Important disclosures appear on the last page of this report.

The Henry Fund

Henry B. Tippie School of Management Michael Kelleher [Michael-Kelleher@uiowa.edu] CF Industries (CF) April 22, 2015 Basic Materials – Agriculture Chemicals Stock Rating Hold

Investment Thesis Target Price $315-325 Based on future earning potential, reduction in cost of goods sold, and a reduction in shares outstanding, CF in poised to experience stable growth in the short and long term period. CF is committed to returning value to shareholders, and in 2014 returned 20% to investors based on dividend payouts and capital gains. We are recommending a hold rating on CF while recommending a reevaluation within the next 6-12 months. Drivers of Thesis x Beginning Q2 2015 CF will be paying 37% less for natural gas when their

long-term hedging expires. Natural gas accounts for 60% of costs of goods sold. CF could see as much as a 15% reduction in COGS, substantially increasing net income attributable to stockholders.

x CF’s Nitrogen production will increase 25% in Q3 2015 when their new state of the art production facility becomes operational in Donaldsonville, LA. Based on past 35% nitrogen profit margins, CF’s net income could see 8-9% organic growth when the plant if fully utilized.

x CF is aiming to increase shareholder value via stock repurchasing and

higher dividend yields. An additional $1 billion repurchase is authorized through 2016, or approximately 7% based on current stock price.

Risks to Thesis x CF experienced a 15% revenue decline in 2014, mainly attributed to the

sale of the phosphate segment. Revenues are projected to fall an additional 3% in 2015, dramatically effecting EPS.

x The US operates a nitrogen trade deficit. A demand for imports opens a

global pricing market. Urea has been affected from record Chinese exports, and future globalization could deflate fertilizer prices.

Henry Fund DCF $377 Henry Fund DDM $280 Relative Multiple $276 Price Data Current Price $291.00 52wk Range $232.40 – 314.43 Consensus 1yr Target $324.50 Key Statistics Market Cap (B) $14.67bn Shares Outstanding (M) 47.91m Institutional Ownership 0.41% Five Year Beta .98 Dividend Yield 2.00% Est. 5yr Growth 28% Price/Earnings (TTM) 10.88 Price/Earnings (FY1) 11.16 Price/Sales (TTM) 3.07 Price/Book (mrq) 3.49 Profitability Operating Margin 33.74% Profit Margin 29.31% Return on Assets (TTM) 9.09% Return on Equity (TTM) 28.71%

Chart and 12 Month Performance Source: Yahoo Finance

Earnings Estimates Year 2012 2013 2014 2015E 2016E 2017E EPS $28.94 $24.87 $27.10 $15.49 $17.29 $20.21

Growth 30.5% -14.1% 9.00% -42.9% 11.6% 16.9% 12 Month Performance Company Description

CF Industries is an agriculture fertilizer producer and distributer. CF is the US’s leading nitrogen fertilizer producer, and continues to gain market share through M&A. After selling their phosphate segment in 2014, CF solely operates in the nitrogen segment. CF aims to bring higher value to shareholders via an aggressive share buy back program and increased dividends. CF will expand nitrogen-based output by 25% in Q3 2015 as they introduce a state of the art nitrogen production facility.

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EXECUTIVE SUMMARY

Nitrogen based fertilizers are the highest used in US farming. Nitrogen is spread on 97% of corn, 90% of cotton, 86% of wheat, and 18% of soybeans. CF, holding the largest nitrogen market share, will outperform when nitrogen is in demand. Conversely, its lack of diversification has hurt the stock price in Q2 based on heavy soybean planting; requiring potash.

A new production facility in Donaldvilleson, LA will boost revenues when operational, more than offsetting the sale of the phosphate segment. The five-year price target represents an 8-12% capital gain, however some analysts are predicting one-year price targets as low as $220. A hold in CF should be a long-term investment, as short-term losses are possible.

CF is driven to return value to shareholders. CF pays a $6.00 per share yearly dividend, providing promising fixed returns. Additionally, CF repurchased $1.9 billion in shares outstanding (roughly 14%) in 2014 causing a 9 percent boost in earnings per share as net income fell. An additional $1 billion repurchase has been approve through 2016.

COMPANY DESCRIPTION

Source: CF Industries

CF Industries is a fertilizer manufacturer and distributer based in Deerfield, IL. Through recent mergers and acquisitions, sell offs, and organic growth, CF has established itself as the leading US nitrogen based fertilizer producer in the US. CF is now relying solely on revenue from nitrogen production. Revenues fell 12% in 2014 mainly contributed to the sale of the phosphate segment, however their aggressive share repurchase program caused earnings per share (EPS) to raise $3 to over $27, a gain of 9%1. Though CF has established itself

as the leader of nitrogen based fertilizers in the US, much of the 2014 profits were attributed to the sale of their phosphate company. Starting in 2015, CF will be operating its under its new single segment business platform.

Nitrogen Production

CF’s revenue comes solely from its production and distribution of nitrogen based fertilizer. Nitrogen is the most versatile and widely used fertilizer in agriculture. In 1960, Nitrogen, Phosphate, and Potash companies all produced 2.5 million tones of fertilizer. By 2001, nitrogen rose to nearly 13 million tons distributed (60% of total crop production), with phosphate and potash accounting for 4.5 million tons each2. CF will be bringing a multi-billion dollar nitrogen production facility online in Q3 2015. The facility will increase nitrogen production output by 25% when operational. If current financials remain stable, CF will be able to boost its 10% global market share to upwards of 15%.

Source: Market realist

Terra Ownership

In 2010 CF purchased a 75% ownership in Terra Nitrogen for $4.7 billion. The merger placed CF on top of the nitrogen fertilizer market in the US. Yara International, based in Norway, had their $4.1 billion offer outbid by CF to secure the merger. CF offered $37.15 per share to Terra stockholders as well as .0953 a share in CF.3 TNH’s current market cap is $2.62 billion, with CF claiming $1.96 billion through the 75% ownership. THN thus accounts for 13.5% of CF’s value, or currently around $38 of CF’s stock price. This merger indicates CF’s intent to become the leader in the nitrogen fertilizer segment. Potash Corp continues to expand its control over potash fertilizers

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while Mosaic Co. expands its reach on the phosphate segment. It is becoming apparent each segment will have one market share leader and CF’s Terra take over shows their intent to control the nitrogen fertilizer market. Nitrogen based fertilizers naturally control the market 2:1 over phosphate and potash combined, and the segment is expected to experience growth of 6% through 2020 in comparison to 1.6% for phosphate and potash.4

Stock Repurchase Program

Since 2010, CF has been engaged in an aggressive stock repurchase program. In combination with dividend yield increase, CF is aiming to maximize stockholder value. In 2014 CF repurchased 7.1 million shares (14% outstanding) at an average price of $250, totaling just over $1.9 billion. Management has authorized an additional $1 billion for additional stock repurchase through 2016. 2014 levels of buy back are not expected to continue, but trends suggest that CF will continue to utilize excess free cash flows to reduce outstanding stock in the future to at least offset employee stock options. Management guidance has not been released beyond 2016. The 2014 10k claims the stock repurchase program was commenced to negate a known fall in revenue; ensuring earnings per share (EPS) would not fall. Despite a 12% fall in revenue in 2014, EPS increased nearly $3 as a result of the repurchasing. CF experienced a bullish run though Q4 2014 as net income fell, showing the market favored management’s decision to distribute cash to shareholders.

Sale of Phosphate Segment

CF is a leader in the nitrogen fertilizer segment, however they operated a smaller phosphate production facility through March 2014. Mosaic agreed to purchase terms of $1.4 billion and agreeing to purchase future nitrogen goods through CF. CF recognized a pretax gain of $750 million, or $450 million after taxes. 2014 revenue dropped 12% while EPS increased to $27. Revenue decomposition shows 31% of 2014 net income was attributed to after tax recognition of business sale. Analysis of 2015 quarterly reported revenue and margins will be critical in predicting future performance, as CF becomes a less diversified, solely nitrogen based company.

Donaldsonville, LA Plant

CF has invested heavy capital into the creation of a new multi-billion dollar nitrogen production facility in

Donaldsonville, LA. The new facility is expected to increase outputs by 25% when it becomes operational in Q3 2015. Donaldsonville is located south of New Orleans with accessibility to international shipping ports via the Gulf of Mexico, and domestic shipping with close proximity to the Mississippi River. Boosting operational output will further CF’s control over the nitrogen fertilizer industry. CF’s eagerness to invest in capital expenditures to spur organic growth show management’s confidence in the nitrate direction. Once operational, profitability numbers will be key to showing the return on the biggest organic capital expenditure in company history.

Lower Earnings Reported in 2014 10k

CF released their 2014 10k on February 26 revealing revenue of $4.7 billion, down from 2013’s $5.47 billion. Net income dropped 7% from 2013 to $1.4 billion in 2014. Management attributed this to the sale of the phosphate segment, reduced nitrogen fertilizer sale price, and a decrease in exports. CF distributed excess cash to shareholders, mainly through repurchasing, to ensure EPS would remain constant. Company strategy of aligning production fully in the nitrogen segment shows no surprise in the revenue decline. CF sold a 20% revenue-producing segment of their company (phosphate sale) as they await a 25% revenue booster (nitrogen facility). CF is beginning its first year operating as a fully integrated nitrogen company. If CF can report profitable 10Qs throughout 2015, the new production facility will only raise profitability.

Management had a positive forward-looking Q1 conference call. They are confident CF can be more efficient concentrating solely on nitrogen production, and falling natural gas prices are expected to give margins a major boost. CF will report 2015 Q1 results on May 06, 2015. This will be the final quarter CF has natural gas hedging in place. Though higher margins may not be experienced, a margin adjustment for COGS will reveal if CF is on track for yearly earnings.

Company Analysis

CF is undergoing major structural change, both operationally and financially. The sale of the phosphate segment shows they are advancing their stance as the dominant US nitrogen based producer. Additionally, CF restructured their balance sheet to increase leverage to invest heavily in capitol expenditures. Along with the new production facility, CF is modernizing existing assets to incorporate new technologies and increase operational

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life. Revenues naturally declined in 2014 after the sale of the phosphate facility but are predicted to rebound when the Donaldvilleson plant increases production, leaving nearly a year gap in revenue loss. Management’s decision to repurchase stock has caused EPS to rise during the last three quarters of 2014. Rising stock prices indicates the market’s confidence in allocations of excess cash and future earning potential.

x Nitrogen fertilizer is a highly versatility plant nutrient seeing heavy usage in corn, the largest row grown crop in the US.

x CF saw revenue dips in 2014 heavily attributed to the sale the their phosphate segment.

x World food demand will undisputable rise with global population growth. Fertilizer demand will increase as crop acreage per person declines. CF can take advantage of increase demands in the future.

x 2015 numbers will reveal the true future of CF’s growth. GAAP accounting standards saw CF’s EPS grow to over $27 as revenues declined. Increased 2015-2016 revenues will show true sustainable EPS for CF.

RECENT DEVELOPMENTS

Falling Natural Gas Prices

Source: Nasdaq

The US has increased natural gas production with expanded shale drilling, mainly in North Dakota. In November 2014 natural gas saw a near 40% price reduction as supply increased and global oil prices dramatically fell5. Nitrogen fertilizers utilize higher levels of natural gas than phosphate and potash, accounting for 40-60% of cost of goods sold depending on the company6. Supply is expected to remain at record highs for the foreseeable future, which should provide above average net income to companies dependent on natural gas inputs. The use of derivatives is extremely important. Though natural gas is currently priced low, future

contracts purchased at higher levels are extremely devalued. Conversely, a company’s ability to lock in low, long term rates will give a more balanced prediction of coming performance.

CF recognized $5 million in derivative losses in Q4 2014 due to its futures contracts on natural gas. CF has no hedges in place past Q1 2015. NYMEX natural gas futures are currently trading at $2.641 (17 April 2015). CF paid on average $4.25 BCF through 2014. Natural gas made up 41% of CF’s cost of goods sold. Pending natural gas price fluctuation, CF is in a position to see COGS decrease by 10-15% moving forward. Lower natural gas prices will boost CF revenues in 2015.

Mergers and Acquisitions

The agricultural fertilizer business has seen several mergers and acquisitions in recent years. Top competitors in the nitrogen (CF), phosphate (MOS), and potash (POT) segments have aligned their companies to become undisputed specialty leaders. CF sold their phosphate production to Mosaic in early 2014 furthering MOS’s lead in phosphate production. CF’s 2010 acquisition of Terra Nitrogen expanded its hold on the nitrogen industry. International companies have also shown interest in merging with US based fertilizer corporations. Norway’s Yara publicly expressed interest in merging operations with CF. They would create the worlds largest nitrogen fertilizer company. Yara has an extensive global customer base while US based CF has access to the worlds cheapest natural gas supply. In October 2014, merger talks ceased due to concerns of the “unsteady markets and questions about so-called inversion deals.”7 Though this merger did not come to fruition, future deals with industry leaders will surly shape the agriculture fertilizer business.

Anti-Trust Accusations

Because of recent M&A activity, speculation has emerged of top producers from each fertilizer segment colluding to control supply and pricing. CF’s phosphate sale to Mosaic Co. furthered its position as the largest producer of phosphate-based fertilizer. MOS has fought past legal trouble as it has expanded. In 2013 the Mosaic Company agreed to pay a portion of the $98 million settlement accusing Mosaic of being involved with collusion to raise and maintain fertilizer prices. Mosaic claimed they agreed on the settlement to, “avoid significant losses in the future.”8

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Anti-trust acquisitions will most likely follow industry M&A activities. As in the Mosaic case, the continuing absorbed market share is catalyst for speculation. Giving the high level of M&A in the fertilizer industry, the threat is ongoing. CF has not publicly announced plans for further M&A at this time, but legal fall out from future activity should be monitored.

Bio-Fuels

Ethanol bio-fuel has been gaining market share in recent years. In 2005 ethanol fuel accounted for 14% of the US corn harvest. By 2008 ethanol accounted for a quarter of corn output, and today it is estimated to have reached 38%. Several factors, such as personal preference, increase food demand, and hybrid vehicles, could have future negative effects on the ethanol demand. However, today the market share is strong and will put a further demand crop production and fertilizer. The main threat to continued bio-fuel growth is government regulation. The Environmental Protection Agency (EPA) is responsible for setting the yearly Renewable Fuel Standard (RFS).9 The RFS sets federal standards of percentage of crop yield used for renewable fuel. The 2015 numbers have not ben finalized. Past acts of congress have attempted to reduce or eliminate the RFS all together, but have been unsuccessful. The 2015 legislative session is again predicted to feature debate on the RFS, with few predicting ensuing change. Percentage of crop yields allocated to bio-fuels appears to be moderately favorable, with little possibility of negative policy change in the future.

Source: USDA

Beyond the increased demand on corn, biofuels help absorb surplus harvest. The early 2010’s record harvest

caused price per bushel of corn to reach as low as $3.30. During this time, ethanol accounted for 30-35% of corn consumption. It is entirely possible that corn prices could have reached a lower floor without the additional demand from ethanol production, making ethanol now a crucial consumer in the yearly corn yield. The REF is extremely unlikely to be removed from law, as renewable energy is a mandate for the future.

INDUSTRY TRENDS

The agriculture fertilizer industry has experienced solid growth and stability in recent years. Through the 2000’s, the fertilizer industry experienced astounding ROE and profit margins. With so few industries competing at the top level, growth should remain positive into the future. Catalysts such as global population, diet change, and bio-fuels have created a higher demand on fertilizers. Since 1965, US corn yield has experienced a consistent 1.9% CAGR. Fertilizers will play a larger role moving forward as higher crop yields are demanded on existing acreage.

Source: Our Finite World

Nitrogen, Phosphate, and Potash Overview

The agriculture fertilizer industry consists of three main segments: nitrogen, phosphate, and potash. Knowing the function of each fertilizer is key to understanding industry and global trends.

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Source: Market Realist

Nitrogen is the widest used fertilizer among farmers. Nitrogen is key for plants production of chlorophyll. Plants would become yellow in color and whither without the chemical. Most plants are able to absorb necessary amounts of nitrogen naturally though the atmosphere and soil, however mass planting practiced by commercial farmers requires a yearly spread of nitrogen to soil. Corn is mainly dependent on yearly application of nitrogen. Cotton and wheat also require high acreage coverage of nitrogen. Soybean is the only unregulated crop in the US uses under 20% distribution per year.

Source: USDA

Phosphate fertilizers help strengthen plant roots. Two situations will need phosphate: crops grown in sub prime soil will show more successful growth, and in times of drought phosphate will push roots deeper to find water base necessary for growth. Phosphate has been popular in southeast US during a lasting drought.

Potash (potassium) boosts crop resistant to disease, natural elements, and to a lesser extent drought. Potash can increase a plants water storage/usage and help

withstand extreme hot and cold temperatures. Potash is not a base fertilizer, meaning it is not applied every year. Potash will see increased usage when harvest elements are outside of normal. Fluctuating supply and demand make potash’s pricing elastic, pending global conditions.

Population and Crop Demand Growth

World population is currently nearing seven billion and growing. The US Census Bureau projects world population to hit eight billion by the mid 2020’s and exceed nine billion in early 2040’s, representing a 28.5% growth in 30 years.

Source: US Census Bureau

The fertilizer industry is equal dependent on population growth as it is GDP growth for its long-term success; food consumption is a necessity. Acreage per person will also be decreasing due to limited farmable acreage. Fertilizers will help produce stronger yields and quality, as well as hedge against drought insect destruction.

World diets are also changing with a heavier emphasis on meat consumption. It takes two pounds of feed to produce one pound of chicken, four pounds to produce one pound of pork, and seven pounds to produce one pound of beef.10 Livestock feed makes up over 50% of yearly corn yield consumption, meaning a trend towards a higher protein diet inevitably depends on fertilizers. If trends continue a further demand will exist on crop yields, and thus on fertilizers.

US Crop Outlook and Fertilizer Demand

The US saw a record harvest in 2014. High domestic production coupled with increased international imports drove down crop prices. If corn is traded at its predicted

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Nitrogen

Phosphate

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$3.50 per bushel in 2015, farmers could be facing upwards of a $50-$100 loss per acre planted. Farmers are reluctant to purchase fertilizer during low price returns in efforts to cut cost. In turn, crop commodity prices have direct correlation with demand of fertilizer. The expected 1.79% reduction in corn production is attributed to farmers planting the higher margin yielding soybean crop (soy beans expected drop is .25%).11 Nitrogen fertilizers are mainly used in corn, which could see a slight decrease in usage by crop estimates. Soybeans are able to utilize natural nitrogen from the atmosphere, and mainly rely on phosphate and potash fertilizers to spur growth. Though corn production is projected to lower 1.79%, price per bushel is only dropping 4.28%. While soybeans appear to be more attractive to farmers, based on the relatively small .25% reduction in planting, price per bushel is expected to fall by 13.33%, more than 3x than corn. Corn is the highest consumed crop per harvest and the market is not expected to react negatively to a 1.79% decline in the near term.

Crop 2014 2015E Bushels (Million) Corn 90.6 89 Soybean 83.7 83.5 Wheat 55.8 56.5 Price per Bushel Corn $3.65 $3.50 Soybean $10.20 $9.00 Wheat $6.00 $5.10 Source: Farm Futures

Though wheat is planted 40% less than corn, it has a 40% price premium over the crop. Nitrogen is spread on 85% of wheat crops, while phosphate is spread on 60%, and potash 18%. Wheat is projected to fall $0.90 cents per bushel in 2015, but number of bushels are projected to increase 0.7 million. Wheat prices will not fully recoup losses from corn, but the diversity of nitrogen will offer natural hedging during changing harvests seasons. In the continuing value stage, the change in crop cycles will be offset natural GDP/population growth. CF should see steady volume sales over the agricultural market.

Global Market

The US is currently trading at a nitrogen deficit. Increase exports from China, the Middle East, and Africa have dominated global shipping as well as created a global pricing market. In the same time, CF reduced its global exports from $468.4 million in 2013 to $205.4 in 2014. The US has recently been declared as having a

competitive advantage globally due to its cheap domestic actability to natural gas. However, the US has a fixed ammonia production capacity (12.5 million tons12), which is extracted from natural gas to make nitrogen-based products. Though we produce the critical natural gas, the US cannot extract the ammonia fast enough to supply nitrogen fertilizer producers. The most notable production facilities being implemented in the US, to offset the deficit, are surrounding the Bakken Shale in North Dakota. Northern Plaines Nitrogen hopes to leverage its close proximity to natural gas and abundant farmland to be a regional nitrogen fertilizer producer.

Source: USDA

The other aspect of globalization is overseas M&A. Currently, Brazil is expected to capture upwards of 40% of the global potash market share due to easy access of raw materials. Potash Co., the global leader of Potash, has purchased the leading potash distributer in Brazil, furthering their global reach over the potash market. Potash Co. is leading the way in creating a globally integrated segmented fertilizer distribution company, and could competitors leverage a business model.

Decreasing Acreage per Yield Worldwide

Rising demands referenced above, coupled with a rising global population, are putting a continued strain on farming production. The 1960’s saw major shift in farming trends requiring higher crop yields per historically planted acreage. From 1960 - present, increased crop demand per acre as been possible via accessibility to arrogation and advances in technology. As seen in the chart below, bushels per acre in the US

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continue a steady rise, increasing 50% to 175 bushels per acre in 2010. In the same period, planted acres in the US have remained relatively stagnant, fluctuating between a 0-15% increase. A recent spike can be seen in the late 2000’s as US farmers have produced record harvests. Chemically produced fertilizers are capable of producing 40% additional crop per acre over natural soil. In 2025, the USDA projects 89 million acres of corn to be planted, with only 81 million being able to be harvested, and 185 bushels per acre. These projections show the acreage to bushel relationship continuing, placing a higher future demand on the fertilizers that make it possible. Additionally, fertilizers are necessary to replace natural chemicals found in soil that is stripped due to high harvests. Fixed global trends will produce safe returns on fertilizer long positions.

Source: USDA

MARKETS AND COMPETITION

The agricultural fertilizer industry has seen several shifts in recent years. The nitrogen, phosphate, and potash segments have seen industry leaders emerge. Other key players shape the industry an attempt to diversify their product lines. This leads to a high competitiveness among current competitors. The three-segmented types of fertilizer mainly shape the landscape. Further increasing competition is the multitude on mergers and acquisitions. Growing manufacturers, smaller fertilizer divisions, and small cap mature performers have all been targets of M&A, only strengthening the position of the high capped, well position firms.

Robust competition creates extremely high barriers to entry. New entries are prone to take over before they

have reasonable chance to reach maturity. The most logical threat to new entry would be a spin off of a larger diversified company. Dow Chemicals consists of five solution focuses including plastics, materials & chemicals, consumer, infrastructure, and agriculture. The agriculture segment offers seed, insecticide, and includes a slim portfolio of fertilizers. However, Dow’s $58 billion market cap is large enough to leverage a spin off subsidiary to enter the consolidated fertilizer industry. Dow has the production in place, and has the free cash flow necessary to fund the large capital expenditures necessary to reach economies of scale. No speculation is current, although these entries could disrupt CF’s market share moving forward.

Pricing power ultimately comes down to the farmers, or buyers. A majority of fertilizer inputs are commodity based. Natural gas is the largest, accounting for nearly 60% of production. Commodities are priced on global, national, or regional markets. Supplier power is low due to its dependence on macroeconomics. Fertilizer and crop prices have historically moved in agreement. The chart below shows fertilizer prices spiking in 2008 due to high energy prices. Farmers were reluctant to purchase additional fertilizer, causing fertilizer prices to quickly rebound in 2009. Fertilizer is heavily depended upon in agriculture, but low crop prices are sure to push down demand for fertilizer. The farmers’ ability to manipulate demand gives ultimate power to the buyers.

Source: USDA

Though farmers control volume, there are currently no substitutions for fertilizer. Nitrogen, phosphate, and potash may all be applied to corn acreage, but each

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serves a distinct purpose. Stronger genetically modified seed in years to come could diminish the need for traditional fertilizers, though the threat is far beyond the forecasted period. Within the current market, the best-positioned companies are high cap, segment-leading companies with a well-established foothold in the their segment. CF is dominating the US nitrogen segment, Mosaic Co. controls the phosphate segment, and Potash Co. is the leading the potash segment. These three companies appear not only to be the best positioned for growth, but also most capable to hold and increase their market share. Following is an outline of POT and MON’s operational highlights.

Potash Corp. (POT)

POT is the worlds leading suppler of Potash based fertilizers in the world. Their Canadian production alone accounts for one fifth of global consumption. From July to October 2015 POT experienced a 20% drop in stock price. Uralkali, Russia’s largest potash producer and a leading global supplier saw their potash mine flooded causing a sudden 20% reduction of global supplies. POT stock has recovered since on expectation of demand increase. It is still undetermined if the Russian mine will be able to reopen in the future. POT has the potential to gain global market share if they can position correctly in the coming months. POT offers high yearly dividends yields, low comparative debt levels and respectable ROE in relation to their competitors.13

The Mosaic Company (MOS)

MOS is the largest phosphate based fertilizer manufacture in the world producing 19 million tons per year. They also have a potash segment producing 10.3 million tons per year. This year they will have “near a half a dozen” multi year projects becoming operational expected to increase potash output by 5 million tons per year. While gaining market share in the potash sector, MOS has reaffirmed their position as the industry leader in phosphate. In 2014 they purchased CF Industries Potash segment including mining operations in Florida. MOS is a fully vertically integrated company. They own the mines producing the raw materials, process the fertilizers, and ship the finished product to over 40 countries.14

Below is a comparison an analysis of CF’s peers. Large oil and chemical companies, such as Dow Industries and DuPont, have small divisions in agricultural fertilizers and seed. However, their product diversification and

corporate finance structures do not align with the firms below and would skew comparative analysis. This comparison has been limited to strictly fertilizer producing companies.

Peer Comparisons

Company Forward PE

Profit Margin

ROE (%)

Debt/ Equity

Dividend Yield

(AGU) 14.39 4.71% 11.83 71.52 2.90%

(POT) 16.59 23.61% 16.68 48.28 4.10%

(MOS) 25.04 11.36% 9.35 35.75 1.9%

(MON) 18.4 16.78% 25.9 110 1.6%

(TNH) 11.63 36.94% 133.2 75.5 8.0%

(SYT) 19.56 10.7% 17.62 43.67 3.30%

(CF) 11.51 30.45% 29.6 94.59 2%

Source Yahoo Finance

Analysis

Increased US crop production, lower US natural gas, higher global imports, and lower per bushel crop prices have created a highly volatile company competition in recent years. However, correct management strategy will be able to lead a company to solid growth.

Fertilizer companies have experienced favorable profit margins. Industry average is 13% compared to 5% for the Basic Materials sector. Heavy capitol expenditures bar entry to the industry, but once infrastructure is established, high returns can be expected. CF and TNH lead the industry, each topping 30%. CF’s 75% ownership in Terra suggests a stable business model is in place. Mosaic and Potash may have higher market cap, but CF offers higher payback to equity holders.

Patterns in debt to equity seem to repeat in the industry. Companies will leverage their balance sheet to heavily invest in additional assets or modernizing current ones, then gradually shift toward equity financing as current payments come due. Since 2013, CF has issued large quantities of corporate bonds, increasing debt levels 150% to $5.5 billion in long-term debt alone. If CF follows peer patters and reduces D/E in the coming years, the

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recent increase should not be alarming. Debt raised was used to build a new production facility, modernize old ones, and repurchase shears outstanding; all showing signs of investing in future growth and increasing value to shareholders.

Source: Yahoo Finance

Exporting fertilizers is the biggest opportunity for growth in the industry. The US operates a nitrogen trade deficit, predicted to expand in 2015, while US firms have access to the cheapest natural gas in the world. CF cut its net exports in half in 2014 to around $200 million in revenue. At the same time, Mosaic purchased stake in a Brazilian phosphate distribution company. Brazil is projected to the worlds leading phosphate producer, and Mosaic shows it is committed to increasing its global reach with the partnership. 2015 will reveal the industries strategy for exportation. Further, US fertilizer companies should be able to capture domestic market share from importers as COGS decreases. US fertilizer produces should aim capital expenditures at raising the nitrogen production capacity ceiling; which is currently limiting growth.

Source: Schlumberger

Aside from MON, the industry appears to be trading at a discount. Forward P/E tends to be below the S&P 500 averages (for those reporting). Negative P/E contributing factors cannot be ignored, but with solid performance metrics across the board and given the recent bullish run on fertilizer stock prices, fertilizer companies are a cheap investment with high payoff potential.

ECONOMIC OUTLOOK

GDP Growth

The Federal Reserve projects long run US real GDP growth to range from 2.1 to 2.3%. These projections align with current 2015 real GDP estimates. GDP drives mature industry market growth perhaps more than any other factor. The agricultural industry also attributes industry growth to population increase. The US Census Bureau projects a US 2020 population of 333 million, representing a 0.75% CAGR from the current 321 million projection. Thus a continuing value growth rate of 3.0% is forecasted.

Though exports are currently not a major revenue generator for the fertilizer industry, companies such as POT and MOS operate international facilities. GDP and population growth will similarly effect overseas operations. The global economy is projected 5% growth in 2015, up from 2% in 2014, mainly attributable to emerging markets. Moreover, the global population could reach upwards of 7.5 billion by 2020, representing a 2% growth rate. CF could increase upward potential by establishing production overseas, or partnering with current international nitrogen producers such a Yara; as previously tied in 2014.

Farming Economic Outlook

The USDA projects a slow recovery of crop prices. The 2015-2025 projections fluctuate from $3.50 per bushel to $3.75. Though these gains are minimal, the projections show harvested bushels of corn increase from 173 million to 185 million. These statistics benefit fertilizers two fold. Primarily, rising crop prices are a determining factor in purchasing additional fertilizer. Second, Bushels per acre are on the rise indicating higher projected usage of fertilizer, and a higher willingness to purchase additional fertilizer from the farmers.

The chart below illustrates the USDA’s forecast. The future patterns are favorable to the agriculture and

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fertilizer industries. Bushel per acre and price per bushel are both trending upwards after 2017. This is attributable to a worldwide over supply over the early 2010’s. The USDA believes prices have reached bottom and should begin to correct to pre 2010 levels ($4.10-4.50 per bushel). The bushels per acre are expected to continue to rise. We believe production should increase 3% CAGR to supply increasing population, livestock feed needs, and increasing demand from biofuels. Harvested acres have trend slightly downwards during the congruent period. Farmland is simply not expanding. Fertilizing existing farmland is the sole way supply can keep pace with demand.

Figure 1 Percent change 2015 - 2025

Source: USDA

Competitive Urea Global Pricing

Urea is a solid compound that contains the highest level of nitrogen; with 90% of the worlds supply going to produce nitrogen-based fertilizers. Urea is one of several chemicals than can be combined with ammonia to create nitrogen fertilizers. Given the high concentration of nitrogen, it is the cheapest form of nitrogen to ship, thus it is globally priced. China exported a record 15 million short tons in 2014 driving down the price of nitrogen-based fertilizers made with Urea. CF operates a Urea segment. Management expressed concern in the 2014 Q4 conference call, additionally adding the Chinese government would be offering subsidies to urea producers in the form of tax benefits. CF’s urea segment accounted for $915 million in revenues, about half of the UAN segment. If cheap shipping and global pricing becomes available for UAN, it could begin to negatively affect cash flows.

CATALYSTS FOR GROWTH

CF’s main source of organic growth will come from the increased revenues derived from the Donaldsonville, LA plant. CF projects a 25% production increase translating into a 8-9% boost in current margin (based on a 35% nitrogen profit margin), though the growth will not be immediately seen. Barring future M&A’s, the development and success of this facility will be vital to CF meeting estimates. 2015 10Q reporting will show is CF’s financials are on par with projections.

INVESTMENT POSITIVES

x High potential for long position capital gains as well as sizable dividend payouts

x Once the Donaldvilleson plant becomes operational, solid revenue growth should follow, furthering CF’s stance as the leading US nitrogen based fertilizer producer.

x Favorable trends in population growth and food demand placing higher need on fertilizers.

x CF controls US market share over the nitrogen fertilizer segment with potential to raise exports as US natural gas prices decline.

INVESTMENT NEGATIVES

x Current low crop prices, especially corn, may discourage farmers from buying excess fertilizer in attempts to cut costs.

x EPS is forecasted to decline in 2015 before a positive trend begins in 2016. Though CF is poised for growth with its new production facility, the market may temporarily react unfavorably to the earnings decline.

x CF was recently downgraded to BBB- due to capital restructuring and issuing $3 billion in corporate bonds since 2013. Further downgrades would rate CF high-yield, boosting interest rates and limiting investors (i.e. insurance companies).

VALUATION

Based on the 2014 10k CF Industry’s revenue fell 12% from 2013. This is attributable to two factors. First is the sale of the phosphate segment, which accounted for close to 25% of 2013 revenue. CF’s new production facility is projected to cover lost revenue once operational. The second factor is the fall in crop prices. Nitrogen is the most versatile fertilizer throughout agriculture. In order to cut costs, farmers are less likely to purchase fertilizer when prices are low due to a lower

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crop margins margin. This could impact fertilizer companies industry wide. Important valuation modeling assumptions to discuss in this section may include the following.

CF’s 2014 net income was $1.4 billion, representing a 6.7% decline from 2013. Of this, $450 million was the after tax realization from the phosphate sale. Removing sale proceeds from net income drops 2014 net income to $986 million, or a 31.1% decline. CF’s phosphate business generated $168 million during Q1 2014 before the sale, making the year projection to be $675 million for the segment. If the phosphate segment was retained, net income for 2014 would be upwards of $1.6 billion, or a 9% gain from 2013. Though reported net income did fall 6.7% in 2014, after dissecting the numbers we are confident in saying CF remains an extremely healthy company. The segment realignment and market conditions are favorable for growth.

x 2015 is projected to see a revenue decline of 3%. 2014 saw additional revenue due to the phosphate sale. Though revenue is projected to fall in 2015, organic growth is actually expected to increase by 2-3%. The new plant will be a catalyst to organic growth. Starting in 2015, we see year over year growth peaking at 7% in 2016, and slowly declining until continuing value at 3% (2019). CV is projected slightly above the Federal Reserve’s forecasted GDP growth due to increased demand potential from the rising population.

x Natural gas prices, one of the largest input factors, have significantly fallen due to higher US production capabilities. COGS percentage should see favorable trends downward from the spike of 60% in 2014. Per the 2014 10k, natural gas makes up 41% of CF’s COGS. Additional, the NYMEX futures show prices not topping $4.00 BCF until 2022. Natural Gas currently sells 37% below what CF was paying on average in 2014 ($2.64 vs. $4.25). If current prices hold, CF’s COGS would drop by 15% of revenue. However, CF is hedging natural gas through Q1, and management is unsure of hedging strategy moving forward. They are currently planning on buying from spot markets. We forecast a 9% decline in COGS due to positive, yet uncertain future. Regardless, margins are due to improve with reduction in natural gas prices.

x Management projects $2-2.5 billion in capital expenditures for 2015. Facility expansions will consume $1.5-2 billion with $500 million going towards what management calls other items. No

further guidance was given past 2015 in regard to major capital expenditure endeavors, but the $500 million in other items is a yearly occurrence. Consequently, 2015 capex is projected $2 billion, with $7000 for years following giving room for further modernization and capex projects.

x Long-term debt is expected to remain stagnant over the forecasted period. CF issued $1.5 billion in 2013 and2014 to finance capex projects with no new announcements expected. The BBB- credit rating downgrade is not expected to downgrade again. Cost of debt should be unaffected.

x A beta of 0.955 is used to determine cost of capital. We used a two-week metric dating back to May 01, 2014, after the sale of the phosphate company was complete. Incorporating a beta time period with the sale date in the middle could skew the accuracy.

x CF repurchased 14% of shares outstanding in 2014 for an average price of $250. Current shares outstanding are the lowest in its publicly traded history. CF has allocated an additional $1 billion in share repurchasing through 2016. When the new facility spurs organic growth, EPS will begin to grow in line with revenue gains. We see repurchasing continuing past 2016 solely to offset employee stock option issuance, unless further guidance is given.

x 1Q 2015 dividend was announced to be $1.50 per share for the third consecutive quarter; this is a 50% increase from the start of 2014. The 2% yield puts CF in line with the S&P 500 averages; however, the yield has increased dramatically since the $.40 3Q 2013 dividend15. The fertilizer industry has seen recent trends of high cash distributions via dividend yields. We project CF increasing yearly dividends per share to $7.00 in 2017 and $8.00 in 2018. This is still a conservative estimate as CF’s cash grows, competitors increase yields, and they aim to distribute more cash to shareholders. Higher yields are possible. In combination with stock repurchasing, CF offered a 20% return to shareholders in 2014 as revenues declined.

Discounted Cash Flow (DCF): Both the Free Cash Flow and Economic Profit models produce a present day value of $377. Three major factors that can dramatically alter this forecast are the risk premium used, the risk free rate, and potential future stock repurchase programs. Small changes in either variable dramatically affect the model. With a current stock price $291 a slight CAPM input change can vastly shift the target stock price. Use of the

Page 13

historical 4.6% risk premium boost the DCF model to $420. Using Damodaran’s March risk premium of 5.06% (compensating for 30 year Treasure bond rates) lowers target price to $35616. The Henry Fund uses standard risk premium of 4.85%, weighting the historical and actual risk premium.

Discount Dividend Model (DDM): The DDM model values CF at $280. Currently, CF’s dividend yields are 2%, mirroring industry averages. CF is committed to dividend distribution into the future. However, if EPS forecasts are not met the DDM price could lower in the future. We have forecasted a dividend raise in 2017 to $7.00, and in 2018 to $8.00. Of course, the DDM model will be most sensitive to dividend yield changes.

Relative P/E (Rel P/E): CF produces a target price of $276 in the Relative P/E model. Agrium, Potash Corp, The Mosaic Company, Monsanto Co and Syngenta AG are CF’s main competitors. All are large agricultural fertilizer companies based in North America and are projected 10-year growth rates very similar to CF. The Rel P/E only projects the next two years of progress relying heavily on EPS. Given the gap in the sale of the phosphate segment and the Donaldsonville, LA plant coming online, CF’s EPS are projected to be the lowest in 2015 and 2016. Future Rel P/E analysis will project a higher stock price when EPS climbs.

Upon analysis of the three forecast models, we set a short-term target price of $315-325, representing a 8-12% upside. We are confident the new single segment business model will prove profitable for CF, and the massive reduction in COGS will undoubtedly boost earnings. The price target falls between the DCF and DDM. CF will continue to return value to their shareholders. Recently, CF has both repurchased shares and increased dividend yield. Management has announced the $1 billion repurchase option through 2016, but it is unclear managements following course of action.

KEYS TO MONITOR

x US natural gas production level and prices - Prices can improve decreasing profit margins by reducing COGS.

x Extent of share repurchasing past 2016 – After the $1 billion approved repurchase concludes in 2016, shares outstanding can fluctuate (affecting EPS) due to continued buy backs, ESOP, or increased equity financing.

x Crop Yield and prices - Corn prices have dipped to recent lows and are predicted to have bottomed out near $3.50 per bushel (currently trading $3.80). Recovery will incentivize farmers to purchase higher amounts of fertilizer.

x Alternative uses of crop yield - As bio-fuels continue to increase in popularity, high yield harvests will be in further demand.

x Increasing debt/equity ratio – CF leveraged their balance sheet to allow additional capex. ROIC without issuing additional debt will be key to future profits.

x Ability to boost exports to emerging market as populations and demand for higher crop yields rise.

REFERENCES

1. CF Industries, 10k 2014 2. United States Department of Agriculture, Economic

Research Service. Data set: Consumption of nitrogen, phosphate, and potash, 1960-2011. http://www.ers.usda.gov/data-products/fertilizer-use-and-price.aspx

3. The New York Times, “Terra Finally Accepts CF Industries’ Takeover bid.” Cyrus Sanati. http://dealbook.nytimes.com/2010/03/12/terra-finally-accepts-cf-industries-takeover-bid/?_r=0

4. Market Realist, “An Investor’s Guide to Nitrogen Fertilizer Companies in 2014,” Xun Yao Chen. http://marketrealist.com/2014/03/investors-guide-to-nitrogen-fertilizers-key-drivers-1q2014/

5. NASDAQ, Natural Gas. http://www.nasdaq.com/markets/natural-gas.aspx

6. Market Realist, Fertilizer Producer Terra Nitrogen Underperforms. Adam jones, Jan 22, 2015. http://marketrealist.com/2015/01/fertilizer-producer-terra-nitrogen-underperforms/

7. New York Times, “Yara of Norway and CF Industries Call of Merger Talks.” Chad Bray. http://dealbook.nytimes.com/2014/10/17/yara-of-norway-and-cf-industries-call-off-merger-talks/

8. Twin Cities Business Magazine, Mosaic, Other Potash Cos. Pay $98M To Settle Antitrust Suit, Jake Anderson, 2013, http://tcbmag.com/News/Recent-

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News/2013/January/Mosaic,-Other-Potash-Cos-Pay-$97-5M-to-Settle-Anti

9. Environmental Protection Agency, Renewable Fuel Standard. http://www.epa.gov/oms/fuels/renewablefuels/

10. University of Minnesota Nutrition Management. http://www.extension.umn.edu/agriculture/nutrient-management/nutrient-lime-guidelines/fertilizer-recommendations-for-agronomic-crops-in-minnesota/soybean/

11. Pyles and Teufel, Fisher Investments on: Materials

12. Farm Futures, USDA: U.S. farmers in 2015 to plant fewer corn and soybeans, Bob Burgdorfer. http://farmfutures.com/story-usda-farmers-2015-plant-fewer-corn-soybeans-17-124214

13. CF Inudstries, Terra Nitrogen Investors. https://www.snl.com/IRWebLinkX/corporateprofile.aspx?iid=4559858

14. Dividend.com, The S&P 500: A Dividend Yield & Growth Overview. http://www.dividend.com/how-to-invest/the-sp-500-a-dividend-overview/

15. Aswath Damodaran, Damodaran online, http://people.stern.nyu.edu/adamodar/

16. Wall Street Pulse, CF Industries Holdings Inc., Target Price Update, Lindt. http://wallstreetpulse.org/cf-industries-holdings-inc-price-target-update/339155/

IMPORTANT DISCLAIMER

Henry Fund reports are created by student enrolled in the Applied Securities Management (Henry Fund) program at the University of Iowa’s Tippie School of Management. These reports are intended to provide potential employers and other interested parties an example of the analytical skills, investment knowledge, and communication abilities of Henry Fund students. Henry Fund analysts are not registered investment advisors, brokers or officially licensed financial professionals. The investment opinion contained in this report does not represent an offer or solicitation to buy or sell any of the aforementioned securities. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Henry Fund may hold a financial interest in the companies mentioned in this report.

CF#IndustriesRevenue&Decomposition

Fiscal&Years&Ending&Dec.&31 2012 2013 2014 2015E 2016E 2017E 2018E 2019ETotal#Net#Sales 6104000 5474700 4743200 4600904 4922967 5218345 5479263 5643640

Nitrogen Ammonia Net Sales 1677600 1437900 1576300 1518298 1624579 1722054 1808157 1862401 Cost of Sales 712700 656500 983200 945900 1012113 1072840 1126482 1160276 Gross Margin 964900 781400 593100 572398 612466 649214 681675 702125 Gross Margin Percentage 57.5% 54.3% 37.6% 37.7% 37.7% 37.7% 37.7% 37.7%

,,,,Sales,volume,by,product,ton,(000) 2786 2427 2969 3058 3150 3244 3342 3442 Average selling price per product ton 602$ 592$ 531$ $515 $510 $505 $500 $495 Gross margin per product ton 346$ 322$ 200$ $194 $188 $188 $188 $188

Granular Urea Net Sales 1,143,400 924,600 914,500 920,181 984,593 1,043,669 1,095,853 1,128,728 Cost of Sales 406,200 410,100 516,600 519,718 556,098 589,464 618,938 637,506 Gross Margin 737,200 514,500 397,900 400,463 428,495 454,205 476,915 491,222 Gross Margin Percentage 64.5% 55.6% 43.5% 43.5% 43.5% 43.5% 43.5% 43.5%

,,,,Sales,volume,by,product,ton,(000) 2593 2506 2459 2410 2362 2314 2384 2455 Average selling price per product ton 441$ 369$ 372$ 375$ 380$ 380$ 380$ 380$ Gross margin per product ton 284$ 205$ 162$ 160$ 163$ 167$ 170$ 170$

UAN Net Sales 1,886,200 1,935,100 1,669,800 1,610,316 1,723,039 1,826,421 1,917,742 1,975,274 Cost of Sales 793,200 895,600 997,400 961,359 1,028,654 1,090,373 1,144,892 1,179,239 Gross Margin 109,300 1,039,500 672,400 648,958 694,385 736,048 772,850 796,035 Gross Margin Percentage 57.9% 53.7% 40.3% 40.3% 40.3% 40.3% 40.3% 40.3%

,,,,Sales,volume,by,product,ton,(000) 6131 6383 6092 6275 6463 6657 6857 7062 Average selling price per product ton 308$ 303$ 274$ 270$ 276$ 280$ 282$ 282$ Gross margin per product ton 178$ 163$ 110$ 100$ 105$ 105$ 110$ 110$

Other Net Sales 389,400 380,200 414,200 552,108 590,756 626,201 657,512 677,237 Cost of Sales 270,900 270,300 309,200 412,094 440,940 467,397 490,767 505,490 Gross Margin 118,500 109,900 105,000 140,015 149,816 158,805 166,745 171,747 Gross Margin Percentage 30.4% 28.9% 25.4% 25.4% 25.4% 25.4% 25.4% 25.4%

,,,,Sales,volume,by,product,ton,(000) 1459 1629 1756 1809 1863 1919 1976 2036 Average selling price per product ton 267$ 233$ 236$ 238$,,,,,,,,,,,,, 240$ 240$ 242$ 244$ Gross margin per product ton 279$ 246$ 217$ 216$ 220$ 222$ 222$ 225$

Phosphate Net Sales 1,007,400 796,900 168,400 Cost of Sales 807,700,,,,,,,,,,,, 722,000,,,,,,, 158,300,,,,,,, Gross Margin 199,700,,,,,,,,,,,, 74,900,,,,,,,,,, 10,100,,,,,,,,,, Gross Margin Percentage 20% 9.4% 6.0%

,,,,Sales,volume,by,product,ton,(000) 2035 1857 487 Average selling price per product ton 495$,,,,,,,,, 429$,,,, 346$,,,, Gross margin per product ton 98$,,,,,,,,,,, 40$,,,,,,, 21$,,,,,,,

Total Net Sales 6,104,000,,,,,,,,, 5,474,700,,,, 4,743,200,,,, 4,600,904,,,, 4,922,967,,,, 5,218,345,,,, 5,479,263,,,, 5,643,640,,,, Cost of Sales 2,990,700,,,,,,,,, 2,954,500,,,, 2,964,700,,,, 2,839,071,,,, 3,037,806,,,, 3,220,074,,,, 3,381,078,,,, 3,482,510,,,, Gross Margin 3,113,300,,,,,,,,, 2,520,200,,,, 1,778,500,,,, 1,761,833,,,, 1,885,162,,,, 1,998,271,,,, 2,098,185,,,, 2,161,131,,,, Gross Margin Percentage 51.0% 46.0% 37.5% 38.3% 38.3% 38.3% 38.3% 38.3%

Total,sales,volume 15,004,,,,,,,,,,,,,, 14,802,,,,,,,,,, 13,763,,,,,,,,,, 13,551,,,,,,,,,, 13,837,,,,,,,,,, 14,134,,,,,,,,,, 14,558,,,,,,,,,, 14,995,,,,,,,,,,Average,selling,price 423$,,,,,,,,, 385$,,,, 352$,,,, 280$,,,, 281$,,,, 281$,,,, 281$,,,, 280$,,,,Average,gross,margin ,$,,,,,,,,,237, ,$,,,,195, ,$,,,,142, ,$,,,,134, ,$,,,,135, ,$,,,,136, ,$,,,,138, ,$,,,,139,

Phosphate segment sold in March 2014

CF#IndustriesIncome'Statement

Fiscal'Years'Ending'Dec.'31 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

Net sales 6,104,000 5,474,700 ,,,,,4,743,200, ,,,,,4,600,904, ,,,,,4,922,967, ,,,,,5,218,345, ,,,,,5,479,263, ,,,,,5,643,640, Cost of Goods Sold 2,570,900,,,, 2,543,900,,,, 2,572,200,,,, 2,070,407,,,, 2,313,795,,,, 2,504,806,,,, 2,630,046,,,, 2,708,947,,,, Depreciation 419,800 410,600 392,500,,,,,,, 587,012,,,,,,, 579,306,,,,,,, 586,677,,,,,,, 635,427,,,,,,, 631,548,,,,,,,Gross margin 3,113,300 2,520,200 1,778,500,,,, 1,943,485,,,, 2,029,867,,,, 2,126,863,,,, 2,213,790,,,, 2,303,145,,,, Selling, general & administrative expenses 151,800 166,000 151,900,,,,,,, 121,924,,,,,,, 132,920,,,,,,, 143,504,,,,,,, 153,419,,,,,,, 160,844,,,,,,, Other operating expenses (income) - net 49,100 (15,800) 53,300,,,,,,,,,, 45,305,,,,,,,,,, 40,321,,,,,,,,,, 38,305,,,,,,,,,, 38,305,,,,,,,,,, 38,305,,,,,,,,,,

Total other operating costs & expenses 200,900 150,200 205,200,,,,,,, 215,460,,,,,,, 200,378,,,,,,, 206,389,,,,,,, 212,581,,,,,,, 218,958,,,,,,, Equity in earnings of operating affiliates 47,000 41,700 43,100,,,,,,,,,, 41,807,,,,,,,,,, 44,733,,,,,,,,,, 47,417,,,,,,,,,, 49,788,,,,,,,,,, 51,282,,,,,,,,,, Gain on sale of Phosphate business 750,100,,,,,,,

Operating earnings (loss) 2,959,400 2,411,700 2,366,500,,,, 1,602,603,,,, 1,700,981,,,, 1,786,081,,,, 1,859,272,,,, 1,936,320,,,,

Interest expense (income) - net 131,000 147,500 178,200,,,,,,, 212,673,,,,,,, 222,316,,,,,,, 232,397,,,,,,, 242,935,,,,,,, 253,951,,,,,,,

Interest on cash, cash equivalents & investments - - (900) Other non-operating - net 1,100 (54,500) ,,,,,,,,,,,,,1,900,Earnings (loss) before income taxes & equity in earnings of non-operating affiliates 2,829,500 2,209,700 2,187,300,,,, 1,389,930,,,, 1,478,664,,,, 1,553,684,,,, 1,616,337,,,, 1,682,369,,,,

Income tax provision (benefit) 964,200 686,500 773,000,,,,,,, 548,319,,,,,,, 581,978,,,,,,, 611,095,,,,,,, 636,137,,,,,,, 662,498,,,,,,, Equity in earnings (loss) of non-operating affiliates - net of taxes 58,100 9,600 22,500,,,,,,,,,, 23,243,,,,,,,,,, 23,986,,,,,,,,,, 24,706,,,,,,,,,, 25,447,,,,,,,,,, 26,160,,,,,,,,,,Net earnings (loss) 1,923,400 1,532,800 1,436,800,,,, 818,368,,,,,,, 872,700,,,,,,, 917,883,,,,,,, 954,753,,,,,,, 993,711,,,,,,,

Less: net earnings attributable to the noncontrolling interest (74,700) (68,200) 46,500,,,,,,,,,, 45,105,,,,,,,,,, 48,262,,,,,,,,,, 51,158,,,,,,,,,, 53,716,,,,,,,,,, 55,327,,,,,,,,,,Net earnings (loss) attributable to common stockholders 1,848,700 1,464,600 1,390,300,,,, 773,263,,,,,,, 824,437,,,,,,, 866,725,,,,,,, 901,037,,,,,,, 938,384,,,,,,,Ending shares outstanding 63,900 58,900 51,302 49,096 48,483 48,084 47,686 47,288

Net earnings (loss) per share - basic 28.94 24.87 27.10 15.75 17.00 18.03 18.90 19.84Dividends per share 1.60 2.20 4.28 6.00 6.00 7.00 8.00 8.00

CF#IndustriesBalance'Sheet

Fiscal'Years'Ending'Dec.'31 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

AssetsCurrent Assets Cash & cash equivalents 1,207,000 1,710,800 1,996,600 (172,053) 298,071 711,569 1,124,073 1,622,313 Restricted cash 154,000 86 Accounts receivable - net 217,400 230,900 191,500 174,834 187,073 198,297 208,212 214,458 Inventories - net 277,900 274,300 202,900 230,045 246,148 260,917 273,963 282,182 Deferred income taxes 9,500 60,000 84,000 128,208 136,078 142,886 148,742 154,906 Prepaid income taxes 33,400 34,800 Other current assets 27,900 92,400 18,600 19,158 19,733 20,325 20,934 21,562 Total current assets 2,807,600 2,630,100 2,528,486 380,193 887,103 1,333,994 1,775,924 2,295,421

Property, plant & equipment - net 3,900,500 4,101,700 5,525,800 7,525,800 8,275,800 9,025,800 9,775,800 10,525,800 Asset retirement obligation funds 200,800 Investments in & advances to affiliates 935,600 926,000 861,500 999,340 1,139,248 1,253,172 1,378,490 1,474,984 Goodwill 2,064,500 2,095,800 2,092,800 2,095,800 2,095,800 2,095,800 2,095,800 2,095,800 Noncurrent assets held for sale 679,000 Other assets 257,900 245,500 243,600 248,472 253,441 258,510 263,680 268,954 Total assets 10,166,900 10,523,600 11,338,200 11,249,605 12,651,392 13,967,277 15,289,694 16,660,959

Liabilities and EquityCurrent Liabilities Accounts payable & accrued expenses 366,500 564,100 589,900 368,072 393,837 417,468 438,341 451,491 Income taxes payable 187,100 73,300 16,000 27,416 29,099 30,555 31,807 33,125 Customer advances 380,700 120,600 325,400 291,063 280,852 298,188 279,143 282,278 Notes payable 5,000 Distributions payable to noncontrolling interest 5,300 Liabilities held for sale 26,800 Other current liabilities 5,600 43,500 48,400 35,529 35,529 35,529 35,529 35,529 Total current liabilities 950,200 828,300 979,700 722,080 739,317 781,739 784,820 802,423

Total long-term debt 1,600,000 3,098,100 4,592,500 4,800,744 5,018,430 5,245,987 5,483,863 5,732,525 Deferred income taxes 938,800 833,200 818,600 544,885 757,866 803,338 843,505 868,810 Noncurrent liabilities held for sale 154,500 Other noncurrent liabilities 395,700 325,600 374,900 339,500 339,500 339,500 339,500 339,500

EquityPaid in Capital 2,493,000 1,594,900 1,416,400 1,416,414 1,416,429 1,416,443 1,416,458 1,416,472 Retained earnings (accumulated deficit) 3,461,100 3,725,600 3,175,300 4,169,388 5,344,917 5,933,579 7,750,414 9,011,786 Treasury stock - at cost 2,300 201,800 222,200 939,150 1,153,700 1,328,700 1,503,700 1,678,700 Accumulated other comprehensive income (loss) (49,600) (42,600) (159,800) (159,800) (159,800) (159,800) (159,800) (159,800) Total stockholders' equity 5,902,200 5,076,100 4,209,700 4,486,852 5,447,846 5,861,523 7,503,371 8,589,758

Noncontrolling interest 380,000 362,300 362,800-------- 355,544------- 348,433------- 341,464------- 334,635------- 327,942-------

Total equity 6,282,200 5,438,400 4,572,500----- 4,842,396---- 5,796,279---- 6,202,987---- 7,838,007---- 8,917,701----

Total-Liabilities-and-Equities 10,166,900 10,523,600 11,338,200 11,249,605 12,651,393 13,967,277 15,289,695 16,660,959

CF#IndustriesCash%Flow%Statement

Fiscal%Years%Ending%Dec.%31 2015E 2016E 2017E 2018E 2019E

Operating Activities

Net Earnings ********818,368* ********872,700* ********917,883* ********954,753* ********993,711*Depreciation 587,012******* 579,306******* 586,677******* 635,427******* 631,548******* Accounts receivable - net 16,666 (12,238) (11,224) (9,915) (6,246) Inventories - net (27,145) (16,103) (14,769) (13,046) (8,219)

Deferred income taxes (Asset) (44,208) (7,870) (6,808) (5,855) (6,164) Other current assets (558) (575) (592) (610) (628) Accounts payable & accrued expenses (221,828) 25,765 23,630 20,873 13,150 Income taxes payable 11,416 1,683 1,456 1,252 1,318 Customer advances (34,338) (10,211) 17,336 (19,045) 3,135 Other current liabilities (12,871) - - - - Deferred income taxes (Liability) (273,715) 212,981 45,472 40,167 25,305 Other noncurrent liabilities (35,400) - - - - Increast from Operating 783,400 1,645,438 1,559,061 1,604,002 1,646,910

Investing Activities: Investments in & advances to affiliates (137,840)****** (139,908)****** (113,925)****** (125,317)****** (96,494)******** Capital Expenditures (2,000,000)*** (750,000)****** (750,000)****** (750,000)****** (750,000)****** Other Assets (4,872)********** (4,969)********** (5,069)********** (5,170)********** (5,274)********** Cash Flows from Investing (2,142,712)*** (894,877)****** (868,994)****** (880,487)****** (851,768)******

Financing Activities: Total long-term debt Proceeds 208,244******* 217,686******* 227,557******* 237,876******* 248,662******* Dividends Paid (307,811)****** (290,895)****** (336,591)****** (381,490)****** (378,305)****** Issuance of Common Stock 14,433********** 14,433********** 14,433********** 14,433********** 14,433********** Repurchase of Common Stock (716,950)****** (214,550)****** (175,000)****** (175,000)****** (175,000)****** Accumulated other comprehensive income (loss) 0**************** 0**************** 0**************** 0**************** 0**************** Non-controlling interest (7,256) (7,111) (6,969) (6,829) (6,693) Cash Flows from Financing (809,340)****** (280,437)****** (276,569)****** (311,011)****** (296,903)******

Increase (decrease) in cash & cash equivalents (2,168,653)*** 470,124******* 413,498******* 412,504******* 498,240*******Cash & cash equivalents at beginning of period 1,996,600 (172,053) 298,071 711,569 1,124,073 Cash & cash equivalents at end of period (172,053)****** 298,071******* 711,569******* 1,124,073**** 1,622,313****

CF#IndustriesIncome'Statement

Fiscal'Years'Ending'Dec.'31 2012 2013 2014 2015E 2016E 2017E 2018E 2019EReport Date

Net sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%Cost of Goods Sold 42.12% 46.47% 54.23% 45.00% 47.00% 48.00% 48.00% 48.00%Depreciation 6.88% 7.50% 8.28% 12.76% 11.77% 11.24% 11.60% 11.19%Gross margin 51.00% 46.03% 37.50% 42.24% 41.23% 40.76% 40.40% 40.81%

Selling, general & administrative expenses 2.49% 3.03% 3.20% 2.65% 2.70% 2.75% 2.80% 2.85%

Restructuring & integration costsOther operating expenses (income) - net 0.80% .0.29% 1.12% 0.98% 0.82% 0.73% 0.70% 0.68%

Total other operating costs & expenses 3.29% 2.74% 4.33% 4.68% 4.07% 3.96% 3.88% 3.88%Equity in earnings of operating affiliates 0.77% 0.76% 0.91% 0.91% 0.91% 0.91% 0.91% 0.91%

Operating earnings (loss) 48.48% 44.05% 49.89% 34.83% 34.55% 34.23% 33.93% 34.31%

Interest expense (income) - net 2.15% 2.69% 3.76% 4.62% 4.52% 4.45% 4.43% 4.50%Interest on cash, cash equivalents & investmentsGain (loss) on early extinguishment of debtEarnings (loss) before income taxes & equity in earnings of non-operating affiliates 46.35% 40.36% 46.11% 30.21% 30.04% 29.77% 29.50% 29.81%Income tax provision (benefit) 15.80% 12.54% 16.30% 11.92% 11.82% 11.71% 11.61% 11.74%Equity in earnings (loss) of non-operating affiliates - net of taxes 0.95% 0.18% 0.47% 0.51% 0.49% 0.47% 0.46% 0.46%Net earnings (loss) 31.51% 28.00% 30.29% 17.79% 17.73% 17.59% 17.42% 17.61%

CF#IndustriesBalance'Sheet

Fiscal'Years'Ending'Dec.'31 2012 2013 2014 2015E 2016E 2017E 2018E 2019EReport DateAssets

Current Assets Cash & cash equivalents 37.27% 31.25% 42.09% -3.74% 6.05% 13.64% 20.52% 28.75% Restricted cash - 2.81% Accounts receivable - net 3.56% 4.22% 4.04% 3.80% 3.80% 3.80% 3.80% 3.80% Inventories - net 4.55% 5.01% 4.28% 5.00% 5.00% 5.00% 5.00% 5.00% Deferred income taxes 0.16% 1.10% 1.77% 2.79% 2.76% 2.74% 2.71% 2.74% Prepaid income taxes - 0.61% Assets held for sale - 1.36% Other current assets 0.46% 1.69% 0.39% 0.42% 0.40% 0.39% 0.38% 0.38% Total current assets 46.00% 48.04% 53.31% 8.26% 18.02% 25.56% 32.41% 40.67% Property, plant & equipment - net 63.90% 74.92% 116.50% 163.57% 168.11% 172.96% 178.41% 186.51% Asset retirement obligation funds 3.29% - Investments in & advances to affiliates 15.33% 16.91% 18.16% 21.72% 23.14% 24.01% 25.16% 26.14% Goodwill 33.82% 38.28% 44.12% 45.55% 42.57% 40.16% 38.25% 37.14% Noncurrent assets held for sale - 12.40% Other assets 4.23% 4.48% 5.14% 5.40% 5.15% 4.95% 4.81% 4.77% Total assets 166.56% - 239.04% 244.51% 256.99% 267.66% 279.05% 295.22%Liabilities and EquityCurrent LiabilitesAccounts payable 1.92% 3.09% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Accounts payable & accrued expenses 6.00% 10.30% 12.44% 8.00% 8.00% 8.00% 8.00% 8.00% Income taxes payable 3.07% 1.34% 0.34% 0.60% 0.59% 0.59% 0.58% 0.59% Customer advances 6.24% 2.20% 6.86% 6.33% 5.70% 5.71% 5.09% 5.00% Notes payable 0.08% - Distributions payable to noncontrolling interest 0.09% - Liabilities held for sale - 0.49% Other current liabilities 0.09% 0.79% 1.02% 0.77% 0.72% 0.68% 0.65% 0.63% Total current liabilities 15.57% 15.13% 20.65% 15.69% 15.02% 14.98% 14.32% 14.22% Total long-term debt 26.21% 56.59% 96.82% 104.34% 101.94% 100.53% 100.08% 101.57% Deferred income taxes 15.38% 15.22% 17.26% 11.84% 15.39% 15.39% 15.39% 15.39% Noncurrent liabilities held for sale - 2.82% 0.00% Other noncurrent liabilities 6.48% 5.95% 7.90% 7.38% 6.90% 6.51% 6.20% 6.02%Equity Minority interest - - Common stock 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% Paid-in capital 40.83% 29.12% 29.85% 30.77% 28.76% 27.13% 25.84% 25.09% Retained earnings (accumulated deficit) 56.70% 68.05% 66.94% 90.62% 108.57% 113.71% 141.45% 159.68% Treasury stock - at cost 0.04% 3.69% 4.68% 20.41% 23.44% 25.46% 27.44% 29.74% Accumulated other comprehensive income (loss) -0.81% -0.78% -3.37% -3.47% .3.25% .3.06% .2.92% .2.83% Total stockholders' equity 96.69% 92.72% 88.75% 97.52% 110.66% 112.33% 136.94% 152.20% Noncontrolling interest 6.23% 6.62% 7.65% 7.73% 7.08% 6.54% 6.11% 5.81% Total equity 102.92% 99.34% 96.40% 105.25% 117.74% 118.87% 143.05% 158.01%

CF#Industries

Value&Driver&Estimation

Fiscal&Years&Ending&Dec.&31 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

EBITA

Operating9Revenue 6,104,000 5,474,700 999994,743,2009 999994,600,9049 999999999994,922,9679 9999999999999995,218,3459 999995,479,2639 999995,643,6409

Cost9of9Goods9Sold 2,570,900999999 2,543,900999999 2,572,2009999 2,070,4079999 2,313,7959999999999 2,504,80699999999999999 2,630,0469999 2,708,9479999

SG9&9A9 151,800 166,000 151,9009999999 121,9249999999 132,92099999999999999 143,504999999999999999999 153,4199999999 160,8449999999

Depreciation 419,800 410,600 392,5009999999 587,0129999999 579,30699999999999999 586,677999999999999999999 635,4279999999 631,5489999999

Implied9Interest9on9PV9Leases M999999999999999999 M999999999999999999 29,0259999999999 29,8969999999999 30,7939999999999999999 31,71799999999999999999999 32,6689999999999 33,6489999999999

Other9Operating9Expenses 49,100 (15,800) 53,3009999999999 45,3059999999999 40,3219999999999999999 38,30599999999999999999999 38,3059999999999 38,3059999999999

EBITA 2,912,400999999 2,370,000999999 1,602,3259999 1,806,1529999 1,887,4189999999999 1,976,76999999999999999 2,054,7339999 2,137,6449999

Adjusted9Taxes

Income tax provision (benefit) 964,200 686,500 99999999773,0009 99999999548,3199 99999999999999581,9789 999999999999999999611,0959 99999999636,1379 99999999662,4989

Tax9Shield9on9Interest9Expense 44,671 45,873 999999999970,2089 999999999973,7099 9999999999999999968,5499 99999999999999999999970,6069 999999999972,7249 999999999974,9069

Tax9on9Interest9income 999999999999999999999M999 999999999999999999999M999

Loss9on9Early9Extinguishment9of9Debt 999999999999999999999M999 999999999999999999999M999

Tax9on9NonMOperating9Income 37599999999999999999 (16,950)9999999999

Tax9on9PV9leases M999999999999999999 M999999999999999999 9,931999999999999 10,2279999999999 10,5349999999999999999 10,85099999999999999999999 11,1769999999999 11,5119999999999

Total#Adjusted#Taxes 1,008,496999999 749,322999999999 853,1399999999 632,2559999999 661,06299999999999999 692,551999999999999999999 720,0369999999 748,9159999999

Deferred9Taxes

Deferred9Taxes9Assets 9,500 60,000 84,0009999999999 128,2089999999 136,07899999999999999 142,886999999999999999999 148,7429999999 154,9069999999

Deferred9Taxes9Liabilities9 938,800 833,200 818,6009999999 544,8859999999 757,86699999999999999 803,338999999999999999999 843,5059999999 868,8109999999

Change9in9Deferred9Taxes (27,500)9999999999 (156,100)99999999 (38,600)99999999 (317,923)999999 205,11199999999999999 38,66499999999999999999999 34,3129999999999 19,1419999999999

########NOPLAT 1,876,404###### 1,464,578###### 710,587####### 855,973####### 1,431,467########## 1,322,883############## 1,369,008#### 1,407,871####

Net9Operating9Working9Capitol

Current9Assets

Normal9Cash 122,080 109,494 1,996,6009999 (172,053)999999 298,07199999999999999 711,569999999999999999999 1,124,0739999 1,622,3139999

Accounts9Receivable 217,400 230,900 191,5009999999 174,8349999999 187,07399999999999999 198,297999999999999999999 208,2129999999 214,4589999999

Inventory 277,900 274,300 202,9009999999 230,0459999999 246,14899999999999999 260,917999999999999999999 273,9639999999 282,1829999999

Prepaid9Expenses 33,400 Other9Current9Operating9Assets 27,900 92,400 18,6009999999999 19,1589999999999 19,7339999999999999999 20,32599999999999999999999 20,9349999999999 21,5629999999999

Total9Current9Assets 645,280999999999 740,494999999999 2,409,6009999 251,9859999999 751,02599999999999999 1,191,10899999999999999 1,627,1839999 2,140,5169999

NonMInterest9Bearing9Current9Liabilities

Accounts9Payable9and9Accrued9Expenses 366,500 564,100 M9999999999999999 M9999999999999999 M9999999999999999999999 M99999999999999999999999999 M9999999999999999 M9999999999999999

Income9Taxes9Payable 187,100 73,300 16,0009999999999 27,4169999999999 29,0999999999999999999 30,55599999999999999999999 31,8079999999999 33,1259999999999

Customer9Advances 380,700 120,600 325,4009999999 291,0639999999 280,85299999999999999 298,188999999999999999999 279,1439999999 282,2789999999

Total9Current9Liabilities 934,300999999999 758,000999999999 341,4009999999 318,4789999999 309,95199999999999999 328,742999999999999999999 310,9509999999 315,4039999999

Net9Operating9Working9Capitol (289,020)99999999 (17,506)9999999999 2,068,2009999 (66,494)99999999 441,07499999999999999 862,365999999999999999999 1,316,2339999 1,825,1139999

PPE9M9Net9(+) 3,900,500 4,101,700 5,525,8009999 7,525,8009999 8,275,8009999999999 9,025,80099999999999999 9,775,8009999 10,525,80099

Other9Assets9(+) 257,900 245,500 243,6009999999 248,4729999999 253,44199999999999999 258,510999999999999999999 263,6809999999 268,9549999999

Operating9Leases(+) 254,600999999999 409,500999999999 655,2009999999 674,8569999999 695,10299999999999999 715,955999999999999999999 737,4339999999 759,5569999999

Other noncurrent liabilities (-) 395,700 325,600 48,4009999999999 35,5299999999999 35,5299999999999999999 35,52999999999999999999999 35,5299999999999 35,5299999999999

Invested#Capitol 3,728,280###### 4,413,594###### 8,444,400#### 8,347,105#### 9,629,888########## 10,827,101############ 12,057,617## 13,343,894##

Change9in9Invested9Capitol (31,578)9999999999 685,314999999999 4,030,8069999 (97,295)99999999 1,282,7839999999999 1,197,21399999999999999 1,230,5169999 1,286,2779999

NOPLAT 1,889,827999999 1,487,147999999 710,5879999999 855,9739999999 1,431,4679999999999 1,322,88399999999999999 1,369,0089999 1,407,8719999

(÷)9Beg,9Invested9Cap 3,759,858999999 3,728,280999999 4,413,5949999 8,444,4009999 8,347,1059999999999 9,629,88899999999999999 10,827,10199 12,057,61799

ROIC 49.91% 39.28% 16.10% 10.14% 17.15% 13.74% 12.64% 11.68%

NOPLAT 1,889,827999999 1,487,147999999 710,5879999999 855,9739999999 1,431,4679999999999 1,322,88399999999999999 1,369,0089999 1,407,8719999

(M)9Capital9Expenditures (31,578)9999999999 685,314999999999 4,030,8069999 (97,295)99999999 1,282,7839999999999 1,197,21399999999999999 1,230,5169999 1,286,2779999

FCF 1,921,405###### 801,833######### (3,320,219)### 953,268####### 148,684############## 125,669################## 138,492####### 121,594#######

Beginning9IC 3,759,858999999 3,728,280999999 4,413,5949999 8,444,4009999 8,347,1059999999999 9,629,88899999999999999 10,827,10199 12,057,61799

ROIC 49.91% 39.28% 16.10% 10.14% 17.15% 13.74% 12.64% 11.68%

EP 1,703,537###### 1,302,421###### 491,906####### 437,577####### 1,017,891########## 845,748################## 832,556####### 810,450#######

CF#IndustriesWeighted(Average(Cost(of(Capital((WACC)(Estimation

Cost%of%Equity Cost%of%Debt

Risk%free 2.7%Via%Federal%Reserve,%quoted%2/18 172%Basis%points%above%Rf%rateImplied%Risk%Premium 4.85% Per%Damodaran.com 1.72%Beta 0.955 Raw%01%May%2014,%after%phospate%portion%sold 4.43%Current%Stock%Price 291.23Shares%Outstanding% 47900

Cost%of%Equity 7.34%Total%Equity 4,842,396%%%%%%%%%%Total%Debt 5,665,000%%%%%%%%%%Total%Value 10,507,396%%%%%%%%

WACC 4.95%

Er=r(f)+B[E(rm)[r(f)]

WACC%=%Re(E/V)%+%Rd(1[t)(D/V)%+%Rpfd(PFD/V)

CF#IndustriesDiscounted+Cash+Flow+(DCF)+and+Economic+Profit+(EP)+Valuation+Models

Key$Inputs:$$$$$CV$Growth 2.75%$$$$$CV$ROIC 6.00%$$$$$WACC 4.95%$$$$$Cost$of$Equity 7.34%

Fiscal+Years+Ending+Dec.+31 2014E 2015E 2016E 2017E 2018E 2019E

WACC 4.95%

NOPLAT 710,587$$$$$$$$$$$$$$$$$$ 855,973$$$$$$$ 1,431,467$$$$ 1,322,883$$$$ 1,369,008$$$$ 1,407,871$$$$$$$$$$$Invested$Capital 8,444,400$$$$$$$$$$$$$$$ 8,347,105$$$$ 9,629,888$$$$ 10,827,101$$ 12,057,617$$ 13,343,894$$$$$$$$ROIC 16.10% 10.14% 17.15% 13.74% 12.64% 6.00%

NOPLAT 710,587$$$$$$$$$$$$$$$$$$ 855,973$$$$$$$ 1,431,467$$$$ 1,322,883$$$$ 1,369,008$$$$ 1,407,871$$$$$$$$$$$(Q)$Capital$Expenditures 4,030,806$$$$$$$$$$$$$$$ (97,295)$$$$$$$$ 1,282,783$$$$ 1,197,213$$$$ 1,230,516$$$$ 1,286,277$$$$$$$$$$$FCF (3,320,219)$$$$$$$$$$$$$$ 953,268$$$$$$$ 148,684$$$$$$$ 125,669$$$$$$$ 138,492$$$$$$$CV 34,589,270$$$$$$$$

Number$of$Discounts $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$1$ 2$$$$$$$$$$$$$$$$$$$$ 3$$$$$$$$$$$$$$$$$$$$ 4$$$$$$$$$$$$$$$$$$$$ 5$$$$$$$$$$$$$$$$$$$$ 5$$$$$$$$$$$$$$$$$$$$$$$$$$PV$of$Cash$Flows $$$$$$$$$$$$$$(3,163,478) 865,388$$$$$$$ 128,605$$$$$$$ 103,567$$$$$$$ 108,747$$$$$$$ 27,160,109$$$$$$$$Total$Operating$Value 25,202,938$$$$$$$$

(Q)$Total$Debt 5,665,000$$$$$$$$$$$(Q)$Earnings$from$NonQControllable$Interests 45,105$$$$$$$$$$$$$$$$(Q)$ESOP 106,830$$$$$$$$$$$$$$(Q)$PV$Operation$Leases 415,850$$$$$$$$$$$$$$Firm$Value 18,970,153$$$$$$$$(/)Shares$Outstanding 51,302$$$$$$$$$$$$$$$$Target$Price 369.78Todays$Price$ 377.30

EP#Model

Economic$Profit 491,906$$$$$$$$$$$$$$$$$$ 437,577$$$$$$$ 1,017,891$$$$ 845,748$$$$$$$ 832,556$$$$$$$ 810,450$$$$$$$$$$$$$$CV$of$Economic$Profit 22,531,652$$$$$$$$Number$of$Discounts 1$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ 2$$$$$$$$$$$$$$$$$$$$ 3$$$$$$$$$$$$$$$$$$$$ 4$$$$$$$$$$$$$$$$$$$$ 5$$$$$$$$$$$$$$$$$$$$ 5$$$$$$$$$$$$$$$$$$$$$$$$$$PV$of$Cash$Flows 468,684$$$$$$$$$$$$$$$$$$ 397,238$$$$$$$ 880,431$$$$$$$ 697,001$$$$$$$ 653,737$$$$$$$ 17,692,254$$$$$$$$PV$Operations 20,789,344$$$$$$$$(+)$Beginning$IC 4,413,594$$$$$$$$$$$EP$CV$Value 25,202,938$$$$$$$$

(Q)$Total$Debt 5,665,000$$$$$$$$$$$(Q)$Earnings$from$NonQControllable$Interests 45,105$$$$$$$$$$$$$$$$(Q)ESOP 106,830$$$$$$$$$$$$$$(Q)PV$Operating$Leases 415,850$$$$$$$$$$$$$$Firm$Value 18,970,153$$$$$$$$(/)Shares$Outstanding 51,302$$$$$$$$$$$$$$$$Target$Price 369.78Price$Today 377.30

CF#IndustriesDividend'Discount'Model'(DDM)'or'Fundamental'P/E'Valuation'Model

Fiscal'Years'Ending'Dec.'31 2015E 2016E 2017E 2018E 2019E

EPS 15.75$.............................. 17.00$......... 18.03$......... 18.90$......... 19.84$.............ROE 16.90% 15.06% 14.80% 12.18% 11.14%

Key$Assumptions...CV.growth 3.00%...CV.ROE 11.14%...Cost.of.Equity 7.34%

Future$Cash$Flows.....P/E.Multiple.(CV.Year) 14.70.....EPS.(CV.Year) 19.84.....Future.Stock.Price 334.00$................Dividends.Per.Share 6.00 6.00 7.00 8.00 8.00.....Future.Cash.Flows 6.00 6.00 7.00 8.00 334.00$...........

.....Discounted.Cash.Flows 5.59 5.21 5.66 6.03 251.58

Intrinsic.Value 268.47$............................Value#Today 280.55$............................

CF#IndustriesRelative(Valuation(Models

EPS EPS Est.'5yrTicker Company Price 2015E 2016E P/E'15 P/E'16 EPS'gr. PEG'15 PEG'16AGU Agrium $115.87 $7.51' $8.97' 15.4'''''''''' 12.9'''''''''' 9.80% 157.44'''''' 131.81''''''POT Potash'Corp $36.84 $2.11' $2.27' 17.5'''''''''' 16.2'''''''''' 7.37% 236.90'''''' 220.20''''''MOS The'Mosaic'Company $53.56 $3.49' $3.95' 15.3'''''''''' 13.6'''''''''' 11.03% 139.14'''''' 122.93''''''MON Monsanto'Company $124.23 $5.90' $6.85' 21.1'''''''''' 18.1'''''''''' 12.50% 168.45'''''' 145.09''''''SYT' Syngenta'AG $71.11 $3.85' $4.18' 18.5'''''''''' 17.0'''''''''' 6.75% 273.63'''''' 252.03''''''

Average 17.6########## 15.6########## 195.1######## 174.4########

CF CF'Industries $291.23 $15.75' $17.00' 18.5'''''''''' 17.1'''''''''' 4.73% 391.0'''''''' 362.1''''''''

Implied#Value:###Relative#P/E#(EPS15) #$###########276.45####Relative#P/E#(EPS16) 264.78$###########

CF#IndustriesKey$Management$Ratios

Fiscal$Years$Ending$Dec.$31 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

Liquidity(RatiosCurrent2Ratio2(Current2Assets/Current2Liabilities) 2.95 3.18 2.58 0.53 1.20 1.71 2.26 2.86Quick2Ratio2(Current2Assets2C2Inventory2/2Current2Liabilities) 2.66 2.84 2.37 0.21 0.87 1.37 1.91 2.51Cash2Ratio2(Cash2+2Marketable2Securites2/2Current2Liabilites) 1.27 2.07 2.04 C0.24 0.40 0.91 1.43 2.02

Activity(or(Asset2Management(RatiosInventory2Turnover2(COGS2/2Average2Inventory) 9.25 9.27 12.68 9.00 9.40 9.60 9.60 9.60Invetory2Period2(3652/2Inventory2Turnover) 39.45 39.36 28.79 40.56 38.83 38.02 38.02 38.02Fixed2Asset2Turnover2(Sales2/2Net2PPE) 1.56 1.33 0.86 0.61 0.59 0.58 0.56 0.54Asset2Turnover2(Sales2/2Total2Assets) 0.60 0.52 0.42 0.41 0.39 0.37 0.36 0.34

Financial(Leverage(RatiosDebt2Ratio2(Total2Debt2/2Total2Assets) 0.16 0.29 0.41 0.43 0.40 0.38 0.36 0.34Debt2to2Equity2Ratio2(Total2Debt2/2Total2Equity) 0.25 0.57 1.00 0.99 0.87 0.85 0.70 0.64Interest2Coverage2(EBITA2/2Interest2Charges) 13.25 16.29 12.23 12.25 10.59 9.29 9.24 9.20

Profitability(RatiosGross2Profit2Margin2(Sales2C2COGS2/2Sales) 57.88% 53.53% 45.77% 55.00% 53.00% 52.00% 52.00% 52.00%Return2on2Assets2(Net2Income2/2Total2Assets) 18.92% 14.57% 12.67% 7.27% 6.90% 6.57% 6.24% 5.96%Return2on2Equity2(Net2Income2/2Shareholder2Equity) 30.62% 28.18% 31.42% 16.90% 15.06% 14.80% 12.18% 11.14%

Payout(Policy(RatiosPayout2Ratio2(Dividends2per2Share2/2EPS) 0.06 0.09 0.16 0.38 0.35 0.39 0.42 0.40Dividend2Cover2(EPS2/2Dividends2per2Share 18.09 11.30 6.33 2.63 2.83 2.58 2.36 2.48

Present'Value'of'Operating'Lease'Obligations'(2013) Present'Value'of'Operating'Lease'Obligations'(2012)Present'Value'of'Operating'Lease'Obligations'(2012) Present'Value'of'Operating'Lease'Obligations'(2012)

Operating Operating 2011 2010Fiscal1Years1Ending1 Leases Fiscal1Years1Ending1 Leases Operating Operating2014 88.8 2013 78 Fiscal1Years1Ending1 Leases Fiscal1Years1Ending1 Leases2015 81.5 2014 52.3 2012 71 2011 66.32016 76.1 2015 34.7 2013 49.2 2012 58.22017 58.7 2016 31.6 2014 32.3 2013 38.32018 42.3 2017 24.1 2015 22.3 2014 22.8Thereafter 91 Thereafter 49.6 2016 19.7 2015 18.2Total1Minimum1Payments 438.4 Total1Minimum1Payments 270.3 Thereafter 51.2 Thereafter 62.4Less:1Interest 23 Less:1Interest 12 Total1Minimum1Payments 245.7 Total1Minimum1Payments 266.2PV1of1Minimum1Payments 416 PV1of1Minimum1Payments 258 Less:1Interest 13 Less:1Interest 17

1000 PV1of1Minimum1Payments 233 PV1of1Minimum1Payments 249415850

Capitalization'of'Operating'Leases Capitalization'of'Operating'LeasesCapitalization'of'Operating'Leases Capitalization'of'Operating'Leases

PreJTax1Cost1of1Debt 4.43% PreJTax1Cost1of1Debt 4.43%Number1Years1Implied1by1Year161Payment 2.2 Number1Years1Implied1by1Year161Payment 2.1 PreJTax1Cost1of1Debt 4.43% PreJTax1Cost1of1Debt 4.43%

Number1Years1Implied1by1Year161Payment 2.6 Number1Years1Implied1by1Year161Payment 3.4Lease PV1Lease Lease PV1Lease

Year Commitment Payment Year Commitment Payment Lease PV1Lease Lease PV1Lease1 88.8 88.8 1 78 78.0 Year Commitment Payment Year Commitment Payment2 81.5 81.5 2 52.3 52.3 1 71 71.0 1 66.3 66.33 76.1 76.1 3 34.7 34.7 2 49.2 49.2 2 58.2 58.24 58.7 58.7 4 31.6 31.6 3 32.3 32.3 3 38.3 38.35 42.3 42.3 5 24.1 24.1 4 22.3 22.3 4 22.8 22.861&1beyond 42.3 68.5 61&1beyond 24.1 37.4 5 19.7 19.7 5 18.2 18.2PV1of1Minimum1Payments 415.9 PV1of1Minimum1Payments 258.1 61&1beyond 19.7 38.1 61&1beyond 18.2 45.7

PV1of1Minimum1Payments 232.6 PV1of1Minimum1Payments 249.5

Present'Value'of'Operating'Lease'Obligations'(2012) Present'Value'of'Operating'Lease'Obligations'(2012) Present'Value'of'Operating'Lease'Obligations'(2012)2009 2008 2007

Operating Operating OperatingFiscal1Years1Ending1 Leases Fiscal1Years1Ending1 Leases Fiscal1Years1Ending1 Leases2010 29.9 2009 33.2 2008 26.42011 14.1 2010 27.2 2009 21.22012 8.8 2011 11.4 2010 16.72013 4.5 2012 7.3 2011 62014 3.5 2013 4.5 2012 4.2Thereafter 7.7 Thereafter 11.3 Thereafter 7.9Total1Minimum1Payments 68.5 Total1Minimum1Payments 94.9 Total1Minimum1Payments 82.4Less:1Interest 2 Less:1Interest 3 Less:1Interest 2PV1of1Minimum1Payments 67 PV1of1Minimum1Payments 92 PV1of1Minimum1Payments 80

Capitalization'of'Operating'Leases Capitalization'of'Operating'Leases Capitalization'of'Operating'Leases

PreJTax1Cost1of1Debt 4.43% PreJTax1Cost1of1Debt 4.43% PreJTax1Cost1of1Debt 4.43%Number1Years1Implied1by1Year161Payment 2.2 Number1Years1Implied1by1Year161Payment 2.5 Number1Years1Implied1by1Year161Payment 1.9

Lease PV1Lease Lease PV1Lease Lease PV1LeaseYear Commitment Payment Year Commitment Payment Year Commitment Payment1 29.9 29.9 1 33.2 33.2 1 26.4 26.42 14.1 14.1 2 27.2 27.2 2 21.2 21.23 8.8 8.8 3 11.4 11.4 3 16.7 16.74 4.5 4.5 4 7.3 7.3 4 6 6.05 3.5 3.5 5 4.5 4.5 5 4.2 4.261&1beyond 3.5 5.8 61&1beyond 4.5 8.4 61&1beyond 4.2 6.0PV1of1Minimum1Payments 66.6 PV1of1Minimum1Payments 92.0 PV1of1Minimum1Payments 80.5

Expected(Annual(Number(of(Options(Exercised: 102

Current(Average(Strike(Price: 141.70$(((((((((Cost(of(Equity: 7.34%Current(Stock(Price: $291.23

2014E 2015E 2016E 2017E 2018E 2019EIncrease(in(Shares(Outstanding: 102 102 102 102 102 102Average(Strike(Price: 141.70$((((((((( 141.70$((((((((( 141.70$((((((((( 141.70$((((((((( 141.70$((((((((( 141.70$(((((((((Increase(in(Common(Stock(Account: 14,433((((((((((( 14,433((((((((((( 14,433((((((((((( 14,433((((((((((( 14,433((((((((((( 14,433(((((((((((

14.43(((((((((((((( 14.43(((((((((((((( 14.43(((((((((((((( 14.43(((((((((((((( 14.43(((((((((((((( 14.43((((((((((((((Change(in(Treasury(Stock 1,925,000 716,950 214,550 175,000 175,000 175,000Expected(Price(of(Repurchased(Shares: 250.00$((((((((( 325.00$((((((((( 350.00$((((((((( 350.00$((((((((( 350.00$((((((((( 350.00$(((((((((Number(of(Shares(Repurchased: 7,700(((((((((((((( 2,206(((((((((((((( 613((((((((((((((((( 500((((((((((((((((( 500((((((((((((((((( 500(((((((((((((((((

Shares(Outstanding((beginning(of(the(year) 58,900 51,302 49,096 48,483 48,084 47,686Plus:(Shares(Issued(Through(ESOP 102 102 102 102 102 102Less:(Shares(Repurchased(in(Treasury 7,700(((((((((((((( 2,308(((((((((((((( 715((((((((((((((((( 500((((((((((((((((( 500((((((((((((((((( 500(((((((((((((((((Shares(Outstanding((end(of(the(year) 51,302 49,096 48,483 48,084 47,686 47,288

VALUATION)OF)OPTIONS)GRANTED)IN)ESOP

Ticker'Symbol CFCurrent'Stock'Price $291.23Risk'Free'Rate 1.40%Current'Dividend'Yield 2.01%Annualized'St.'Dev.'of'Stock'Returns 35.00%

Average Average BJS ValueRange'of Number Exercise Remaining Option of'OptionsOutstanding'Options of'Shares Price Life'(yrs) Price GrantedRange'1 24 15.86 1.90 15.86$'''''''''' 381$''''''''''''''''''''''Range'2 234 76.50 5.40 192.75$'''''''' 45,103$''''''''''''''''Range'3 479 179.86 8.40 128.07$'''''''' 61,346$''''''''''''''''Total 737 141.70$'''''''' 7.24 180.55$'''''''' 106,830$))))))))))))))

Risk Free Rate CVGrowth377.30 2.25% 2.50% 2.75% 3.00% 3.25% 288.55 2.50% 2.75% 3.00% 3.25% 3.50%4.35% 509.44 549.39 601.83 673.69 778.21 10.50% 262.81 268.08 273.96 280.55 288.014.60% 431.24 457.64 491.17 535.18 595.49 10.75% 264.84 270.40 276.60 283.56 291.43

WACC 4.95% 346.18 360.72 378.58 401.00 430.03 CV ROE 11.14% 267.86 273.84 280.52 288.02 296.495.20% 297.83 306.93 317.89 331.35 348.25 11.25% 268.67 274.78 281.59 289.23 297.865.45% 257.07 262.29 268.48 275.94 285.09 11.50% 270.49 276.85 283.94 291.90 300.89

2015 COGS CV Growth377.30 0.41 0.43 0.45 0.48 0.5 288.55 2.50% 2.75% 3.00% 3.25% 3.50%

-7% 346.05 349.38 352.79 358.06 361.68 6.75% 309.39 318.65 329.14 341.14 354.97-5% 358.10 361.55 365.09 370.55 374.30 7.00% 290.51 298.20 306.85 316.65 327.86

2015 Rev -3% 370.07 373.64 377.30 382.96 386.84 Cost of Equity 7.34% 267.99 273.99 280.68 288.19 296.67Growth -1% 381.96 385.65 389.43 395.28 399.31 7.50% 258.46 263.80 269.74 276.37 283.84

1% 393.76 397.58 401.48 407.53 411.69 7.75% 244.74 249.20 254.13 259.61 265.74

2015 Growth Rate CV ROE377.30 -7% -5% -3% -1% 1% 288.55 10.50% 10.75% 11.14% 11.25% 11.50%6.50% 353.50 365.80 378.01 390.14 402.20 6.75% 321.34 324.47 329.11 330.37 333.156.75% 353.15 365.44 377.66 389.79 401.84 7.00% 299.60 302.51 306.82 307.99 310.57

Depreciation 7.00% 352.79 365.09 377.30 389.43 401.48 Cost of Equity 7.34% 274.08 276.72 280.65 281.71 284.067.25% 352.44 364.73 376.95 389.08 401.13 7.50% 263.41 265.95 269.71 270.73 272.997.50% 352.08 364.38 376.59 388.72 400.77 7.75% 248.19 250.57 254.11 255.06 257.18

Tax Rate377.30 0.32 0.33 0.34 0.35 0.36

-0.07 352.89 352.85 352.79 352.76 352.71-0.05 365.19 365.14 365.09 365.05 365.01

Rev Growth -0.03 377.40 377.36 377.30 377.27 377.22-0.01 389.53 389.49 389.43 389.40 389.350.01 401.58 401.54 401.48 401.45 401.40

Cost of Debt377.30 4.00% 4.25% 4.43% 4.75% 5.00%7.00% 471.42 442.39 422.98 391.17 368.46 7.25% 431.97 406.21 388.91 360.44 340.01

Cost of Equity 7.34% 418.85 394.14 377.52 350.12 330.44 7.75% 365.27 344.61 330.64 307.47 290.71 8.00% 336.82 318.18 305.53 284.49 269.21

ESOP377.30 50 75 102 125 150

7250 374.72 374.56 374.38 374.24 374.087500 376.34 376.17 376.00 375.85 375.69

Stock 7700 377.64 377.48 377.30 377.15 376.99Repurchased 8000 379.62 379.45 379.27 379.12 378.96

8250 381.28 381.12 380.93 380.78 380.61