CF Industries Holdings, Inc.

Good day, ladies and gentlemen, and welcome to the first quarter 2020 CF Industries Holdings Earnings Conference Call. My name is Natalia. I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question and answer session towards the end of the presentation. To pose a question at any time, please press star 1 on your touchtone telephone keypad. If at any time during this call you require assistance, please press star zero, and an operator will be happy to assist you. I would now like to turn the presentation over to the host for today, Mr. Martin Jurasic with CF Investor Relations. Sir, please proceed.

Good morning, and thanks for joining the CF Industries first quarter 2020 earnings conference call. I'm Martin Jurasic, Vice President, Investor Relations for CF. With me today are Tony Will, CEO, Chris Bone, CFO, and Bert Frost, Senior Vice President of Sales, Market Development, and Supply Chain. CF Industries reported its first quarter 2020 results yesterday afternoon. On this call, we'll review the CF Industries results in detail, discuss our outlook, and then host a question and answer session. Statements made on this call and in the presentation on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statements. More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available on our website. Also, you will find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website. Now, let me introduce Tony Will, our president and CEO.

Thanks, Martin, and good morning, everyone. Before we jump into commentary about the quarter and our outlook, I just want to say how good it feels to be here today. It's a beautiful sunny day in Chicago, and it's both my privilege and my pleasure to be sitting around our conference table with all of the Deerfield-based senior leadership team. Of course, we're maintaining appropriate social distancing. But it's been almost 10 weeks since we closed our headquarters office, and although we have a standing conference call every day, it's great to be back together again in the same room as a team. This team has done an amazing job of not only keeping their organizations engaged in executing our business, but also keeping our people safe. Globally, we're an organization of 3,000 people, and we've only had a total of four employees test positive for COVID-19. At the end of March, three of our employees tested positive in our Donaldsonville plant and all spent the month of April at home recovering. I'm delighted to say all three have fully recovered and are back at work. The other individual is a very recent event and works in our Deerfield headquarters. Given this result today, I'm particularly proud of the processes and procedures this team has established to make sure we keep our people safe and our operations running. Last day, we posted our financial results for the first quarter of 2020, in which we generated adjusted EBITDA of $318 million, approximately 4% higher than the same period a year ago. These results reflect the impact of higher sales volumes and lower natural gas costs, partially offset by lower product prices across all segments. The underlying story of the quarter, however, is the CF team. Our facilities are part of the critical infrastructure in all regions where we operate because we serve a vital role in helping to feed the world. Our operations employees continue to come into our facilities and run our plants, while our non-operations employees are supporting them remotely. The whole team is performing exceptionally well under the difficult circumstances created by the COVID-19 pandemic. We produced 2.7 million tons of ammonia in the first quarter. This is the second highest quarterly volume in the company's history and continues to demonstrate our outstanding track record of asset utilization. Most importantly, we are working safely. As of March 31, we achieved our lowest ever 12-month recordable incident rate of 0.34 incidents per 200,000 labor hours. As we've said many times, we evaluate the company based on full year and half year performance rather than on individual quarters. This is because weather can significantly shift volume from one quarter to another. Those temporary shifts tend to smooth out over longer periods. That said, we're fortunate that 2020 has started with strong volumes in Q1 and good demand in shipments so far through Q2. So at this point, we have good visibility on the first half of the year. As Bert will describe, we see strong nitrogen demand for the spring in North America and the UK. Compared to the last couple of years through this point in the calendar, the weather has been significantly better for field work and planting. And to date, we have not experienced any significant disruption to our business from the pandemic. We feel good about how the second quarter is progressing, and we expect our first half 2020 total product sales volumes to be similar to the previous three years. Looking forward, there is more than the typical amount of uncertainty for the second half of the year and into 2021 due to the COVID-19 pandemic. Although we have not been impacted directly by the pandemic, and we are seeing very strong agricultural demand, as the global economy contracts, industrial demand does soften. However, I'd like to provide some context for the magnitude of the uncertainty we're talking about. First, nitrogen is the only non-discretionary plant nutrient. Unlike potash and phosphate, which can be reduced or skipped entirely for a year, nitrogen must be applied. Second, our plants are some of the most efficient, lowest cost operations in the world, and we're on the very low end of the global cost curve. Further, we produce in import-dependent regions, so our logistics costs to get our products into market are lower than imports. Third, North America has some of the most productive, fertile farmland in the world. Additionally, the U.S. government has historically supported agriculture in times of distress, and already there has been $19 billion of aid approved with more expected to come in the future. Given this, we continue to expect our full-year production and sales volumes will be between 19.5 and 20 million tons, just like it's been the last several years in a row. So the uncertainty is not about our sales volume. It tends to be more about price realization. And while it is true that energy prices are generally lower globally, Chinese-based anthracite coal remains the high-cost marginal production in the industry. Chinese anthracite coal is currently over $7 per MMBTU on an equivalent basis. So with our gas costs currently trading below $2, we have a significant built-in margin structure. Additionally, we're beginning to see somewhat of a supply-side response with announced curtailments or closures in Europe, Asia, and South America, particularly for those plants that were principally serving industrial demand, which has softened. I said on our last conference call that we expect 2020 full-year EBITDA to come in somewhere between 2018 and 2019's performance. So far this year, our first quarter results are pacing ahead of 2019. As I said, we also expect good volume movement in Q2 this year, but we are comping against an all-time record Q2 volume from 2019. Furthermore, prevailing prices are lower than last year, And given the additional uncertainty for the second half of this year, that leads me to think we are likely to be more in the range of 2018's full year of financial performance. Now, there's a lot of the year still to play for, and we are off to a strong start with the business running well. So we feel really good about our situation compared to many companies and industries out there today. Given the uncertainty we face in the second half of the year, we are focusing our efforts on controlling those things we can control, First and foremost, as always, our top priority is protecting the health and well-being of our employees and contractors at our locations. Next, we remain focused on operating safely and achieving high asset utilization. As you can see on slide six of our materials, the CF team has delivered consistently strong performance. In fact, on a trailing 12-month basis, we have produced 10.3 million tons of ammonia, and sales volumes have exceeded 20 million tons. both of which are company records. Finally, we continue to manage the company responsibly for both the short and the long term. As Chris will describe, we are ensuring that our capital expenditures, manufacturing controllable costs, and SG&A expense all reflect the broader economic environment. With that, let me turn it over to Bert, who will discuss the market. Then Chris will talk about our financial position before I return for some closing comments.