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CEO Message


Your company delivered terrific results in 2018 that reflected outstanding operating performance against a backdrop of significantly improved market conditions compared to recent years.

Global nitrogen prices during the year were meaningfully higher than in 2017 due primarily to increased energy costs for producers in Asia and Europe, along with enforcement of environmental regulations in China. CF’s margins also benefited from lower natural gas prices in North America. For the year, our net earnings attributable to common stockholders were $290 million, or $1.24 per diluted share, with adjusted EBITDA of $1.4 billion – 45 percent higher than in 2017.(1)

These results would not have been possible without the exceptional execution of our business by the CF team. We operated well and, most importantly, we did so safely. We ended the year with a recordable incident rate of 0.60 incidents per 200,000 work hours. This is particularly impressive given the considerable turnaround and maintenance schedule we had in 2018.

An Advantaged Business Model

Our performance in 2018 was the result of more than just positive market conditions. It represents years of unwavering focus on our long-term strategy – leveraging our core capabilities to optimize and grow the world’s most advantaged nitrogen and chemicals platform. We participate in a global chemical commodity business: nitrogen-based products. Given the commodity nature of our business, our first order of business is simple and it drives everything we do: having the lowest delivered cost per ton.

For us that means:

  • high asset utilization and productivity
  • low SG&A and controllable costs
  • extensive multimode distribution network to lower logistics costs
  • maximize margins by optimizing customer locations and product type
  • disciplined capital and corporate stewardship

Four years ago in our Annual Report, I described CF’s business model as “simple, yet powerful” in its ability to drive substantial cash generation. In the years since, much has changed about CF. Our average annual production capacity has increased by 33 percent; we have expanded beyond nitrogen fertilizer to become North America’s largest and most reliable supplier of diesel exhaust fluid; and we’ve grown a global portfolio of customers. But through all that, our business model remains the same, simple yet powerful.

It starts with our substantial structural advantages. Our access to abundant low-cost North American natural gas provides us with some of the lowest feedstock costs in the industry and positions CF firmly on the low end of the global cost curve. We primarily operate in regions that are import-dependent today and for the foreseeable future. Additionally, nitrogen fertilizers have no substitute and must be applied each year. As the global population and demand for food has increased, global demand for nitrogen has grown at about 2 percent per year.

Investment in our facilities and the capabilities of our people has resulted in consistently superior operating performance. We run our nitrogen complexes at industry-leading utilization rates. Data collected by CRU, a global industry consulting firm, shows that our asset utilization and production is approximately 10 percent higher than the average utilization rate of our North American competitors. Based on the size of our network, that translates into roughly 800,000 tons of incremental ammonia per year – the capacity of a world-scale ammonia plant.

We’ve built the most flexible manufacturing and distribution platform in the world, which allows us to optimize our overall margin by shifting where, when and what we sell. In 2018, for example, the North American spring application season was significantly compressed due to unfavorable weather in March and April. While many struggled to meet customer needs in a tight window, our network enabled us to ship approximately 4 million product tons in May and June alone.

Our disciplined portfolio management has created substantial value for shareholders, most notably through capacity expansions, targeted acquisitions and divestitures of non-core assets. We have also driven value through long-term agreements, such as our strategic venture with CHS and our supply agreements with Mosaic and Orica/Nelson Brothers.

We do all this while operating efficiently. Our SG&A costs as a percent of sales remain among the lowest in both the chemicals and fertilizer industries.

Our goal is
to use excess
cash to increase shareholder participation in our underlying assets.

CF Industries’ Nitrogen Volumes and Shares
Outstanding as of Year-End* 2009 – 2018 Nitrogen per share CAGR: 14.7%

How We Create Shareholder Value

We believe that we are well-positioned to generate superior cash flow through the cycle compared to most of our global competitors.

Our goal is to use excess cash to increase shareholder participation in our underlying assets as measured by tons of nitrogen capacity per 1,000 shares. We do this in two ways. First, we look to invest in growing our production capacity when we can identify opportunities that fit within our strategic fairway and have risk-adjusted rates of return well above our cost of capital. Second, in the absence of available growth opportunities, we return excess capital to shareholders.

In 2018, net cash provided by operating activities was approximately $1.5 billion. We invested $422 million back into our business for sustaining and improvement capital projects. We also purchased all of the outstanding publicly traded common units of Terra Nitrogen Company, L.P. for $388 million.

Additionally, we returned $780 million to shareholders. This included $280 million through our quarterly dividend as well as $500 million through share repurchases. The repurchase program reduced our share count by approximately 11 million shares.

Taken together, these 2018 activities increased shareholder participation in the underlying assets of the business by approximately 5 percent, or two tons of nitrogen per 1,000 shares, compared to the end of 2017. Since the beginning of 2014, we have increased shareholder participation in our underlying assets by 37 percent.

$290M Net Earnings
to Common
$1.4B Adjust
$1.5B Net Cash
Provided By

A Strong Outlook for the Future

We believe we are well-positioned to build on this track record in 2019 and beyond.

In the near-term, we expect a significant increase in corn and wheat plantings in North America in 2019. This should drive incremental demand for nitrogen in the first half of the year.

Longer-term, we believe the global supply and demand balance will continue to tighten. Net global urea capacity is projected to grow more slowly than the historical nitrogen demand growth rate of approximately 2 percent through 2022. Because it takes roughly four years to construct an ammonia-urea complex, it is unlikely that significant capacity will come online during this time period, beyond what is already visibly under construction.

We also believe global energy fundamentals are likely to support higher hydrocarbon prices internationally, while at the same time North American natural gas prices should remain relatively low. CF benefits greatly from this spread as it elevates production costs for the upper half of the global nitrogen supply curve while keeping our production costs low.

With nearly $700 million of cash on the balance sheet at the end of 2018 and our positive outlook over the next four to five years, we are well-positioned to create additional shareholder value and further strengthen the company. This includes the new $1 billion share repurchase program that the Board of Directors authorized in February and our commitment to retire $500 million in debt on or before its maturity in May 2020.

Sustainable for the Long-Term

Our commitment to sustainability remains a key focus for your company in our efforts to create long-term shareholder value. Indeed, sustainability is inherent to our business. Because 23 percent of global greenhouse gas emissions are estimated from land use, a sustainable future requires the world to use less land to feed its people. Deforestation for new crop land not only releases carbon into the atmosphere but destroys carbon-sequestering trees. We estimate that fertilizer helps save the world nearly five gigatonnes of CO2-equivalent emissions each year by allowing farmers to grow more food on less land, saving trees in the process.

While our products support a more sustainable future, we also continue to drive improvement in the sustainability of our operations. We operate some of the world’s most energy-efficient nitrogen production facilities. As we’ve expanded our plants, our new natural gas-based facilities have displaced inefficient coal-based nitrogen facilities in China, reducing net greenhouse gas emissions by the fertilizer industry. We also continue to increase our Global Reporting Initiative disclosures as part of our annual Corporate Sustainability Report. Notably, we documented our water use intensity for the first time this year. We invite you to learn more about the positive impact we have on global sustainability here.

A Proud Legacy and a Bright Future

For more than 70 years, CF has played a vital role in helping feed the crops that feed the world. Today, 3,000 CF employees continue that work with pride, contributing to a healthier and more sustainable world while delivering outstanding operational and financial results.

CF’s future is bright. We are well-positioned to leverage our considerable strengths and take advantage of the favorable industry fundamentals we see for the foreseeable future. We expect this to drive our substantial cash generation capability and enable us to continue to create long-term shareholder value.

Thank you for your confidence in CF. We look forward to rewarding you for your continued support in the years ahead.

Tony Will
President and CEO