2024-06-26 09:34:14 ET
Summary
- CF Industries is the largest producer of nitrogen fertilizer in North America.
- CF benefits from low US natural gas prices, giving it a cost advantage over global peers and allowing for positive free cash flow even at low fertilizer prices.
- Despite being well-managed and generating positive free cash flow, CF's stock has limited upside in 2024 due to lower corn acres planted and lower global gas prices.
As any gardener can attest, plants need three basic nutrients to flourish: Nitrogen, phosphate, and potassium (potash). Illinois-based CF Industries Holdings, Inc. ( CF ) is the largest producer of nitrogen fertilizer in North America.
Nitrogen fertilizers are produced by mixing nitrogen present in the air - the atmosphere is about 78% nitrogen - with hydrogen present in methane (also known as natural gas with the chemical symbol CH4) under pressure and in the presence of a catalyst.
The basic building block of most nitrogen fertilizers is ammonia, which consists of a nitrogen atom bonded to three hydrogen atoms. Ammonia can also be processed further to produce common nitrogen fertilizer products such as granular urea and urea ammonium nitrate ((UAN)).
In 2023, CF produced a total of 19.13 million tons of total nitrogen products including about 3.55 million short tons of ammonia, 4.57 million tons of granular urea, and 7.24 million tons of UAN. The company has six nitrogen production facilities in the US, including its largest complex located in Louisiana (near the Mississippi River and New Orleans)....
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CF Industries: High-Quality Company But Lacks Catalysts