CF Industries' Q3 2025: Contradictions Emerge on CCS Costs, European Gas Prices, and Market Dynamics

Date of Call: November 6, 2025

Financials Results

• EPS: $2.19 per diluted share in Q3 2025; YTD 9M EPS $6.39 (9M EPS ~31% higher YOY; net earnings for first 9 months up ~18% YOY)

Guidance:

• Full-year 2025 gross ammonia production expected to be approximately 10 million tons.
• 2025 capital expenditures on existing network updated to approximately $575 million; baseline run-rate ~ $550M going forward (ex-Blue Point).
• Blue Point: detailed engineering/permitting progressing, long‑lead equipment procured, site construction expected to begin in 2026; project budget ~$3.7B with ~$500M contingency.
• CCS/abatement projects (Donaldsonville, Verdigris, Yazoo City) expected to add ~$150M–$200M annual incremental free cash flow by decade end.
• Executing $2B repurchase program; strong liquidity ( ~$1.8B cash at end of Q3).

Business Commentary:

* Financial Performance and Shareholder Value:
- CF Industries reported adjusted EBITDA of $2.1 billion for the first 9 months of 2025, reflecting an increase in operating efficiency and execution across the business.
- The company's focus on share repurchases, with $1.3 billion returned to shareholders in the first 9 months, highlights its confidence in creating long-term shareholder value.

• Strategic Decarbonization and Emission Reduction:
• CF Industries achieved a 25% reduction in greenhouse gas emissions intensity through initiatives like plant closures and expansions, abatement systems, and CO2 sequestration.

• These efforts have generated significant shareholder value, with returns exceeding 20% IRR for each major initiative.

• Supply and Demand Dynamics:

• The global nitrogen supply-demand balance remained tight in Q3 2025 due to low inventories, outages, and geopolitical issues.

• Demand, particularly in North America, India, and Brazil, was robust, while supply constraints were exacerbated by delayed new capacity start-ups and outages.

• Innovation and New Project Developments:

• CF Industries is developing the world's largest ultra-low emissions ammonia plant at the Blue Point complex in Louisiana, with partners JERA and Mitsui.

• The project is expected to drive significant financial and societal benefits, with a high-return growth trajectory through the end of the decade.

• Valuation and Market Perception:

• CF Industries believes its valuation is low compared to industry peers, trading at an average cash flow multiple of only 7.5x.
• The company's unique financial profile, with consistently high cash flow generation and operating performance, is not well-reflected in its valuation.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted strong results (adjusted EBITDA ~$2.1B YTD, Q3 adjusted EBITDA ~$670M), 65% free cash flow to EBITDA conversion, 25% reduction in GHG intensity, monetization of low‑carbon ammonia at $20–$25/ton premium, and multiple high‑return growth projects (Blue Point, CCS).

Q&A:

• Question from Benjamin Theurer (Barclays): How should we think about the mid‑cycle ($2.5B) outlook vs current conditions and feed costs into 2030, and what magnitude premium are you seeing for low‑carbon ammonia pricing?
  Response: Management: Current conditions are above mid‑cycle; CF retains a U.S. feed‑cost advantage vs Europe and expects full‑year results well above mid‑cycle; low‑carbon ammonia premiums are ~$20–$25/ton.

• Question from Edlain Rodriguez (Mizuho): Where would you look for downside/’bogeyman’ risks near‑to‑medium term, and what more can be done to convince investors on the valuation disconnect?
  Response: Management: Hard to find a material near‑term negative—supply is constrained and demand strong into 2026; continue executing operational excellence and aggressive buybacks to close valuation gap.

• Question from Joel Jackson (BMO): If $75M of maintenance CapEx was brought forward this year, should next year’s non‑BluePoint CapEx be ~$425M; and how long might the Yazoo City incident outage last?
  Response: Management: Use a ~$550M base non‑BluePoint CapEx run‑rate going forward (Blue Point additional); Yazoo City impact is under investigation, ammonia still operating, too early to estimate outage duration but full‑year ~10M tons still expected.

• Question from Christopher Parkinson (Wolfe Research): How much of 2025 price strength is supply disruption vs robust demand, and what lessons from past expansions apply to Blue Point?
  Response: Management: Both tight supply (outages, delayed capacity) and robust demand contributed; Blue Point will apply lessons—FEED/detailed engineering, modular construction, early operator hiring—to mitigate timing/cost risk.

• Question from Andrew Wong (RBC): Any consideration of using debt to fund Blue Point and return cash via buybacks, and can you explain modest SG&A and non‑gas cost drivers this quarter?
  Response: Management: Prefer balance‑sheet flexibility over higher fixed charges—cash flow allows both growth and buybacks; SG&A uptick due to bonus accruals; non‑gas production costs rose from purchased‑ton mix and turnaround timing.

• Question from Kristen Owen (Oppenheimer): In a 2030 framework how much exposure is left in ag versus industrial/low‑carbon applications, and any thoughts on China exports for 2026?
  Response: Management: Ag will remain the majority (~75–80%) of volumes; low‑carbon/industrial initiatives add ratable, predictable cash (45Q/credits/premiums ~ $150–$200M); China exports likely ~3–5M tons.

• Question from Lucas Beaumont (UBS): Regarding Blue Point long‑lead equipment procurement, how are costs versus budget, what percent of spend, and how are escalation/tariff risks covered?
  Response: Management: Long‑lead items procured and project tracking to the $3.7B estimate; modular contracts fixed‑fee bids forthcoming; ~$500M contingency incorporated to cover escalation/tariff risk.

• Question from Matthew DeYoe (BofA): On the European closures (3–4 million tons), how much is announced and what are running rates/near‑term implications?
  Response: Management: Company analysis showed many high‑cost European assets already curtailed; EU ammonia assets fell from ~48 to ~30 and another 4–5 assets likely to be removed over next years, supporting tighter market.

Contradiction Point 1

Expectations for Carbon Capture and Storage (CCS)

It involves differing expectations and benefits regarding the CCS project, which may have implications for operational costs and sustainability efforts.

How should we assess the bull vs. bear for the $2.5 billion mid-cycle benchmark? What is the price premium for ammonia sold in Europe? - Benjamin Theurer (Barclays Bank PLC)

2025Q3: The carbon capture project adds another 50% EBITDA that was not anticipated. - W. Will(CEO)

How do you account for tax credits from the Donaldsonville CCS project, and what is the CO2 capture rate? - Jeffery Zekauskas (JPMorgan)

2025Q2: The lower NOx emissions from Blue Point will result in lower SCR cost, and we expect further emissions reduction with Blue Point resulting in lower SCR costs. - W. Will(CEO)

Contradiction Point 2

Impact of European Gas Prices and Market Dynamics

It highlights differing perspectives on the impact of European gas prices and market dynamics, which could influence strategic decisions and financial forecasts.

What potential market challenges could impact the business in the short- or medium-term? - Edlain Rodriguez (Mizuho Securities USA LLC)

2025Q3: The market faces constraints due to global conflicts impacting production and high-cost gas in Europe. - Bert Frost(EVP of Sales, Market Development & Supply Chain)

How should investors assess supply-side dynamics through 2026? - Chris Parkinson (Wolfe Research)

2025Q2: Europe faces chronic gas shortages, and China's exports are limited. - Bert Frost(EVP of Sales, Market Development and Supply Chain)

Contradiction Point 3

Market Strength and Demand-Supply Dynamics

It involves differing perspectives on the market's strength and demand-supply dynamics, which are crucial for understanding the company's strategic positioning and market outlook.

How much of the demand and pricing strength is due to supply issues vs. strong demand? - Christopher Parkinson (Wolfe Research, LLC)

2025Q3: Demand is robust and consistent across regions, while supply is constrained due to geopolitical issues and plant outages. The market conditions are favorable for both supply and demand sides. - W. Will(CEO)

How do you view the nitrogen cost curve given gas supply issues and geopolitics? - Chris Parkinson (Wolfe Research)

2025Q1: The U.S. is one of the lowest cost regions for gas, with supportive regulation. We do not expect substantial long-term compression between gas costs in Europe and the U.S. - Tony Will(CEO)

Contradiction Point 4

Impact of Geopolitical Issues on Market Strength

It involves differing perspectives on how geopolitical issues affect the market strength, which is crucial for assessing the company's competitive position and revenue projections.

What potential market challenges could impact the near- to medium-term outlook? - Edlain Rodriguez (Mizuho Securities USA LLC)

2025Q3: Challenges are typically highlighted by others in the industry, but we don't see significant risks given our cost structure and operational efficiency. - W. Will(CEO)

What are the implications of strong demand for Blue Point and the status of Mitsui as a potential partner? - Aron Ceccarelli (Berenberg)

2024Q4: Risks include supply outages, geopolitical issues, and customer purchasing behaviors. Despite these, the first half of the year looks positive due to strong demand and undersupply. - Bert Frost(CMO)

Contradiction Point 5

Assessment of Market Demand and Supply Dynamics

It highlights differing views on the dynamics of market demand and supply, which are critical for understanding the company's pricing strategy and revenue outlook.

How much of the demand and price strength is due to supply constraints versus strong demand? - Christopher Parkinson (Wolfe Research, LLC)

2025Q3: Demand is robust and consistent across regions, while supply is constrained due to geopolitical issues and plant outages. The market conditions are favorable for both supply and demand sides. - W. Will(CEO)

What are your expectations for the cost curve with a potential Ukraine resolution, and how might it affect fundamentals? - Kristen Owen (Oppenheimer & Co. Inc., Research Division)

2024Q4: Basics of the market are tight due to healthy demand globally and undersupply in North America. Russia's tons are still moving despite sanctions, and increased demand in Europe from reduced production could persist. - Bert Frost(CMO)