CF Industries Holdings, Inc.

Good day, ladies and gentlemen, and welcome to the four-year and fourth quarter 2021 CF Industry Holdings Earnings Conference Call. My name is Tawanda, and 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 Father 1 on your touch telephone keypad. and overseer host for today, Mr. Martin Jarosik with CF Investor Relations. Sir, please proceed.

Good morning, and thanks for joining the CF Industries Earnings Conference Call. 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 results for the full year and fourth quarter in 2021 yesterday afternoon. On this call, we'll review the results, 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 your performance can 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 Wild, our president and CEO.

Thanks, Martin, and good morning, everyone. Yesterday afternoon, we posted results for 2021 in which we generated adjusted EBITDA of $2.7 billion, net cash from operations of $2.9 billion, and a company record free cash flow of nearly $2.2 billion. These results were made possible by the exceptional performance of the CF Industries team. We managed through two severe weather events in North America, completed the highest level of maintenance activity in our company's history, navigated runaway gas costs in the UK, and adeptly responded to a rapidly changing marketplace for our product. Consistent with our do it right culture, we did all of this safely. Our year-end recordable incident rate was 0.32 incidents per 200,000 labor hours, outstanding by any measure, but truly remarkable given the challenges of the year. Several of the factors that drove these terrific results in 2021 are expected to persist into the foreseeable future, namely strong demand, high energy spread differentials, and outstanding execution by our team. Let's start with the robust demand component. Significantly improving grain prices drove strong agricultural demand, while global economic recovery led to high industrial use as well. With December corn trading at $5.90 this year and $5.56 for next year, we see strong ag demand for at least the next two years. On the economy-driven industrial demand side, the last two months have seen inflation at 7% year-over-year, and that doesn't appear to be slowing down. So the combination of strong ag and industrial demand suggests overall global demand for nitrogen will continue at a torrid pace. Energy spread differentials between North America and high-cost Europe and Asia production indicate exceeded $20 per MMBTU for most of the fourth quarter, which provided the opportunity for us to achieve record margins for our products. As we look forward, the energy spreads continue in the $18 to $20 range for the balance of this year and remain well above $10 for 23 and 24. Those energy differentials provide an extremely attractive environment for North American producers and give us a lot of confidence about our continuing cash generation potential. On top of this backdrop of very strong demand and high energy spreads, we're a set of factors that negatively impacted global supply in 21. Turnarounds and maintenance activity originally scheduled for 2020 was deferred into 21 because of the COVID pandemic and a desire to keep employees safe by limiting contractors coming on site. The catch-up in maintenance activities last year took an unusual amount of production out of the global supply. Two significant weather events in North America, winter storm Uri and Hurricane Ida, further reduced production. The natural gas price spike in Europe and Asia exceeding $30 per mm BTU for weeks at a time, caused plants to curtail or shut down in those regions, further reducing supply. And adding to these pressures, several important producing countries, in an effort to ensure nitrogen availability and affordability in their home markets, enacted export limitations or outright bans, including China, Russia, Egypt, and Turkey. The result was significantly constrained supply at the exact time demand was surging, which led to the predictable outcome of rapidly increasing nitrogen prices. These dynamics came to a head in the second half of the year, and in particular during the fourth quarter of 21, when global nitrogen prices reached record highs. This provided the market opportunity for the company to deliver an all-time record quarter, both in terms of EBITDA and free cash flow. This enabled us to return $800 million in capital to shareholders through share repurchases and dividends, repay $500 million of long-term debt and return to investment-grade credit ratings, while adding roughly $1 billion of cash to the balance sheet. As I said earlier, we believe the market dynamics of last year have plenty of runway ahead. To this environment, we bring unique capabilities honed over the past decade. Our investments in people, safety, and growth have built the industry's highest-performing manufacturing network, as shown on slide 6 of our materials. Slide 10 underscores how this advantage is amplified by the low-cost position that North American natural gas provides us. As a result, we are able to capture the significant margin opportunities in front of us. Now let me turn it over to Bert, who will discuss the global nitrogen outlook in more detail.