the low cost delivery of of the product is is it's not just the production site it's it's an integrated chain that we do focus on and if i think about rail you know like chlorine right nobody wants to move chlorine any of the tihs any of the tihs ethylene oxide chlorine ammonia so that was my point on ammonia is there some government restrictions around it or is it really just it's hazardous and corrosive and you just you don't want to move it by rail and so there's like an implicit pushback from the rail companies themselves oh it's priced out more than just they they still move it it's just priced out but we do have some very good relationships with our rail partners and need to continue to work on that as well as regulatory support to make the efficient moving of ammonia possible okay okay i'm i'm happy to well sal i I don't know.

Do you have a question? We have one question up front. Sally, do you want to raise your hand? But otherwise, you know, get that hand up, Sal.

Thank you. So since we're talking about logistics and Matt brought up the whole U.S. Gulf tons going to the Corn Belt, can you give us a little bit more clarity? Essentially, if there is a plant on the U.S. Gulf Coast, what stops them from, you know, let's say, chartering a barge that has the ability to be in the shallow waters of the U.S. Gulf and then going out of the river? Is the coast prohibitive? Do they need to have access to tanks in the Midwest that they don't? What essentially stops them from doing that? Yes and yes.

One, it's when you're over in Houston, to barge all the way to the mouth of the river where we already are is a cost. Two, is your destination point, where are you going to offload that barge where most of the producers have the tanks so you need to build a tank or partner with those who do and those tanks are limited so i do believe some tons could in the theoretical move up into the river system it just has to be coordinated with the receiving points and the barge companies as well um i have one more and i'm sure steve has asked you this question every time he sees you But, you know, I got to carry the torch a little bit now.

I mean, as we think about microbes and nitrogen delivery to the corn plant, everybody's, well, not everybody, but there's a lot of companies working on it, right? We'll have a biologics panel right after you with Corteva, Mosaic, and Pivot, and all three of them are working on nutrient bioavailability. so how do you address this longer term domestically internationally as an opportunity as a company who has you know made a lot of money with synthetic nitrogen anything that's good for the american farmer the world farmer is good for the system and so yes we follow it yes i've been following for decades yeah and it's always this is another one of those promises that is going to come in the future it's just the future is always in the future and so when that comes and we have met with

many of those companies and have exchanges of ideas but a plant is like a child and you feed your child daily and then when they reach puberty consumption increases and a corn crop is just like that it has different growth spurts and it needs a concentrated form of specific nitrogen in order to reach maturity and to have a full head or ear of corn that's where the value sits is in that one ear every plant produces one ear of corn maybe two but the second one is a dwarf and so you have to if you're a farmer you want to use what works and what has consistently worked and for decades nitrogen has worked very well in that growth cycle that's why we've gotten better at our Precision ag, multiple applications of nitrogen. And so we've gone from yielding when I was a young person, 130 bushels an acre to today, 180 bushels. That's the average. But you have some farms that are at 300 bushels of acre. That hasn't come with micros. Maybe that has supported it a little bit. But the fundamentals of our business is we produce a product that is demanded, consumed, and applied in appropriate ways.

And we're getting better at that. and so we're our future is bright for nitrogen okay all right well i'll end it there bird thank you so much martin as well appreciate you uh coming out and participating