CF Industries (CF) Tops Q1 EPS by 5c

CF Industries (NYSE: CF) reported Q1 EPS of $0.31, $0.05 better than the analyst estimate of $0.26. Revenue for the quarter came in at $971 million versus the consensus estimate of $925.62 million.

“The CF team is performing exceptionally well in a very difficult and uncertain environment created by the COVID-19 pandemic,” said Tony Will, president and chief executive officer, CF Industries Holdings, Inc. “We are operating safely, achieving high asset utilization rates and reliably supplying our customers as we enter the peak spring demand period in North America and the United Kingdom. Our unwavering focus on protecting the health and well-being of our employees will support our ability to continue to operate strongly. This will serve us well as we meet the anticipated high demand for nitrogen in North America this spring.”

OUTLOOK

In the near-term, CF expects positive global nitrogen demand driven by an increase in nitrogen-consuming planted corn and coarse grain acres in North America in 2020 compared to 2019. The company anticipates 92-94 million acres of corn will be planted in the U.S. in 2020, below the U.S. Department of Agriculture’s March forecast of 97 million acres. The company believes its forecast is supported by favorable planting conditions across most of North America, farm-level income support such as crop insurance and pandemic-related government payments, and the strongest movement of ammonia for spring fertilizer application from the CF system in any April since 2015.

Global nitrogen requirements have been underpinned by demand for urea imports to India and Brazil. India executed its first urea tender of 2020 in late March and issued its second tender in late April. Urea tender volumes in India in 2020 may ease from 2019’s record high based on less favorable growing conditions and new domestic urea capacity. Demand for urea imports to Brazil is expected to be higher in 2020 compared to 2019, as domestic urea production is projected to remain shut down throughout the year.

CF continues to monitor the impact of the COVID-19 pandemic on near-term global nitrogen supply and demand. Announced outages due to the pandemic include certain nitrogen facilities in India and France. Additionally, new nitrogen capacity under construction may experience labor and equipment issues related to the pandemic that delay project completion and commissioning. The company believes nitrogen demand for industrial applications, such as explosives and emission abatement, have been affected by the COVID-19 pandemic. The company expects this to extend through the remainder of the year as current economic activity remains low due to efforts to slow the spread of COVID-19. There is also uncertainty regarding the factors that influence farmers’ planting decisions in 2021, such as ethanol demand, feed demand, exports, and potential governmental policy responses to these factors.

The company expects North American nitrogen production facilities to remain at the low-end of the global nitrogen cost curve for the foreseeable future due to their access to low-cost North American natural gas. Additionally, the company projects that Chinese anthracite coal-based nitrogen complexes will remain the global marginal urea producer and thus set the global price. Forward energy curves suggest the cost advantage per metric ton of urea for North American producers in 2020 should remain well over $100 compared to Chinese anthracite-coal based producers despite lower global energy costs. This is approximately 20-35 percent higher than the cost advantage realized in 2016 and 2017. The company believes this cost advantage, along with its high-performing team, consistently high operating rate and distribution and logistics capabilities, will continue to support its substantial cash generation capability.

For earnings history and earnings-related data on CF Industries (CF) click here.

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