01—Abstract
Summary
Summary of the 10-K filed February 22, 2024. Cited figures are marked; the original filing is the authoritative source.
CF Industries Holdings, Inc. reported net sales of $6.63 billiona for 2023, down from $11.19 billion in 2022, as average selling prices fell to $347 per ton from $610 per ton, partially offset by sales volume of 19.1 million tons.
Gross margin declined to $2.55 billionb from $5.86 billion, while lower natural gas costs ($3.67 per MMBtu versus $7.18 in 2022) cushioned the impact of weaker pricing. Net earnings attributable to common stockholders were $1.53 billion, or $7.87 per diluted share, compared with $3.35 billion, or $16.38 per diluted share, in 2022. During 2023 the company acquired the Waggaman, Louisiana ammonia facility from Dyno Nobel Louisiana Ammonia, LLC on December 1, 2023 for a purchase price of $1.675 billion, funded with $1.223 billion of cash on hand, and it has an 880,000-ton nameplate ammonia capacity.
Cash and cash equivalents were $2.03 billionc at year-end, with $3.0 billion of senior notes outstanding and $750 million of unused revolver capacity. The company also reported that its Board declared a quarterly dividend of $0.50 per share in January 2024, up from $0.40, and that it repurchased $580 million of shares in 2023 under its share repurchase programs. The strategic focus is on low-carbon and green ammonia.
The Donaldsonville green ammonia project is in commissioning, a CO2 dehydration and compression facility costing an estimated $200 milliond is under construction, and a FEED study estimated a greenfield low-carbon ammonia facility in Louisiana at roughly $3 billion, with a final investment decision targeted for the second half of 2024. The filing identifies natural gas price volatility, global nitrogen oversupply, and the timing of clean ammonia demand as key risks to these plans.
02—Key points
Key Highlights
- Net sales fell 41% to $6.63 billion in 2023, driven by a 43% decline in average selling prices to $347 per ton, partly offset by a 4% increase in sales volume to 19.1 million tons.
- Gross margin decreased to $2.55 billion from $5.86 billion, with lower natural gas costs adding about $1.16 billion to gross margin.
- Diluted net earnings per share were $7.87, down from $16.38 in 2022, reflecting lower gross margin partly offset by a lower income tax provision.
- The Waggaman ammonia facility was acquired on December 1, 2023 for $1.675 billion, adding 880,000 tons of nameplate ammonia capacity and a supply contract with Dyno Nobel for up to 200,000 tons per year.
- Operating cash flow was $2.76 billion, and capital expenditures were $499 million, with 2024 capital expenditures estimated at about $550 million.
- The quarterly dividend was raised to $0.50 per share from $0.40, and $580 million was spent on share repurchases during 2023.
- Low-carbon ammonia projects include a $200 million CO2 compression facility at Donaldsonville with start-up planned for 2025, and a greenfield project with a final investment decision targeted for the second half of 2024.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, CF Industries Holdings kept $0.23.
- Revenue$6.63B100.0%
- Cost of revenue−$4.09B61.6%
- Gross profit$2.54B38.4%
- Operating costs−$315.0M4.8%
- Operating income$2.23B33.6%
- Interest, other & tax−$705.0M10.6%
- Net income$1.52B23.0%
Where FY2023 revenue went
$6.63B- Cost of revenue: $4.09B, 62% of revenue
- Net income: $1.52B, 23% of revenue
- SG&A: $289.0M, 4.4% of revenue
- Interest, other & tax: $705.0M, 11% of revenue
Kept 23% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 22, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $6.63B$11.19B | −40.7% |
| Cost of Revenue | $4.09B$5.33B | −23.3% |
| Gross Profit | $2.54B$5.86B | −56.6% |
| SG&A Expenses | $289.00M$290.00M | −0.3% |
| Operating Income | $2.23B$5.40B | −58.7% |
| Interest Expense | $150.00M$344.00M | −56.4% |
| Net Income | $1.52B$3.35B | −54.4% |
| EPS (Basic) | $7.89$16.45 | −52.0% |
| EPS (Diluted) | $7.87$16.38 | −52.0% |
| Shares Outstanding (Basic) | 193.30M203.30M | −4.9% |
| Shares Outstanding (Diluted) | 193.80M204.20M | −5.1% |
05—Questions
Frequently Asked Questions
Why did CF Industries' earnings decline so sharply in 2023?
Average selling prices fell 43% to $347 per ton as lower global energy costs reduced the market clearing price for nitrogen products. Net sales dropped $4.56 billion, and gross margin fell $3.32 billion to $2.55 billion. Lower natural gas costs, which fell to $3.67 per MMBtu from $7.18, partially offset the price decline.
What did the Waggaman acquisition add to the company?
The company acquired an ammonia facility with a nameplate capacity of 880,000 tons per year for $1.675 billion, funded with $1.223 billion of cash on hand. The purchase price included an allocation of $425 million to a supply agreement under which CF supplies up to 200,000 tons of ammonia per year to Dyno Nobel. The facility contributed $28 million in net sales and $7 million in net earnings from December 1 through year-end 2023.
How strong is the company's balance sheet and liquidity?
Cash and cash equivalents were $2.03 billion at December 31, 2023. Total long-term debt was $3.0 billion in principal, consisting of senior notes maturing between 2026 and 2044. The company had $750 million of unused capacity under its revolving credit agreement and was in compliance with its covenants at year-end.
What are the main long-term growth initiatives?
The company is pursuing decarbonization of its ammonia network. The Donaldsonville green ammonia project is in commissioning and is expected to produce about 20,000 tons per year. A CO2 compression facility is under construction for low-carbon ammonia with start-up planned for 2025. A greenfield low-carbon ammonia facility in Louisiana, estimated at about $3 billion, has a final investment decision targeted for the second half of 2024, and the company has a memorandum of understanding with JERA for up to 500,000 tonnes per year starting in 2027.
What are the key risks highlighted in the filing?
The filing highlights the cyclical nature of nitrogen pricing and potential oversupply from new global capacity, volatility in North American natural gas prices, weather and seasonality, reliance on a limited number of key facilities (Donaldsonville represented about 40% of ammonia production capacity), and uncertainty in the market for green and low-carbon ammonia. It also notes the risk of credit rating downgrades and the company's obligations related to its indebtedness.
06—Continue