Q3 2025 Earnings Call Transcript

Good day, and welcome to the CF Industries Q3 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Martin Jarosick, Vice President of Treasury and Investor Relations. Please go ahead.

Good morning, and thanks for joining the CF Industries earnings conference call. With me today are Tony Will, President and CEO; Chris 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 9 months and third quarter of 2025 yesterday afternoon. On this call, we'll review the results, discuss our outlook and then host a question-and-answer session.

Statements made on this call and in the presentation on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statements. More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available on our website.

Also, you'll find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website. Before we begin today's call, I want to provide an update on the incident we experienced at our Yazoo City, Mississippi complex last evening. All employees and contractors are safe and have been accounted for, and there are no significant injuries. The incident has been contained, and an investigation is underway.

Now let me introduce Tony Will.

Thanks, Martin, and good morning, everyone. Yesterday afternoon, we posted results for the first 9 months of 2025 in which we generated adjusted EBITDA of $2.1 billion. These results reflect outstanding execution by the CF Industries team across all aspects of our business. And most importantly, our team continued to work safely.

At the end of the quarter, our trailing 12-month average recordable incident rate was 0.37 incidents per 200,000 work hours. Five years ago, October 2020, we announced a significant shift in the company's strategic direction, including an ambitious plan to begin decarbonizing our production network, a plan to become the world's leader in clean ammonia and a model example of environmental stewardship and how to abate an energy-intensive business in a financially responsible way. Today, that vision has been realized. I'm very excited to announce that the plans we launched 5 years ago have begun delivering real value to our shareholders and broader benefits to the society as a whole.

We have made great strides over the last 5 years and have reduced our GHG emissions intensity by whopping 25% from our original baseline. And every single one of the initiatives that contributed to this remarkable achievement have been highly NPV positive, creating substantial value for shareholders. We are the best example of how being environmentally responsible can actually go hand-in-hand with creating significant shareholder value. On our journey, we have executed all of the following initiatives.

We closed 2 of our least efficient, highest emissions plants that were also borderline uneconomic to continue operating. We commissioned 2 new highly efficient, lower emissions plants that have return profiles exceeding 20% IRR. We acquired the Waggaman, Louisiana ammonia plant, a very efficient plant with relatively low GHG emissions intensity and increased production at that facility significantly from 750,000 tons annually to over 900,000 tons, resulting in an IRR of over 20%. We installed N2O abatement systems into certain nitric acid plants, the resulting carbon credits from which are being sold at high values, more than recovering our costs within just a single year.

And finally, we have begun sequestering approximately 2 million metric tons per year of CO2 from our Donaldsonville complex. The 45Q tax credits from this project will more than pay our installation costs within 2 years, generating an IRR over 20%. And we are currently selling the resulting low-carbon ammonia at a premium. What is otherwise a commodity product, chemically identical to ammonia produced anywhere else in the world has become differentiated and now commands a premium in the marketplace.

These initiatives have helped reduce our emissions intensity by roughly 25% from our baseline while creating significant value for our shareholders. And now we are embarking on the development of the world's largest ultra-low emissions ammonia plant at our Blue Point complex in Louisiana. We have 2 world-class equity partners, JERA and Mitsui with us in this venture, and I fully expect the financial and societal benefits will be equally as impressive as the initiatives we have already completed. Additionally, we have a second carbon capture and sequestration project underway at our Yazoo City, Mississippi complex and numerous other initiatives yet to be announced.

The end result is that we have a robust high-return growth trajectory in front of us through the end of the decade that will continue to dramatically reduce our GHG emissions intensity while providing exceptional financial returns. Before I turn the call over to Chris to talk more about our operating results, I do want to take a moment and highlight what I consider to be a great misconception in the market. I want to refer you all to Slides #10, 11 and 12 in our materials. Slides 10 and 11 show our consistently strong free cash flow generation and our relentless share repurchase program.

Slide 12 shows our remarkable free cash flow conversion efficiency from EBITDA and yet amazingly how we trade at a shockingly low valuation. Oftentimes, CF Industries is compared to agricultural companies, and yet we are very different from most of those. The seed and chemical companies face challenges of products coming off patent and declining margins or of distribution channels being stuffed full and having to go through the pain of destocking. We are also very different from capital equipment companies or those selling more discretionarily applied products like phosphate and potash who are really and truly subject to grower profitability.

However, our sole product, nitrogen, is fundamentally different. Even in periods of relatively weak grower profitability, nitrogen demand is unaffected, almost completely inelastic. This year, when there was great hand ringing due to subdued grower profitability, high planted corn acres and global nitrogen supply production disruptions in other parts of the world, created a situation where nitrogen demand and resulting pricing was very, very strong. As Bert will talk about in a few minutes, we see the same strong demand dynamic shaping up for next year.

Nitrogen and certainly CF Industries' financial performance is not impacted by most of the factors affecting the rest of the ag sector companies. While other times, we are compared to industrials or material sectors, again, we have very little in common with most of those companies either, especially the chemical companies. We do not suffer from global overcapacity nor from sluggish or declining demand. Our free cash flow generation is consistently high.

And yet as shown on Page 12, we have traded at an anemic average cash flow multiple of barely 7.5x free cash flow. Realistically, that should be the low end of an EBITDA multiple, not a cash flow multiple. Oddly, businesses that are on the whole more volatile and structurally way less advantaged than CF trade at a higher valuation. The industrial sector trades at 27x cash flow.

The materials sector trades at 30x cash flow, while our consistently high cash flow generation on average has traded at a sickly 7.6x. All of this is a long way of saying the market doesn't really understand our business or our consistently high free cash generation. As Greg will talk about shortly, we have made great progress on our share repurchases and continue to do so. We, around this table, believe CF represents an amazing value, especially when only trading at an average 7.5x cash flow.

And we will continue aggressively repurchasing shares from the nonbelievers and those that don't take the time to understand why we are fundamentally different from most ag, industrial and materials companies. With that, I'll now turn it over to Chris to provide more details on our operating results. Chris?

Thanks, Tony. CF Industries manufacturing network has operated well throughout the year with a 97% ammonia utilization rate for the first 9 months of 2025. As is typical for the third quarter, we had significant maintenance activity, which reduced production volumes compared to the first 2 quarters. We continue to expect to produce approximately 10 million tons of gross ammonia for the full year. We also have made significant progress on strategic initiatives that are now generating EBITDA and free cash flow growth for the company.

In August, we were able to fully utilize expanded diesel exhaust fluid rail loadout capabilities at our Donaldsonville complex for the first time. This enabled us to capture incremental high-margin DEF sales and led to a monthly record for DEF shipments from the site. Also at Donaldsonville, the carbon dioxide dehydration and compression unit, which was commissioned in July, continues to run well. We are generating 45Q tax credits and moved to full rate safely through the quarter.

Finally, in October, we completed a nitric acid plant abatement project at our Verdigris, Oklahoma facility. This project is expected to reduce carbon dioxide equivalent emissions at the site by over 600,000 metric tons on an annual basis, which we are monetizing through the sale of carbon credits. By the end of the decade, we expect the returns generated by our CCS projects, along with the Verdigris abatement project will add a consistent incremental $150 million to $200 million to our free cash flow. Longer term, we remain excited about the compelling growth opportunity that the Blue Point project offers us, particularly given the sales team's success in selling low-carbon ammonia from Donaldsonville for a premium.

Detailed engineering activities and the regulatory permitting process are progressing well with capital expenditures for 2025 expected to be within the range we projected earlier this year. We expect site construction to begin in 2026. With that, let me turn it over to Bert to discuss the global nitrogen market and the growing interest in low-carbon ammonia. Bert?

Thanks, Chris. The global nitrogen supply-demand balance remained tight in the third quarter of 2025. Demand led by North America, India and Brazil was robust. Additionally, product availability remained constrained due to low global inventories and outages during both the third quarter and earlier in 2025. China's re-entry into the urea export market provided tons the world needed, but did not substantially alter these dynamics. Looking ahead, we expect the global nitrogen supply-demand balance to remain constructive.

We believe supply availability will continue to be constrained. Global inventories are low, including in North America. Additionally, major planned and unplanned outages are occurring now while geopolitical issues and natural gas availability, particularly in Trinidad, remain a challenge. The start-up of new capacity also continues to be delayed.

At the same time, we expect global demand to remain strong. India is likely to tender for urea in the near term, especially given the result of their most recent tender. Nitrogen demand in Brazil and Europe has picked up recently. And in North America, economics favor corn planting over soybeans next spring based on the December 2026 corn contract, which is currently priced at approximately $4.70 per bushel.

Farmer economics across the globe remain a key focus as crop prices have not kept price up -- pace with the price of inputs, equipment, rent and other costs. That said, we believe nitrogen offers clear value for farmers relative to other nutrients for its immediate impact on yields. Given where crop prices are today, we expect farmers to focus on optimizing yield, which should support healthy nitrogen applications. We believe that the strong uptake of our UAN fill program and our robust fall ammonia program and the order book that supports it will support that outlook.

We're also preparing for the implementation of the European Union's Carbon Border Adjustment Mechanism, or CBAM, which takes effect in less than 2 months. While there remains some uncertainty about the final structure of these regulations, we feel very confident about our competitive position. Thanks to our Donaldsonville CCS project, we have the largest certified low-carbon ammonia volume in the world. And over the last few years, our team has put in a great deal of time to build relationships with customers, including those who will be affected by CBAM.

This has enabled us to sell certified low-carbon ammonia at a premium to conventional ammonia today as customers begin to adapt their supply chains. Based on our conversation with customers, we also believe CBAM will drive significant demand for other low-carbon nitrogen products such as UAN. We see this as a tremendous opportunity for CF Industries on top of our already high-performing nitrogen business. We look forward to working with customers to build out a low-carbon ammonia and nitrogen derivatives supply chain.

With that, I'll turn it over to Greg.

Thanks, Bert. For the first 9 months of 2025, the company reported net earnings attributable to common stockholders of approximately $1.1 billion or $6.39 per diluted share. EBITDA and adjusted EBITDA were both approximately $2.1 billion. For the third quarter of 2025, we reported net earnings attributable to common stockholders of $353 million or $2.19 per diluted share.

EBITDA and adjusted EBITDA were both approximately $670 million. On a trailing 12-month basis, net cash from operations was $2.6 billion and free cash flow was $1.7 billion. We continue to be efficient converters of EBITDA to free cash flow. Our free cash flow to adjusted EBITDA conversion rate for this time period was 65%.

As you saw in the press release, we updated our projection for capital expenditures on our existing network to approximately $575 million for 2025. This reflects additional maintenance we were able to complete efficiently during planned outages as well as the timing of strategic investments that Chris mentioned this morning, and he spoke about at our Investor Day in June. We returned $445 million to shareholders in the third quarter of 2025 and approximately $1.3 billion for the first 9 months. In October, we completed our 2022 share repurchase authorization, having repurchased 37.6 million shares, which represents 19% of the outstanding shares at the start of the program.

Our share repurchase program continues to create strong value for long-term shareholders. Net earnings increased approximately 18% compared to the first 9 months of 2024, while earnings per share were approximately 31% higher, reflecting our significantly lower share count. The same positive impact can be seen in our shareholders' participation in our production capacity and the free cash flow it generates. We are now executing the $2 billion share repurchase program authorized in 2025 with over $1.8 billion of cash on hand at the end of the third quarter.

We are well positioned to continue returning substantial capital to our shareholders while also investing in growth through Blue Point and other strategic projects. With that, Tony will provide some closing remarks before we open the call to Q&A.

Thanks, Greg. For me, this is earnings conference call #48 and my very last one as CEO of CF Industries. Over the past 12 years, traditionally at this point in the call is when I have thanked the entire CF Industries team for their hard work and contributions to our success. I'm eternally grateful to the entire team.

Today may be more so than usual, and I am particularly aware of what an amazing team we have here. So indeed, thank you all said perhaps a bit more heartfelt than the past 47 times. I'm exceptionally proud of the company and the organization I'm leaving. The highly ethical way in which we conduct ourselves, our unwavering commitment to employee safety and our absolute focus on value creation.

In addition to the entire CF team, I also want to thank our Board of Directors who have always been supportive of me, providing insight and guidance through the years and importantly, always aligned with me on the objective of value creation. I also want to particularly thank the CF senior leadership team with whom it has been a truly great pleasure to work alongside. I can honestly say this is the best group one could possibly hope for and not only respect them as individuals along with their business acumen, but I also thoroughly enjoy their company and our camaraderie. Finally, I want to thank and congratulate Chris Bohn on being named CEO.

Chris has been a consistent thought partner and devil's advocate working with me as we navigated foundational decisions like the Terra acquisition, the sale of our phosphate business, the capacity expansion projects, our strategic repositioning of the company, the Waggaman acquisition, and most recently our Blue Point joint venture. Chris has been hugely successful in leadership roles across the company, including heading FP&A, supply chain, manufacturing, CFO, and his current role as COO. Chris has my complete faith and confidence that he will successfully lead the company to new heights. Again, thank you, and congrats.

It has been some kind of a thrilling ride for me as CEO, an incredible honor and a very great privilege. We've accomplished many things over the years. As I say, success has many parents and indeed, all of our successes were team efforts, and I'm delighted to say that the team remains in place. Therefore, I'm steadfastly confident that the company's best years are in front of it.

With that, operator, we will now open the call to your questions.

Before Q&A, I want to take a moment to acknowledge Tony's retirement and his contributions to CF over his 18-year tenure. Tony's influence and impact on CF cannot be overstated. From his time leading manufacturing where he generated and championed the do-it-right phrase is a core statement of CF's values and culture to his relentless pursuit of personal and process safety. CF has improved through his leadership.

Tony's leadership, which can be best described as bias towards action. This has been exemplified through the growth the company has experienced under his guidance through the CHS transaction, Donaldsonville and Port Neal expansion projects, Waggaman acquisition to the recent announcement of the Blue Point joint venture, increasing CF ammonia production and free cash flow generating assets by 45% during his time as CEO and over 200% since he started at CF as a member of the senior leadership team. His safety-first mentality, keen decision-making and focused on disciplined investments and execution is what has positioned CF where we are today, tremendous safety performance, industry-leading asset utilization and superior capital allocation.

Over the years, he's not only been a great mentor, but also a great friend. I look forward to building on what Tony has established and wish him the best in his next act. Thank you, Tony.

Thank you.

[Operator Instructions] First question comes from Ben Theurer from Barclays.

So first of all, Tony, all the best in retirement. I'm pretty sure you have plenty of things you want to do. So enjoy that. And that's -- it was quite a run, I guess.

So that's never bad. So enjoy that piece. And maybe as well for you, Chris, all the best on your new assignment as CEO. So 2 quick questions I have.

So one, you've talked about in your presentation material about the mid-cycle where you are right now and the mid-cycle where you think you're going to be in 3, 4 years' time as you get these additional projects come through. So I just want to understand the current market conditions obviously still seem to a degree, stretched, right, with the European gas price somewhat elevated versus what maybe mid-cycle in the past was. So I wanted to get your view in terms of the bull versus the bear around that $2.5 billion mid-cycle mark and how we should think about that evolving from a feed cost standpoint of view into the period of 2030?

And then I have a very quick follow-up on pricing premiums.

Yes. So I'll start. It's Greg. So clearly, today, right, when we built the $2.5 billion, we had a $3.50 gas strip in there for Henry Hub and a price -- realized price on urea at $3.85. As of today and through the year, we've obviously traded below that on the Henry Hub.

So from a feedstock, we've been benefiting in our results. And then lately, you've definitely seen a price move up through the course of the year on the urea. So from a results standpoint, hopefully, you're seeing that and appreciating that in the results that we printed at $2.1 billion of EBITDA through the first 3 quarters. I think as you think about it going forward and the spread between what we see here in the U.S. and in Europe, our view is that there'll be some tightening there, we expect to have a competitive advantage and remain lower priced on a nominal basis as well as relative basis versus what we're seeing in European production, which is -- will continue to be a tailwind to us for our financial performance.

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

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

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

Sure. This is Bert. And we've been fairly consistent with our goals of as we build the supply, which has come on stream and over time, as we add additional locations and then Blue Point, we want to build correspondingly demand. And so we've been working very synergistically with our European customers, North African customers and even in the United States.

So today, the premium is $20 to $25 per ton. As demand grows and we don't see the supply, we would anticipate that those will be matched on as demand grows. So very positive for CF.

But again, Ben, that was never contemplated as being part of the economics when we went with the dehydration compression plant. So the cost of the plant was just under $200 million. The 45Q benefit when we're sequestering at a rate of 2 million tons a year is going to be about $100 million of cash. And then we're adding another roughly almost 40-ish to 50 from product premium.

So we're picking up an extra 50% EBITDA that was never initially part of the justification of that project. And so it's kind of nothing but goodness across the board in terms of our -- that project.

The next question comes from Edlain Rodriguez from Mizuho.

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

Well, actually, we do every day, assess the forward market, the spot market, the prompt market, and we try to be constructive in terms of how we build our order book and thinking about the customer base. That's why we're broad-based in terms of ag business, industrial business, export business, and we're levering those along with our terminaling activity, how do we enter and exit the market and play the market. But when you look at the market today, then it's a global market, you're seeing a constrained supply, and that happened through the global conflicts as well as plants coming offline in Saudi Arabia, Bangladesh and a few other places and gas limitations in Trinidad, high-cost gas in Europe and not a lot of new capacity coming online in low-cost areas.

So constructively, supply is, I would say, consistent on a limited basis, while demand continues to grow at that 1% to 2% per year. And we're seeing very healthy demand in India, Brazil, North America, and we plan to continue with that level of demand. And so when I look at the negatives, I think what -- it's -- from your side, it's always yes, but yes -- but this is going to be negative. And we've been hearing about China for 10 years.

We've been hearing about other issues for years, and we continue to outperform the market. So looking at the negatives, I would say I like the current market. I think the current market is going to extend into 2026. That's as far as we give a viewpoint. But China's demand internally to consume the tons they produce is pretty well tied to that.

So these 4 million tons of exports that we see coming out in 2025 is probably needed. And then India hasn't performed on their production internally. They've been importing consistently high levels of urea and Brazil continues to grow. So I have a hard time finding a negative bogeyman out there.

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

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

I mean we did a European roadshow this summer or this fall and talked to investors over there. And there was a little bit of kind of not understanding why the valuation was what it was, but also -- there was also, frankly, a little bit of just we trade you as part of this broader group of other companies. And when there's a lot of automated trading going on and there's something that affects, like I said, either the ag sector or something else, all of the company's kind of move. And I think there just isn't a recognition that we're -- our financials are very different from most of the companies in that sector.

And I think at some point, when there are few enough shares out, we'll start getting a more realistic valuation against what's remaining. And I think, fortunately, we're generating enough cash, and the shares are such a screaming value that I think continuing just to buy shares out of the market is the only way we can eventually get there.

Yes. And the only thing I would add to that is when you ask what should we do, it's to continue to do what we are doing. We have exceptional operational performance focused on safety and a conversion to free cash flow that I think we, as a company, reflect on more than anybody else that I see both in the chemical and the agri and really all industries. And so at some point, that has to resonate with people.

Cash is king and whether it's buying back the shares, as Tony said, or making high-growth investments that have great return profiles, it will pay off at some point. So it's continuing to execute the way we're executing.

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

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

Yes. Joel, I'll start with that and then if anybody needs to add something to it. But that increase, we were probably a little light on the $500 million. Generally, we start the year running at about a $550 million is kind of the range we're performing in, but it's really affected by 3 things.

One, we completed more projects than we typically do at this time. There's a lot more, I would say, smaller dollar projects that are easier to finish during this particular timeframe. And then we also -- part of it was a timing of a nitric acid precious metal purchase, which was quite a bit that we do from time to time. And then we had, to be honest, slightly higher labor and capital costs related to some of the inflation by a few percentage points than what we had been forecasting.

So as I look at 2026, I would still use the $550 million as our range going forward for sort of, let's call it, our base CapEx and then adding CF's component of Blue Point on top of that.

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

Yes. It's way too early to speculate on that. I would say the ammonia plant was not directly affected. It's still operating as of this morning.

But at some point, you run into inventory containments depending upon how long the upgrades are down. So we're thankful that everyone is accounted for and is safe and that really there is only just a couple of very minor injuries, nothing serious or significant. That was our biggest concern. And then also that there is -- the site has been secured.

Now we're in the process of kind of really understanding what the condition of things are and what the root cause was, and then we'll start worrying about turning things on after we do a thorough investigation. I would say, Joel, that this is our smallest segment and a relatively small plant in our smallest segment. So we're not focused on kind of potential financial implications at this time. And as Chris said, we're still expecting to be able to produce the 10 million tons of ammonia this year like we had planned on.

The next question comes from Chris Parkinson from Wolfe Research.

Awesome. Tony, I'm not one to always say like say great quarter, but I'll give you a shout out and I'll say great 12 years and through all the debate, agreements and at times disagreements, you've always challenged me. So I'd like to personally thank you for that. It's been a pleasure.

A question to both you and Bert. There's been -- and it shows you outside the market to me. There's been a lot of inconsistency of supply throughout the entirety of this year. And you have things in Russia, Germany, Poland, Romania.

I mean perhaps this becomes a broader intermediate to longer-term question. But how much of the demand and the price strength do you attribute to the supply side of it versus the fact that demand, I think, broadly speaking, throughout the year-to-date has also been pretty healthy and kind of led to these price rallies at times at nonseasonal time. So I'd really appreciate your perspectives and kind of how to think about '26 in the context of what we've actually been seeing experience and what we've been experiencing in 2025.

I think the demand piece of the equation is much easier to forecast going forward. And as Bert said earlier, given where the different products are priced at in the corn-to-bean ratio and just looking at what we saw in the way of the UAN fill program as well as fall application of ammonia that's going on right now, we're anticipating the demand side of the equation to be very strong for the planting year of '26. The supply side is a little harder to kind of peel back. And as you said, it's an integrated kind of question in terms of how much it is the S and how much of it is the D. I would say a lot of the places that you mentioned, not so much Russia and Iran, but a lot of the places that you mentioned where there were some supply disruptions are on the relatively higher end of the cost curve.

So those tons don't necessarily move things dramatically up in terms of price. But there's no doubt the conditions that we saw this year due to both the S and the D side were quite strong, and that's why our anticipation is delivering a result that's well above what our mid-cycle numbers when Greg talked about it at Investor Day, what he gave, we expect to be well above that.

I think for CF in particular, how we view the world and being students of the world geopolitically, economically and systematically and how it affects our business. Tony touched on the specifics, but we did lose 5 million tons from the market through the conflicts for Iran and Egypt, Algeria and some in Russia and Turkmenistan. And then I think the lack of China or the late coming in of China in June probably pushed the market higher than anticipated. But we're still tight.

And like Tony articulated in terms of demand with India pulling 8 million to 9 million tons, Brazil, 7 million to 8 million tons, North America, 6 million tons and Europe producing less and not having the access and the lack of inventory in any major destination market sets up 2026, I think, very well. And we're going to see, I think, higher-than-anticipated corn acres in North America due to just the economic opportunities and impacts, which is constructive for CF.

Got it. And just as a quick follow-up, I mean, Tony, you've gone through your fair share of capacity expansions, both -- well I should say, very large brownfields and other brownfields and everything within your network. What have you, Bert and Chris learned the most from all of those efforts over the last 12 or so years that Chris and his team can essentially apply the Blue Point to perhaps mitigate a lot of the things. Is there kind of a track record of lessons that you can really apply here?

Or is it just going to be every project is different at the end of the day?

Yes. I would say we learned a ton that is currently in direct application of this project, one of which was we did a full-blown FEED study and detailed engineering of this plant before we announced it, went to FID. And so we have a much better perspective of the actual construction hours, and the unit build material lifts than we did when we announced the expansion projects back in 2012. The other thing I would say is the size of our network and the expertise we have across the network and the scale we have brings tremendous skill sets and capabilities to bear against a project like this. And you see that when you're looking at other people that are trying to start up ammonia plants that are years late because they just don't have the capability and expertise running ammonia.

And there are a few of those out there right now. And so I think both the fact that a number of the people involved in this construction project were also involved in the big Port Neal, Dville expansions in 2012 through '16 as well as just some of the broader lessons like the engineering and FEED study, I feel very confident in this. And we also have expertise from our partners that we're going to be able to leverage as well with JERA and Mitsui that are equally, if not even more so, comfortable doing very, very large capital projects like this, and they're bringing some of their best resources to bear as well.

I would say, as Chris said in his comments, Tony, being bold and -- but that boldness is based on market knowledge, understanding -- we've looked at plants all around the world. We've looked at a lot of opportunities over the years. We've had some great debates and discussions and disagreements at times on where to go and how to grow. But in the end, have made some very good decisions on that.

And Blue Point is a good example. We're the company that does it right, builds -- stays within, I think, our fairway and brings these plants on safely, and they operate above nameplate. And so it's that bold step of taking it when the market is growing and needs these tons.

Yes. And the only thing I would add is that's different from last time, Chris, as we've talked about before, is we're going with modular construction. Last time on a stick build time and material, you started to see labor costs get out of control. So I think that was something that we did a lot of evaluation on and also looking at who we're going to select to build those modules.

And then lastly, something that we'll do that we did last time that the whole team is working on, which is we begin hiring operators and engineers today, even though the plant will not be up for 4.5, 5 years or whatever. And what that allowed us last time was to get to over nameplate production within a couple of months after start-up, which nobody else was able to do. So again, as Tony said, leveraging our overall network, not just for engineering expertise, but to train operators and other individuals that will be working at these sites.

The next question comes from Andrew Wong from RBC Capital Markets.

Just echoing everybody else's comments, Tony, congratulations on a very successful career and guiding CF through a lot of market ups and downs. We've seen a lot. So enjoy your next chapter.

Thank you, Andrew.

Yes. And so just maybe on the comments you made earlier around the valuation, I think you made some very fair points. So maybe a question for you and also for Chris. Just given the value in shares and buybacks seem to be the path to kind of realize that value, you have a very strong balance sheet.

Would there be any consideration for using debt to fund Bluepoint and then maybe using the cash flows and the cash generation to buy back shares? Like would that make more sense right now.

I think the problem with doing that a little bit, Andrew, is its sort of a onetime sort of benefit that you get and then you're living with much higher fixed costs as you go. And I think one of the things that we've seen in this business is having a balance sheet with low fixed cost and a lot of liquidity gives us opportunities to move when there's things that are available to us like the Waggaman deal, which we did in cash. And so instead of this being a kind of trying to rush an equity swap for debt, which benefits kind of near-term shareholders. We're really playing the long game here, and it's about trying to make sure that we retain all of the long-term operating and strategic flexibility and at the same time, rewarding the truly long-term shareholders who eventually, I think, will start valuing the company properly.

But given my perspective, I'm not going to be here in a couple of months. So this is probably -- Chris and Greg can talk about it.

Yes. From my perspective, well, just for starters, I think the numbers that Greg presented and where we're seeing this year, where we're seeing next year and even the mid-cycle, we're going to have enough cash to do both at a significant level, just as we've done over the last decade under Tony, where we've been able to grow and also do significant share repurchases. So the ability to do both. I would echo Tony's comments, like having fixed charges in line, having a, I would say, flexible balance sheet is very important when you're in a commodity business.

As we're seeing more of our business here go to ratable, more industrial with premiums and things, we can make different decisions from there. But I think the cash flow that we're generating due to the conversion rate that we do allows us to do whatever we want to do really.

Yes. The only thing I would add to it is just emphasize the numbers that we talked about today, right? $1.3 billion of cash back to the shareholders for the first 3 months, $700 million in CapEx, so $2 billion, and we have $1.8 billion of cash on hand today. That creates incredible flexibility for the company.

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

It's Greg. On the SG&A side, we continue to just update our bonus accrual for the company for the year, and there was a small catch-up as well as a plan for the third. So that's the elevated level on the SG&A. On the non-gas side of production cost, really the one that stuck out to me as I climbed through them was really around ammonia in that segment.

And the point to make there is we did have an increased mix around our purchased tons, which obviously come into the system at a higher value than what we can produce them at, but it also contributed to gross margin dollars in the ammonia segment being up 30% year-over-year. So other than that and the timing of some turnarounds, there was really nothing to speak of in the non-production cost.

Yes. And on the purchase front, just to remind you, the tons that are produced in Trinidad, we purchased, and we realize the value in Trinidad and then that comes through equity earnings instead of directly into the ammonia segment. And then into the U.K., we're purchasing ammonia and then upgrading it to a margin, and then that's going to come through kind of our other ops segment. But the price because we're buying it at market shows up in COGS for ammonia.

So that kind of helps dimensionalize what Greg was talking about.

The next question comes from Kristen Owen from Oppenheimer.

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

Yes. I mean ag is still going to represent the lion's share for the foreseeable future of where we sell our products. And the simple reason for that, Kristen, is that the margins in ag are far superior to the margins in industrial. We could move all of our products into the industrial marketplace, which tends to be ratable and then -- but we would end up doing it at a significantly lower price point, and we wouldn't get the benefit of our distribution and logistics network by doing so.

And so some of the -- even though it is kind of "a little bit less predictable," it's at a lot higher volatility. And I'm going to refer back to, I think, sort of something I've heard attributed to Warren Buffett, which is give me a 15% spiky return over a 10% flat, we'd way rather have a spiky to the upside return profile associated with serving the ag marketplace than we would the other way. Now we're starting to build some and that will continue to increase. That does tend to be a little more ratable with predictable margin structures.

But we're going to be -- we're 75%, 80% in ag company today, and it's going to be like that for a very long time.

I think you have to also think about how our company is structured with our unique distribution and terminaling assets that are throughout the Midwest on the best farmland in the world with the lowest cost access logistically, if you compare our cost to get to the middle of Iowa for, let's say, $30 for urea against taking that to Mato Grosso from Paranagua or Santos, it's significantly cheaper and the yields are significantly better and the farmer economics is better as well. On top of, we have low-cost gas in those regions. So we are structured to serve the ag business, which, as Tony mentioned, is spiky but profitable.

But we balance that with this industrial book and export book that places us in, I think, globally, a very unique position, and we're benefiting from that.

Sure. And I appreciate that. And perhaps a little clarification on my side. I'm not suggesting that there's some major move out of the ag markets.

It's more just how much more meaningful can the earnings potential be on the industrial side given the uplift of some of these markets. So perhaps a slight clarification there. And while I'm here, I'll just ask my follow-up question. Just given the cost curve in China, a little bit more affordable to keep those a little bit more domestic affordability.

So just any thoughts on China exports in 2026?

We've been fairly consistent regarding China in that 3 million to 5 million ton range, and that's how they seem to perform. We're expecting them in 2025 to be in the 4 million to 4.5 million ton range. And they've announced this additional export quota. They haven't announced their program for 2026, but I would just bet on the same, probably coming out in sometime in Q2 with exports, May, June and exporting into the early part of Q4. Because their domestic market is so big, their domestic demand, both ag and industrial and where they are capacity-wise and operationally, that 4 million to 5 million -- 3 million to 5 million tons of exports makes sense as you build kind of what their structure should be.

Yes. Kristen, I'll just add one thing back to your first question. If you think about the 45Q tax credit associated with both Dville and Yazoo City when it comes online, we'll probably be close to $150 million of cash, and that's not net of taxes and everything that is not dependent upon where market pricing is for any of our products. Between what Bert is able to realize in price premium and some of the other initiatives we have like selling carbon credits, there could be another $25 million to $50 million of additional value that accrues to us that is also not tied to the market.

So you're starting to get to the point where there's probably -- could be $200 million-ish a year that's coming in that is very ratable and predictable and just part of the base then that, everything else kind of rides above.

The next question comes from Lucas Beaumont from UBS.

Good luck with your retirement, Tony. Congrats on your career [indiscernible] the others. Yes, I just wanted to kind of ask you about Blue Point. So you guys noted that you'd procured all the long lead time equipment now.

So kind of just where did the costs come in there compared to the budget? Kind of what percent of the project spend was that. And kind of just remind us of any cost escalation components that are built in there for like inflation and tariffs, et cetera, between now and sort of when the delivery occurs?

Yes. Thanks. This is Chris. Well, for starters, I would say the projects were way too early in the phase to say we're under significantly or we're slightly over or whatever.

I would say we're right where we thought we'd be. The products that we -- or the equipment that we ordered as long lead time is like your boilers, your compressors, different equipment like that. The modular equipment, which is going to be the significant dollar amount that we'll be selecting the modular yard here shortly. And those have been fixed fee bids in which we had -- which was part of our overall $3.7 billion.

So that part, we still feel very confident about. As we look at, I think, your question probably with tariffs, I mean, with the Supreme Court hearing arguments right now, there's still a lot of uncertainty what happens. A lot of the equipment that would be tariffed is most likely going to be coming in, in 3 years from now. So there's still quite a bit of time frame, and I'm certain more will change between now and then.

But what I would say is we forecasted quite a bit into tariffs. We're slightly higher than that, that's going into our $500 million contingency, but not anything that would have us concerned at this time. I think additionally, there potentially could be upside dependent on what the Supreme Court rules, but I'm certain there would be some reactions by the administration as well on additional tariffs and other areas. So again, tariff side, a little uncertain, but we feel like we're covered there.

Long lead items, those are in path, but those are more some of the more engineered complex items like compressors and such.

And then I guess just on the pricing outlook, I mean, you guys are kind of talked at length about it. I mean, ammonia has been very tight. The pricing is strong. UAN and ammonia imports are sort of running below trends heading into the fall and spring.

So I mean the near-term setup looks quite attractive. I mean, at the same time, the TTF futures have sort of been coming off the past couple of months have sort of gone from 12 and looking flattish year-on-year, sort of low 10s kind of now down about $1.50. So I guess just how do you kind of see those 2 factors resolving each together as we go through '26? Or I guess, if you don't think they'll resolve, then why not?

Maybe I'll start with the gas side with the TTF -- I mean, TTF has come off about $1. So you're still sitting near $11 on the forward strip with that with the U.S. sitting anywhere from $3.50 to $4. So you still have that differential that is very constructive. As Greg said, longer term, when we get into '28, '29, we may see that contract some, but not nearly to the level just given that the projects being built have to have return profiles with those as well and the additional demand that will be drawing on LNG. So from a constructive standpoint, we still think the gas differential is going to be very strong even if it comes in $1 or $2 from where it is today.

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

And so looking at gas and costs and kind of upside, I think we roll very well into 2026 and probably through the first half easily in a positive way.

The next question comes from Vincent Andrews from Morgan Stanley.

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

Thank you, Vincent. I appreciate that.

The next question comes from Matthew DeYoe from Bank of America.

Tony, congrats on the run. I know I didn't cover you directly for much of the time, but Steve always held you with the highest regard. So I know that goes for the rest of us here at Team BofA. I wanted to ask, I guess, a little bit on the slide where we talk about like ammonia expansions and closures.

Certainly, we don't disagree that a number of European plants need to close chemicals across like a lot of chains. But if we look at that 3 to 4 number, I mean, what's the -- how much of that has been announced? What do you think the rates are that those plants are running? And then like I just know that closing plants is expensive and not really done easily.

So I'd love a little bit more kind of commentary around your outlook for that capacity.

Yes. So this, as you may recall, is a study we did about 1.5 years ago where we analyzed every ammonia plant in Europe based on how its ownership structure was, what its maintenance structure, what its cost structure was going to be to try to identify which of those plants would come off. In Europe used to have about 48 ammonia assets that we're operating and how we have it leveled was red, yellow, green. And what we've seen is the red plants have come off as we expected.

And in fact, we're probably ahead of that particular schedule with a number of curtailments and shutdowns that are occurring in Europe from that. But that 48 assets today is probably around 30 assets or maybe 31 assets. And we expect that to drop another 4 to 5 assets over the next couple of years. You have to remember, the decision we made in the U.K. was because we had a significant turnaround coming forward.

And these turnarounds are $50 million to $60, so when you're entering into that, you have to make certain you're going to get that return on that cash. Additionally, where TTF is today at the $10 to $12 range makes it difficult to be producing throughout 12 months of the year for really selling in what may be 3 months a year, maybe 4 months a year. So you're making a risk decision based on that. So what we're seeing today is with some of the pricing, there's just a little bit more curtailment going on.

But eventually, through our study and what we've seen, you're going to see some of those plants continue to go off. So the European side, we feel very confident that, that 3 million to 4 million is going to come off. Now whether all that gets imported as net ammonia or as upgraded product, that will be determined. But I think the other aspect here is, as Bert mentioned, there is just not a lot of new supply coming on. we have visibility of what plants are being built.

And with the exception of ours and the 2 in the Gulf Coast that are about to come on probably sometime in 2026 and one in Qatar, there's really not much coming on. And the other plants that are coming on are upgrade plants that are consuming ammonia and making the ammonia market even tighter. So what we see is a strong constructive gas differential where we'll make money off of that versus TTF. And then we also see a very tight S&D balance that not only continues here into 2026 but really goes all the way to 2030.

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

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

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