CF Industries Holdings, Inc.

Good day and welcome to the CF Industries Q3 2025 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Martin Jarosik, Vice President of Treasury and Investor Relations. Please go ahead.

Good morning, and thanks for joining the CF Industries Earnings Conference Call. With me today are Tony Will, President and CEO, Chris Bone, Executive Vice President and Chief Operating Officer, Burt Frost, Executive Vice President of Sales, Market Development, and Supply Chain, and Greg Cameron, Executive Vice President and Chief Financial Officer. CF Industries reported its results for the first nine months and third quarter of 2025 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 our performance may be found in our filings with the SEC, which are available on our website. Also, you'll find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website. Before we begin today's call, I want to provide an update on the incident we experienced at our Yazoo City, Mississippi complex last evening. All employees and contractors are safe and have been accounted for, and there are no significant injuries. The incident has been contained and an investigation is underway. Now let me introduce Tony Will.

Thanks, Martin, and good morning, everyone. Yesterday afternoon, we posted results for the first nine months of 2025 in which we generated adjusted EBITDA of $2.1 billion. These results reflect outstanding execution by the CF Industries team across all aspects of our business. And most importantly, our team continued to work safely. At the end of the quarter, our trailing 12-month average recordable incident rate was 0.37 incidents per 200,000 work hours. Five years ago, October 2020, we announced a significant shift in the company's strategic direction, including an ambitious plan to begin decarbonizing our production network, a plan to become the world's leader in clean ammonia, and a model example of environmental stewardship and how to abate an energy-intensive business in a financially responsible way. Today, that vision has been realized. I'm very excited to announce that the plans we launched five years ago have begun delivering real value to our shareholders and broader benefits to society as a whole. We have made great strides over the last five years and have reduced our GHG emissions intensity by a whopping 25% from our original baseline. And every single one of the initiatives that contributed to this remarkable achievement have been highly NPV positive, creating substantial value for shareholders. We are the best example of how being environmentally responsible can actually go hand in hand with creating significant shareholder value. On our journey, we have executed all of the following initiatives. We closed two of our least efficient, highest emissions plants that were also borderline uneconomic to continue operating. We commissioned two new, highly efficient, lower emissions plants that have return profiles exceeding 20% IRR. We acquired the Wagamon, Louisiana ammonia plant, a very efficient plant with relatively low GHG emissions intensity. and increased production at that facility significantly, from 750,000 tons annually to over 900,000 tons, resulting in an IRR of over 20%. We installed N2O abatement systems into certain nitric acid plants, the resulting carbon credits from which are being sold at high values, more than recovering our costs within just a single year. And finally, we've begun sequestering approximately 2 million metric tons per year of CO2 from our Donaldsonville complex. The 45Q tax credits from this project will more than pay our installation costs within two years, generating an IRR over 20%. And we are currently selling the resulting low-carbon ammonia at a premium. What is otherwise a commodity product chemically identical to ammonia produced anywhere else in the world, has become differentiated and now commands a premium in the marketplace. These initiatives have helped reduce our emissions intensity by roughly 25% from our baseline, while creating significant value for our shareholders. And now we are embarking on the development of the world's largest ultra-low emissions ammonia plant at our Blue Point Complex in Louisiana. We have two world-class equity partners, Jera and Mitsui, with us in this venture, and I fully expect the financial and societal benefits will be equally as impressive as the initiatives we have already completed. Additionally, we have a second carbon capture and sequestration project underway at our Yazoo City, Mississippi complex and numerous other initiatives yet to be announced. The end result is that we have a robust high return growth trajectory in front of us through the end of the decade. that will continue to dramatically reduce our GHG emissions intensity while providing exceptional financial returns. Before I turn the call over to Chris to talk more about our operating results, I do want to take a moment and highlight what I consider to be a great misconception in the market. I want to refer you all to slides numbered 10, 11, and 12 in our materials. Slides 10 and 11 show our consistently strong free cash flow generation and our relentless share repurchase program. Slide 12 shows a remarkable free cash flow conversion efficiency from EBITDA, and yet amazingly how we trade at a shockingly low valuation. Oftentimes CF Industries is compared to agricultural companies, and yet we are very different from most of those. The seed and chemical companies face challenges of products coming off patent and declining margins. or of distribution channels being stuffed full and having to go through the pain of destocking. We're also very different from capital equipment companies or those selling more discretionarily applied products like phosphate and potash, who are really and truly subject to grower profitability. However, our sole product, nitrogen, is fundamentally different. Even in periods of relatively weak grower profitability, Nitrogen demand is unaffected, almost completely inelastic. This year, when there was great hand-wringing due to subdued grower profitability, high planted corn acres, and global nitrogen supply production disruptions in other parts of the world, created a situation where nitrogen demand and resulting pricing was very, very strong. As Bert will talk about in a few minutes, we see the same strong demand dynamic shaping up for next year. Nitrogen and certainly CF industry's financial performance is not impacted by most of the factors affecting the rest of the ag sector companies. While other times we were compared to industrials or material sectors, again, we have very little in common with most of those companies either, especially the chemical companies. We do not suffer from global overcapacity, nor from sluggish or declining demand. Our free cash flow generation is consistently high, and yet as shown on page 12, we have traded an anemic average cash flow multiple of barely 7.5 times free cash flow. Realistically, that should be the low end of an EBITDA multiple, not a cash flow multiple. Oddly, businesses that are on a whole more volatile and structurally way less advantaged than CF trade at a higher valuation. The industrial sector trades at 27 times cash flow The materials sector trades at 30 times cash flow, while our consistently high cash flow generation on average has traded at a sickly 7.6 times. All of this is a long way of saying the market doesn't really understand our business or our consistently high free cash generation. As Greg will talk about shortly, we have made great progress on our share repurchases and continue to do so. We, around this table, believe CF represents an amazing value. especially when only trading at an average 7.5 times cash flow. And we will continue aggressively repurchasing shares from the non-believers and those that don't take the time to understand why we are fundamentally different from most ag, industrial, and materials companies. With that, I'll now turn it over to Chris to provide more details on our operating results.

Chris? Thanks, Tony. CF Industries Manufacturing Network has operated well throughout the year, with a 97 percent ammonia utilization rate for the first nine months of 2025. As is typical for the third quarter, we had significant maintenance activity, which reduced production volumes compared to the first two quarters. We continue to expect to produce approximately 10 million tons of gross ammonia for the full year. We also have made significant progress on strategic initiatives that are now generating EBITDA and free cash flow growth for the company. In August, we were able to fully utilize expanded diesel exhaust fluid rail loadout capabilities at our Donaldsonville complex for the first time. This enabled us to capture incremental high margin DEF sales and led to a monthly record for DEF shipments from the site. Also at Donaldsonville, the carbon dioxide dehydration and compression unit, which was commissioned in July, continues to run well. We are generating 45 Q tax credits and move to full rates safely through the quarter. Finally, in October, we completed a nitric acid plant abatement project at our vertigrous Oklahoma facility. This project is expected to reduce carbon dioxide equivalent emissions at the site by over 600,000 metric tons on an annual basis, which we are monetizing through the sale of carbon credits. By the end of the decade, we expect the returns generated by our CCS projects, along with the vertigris abatement project, will add a consistent incremental $150 to $200 million to our free cash flow. Longer term, we remain excited about the compelling growth opportunity that the Bluepoint project offers us, particularly given the sales team's success in selling low-carbon ammonia from Donaldsonville for a premium. Detailed engineering activities and the regulatory permitting process are progressing well, with capital expenditures for 2025 expected to be within the range we projected earlier this year. We expect site construction to begin in 2026. With that, let me turn it over to Bert to discuss the global nitrogen market and the growing interest in low-carbon ammonia. Bert?

Thanks, Chris. The global nitrogen supply-demand balance remained tight in the third quarter of 2025. Demand, led by North America, India, and Brazil, was robust. Additionally, product availability remained constrained due to low global inventories and outages during both the third quarter and earlier in 2025. China's reentry into the export market provided tons the world needed, but did not substantially alter these dynamics. Looking ahead, we expect the global nitrogen supply-demand balance to remain constructive. We believe supply availability will continue to be constrained. Global inventories are low, including in North America. Additionally, major planned and unplanned outages are occurring now while geopolitical issues and natural gas availability, particularly in Trinidad, remain a challenge. The startup of new capacity also continues to be delayed. At the same time, we expect global demand to remain strong. India is likely to tender for urea in the near term, especially given the result of their most recent tender. Nitrogen demand in Brazil and Europe has picked up recently, and in North America, economics favor corn planting over soybeans next spring, based on the December 2026 corn contract, which is currently priced at approximately $4.70 per bushel. Farmer economics across the globe remains a key focus as crop prices have not kept up pace with the price of inputs, equipment, rent, and other costs. That said, we believe nitrogen offers clear value for farmers relative to other nutrients for its immediate impact on yields. Given where crop prices are today, we expect farmers to focus on optimizing yield, which should support healthy nitrogen applications. We believe that the strong uptake of our UAN fill program and our robust fall ammonia program and the order book that supports it supports that outlook. We're also preparing for the implementation of the European Union's Carbon Border Adjustment Mechanism, or CBAM, which takes effect in less than two months. While there remains some uncertainty about the final structure of these regulations, we feel very confident about our competitive position. Thanks to our Donaldsonville CCS project, we have the largest certified low-carbon ammonia volume in the world. And over the last few years, our team has put in a great deal of time to build relationships with customers, including those who will be affected by CBAM. This has enabled us to sell certified low-carbon ammonia at a premium to conventional ammonia today as customers begin to adapt their supply chains. Based on our conversation with customers, we also believe CBAM will drive significant demand for other low-carbon nitrogen products such as UAN. We see this as a tremendous opportunity for CF Industries on top of our already high-performing nitrogen business. We look forward to working with customers to build out a low-carbon ammonia and nitrogen derivatives supply chain. With that, I'll turn it over to Greg.

Thanks, Bert. For the first nine months of 2025, the company reported net earnings attributable to common stockholders of approximately $1.1 billion. or $6.39 per diluted share. EBITDA and adjusted EBITDA were both approximately $2.1 billion. For the third quarter of 2025, reported net earnings attributable to common stockholders of $353 million, or $2.19 per diluted share. EBITDA and adjusted EBITDA were both approximately $670 million. On a trailing 12-month basis, net cash from operations was $2.6 billion, and free cash flow was $1.7 billion. We continue to be efficient converters of EBITDA to free cash flow. Our free cash flow to adjusted EBITDA conversion rate for this time period was 65%. As you saw in the press release, we updated our projection for capital expenditures on our existing network to approximately $575 million for 2025. This reflects additional maintenance we were able to complete efficiently during planned outages as well as the timing of strategic investments that Chris mentioned this morning, and he spoke about it at our investor day in June. We returned $445 million to shareholders in the third quarter of 2025, and approximately $1.3 billion for the first nine months. In October, we completed our 2022 share repurchase authorization, having repurchased 37.6 million shares, which represents 19% of the outstanding shares at the start of the program. Our share repurchase program continues to create strong value for long-term shareholders. Net earnings increased approximately 18% compared to the first nine months of 2024, while earnings per share were approximately 31% higher, reflecting our significantly lower share count. The same positive impact can be seen in our shareholders' participation in our production capacity and the free cash flow it generates. We are now executing the $2 billion share repurchase program authorized in 2025 with over $1.8 billion of cash on hand at the end of the third quarter. We are well positioned to continue returning substantial capital to our shareholders while also investing in growth through Bluepoint and other strategic projects. With that, Tony will provide some closing remarks before we open it up. Call to Q&A.

Thanks, Greg. For me, this is earnings conference call number 48, and my very last one is CEO of CF Industries. Over the past 12 years, traditionally at this point in the call is when I have thanked the entire CF Industries team for their hard work and contributions to our success. I'm eternally grateful to the entire team. Today may be more so than usual, and I am particularly aware of what an amazing team we have here. So indeed, thank you all. said perhaps a bit more heartfelt than the past 47 times. I'm exceptionally proud of the company and the organization I'm leaving. The highly ethical way in which we conduct ourselves, our unwavering commitment to employee safety, and our absolute focus on value creation. In addition to the entire CF team, I also want to thank our board of directors who have always been supportive of me, providing insight and guidance through the years, and importantly, always aligned with me on the objective of value creation. I also want to particularly thank the CF senior leadership team, with whom it has been a truly great pleasure to work alongside. I can honestly say this is the best group one could possibly hope for, and not only respect them as individuals along with their business acumen, but I also thoroughly enjoy their company and our camaraderie. Finally, I want to thank and congratulate Chris Bone on being named CEO. Chris has been a consistent thought partner and devil's advocate working with me as we navigated foundational decisions, like the Terra acquisition, the sale of our phosphate business, the capacity expansion projects, our strategic repositioning of the company, the Wagman acquisition, and most recently, our Bluepoint joint venture. Chris has been hugely successful in leadership roles across the company, including heading FP&A, supply chain, manufacturing, CFO, and his current role as COO. Chris has my complete faith and confidence that he will successfully lead the company to new heights. Again, thank you and congrats. It has been some kind of a thrilling ride for me as CEO, an incredible honor and a very great privilege. We've accomplished many things over the years, As they say, success has many parents, and indeed, all of our successes were team efforts, and I'm delighted to say that the team remains in place. Therefore, I am steadfastly confident that the company's best years are in front of it. With that, operator, we will now open the call to your questions.

Before Q&A, I want to take a moment to acknowledge Tony's retirement and his contributions to CF over his 18-year tenure. Tony's influence and impact on CF cannot be overstated. From his time leading manufacturing, where he generated and championed the do-it-right phrase as a core statement of CF's values and culture, to his relentless pursuit of personal and process safety, CF has improved through his leadership. Tony's leadership, which can be best described as bias towards action, This has been exemplified through the growth the company has experienced under his guidance. Through the CHS transaction, Donaldsonville and Port Neal expansion projects, Wegman acquisition to the recent announcement of the Bluepoint joint venture, increasing CF ammonia production and free cash flow generating assets by 45% during his time as CEO and over 200% since he started at CF as a member of the senior leadership team. His safety-first mentality, keen decision-making, and focused on discipline investments and execution is what has positioned CF where we are today. Tremendous safety performance, industry-leading asset utilization, and superior capital allocation. Over the years, he's not only been a great mentor, but also a great friend. I look forward to building on what Tony has established and wish him the best in his next act. Thank you, Tony.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. First question comes from Ben Thurher from Barclays. Please go ahead.

Good morning, and thanks for taking my question. So first of all, Tony, all the best in retirement. I'm pretty sure you have plenty of things you want to do. Enjoy that. It was quite a run, I guess. That's never bad. Enjoy that piece. Maybe as well for you, Chris, all the best on your new assignment as CEO. Two quick questions I have. One, you've talked about in your presentation material about the mid-cycle where you are right now and the mid-cycle where you think you're going to be in three, four years' time as you get these additional projects come through. I just want to understand, the current market conditions obviously still seem to a degree stretched, with the European gas price somewhat elevated versus what maybe mid-cycle in the past was. I wanted to get your view in terms of the bull versus the bear around that $2.5 billion mid-cycle mark and how we should think about that evolving from a feed cost standpoint of view into the period of 2030. And then I have a very quick follow-up on pricing premiums.

Yeah. So I'll start. It's Greg. So clearly today, right, when we built the $2.5 billion, we had a $3.50 gas strip in there for Henry Hub and a price, a realized price on urea at $3.85. As of today and through the year, we've obviously traded below that on the Henry Hub. So from a feedstock, we've been benefiting in our results. And then lately, you've definitely seen a price move up through the course of the year on the urea. So from a results standpoint, hopefully you're seeing that and appreciating that in the results that we've printed at $2.1 billion of EBITDA through the first three quarters. I think as you think about it going forward and the spread between what we see here in the U.S. and in Europe, our view is that although there will be some tightening there, we expect to have a competitive advantage and remain lower priced on a nominal basis as well as a relative basis versus what we're seeing in European production, which will continue to be a tailwind to us for our financial performance.

I mean, I guess it's a long way of saying, Ben, that Um, we would agree with you. The current conditions are well above mid cycle and our expectation just based on history of how fourth quarter paces against the other quarters, um, should deliver full year results well above mid cycle this year. And, uh, you know, I, I think that's consistent with kind of what you said, industry conditions. Gas price in Europe, kind of what's going on in terms of the energy space and overall demand, it does feel stronger than, I would say, mid-cycle, but we're delivering against it.

And the only other point I would add is on the growth that, you know, Greg talked about going to the $3 billion. That is identified in motion being executed on today, so that is not things that are in the pipeline. That is what we know today, and that will likely grow as time goes on as well.

Okay, got it. And then that price premium on the ammonia you're selling in Europe, the blue ammonia that you're getting out of Donaldson, Will, can you give us a little sense of magnitude as to the premium that you're getting here with your customers? Yes.

This is Bert, and we've been fairly consistent with our goals of as we build the supply, which has come on stream, and over time as we add additional locations and then Bluepoint, we want to build correspondingly demand. And so we've been working very synergistically with our European customers, North African and even in the United States. So today, the premium is $20 to $25 per ton. As demand grows and we don't see the supply, we would anticipate that those will be matched as demand grows. So very positive for CF.

But again, Ben, that was never contemplated as being part of the economics when we went with the dehydration compression plants. So the cost of the plant was just under $200 million. The 45-cube benefit when we're sequestering at a rate of 2 million tons a year is going to be about $100 million of cash. And then we're adding another roughly almost 40-ish to 50 from product premium. So we're picking up an extra 50%. that was never, you know, initially part of the justification of that project. And so it's kind of nothing but goodness across the board in terms of our, you know, that project.

Fantastic. I'll pass it on.

The next question comes from Edlane Rodriguez from Mizuho. Please go ahead.

Thank you, and good morning, everyone. Again, Bert, I mean, Tony, clearly you will be missed. That's clearly the case. And good luck with everything. Thank you. So quick question, again, maybe for you, Tony, and maybe for Bert. In terms of, I mean, as you noted, the nitrogen outlook looks very constructive. But if you were digging for possible boogeyman in terms of trying to find something to worry about in the near or medium terms, where would you look?

Well, actually, we do every day assess the forward market, the spot market, the prompt market, and we try to be constructive in terms of how we build our order book and thinking about the customer base. That's why we're broad-based in terms of ag business, industrial business, export business, and we're levering those along with our terminaling activity. How do we enter and exit the market and play the market? When you look at the market today, then it's a global market. You're seeing a constrained supply, and that happened through the global conflicts as well as plants coming offline in Saudi Arabia, Bangladesh, and a few other places, and gas limitations in Trinidad, high-cost gas in Europe. and not a lot of new capacity coming online in low-cost areas. Constructively, supply is, I would say, consistent on a limited basis while demand continues to grow at that 1% to 2% per year. We're seeing very healthy demand in India, Brazil, North America, and we can plan to continue with that level of demand. When I look at the negatives, I think from your side, it's always, yeah, but. Yeah, but this is going to be negative. And we've been hearing about China for 10 years. We've been hearing about other issues for years. And we continue to outperform in the market. So looking at the negatives, I would say I like the current market. I think the current market is going to extend into 2026. That's as far as we give a viewpoint. But China's demand internally to consume the tons they produce is pretty well tied to that. So this 4 million tons of exports that we see coming out in 2025 is probably needed. And then India hasn't performed on their production internally. They've been importing consistently high levels of urea, and Brazil continues to grow. I have a hard time finding a negative boogeyman out there.

See, I was going to give you a little more flippant answer. I was going to say all you have to do is read some of your other colleagues out there in the industry, and you'll get kind of where the boogeyman sits, even though we don't really believe a lot of that's accurate.

So one quick follow-up for you, and this is for Tony and Chris. I mean, Tony, you've talked about the valuation disconnect in your shares. Clearly, I guess you failed to convince those jaded investors. What else do you think, Chris, and Chris, you could answer that too, what else do you think you will need to do to convince investors of that valuation gap that you clearly see?

I mean, we did a European Roadshow this summer or this fall, and talked to investors over there, and, you know, there was a little bit of kind of not understanding why the valuation was what it was, but also, you know, there was also, frankly, a little bit of just, you know, we trade you as part of this, you know, this broader group of other companies, and when there's, you know, when there's a lot of automated trading going on and there's something that affects, like I said, either the ag sector or or something else, all of the companies kind of move. And I, I think there just isn't a recognition that we're with our financials are very different from most of the companies in that sector. And I, you know, I think at some point when there are few enough shares out, we'll start getting a, you know, um, a more realistic evaluation against what's remaining. Um, And I think, fortunately, we're generating enough cash and the shares are such a screaming value that I think continuing just to buy shares out of the market is the only way we can eventually get there.

Yeah, and the only thing I would add to that is when you ask what should we do, it's to continue to do what we are doing. We have exceptional operational performance focused on safety and a conversion to free cash flow that I think we as a company reflect on more than anybody else that, you know, I see both in the chemical and the agar and really all industries. And so at some point that has to resonate with people. Cash is king. And whether it's buying back the shares, as Tony said, or making high growth investments that have great return profiles, you know, it'll pay off at some point. So it's continuing to execute the way we're executing.

Thank you.

The next question comes from Joel Jackson from BMO Capital Markets. Please go ahead.

Good morning. Tony, congrats again. A couple of questions. If you brought forward $75 million of maintenance CapEx this year, does that mean that next year you should be generating $425 CapEx on your non-Bluepoint network?

Yeah, Joel, I'll start with that and then if anybody needs to add something to it. But That increase, you know, we were probably a little light on the $500 million. Generally, we start the year running at about a $550 is kind of the range we're performing in. But it was really affected by three things. One, we completed more projects than we typically do at this time. There's a lot more, I would say, smaller dollar projects that are easier to finish during this particular timeframe. And then we also, part of it was a timing of a nitric acid, you know, precious metal purchase, which was quite a bit that we do from time to time. And then we had, you know, to be honest, slightly higher labor and capital costs related to some of the inflation by a few percentage points in what we had been forecasting. So as I look at 2026, I would still use the 550 as our range going forward for sort of what's called our base CapEx and then adding CF's component of Bluepoint on top of that.

Okay, and I know it's early, very early, and it's great that there's no injuries, but do you know if what's happening in Yazoo City, is this going to be an outage that order of magnitude days, weeks, or months?

It's way too early to speculate on that. I would say the ammonia plant was not directly affected. It's still operating as of this morning. but at some point you run into inventory containment depending upon how long the upgrades are down. So we're thankful that everyone is accounted for and is safe and that really there was only just a couple of very minor injuries, nothing serious or significant. That was our biggest concern, and then also that there is The site has been secured. Now we're in the process of kind of really understanding what the condition of things are and what the root cause was, and then we'll start worrying about turning things on after we do a thorough investigation. I would say, Joel, that this is our smallest segment and a relatively small plant in our smallest segment. So, you know, we're... We're not, you know, focused on kind of potential financial implications at this time. As Chris said, we're still expecting to be able to produce the 10 million tons of ammonia this year like we had planned on. Thank you very much.

The next question comes from Chris Parkinson from Wolf Research. Please go ahead.

Awesome. Tony, I'm not one to always say, like, say great quarter, but I'll give you a shout out and I'll say great 12 years. And through all the, you know, debates, agreements, and at times disagreements, you've always challenged me. So I'd like to personally thank you for that. It's been a pleasure. The question to both you and Bert, you know, there's been, and it shows you outside the market to me, there's been a lot of inconsistency of supply throughout this, the entirety of this year. And you have things in Russia, Germany, Poland, Germany, I mean, perhaps this becomes a broader intermediate to longer term question, but how much of the demand and the price strength do you attribute to the supply side of it versus the fact that demand, I think broadly speaking throughout the year to date, has also been pretty healthy and kind of led to these price rallies at times at non-seasonal times. So I'd really appreciate your perspectives and kind of how to think about 26 in the context of of what we've actually been experiencing in 2025. Thank you.

I think the demand piece of the equation is much easier to forecast going forward, and as Bert said earlier, given where the different products are priced at and the corn-to-bean ratio, and just looking at what we saw in the way of the UA unfilled program as well as fall application of ammonia that's going on right now, we're anticipating the demand side of the equation to be very strong for the planting year of 26. The supply side's a little harder to kind of peel back, and as you said, it's an integrated kind of question in terms of how much it is the S and how much of it is the D. I would say a lot of the places that you mentioned Not so much Russia and Iran, but a lot of the places that you mentioned where there was some supply disruption are on the relatively higher end of the cost curve. So those tons don't necessarily, you know, move things dramatically up in terms of price. But there's no doubt that conditions that we saw this year due to both the SA and the We're quite strong, and that's why our anticipation is delivering a result that's well above what our mid-cycle numbers. When Greg talked about it at Investor Day, what he gave, we expect to be well above that.

I think for CF in particular, how we view the world and being students of the world geopolitically, economically, and systematically, and how it affects our business Tony touched on the specifics, but we did lose 5 million tons from the market through the conflicts for Iran and Egypt, Algeria and some in Russia and Turkmenistan. And then I think the lack of China or the late coming in of China in June probably pushed the market higher than anticipated. But we're still tight. And like Tony articulated, in terms of demand, with India pulling 8 to 9 million tons, Brazil 7 to 8 million tons, North America, 6 million tons, and Europe producing less and not having the access and the lack of inventory in any major destination market sets up 2026, I think, very well. And we're going to see, I think, higher than anticipated corn acres in North America due to just the economic opportunities and impacts, which is constructive for CF.

And just as a quick follow up, I mean, Tony, you've gone through your fair share of, you know, capacity expansions, both, you know, I should actually say very large brownfields and other brownfields and everything with your network. What have you, Bert and Chris, learned the most from that? all of those efforts over the last 12 or so years that Chris and his team can essentially apply to Bluepoint to perhaps mitigate a lot of the things. Is there kind of a track record of lessons that you can really apply here, or is it just going to be every project's different at the end of the day?

Yeah, I would say we learned a ton that is currently in direct application of this project, one of which was We did a full-blown feed study and detailed engineering of this plant before we announced it and went to FID. And so we have a much better perspective of the actual construction hours and the unit build material list than we did when we announced the expansion projects back in 2012. The other thing I would say is, The size of our network and the expertise we have across the network and the scale we have brings tremendous skill sets and capabilities to bear against a project like this. And you see that when you're looking at other people that are trying to start up ammonia plants that are years late because they just don't have the capability and expertise running ammonia. And there are a few of those out there right now. And so I think both the fact that a number of the people involved in this construction project were also involved in the big Portneil-Deville expansions in 2012 through 16, as well as just some of the broader lessons like the engineering and feed study, I feel very confident in this. And we also have expertise from our partners that we're going to be able to leverage as well with Jared and Mitsui that are equally, if not even more so, comfortable doing very, very large capital projects like this, and they're bringing some of their best resources to bear as well.

I would say, and Chris said in his comments to Tony, being bold, but that boldness is based on market knowledge, understanding. We've looked at plants all around the world. We've looked at a lot of opportunities over the years. We've had some great debates and discussions and disagreements at times on where to go and how to grow, but in the end have made some very good decisions on that, and Bluepoint's a good example. We're the company that does it right, stays within, I think, our fairway, and brings these plants on safely, and they operate above nameplate. And so it's that bold step of taking it when the market is growing and needs these tons.

Yeah, and the only thing I would add is, you know, that's different from last time, Chris, as we've talked about before, is we're going with modular construction. Last time, you know, on a stick build time and material, you started to see labor costs get out of control. So I think that was something that we did a lot of evaluation on and also looking at who we're going to select to build those modules. And then lastly, something that we'll do that we did last time that the whole team's working on, which is We begin hiring operators and engineers today, even though the plant will not be up for four and a half, five years or whatever. And what that allowed us last time was to get to over name plate production within a couple months after startup, which nobody else was able to do. So again, as Tony said, leveraging our overall network, not just for engineering expertise, but to train operators and other individuals that will be working at these sites.

Thank you for the color, as always.

The next question comes from Andrew Wong from RBC Capital Markets. Please go ahead.

Hey, good morning. And just echoing everybody else's comments, Tony, congratulations on a very successful career and guiding CS for a lot of market ups and downs. We've seen a lot. So enjoy your next chapter.

Thank you, Andrew.

Yeah, thanks. And so just maybe on the comments you made earlier, around the valuation, I think you made some very fair points. So maybe a question for you and also for Chris, you know, just given the value in shares and buybacks seem to be the path to kind of realize that value. You have a very strong balance sheet. Would there be any consideration for using debt to fund Blue Point and then maybe using the cash flows and cash generation to buy back shares? Like, would that make more sense right now?

I think the problem with doing that a little bit, Andrew, is it's sort of a one-time sort of benefit that you get, and then you're living with much higher fixed costs as you go. And I think one of the things that we've seen in this business is having a balance sheet with low fixed costs and a lot of liquidity gives us opportunities to move when there's, you know, things that are available to us, like the Wagamon deal, which we, you know, did in cash. And so instead of this being a, you know, kind of trying to rush an equity swap for debt, which, you know, benefits kind of near-term shareholders, we're really playing the long game here, and it's about trying to make sure that we retain all of the long-term operating and strategic flexibility, and at the same time, rewarding the truly long-term shareholders who eventually, I think, will start valuing the company properly. I'm given my perspective, I'm not going to be here in a couple months, so this is probably, you know, Chris and Greg can talk about it.

Yeah, from my perspective, well, just for starters, I think the numbers that Greg presented and where we're seeing this year, where we're seeing next year, and even the mid-cycle, we're going to have enough cash to do both at a significant level, just as we've done over the last decade under Tony, where we've been able to grow and also do significant share repurchases. So, The ability to do both, I would echo Tony's comments, like having fixed charges in line, having a, I would say, flexible balance sheet is very important when you're in a commodity business. As we're seeing more of our business here go to ratable, more industrial with premiums and things, we can make different decisions from there. But I think the cash flow that we're generating, due to the conversion rate that we do, allows us to do whatever we want to do really.

Yeah. The only thing I would add to it is just emphasize the numbers that we talked about today, right? $1.3 billion of cash back to the shareholders for the first three months, $700 million in CapEx. So $2 billion and we have $1.8 billion of cash on hand today that creates incredible flexibility for the company.

Okay. Understood. Um, and then maybe just one on costs. Um, I think SG&A looked still just a little bit elevated for the quarter, obviously not hugely, but just curious if there's anything there. And then also on just some of the non-gas costs, I suspect that the turnarounds this quarter contributed to some of that. Just wondering if there's anything to flag or anything.

Yeah, it's Greg. On the SG&A side, we continue to just update our bonus accrual for the company for the year, and that was a small catch-up as well as a plan for the third. So that's the elevated level on the SG&A. On the non-gas side of production cost, really the one that stuck out to me as I climbed through them was really around ammonia in that segment. The point to make there is we did have an increased mix around our purchase tons, which obviously come into the system at a higher value than what we can produce them at, but it also contributed to gross margin dollars in the ammonia segment being up 30 percent year-over-year. Other than that and the timing of some turnarounds, there was really nothing to speak of in the non-production cost.

Yeah, and on the purchase front, just to remind you, the tons that are produced in Trinidad, we purchase and we realize the value in Trinidad, and then that comes through equity earnings instead of directly into the ammonia segments. And then into the U.K., we're purchasing ammonia and then upgrading it to a margin, and then that's going to come through kind of our other op segment. But the price, you know, because we're buying it at market, shows up in COGS for ammonia. So that kind of helps dimensionalize what Greg was talking about.

Okay, gotcha. Thank you very much.

The next question comes from Kristen Owen from Oppenheimer. Please go ahead. Hi, good morning.

Thank you for the question. I do want to start with a more strategic long view here, just given some of the prepared remarks about the valuation disconnect. And given your comments on whether it's CBAM, where those blue point ammonia tons will go, even some of your comments on DEF, help us understand if we're looking at this business model in that 2030 framework, You know, how much exposure really is ag anymore versus some of these more industrial applications? And how should we think about that mix contributing to that sort of mid-cycle framework?

Yeah, I mean, ag is still going to represent the lion's share for the foreseeable future of where we sell our products. And, you know, the simple reason for that, Kristen, is that, the margins in ag are far superior to the margins in industrial. We could move all of our products into the industrial marketplace, which tends to be ratable, but we would end up doing it at a significantly lower price point, and we wouldn't get the benefit of our distribution and logistics network by doing so. And so some of the you know, even though it is kind of quote-unquote a little bit less predictable, it's at a lot higher volatility. And I'm going to refer back to, I think, a sort of something I've heard attributed to Warren Buffett, which is, you know, give me a 15% spiky return over a 10% flat. We'd way rather have a you know, spiky to the upside return profile associated with serving the ag marketplace than we would the other way. Now, we're starting to build, you know, some, and that will continue to increase. That does tend to be a little more ratable with predictable margin structures. But we're going to be, you know, we're 75%, 80% an ag company today, and it's going to be like that for a very long time.

I think you have to also think about how our company is structured with our unique distribution, the terminaling assets that are throughout the Midwest on the best farmland in the world with the lowest cost access logistically. If you compare our cost to get to the middle of Iowa for let's say $30 for urea against taking that to Mata Grosso from Paranaguay or Santos, it's significantly cheaper and the yields are significantly better and the farmer economics better as well. On top of, we have low-cost gas in those regions, so we are structured to serve the ag business, which, as Tony mentioned, is spiky but profitable, but we balance that with this industrial book and export book that places us in, I think, globally a very unique position, and we're benefiting from that.

Sure, and I appreciate that. Perhaps a little clarification on my side. I'm not suggesting that there's some major move out of the ag markets. It's more just how much more meaningful can the earnings potential be on the industrial side given the uplift of some of these markets. So perhaps a slight clarification there. And while I'm here, I'll just ask my follow-up question. Just given the cost curve in China, a little bit more affordable to keep those markets a little bit more domestic affordability. So just any thoughts on China exports in 2026? Thank you.

We've been fairly consistent regarding China in that 3 to 5 million ton range, and that's how they seem to perform. We're expecting them in 2025 to be in the 4 to 4.5 million ton range, and they've announced this additional export quota. They haven't announced their program for 2020, probably coming out sometime in Q2 with exports, May, June, and exporting into the early part of Q4. Because their domestic market is so big, their domestic demand, both ag and industrial, and where they are capacity-wise and operationally, that four to five, three to five million tons of exports make sense as you build kind of what their structure should be.

Chris, I'll just add one thing back to your first question. If you think about the 45Q tax credit associated with both Dville and Yazoo City when it comes online, we'll probably be close to $150 million of cash, and that's net of taxes and everything. That is not dependent upon where market pricing is for any of our products. between what BERT is able to realize in price premium and some of the other initiatives we have, like selling carbon credits, you know, there could be another 25 to 50 million of additional value that accrues to us that is also not tied to the market. So you're starting to get to the point where, you know, there's probably could be 200 million-ish a year that's coming in that is very ratable and predictable and just part of the base than that everything else kind of rides above.

Thank you. The next question comes from Lucas Beaumont from UBS. Please go ahead.

Thanks. Good morning. Good luck with your retirement, Tony. Congrats on your career, man.

Thank you.

I like the sentiment with the others. Yes. Yeah, I just wanted to kind of ask about Bluepoint. I see you guys noted that you'd procured all the long lead time equipment now. So kind of just where did the costs come in there compared to the budget? Kind of what percent of the project spend was that? And kind of just remind us of any cost escalation components that are built in there for like inflation and tariffs, et cetera, between now and sort of when the delivery occurs.

Yeah, thanks. This is Chris. Well, for starters, I would say the projects were way too early in the phase to say we're under significantly or we're slightly over or whatever. I would say we're right where we thought we would be. The equipment that we ordered as long lead time is like your boilers, your compressors, different equipment like that. The modular equipment, which is going to be the significant dollar amounts, That, you know, we'll be selecting the modular yard here shortly, and those have been fixed fee bids in which we had, which was part of our overall $3.7 billion. So that part we still feel very confident about. As we look at, I think, your question probably with tariffs, I mean, you know, with the Supreme Court, you know, hearing arguments right now, there's still a lot of uncertainty what happens. A lot of the equipment that would be tariffed, is most likely going to be coming in three years from now. So there's still quite a bit of time frame, and I'm certain more will change between now and then. But what I would say is we forecasted quite a bit into tariffs. We're slightly higher than that. That's going into our $500 million contingency, but not anything that would have us concerned at this time. I think, you know, additionally, there potentially could be upside interest dependent on what the Supreme Court rules, but I'm certain there would be some reactions by the administration as well on additional tariffs in other areas. So again, tariff side, a little uncertain, but we feel like we're covered there. Long lead items, those are in PATH, but those are more some of the more engineered complex items like compressors and such.

Great, thanks. And then I guess just on the pricing outlook, I mean, you guys have kind of felt your length of that. I mean, ammonia has been very tight. You know, the pricing is strong. UA and ammonia imports are sort of running below trends, heading into the fall and spring. So, I mean, the near-term setup looks quite attractive. I mean, same time, the TTF futures has sort of been coming off the past couple of months. It's sort of gone from 12 and looking flattish year-on-year, sort of low 10s, kind of now down about $1.50. So I guess just how do you kind of see those two factors resolving each together as we go through 26? Or I guess if you don't think they'll resolve, then why not?

Thanks. Maybe I'll start with the gas side. With TTF, I mean, TTF has come off about $1. So you're still sitting near $11 on the forward strip with that. with the US sitting anywhere from 350 to four. So you still have that differential that is very constructive. As Greg said, longer term, when we get into 28, 29, we may see that contract some, but not nearly to the level, just given that the projects being built have to have return profiles with those as well, and the additional demand that'll be drawing on LNG. So from a constructive standpoint, we still think the gas differential is going to be very strong, even if it comes in a dollar or two from where it is today.

Regarding the market and the tightness we're experiencing today, with Saudi, the ammonia plant being down and the late start of some of these new capacities, as well as Trinidad and then suboptimally operating in Europe, the ammonia market is, I think, going to maintain tightness until these new plants come on. and we'll see what happens. But the United States today is at a net import negative on UAN and ammonia and probably balanced on urea. And so, again, looking around the world where we participate and where we have communication, you have a tight inventory position in all of the destination markets. And so looking at gas and costs and kind of upside, I think we roll very well into 2026. in a positive way.

The next question comes from Vincent Andrews from Morgan Stanley. Please go ahead.

Thank you very much. I'm actually late to something else, but I wanted to stick around and just congratulate you, Tony, and say thank you and good luck in the future.

Thank you, Vincent. I appreciate that.

The next question comes from Matthew Deoy from Bank of America. Please go ahead.

Yeah, good morning. Tony, yeah, congrats on the run. I know I didn't cover you directly for much of the time, but Steve always held you with the highest regard, so I know that goes for the rest of us here at Team B of A. Thank you for that. Yeah. I wanted to ask, I guess, a little bit on the slide where we talk about, like, ammonia expansions and closures. Certainly, we don't disagree that a number of European plants need to close chemicals across like a lot of chains. But if we look at that three to four number, I mean, what's the, how much of that's been announced? What do you think the rates are that those plants are running? And then like, I just know that closing plants is expensive and not really done easily. So I'd love a little bit more kind of commentary around your outlook for, for that capacity.

This, as you may recall, is a study we did about a year and a half ago where we analyzed every ammonia plant in Europe based on how its ownership structure was, what its maintenance structure, what its cost structure was going to be to try to identify which of those plants would come off. Europe used to have about 48 ammonia assets that were operating. And how we have it leveled was red, yellow, green. And what we've seen is the red plants have come off as we expected. And in fact, we're probably ahead of that particular schedule with the number of curtailments and shutdowns that are occurring in Europe from that. But that 48 assets today is probably around 30 assets or maybe 31 assets. And we expect that to drop another four to five assets over the next couple of years. You have to remember the decision we made in the UK was because we had a significant turnaround coming forward and these turnarounds are 50 to $60 million. So when you're entering into that, you have to make certain you're going to get that return on that cash. Additionally, where TTF is today at the 10 to $12 range, makes it difficult to be producing throughout 12 months of the year for really selling in what may be three months a year, maybe four months a year. So you're making a risk decision based on that. So what we're seeing today is with some of the pricing, there's just a little bit more curtailment going on, but eventually through our study and what we've seen, you're going to see some of those plants continue to go off. So the European side, we feel very confident that that 3 to 4 million is going to come off. Now, whether all that gets imported as net ammonia or as upgraded product, that'll be determined. But I think the other aspect here is, as Bert mentioned, there is just not a lot of new supply coming on. We have visibility of what plants are being built, and with the exception of ours, and the two in the Gulf Coast that are about to come on probably sometime in 2026, and one in Qatar, there's really not much coming on. And the other plants that are coming on are upgrade plants that are consuming ammonia and making the ammonia market even tighter. So what we see is a strong constructive gas differential where we'll make money off of that versus TTF. And then we also see a very tight S&D balance that not only continues here in the 2026, but really goes all the way to 2030.

Thanks for that. I'll hand it back.

This concludes our question and answer session. I would like to turn the conference back over to Martin Jarasek for closing remarks.

Thanks, everyone, for joining us today. We look forward to speaking with you at future conferences.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.