01—Abstract
Summary
Summary of the 10-K filed February 24, 2022. Cited figures are marked; the original filing is the authoritative source.
CF Industries Holdings, Inc. reported net sales of $6.54 billiona in 2021, up from $4.12 billion in 2020, as average selling prices rose 74% to $353 per ton while sales volume fell 9% to 18.5 million product tons.
Gross margin increased to $2.39 billionb from $801 million, but results were offset by $521 million of impairment charges tied to the U.K. energy crisis. Net earnings attributable to common stockholders were $917 million, or $4.24 per diluted share, compared with $317 million, or $1.47 per diluted share, in 2020. Excluding the impairment charges, the filing presents as-adjusted net earnings of $1.38 billion, or $6.38 per diluted share.
The increase in earnings was driven by a tighter global nitrogen supply and demand balance, with higher global energy costs reducing operating rates elsewhere. Natural gas costs rose 88% to $4.21c per MMBtu, reducing gross margin by $663 million, and manufacturing and maintenance costs reduced it by $494 million. Cash flow from operations increased to $2.87 billion from $1.23 billion, and cash and cash equivalents ended the year at $1.63 billion.
Total funded indebtedness was $3.5 billiond, and the company repurchased about 8.6 million shares for $540 million in 2021. The company is also pursuing a clean energy strategy, including a green ammonia project at Donaldsonville with an estimated cost of about $100 million and blue ammonia projects authorized for up to 1.25 million tons of annual production starting in 2024. Ince, U.K. production remained idled as of the filing date, and the U.K. operations generated negative gross margin in 2021.
02—Key points
Key Highlights
- Net sales rose 59% to $6.54 billion, driven by a 74% increase in average selling prices to $353 per ton, partly offset by a 9% decline in sales volume to 18.5 million tons.
- Gross margin more than doubled to $2.39 billion (36.5% margin) from $801 million in 2020.
- Net earnings attributable to common stockholders rose to $917 million ($4.24 per diluted share) from $317 million ($1.47 per diluted share), after $521 million in U.K. impairment charges.
- Natural gas costs rose 88% to $4.21 per MMBtu, reducing gross margin by $663 million; the company also recognized a $112 million gain from net settling natural gas contracts during Winter Storm Uri.
- Operating cash flow was $2.87 billion versus $1.23 billion in 2020, and cash and equivalents reached $1.63 billion at year-end.
- Total funded indebtedness was $3.5 billion, and the company repurchased 8.6 million shares for $540 million in 2021, with a new $1.5 billion repurchase authorization covering 2022 through 2024.
- Clean energy plans include a green ammonia project at Donaldsonville (about $100 million, expected 2023) and blue ammonia projects for up to 1.25 million tons per year starting in 2024.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, CF Industries Holdings kept $0.14.
- Revenue$6.54B100.0%
- Cost of revenue−$4.15B63.5%
- Gross profit$2.39B36.5%
- Operating costs−$658.0M10.1%
- Operating income$1.73B26.4%
- Interest, other & tax−$812.0M12.4%
- Net income$917.0M14.0%
Where FY2021 revenue went
$6.54B- Cost of revenue: $4.15B, 63% of revenue
- Net income: $917.0M, 14% of revenue
- Interest, other & tax: $812.0M, 12% of revenue
- SG&A: $223.0M, 3.4% of revenue
- Other operating costs: $435.0M, 6.7% of revenue
Kept 14% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 24, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $6.54B$4.12B | +58.5% |
| Cost of Revenue | $4.15B$3.32B | +24.9% |
| Gross Profit | $2.39B$801.00M | +198.0% |
| SG&A Expenses | $223.00M$206.00M | +8.3% |
| Operating Income | $1.73B$623.00M | +177.5% |
| Interest Expense | $184.00M$185.00M | −0.5% |
| Net Income | $917.00M$317.00M | +189.3% |
| EPS (Basic) | $4.27$1.48 | +188.5% |
| EPS (Diluted) | $4.24$1.47 | +188.4% |
| Shares Outstanding (Basic) | 215.00M214.90M | 0.0% |
| Shares Outstanding (Diluted) | 216.20M215.20M | +0.5% |
05—Questions
Frequently Asked Questions
Why did CF Industries' earnings improve so much in 2021?
The filing attributes the improvement primarily to higher average selling prices, which rose 74% to $353 per ton, driven by a tighter global nitrogen supply and demand balance as higher global energy costs lowered operating rates. Gross margin increased by $1.59 billion to $2.39 billion, though higher natural gas costs and maintenance expenses partly offset the gains.
How did the U.K. energy crisis affect the company?
The company halted operations at its Ince and Billingham plants in September 2021 due to high natural gas costs, and it recorded total impairment charges of $521 million in 2021, including $285 million of goodwill impairment and $236 million of long-lived and intangible asset impairment. Production continued at Billingham while Ince remained idled as of the filing date, and the U.K. operations generated negative gross margin representing about 1% of consolidated gross margin.
What is the company's debt position and capital return activity?
As of December 31, 2021, total funded indebtedness was about $3.5 billion, mainly unsecured senior notes maturing between 2023 and 2044, and the company had $750 million of unused revolving credit availability. In 2021 it redeemed $518 million of debt and repurchased shares for $540 million, while paying $260 million in dividends on common stock.
What is the company's plan for green and blue ammonia?
The company is building a 20 MW green hydrogen electrolysis plant at Donaldsonville, with an estimated cost of about $100 million and completion expected in 2023, which would produce approximately 20,000 tons per year of green ammonia. The Board also authorized blue ammonia projects enabling up to 1.25 million tons of annual production starting in 2024, with an estimated cost of $200 million at Donaldsonville and $85 million at Yazoo City. The filing notes that market demand for green and blue ammonia could take several years to materialize.
What are the main risks highlighted in the filing?
Key risks include the cyclical nature of fertilizer prices and periods of industry oversupply, dependence on natural gas whose prices have been highly volatile, reliance on a limited number of key facilities (Donaldsonville represented about 40% of ammonia production capacity), weather and seasonality, and intense global competition including imports from subsidized producers. The filing also cites risks around the viability of green and blue ammonia markets and the outcome of the Canadian arbitration decision on a transfer pricing matter.
06—Continue