01—Abstract
Summary
Summary of the 10-K filed February 24, 2021. Cited figures are marked; the original filing is the authoritative source.
CF Industries Holdings, Inc. reported net sales of $4.12 billiona for 2020, down from $4.59 billion in 2019, as average selling prices fell to $203 per ton from $235 per ton.
Sales volume rose to a record 20.3 million product tons, up from 19.5 million tons in 2019, but this partly offset the price decline. Gross margin fell to $801 millionb from $1,174 million, and net earnings attributable to common stockholders declined to $317 million from $493 million, or diluted EPS of $1.47 versus $2.23. Lower realized natural gas costs of $2.24 per MMBtu, down from $2.74, helped cushion the margin compression.
The company describes itself as a leading global manufacturer of hydrogen and nitrogen products and is positioning itself around green and low-carbon ammonia, with an initial green ammonia project at its Donaldsonville complex targeting about 20,000 tons per year. Capital expenditures fell to $309 millionc in 2020 from $404 million, and 2021 capital expenditures are estimated at around $450 million. The company ended 2020 with $683 million of cash and cash equivalents and $750 million of unused revolving credit capacity, against $4.0 billion of total funded debt.
Key risks for investors include the cyclical, commodity nature of nitrogen pricing, dependence on North American natural gas, concentration in a limited number of key facilities, and the West Fertilizer Co. litigation. The company also disclosed that it will redeem its $250 milliond 3.400% senior secured notes due December 2021 on March 20, 2021, at an estimated cost of about $258 million including accrued interest.
02—Key points
Key Highlights
- Net sales fell 10% to $4.12 billion in 2020, as a 14% decline in average selling prices reduced net sales by $665 million, partly offset by a 4% volume increase that added $199 million.
- Gross margin declined to $801 million from $1,174 million, with gross margin percentage at 19.4% versus 25.6% in 2019.
- Net earnings attributable to common stockholders were $317 million, or $1.47 per diluted share, compared with $493 million, or $2.23 per diluted share, in 2019.
- Sales volume reached a record 20.3 million product tons in 2020, the highest annual sales volume for the Company.
- Realized natural gas costs fell 18% to $2.24 per MMBtu, which increased gross margin by $195 million.
- Cash and cash equivalents rose to $683 million at year-end, and operating cash flow was $1,231 million, versus $1,505 million in 2019.
- Total funded indebtedness was about $4.0 billion, and the company repurchased $100 million of stock in 2020 under its $1 billion 2019 program, with $563.4 million remaining authorization at year-end.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, CF Industries Holdings kept $0.08.
- Revenue$4.12B100.0%
- Cost of revenue−$3.32B80.6%
- Gross profit$801.0M19.4%
- Operating costs−$178.0M4.3%
- Operating income$623.0M15.1%
- Interest, other & tax−$306.0M7.4%
- Net income$317.0M7.7%
Where FY2020 revenue went
$4.12B- Cost of revenue: $3.32B, 81% of revenue
- Net income: $317.0M, 7.7% of revenue
- SG&A: $206.0M, 5.0% of revenue
- Interest, other & tax: $306.0M, 7.4% of revenue
Kept 7.7% as net incomeNet income $317.0M · 7.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 24, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $4.12B$4.59B | −10.2% |
| Cost of Revenue | $3.32B$3.42B | −2.7% |
| Gross Profit | $801.00M$1.17B | −31.8% |
| SG&A Expenses | $206.00M$239.00M | −13.8% |
| Operating Income | $623.00M$1.00B | −37.9% |
| Interest Expense | $185.00M$237.00M | −21.9% |
| Net Income | $317.00M$493.00M | −35.7% |
| EPS (Basic) | $1.48$2.24 | −33.9% |
| EPS (Diluted) | $1.47$2.23 | −34.1% |
| Shares Outstanding (Basic) | 214.90M220.20M | −2.4% |
| Shares Outstanding (Diluted) | 215.20M221.60M | −2.9% |
05—Questions
Frequently Asked Questions
Why did CF Industries' earnings decline in 2020?
The decline was driven primarily by lower selling prices. Lower global energy costs drove higher global nitrogen operating rates and additional supply, which reduced average selling prices 14% to $203 per ton. The price decline reduced gross margin by $665 million, which was only partly offset by lower realized natural gas costs and higher sales volume.
What is the company's green ammonia strategy?
The company announced in October 2020 plans to produce green and low-carbon ammonia. It has announced an initial green ammonia project at its Donaldsonville nitrogen complex to produce approximately 20,000 tons per year, and it is developing carbon capture and sequestration and other carbon abatement projects to enable low-carbon ammonia production. The filing notes that the market for these products may develop more slowly than expected and that the projects carry execution risk.
How is the company's debt structure and liquidity position?
At December 31, 2020, total long-term debt principal was $4.0 billion across public senior notes and senior secured notes maturing between 2021 and 2044. The $750 million revolving credit facility was undrawn at year-end, and the company had $750 million of unused borrowing capacity. The company intends to redeem its $250 million 3.400% senior secured notes due December 2021 on March 20, 2021, at an estimated cost of about $258 million including accrued interest.
What are the main risks to the business highlighted in the filing?
The filing highlights the cyclical and globally traded nature of nitrogen products, intense competition from state-owned and subsidized producers, dependence on North American natural gas prices, reliance on a limited number of key facilities (with Donaldsonville representing about 40% of ammonia production capacity), weather, and the pending West Fertilizer Co. litigation. It also notes that credit rating downgrades could raise borrowing costs and affect vendor credit terms.
Did the company return capital to shareholders in 2020?
Yes. Dividends paid on common stock were $258 million in 2020, and dividends declared per common share were $1.20, unchanged from 2019. The company repurchased about 2.6 million shares for $100 million in the first quarter of 2020 and made no further repurchases under the 2019 program in the second through fourth quarters. Distributions to noncontrolling interests totaled $174 million.
06—Continue