CF INDUSTRIES HOLDING INC

CF : NYSE

Date: 18.03.11

Symbol: CF

Exchange: NYSE

Industry: Agricultural

Chemicals

Sector: Basic Materials

Recommendation:

Target Price: 200.00USD

Current Price: 129.53 USD

Summary

• CF Industries Holdings eliminated a key rival

when it bought Terra Industries last year.

• North America’s largest manufacturers and

distributors of nitrogen and phosphate

fertilizer products.

• Given its deep connection to agriculture, CF is

often seen by hedge funds and other short-

term investors as a pure bet on corn demand.

• CF controls about two-thirds of the ammonia

supply in the heart of the U.S. corn belt.

Fundamental Data

Market Cap ($M): 9.24B

Avg.Vol (10Day): 2,737,540

52 Week High/Low: 153.83-57.56

P/E ratio (TTM): 24.26

P/B ratio: 2.28

Dividend yield (%): 0.30

ROA (%): 12.09

ROE (%): 14.27

Profit Margin (%): 8.81

Operating Margin (%): 27.45

SUMMARY INTRA-DAY INTERACTIVE CHART

Change 2.640 (2.081%)

Bid 127.000

Ask 132.000

Open 129.220

High 131.030

Low 127.780

Volume N.A.

52-Week Range 153.83 - 57.56

1-Yr Return 39.662%

Earnings

EARNINGS FUNDAMENTALS

Earnings Past 12 Months 8.940 Shares (Millions) 71.298

Quarter Est. EPS (03/11) 3.21 Market Cap (Millions) 9,235.222

Quarter Est. EPS (06/11) 5.01 Float (Millions) 70.951

Year Est. EPS (12/11) 13.63 Return on Equity 12.084

Price/Earnings (Trailing) 14.489 Short Interest 1,261,871.000

Relative P/E 0.970 Last Dividend Reported 0.100 Regular Cash

Earnings Growth Rate 58.100 Dividend Yield (ttm) 0.309

Estimated P/E 9.300 Relative Dividend Yield 0.163

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CF Industries produces and

distributes nitrogen and

CF INDUSTRIES HOLDING INC

CF Industries Holdings, Inc. (CF Holdings) is a manufacturer and distributor of nitrogen and phosphate fertilizer products. CF Holdings operates in two segments: the nitrogen segment and the phosphate segment. Its principal products in the nitrogen segment are ammonia, urea, urea ammonium nitrate solution (UAN), ammonium nitrate (AN), diesel exhaust fluid (DEF) and aqua ammonia. Its principal products in the phosphate segment are diammonium phosphate (DAP) and monoammonium phosphate (MAP). The Company’s market and distribution facilities are concentrated in the Midwestern United States grain-producing states, and other agricultural areas of the United States and Canada. The Company also serves off-shore markets through exports of nitrogen fertilizer products from its Donaldsonville, Louisiana manufacturing facilities, and phosphate fertilizer products from its Florida phosphate operations through its Tampa port facility, as well as from its joint-venture production facilities in the Republic of Trinidad and Tobago, and the United Kingdom. The principal customers for its nitrogen and phosphate fertilizers are cooperatives and independent fertilizer distributors. During the year ended December 31, 2010, the Company sold 11.5 million tons of nitrogen fertilizers and 1.9 million tons of phosphate fertilizers. In April 2010, it acquired Terra Industries Inc. (Terra), a North American producer and marketer of nitrogen fertilizer products.

Nitrogen Segment

CF Holdings operates seven nitrogen fertilizer production facilities in North America. It owns five of those

production facilities, four in the

Central United States, and one in Ontario, Canada. The Company also has a 75% interest in Terra Nitrogen Company, L.P. (TNCLP) and its subsidiary, Terra Nitrogen, Limited Partnership (TNLP), which owns a nitrogen fertilizer facility in Verdigris, Oklahoma, and a 66% interest in Canadian Fertilizers Limited (CFL), a variable interest entity that owns the nitrogen fertilizer complex in Medicine Hat, Alberta, Canada. During 2010, the combined production capacity of these seven facilities represented approximately 39% of North American ammonia capacity, 34% of North American dry urea capacity, 47% of North American UAN capacity and 22% of North American ammonium nitrates products capacity. Each of its nitrogen fertilizer production facilities in North America has on-site storage. The Company’s joint venture interests in Point Lisas Nitrogen Limited (PLNL) and GrowHow UK Limited (GrowHow) provides additional production capacity in three additional nitrogen fertilizer production facilities, one located in the Republic of Trinidad and Tobago, and two located in the United Kingdom.

The Company’s Donaldsonville nitrogen fertilizer complex is a nitrogen fertilizer production facility in North America, which has five ammonia plants, five urea plants and two UAN plants. The complex, which is located on the Mississippi River, includes deep-water docking facilities, access to an ammonia pipeline, and truck and railroad loading capabilities. The complex has on-site storage for 130,000 tons of ammonia, 168,000 tons of UAN (measured on a 32% nitrogen content basis) and 83,000 tons of granular urea. CF Holdings' Medicine Hat is a nitrogen fertilizer complex in Canada. The facility is owned by CFL. It has two ammonia plants and a urea plant. The complex has on-site storage for 60,000 tons of ammonia and 70,000 tons of urea. It ships its share of ammonia and urea produced at the Medicine Hat nitrogen fertilizer complex by truck and rail to customers in the United States and Canada and to its storage facilities in the northern United States.

The Company’s Port Neal facility consists of an ammonia plant, two urea plants, two nitric acid plants and a UAN plant. The location has on-site storage for 30,000 tons of ammonia and 81,000 tons of 32% UAN. The Company’s Verdigris facility, owned by TNLP, is an UAN production facility in North America. Verdigris facility consists of two ammonia plants, two nitric acid plants, two UAN plants and a port terminal. Through its 75.3% interest in TNCLP and its subsidiary, TNLP, the Company operates the plants and leases the port terminal from the Tulsa-Rogers County Port Authority. The complex has on-site storage for 23,000 tons of ammonia and 49,100 tons of 32% UAN.

The Company’s Woodward facility consists of an integrated ammonia plant, a nitric acid plant, a urea plant and two UAN plant. Woodward facility has on-site storage for 40,000 tons of ammonia and 83,000 tons of 32% UAN. The Company’s Yazoo City, Mississippi facility includes one ammonia plant, four nitric acid plants, an AN plant, two urea plants, a UAN plant and a dinitrogen tetroxide production and storage facility. The site has on-site storage for 28,000 tons of ammonia, 17,000 tons of 32% UAN and 7,000 tons of AN and related products. The Courtright facility consists of one ammonia plant, a UAN plant, a nitric acid plant and one urea plant. The location has on-site storage for 58,000 tons of ammonia and 14,000 tons of 32% UAN. The Point Lisas Nitrogen facility in the Republic of Trinidad and Tobago is owned jointly through a 50/50 venture with Koch Fertilizers. Point Lisas Nitrogen facility has the capacity to produce 720,000 tons of ammonia annually from natural gas supplied under contract with the National Gas Company of Trinidad and Tobago.

GrowHow is a 50/50 joint venture between the Company (as successor to Terra) and Yara International ASA (Yara) that owns and operates the Ince and Billingham facilities. The Ince facility consists of an ammonia plant, three nitric acid plants, an AN plant and three fertilizer compound plants. The Billingham facility is geographically split among two primary areas: the main site contains an ammonia plant, three nitric acid plants and a carbon dioxide plant, and the Portrack site, approximately two miles away, contains an AN fertilizer plant.

Phosphate Segment

CF Holdings' phosphate fertilizer manufacturing operations are located in central Florida and consist of a phosphate fertilizer chemical complex in Plant City, a phosphate rock mine, a beneficiation plant and phosphate rock reserves in Hardee County, and a deepwater terminal facility in the port of Tampa. It owns each of these facilities and properties. The Company’s Plant City phosphate fertilizer complex is a phosphate fertilizer facility in North America. At one million tons per year, its phosphoric acid capacity represents approximately 10% of the total United States capacity. During 2010, all of Plant City's phosphoric acid was converted into ammonium phosphates (DAP and MAP), representing approximately 14% of United States capacity for ammonium phosphate fertilizer products.

CF Holdings competes with Agrium, Koch Nitrogen, Terra Industries, Mosaic, Simplot and Potash Corp.

Products

CF Industries Holdings, Inc., through its CF Industries, Inc. subsidiary, is one of North America’s largest manufacturers and

distributors of nitrogen and phosphate fertilizer products. Nitrogen fertilizer is essential to healthy plant growth and high crop yields,

especially for corn, cotton, and wheat. Phosphate fertilizer helps plants generate necessary sugars, germinate seeds, and build

strong root structures. The company also produces nitrogen products for industrial and environmental applications.

Primary nitrogen products produced by CF Industries are:

• Urea Ammonium Nitrate (UAN)

Solution

• Anhydrous Ammonia

• Granular Urea

• Ammonium Nitrate

• Other Urea

Primary phosphate fertilizers produced by CF

Industries are:

• Diammonium Phosphate (DAP)

• Monoammonium Phosphate (MAP)

Custom fertilizer products include Aqua

Ammonia, UAN with Sulfur, DAP – Turf grade,

and others.

Man-made fertilizers have had a tremendous impact on farm productivity and food availability. In 1950, for example, the average

U.S. farmer produced enough food to feed 27 people. Since then, thanks to advances in fertilizers, seeds, herbicides, pesticides, and

farming practices, average yields of all crops have increased by 55 percent. The average farmer now produces enough food to feed

more than 120 people. This unprecedented improvement in crop yields has had important environmental benefits, too, significantly

reducing the amount of land required to feed a growing world population.

Distribution

CF Industries operates an integrated manufacturing and distribution system, providing agricultural and industrial customers a reliable

source of nitrogen and phosphate fertilizers. The company manufactures nitrogen products at seven large complexes, located in

Courtright, ON, Donaldsonville, LA, Medicine Hat, AB, Port Neal, IA, Verdigris, OK, Woodward, OK, and Yazoo City, MS. It

manufactures phosphate at mining and production operations in Central Florida. It distributes products through one of the industry’s

largest networks of terminals and warehouses, many of them in Midwestern states with excellent access to rail, water, and pipeline

transport. CF Industries also serves international customers through KEYTRADE AG, a leading global fertilizer trading company in

which it acquired a 50 percent interest in 2007, and owns 50% joint ventures in the U.K. and The Republic of Trinidad and Tobago.

• Its Courtright, ON Nitrogen Complex produces a full line of nitrogen fertilizers and industrial products, including anhydrous

ammonia, ammonium nitrate, urea, and urea ammonium nitrate (UAN) solution.

• Its Donaldsonville, LA Nitrogen Complex is North America’s largest and likely its most flexible operation. The complex

produces anhydrous ammonia, granular urea, and UAN solution for agricultural and industrial use.

• Its Medicine Hat, AB Nitrogen Complex is Canada’s largest. The complex produces anhydrous ammonia and granular urea.

• Its Port Neal, IA Nitrogen Complex consists of an ammonia plant, two urea plants, two nitric acid plants and a UAN solution

plant. The vast majority of the complex’s output serves customers in Iowa, Nebraska, South Dakota, Minnesota, and

Missouri.

• Its Verdigris, OK Nitrogen Complex is the largest UAN solution production facility in North America.

• Its Woodward, OK Nitrogen Complex contains an integrated ammonia/methanol plant and an upgraded plant that consists

of an acid, urea and UAN solution plant.

• Its Yazoo City, MS Nitrogen Complex consists of one ammonia plant, four nitric acid plants, an ammonium nitrate (AN)

plant, two urea plants, a UAN solution plant and a dinitrogen tetroxide production and storage facility.

• Its Central Florida Phosphate Operations include a rock mine and beneficiation plant in Hardee County, an integrated

fertilizer complex in Plant City, and terminal and warehousing facilities at the Port of Tampa.

• Its Distribution Facilities include over 20 ammonia terminals, as well as seven dry products warehouses and 16 UAN

solution terminals, located primarily in Midwestern U.S. states.

• Its KEYTRADE AG partner is a leading global fertilizer trading company based near Zurich, Switzerland. KEYTRADE trades

fertilizer in more than 90 nations and has offices in North America, Europe, and Asia.

• Its GrowHow UK Ltd. partner is a leading manufacturer of nitrogen fertilizer in the UK, and a major supplier of process

chemicals and utilities.

• Its 50% interest in Point Lisas Nitrogen Limited in The Republic of Trinidad and Tobago consists of an ammonia facility with

a long-term, beneficial gas contract.

In addition to its manufacturing capabilities, CF Industries has the ability to source products from offshore producers, receive them

at its Donaldsonville, LA nitrogen complex and its Tampa terminal, and market them through its distribution network.

News

A year after buyout, Terra does little to aid CF's shares

NEW YORK, March 2 (Reuters) - CF Industries Holdings eliminated a key rival when it bought Terra Industries last year, but so far surging corn prices rather than the deal's benefits have driven the fertilizer producer's stock. CF makes nitrogen and phosphate fertilizers, both crucial material for farmers. The company spent most of 2009 and part of 2010 in hot pursuit of Terra (TRAQP.PK), all the while fending off a hostile bid from Canada's Agrium (AGU.TO) (AGU.N). Ultimately, CF emerged the winner of the so-called fertilizer wars when it clinched Terra for $4.6 billion in cash and stock, more than double the initial offer. [ID:nLDE62B0AA] The deal made CF the world's second-largest producer of nitrogen, after Norway's Yara (YAR.OL), by increasing its number of fertilizer plants to seven from two. The buyout also brought access to pipelines and barges in the U.S. Midwest, the world's largest corn-growing region. But the acquisition has yet to lift CF's stock above pre-recession levels, in part because Wall Street is less focused on Terra's benefits and more concerned with the price of corn, which unlike soy requires nitrogen fertilizer. "Without a doubt, the impact of the Terra deal has been relatively minor," said Alan Rowsell of Standard Life Investments, which owns about 910,000 shares of CF. "The key driver for CF's stock over the last year has been the rise in the price of corn." Corn futures Cc1 on the Chicago Board of Trade have doubled since March 11, 2010, the day before the Terra deal closed, and were trading around $7.12 a bushel at midday Wednesday. CF shares have climbed 32 percent during the same period. By comparison, shares of Potash Corp (POT.TO) are up 54 percent, shares of Agrium have jumped 38 percent, and shares of Mosaic Co (MOS.N) have added 41 percent. CF shares were trading at $136.40 at midday Wednesday. "I don't see any reason why this stock couldn't have gone to $140 without this (Terra) deal," CLSA analyst Mark Connelly said. "I don't think this deal created an ounce of value." CF Chief Executive Steve Wilson disagreed, saying shareholders should continue to expect benefits from the buyout. "We believe there's more good news to come as the full realization of identified synergies, the benefits of our rapid debt repayment, and current fertilizer market conditions get reflected in financial markets," Wilson said in a statement to Reuters. COMMODITY PLAY Given its deep connection to agriculture, CF is often seen by hedge funds and other short-term investors as a pure bet on corn demand. That partly explains the interest in the stock from BlackRock, Vanguard, FMR and other hedge funds, most of whom tend to trade on short-term developments rather than long-term fundamentals. CF controls about two-thirds of the ammonia supply in the heart of the U.S. corn belt. Urea and other nitrogen-based fertilizers come from ammonia. In the past year ammonia prices have increased 62 percent and urea prices have risen 20 percent, according to Green Markets, a fertilizer market research firm that tracks pricing. CF also mines phosphate fertilizer from Florida's fossil-rich "bone valley." In the past year prices for diammonium phosphate, known as DAP, have increased 35 percent, according to Green Markets. "There's some synergies from distribution in the U.S. corn belt from the deal that are undeniable," BCMI research analyst Chris Damas said. "Terra was a very good match because its plants are closer to customers." CF, based in a Chicago suburb, gets a boost from cheap North American natural gas NGc1, a key feedstock for nitrogen fertilizer. NYMEX prices for the fuel have dropped 19 percent in the past year. That's attractive to Wall Street, where many analysts expect natural gas prices to stay low for years given recent North American shale gas discoveries. "CF is in a better position because it's much more of a nitrogen play and can take advantage of low-cost feedstock here domestically," said Randy Hare of the Huntington New Economy Fund, which owns about 12,400 shares of CF. CF holds no similar advantage when it comes to corn prices. Higher corn prices help all fertilizer producers, and CF more than others because hedge funds like to pile in when they see prices rising. The inverse is true, as well. "If we believed corn prices were going to reduce meaningfully, we probably would reduce our position in CF," said Standard Life's Rowsell. No one can predict where corn prices will go, but food demand will grow in line with populations in China, India and other emerging economies. Corn supplies are also at historic lows, prompting farmers to plant more and use more fertilizer. Jeff Doppelt, who bought Terra stock at around $2 per share and watched it spike to around $50 before the CF buyout, unloaded some of his CF holdings when the stock was trading at $150 last month.

But he has no plans to sell his remaining 11,000 shares any time soon. "The overwhelming majority of the stock I'm holding," Doppelt said. "I definitely think CF could be a $200 stock." StarMine valuations on CF and peers: CF Mosaic Potash Agrium Mkt Cap (Mln $): 9,766 37,905 52,207 14,895 Price (% 360 days): 31.3 38.4 56.8 38.8 EPS SmartEstimate: 14.2 4.03 3.68 7.93 P/E SmartEstimate: 9.6 21 19 12.3 Debt to Equity: 0.48 0.08 0.54 0.32 5-year oper. margin: 19.3 18.4 30.3 11.3 Mean Price Target: 160.33 86.18 62.69 105.94 (Source: StarMine. All SmartEstimates are for 2011, in US$)

Source : http://www.cfindustries.com/

REVENUE

Periods 2009 2010

March 680.6 502.4

June 991.0 1307.9

September 430.1 917.1

December 506.7

Note: Units in Millions of U.S. Dollars

EARNINGS PER SHARE

Periods 2009 2010

March 1.27699 -0.09053

June 4.32927 1.54106

September 0.78093 0.67038

December 1.0426

Note: Units in U.S. Dollars

CONSENSUS ESTIMATES ANALYSIS

# of Estimates Mean High Low 1 Year Ago

SALES (in millions)

Quarter Ending มี.ค.-54 10 1,168.50 1,359.00 920.00 573.47

Quarter Ending มิ.ย.-54 10 1,594.67 2,017.00 1,242.20 759.83

Year Ending ธ.ค.-54 15 5,224.05 6,004.00 4,636.20 2,545.74

Year Ending ธ.ค.-55 12 5,045.19 5,697.00 4,165.90 2,589.17

EARNINGS (per share)

Quarter Ending มี.ค.-54 13 3.15 4.19 2.42 1.65

Quarter Ending มิ.ย.-54 13 5.05 6.45 3.36 2.72

Year Ending ธ.ค.-54 17 13.86 16.07 10.04 7.28

Year Ending ธ.ค.-55 14 12.48 15.00 9.42 6.55

LT Growth Rate (%) 2 8.50 12.00 5.00 15.49

Sales and Earnings Figures in U.S. Dollars (USD)

VALUATION RATIOS

Company Industry Sector S&P 500

P/E Ratio (TTM) 26.42 14.39 23.55 17.06

P/E High - Last 5 Yrs. 42.43 30.87 121.00 89.54

P/E Low - Last 5 Yrs. 4.05 6.39 13.96 12.29

Beta 0.98 1.14 1.33 1.31

Price to Sales (TTM) 2.33 1.38 2.37 2.12

Price to Book (MRQ) 2.28 0.86 2.16 2.89

Price to Tangible Book (MRQ) 4.84 0.85 2.27 5.15

Price to Cash Flow (TTM) 11.37 10.14 21.92 69.04

Price to Free Cash Flow (TTM) 10.38 5.63 20.43 19.92

% Owned Institutions -- -- -- --

DIVIDENDS

Company Industry Sector S&P 500

Dividend Yield 0.31 1.51 1.14 1.66

Dividend Yield - 5 Year Avg. 0.33 1.96 1.49 2.51

Dividend 5 Year Growth Rate 82.06 18.70 16.65 -5.37

Payout Ratio(TTM) 7.50 11.75 11.43 42.82

GROWTH RATES

Company Industry Sector S&P 500

Sales (MRQ) vs Qtr. 1 Yr. Ago 144.25 15.33 342.78 10.06

Sales (TTM) vs TTM 1 Yr. Ago 52.01 18.15 24.70 10.16

Sales - 5 Yr. Growth Rate 15.04 14.23 13.66 7.37

EPS (MRQ) vs Qtr. 1 Yr. Ago 166.83 71.74 83.33 77.69

EPS (TTM) vs TTM 1 Yr. Ago -34.01 -- -- --

EPS - 5 Yr. Growth Rate -- 15.13 23.84 4.47

Capital Spending - 5 Yr. Growth Rate 30.04 23.05 20.47 3.38

FINANCIAL STRENGTH

Company Industry Sector S&P 500

Quick Ratio (MRQ) 1.13 0.24 0.76 0.66

Current Ratio (MRQ) 1.42 0.36 1.46 0.98

LT Debt to Equity (MRQ) 48.24 4.79 12.56 115.48

Total Debt to Equity (MRQ) 48.37 7.42 28.25 165.42

Interest Coverage (TTM) -- 0.96 0.12 16.23

PROFITABILITY RATIOS

Company Industry Sector S&P 500

Gross Margin (TTM) 29.75 13.60 24.84 31.32

Gross Margin - 5 Yr. Avg. 26.56 -12.10 25.04 29.07

EBITD Margin (TTM) 31.95 -- -- --

EBITD - 5 Yr. Avg 27.13 13.08 19.33 18.63

Operating Margin (TTM) 22.16 10.78 13.45 --

Operating Margin - 5 Yr. Avg. 22.12 8.49 14.05 14.56

Pre-Tax Margin (TTM) 17.34 10.98 13.46 15.23

Pre-Tax Margin - 5 Yr. Avg. 21.18 8.74 13.88 14.16

Net Profit Margin (TTM) 10.44 8.57 9.62 11.19

Net Profit Margin - 5 Yr. Avg. 13.87 6.51 9.96 10.43

Effective Tax Rate (TTM) 39.80 19.47 19.90 19.76

Effecitve Tax Rate - 5 Yr. Avg. 34.50 23.76 26.84 24.11

EFFICIENCY

Company Industry Sector S&P 500

Revenue/Employee (TTM) 1,652,083 9,246,358 39,852,766 688,009

Net Income/Employee (TTM) 172,500 824,726 -56,058,682 84,462

Receivable Turnover (TTM) 19.52 1.33 4.81 8.48

Inventory Turnover (TTM) 11.65 0.72 4.55 7.14

Asset Turnover (TTM) 0.70 0.12 0.93 0.55

MANAGEMENT EFFECTIVENESS

Company Industry Sector S&P 500

Return on Assets (TTM) 7.36 1.69 10.50 5.95

Return on Assets - 5 Yr. Avg. 16.09 7.03 11.48 5.55

Return on Investment (TTM) 8.78 2.14 16.37 7.58

Return on Investment - 5 Yr. Avg. 21.21 9.80 17.01 7.22

Return on Equity (TTM) 12.08 3.16 16.10 17.66

Return on Equity - 5 Yr. Avg. 24.32 18.05 20.96 14.47

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Contact Detail:

Chutinush Taksinapinunt

Business Development Director

Heffernan Capital Management

Email: chutinush@heffernan-inc.com

Chutinush Taksinapinunt holds a Bachelor of Business Administrators degree Majoring in

Finance and Banking. Chutinush Taksinapinunt is an experienced market maker and Portfolio

Manager, having worked with some of Thailand’s largest Securities Company and Financial

Institutions.

Price Estimate by Shayne Heffernan PhD

Shayne Heffernan of Ebeling Heffernan holds a PhD in Economics serves as CEO of Heffernan

Holdings Inc and Co Founder of Ebeling Heffernan www.ebeling-heffernan.com

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