CF Industries Holding, Inc. 2026 Q2 Earnings Call

Thanks, Martin, and good morning, everyone. Yesterday afternoon, we posted results for the first half of 2026, in which we generated adjusted EBITDA of $2.2 billion. These results reflect the CF Industries team's strong operational performance and a tight global nitrogen supply-demand balance, which was further strained by the conflict with Iran. Most importantly, our teams continue to embrace our Do It Right culture to deliver outstanding safety performance. We closed the quarter with trailing 12-month incident rate of 0.16 incidents per 200,000 hours worked, well below industry averages. That focus on safety directly supported high asset utilization in the first half. We operated our available Ammonia capacity at nearly 98%, enabling us to meet demand from our domestic, retail, wholesale, and cooperative customers who supply North American farmers. In addition to our strong operating performance, we are making steady progress on our strategic initiatives.

At Blue Point, we have received all necessary permits to begin construction. Nearly all long lead items are ordered, and module fabrication is set to begin later this year. Within our existing network, we expect our Yazoo City complex to resume operations in the first half of 2027 after completing work to improve the site's long-term sustainability and operational flexibility. We also continue to be disciplined as we evaluate high-return projects across our network to unlock further value. As you saw in our presentation, we have raised our mid-cycle EBITDA and free cash flow expectations. In a moment, Andrew will address more of this, I want to address the broader market context first. Right now, we believe the market views a disproportionate amount of our EBITDA and free cash flow growth primarily through the lens of short-term geopolitical friction in the Middle East.

That view misses a fundamental structural shift in our industry that has been occurring over the years and exposed through the recent global nitrogen supply chain dislocation. Higher global capital costs have structurally raised the incentive price required for new global nitrogen capacity, lifting CF Industries' baseline mid-cycle earnings power while reinforcing the value of our existing manufacturing and distribution network. This is before we factor in any geopolitical premium. To be clear, our low cost, low risk North American asset base and not geopolitical risk is the foundation of our profitability. Our ability to operate at high utilization rates during disruptions enhances our stable mid-cycle return profile above and beyond the strong free cash flow generation already embedded in our outlook. This, in turn, augments our ability to invest in high return projects and return capital to shareholders.

With that, I'll turn it over to Bert to discuss the global nitrogen market.

Bert? Thanks, Chris. The first half of 2026 saw rapidly changing global nitrogen market dynamics.

Global prices rose significantly as an already tight supply-demand balance was further constrained by supply disruptions from the conflict with Iran. In regions where application seasons occur in the second half of the year, many customers deferred purchases. In North America, agricultural demand remained strong through most of the first half of 2026, led by Ammonia and Urea. Our team created significant value by leveraging our operational flexibility to prioritize Urea production over UAN. It also enabled us to deliver our second highest DEF volumes in a first half, our highest margin product. In June, our customers slowed purchases as the nitrogen channel drew inventories down to a very low level. Those low inventory levels and positions ultimately drove strong participation in our UAN and Ammonia fill programs in July As a result, we built a substantial UAN order book that extends into November and expect a strong fall Ammonia season.

Looking at the broader market, global nitrogen fundamentals remain tight even before factoring in geopolitical conflicts. Rising capital costs, permanent closures, and the limited pace of new capacity additions have kept supply growth constrained relative to demand. Additionally, a meaningful portion of global nitrogen capacity remains exposed to geopolitical uncertainty, and this exposure has further tightened the global nitrogen supply-demand balance. We believe this will continue to affect supply availability, delivery confidence, and pricing due to higher logistics and insurance costs. Additionally, high LNG prices continue to pressure production economics for marginal nitrogen producers and are likely to limit operating rates. We do expect China to export Urea volumes similar to last year.

Those exports are necessary to meet global demand, but they are not enough to materially loosen market fundamentals. On the demand side, we expect purchasing activity to recover in deferred regions such as Brazil and India. We also expect North American demand to remain firm through the upcoming application seasons. Taken together, we expect the global nitrogen market to remain tight into 2027. Looking further ahead, we see continued structural tightening through the end of the decade as nitrogen capacity currently under construction falls short of historical demand growth. Finally, our low-carbon sales program continues to gain momentum. Approximately 10% of our Ammonia sales volumes in the first half were low carbon that earned an average premium of more than $20 per ton. With that, I'll turn it over to Andrew.

Thanks, Bert, and good morning, everyone. In the first half of 2026, the company reported net earnings attributable to common stockholders of $1.3 billion, or $8.71 per diluted share. EBITDA and adjusted EBITDA were both $2.2 billion. For the second quarter of 2026, the company reported net earnings attributable to common stockholders of $727 million, or $4.73 per diluted share. EBITDA and adjusted EBITDA were both $1.2 billion. We continue to efficiently convert EBITDA into free cash flow. Our trailing 12-month net cash from operations was approximately $3 billion, and free cash flow was approximately $1.8 billion. As you can see on slide 10, our EBITDA to free cash conversion is consistently high, producing predictable and stable free cash flow. Over the last 12 months, we've returned nearly $1.3 billion of free cash flow to shareholders.

This includes repurchasing 10.6 million shares for $958 million and $314 million in dividend payments. In July, the board increased our quarterly dividend by 20% to $0.60 per share. As we have reduced the number of shares outstanding over time, we are able to reward the remaining shareholders with a higher dividend. For context, since the start of 2021, shares outstanding have decreased 29%, and over that time, our dividend has doubled. Looking ahead, we continue to project approximately $1.3 billion of capital expenditures in 2026, of which CF Industries' portion is approximately $950 million. With construction at Blue Point expected to begin in August, the pace of capital expenditures will accelerate. We continue to focus on mitigating our cost exposure through fixed-fee contracts.