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Presentation

Operator: Good day, and welcome to the CF Industries Q1 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Martin Jarosick, Vice President, Treasury and Investor Relations. Please go ahead.

Martin Jarosick: Good morning, and thanks for joining the CF Industries earnings conference call. With me today are Tony Will, President and CEO; Chris Bohn, Executive Vice President and Chief Operating Officer; Bert 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 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 these 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. Now, let me introduce Tony Will.

Tony Will: Thanks Martin, and good morning everyone. Yesterday afternoon we posted results for the first quarter of 2025 in, which we generated adjusted EBITDA of $644 million. These results reflect outstanding performance by the CF Industries team, against the backdrop of very constructive global nitrogen industry conditions. We are operating safely and at a high level across all aspects of our business. Over the longer term, we have positioned the company for attractive growth, through our Blue Point joint venture with JERA and Mitsui. This industry defining project, will not only supply ammonia that the world desperately will need, but it will also add – it will also develop additional demand for low carbon ammonia, into brand new applications.

We also remain committed, to returning capital to long-term shareholders. Since the beginning of 2022, we have returned $5 billion to shareholders through share repurchases and dividends. Given the confidence we have in our free cash generation going forward, and the disciplined nature of our investment at Blue Point, the Board has authorized an additional $2 billion share repurchase program. This new program, will begin immediately after we complete our existing authorization, and will run through the end of 2029. With that, I’ll turn it over to Chris, to provide more details on our operating results, and the status of key strategic initiatives. Chris?

Chris Bohn: Thanks, Tony. Our production network continued to operate very well in the first quarter. For the second quarter in a row, we produced over 2.6 million tons of gross ammonia, which reflects 100% utilization rate. We continue to project approximately 10 million tons of gross ammonia production in 2025. Turning to our strategic initiatives, we are nearing completion of our landmark Donaldsonville Complex, carbon capture and sequestration project. Commissioning activities for the carbon dioxide dehydration and compression unit, are in advanced stages, and we expect startup sequestration in the second half of 2025. This will also initiate the 45Q tax credit generation on up to 2 million metric tons of carbon dioxide on an annual basis.

Longer term, we believe our Blue Point joint venture presents a compelling growth opportunity, for the company given the tighter global nitrogen supply demand balance, we project for the end of the decade. Additionally, our positive FID announcement has advanced existing conversations, and spurred interest in our portion of Blue Point ammonia production. We are pleased that the joint venture includes world-class partners in JERA and Mitsui, with whom we will share cost and offtake. The joint venture’s priorities for the rest of 2025, are to build out our project team, order long lead equipment items and further prepare the site for construction. With that, let me turn it over to Bert, to discuss the global nitrogen market.

Bert Frost: Thanks, Chris. The CF Industries team navigated a dynamic environment, through the first part of 2025, driven by a tight nitrogen supply demand balance. In particular, we have seen strong global demand as the very low corn stocks, to use ratio points to a need to replenish global corn stocks. In North America, farmer economics favor corn the USDA, reported corn planting expectations of 95 million acres in the United States this year. However, based on the nitrogen demand we are seeing, we believe that the final planted corn acres for 2025, will likely be higher. At the same time, channel inventories of nitrogen fertilizer are low due to high demand, and industry production outages, as well as lower than typical net imports of UAN and urea.

This has supported prices well into the second quarter. Given the strong demand and tight availability across our network, we expect to end the spring season low with low inventory, across all our products positioning us well for our fill programs, and the rest of 2025. We expect the global nitrogen industry conditions, to remain constructive into the second half of the year. Globally, we believe nitrogen inventory is average to lower throughout the key consuming regions, supporting strong demand. This includes Brazil, the world’s largest importer of urea, as well as India, which has not secured target volumes for its last few urea tenders. However, the expected startup of new ammonia capacity in North America this year, may bring more volatility and global ammonia prices as trade flows adjust.

Longer term, we expect the global nitrogen supply demand balance, to tighten through the end of the decade. Capital availability, long-term feedstock costs and geopolitical events continue to limit the number of new projects. As a result, projected new capacity growth is not keeping pace with demand growth, for traditional fertilizer and industrial applications. We believe demand for low carbon ammonia for new applications such as power generation, will only further tighten the global supply demand balance. With that, Greg will cover our financial performance.

Greg Cameron: Thanks, Bert. For the first quarter of 2025, the company reported net earnings attributable to common stockholders of approximately $312 million or $1.85 per diluted share. Net earnings increased approximately 60%, compared to the first quarter of 2024, while earnings per share were approximately 80% higher, reflecting our significantly lower share count. EBITDA was $617 million, and adjusted EBITDA was $644 million. On a trailing 12-month basis, net cash from operations was $2.4 billion, and free cash flow was approximately $1.6 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 with 63%. We returned $530 million to shareholders in the first quarter of 2025.

This included $434 million, to repurchase 5.4 million shares. Over the last 12 months, we have returned approximately $2 billion, repurchasing nearly 20 million shares for approximately $1.6 billion, and returning another $353 million in dividend payments. Entering the second quarter, we had approximately $630 million remaining on our current share repurchase authorization. We anticipate completing the remainder of this program, before its expiration in December. Upon completion, we will begin an additional 2 billion share repurchase program, which expires at the end of 2029. For the full year, we expect CF Industries capital funded expenditures, which will be approximately $650 million. This includes approximately $500 million related to activities, within our existing network and approximately $150 million related to our portion of the Blue Point activities.

As we will be consolidating the Blue Point joint venture into our financial statements. Our reported capital expenditures, will also include the portion of the Blue Point activities, funded by the joint venture partners going forward. With that, Tony will provide some closing remarks, before we open up the call to Q&A.

Tony Will: Thanks, Greg. Before we move on to your questions, I want to thank everyone at CF Industries, for their contributions to an outstanding first quarter of 2025. I also want to note that we are holding an Investor Day, June 24 in New York. Martin and Darla will be contacting you with specific details and invitations. We look forward to talking in more detail about our strategy, initiatives and long-term outlook at that time. CF Industries is exceptionally well positioned for the years ahead. In the near term, industry dynamics remain favorable for our low cost North American production network. Longer term, we expect the global nitrogen supply demand balance to tighten, while our investments in low carbon ammonia production, provide a robust growth platform with attractive returns.

Taken together, we expect to continue to drive strong cash generation, and create substantial value for long-term shareholders. With that operator, we will now open the call to your questions.

Operator: Thank you. [Operator Instructions] The first question comes from Stephen Byrne with Bank of America Securities. Please go ahead.

Stephen Byrne: Thank you. You’re only a couple months away from having some blue ammonia to sell out of D Ville. Do you have any offtake lined up for this as of yet?

Tony Will: So we’ve been working on that Steve, for quite a while, having a lot of conversations and yes, we do have agreements in place for when that product is available. They’re structured for growth and so as we bring on the tons, and some of these are tied to exports to Europe and some other locations as well as some industrial contracts, we’re not fully booked yet, and don’t anticipate that. We’re anticipating demand to grow, as the understanding and this product becomes available, we’re the first and only producer with these tons to the market. And I think, when you look around the world with what people are trying to do with their own carbon structures, as well as CBAM, a lot of opportunity in front of us.

Stephen Byrne: And I’m sure you’re aware also in Ascension Parish with D Ville and your Blue Point project, is the project that – Air Products is trying to get on stream, and they would like to either bring on a partner or just sell off the ammonia loop. And I’m just curious, is this a potential project that you might be interested in? You would be the only one that might be able to put that product into the NuStar pipeline. If that opportunity for, low carbon corn really develops down the road is that of interest. And you, you also highlighted your view of tightening supply and demand in nitrogen through the end of the decade. So is this a potential project you might also get involved in?

Tony Will: Yes, Steve, this is. Tony. I think this project, at least from an ammonia producer’s perspective, suffers from some of the challenges that we saw with the OCI project, and why we opted not to participate in that, that discussion, which is the hydrogen producer in this case Air Products, is looking to earn a nice return risk free off of the production of hydrogen and enter into take-or-pay agreements with the ammonia loop operator, at something that is a very high operating cost. Basically it puts your gas cost in the third or fourth quartile. So while you might get a little bit of a break on CapEx, if you’re on the hook to buy gas at $10 an MMBtu, come hacker high water, you’re going to be paying on a gas cost basis $300 of energy content for a ton of ammonia, whereas our project doesn’t suffer from that. So that is not a project that we would be interested in in any way, because we don’t want to deploy that level of capital against non-competitive assets.

Stephen Byrne: Understood. Thank you.

Operator: Thank you. The next question comes from Richard Garchitorena with Wells Fargo. Please go ahead.

Richard Garchitorena: Thanks. Nice quarter. Just a question on Blue Point. Congrats on the close of JV. But just on the partnership stakes, JERA has an option to reduce your stakes before the end of the year. If you can just give us some clarity on some of the conditions there. And in terms of like what the potential in terms of changes in offtake for the other partners would be, if you took I guess, the remaining stake, taking you up to 60%, how would that impact sort of marketing the tons going forward, easy?

Tony Will: Yes. So we fully expect that JERA is going to want to maintain their ownership level at 35%. On the other hand, if they opt to return kind of 15% of the economics back to us, we’re very comfortable with that. It still only puts us at 55% ownership of the overall project. And we believe that the economics around this project are very attractive. And so having incrementally a little more of the equity and the offtake. Offtake is proportionate to equity ownership, is something that we are 100% comfortable with. But we don’t believe that’s going to be the ultimate outcome of all of this. And the incremental tonnage that you’re talking about on that 15% is, call it, roughly 200,000 tons. And Bert has plenty of options in terms of where to take those ones, both at home and abroad. So again, we have no issues at all with that.

Chris Bohn: Yes. Just building on that, Richard, as we’ve mentioned in our prepared remarks, we’re seeing more interest since the announcement of this particular project, with individuals looking for low carbon production assets, or production offtake. So I don’t think it would be that big of a stretch for us, to find a home to that. But I agree with Tony that, I would find that to be somewhat of an unlikely case, given JERA’s position.

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

Joel Jackson: Tony, Bert team, maybe talk about the market. It’s obviously been quite a hot spring market in the U.S. for urea and UAN. Maybe talk what you’ve seen, it seems like now we’re starting to cool off, what your views are going into the spring and summer? Do you have a view on where fall-summer market be and you be able to capture in Q2 here, a lot of the surge or what does your book like?

Bert Frost: Yes, we’re pleased with our order book. Normally, through this type of environment in our commodity business, you’re always building your order book for the approximate one, two and three months. And so as you see the results in Q1, we exceeded expectations. And for Q2, we had a book coming in, but also open positions, which we’re executing against today and you’re seeing those in the publications. It has been a very positive market. A lot of that is related to some of the issues we’ve talked about, which – the inventory is coming in to North America were lower. And I think because of the tariffs, you’ve seen some diversions of vessels, which limited probably prompt availability for the May – or April, May, June time frame.

And our plans have operated very well. And our network was prepared. Our – I got to give a shout out our logistics team, Mike Muller and the folks in the supply group of putting the product in the terminals at the right time understanding where, because of weather where demand would be. And so we capitalized on that. And so some of the prices you’re seeing in the market, we’re executing against that, feel very good about Q2. And that will probably then extend into Q3. And I would say the fill programs, are going to be later than anticipation just, because of low inventories in North America, outside of CF as well as CF. And we’ll execute accordingly, but believe that we have a positive market in front of us.

Joel Jackson: And then on a different tact here, Tony, when you did do the FID about a month ago on Blue Point, it was obviously remains a very interesting macro and tariff environment. Just thinking about historical context, you see other golf producers, the capital inflation we saw on products a decade ago, early last decade, the problems with labor rates, and getting good labor and what gets paid for it. How do you mitigate what could be very strong capital inflation or not? Like what can you do with your partners, to make this so it’s not going to really affect the level of buyback, you can do in the next four years?

Tony Will: Yes, Joel. So we’re taking a fundamentally different approach to production of this plant than what we employed historically. And by that, I mean, the last projects we did, and in fact, the ones we did prior to that were all what you’d call stick build. So individual beams going up, and creating attachment points for the vessels and continuing to build it kind of piece by piece-by-piece. And when you’re doing that, the vast majority of consumed content is happening here on site. And you are subject because of the way that those are contracted on a reimbursable basis. To the possibility of inflationary pressures and potential time delays. The approach that we’re taking on this project is really one of modular construction.

So these very large integrated modules are being constructed overseas. And will be shipped here and basically just positioned in place, secured to the mounting locations and then connected together. So the amount of on-site construction content here in the U.S., has dramatically reduced. And we are choosing with our partners and our EPC or our, I guess, EPC provider to find locations where we can construct it, which are much less likely to be affected by any kind of tariff regime. So it be in place in the long-term. And those modules are all being constructed on a fixed price basis. It’s so much more of the content is what you’d call LSTK. And therefore, lump sum turnkey, therefore, you are not subject to the kind of inflationary pressures, or the potential overrun of labor content that, we were the last time we were doing this.

Operator: Thank you. The next question comes from Chris Parkinson with Wolfe Research. Please go ahead.

Chris Parkinson: Great. Thank you so much. So Tony, there’s been a lot of debate around the intermediate to long-term cost curve, just given gas supply issues elsewhere in the world, geopolitics, so on and so forth. Can you just give us an update on how you’re thinking about that as it relates to the nitrogen cost curve. You’re – and within that basically how you’re thinking about free cash flow conversion, and your ability not only to buy back shares, but also obviously fully facilitate the CapEx updates, which you gave us today, which were roughly in line with our expectations? Thank you.

Tony Will: Yes, you bet. So I think it’s regardless of which service or whose analysis you’re looking at it’s pretty undeniable that the U.S., is the one of the lowest cost regional world from a gas production perspective. And really with rule of law and the access, to cavern space for CCS and supportive regulation, really, I think, the best place in the world to build these kind of assets. We expect that to be true, not only today, but going forward into the future. And despite the fact that there are some LNG capacity, coming online in the U.S., the level of demand for natural gas continues to go up at a rate that, I think is equal to or above the level of liquefaction capacity that, is coming online. That’s particularly true when you consider the number of data centers going into support AI and other applications and the power consumption that those things draw.

So as we look at it, we do not see substantial long-term compression between gas cost in Europe and parts of Asia, and the U.S. We think that’s going to be much more, sticky than what – some people are forecasting doom and gloom in that regard. But as you look through, what energy consumption continues to be in demand for natural gas, is we couldn’t be happier locating this production asset in the U.S.

Chris Parkinson: Got it. And when we take a step back and we think about the ultimate return for Blue Point, presumably, we’re looking at a site fee tax credits as well as the return on your proportion of what’s produced. Can you kind of walk us through how we should be thinking about not only those baselines and what’s locked in versus the variability of the tons? And then also presumably, you’ll be selling some of those tons to yourself in the U.K., and getting a benefit there. So can you help us just conceptualize, like the structure of how we should be forecasting that? Thank you.

Tony Will: Yes. So at a 40% ownership, we’re going to have about – just call it roughly 650,000 tons. It will likely be a bit more than that. Given that historically, we our operating assets at above their nameplate capacity and certainly did with D Ville number 6 and Port Neal number 2. And so about half of that is tentatively earmarked to go into the U.K. To be able to produce extremely low carbon ammonium nitrate for the U.K. and European marketplace. Which should have a significant advantage given the CBAM, regime that’s getting put in place. The rest of it, we have a lot of options for it, as Bert talked about, we’ve been working on this for a while, just on the devil CCS project, but are beginning to now talk about extremely low carbon intensity product, coming out of Blue Point.

And so, we’re talking about a relatively small amount of tons given the scope of our ongoing operation. And again, Bert’s got more I would say, demand, and we do have tons available, given half of that is going to go to the U.K. The rest of the tons, are being offtake is for our partners, who are going to be using that product learn in Asia. And so that’s going to disappear. And they’re basically, because they’re into the project at – on the equity side are going to be paying kind of full cost, on those the same as we are, and we’ll receive production economics just like we will as well.

Chris Parkinson: Thank you.

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

Lucas Beaumont: Good morning. I just wanted to ask about tariffs. I just wanted to get your view on how you see that, kind of impacting the various sort of nitrogen derivative markets in the U.S., I guess, over the near term to start with. And then, if we look a bit further out 12 to 18 months to give trade flows, the chance to adjust. I mean would you expect to sort of see pricing uplift in the range of sort of, where the marginal importer is, so at least kind of 10%? And do you think that could be reduced over time? Or how do you kind of see those factors playing out? Thanks.

Tony Will: Yes. In a weird way, and then I’m going to let, Bert kind of get into some more specifics. But in a weird way, even though there tends to be tariffs and/or sanctions on a lot of Russian product, Russian fertilizer comes unabated into the U.S., with no tariff regime at all. So in a lot of ways, we are creating trade policy that is advantaged in the Russians to access this marketplace. At potentially the expense of much more closely allied country. And so, there is a perversion in terms of what’s going on with trade policy in that particular event. But I’ll let Bert go into some of the more details here.

Bert Frost: When you look at the tariff structures that are in place for today for certain countries, and Tony is 100% correct, the frustration. Russia is the largest importer of UAN and urea to the United States and almost 1.5 million tons of urea at zero tariff it’s not tariff. So of the total, we have almost 2 million tons of common tariff free. So if you structure where we import 4 million to 5 million tons a year. The rest of it comes from basically the Middle East and North Africa, Qatar at 10%, Algeria at 30%, Nigeria at 14%, Oman, UAE, Egypt all at 10%. So you are going to have an impact, and you’re exactly right. There’s going to be a trade flow movement of probably tons going, different directions in the meantime. But the U.S. has been one of the lowest-priced markets, consistently in the world.

And I think this will have an impact and we’ll probably move closer to a Brazil parity, or even maybe slightly above that. And it will be – as this unfolds, I think it will impact behavior in terms, of when and how people are purchasing their imported tons. We feel very confident the North American market is the best market in the world, and we’ve got great customers. And we’re working with them to make sure that they’re adequately supplied today, as well as in the forward market, and we may be positioning more of our tons domestically, which is a perfect solution.

Lucas Beaumont: And then – sorry. And then I just had a follow-up on Blue Point. So I just wanted to kind of – you called out a couple of other components, there to the agreement I just sort of wanted to check. So you said it was, like some bad service revenue components on the management of the facility. And then just with regard to sort of the credit side, I was assuming that would be split evenly, based on the ownership percentage in the offtake as well. Is that right?

Chris Bohn: Yes. So from the common facility standpoint, CF will be funding that. And that said, $550 million, that will be over the five-year period in which we’ll receive a fee and payment that will more than cover the cost of capital, and then some on that from our partners as we go forward. Related to the 45Q tax credit incentive associated, with the carbon sequester there that will be spread, throughout the JV and essentially go back on equity percentage terms.

Lucas Beaumont: Thanks so much.

Operator: Thank you. The next question comes from Andrew Wong with RBC Capital Markets. Please go ahead.

Andrew Wong: Hi. Good morning. On tariffs here, if the EU implements tariffs on Russian product, what’s your thought on how like UAN trade flows range? So could you see more Russia and UAN go into the U.S.? And then, maybe does it make more sense for the U.S. I understand that there’s a benefit, from the tariffs right now and other sources, but Russian doesn’t a lot to the U.S. on the UAN? Like does it make more sense to send it into Europe tariffs are at high and Russian product into Europe?

Bert Frost: So there are – those are being discussed and implemented for a Russian product into the EU, and there are various discussions on different structures. But that could be an eventual outcome. We are an exporter to the EU and the U.K. for UAN, and have been for years and have some very good partners there that we are in conversations, with and supplying. So I think with a few years ago. There was a urea plant that was dropped in that took away some of the UAN capacity that Russia had crown. And I do think they are more balancing in terms of what we see from behavior of – in terms of the – what’s the value of the end molecule in terms of UAN, urea, ammonia or ammonia nitrate. And so the volume that comes to the U.S. today, I would assume that continues, at least in the present structure of tariffs and zero tariffs on Russian product, probably continue at the same level. And then, we’ll see how the rest of the world settles out.

Andrew Wong: Okay. Thank you. And then maybe just to clean ammonia pricing when you are discussing your potential customers. I’m just curious like what factors you talked about, are you talking about like energy content equivalent, and then look at that from price – equivalent pricing you – for industrial users, you take like a merchant ammonia and then put a clean ammonia premium on it. You’re building a new plant, the returns factor into those pricing conversations? Any of that detail would be great? Thanks.

Bert Frost: In terms of how this is being laid out in the market, it’s a fairly understood value proposition of low carbon. And so, as companies look at their scope emissions, and their structures and what they’re doing, what they need, whether that be in ag with the corn value chain, or with an industrial production such as a synthetic fiber producer, or ammonia is a chemical intermediate. Everyone is trying to improve their position and obviously, cost structure. So the conversations with the customers, are if we have this product. It is a unique product that’s coming online, and this is part of the preparation of get ready. Are you interested? Okay, you’re interested at what level. How does this work with contracts, because we want to contract generally on an industrial basis, we have annual or multiyear contracts.

And then you’re exactly right. The one fact we talk about, is we’re going to have a separate line item for the value of low-carbon ammonia. And the intention is that initially, that will start off at a fairly lower level. And then as demand builds, then there’ll be a competition for the molecule. But the first series of low-carbon ammonia that’s coming off of Donaldsonville, with the CCS program in Q3 as in preparation for the new plant that will come on in 2029. And that will be, I would say, if not low, close to zero carbon product, and that’s even more attractive to the market. So what you see from CF is – like anything, we’re well prepared. We’re in the market. We’re communicating clearly, with our customers with the expectation of a carbon premium, for this product.

Andrew Wong: Thank you.

Operator: Thank you. The next question comes from Benjamin Theurer with Barclays. Please go ahead.

Benjamin Theurer: Yes, thank you very much for taking my question. One quick one is, you saw news that the Chinese government setting an export window from May through September, for urea as it relates to the potential quota, to be similar to the 2023 level. So when we look through your materials, is that something that’s basically as expected from you guys? Or is that meaningful from a negative perspective, just as it goes out? And also if you could comment anything around, the fact that the Chinese are restricting this to India, which seems to be a big purchase. And then I have a quick follow-up on gas markets?

Tony Will: Yes. So the world is very tight and arguably short urea capacity. So the world really needs these tons, to become available and part of the global trade flow. We’re fully expecting and have considered, somewhere in the neighborhood of 3 million, maybe 4 million tons to come out of China, during this period of time. And so, I think that’s wholly consistent with our expectations. One of the things to keep an eye on, is what happens to the domestic price of urea within China, because the last time the “or got opened and price started rising, they rescinded providing export licenses to people. And so, what came out was actually a lot less than what was expected. But we think that the world really needs these tons. And so, it’s helpful to the overall functioning market.

Benjamin Theurer: Okay. And then there has been noise that goes into different direction. Some say there might be U.S. and Russia trying to work together, to figure out the gas flow back to the European Union, what basically was cut with the innovation back a few years ago. But I always say that the European Union, is considering a potential embargo actually on Russian gas. Have you seen or heard any news – any comment that you have as to the expectations, for that Russian gas into Europe? However, we want to think about this for the gas price in Europe?

Tony Will: Yes. The initiative that we’ve been kind of following, is the plan to basically completely wean Europe off, of Russian gas by ’27, and really provide a restriction on access to that marketplace. So I don’t know what the U.S. has to say about that, or the role that we play, because if the Europeans decide they don’t want it, there’s very little other people can do to make them take it. So that – that is very much a European policy issue, which I’m afraid is these days almost, as opaque as Washington is.

Benjamin Theurer: All right. Thank you very much.

Operator: Thank you. The next question comes from Jordan Lee with Goldman Sash. Please go ahead.

Jordan Lee: Hi. Thank you. We are seeing a pretty strong divergence, between urea and ammonia prices currently. In terms of the delta and margin between the two, can you talk about how it compares to history, and how you expect that to play out going forward?

Bert Frost: We’re seeing a divergence internationally. And the – in ammonia today, the market is – and I talked about this in my prepared remarks, with the two plants that are coming online in the Gulf Coast, today, the market in the East is long, or longer and you’ve seen a price differential between East and West markets. And then, with the expectation of these two plants, which would be probably in excess of 200,000 tons a month coming online needing to find a home. That’s the projected weakness. And you’re correct, there is a divergence and urea is staying fairly stronger worldwide, almost closed ammonia parity at $400 a ton coming into North America or Brazil. And so, that’s a reflection of supply and demand, and additional supply coming on.

And in terms of how that looks historically, that’s been imbalance. And I would expect that to be, corrected through the addition of additional urea plants being built, to soak up some of that extra ton, as well as what we’ve talked about is the growth in consumption of ammonia as a feedstock and in low-carbon markets.

Tony Will: I’d also, though, add to that, it’s important to separate the price of traded ammonia, Tampa, North Sea, other pricing points, versus the price of ammonia and the interior used for agricultural applications. Those two are historically fairly different. And the tone or the new plants that, Bert is referencing those don’t have access to in-market terminals in the corn belt for use in agricultural applications. So those are going to be focused exclusively on the merchant market globally. And so that’s why you see a little bit of, as Bert said, kind of that overhang in divergence. But from a – an in-market agricultural application, the price of ammonia is still very strong, although you’re also getting near the end of the application window, whereas urea requirements are still very, very strong, and that’s also part of the reason why you see a difference there as well.

Jordan Lee: Got it. Okay. Thank you. And the general sense was that farmers under ply last fall, do you think you farmers will get down all of the nitrogen that, they would like to this spring? Or are there any constraints such as the urea, or UAN supply that you would call out?

Bert Frost: I think there’s a question on availability of the end, or type of end that farmers in different regions are wanting. So Tony talked about ammonia in the Midwest. And it has been very attractive out of our terminals, that’s probably around $650 a ton where you talked about the international market at $400. But there is a very tight market today in North America, for urea and UAN. And we expect that maybe additional side dress of ammonia, will take place that maybe wouldn’t have in other years. But today, when you look at the corn bean ratio and the crop insurance, for the revenue guarantees that are available to a farmer, selecting corn this year makes economic sense. And then if that’s the case, maximizing yield through the use of nitrogen makes ultimate sense.

And so, we’re actually seeing – and we talked about this in the prepared remarks, the 95 million acres is probably going to be higher just based on, what we’re seeing with demand. And for exactly your question on application rates, I would say today, they’re probably going to be higher, and you’re going to see yields in irrigated areas and high-yielding areas of the, I states, probably pretty good. But the dry land places, I think, will be interesting as well. So, we do have a stocks-to-use ratio that’s very low for corn globally. And so there’s a need for this product to be produced in North America, and it’s been a very exciting market.

Operator: Thank you. The next question comes from Edlain Rodriguez with Mizuho. Please go ahead.

Edlain Rodriguez: Thank you. And good morning everyone. And so guys, when you’re looking at given the level of grain inventories crop prices, as you said, start to use ratio levels. Like how would you describe the current ad fundamentals like good, great, mix? And it could be either, like globally or in the U.S.? Like how would you describe, the ag fundamentals right now?

Bert Frost: Yes, it would be differentiated based on obviously location crop, and activity and timing. So the inventories for a specific to corn, as we’ve been talking about our favorite consumer of nitrogen, are very low globally. You’re at decade lows, globally, excluding China, and that’s kind of a question mark and always has been, with what inventories are there. But the fundamentals at the farm gate, are not as positive as they have been in the previous several years based on cost of inputs, cost of land rent and the output values of corn and soybeans and wheat. And so, with crush margins suffering and soybeans a little bit lower, that’s why we believe will be the preferred choice we’re available in North America. What has happened in other years, is sometimes like in places like Brazil, or Argentina devaluations that assist farmers, in terms of their profitability.

You’ve seen some taxes come off in Argentina. And so, we see those countries continue to grow, but also growth along the side of protein production, and ethanol production specific to Brazil. So it’s different in different places. Europe is subsidized, India is subsidized. And an interesting side note, is also the growth of urea consumption in China, both for ag and industry that China’s consumption has grown substantially of urea. But again, it’s subsidized with low-cost coal, and a very inexpensive product is related to the world market. So all to say, differentiated market, I think, for the U.S. farmer or North American farmer a challenge, but acceptable historical regard to returns, but they need to watch their dollars and cents.

Edlain Rodriguez: Thank you very much.

Operator: Thank you. The next question comes from Jeff Zekauskas with JPMorgan. Please go ahead.

Jeff Zekauskas: Thanks very much. Was the quarter in some ways, unusually profitable in that sequentially, your gas costs were up maybe $1.25 per MMBtu? And maybe sequentially, that’s something like, I don’t know, $130 million in cost inflation. And your cost of goods sold was up sequentially, maybe by about $90 million. Can you talk about the – I get it, you sold a few more tons in the first quarter, than you did in the fourth, and your price per ton was a little bit higher. But when you net it out, it seemed that the sequential change was a little bit larger than expected?

Tony Will: Yes, I think it comes down to, as you said, just a couple of big moving pieces here, which is, Bert was able to get great price realization against a little bit of a headwind of higher gas costs, which subtracted from that a little bit. And that remains very robust. But the way we think about this business, we continue to come back to this over and over again, which is because we try to run our plant to 24/7 365. There is a maximum amount of capacity that, we have and we run it as close to full as we possibly can, and we can only produce, or sell what we produce. And fortunately, the plants and old network ran really, really well in the first quarter, and are continuing to run really well in the second quarter. And you get a little bit of inventory fluctuations here or there.

But we think about the business on a half year on a full year basis, not on an individual quarter basis. And like you said, though, which is good price realization, a little bit of headwind on the gas front. But going into the second quarter, we’ve got much more moderated gas environment, and even stronger pricing environment than where we entered into Q1. And so, we’re excited about what the first half of this year looks like.

Chris Bohn: And Jeff, I would actually add to that our controllable cost per tonight, were actually significantly lower than what they have been in the past. So that’s our cost of goods sold less our gas, and depreciation in our distribution. So we’re actually, to Tony’s point, how we are producing at 100% utilization. We saw those benefits come through in controllable. What you’re seeing in the COGS is related, as you mentioned, to a higher gas costs on a sequential basis. But also the purchases that come into the U.K. and also our LSB agreement where we purchased some of their ammonia tons, and then additionally, our point leases. So as those prices were elevated a little bit, you see that in COGS. When you back those out from that perspective, you’re actually going to see a much more efficient quarter than what we had in Q4, and definitely what we had in prior year quarter.

Jeff Zekauskas: Okay. And in terms of your capital expenditures that are actually your own what might they be in 2026 or ’27 ballpark exclusive of the monies that would come from…?

Tony Will: Yes. I mean I think our business historically has run about $500 billion a year, for the legacy business. That includes a little bit of improvement capital, like we’ve done with the CCS projects and expanding our DEF capacity, and some of those things and also allowing us, to invest in infrastructure on the IT side and so forth. So $500 billion is a pretty reasonable estimate year in and year out, for how we’ve been able to manage the business. And then as we look at our portion of the CapEx for Blue Point next year. It’s not really until you get out to ’27 and ’28, that the bulk of that money starts getting spent. Chris said, we are going to be doing some site prep, and whatnot this year. There’s going to be a little bit of civil work that gets done next year. I’d expect next year to run somewhere in the neighborhood, of about $300 million in terms of ’26. And so, we’re still talking I don’t know, $750 million to $800-ish million is of our CapEx.

Jeff Zekauskas: Okay. And then where is the carbon dioxide going to be stored for Donaldsonville exactly? And who’s going to store it?

Tony Will: Yes. So we have an ongoing active dialogue with our partner, ExxonMobil. And they have a number of different alternatives, and different permits that are in kind of advanced stages. And so, we’re working through the details on that to partner with them, and it may mean that we go to EOR for a couple of months, until that Class 6 permit comes through, or we may opt to just wait until the Classic is ready to go. Those are ongoing conversations between the two of us. To make sure that we maximize the economics around the project. But as we’ve mentioned in our earlier remarks, we expect to begin likely flowing gas here in the second, third quarters. And we’re excited about the outcome, not only from the standpoint of reducing greenhouse gas emissions, with getting the 45Q credit, and having a low-carbon product, and that Bert can take into the marketplace with a premium.

Operator: Thank you. The next question comes from Vincent Andrews with Morgan Stanley. Please go ahead.

Vincent Andrews: Thank you. And good morning. It’s a while away, but I’d be curious what your plan is in terms of how you’re going, to report Blue Point within your financials. Are you intending to just put it in the existing ammonia segment? Or is this an opportunity for some differentiation, and maybe or maybe not including your other ammonia facilities, have contracted volume that have, sort of less volatility in their profitability through the cycle. How are you thinking, of disclosing everything to us?

Greg Cameron: Yes. Vincent, it’s Greg. So first big step we’ve gone through, is made the determination that we’re going to consolidate the entire entity into our financials, and that’s our plan to do that. So the first part will be all the revenue and costs associated, with Blue Point for our share as well as our partners will come through our statement, and then we’ll take that out at the end through the 60% that goes to them through the non-tolling inter side. Given that the product is ammonia, our expectation is that we will likely report this in the ammonia segment, and keep our business segment intact is the way they are. There’s a way in, which we run the business that’s consistent, with how we report it and the team that runs the ammonia segment, from a commercial standpoint will be as responsible, for these tons as they are for the other times coming out of our other facilities.

So I don’t foresee a change at all in that. And then, as we do get into reporting and you’re going to see this in the second quarter, you saw it in our press release this time, where we talked about the CapEx of the entire entity. When you get to the second quarter financials, since we’re receiving as from the joint venture, our cash balances will include, what the joint venture is consolidated in. But we will break that out through the footnotes, and other disclosures. So people have perfect clarity, on where the legacy business is in addition plus where the JV is, to get to the total. So we’ll make it as easy as we can to make sure that, you can do your comparisons year-over-year, quarter-over-quarter as we move forward.

Vincent Andrews: Okay. And as a follow-up, you’re obviously in conversations both for the Blue Point product out of DVille and then ultimately, for Blue Point. What type of offtake agreements are you looking for? Do you feel the need to have them? Or is there some percent of the volume you’d like to have on them? What are the resort you just sort of open to anything at this point, given it’s so far away?

Tony Will: Yes. I mean, I would say, in general, when you are locking in prearranged offtake agreement, you tend to do it off of some type of either gas plus basis, or there may be a mix of gas plus end market kind of impact on it. And as just a broad brush generality that tends to be lower margin over long periods of time than us having an ability to move it into the marketplaces and take advantage of some of the upside opportunities that the market provides. So for instance, our historical contracts on ammonia supply to Mosaic, while played a very important role, as we brought on the Donaldsonville project and actually what was helpful to us as a natural hedge in the first year, due because the contract was above where market price was – it has been a fantastic deal for Mosaic ever since, because it’s trading at, but the contract formula is well below what we’ve otherwise been able to achieve.

And just on the scope, and size of our operation. We may consider small pieces of it that makes sense, but we’re certainly not looking to pre-contract the whole of our production volume because again, historically, we’ve been able to get much better returns by allowing Bert to do what he does best.

Vincent Andrews: Thanks very much.

Operator: Thank you. The next question comes from Joel Jackson with BMO Capital Markets. Please go ahead.

Joel Jackson: Sorry for the follow-up. I think, Tony, I think you said that run rate sort of CapEx next year might be $750 million to $800 million. But when you look at your Slide 11, I think, you add up the numbers, assuming $500 million maintenance, you get to something like $900 million to $950 million. Can you just clarify?

Chris Bohn: Yes. Joel, I think what Tony was talking about, one was the CF portion. And what you should look at probably ’25 and ’26, we’re going to have 10% to 15% each of those years, of our total amount. So as I mentioned, we have $500 million that is our EHS and sustaining CapEx. And then incremental to that, you can kind of plan about circa $150 million over the next two years. It’s really ’27 and ’28, as you’re referencing the slide in our deck, where you start to see a little bit larger, which would be a couple of hundred million dollars for CF coming out in ’27 and ’28. And then a light tail in ’29, when the project comes online. So I was going to say, so if you had to kind of bundle where we think we’re going to be this year, it’s about $650 million this year, probably slightly north of that next year, not by much, and then increasing in the ’27, ’28 period…

Joel Jackson: And I’m still confused because that slide, if you add up the numbers suggest it’s a little over $900 million next year. So where am I wrong or what’s next?

Chris Bohn: So are you taking it just as CF portion of that, which is a 40%…

Joel Jackson: 40% Yes. $500 million maintenance, plus 40% of 15% and then 100% of 35%?

Chris Bohn: Yes.

Joel Jackson: Isn’t that over $900 million?

Chris Bohn: 100% of the…

Tony Will: Yes. If you take the chart as we have, and we’ve tilted them. So there’s a range that we work with internally, and it close ties close to the tilt, but there’s some tilt here. So if you take into account our sustaining at the $400 million to $500 million in that it’s been before. And then Blue Point this year, we’ve got in $150 million that is about the same, as Chris said, next year, up slightly. And then as well, when you take in the scalable infrastructure for a little bit more, it does move you up closer to that number that you gave there.

Joel Jackson: Thank you very much.

Operator: Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Martin Jarosick for any closing remarks.

Martin Jarosick: Thanks for joining us today, and we look forward to seeing you at upcoming conferences.

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