CF Industries Holdings Inc

Previous wording

Our strategy is to leverage our unique capabilities to accelerate the world’s transition to clean energy. We believe this strategy builds upon the Company’s leadership in ammonia production to capture emerging opportunities available to ammonia produced with a lower carbon intensity than that of ammonia produced through traditional processes. These opportunities include traditional applications in agriculture to help reduce the carbon footprint of food production and the life cycle carbon intensity of ethanol production, enabling its use for sustainable aviation fuel, among other purposes. They also include new applications, such as power generation and marine shipping, that would use the hydrogen component of the ammonia molecule for clean energy given that ammonia does not contain or emit carbon when combusted.

Current wording

Our strategy leverages our unique capabilities to accelerate the world’s transition to clean energy. We believe this strategy builds upon our leadership in ammonia production to capture emerging opportunities to produce ammonia with a lower carbon intensity than that of ammonia produced through traditional processes. These opportunities include traditional applications in agriculture to help reduce the carbon footprint of food production and the life cycle carbon intensity of ethanol production, enabling ammonia’s use as a sustainable aviation fuel, among other purposes. These opportunities also include new growth opportunities from energy-intensive industries, such as power generation and marine shipping, as ammonia represents an efficient mechanism to both ship and store hydrogen, as well as a clean energy fuel source in its own right as ammonia does not contain or emit carbon when combusted. Our strategy also strengthens our existing business.

Previous wording

We execute our strategy across four dimensions: decarbonizing our existing network to accelerate the availability of low-carbon ammonia; evaluating new low-carbon ammonia capacity growth; forging partnerships to accelerate our timeline, reduce risks and bridge gaps in areas where we do not have expertise; and collaborating to build understanding of ammonia’s clean energy capability, safety track record and regulatory environment.

Current wording

We execute our strategy across four dimensions: decarbonizing our existing network to accelerate the availability of low-carbon ammonia and upgraded nitrogen products for traditional agricultural and industrial applications; evaluating new low-carbon ammonia capacity growth to supply emerging opportunities from power generation and marine shipping, among others; forging partnerships to accelerate our timeline, reducing risks and bridging gaps in areas where we do not have expertise; and collaborating to build understanding of ammonia’s clean energy capability, safety track record and regulatory environment.

Previous wording

Decarbonization projects in our existing network include our green ammonia project at our Donaldsonville, Louisiana complex. Green ammonia refers to ammonia produced with hydrogen sourced through an electrolysis process that produces no carbon emissions. In April 2021, we signed an engineering and procurement contract with thyssenkrupp to supply a 20 MW alkaline water electrolysis plant to produce green hydrogen at our Donaldsonville complex. We will integrate the green hydrogen generated by the electrolysis plant into existing ammonia synthesis loops to enable the production of approximately 20,000 tons per year of green ammonia. The green hydrogen production facility is mechanically complete, and commissioning activities are nearing completion. We believe that the Donaldsonville green ammonia project will be the largest of its kind in North America at the time of its startup.

Current wording

Decarbonization projects in our existing network include our green ammonia project at our Donaldsonville, Louisiana, complex. Our green hydrogen production facility, consisting of a 20-megawatt alkaline water electrolysis plant to produce hydrogen, is mechanically complete, and commissioning activities are nearing completion. In the third quarter of 2024 and in anticipation of start-up, we entered into an agreement to procure 45V-compliant renewable energy certificates to pair with the electricity consumed by electrolyzer operation. As a result, the electrolyzer will generate green hydrogen that enables us to produce green ammonia, which refers to ammonia produced with hydrogen sourced from an electrolysis process that produces no carbon dioxide emissions. At full electrolyzer capacity, we will be able to produce approximately 20,000 tons of green ammonia per year. At the time of its startup, we believe that the Donaldsonville green ammonia project will represent North America’s first commercial-scale green ammonia capacity. Under current regulations, the hydrogen produced and used in our green ammonia production is expected to qualify under Section 45V of the Internal Revenue Code for tax credits based on the carbon intensity of the hydrogen produced.

Previous wording

Decarbonization projects in our existing network also include the production of low-carbon ammonia. Low-carbon ammonia is ammonia produced by conventional processes but with approximately 60-98% of the process and flue gas CO 2 generated by ammonia production removed through carbon capture and sequestration (CCS). We are executing a project at our Donaldsonville complex that will enable us to produce a significant volume of low-carbon ammonia. At an estimated cost of $200 million, we are constructing a CO 2 dehydration and compression facility to enable CCS at the facility. Engineering activities for the construction of the dehydration and compression unit continue to advance: all major equipment for the facility has been procured, fabrication of the CO 2 compressors is proceeding and construction of the cooling tower required for the unit has begun. Once the dehydration and compression unit is in service and sequestration is initiated, we expect that the Donaldsonville complex will have the capacity to dehydrate and compress up to 2 million tons per year of process CO 2, thereby converting a portion of our existing ammonia production to low-carbon ammonia. In October 2022, we announced that we had entered into a definitive CO 2 offtake agreement with ExxonMobil to transport and permanently sequester the CO 2 from Donaldsonville. Start-up for the project is planned for 2025. Under current regulations, the project would be expected to qualify for tax credits under Section 45Q of the Internal Revenue Code, which provides a credit per tonne of CO 2 sequestered.

Current wording

We are also advancing decarbonization projects at our Donaldsonville and Yazoo City complexes that leverage carbon capture and sequestration (CCS) to enable the production of low-carbon ammonia. Low-carbon ammonia is ammonia produced by conventional processes but with approximately 60-98% of the process and flue gas carbon dioxide (CO 2) generated by ammonia production and currently emitted to the atmosphere removed through CCS. CCS requires the construction of CO 2 dehydration and compression units to enable CO 2 already captured from the ammonia production process to be transported and sequestered. Construction of the dehydration and compression unit at our Donaldsonville complex is in advanced stages, with an estimated total cost of approximately $200 million over the life of the project. Activities related to the construction of the dehydration and compression unit at our Yazoo City complex will commence in the second half of 2024 with an estimated total cost of $100 million over the life of the project. In addition, for each facility we have contracted with ExxonMobil to transport and sequester the captured CO 2 in permanent geologic storage. At Donaldsonville, CCS is expected to commence in 2025 and annually will capture up to approximately 2 million tonnes of CO 2. At Yazoo City, CCS is expected to commence in 2028 and annually will capture up to approximately 500,000 tonnes of CO 2. Under current regulations, each project is expected to qualify under Section 45Q of the Internal Revenue Code for tax credits per tonne of sequestered CO 2.

Previous wording

Alongside these projects, we are also evaluating the construction of greenfield low-carbon ammonia capacity in Louisiana. In the fourth quarter of 2023, we and Mitsui & Co., Ltd. (Mitsui) completed a front-end engineering and design (FEED) study on a potential greenfield steam methane reforming (SMR) ammonia facility with CCS technologies. The FEED study estimates the cost of a project with these attributes to be in the range of $3 billion, with approximately $2.5 billion allocated to the ammonia facility and CCS technologies and approximately $500 million allocated to scalable common infrastructure for the site, such as ammonia storage and vessel loading docks.

Current wording

We are also evaluating the construction of export-oriented greenfield low-carbon ammonia capacity at our Blue Point complex in Ascension Parish, Louisiana. This evaluation includes assessing ammonia production technology options that will meet the carbon intensity requirements of end users. In the fourth quarter of 2023, we completed a front-end engineering and design (FEED) study on a potential approximately 1.2 million tonne capacity greenfield steam methane reforming (SMR) ammonia facility with CCS technologies that would enable sequestration of process CO 2 emissions. The FEED study estimates the cost of a project with these attributes to be in the range of $3 billion, with approximately $2.5 billion allocated to the ammonia facility and CCS technologies and approximately $500 million allocated to scalable common infrastructure for the Blue Point complex, such as ammonia storage and a vessel loading dock.

Previous wording

We and our partners are progressing two additional FEED studies focused on technologies that would further reduce the carbon intensity of the proposed low-carbon ammonia facility, namely a FEED study evaluating autothermal reforming (ATR) ammonia production technology and a FEED study assessing the cost and viability of adding flue gas capture to the greenfield SMR ammonia facility. We expect to obtain results from both FEED studies in the second half of 2024.

Current wording

We, along with our partners, are also progressing two additional FEED studies focused on technologies that would further reduce the ammonia product’s carbon intensity. The first is assessing the cost and viability of integrating flue gas CO 2 capture on a SMR ammonia facility. The second is evaluating autothermal reforming (ATR) ammonia production technology. We expect to obtain results from both FEED studies in the fourth quarter of 2024.

Previous wording

We are also evaluating and in various stages of developing discussions and agreements with other companies for clean ammonia long-term offtake opportunities related to new applications of ammonia.

Current wording

In addition to discussions with existing customers who have interest in using low-carbon ammonia for traditional applications, we are engaged in advanced discussions regarding the supply of low-carbon ammonia for new applications, such as JERA’s co-firing project discussed above. We are evaluating and are in various stages of discussions and agreements with other companies for long-term offtake and joint investment opportunities related to new applications of ammonia. These discussions continue to advance as we gain greater clarity regarding demand for low-carbon ammonia, including carbon intensity requirements, government incentives and regulatory developments.

Previous wording

In the first quarter of 2024, the average selling price for our products was $325 per ton, a decrease of 27% compared to $444 per ton in the first quarter of 2023, reflecting lower average selling prices across all our segments, which resulted in a decrease in net sales of approximately $567 million in the first quarter of 2024 compared to the first quarter of 2023. Average selling prices for all our major products were lower in the first quarter of 2024 than in the first quarter of 2023, as lower global energy costs reduced the global market clearing price required to meet global demand.

Current wording

In the second quarter of 2024, the average selling price for our products was $322 per ton, a decrease of 10% compared to $359 per ton in the second quarter of 2023, reflecting lower average selling prices across most of our segments, as lower global energy costs reduced the global market clearing price required to meet global demand. Lower average selling prices resulted in a decrease in net sales of approximately $165 million in the second quarter of 2024 compared to the second quarter of 2023. In the six months ended June 30, 2024, the average selling price for our products was $324 per ton, or 19% lower compared to $400 per ton in the six months ended June 30, 2023. This resulted in a decrease in net sales of approximately $732 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Previous wording

Due to the impact of plant downtime resulting from the adverse weather and additional plant maintenance activity in the first quarter of 2024 that limited production, we purchased and sold approximately 62,000 tons of ammonia and 48,000 tons of granular urea at near breakeven margins in order to fulfill sales commitments. The plant downtime led to approximately $75 million of additional costs in the first quarter of 2024 for maintenance, repairs and certain unabsorbed fixed costs.

Current wording

In January 2024, a winter storm produced extremely cold temperatures that impacted our operations, including the temporary shut-down and lost production at certain of our plants. Due to the impact of plant downtime resulting from the adverse weather and additional plant maintenance activity in the first quarter of 2024, we purchased and sold approximately 62,000 tons of ammonia and 48,000 tons of granular urea at near breakeven margins in order to fulfill sales commitments. The plant downtime led to approximately $75 million of additional costs in the first quarter of 2024 for maintenance, repairs and certain unabsorbed fixed costs.

Previous wording

Additionally, the Waggaman acquisition, which we completed on December 1, 2023, increased our ammonia sales volume in the first quarter of 2024 by approximately 122,000 tons.

Current wording

Additionally, the Waggaman acquisition, which we completed on December 1, 2023, increased our ammonia sales volume in the second quarter and first six months of 2024 by approximately 161,000 tons and 283,000 tons, respectively.

Previous wording

Natural gas is the principal raw material used to produce our nitrogen products. Natural gas is both a chemical feedstock and a fuel used to produce nitrogen products. Natural gas is a significant cost component of our manufactured nitrogen products, representing approximately 32% and 40%, respectively, of our production costs in the first three months of 2024 and the year ended December 31, 2023. Most of our nitrogen manufacturing facilities are located in the United States and Canada. As a result, the price of natural gas in North America directly impacts a substantial portion of our operating expenses.

Current wording

Natural gas is the principal raw material used to produce our nitrogen products. Natural gas is both a chemical feedstock and a fuel used to produce nitrogen products. Natural gas is a significant cost component of our manufactured nitrogen products, representing approximately 28% and 40% of our production costs in the first six months of 2024 and the year ended December 31, 2023, respectively. Most of our nitrogen manufacturing facilities are located in the United States and Canada. As a result, the price of natural gas in North America directly impacts a substantial portion of our operating expenses.

Previous wording

In the first quarter of 2024, our cost of natural gas used for production, which includes the impact of realized natural gas derivatives, decreased 52% to $3.19 per MMBtu from $6.62 per MMBtu in the first quarter of 2023. This decrease in natural gas costs resulted in an increase in gross margin of $269 million compared to the first quarter of 2023.

Current wording

In the second quarter of 2024, our cost of natural gas used for production, which includes the impact of realized natural gas derivatives, decreased 31% to $1.90 per MMBtu from $2.75 per MMBtu in the second quarter of 2023. This decrease in natural gas costs resulted in an increase in gross margin of $81 million, excluding the impact of the Waggaman acquisition, compared to the second quarter of 2023. In the first half of 2024, our cost of natural gas used for production, which includes the impact of realized natural gas derivatives, decreased 45% to $2.53 per MMBtu from $4.56 per MMBtu in the first half of 2023. This decrease in natural gas costs resulted in an increase in gross margin of $350 million compared to the first half of 2023.

Previous wording

In the first quarter of 2024, warmer-than-normal average temperatures in North America drove lower heating demand for natural gas, in spite of a short-lived period of extremely cold temperatures in January 2024 that affected most of North America. North American natural gas supply remained strong through the quarter, with a decline in supply occurring near the end of the quarter as producers responded to the weaker price environment. In addition, although the higher cost for natural gas outside of North America incentivized liquefaction facilities in the United States to export domestic natural gas during the first quarter of 2024, an outage at the Freeport liquefied natural gas facility limited total gas exports, supporting domestic supply. As a result, North American gas withdrawals from storage during the first quarter of 2024 were lower than normal, leading to 23% higher storage levels as of March 31, 2024, compared to one year ago and 39% higher than the five-year average.

Current wording

In the first quarter of 2024, warmer-than-normal average temperatures in North America drove lower heating demand for natural gas, in spite of a short-lived period of extremely cold temperatures in January 2024 that affected most of North America. North American natural gas supply remained strong through the quarter, with a decline in supply occurring near the end of the quarter as producers responded to the weaker price environment. In addition, although the higher cost for natural gas outside of North America incentivized liquefaction facilities in the United States to export domestic natural gas during the first quarter of 2024, an outage at the Freeport liquefied natural gas facility limited total gas exports, supporting domestic supply.

Previous wording

We reported net earnings attributable to common stockholders of $194 million for the three months ended March 31, 2024 compared to $560 million for the three months ended March 31, 2023, a decrease in net earnings of $366 million. The decrease in net earnings for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily reflects a decrease in gross margin, partially offset by a lower income tax provision in the first quarter of 2024 as compared to the first quarter of 2023.

Current wording

We reported net earnings attributable to common stockholders of $420 million for the three months ended June 30, 2024 compared to $527 million for the three months ended June 30, 2023, a decrease in net earnings of $107 million, or 20%. The decrease in net earnings for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 primarily reflects a decrease in gross margin.

Previous wording

Gross margin decreased by $454 million to $409 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease in gross margin was due primarily to a 27% decrease in average selling prices to $325 per ton in the first quarter of 2024 from $444 per ton in the first quarter of 2023, which decreased gross margin by $567 million. The impact of lower selling prices was partially offset by lower natural gas costs, which increased gross margin by $269 million. The lower gross margin was partially offset by a decrease of $107 million in the income tax provision due primarily to lower pre-tax earnings in the first quarter of 2024 compared to the first quarter of 2023 and a decrease of $46 million in net earnings attributable to noncontrolling interest.

Current wording

Gross margin decreased by $125 million, or 16%, to $679 million for the three months ended June 30, 2024 compared to $804 million for the three months ended June 30, 2023. The decrease in gross margin was due primarily to a 10% decrease in average selling prices to $322 per ton in the second quarter of 2024 from $359 per ton in the second quarter of 2023, which decreased gross margin by $165 million, and including the impact of the Waggaman acquisition, a decrease in sales volume, which decreased gross margin by $59 million. The impact of lower selling prices was partially offset by lower natural gas costs, which increased gross margin by $81 million, excluding the impact of the Waggaman acquisition.

Previous wording

Diluted net earnings per share attributable to common stockholders decreased $1.82 per share, to $1.03 per share, in the first quarter of 2024 compared to $2.85 per share in the first quarter of 2023, due primarily to lower net earnings, partially offset by lower weighted-average common shares outstanding as a result of shares repurchased under our share repurchase programs.

Current wording

Diluted net earnings per share attributable to common stockholders decreased $0.40 per share, or 15%, to $2.30 per share, in the second quarter of 2024 compared to $2.70 per share in the second quarter of 2023, due primarily to lower net earnings, partially offset by lower weighted-average common shares outstanding as a result of shares repurchased under our share repurchase programs.

Previous wording

In connection with the acquisition, we entered into a long-term ammonia offtake agreement providing for us to supply up to 200,000 tons of ammonia per year to IPL’s Dyno Nobel, Inc. subsidiary. Under the terms of the asset purchase agreement, $425 million of the purchase price of $1.675 billion, subject to adjustment, was allocated by the parties to the ammonia offtake agreement. We funded the balance of the purchase price with $1.223 billion of cash on hand.

Current wording

In connection with the acquisition, we entered into a long-term ammonia offtake agreement providing for us to supply up to 200,000 tons of ammonia per year to IPL’s Dyno Nobel, Inc. subsidiary. Under the terms of the asset purchase agreement, $425 million of the purchase price of $1.675 billion, subject to adjustment, was allocated by the parties to the ammonia offtake agreement. We funded the balance of the initial purchase price on the acquisition date with $1.223 billion of cash on hand.

Previous wording

The consideration transferred reflects an estimated net working capital adjustment and other adjustments to the purchase price, which is subject to further adjustment pursuant to the terms of the asset purchase agreement. We expect any further purchase price adjustments required under the asset purchase agreement will not be material and will be completed in the second quarter of 2024.

Current wording

The consideration transferred on the acquisition date reflected an estimated net working capital adjustment and other adjustments to the purchase price, which was subject to further adjustment pursuant to the terms of the asset purchase agreement. The purchase price adjustments required under the asset purchase agreement were finalized in the second quarter of 2024, which resulted in a $2 million reduction in the purchase price with a corresponding reduction in goodwill. As a result, the final purchase price was $1.221 billion.

Previous wording

For the three months ended March 31, 2024 and 2023, we reported net earnings attributable to common stockholders of $194 million and $560 million, respectively. In addition to the impact of market conditions and the acquisition of the Waggaman ammonia production facility discussed above, certain items affected the comparability of our financial results for the three months ended March 31, 2024 and 2023. The following table and related discussion outline these items and their impact on the comparability of our financial results for these periods. The descriptions of items below that refer to amounts in the table refer to the pre-tax amounts unless otherwise noted.

Current wording

For the three months ended June 30, 2024 and 2023, we reported net earnings attributable to common stockholders of $420 million and $527 million, respectively. For the six months ended June 30, 2024 and 2023, we reported net earnings attributable to common stockholders of $614 million and $1.09 billion, respectively. In addition to the impact of market conditions and the acquisition of the Waggaman ammonia production facility discussed above, certain items affected the comparability of our financial results for the three and six months ended June 30, 2024 and 2023. The following table and related discussion outline these items and their impact on the comparability of our financial results for these periods. The descriptions of items below that refer to amounts in the table refer to the pre-tax amounts unless otherwise noted.

Previous wording

Natural gas is the largest and most volatile single component of the manufacturing cost for our nitrogen-based products. At certain times, we have managed the risk of changes in natural gas prices through the use of derivative financial instruments. The derivatives that we use for this purpose are primarily natural gas fixed price swaps, basis swaps and options. We use natural gas derivatives as an economic hedge of natural gas price risk, but without the application of hedge accounting. This can result in volatility in reported earnings due to the unrealized mark-to-market adjustments that occur from changes in the value of the derivatives, which are reflected in cost of sales in our consolidated statements of operations. In the three months ended March 31, 2024 and 2023, we recognized unrealized net mark-to-market gains on natural gas derivatives of $33 million and $72 million, respectively.

Current wording

Natural gas is the largest and most volatile single component of the manufacturing cost for our nitrogen-based products. At certain times, we have managed the risk of changes in natural gas prices through the use of derivative financial instruments. The derivatives that we use for this purpose are primarily natural gas fixed price swaps, basis swaps and options. We use natural gas derivatives as an economic hedge of natural gas price risk, but without the application of hedge accounting. This can result in volatility in reported earnings due to the unrealized mark-to-market adjustments that occur from changes in the value of the derivatives, which are reflected in cost of sales in our consolidated statements of operations. In the three months ended June 30, 2024, we recognized an unrealized net mark-to-market gain on natural gas derivatives of $1 million. In the six months ended June 30, 2024 and 2023, we recognized unrealized net mark-to-market gains on natural gas derivatives of $34 million and $72 million, respectively.

Previous wording

Loss (gain) on foreign currency transactions, including intercompany loans

Current wording

(Gain) loss on foreign currency transactions, including intercompany loans

Previous wording

In the three months ended March 31, 2024 and 2023, we recognized a loss (gain) on foreign currency transactions of $1 million and $(1) million, respectively. Loss (gain) on foreign currency transactions consists of foreign currency exchange rate impacts on foreign currency denominated transactions, including the impact of changes in foreign currency exchange rates on intercompany loans that are not permanently invested.

Current wording

In the six months ended June 30, 2024 and 2023, we recognized a loss (gain) on foreign currency transactions of $1 million and $(2) million, respectively. (Gain) loss on foreign currency transactions consists of foreign currency exchange rate impacts on foreign currency denominated transactions, including the impact of changes in foreign currency exchange rates on intercompany loans that are not permanently invested.

Previous wording

In the three months ended March 31, 2023, we incurred restructuring costs of $2 million related to the permanent closure of our Ince facility in the United Kingdom.

Current wording

In the six months ended June 30, 2023, we incurred restructuring costs of $2 million related to the permanent closure of our Ince facility in the United Kingdom.

Previous wording

The following table presents our consolidated results of operations and supplemental data for the three months ended March 31, 2024 and 2023:

Current wording

The following table presents our consolidated results of operations and certain supplemental data for the three and six months ended June 30, 2024 and 2023:

Previous wording

In January 2024, a winter storm produced extremely cold temperatures that impacted our operations, including the temporary shut-down of certain of our plants. As a result of the adverse weather, we incurred additional maintenance costs and lost production. Gross ammonia production for the first three months of 2024 was 2.1 million tons, a 9% decrease from 2.4 million tons of gross ammonia production in the first three months of 2023, due primarily to an increase in maintenance activity, including the unplanned maintenance due to the adverse weather. We expect gross ammonia production for 2024 will be approximately 9.8 million tons.

Current wording

Gross ammonia production for the three and six months ended June 30, 2024 was 2.6 million tons and 4.8 million tons, respectively. We expect gross ammonia production for 2024 will be approximately 9.8 million tons.

Previous wording

Equity in Earnings of Operating Affiliate

Current wording

Equity in (losses) earnings of operating affiliate was a $3 million loss in the second quarter of 2024 compared to $7 million of earnings in the second quarter of 2023. Lower equity in earnings of operating affiliate reflects a decrease in the operating results of PLNL as a result of a plant turnaround in the second quarter of 2024 at the PLNL facility in Trinidad and lower ammonia selling prices.

Previous wording

For the three months ended March 31, 2024, we recorded an income tax provision of $62 million on pre-tax income of $300 million, or an effective tax rate of 20.7%, compared to an income tax provision of $169 million on pre-tax income of $819 million, or an effective tax rate of 20.6%, for the three months ended March 31, 2023.

Current wording

For the three months ended June 30, 2024, we recorded an income tax provision of $123 million on pre-tax income of $629 million, or an effective tax rate of 19.5%, compared to an income tax provision of $134 million on pre-tax income of $740 million, or an effective tax rate of 18.2%, for the three months ended June 30, 2023.

Previous wording

Our total net sales decreased $542 million, or 27%, to $1.47 billion in the first three months of 2024 compared to $2.01 billion in the first three months of 2023. The decrease in our net sales reflects (i) the impact of the Waggaman acquisition completed on December 1, 2023, which increased our net sales by $55 million, and (ii) a $597 million, or 30%, decline in our net sales excluding the impact of the Waggaman acquisition, due primarily to a decrease in average selling prices of approximately 27%.

Current wording

Our total net sales decreased $0.75 billion, or 20%, to $3.04 billion in the first six months of 2024 compared to $3.79 billion in the first six months of 2023. The change in our net sales reflects (i) the impact of the Waggaman acquisition completed on December 1, 2023, which increased our net sales by $114 million, and (ii) a $0.86 billion, or 23%, decline in our net sales excluding the impact of the Waggaman acquisition, due primarily to a decrease in average selling prices of approximately 19%.

Previous wording

Our average selling price was $325 per ton in the first three months of 2024 compared to $444 per ton in the first three months of 2023, due to lower average selling prices across all our segments, as lower global energy costs reduced the global market clearing price required to meet global demand. The impact of lower average selling prices was a decrease in net sales of approximately $567 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Current wording

Our average selling price was $324 per ton in the first six months of 2024 compared to $400 per ton in the first six months of 2023, due to lower average selling prices across all our segments, as lower global energy costs reduced the global market clearing price required to meet global demand. The impact of lower average selling prices was a decrease in net sales of approximately $732 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Previous wording

Our total cost of sales decreased $88 million, or 8%, to $1.06 billion in the first three months of 2024 from $1.15 billion in the first three months of 2023. The decrease in our cost of sales primarily reflects lower costs for natural gas including the impact of realized derivatives. The impact of lower natural gas costs decreased cost of sales by $269 million, excluding the impact of the Waggaman acquisition. The impact of lower natural gas costs was partially offset by higher costs for planned and unplanned maintenance activities in the first quarter of 2024, including as a result of the adverse weather, as discussed above. The impact of the Waggaman acquisition increased our cost of sales by $61 million.

Current wording

Our total cost of sales decreased $166 million, or 8%, to $1.95 billion in the first six months of 2024 from $2.12 billion in the first six months of 2023. The decrease in our cost of sales primarily reflects lower costs for natural gas, including the impact of realized derivatives. The impact of lower natural gas costs decreased cost of sales by $350 million, excluding the impact of the Waggaman acquisition. The impact of lower natural gas costs was partially offset by higher costs for planned and unplanned maintenance and repair activities in the first six months of 2024, including as a result of the adverse weather in January 2024, as discussed above under “Nitrogen Sales Volume,” which increased cost of sales by approximately $75 million. The impact of the Waggaman acquisition increased our cost of sales by $108 million.

Previous wording

Cost of sales also includes the impact of a $33 million unrealized net mark-to-market gain on natural gas derivatives in the first three months of 2024 compared to a $72 million gain in the first three months of 2023.

Current wording

Cost of sales also includes the impact of a $34 million unrealized net mark-to-market gain on natural gas derivatives in the first six months of 2024 compared to a $72 million gain in the first six months of 2023.

Previous wording

Selling, general and administrative expenses increased $14 million to $88 million in the first three months of 2024 compared to $74 million in the first three months of 2023. The increase was due primarily to higher amortization expense related to the customer relationships recorded in conjunction with the Waggaman acquisition and an increase in costs related to other corporate initiatives.

Current wording

Selling, general and administrative expenses increased $19 million to $164 million in the first six months of 2024 compared to $145 million in the first six months of 2023. The increase was due primarily to higher amortization expense related to the customer relationships recorded in conjunction with the Waggaman acquisition on December 1, 2023, and an increase in costs related to certain corporate initiatives.

Previous wording

Other operating—net was $17 million of expense in the first three months of 2024 compared to $35 million of income in the first three months of 2023. The $17 million of expense in the first three months of 2024 consists primarily of costs related to FEED studies for our clean energy initiatives and losses on the disposal of property, plant and equipment. See “Our Strategy,” above, for additional information related to our clean energy initiatives. The $35 million of income in the first three months of 2023 consists primarily of a gain on sales of emission credits.

Current wording

Other operating—net was $22 million of income in the first six months of 2024 compared to $32 million of income in the first six months of 2023. The $22 million of income in the first six months of 2024 consists primarily of gains on sales of emission credits, partially offset by costs related to FEED studies for our clean energy initiatives. See “Our Strategy,” above, for additional information related to our clean energy initiatives. The $32 million of income in the first six months of 2023 consists primarily of gains on sales of emission credits.

Previous wording

Equity in earnings of operating affiliate was $2 million in the first three months of 2024 compared to $17 million in the first three months of 2023. Lower equity in earnings of operating affiliate reflects a decrease in the operating results of PLNL as a result of lower ammonia selling prices and lower operating rates at PLNL due to lower available natural gas.

Current wording

Equity in (losses) earnings of operating affiliate was a $1 million loss in the first six months of 2024 compared to $24 million of earnings in the first six months of 2023. Lower equity in earnings of operating affiliate reflects a decrease in the operating results of PLNL as a result of a plant turnaround in the second quarter of 2024 at the PLNL facility in Trinidad, lower ammonia selling prices and lower operating rates at PLNL due to lower available natural gas.

Previous wording

Net interest expense was $7 million in the first three months of 2024 compared to $10 million in the first three months of 2023. The decrease of $3 million was due primarily to a decrease in interest on tax liabilities.

Current wording

Net interest expense was $16 million in the first six months of 2024 compared to $6 million in the first six months of 2023. The increase of $10 million was due primarily to a decrease in interest income on short-term investments, partially offset by a decrease in interest on tax liabilities.

Previous wording

Our effective tax rate is impacted by earnings attributable to the noncontrolling interest in CFN, as our consolidated income tax provision does not include a tax provision on the earnings attributable to the noncontrolling interest. Our effective tax rate for the three months ended March 31, 2024 of 20.7%, which is based on pre-tax income of $300 million, including $44 million of earnings attributable to the noncontrolling interest, would be 3.6 percentage points higher, or 24.3%, if based on pre-tax income exclusive of the earnings attributable to the noncontrolling interest of $44 million. Our effective tax rate for the three months ended March 31, 2023 of 20.6%, which is based on pre-tax income of $819 million, including $90 million of earnings attributable to the noncontrolling interest, would be 2.6 percentage points higher, or 23.2%, if based on pre-tax income exclusive of the earnings attributable to the noncontrolling interest of $90 million.

Current wording

Our effective tax rate is impacted by earnings attributable to the noncontrolling interest in CFN, as our consolidated income tax provision does not include a tax provision on the earnings attributable to the noncontrolling interest. Our effective tax rate for the six months ended June 30, 2024 of 19.9%, which is based on pre-tax income of $929 million, including $130 million of earnings attributable to the noncontrolling interest, would be 3.2 percentage points higher, or 23.1%, if based on pre-tax income exclusive of the earnings attributable to the noncontrolling interest of $130 million. Our effective tax rate for the six months ended June 30, 2023 of 19.5%, which is based on pre-tax income of $1.56 billion, including $169 million of earnings attributable to the noncontrolling interest, would be 2.3 percentage points higher, or 21.8%, if based on pre-tax income exclusive of the earnings attributable to the noncontrolling interest of $169 million.

Previous wording

Net earnings attributable to noncontrolling interest decreased $46 million to $44 million in the first three months of 2024 compared to $90 million in the first three months of 2023 due to lower earnings of CFN driven by lower average selling prices, partially offset by lower natural gas costs.

Current wording

Net earnings attributable to noncontrolling interest decreased $39 million to $130 million in the first six months of 2024 compared to $169 million in the first six months of 2023 due to lower earnings of CFN driven by lower average selling prices, partially offset by lower natural gas costs.

Previous wording

Diluted net earnings per share attributable to common stockholders decreased $1.82 to $1.03 per share in the first three months of 2024 from $2.85 per share in the first three months of 2023. This decrease was due primarily to a decrease in gross margin, driven by lower average selling prices, partially offset by lower costs for natural gas. Lower gross margin was partially offset by a decrease in the income tax provision resulting from lower profitability and a decrease in net earnings attributable to noncontrolling interest. Additionally, diluted weighted-average common shares outstanding declined 4% from 196.9 million shares for the three months ended March 31, 2023 to 188.1 million shares for the three months ended March 31, 2024, due primarily to repurchases of common shares under our share repurchase programs.

Current wording

Diluted net earnings per share attributable to common stockholders decreased $2.24, or 40%, to $3.31 per share in the first six months of 2024 from $5.55 per share in the first six months of 2023. This decrease was due primarily to a decrease in gross margin, driven by lower average selling prices, partially offset by lower costs for natural gas. Lower gross margin was partially offset by a decrease in the income tax provision resulting from lower profitability and a decrease in net earnings attributable to noncontrolling interest. Additionally, diluted weighted-average common shares outstanding declined 5% from 195.9 million shares for the six months ended June 30, 2023 to 185.5 million shares for the six months ended June 30, 2024, due primarily to repurchases of common shares under our share repurchase programs.

Previous wording

Net Sales. Net sales in our Ammonia segment decreased by $22 million, or 5%, to $402 million in the three months ended March 31, 2024 from $424 million in the three months ended March 31, 2023. The decrease in our net sales reflects a 33% decrease in average selling prices, partially offset by a 41% increase in sales volume, including the impact of the Waggaman acquisition completed on December 1, 2023. Average selling prices decreased to $438 per ton in the three months ended March 31, 2024 compared to $650 per ton in the three months ended March 31, 2023 as lower global energy costs reduced the global market clearing price required to meet global demand.

Current wording

Net Sales. Net sales in our Ammonia segment decreased by $138 million, or 15%, to $811 million in the six months ended June 30, 2024 from $949 million in the six months ended June 30, 2023. The decrease in our net sales reflects a 23% decrease in average selling prices, partially offset by an 11% increase in sales volume, including the impact of the Waggaman acquisition completed on December 1, 2023. Average selling prices decreased to $428 per ton in the six months ended June 30, 2024 compared to $557 per ton in the six months ended June 30, 2023 as lower global energy costs reduced the global market clearing price required to meet global demand.

Previous wording

In January 2024, a winter storm produced extremely cold temperatures that impacted our operations, including the temporary shut-down of certain of our plants. As a result of the adverse weather, we incurred additional maintenance costs and lost production in the first quarter. Due to the impact of plant downtime resulting from the adverse weather and additional plant maintenance activity in the first quarter of 2024 that limited production, we purchased and sold approximately 62,000 tons of ammonia at near breakeven margins in order to fulfill sales commitments.

Current wording

In January 2024, a winter storm produced extremely cold temperatures that impacted our operations, including the temporary shut-down of certain of our plants. As a result of the adverse weather, we incurred additional maintenance costs in the first quarter of 2024. Due to the impact of plant downtime resulting from the adverse weather and additional plant maintenance activity in the first quarter of 2024, we purchased and sold approximately 62,000 tons of ammonia at near breakeven margins in order to fulfill sales commitments.