CF Industries Holdings, Inc.

Good day, ladies and gentlemen, and welcome to CF Industries' first quarter of 2026. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. We will facilitate a question and answer session towards the end of the presentation. To pose a question at any time, please press star, then one on your touch-tone phone. I would now like to turn the presentation over to the host for today, Mr. Martin Jarvisik with CF Investor Relations. Sir, please proceed.

Good morning, and thanks for joining the CF Industries Earnings Conference Call. With me today are Chris Bone, President and CEO, Bert Ross, Executive Vice President and Chief Commercial Officer, and Rich Hofer, Vice President, Interim CFO, and Chief Accounting Officer. CF Industries reported its results for the first quarter of 2026 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 boards of 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 More detailed information about factors that may affect your performance may be found in our filings with the FTC, 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 the website. Now, let me introduce Chris Vaughn.

Thanks, Martin, and good morning, everyone. Yesterday afternoon, we posted results for the first quarter of 2026 in which we generated adjusted EBITDA of $983 million. These results reflect a continued focus on safety, operational excellence, and discipline execution by our team. Starting with safety, our trailing 12-month recordable incident rate at the end of the quarter was 0.16 incidents per 200,000 hours worked. This is a direct result of how our team lives our do it right culture every day. Operationally, we had another strong quarter running available ammonia capacity at nearly 100%. And our commercial, logistics, and distribution teams ensured we met customers' requirements leading into the North American spring application season. Our performance in the quarter also reflected the tight global nitrogen supply-demand balance that carried into 2026. Late in the quarter, the conflict with Iran severely tightened the global nitrogen market a dynamic we expect to continue for some time. Lost production cannot be recovered. Damaged nitrogen and upstream feedstock capacity must be restored, and global trade flows will require time to recalibrate. In addition, the Russia-Ukraine war continues to disrupt nitrogen production at Russian facilities. From a macro perspective, we believe recent geopolitical disruptions are driving a fundamental shift in our global industry's risk return framework. First quartile producers have historically been defined by low natural gas costs alone. Recent supply disruptions from the Middle East and Russia show that low cost feedstock is no longer enough. As a result, we see a clear divide within the first quartile. North America where we have intentionally invested billions of dollars over decades to build the leading nitrogen manufacturing and distribution network is low cost and low risk, representing premium grade assets. This is in stark contrast to their approximately 50 percent of first quartile capacity that is fragile and exposed with low natural gas costs that are offset by extreme geopolitical exposure. We believe the geopolitical risk premium that fragile and exposed producers face will be an enduring structural headwind, increasing the cost of capital and adding cost and uncertainty for moving product to customers. In our view, this has strengthened mid-cycle economics across the nitrogen industry. With a higher urea price now required to incentivize investment in new capacity in the Middle East to offset geopolitical risk, or to build in higher capital cost, low risk regions. With that, I'll turn it over to Bert to discuss the global nitrogen market environment. Bert? Thanks, Chris.

As we have discussed in our last several earnings calls, the global nitrogen supply demand balance has been structurally tight for more than a year. Global nitrogen demand has been robust. At the same time, supply has been constrained by geopolitical conflicts, elevated natural gas prices in Europe, export restrictions, and declining natural gas availability in several key producing regions. The conflict with Iran and the closure of the Strait of Hormuz introduced a significant supply shock into this already tight market. Exports of urea and ammonia from the region have been severely limited, removing a meaningful portion of low-cost supply during peak nitrogen season. Additionally, producers that use imported LNG for nitrogen production have curtailed or shut down facilities due to fuel availability issues. These dynamics have substantially raised the global clearing price to meet nitrogen demand. During this period, our focus has been on our long-standing North American customer base, which includes retailers, wholesalers, and cooperatives. We've been moving product to our customers for the spring 2026 planting season since July of 2025. Based on what we see today, inventory for both pre-plant and post-plant applications appears well covered. We continue to work with our customers to meet the last layers of demand for this season. This includes leveraging our manufacturing, logistics, and distribution capabilities to increase nitrogen availability this spring For example, we temporarily delayed a turnaround at Donaldsonville, allowing us to produce about 100,000 additional tons of urea for the season. We also repurposed Yazoo City Rail assets to move urea from Donaldsonville into the Corn Belt and to ship ammonia from Medicine Hat Canada into our U.S. distribution network. We continue to evaluate all our operations and distribution channels to ensure product availability through the end of the season. While CF Industries has flexibility to support our customers globally, there are not many options to overcome a supply disruption of this magnitude. Indeed, we are seeing several nations restrict exports, further removing supply from global trade flows. China remains focused on ensuring their domestic agricultural industry is well supplied. with exports of nitrogen largely restricted. While we expect controlled and limited urea exports to begin later in the second quarter, volumes are unlikely to fully offset lost Middle Eastern supply. Russia had also implemented export restrictions to prioritize their domestic agriculture, and this week Egypt moved to apply a $90 per metric ton duty on nitrogen fertilizer exports. With global nitrogen supply constraints, there will be intense competition for available supply. We expect India, which entered 2026 with low inventories, to lead the way. Given urea volumes not delivered under a previous tender and lower than expected domestic urea production, we believe India's urea imports requirements will be substantial in 2026, potentially rising to 10 to 12 million metric tons. This would be approximately 10 to 30 percent higher than 2025 and nearly double their 2024 imports. With this environment, we expect to see unmet demand in certain parts of the world. We believe Latin America, Africa, and Southeast Asia are areas where we will see lower fertilizer consumption. As application volume per acre decreases globally, yields will decline and which we expect to result in higher prices for corn, wheat, rice, cotton, and sugar. Looking ahead, even with some incremental supply later in the year, we expect global nitrogen markets to remain tight through 2020-26 and into 2027. We also expect further structural tightening through the end of the decade as new nitrogen capacity under construction today falls short of the traditional nitrogen demand growth rate. With that, let me turn it over to Rich.

Thanks, Bert, and good morning, everyone. For the first quarter of 2026, the company reported net earnings attributable to common stockholders of approximately $615 million, or $3.98 per diluted share. EBITDA was approximately $1 billion, and adjusted EBITDA was $983 million. These results reflect a gain of approximately $170 million from a previously disclosed litigation settlement with Orica and Nelson Brothers. We recorded the gain in the first quarter and received the proceeds in April. As a result, it will be reflected in our cash flow statement next quarter. On a trailing 12-month net cash from operations was approximately $2.7 billion, and free cash flow was approximately $1.65 billion. We continue to efficiently convert EBITDA to free cash flow at industry-leading margins positioning the company well to continue to invest in accretive growth and return capital to shareholders. Our capital expenditure projection for 2026 remains approximately $1.3 billion on a consolidated basis. CF Industries' portion of this is approximately $950 million, which includes $550 million for sustaining CapEx for our existing network, plus approximately $400 million relating to both the Bluepoint joint venture and the Bluepoint common infrastructure we're building at the site. Construction on the Bluepoint ammonia plant is expected to commence this year once applicable permits have been received. We continue to be pleased by the progress that has been made on this high return project that will add over 1.5 million tons of gross ammonia capacity in the United States when it begins operation late in 2029. Finally, we repurchased approximately 150,000 shares of our common stock for $15 million in the first quarter. We expect to continue to be opportunistic and disciplined as we execute the remainder of our current share repurchase program. With that, Chris will provide some closing remarks before we open the call to Q&A.

Thanks, Rich. I want to thank CF Industries employees for their commitment and dedication during the first quarter of 2026. They worked safely, delivered outstanding operational performance, and stayed closely engaged with our customers as industry dynamics evolved rapidly. CF Industries is well positioned for the near, medium, and long term. Our North American footprint, operational excellence, and consistent industry-leading free cash flow conversion set us apart. Alongside our structural and operational advantages, we are realizing decarbonization opportunities today that provide incremental free cash flow. And our blue point complex and additional opportunities within our existing network provide a robust growth platform for the future. With our capital allocation strategy to grow our production base, enhance network margins, and return capital to shareholders, we expect to continue to create substantial value for long-term shareholders. As a result, the intrinsic value of CF's assets, durable advantages, and growth initiatives has increased. That value proposition is becoming even more relevant against the current global backdrop. The conflict with Iran represents the third major supply and demand shock to the global nitrogen market in the last six years and has exposed the fragile nature of the global nitrogen supply chain. This fragility is not limited to production assets. It includes feedstock assets such as LNG and logistical assets such as shipping that are essential to the way our global industry operates. In an environment of frequent geopolitical disruptions, we see distinct value in the true stability of our hard-to-replicate network and superior assets, strengthening mid-cycle expectations and the predictability of the substantial free cash flow we generate. As we continue to execute our strategy, we believe this CF premium will become increasingly evident.

With that, operator will open the call to questions.

Thank you. We will now begin the question and answer session. To ask a question, you will press star then one on your touchtone phone. The first question comes from Christian Owen with Oppenheimer.

Good morning. Thank you for taking the question. I actually wanted to start out with this sort of CF premium idea and sort of phrase a longer term position here where, you know, if we're in this scenario of higher for longer sustained energy arbitrage advantage in the U.S., like how are you thinking about the calculus now on your blue point economics As you think about the export opportunity and just given the excess cash generation, how that all factors together into those unit economics for that new capacity. Thank you.

Thanks, Kristen, and good morning. Related to really the structural changes that are happening with the longer, I would say, natural gas differential that you're talking about, I think all it does for our Blue Point project is really increase the return profile that we have put in place. We're always very disciplined in our investment decisions and almost to the point of being conservative. But I think what we're seeing here, as we talked about, is a structural shift in how the world views low cost. And low cost isn't just low cost feedstock like what we have, but it's also breaking out what other costs are involved in that, from transport costs to even operational efficiency costs. So what we see in place there is just an increased return profile. And really, I think, if anything, the conflict is shedding a light on the strength of our strategy, being very intentional where we build and expand our assets here in North America that allow us not only low-cost inputs, but allow us to be able to move product throughout the world, whether it be export or up into the Midwest where it's required.

And I think regarding the premiums, We're seeing that today in the market as we have brought on our low carbon product, ammonia and upgraded products in Donaldsonville and then the future blue point, which will be 95% or more decarbonized. We're seeding the market today, building those relationships, putting in place those contracts, all with the premium on the current market. And so we're seeing very significant uptake and positive receptivity to our program.

Thank you.

The next question comes from Mike Sison with Wells Fargo.

Hey, good morning. Thank you. In terms of your, in terms of the, you mentioned that in 2017 you felt supply-demand would remain pretty tight for nitrogen. And, you know, when you think about the conflict here, and the damage that is occurring in the Middle East. I mean, how tight do you think it'll be? Do you think nitrogen and the prevailing products will stay above the average? And just kind of a feel for kind of longevity of this elevated pricing. Thank you.

Yeah, thanks, Mike. I'll start, and then Bert will probably add some additional color related to it. But I think What we will see here is a longer tail, even if we are able to see the straight open up and begin to see product flow move through there. As you mentioned, there's a lot of damaged assets that will have to be assessed. The vessel movement itself is going to take a significant amount of time. You know, normal transport would be 30 to 40 days. But then, you know, you can add something to that to get those assets back. And even the quality of the product in those particular vessels I think is going to be questioned. And then these assets that have been shut down during this part that haven't been damaged, to bring those back up is going to take some time as well. The thing we're seeing is probably some longer lasting where there'll be some increased costs related to inflation, risk premiums, even vessel insurance as we go forward. And that's really the underlying thesis where what we've been saying over the years has only been strengthened more, where we're seeing the mid-cycle of urea costs increase during that time frame. I'll let Bert talk about maybe the 2027 S&D balance side of it.

I think probably an informal comparison is the world has been operating like a Ferrari, where it's been operating on all cylinders, just-in-time inventory, delivered, it's worked. supply has moved efficiently and effectively to all parts of the world and bid a common number for a global market. All that is disrupted. You've got 1,000 to 1,500 vessels stuck behind the strait. You've got to untangle all of that. You've got the repairs that Chris talked about. But when you look to the production or the products that our products produce, you've got a pretty tight supply and demand stocks to use ratio for corn and other nitrogen-related products. So I see that demand is elevated, one, due to lack of LNG. And so you're going to see Bangladesh, India, Pakistan that rely on LNG that have had sub-operating levels for their nitrogen are going to have to import more. There's going to be a tightness on that import that's going to be bid in for a price. And so I see this 2027 number ahead of probably the average pricing that we've been expecting over the last several years. And then it's, what does it do for food?

Mike, does that answer your question?

Yeah. The next question comes from Joel Jackson with BMO Capital Markets.

Good morning. Maybe, Bert, you could opine. We're seeing, as we get into the end of the spring season here, some interesting behavior in domestic nitrogen markets, urea markets to be specific. I mean, we've seen NOLA come down a fair bit. Seasonality, there's also what's going on in the Middle East. Also, some commentary that the import into the U.S. in Q1 is were stronger than many people thought. Maybe you can give your opinions on the bifurcation we're seeing in U.S. nitrogen prices versus offshore pricing, seasonality, and the strength of importance to the U.S.

Good morning, Joel. And it is an interesting dynamic in that the U.S. is the lowest priced market in the world today. And if you look at pricing that has been offered this week of plus or minus $600 per short ton or 650 to 660 a metric ton, compare that with North Africa, which is producing and shipping and over $800 per metric ton. So a gigantic differential. And I think North America is well supplied for spring with July or the Q3 of 2025 through Q1 of 2026. All that product has been produced and shipped and is in place for the retail sector to supply the farmer. And so I think what's happening on that retail and co-op side of the equation is inventory liquidation. Prices are high based on a historic level. A lot of those customers don't want to take additional open risk without having a buyer on the backside, that being a farmer. And so there you have an inventory liquidation that's going to take place. And then for second and third applications, you're going to see those retailers coming back to us to buy at whatever the market price is. And so this spring has been, I think, well supplied. I think there's been a little bit of anxiety, probably overexpressed, in terms of supply availability. And the average price that has been to the retail sector and to the farmer this year has been, on a historic level, pretty good. And so then it's as we come out of this into Q3 2020, And what does the rest of the year look like? We've talked about still a very tight market and probably a higher-priced market. And I think you'll see the United States or let's say the NOLA market probably come into more equalization with the world price.

Thank you.

The next question comes from Vincent Andrews with Morgan Stanley.

Thank you, and good morning. I wanted to ask on the buyback in the quarter. It was $15 million. Were you buying throughout the quarter? Were you locked up in some way? And if you weren't, how should we think about buybacks for the rest of the year? Is there a share price level now that you're more comfortable in versus others, or just any update would be great?

Yeah, so maybe I'll start with the back end of that question that we continue to be a buyer of our shares. As I mentioned in prepared remarks, we think they're trading below the intrinsic value for not only what's happened just recently, but what has been occurring over the last couple of years where we've talked about our assets and accruing more value related to the consistent free cash flow. So we have $1.7 billion remaining on our open authorization for the share repurchase, and our intention is to execute that just as we've done historically. In Q1 here, we generally go about and we set a grid in place. We had a grid in place that we ended up keeping in place, and then the conflict broke out, and we weren't certain the duration of the conflict at that particular time, So as a result of that, we were probably a little lighter during that timeframe, but it has no indication on what we see as the value of our shares. As I said, we still have $1.7 billion open. Our intention is that we're going to execute that before the expiration time of it.

Thank you. The next question comes from Ben Thurer with Barclays.

Hi, good morning and thanks for taking my question. Just two quick ones kind of like related here. So one thing you've talked about the China restrictions on the export side, Egypt, etc. So just want to understand with those markets putting in more of the export restrictions here or incremental duties. What does that do in terms of like just the pricing globally in your view and the benefits that you might have, particularly in the North American market? And then just as a follow-up, you mentioned on the shutdown of some of the facilities that might not be damaged. How long, remind us, how long does it take to run something up again, assuming conflict ends tomorrow and we can basically be back online? How long would it take for some of those nitrogen facilities to be properly operational back online. Thank you.

Okay, Ben, this is Bert, and I'll take the China restrictions and just kind of the market and what's going on. It is an interesting nationalistic move a lot of these supply countries are making to restrict supply for their citizens, and that's one of the things that China has done with exports still restricted in 2026 and expected to come out sometime in Q2. And so, uh, pretty last year in 2025, about 5 million tons came out of China. We need all of that and more to balance, uh, the world's supply. And I don't think that's going to be able to happen with what's going on in the Gulf and, uh, the, the current capacity is offline, either damaged, destroyed, or just not operating. Uh, so I would expect that China comes out, uh, like they did last year, maybe June through October. million plus tons a month. And we mentioned earlier Egyptian restrictions or costs and Russian restrictions. And then it's back to the suboptimally operating plants specific to India that's estimated today to be operating at 70% or driving that additional import need to meet their demands. So a tight market. Pricing today, as we mentioned, in the North Africa that has available supplies in the 800 to 850 per metric ton. As we look to the back half of the year, I think the global market's expecting some price moderation. I just can't give you an estimate today of what that price would be.

Yeah, and then related to the operational side and the shutdowns, I think there's two parts to that. The first being you know, getting the equipment back up, and there's a lot of rotating equipment. If these were, you know, as we understand, shut down and, you know, put down, you're looking at one to three months depending on what type of maintenance was being performed during that particular timeframe and what type of procurement they may have to do on some of the parts that would be required to bring those back up. So I would use conservatively like a one to three month timeframe But in addition, a lot of these particular plants had loaded inventory. Before they shut down, they had loaded up their inventory. And when you're looking at that vessel movement that we talked about earlier, you could be months away from getting vessels back where you can start to deplete that inventory and really bring up that production as well. So I think there's a lot of different components here, and that's why there's going to be a much longer tail and knock-on effects, secondary effects, some of which we don't even know right now, in order to get the entire system operating again.

Just to put some numbers behind what's shut down, it's estimated that 31 ammonia plants in the Middle East have been directly impacted by the conflict or shutdown production. Forty-nine plants in India, Pakistan, and Bangladesh are either curtailed or shut down due to constrained feedstock. And in Russia, at least 20 to 21 plants have been associated with

being drone by ukraine so the impact is widespread thank you very much the next question comes from chris parkinson with wolf research got it uh thank you so much um i think we could all debate the the degree of the windfall for cash flow you're going to have presumably by year end and you know we could all debate even further into 27 28 And then you have the Secretary of Treasury and the Secretary of Agriculture pleading for new capacity. And on top of that, you have, by my count, up to seven, probably at least six or seven other either blue or gray nitrogen facilities either canceled or suspended indefinitely. When you think about those three factors in the intermediate to longer term, how are you thinking about blue point number two? Is there anything else that you think, you know, the industry should be doing to work in terms of U.S. policymakers. I'd love to hear your perspectives.

Yeah, so Chris, I think you've characterized it well. And this goes on top of what we've been talking about really for the last couple of years, that the market was already tight, as Bert said, coming into 2026. And now having some of these fundamental additional costs, how things are being reviewed, We needed new capacity before. We're probably going to need even more right now. I think there is going to be an increased cost into where that capacity goes around the world, and it makes our decision to move forward with Bluepoint look even better. As I said on the first question here, we're probably going to see higher return profile than what we thought. And we continually, because this has been our view for a while, look at production expansion. I think there's still some things we want to get a better understanding at blue point number one before we would move into blue point number two. But whatever the decision that's going to be made, again, I think you've worked with us long enough that it's a very disciplined investment decision. Now, that being said, the amount of cash flow, just given our efficiency in converting that cash flow, is going to be significant over the next several years. And I think we see opportunities, whether it be within our network or elsewhere, to enhance our margins or increase our production on a very value, high return profile type of return.

Got it. And just a quick follow-up for either you or Bert. Obviously, there's a lot of things moving in terms of when we would generally think about summer fill prices. Do you have, in terms of international dynamics versus domestic, assurity of supply, you know, the balance between your re-availability versus perhaps UAN, are you thinking about things presumably a little bit differently this year? Or, you know, how should we think about that?

Yeah, that's a question we ask ourselves pretty much every day. And the team looks at that. And every year has been different in my 18 years at CF of how we looked at fill, when it's offered. the communication with our customers. And I've got to give Mike Hamm and his team a lot of credit from last year, communicating openly and ahead of time on the date we were going to launch, giving our customer friends time to prepare and put things in place on what their needs were in terms of volume and price expectations and a very successful campaign. And we're probably looking to replicate that in terms of thematics for this year. Now, It does get to, though, the price and the timing because we're in a highly volatile world, and you're right. We look at the balance internally. What is the best use of the molecule? So the nitrogen molecules that work through the system from ammonia to urea to UAN to ammonium nitrate to DEF or any of the products we produce, and we look at where is the highest value, where is the need, what is our inventory system, what does the export opportunities look like, and then we make judgments and seek a consensus with the team and leadership on moving forward. So I expect that to happen, but I would expect this to be a Q3 event.

Thank you.

The next question comes from Edlin Rodriguez with Mizzou.

Thank you. Good morning, everyone. As nitrogen prices have moved up higher, what do you think farmers can or will do to lower the fertilizer cost basket? Related to that, in a typical year, how much of the nitrogen needs do farmers prepay for earlier in the year?

Very good question, especially in a high-priced, high-cost environment. The best thing that could happen is we see a rally in corn, and that's why I mentioned in my prepared remarks the impacts to some parts of the world that I expect to take place with underapplications of fertilizer leading to underperforming yields, and that could happen in Brazil for the second crop that gets planted in January and February, or if there's a weather event in El Nino in Argentina or something like that. But end prices are high. We are in a high-priced environment, and a lot of times supply and demand get, or more demand gets impacted by high prices. But nitrogen is the one nutrient that you really can't skip on. And this is a year, I think, for North America, because the majority of our tons are consumed in North America. We're talking with our retail and cooperative friends, as well as our agribusiness friends, partners like ADM and those people who are dealing with the output of the farmer. And when you're looking at the opportunity of corn today in North America, there's two ways to, you can cut costs or you can increase yield to improve your revenue per acre. And in this type of environment, we don't expect a cut in nitrogen in North America with the yield opportunity that's available, whether that be dry or irrigated land. And so we're seeing that in terms of behavior and purchasing and positioning of nitrogen. And so the typical applications for nitrogen, you can apply ammonia in the fall. And we had an extremely good fall ammonia season in November of 2025. And we've had a very good one for spring this year for ammonia. And so that, to me, communicates, one, farmer planning, two, yield expectations, and three, they bought low-cost product because all of that was priced earlier, the spring as well as the fall, earlier in the year at attractive prices. And so then it gets to what kind of secondary and third applications are added to that for yield, and we had a phenomenal yield in 2025 of, I think, of 187 bushels per acre, and I would expect that to fall a little bit, but we're hoping for farmers to make money and to do that with nitrogen. Okay, thanks.

The next question comes from Lucas Beaumont with UBS.

Thanks. Good morning. Yeah, I just wanted to follow up on how you're kind of seeing the outlook for nitrogen processing as we kind of move through the next a couple of quarters. So, I mean, there's been no improvement yet in terms of trade flows, and then we have a significant portion of global production offline. But as we sort of get past the peak northern hemisphere demand period, however, there's probably likely to be less incentive for people to, I guess, restock during the year than what you would kind of see normally. I mean, offsetting that, you know, Brazil demand will kind of pick up for the third quarter with imports. And, you know, we have shortages in sort of the other importing regions globally, coupled with just how the normal sort of seasonal factors would play out. So I guess, could you just help us understand how do you sort of see the interplay of those factors there together and sort of what you think is going to happen kind of sequentially as we move forward over the next few months? Thank you.

Yeah, Lucas, we're still, this is Bert, and we're at the peak of our movement for North America. So at CF, we're focused on supplying our North American customers to make sure we make it through spring applications with adequate supply and communicating daily with our customers. But the outlook for, I would say, Q3 and Q4 is higher than normal, and I can't give an exact price. I do think what Chris said in terms of what is going to come back and when it comes back from the Middle Eastern suppliers, that's 30% of global urea, but it's 20% of LNG. And so there are a lot of countries that produce nitrogen that are dependent upon that LNG to make those nitrogen plants operate. And I think you're going to lose some of that capacity. So in a 56 million ton export traded market with, let's say, 18 million of that on an annualized basis taken out, so on a monthly basis, you have a million and a half to 2 million tons not available from March, April, and now May. So adding up just to be conservative, maybe 5 million tons. So you need all of China to come out, and aggressively so, to balance that. I don't think that's possible. And then you go to the importing countries, like we mentioned India, which has imported between, let's say, 6 to 9 million tons over the last several years. We're expecting them to be 10 to 13 million tons because of the low operating rate of their LNG import dependent plants. So you've lessened supply, you've increased demand specific to that country as well as in South America. I don't see their import needs changing or going down unless they're going to have an impact on grains and oilseed production. And so trade flows right now are you're having to ship longer distances to cover immediate needs. Freight rates are high, much higher than normal, probably double. So the outlook for end pricing is higher than normal for longer. And the restock, I don't know if the restock can be done in time without severe disruptions as in demurrage at the Brazilian ports. or late arrivals for some other locations. So you're going to have shortages.

Yeah, I think that's why we're very confident how this pushes into 2027. And I think the one part that Bert touched on earlier was really the nationalism and kind of the regionalism of energy in general. And are these countries going to want to export what they have exported historically to even fill some of those gaps that are already tight? So this is something where we see going through 2027 and allowing us to provide probably or generate significant free cash flow even during that particular time frame as well.

Thank you.

The next question comes from Andrew Wong, RBC Capital.

Hey, good morning. I just wanted to ask about your expansion plans. Just given elevated nitrogen prices, both now and into the future, plus the tightness in feedstock, like you mentioned, and obviously the competitive advantage in North America and the better return profile for North American nitrogen, does that change how you think about expansion plans? Could you accelerate and add more capacity?

Well, thank you, Andrew, for the question. It's something that we review consistently around the organization, and we have quite a bit going on right now with projects that we're looking at that go over and above what is with Bluepoint. But I think what we're looking at is, given the bandwidth and where we are right now, is just seeing that those particular investments that are in motion or that we're considering are seeing higher return profiles than what we expected. As I mentioned earlier on the call, we are continuing to evaluate what we would do at the site, the Bluepoint site. It is a site that we can expand on over time, but I think there's certain answers that we want on the first unit before we had moved forward. One is to get the permitting through. The second plant there would see some efficiencies. given the infrastructure would already be in place, that being the dock, tanks, off-sites, et cetera. So it's something we're considering, but nothing that is imminent at this particular time frame. What I would say is with the cash that we've generated so far and what we expect over these next several years, our capital allocation philosophy hasn't changed. We're going to be extremely disciplined how we look at investments. and critical as to how we evaluate them. And then in addition to that, I think what we have on the table, we have excess free cash flow that we're expecting to generate that will return in the form of either share repurchases or dividends to our shareholders.

Yeah, that's great. Thank you very much.

The next question comes from Jeff Dikoskis, JP Morgan.

Thanks very much. If I can ask you a speculative question, given the confusion over CBAM and of carbon dioxide emissions generally, and given the shortages in the nitrogen markets, do you expect new plants in the United States to be steam methane reformers again, rather than autothermal reactors, or is it too difficult to tell?

Well, I think the confusion over CBAM may be a little overstated. CBAM is in place today, and I think if you've been following what the European Commission and the European Parliament, there really hasn't been any change, of course. If anything, I would say it's almost gotten stronger that CBAM is going to remain in place. We view... The decarbonization, I can really only speak for ourselves as providing incremental opportunity that doesn't exist to others. I think if you look at what we've done both with the 45Q, with the shipments we're making at a premium into Europe, and then our recent announcement with Pepsi and other CPG companies that we're looking at working with, we look at decarbonization as creating value and see the value in doing an autothermal to recover as much of that CO2 as we possibly can. So I can't necessarily speculate for others, but I know what our path forward and the value that we're seeing, not only in the future, but that we're accruing today.

Okay. Do you think, thanks for that, have the contractual terms, for ammonia with industrial customers changed over time. And do you think that there's room to make those financial terms more attractive to producers as the nitrogen markets have tightened through the years?

Yeah, regarding the contractual terms, so how we look at our business and we segment The majority of our tons go to agriculture, and then we have an export portion, and then we have an industrial portion that's fairly ratable. And we look at those dynamics each year to make sure we're placing the tons where they're most valued, and those relationships are obviously contributing to both sides. So many conversations regarding... contractual terms, but the actual terms haven't changed, but the implementation of low carbon and the low carbon premium that we're receiving and that we're communicating consistently to our industrial customers, our export customers who are under CBAM issues are attractive. And as I think industrial companies look to their own scope emissions and want to improve those, and Pepsi is a very good example of that partnership, as well as Poets, on ethanol and talking with other similar producers, we're seeing a positive receptivity of wanting to align with CF. So this is a growth platform for us. It's economically attractive. It's returning a good investment for us, and it's aligning us with what I think are good goals both thematically, culturally, and environmentally with ourselves and with our customers.

Great. Thanks.

The next question comes from Mizahir Manantli with Rothschild.

Thank you. Just a follow-up on the gas costs. So the Q1 came in at $4.50. What would you expect the trajectory to be during the rest of the year? Thank you.

Yeah, I'll start, and then Bert or Rich can add any color to it. But I think the first quarter, we experienced a couple different things in that. Both January and February, we saw elevated Henry Hub gas costs here, with I think February even settling at over $7 per MMBTU. Since that time frame, it was a pretty acute problem. portion of the quarter or of the year in which that occurred, we've seen gas come down significantly, where today I think it's trading in the $2.60 type of range. And we're seeing, you know, as the curve goes out, it flattens even more. So our expectation is that, you know, we're going to see the gas cost for the remaining part of the year very close to, you know, what we're seeing in the NYMEX strip today.

Yeah, and we're not hedged on a forward basis, so we're open and receiving those prices that are represented in IMEX.

Thank you. And just to follow up on the production volumes, I believe early in the year you communicated the intent to switch to UAM from Urea to take advantage of better production margins. Has that strategy effectively been reversed with urea price having surged much higher than urea?

Well, the interesting thing about our capabilities is we can switch on a shift. So a shift, an eight to ten hour shift at a plant, and that is well coordinated with our team on economic value. And so as the urea values increased and probably exceeded the opportunities with UN, you would expect that we would, in terms of the capabilities of the specific plants, we would be achieving that.

Thank you.

The next question comes from Christian Omen with Okinawa.

Thank you for taking my follow-up. I didn't think I was going to get one. Just wanted to ask on your maintenance schedule. I think you've made some public comments out there about maybe delaying some maintenance in order to ensure domestic supply. Just if you can help us on how you're thinking about that maintenance schedule for the rest of the year. Thank you.

Yeah, the maintenance that we had shifted, and we did it after evaluating to ensure that we could do it safely, was at one of our particular sites. And we were You know, it was already scheduled to be late in May, and we just shifted it to late in June. So it wasn't a significant amount of a shift that we were doing, but allowed us to get, as Bert mentioned, about another 100,000 tons of urea up into the market in order to go down for this application season. Other than that, I would say we have it pretty well where it's going to be the typical – that we've done historically, and you can use that as a benchmark.

Thank you.

Ladies and gentlemen, that is all the time we have for questions for today. I would like to turn the call back over to Martin Janosik for any closing remarks.

Thanks, everyone, for joining us, and we look forward to seeing you at upcoming conferences.

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