CF Industries Holdings, Inc. (CF) Earnings Call Transcript & Summary

Hi. Good morning, everyone. So my name is Patrick Cunningham. I'm the North America Chemicals Analyst here at Citi. Excited to have CF Industries here with me today. And from CF, on the far side, we have Chris Bohn, COO and CFO; and then Bert Frost, EVP of Sales, Market Development and Supply Chain. So Chris was recently appointed CF's EVP and COO, a role he assumed in February 2024. For those who don't know, CF is the world's largest producer of ammonia, operating 16 ammonia plants in the U.S. and Canada. The company has several clean ammonia projects in its pipeline and significant global partnerships. So here to give us an update on the nitrogen fertilizer markets and clean ammonia opportunity. Please welcome, Chris and Bert.

Thank you.

Thank you.

So why don't we start with the current state of the global nitrogen market and maybe just on energy prices. So we've seen tremendous volatility in Europe and Asia natural gas over the past couple of years. And more recently, those prices have come down. So remind us who is the marginal cost producer today? And with these high energy differentials, obviously, there's going to be some volatility. But what's the new normal from here?

Well, the new normal is if you have a normal, that would be pretty amazing, basically, than anything but over the last several years. And part of that is the opportunities that have presented themselves to CF. When you look at energy and the whole advent of the fracking and shale gas revolution in the United States has positioned CF so well. And today, I just looked a little bit ago over $1.70-plus an MMBtu and has been as low as $1.50, that's extraordinary. And so the margin opportunity for a North American producer, and that's why you're seeing, coupled with the investment opportunity and the governmental and regulation structure and the opportunity for carbon sequestration and then clean products or low carbon products has positioned North America very, very well for the future. And then you feather in the energy spreads that are taking place around the world where today, Europe is $7 to $8, but it has been as high as $13 to $15 and some points even higher than that during the spiky periods and the LNG movement around the world that's supplying many ammonia plants that is cost based off of Henry Hub, maybe contracted, but you have investments in shipping costs that probably put that energy spread in that $5 to $7 long-term range. And sometimes, if we get a cold winter in Europe or other places, probably spike even more. So the new normal is kind of that. As I think what we saw in 2022 with the invasion of Ukraine, a spike in some extraordinary movements and -- but as we're moderating down into an environment that today positions the market and then the nitrogen market off those gas costs, where we are today is a good place at $350 a ton for urea and how that plays out.

This is probably a bit of a crazy and [ longer-dated ] question, but what would it take to flatten that cost curve? I mean not dramatically, but for those differentials to compress significantly over a sustained period of time?

You'd have to go back to evolution and get more gas in Europe. The gas -- you look at the North Field, Norway is well positioned, but gas production in Europe is not there or something needs to [ dig ] our deeper wells and with the pipeline gone from Russia and the difficulty of moving gas through Ukraine or any other place, you're talking years to replace that flow. So that's why floating storage and LNG is the new pipeline, and that has -- as we set a cost. And then what's interesting about LNG, though, if you're a producer of LNG and nitrogen, which many in the Middle Eastern and North African producers are, then you have a competition for the molecule. And that's why Europe is the marginal producer because they have to bid in that supply of energy to therefore, produce the nitrogen.

And I would just add to what Bert said, when we look at our investment decisions, we look at the longer term. As you mentioned, Patrick, there's going to be volatility in the market where we see contraction quite a bit between Henry Hub and what Europe is based on a warm summer, warm winter or whatever. I think longer term, though, it goes to the fundamentals that Bert just addressed here. And that's when we look at our investment decision, it's not about what's happening next quarter or even the remaining part of the year. It's what is the long-term fundamentals. As you said, the resource base here in the U.S., we feel very confident about some of the structural disadvantages in Europe and really globally that Bert talked about, is what we feel too. And that's why we feel comfortable that differential will remain for some time.

Got it. And then maybe just moving to the supply side. You guys made the comment last week on the call that supply may be more constrained than is forecasted this year. And maybe we can just take a walk around the globe in some of the key producing regions. Maybe starting with Europe, how much capacity has been shut in or shut down. And with these gas prices coming down, the probability that some or some fraction of these producers come back online?

Well, starting with Europe. You have to remember, most of these plants are decades, if not 50 years old. So a little on the inefficient side, probably are needing some investment. And every 4 or 5 years, you have a turnaround, which can cost $40 million to $60 million. So cycling the plants is not very attractive. And we have talked about 30% to 40% of that capacity was off-line at any given time in the last year. And there have been some announcements on both sides, permanent shutdowns, as well as restarts. And so some of that capacity will come back online at this current gas environment. But as we said, Europe, we believe, is the marginal producer and tons will be bid in as whether that be ammonia or as we are supplying UAN and urea ammonium nitrate to that market from an export position out of our Donaldsonville, Louisiana plant. But as you move around the world and you look at China, it's more driven by export controls and governmental control. And that's probably a thematic issue in China with what's going on with different industries and sectors. But in urea, we still say they will export, but it will be more June through October and a limited amount of tons. If you go to India, which has been the largest importer over the last several years, the Modi program of build India is taking place, and there have been new plant start-ups and additional tonnage that has come online in India, but they are also a high-cost producer, relying 60% on LNG to supply those plants with natural gas. And so India will play a role in the import market, but less so than they have in the past. Then Brazil becomes now the largest importing country and those plants are the Brazilian production of urea, the Unigel plants that have been supplied by Petrobras are now offline, and that's going to further increase the level of urea imports as well as acreage and volume. And as Brazil becomes -- continues to grow and be more of a global player in the feed grains, you're going to see, I think, that going to 8 million to 9 million tons and then North America is the next largest importer from there. And we have always been an import market, probably in the last 25 years since a number of U.S. plants have gone offline. And so when you look and put these into position, Europe and North America and Brazil and India are big import players. North Africa and Middle East continue to be big on the supply base, a little bit feathered in from China and we export some as well from North America, less so. And what you're seeing is some gas constraints in some areas like Trinidad, like Brazil and Pakistan and different countries that are -- and we talked about Europe, also on the well constrained supply.

And I think if you layer into what Bert said there is not only the S&D balance, but it's some of the geopolitical events that are occurring, whether it's the Suez Canal that's adding freight costs to particular product moves or just even what's happening in Ukraine, but where is the next one. And you really don't know where the next one is going to occur or how long the existing ones are going to go. So that adds some uncertainty in the market as well.

Got it. And then maybe just shifting over to the demand side. How is demand shaping up in the key growing regions? I know stocks to use is maybe back to normal. Maybe have better weather, higher forecasted acreage into this year. How do you see that translating into nitrogen fertilizer demand? Maybe starting with U.S. as a key growing region.

So several factors are impacting the U.S. market today. We have discussed in previous meetings, the lower level of carry in from the fertilizer year last year into this year and then lower level of imports, which we track on a monthly basis and communicate that. And then the freeze-offs that took place in January that impacted CF and other producers, all those together have lower supply available as compared to previous years. And that's why you're seeing the dynamic of a rising market. And then when you look at the -- you're right, the stocks-to-use ratios have normalized, and so that has been reflected in the price of corn, soybeans and wheat with corn now around 450. But you're still -- the corn-to-bean ratio is attractive still to plant corn. And we think we were at 91 million acres, and I would say that's on the -- I would bet even higher as you roll into spring. But the interesting thing for this spring is the potential for an early spring. It's going to be 70 degrees next week in Des Moines, Iowa, which for those who don't know, it's a big corn area. And 70 degrees is pretty attractive. If you can get out early and apply your fertilizer as a farmer, what you want to have in place is the ability to plant the corn or the whatever crop you're planting when the soil temperature is appropriate with the ambient temperature. And if you can have all your field work done early, that just accelerates and elongates the growing opportunity for long-cycle corn. And that's what we're seeing this year. We haven't seen this type of environment since 2012. So it is attractive on a weather and then on a supply basis, we think, attractive for CF.

Got it. And then maybe just -- are there any other key growing regions to highlight where you may be forecasting better or worse-than-expected demand? Any sort of one-offs where maybe dealer retail inventories are depleted or elevated? Where we might see a decrease or increased import trend to some of those regions?

I think the positive -- what we're seeing out of Argentina with the governmental change with the election and the inauguration that took place in December is capital controls that were in place and limits on how to import and the dollars available to transact. That was not very easy in 2022, 2023. And with hopefully some liberalized and better economic decisions, you could see Argentina return and increase, I'd say, significantly their imports of urea and UAN. Brazil is a great story. What is going on with consumption of NP&K fertilizers moving from just 15 years ago, 25 million tons, to today 45 million tons, they are the growth engine of consumption for fertilizer as well as supplying the world with feed grains and oilseeds.

Got it. And then ag and industrial demand in aggregate typically grows 1% to 2% per year. When do we start to see outsized growth from the clean energy opportunity?

Yes. Maybe I'll take that one. I think -- we're in quite a few discussions with primarily Asian partners at being JERA and Mitsui about using ammonia as a co-firing in their coal plants to reduce the greenhouse gas effect there. So JERA has a commercial test that's going to be occurring in about a month from now that will run 90 days. All suggestions are that, that's going to be successful. I've actually visited the plant where they're going to be doing it, bringing in the ammonia. I think that's going to be the catalyst after that test to really look at how does this get used throughout coal plants in Asia, primarily starting to reduce greenhouse gas. There's a few steps that need to occur prior to we get to that point where we'll start to see that demand uplift and that's some of the contract for differences that the Asian countries, specifically Japan and Korea are looking through. And then also what is the carbon intensity level. With our sequestration that we're looking at right now, we're able to sequester 65% to 70% of the CO2 that comes off of there. It looks as most of the programs are going to start with that as a starting point and then trying to move up to 90% sequestration over time, in which case we may put in flue gas capture or do something like that. So I think the demand, albeit is probably delayed a little bit from what we thought by 6 months or a year. I think this fall, we're going to have much more clarity, and that's really why we deferred our FID decision is to really understand what are the government regulations that are going in place. As Bert mentioned, what is the overall global S&D for ammonia itself, but it's something that we see occurring over the next couple of years, but it's not going to be something that's going to be a hockey stick. I think it will be more gradual growth as we get closer to 2030.

Yes. I want to jump on that in terms of potential technologies that you're going to use with, whether it be SMRs or SMRs with flue gas capture or ATRs. Could you walk us through what that looks like from a carbon capture efficiency standpoint and then what the differences might be in terms of capital intensity?

Yes. So the SMR is a steam methane reforming and that's -- of our 16 ammonia plants, that's how they all operate is with steam methane reforming. So the plant that we've looked at and have the FEED study on that we just completed down in Louisiana is a steam methane reformer that's identical to what we call Ammonia 6, which is the world's largest producing ammonia plant in our Donaldsonville, Louisiana plant. So we see a lot of benefits in replicating that particular plant. A lot of the engineering specs that we had to work through with Ammonia 6, we can copy those, take those. It's right near our core of our engineering excellence center in Donaldsonville. And then spare parts as time goes on, we'd be able to share those spare parts. So the FEED study we did was on that. But as I mentioned, that captures about 65% to 70% of the carbon that we're able to sequester. The 2 other FEED studies that we've just recently had, one is a flue gas capture. So in the steam methane reforming process, 2/3 of the gas is used for the actual process to produce the ammonia. 1/3 of it is used to fire and basically be the combustion gas. And that today, we do not capture. By having flue gas capture in there, we'd be able to get that. So we're running down that study. And then the other study is an integrated auto thermal reformer which uses a slightly different process than the SMR, but you're able to achieve maybe 90% carbon capture. The important thing is here, there isn't an integrated ammonia plant that's built with the ATR. So that's why we just -- as the world's largest nitrogen producer, ammonia producer, it's something that we want to get more understanding of. I think probably right now, the SMR is where we're leaning closer to if we were to move forward with an FID on that.

Got it. And the near-term focus in the U.S. seems to be more on blue hydrogen and blue ammonia. And can you talk about the economics versus blue and versus green where they stand today, given that you do have some green -- smaller green projects in there? And what would it take to accelerate green relative to blue?

Well, to accelerate green relative to blue, it take a lot. So I'll get to that here in a bit. If you think about blue ammonia, which is just capturing the CO2 that we already captured today and sequestering it, that is pretty close to conventional cost of ammonia. So there's not a big cost difference. And in fact, with the 45Q, it actually provides potentially a higher return to the organization to do that. From a green perspective, green, we have a 20,000-ton year ammonia green plant that we're in commissioning phase right now at our Donaldsonville facility. The cost of green ammonia is about 5x that of conventional ammonia or blue ammonia. And the reason for that is not because of the electrolyzer or different pieces. It's because of the amount of electricity that is required in order to produce green ammonia. So if you think of it, we're producing 20,000 tons of green ammonia at our Donaldsonville facility, which produces over 4 million tons in total on an annual basis. We're consuming almost 20% of the power load to produce 20,000 tons compared to the overall site, which produces 4 million. So it's a huge amount of energy and today, without having the renewable resources in place for renewable energy, you're pulling off the grid and the latest 45V that would allow us to get some sort of credit from that has to have renewable power. So we won't be able to get that. Now the way that we will be able to obtain the 45V is through renewable energy credits, we'll purchase those. But after 2028, we may not be able to do that. So I think a long way to say we have very high energy costs, which is increasing the cost of production for that. We have incentives put in place that really need a lot of renewable energy to be built in a very short time frame that I'm not certain could occur in that time frame. So you may stifle a little bit of the innovation by being so restrictive on those incentives from a government standpoint. So our focus is more on low-carbon blue ammonia.

Got it. And just given the incentive from 45Q, you started to see some players who maybe did or maybe didn't have experience in this space, whether it's clean hydrogen or clean ammonia, whether it's oil and gas majors, industrial gases. What's your level of confidence that those -- that you can be competitive with some of these larger announcements that we've seen here in the U.S.?

Well, I think globally, we had tracked -- Bert's group was tracking it, and there's over 100 announcements of new ammonia plant screen and low carbon that were going to be built. I believe 2 have broken ground and 1 was already in flight when we did the analysis. So I think it's easy to say you're going to build an ammonia plant. And what we're seeing is a lot of the participants who were maybe on the periphery of chemical producing to ammonia are starting to rethink their investment decisions related to that because the benefit that CF has is our infrastructure is already in place. So when we produce conventional ammonia or low-carbon ammonia, it's stored the same, it's transported the same, sold to a lot of the same customers that Bert's team works with. So we already have that capital that's installed versus some of these others. So I think it's going to be very difficult to see significant growth. And I think that's why you've seen less and less talk by some of these players about entering in. There will be new plants built because the world needs new plants to be built in order to meet the demand that's coming.

When he talks about infrastructure, that's an important point because of our 20-plus terminals pipeline, ability to load large and small-sized vessels, we have our own barge fleet and so we have a river system of terminals. We have a lot of flexibility and then the upgrade capacity to take that ammonia ton. If you're just a pure ammonia player, you're beholden if you're building one of these new plants. Most of them are export-oriented or connected to a tank. You better have either ratable demand that equals your production or the options that we have, it would be a very difficult endeavor just to build a plant in isolation.

Yes, makes perfect sense. And then you obviously have several MOUs and a JDA for clean ammonia supply. So maybe just give some perspective on what end users and geographies have the most promise for low-carbon ammonia as we stand now? And when do we expect to see ag markets drive increased demand for clean ammonia?

Yes. I think I'll start on the sort of new demand side with clean energy and let Bert go to some of the legacy applications that potentially will happen. But for us, as I mentioned, I think this test that JERA is doing here on co-combustion with coal, it's going to be very important to see where globally that can develop utilizing ammonia. I think we also see longer dated is some of the uses that will be used for marine. Ammonia would be able to be low carbon to almost zero carbon related to marine fuel. And then additionally, you've seen the Biden administration put in some different incentives that are related to sustainable aviation fuel that we're getting a little bit more interest on that from ethanol players and other players globally. So I think there's a few different tranches that are beginning to build. Some are longer dated than others. I would see the co-combustion being first, sustainable aviation fuel being second and then moving into more marine fuel.

When you look at the market and what we're talking about, decarbonization is good for all seasons. We are actively engaged and putting the equipment in place. So we will have and we will be the first to have decarbonized ammonia, which then leads to decarbonized upgrade products like ammonium nitrate or UAN and a lot of conversations are taking place, and that's globally. Our European customers would love to have low-carbon products. Our South American customers are targeting that. And what is going on with Brazil with Raízen, the sugar and ethanol company, targeting SAF for Europe and low carbon ethanol as well as our customers here and the whole value chain for corn. If you can add a low-carbon fertilizer or no carbon fertilizer and then take that through with carbon sequestration at the ethanol plant level, you have a very good score, if not negative score, which impacts not only the carb in California, but again, for SAF and what the goals are for some of the scope goals for our customer's customers. And so that explosives -- I mean I can target an industry, fibers, they're all focused on their own scope emissions and how do they improve their 1, 2 and 3 and we're in the process of helping our customers achieve some of that.

I think that's an important point because we will be the first that will have large-scale decarbonized product. And as Bert mentioned, while this is great with new demand centers beginning to evolve here, we don't need to wait to that. And because we'll have the first and there is a bit of a pull that's beginning to happen there, where we do think that economics will play out, and we'll benefit from that.

Got it. And just a quick follow-up on green versus blue just in terms of who might be the natural offtakers. Is there any relative difference on now, who might have the demand for green versus what you could do with blue in terms of willingness to pay a premium or needing to be regulations?

Well, I would start with the amount of green ammonia we're going to produce is such a small quantity that I think Bert is going to be able to -- his team is going to be able to get a fairly large premium on it just given that it's only 20,000 tons. If it were 1 million tons, you'd probably see some of that come down. I think where most of the interest from true green is coming is more European. I think there's -- I wouldn't even call it standards, but I would say their goal is to be not low carbon, but to be zero carbon. So I think that's where some of the directive for green would be. As I said earlier, I think there is the cost impediment that you're going to hit where it's going to be low carbon for many years. And in order for this to be successful and for the world really to decarbonize, you do need those interim steps. If we say we're going to go green tomorrow, you won't see anybody move that way.

All right. I'll pause here just to see if there's any questions from the audience. All right. So what changes or developments would allow you to announce more projects, brownfield at your sites in North America? What might be the next sites for carbon capture and sequestration?

Yes. I think the next sites for carbon capture and sequestration are going to be those that are closest to areas where are going to have Class 6 permits in place here relatively soon. So when we look at that, we look at our Yazoo City, Mississippi plant, our recently acquired Waggaman, Louisiana plant and even our Medicine Hat Alberta plant. And while that's not privy to the 45Q, it does have a very high carbon tax, which we'd be able to reduce what our carbon penalty would be up there along with cell incremental carbon credits onto the market where we believe that, that would be a profitable venture to go through. So those are the 3 areas that we're looking at right now. As far as brownfields go, I think Bert's team is continually looking at what type of upgrades, whether it be through industrial or how can we utilize the ammonia molecule, the nitrogen molecule in order to get the highest margin. So we're continually looking at that. And I think for the big step change, though, it's really what we're looking at with our Blue Point site. Do we build another low-carbon ammonia plant that we would have primarily for export-oriented customers.

Got it. And you mentioned the recent Waggaman acquisition. So you're adding 800,000 tons of production. Can you talk about how that plant fits into your network and why that deal made sense?

And maybe I'll start with the value side and let Bert talk about how it fits into our network. So from a value standpoint, we think we got a tremendous deal there. As you see with the recent transactions that were announced in the multiples and on a cost per nitrogen tons are significant. So we feel like getting a first quartile cost curve asset for the price we got is going to be extremely well received from economics going forward. But additionally, with that, as I mentioned, we have the carbon capture and sequestration opportunity there. Being in Louisiana, a lot of Class 6 wells are looking to be permitted. You have more CO2 pipeline infrastructure that's there. So we think we'll be able to benefit from that as well. So from a value creation outside of how well it fits into our organization that Bert will talk about here in a moment, it was just something that we felt having a North American asset that we could acquire with something that was very important.

100% agree with all that. And how we look at it, our reputation in the market is as the best operator, the safest operator and we take that seriously. We have a do-it-right culture, and it permeates everything we do. And what I'm excited about is our team getting in there, those -- I'm sure those folks at Waggaman are good folks. But Chris' broad point, they had 5 engineers. We have 150 engineers. We have a spare part program. It's a Kellogg plant. We have Kellogg plants. And so the integration on technology, on added knowledge sharing and integration into our system and the safety culture that we bring with that, that's a great first step. And what we -- how we run our plants is we target 110% of capacity of nameplate. So if you're at 800,000, 880,000 tons, we would like to get that to even higher, and we believe that we've already demonstrated that we can do that. And then we know the customers. We know each of these customers well. We deal with them. So we're tucking that into our customer base and our consumption base. And then it's that additional incremental ton that's produced because Waggaman is connected to the pipeline and is connected to Donaldsonville, we can load vessels, we can load barges, we can put it up into our terminals. So much flexibility, and it's just another tool in our toolbox. So it's a fantastic acquisition.

Got it. And you guys -- you mentioned that the precedent -- the recent transaction precedent, and in last earning's call, you were talking about your equity value being substantially undervalued relative to dollars per nitrogen tons. So can you talk about how that informs your growth strategy and free cash flow allocation going forward?

Well, I think there's 2 points. One, as Tony Will, our CEO mentioned on the call, every asset that we've built over time that looks like it's been expensive, has had a very high return profile for us because first quartile assets continue to appreciate and value -- and the economic value goes along with that. So if you look back at 2010 when we purchased Terra at roughly $2,000 per ton of nitrogen compared to Coke's acquisition of the OCI assets just recently at 5,000 tons per asset. So anything that's in the first quartile that's exchanging hands from a willing buyer to a willing seller is really demonstrating that we're undervalued. And so that's our thesis that we believe we're undervalued. So what are we doing about it? Well, we have an open authorization that of $3 billion for share repurchases, that expires at the end of next year where we have about $2.6 billion left on that. Our expectation is that we'll close that out. We think where our equity is valued now grossly underestimates what our embedded assets are able to achieve from an economic value going forward, both by the transactions, but also what new builds costs as well has been represented by our FEED study. But at the same time, had we just always bought back shares over the years, whether it's been the Terra acquisition, our expansions at Donaldsonville and Port Neal or the acquisition of our remaining assets at Medicine Hat and Terra Nitrogen, we would have never seen the growth that we have today of over 30% bigger footprint that's allowing us to generate cash. So it's a measured level. The benefit we have is our starting point is $2 billion of cash on our balance sheet. Last year, we did $1.8 billion in free cash flow. We see a tight to balanced market going forward where we believe we're going to be able to achieve that. And the one thing this organization does extremely well is our free cash flow conversion. So everybody reports their EBITDA number. Everybody puts a multiple against it and says that's what the value should be. If you go down a layer of that, you can see our free cash flow conversion is significantly higher than not only our peers, but a lot of companies in the chemical space that allows us to not only buy back shares, but also to do expansion projects along the way.

Let me give some granularity to what he just said. We bought Terra in 2010 for a little under $5 billion. With that, we got Yazoo City, Verdigris, Woodward, Port Neal, Courtright, Trinidad and the U.K. Coke bought 1 asset for $3.5 billion plus probably some debt or $3.6 million. And so when we look at our company and then you again, layer in our operating capability and our safety culture and the value creation and the free cash flow that we create from that operation, we're substantially undervalued.

Very well said. And maybe just going back to low-carbon ammonia and expansions, how much capital is needed to fund conventional versus blue versus green ammonia projects. And are you comfortable taking on more leverage to accelerate the low-carbon ammonia?

Yes. So I think just for starters, we've done the green plant. We've largely done the blue plant at Donaldsonville and our CapEx really hasn't moved from the prior 3 years. And so the reason why I say that is these projects, because of the infrastructure I talked about, like we don't have to build new tanks. We don't have to buy new barges. A lot of our logistics systems are all set up because the conventional ton is the same as a low-carbon ton. Now that being said, we generally allocate anywhere from $50 million to $100 million to growth projects that sits within that range of $500 million or $550 million of CapEx we do each year. If we were to move forward with a new plant, I think the one area people are getting a little caught up in is we came out with a FEED study that says an ammonia plant would be a replica of Ammonia 6 would be $2.5 billion, about another $500 million for scalable infrastructure. Well, our portion of that is roughly about half. So that puts us at $1.5 billion. When you build these plants, while they will be operational in 4 years, you really have a tail on the spend. So you have sort of 5 years at which that $1.5 billion would go over. And it's almost similar to a standard distribution, thinner tails on the front and the back and more spending in between. So you really wouldn't see spending until -- heavy spending until probably 2026. And with the free cash flow we're generating, I think we feel very comfortable that we could -- if we chose to do that with cash on our balance sheet, along with continuing to return capital to shareholders as we've done not only with share repurchase, but by increasing our dividend over 67% over the last roughly 24 months. So a pretty significant move in that, and that's really underscores the confidence we have in the industry. Taking on debt, if we were to do an inorganic acquisition that's bringing in free cash flow right away, we'd probably consider levering it up if we needed to. So we're not necessarily against utilizing the balance sheet correctly. At this time, we just don't think we need to.

Got it. And maybe we're bumping up against time here. So what are the top 2 or 3 innovations and structural changes affecting your company over the next 5 years? And are there any emerging trends that are perhaps being overlooked in the current discourse?

Maybe I'll start, and you can go. I think it's the unknown, whether it's geopolitical or different regulatory environments that may come that may be protectionist globally that could influence things. So those are sort of the unknowns that you continue to look at scenario planning around. And then from an innovation standpoint, I would just say it's the continued path on decarbonization. Does that get cheaper? Does it get more effective? Are there different government incentives that allow you to do more there.

If history is a predictor of the future, you better be a student of history. And in this industry, we've seen from going back 25 years, a complete collapse in North American production, why gas was high, the world was changing. And then you go in and a lot of plants were taken out. And then the ethanol boom took place and acreage expanded and the price and the structure just continued to improve. And then we had the collapse of '08, but we had the shale gas revolution parallel to that, which just accelerated and improved all the profiles of a North American chemical, whether it's fertilizer or ammonia or chlor-alkali or whatever. And then you go through that in terms of the improving dietary changes in the world and the demand for oilseeds and feed grains, taking a China that produced a lot of urea and a China that rationalized all that urea, so expansion contraction, India growth, Brazil growth. If you chart that, it is one of yield growth in the world, consumption growth in the world, demand growth in the world, all that is impacted by our product. And so if you're an investor, if you're following this industry, you're going to want to be in a low-cost environment, which is North America in a capacity creative company such as CF Industries that has optionality of exports and movements in storage that's leverageable, which we do and prepare for what you just mentioned, the geopolitical oscillations that occur. And when they occur, you have to be able to execute against them, which we do. So I'm excited. I think there are so many things that are taking place in the world today and the need for a company like ours to one, decarbonize and improve the profiles of our products, it's exciting.

All right. Bert, Chris, thank you so much. Please join me in thanking our speakers.