What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-03 compared with 2023-05-02 · 410 added, 219 removed, 507 unchanged (55% of the section changed)

28 unchanged sentences

Our other nitrogen products include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia, which are sold primarily to our industrial customers.

Our principal assets as of March 31, 2023 include:

Our principal assets as of June 30, 2023 include:

nitrogen manufacturing facilities located in Donaldsonville, Louisiana (the largest nitrogen complex in the world);

10 unchanged sentences

• a 50% interest in Point Lisas Nitrogen Limited (PLNL), an ammonia production joint venture located in the Republic of Trinidad and Tobago (Trinidad) that we account for under the equity method.

We previously operated a United Kingdom nitrogen manufacturing facility located in Ince.

In June 2022, we approved and announced our proposed plan to restructure our U.K.

operations, including the permanent closure of our Ince facility.

In August 2022, the final restructuring plan was approved, and decommissioning activities were initiated.

Our Commitment to a Clean Energy Economy

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(Mitsui) signed a joint development agreement for the companies’ proposed plans to construct an export-oriented blue ammonia facility.

We and Mitsui continue to progress a front-end engineering and design (FEED) study for the project, and expect to make a final investment decision on the proposed facility in the second half of 2023.

We and Mitsui continue to progress a front-end engineering and design (FEED) study for the project and expect to make a final investment decision on the proposed facility later in 2023.

Should the companies agree to move forward, the ammonia facility would be constructed at our new Blue Point complex.

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We are currently executing a project with an estimated cost of $200 million to construct a CO 2 dehydration and compression facility at our Donaldsonville complex to enable the transport and permanent sequestration of the ammonia process CO 2 byproduct.

Engineering activities and procurement of major equipment for the facility are in progress, and modification of the site’s existing equipment to allow integration with existing operations 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 CO 2 , enabling the production of blue ammonia.

Engineering activities for the construction of the dehydration and compression unit continue to advance, procurement of major equipment for the facility is in progress, and fabrication of the CO 2 compressors has begun.

In October 2022, we announced that we had entered into a definitive CO 2 offtake agreement with ExxonMobil to transport and permanently sequester 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.

CF INDUSTRIES HOLDINGS, INC.

Agreement to Purchase Ammonia Production Facility

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The facility has a nameplate capacity of 880,000 tons of ammonia annually.

The parties will allocate $425 million of the purchase price to 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.

The parties will allocate $425 million

CF INDUSTRIES HOLDINGS, INC.

of the purchase price to 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.

We expect to fund the balance of the purchase price, representing the $1.675 billion purchase price, as adjusted, less $425 million, with cash on hand.

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Changes in the geopolitical environment can have significant effects on our financial results.

Russia’s invasion of Ukraine in February 2022, and the resulting war between Russia and Ukraine, disrupted global markets for certain commodities, including natural gas, nitrogen fertilizers and certain commodity grains, leading to production curtailments, export reductions and logistical complications involving these commodities.

Russia’s invasion of Ukraine in February 2022, and the resulting war between Russia and Ukraine, disrupted global markets for certain commodities, including natural gas, nitrogen fertilizers and certain commodity grains and oilseeds, leading to production curtailments, export reductions and logistical complications involving these commodities.

Additionally, energy, financial and transportation sanctions were announced by U.S., Canadian, European and other governments against Russia in response to the war.

During 2022 and continuing into 2023, market participants adjusted trade flows and manufacturers adjusted production levels in response to these factors.

As of the date of filing of this report, nitrogen fertilizers have largely been explicitly exempted from Russian sanctions by the United States and certain other governments.

During 2022 and 2023, market participants have continued to adjust trade flows and manufacturers have continued to adjust production levels in response to changing conditions resulting from these factors.

As of the date of filing of this report, nitrogen fertilizers have largely been explicitly exempted from sanctions against Russia by the United States and certain other governments, and as a result, there has been an increase in Russian fertilizer exports into the United States and other parts of the world.

As further described below, natural gas is the principal raw material used to produce our nitrogen products.

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This led to further increases in natural gas prices and natural gas price volatility, which in turn led to disruptions in manufacturing and distribution activities at other nitrogen manufacturers and suppliers in our industry, resulting in changes in nitrogen product trade flows and reductions in global fertilizer supply.

In September 2022, in response to the high prices for natural gas in the United Kingdom, we temporarily idled ammonia production at our Billingham complex and since that time have been importing ammonia from one of our North American manufacturing facilities or from purchases in the open market for upgrade into AN and other nitrogen products at that location.

In September 2022, in response to the high prices for natural gas in the United Kingdom, we idled ammonia production at our Billingham complex and since that time have been importing ammonia from one of our North American manufacturing facilities or from purchases in the open market for upgrade into AN and other nitrogen products at that location.

The geopolitical developments relating to the war in Ukraine also led to some supply chain disruptions for Russian producers of fertilizer, contributing to reduced global nitrogen fertilizer supply.

Prior to its February 2022 invasion of Ukraine, Russia in recent years had been a significant supplier of nitrogen fertilizer products to North America and Europe and a leading exporter of nitrogen fertilizer products globally.

Since that invasion, the closure of a pipeline historically transporting ammonia from Russia through Ukraine for export has been a large contributor to reduced global exportable ammonia supply.

Furthermore, the subsequent closure of a pipeline historically transporting ammonia from Russia through Ukraine for export has been a large contributor to reduced global exportable ammonia supply.

In addition, Russia and Ukraine have been large exporters of commodity grains such as wheat, corn and soybeans.

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As Russian-sourced natural gas supply declined due to geopolitical factors, European purchasers of natural gas increased imports from the liquified natural gas (LNG) market to build storage levels leading up to the winter 2022/2023 peak demand season.

As storage levels of natural gas increased due to the increased LNG imports, in conjunction with a warmer than expected winter in Europe, prices for natural gas first stabilized and then fell as the first quarter of 2023 progressed.

As natural gas prices decreased, certain nitrogen producers restarted previously idled production, leading to an increase in global nitrogen production operating rates.

The increased nitrogen product supply availability resulting from the increase in operating rates, in

The increased global nitrogen product supply availability resulting from the increase in operating rates, in addition to new global production coming on line and an increase in Russian imports of UAN into the United States, resulted in an increase in supply and lower average selling prices in the first half of 2023 compared to average selling prices realized in 2022.

CF INDUSTRIES HOLDINGS, INC.

addition to new global production coming on line and an increase in Russian imports into North America, resulted in lower average selling prices in the first quarter of 2023 compared to average selling prices realized in 2022.

Nitrogen Selling Prices

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In general, the prevailing global prices for nitrogen products must be at a level to incent the high cost marginal producer to produce product at a breakeven or above price, or else they would cease production and leave a portion of global demand unsatisfied.

In the first quarter of 2023, the average selling price for our products was $444 per ton, a decrease of 28% compared to $620 per ton in the first quarter of 2022, reflecting lower average selling prices across all our segments, which drove a decrease in net sales of approximately $804 million for the first quarter of 2023 compared to the first quarter of 2022.

In the second quarter of 2023, the average selling price for our products was $359 per ton, a decrease of 49% compared to $701 per ton in the second quarter of 2022, reflecting lower average selling prices across all our segments, which drove a decrease in net sales of approximately $1.66 billion for the second quarter of 2023 compared to the second quarter of 2022.

The decrease in average selling prices reflects the impact of an increase in global supply availability as lower global energy costs drove higher global operating rates.

In addition, higher average selling prices in 2022 were driven in part by the geopolitical environment experienced in 2022, as described above.

In the six months ended June 30, 2023, the average selling price for our products was $400 per ton, or 39% lower compared to $661 per ton in the six months ended June 30, 2022.

This resulted in a decrease in net sales of approximately $2.47 billion for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.

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 50% of our production costs in both the first three months of 2023 and in the year ended December 31, 2022.

The following table presents the average daily market price of natural gas at the Henry Hub, the most heavily-traded natural gas pricing point in North America, and the National Balancing Point (NBP), the major trading point for natural gas in the United Kingdom:

Three Months Ended March 31,

Natural gas is a significant cost component of our manufactured nitrogen products, representing approximately 50% of our production costs in both the first six months of 2023 and in the year ended December 31, 2022.

The following table presents the average daily market price of natural gas at the Henry Hub, the most heavily-traded natural gas pricing point in North America:

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 v.

Natural gas supplemental data (per MMBtu)

Average daily market price of natural gas Henry Hub (Louisiana) $ 2.68 $ 4.60 $ (1.92) (42) %

Average daily market price of natural gas National Balancing Point (United Kingdom) $ 16.20 $ 30.20 $ (14.00) (46) %

2022 2023 2022 2023 v.

Average daily market price of natural gas Henry Hub (Louisiana) (per MMBtu) $ 2.12 $ 7.40 $ (5.28) (71) % $ 2.40 $ 6.01 $ (3.61) (60) %

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.

North American natural gas prices were lower on average during the first three months of 2023 than during the first three months of 2022.

Warmer-than-normal temperatures in the first quarter of 2023 drove lower heating demand for natural gas, while North American supply remained strong, as there were few weather-related disruptions.

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 2023, the ongoing outage at the Freeport LNG facility limited total gas exports, supporting domestic supply.

As a result, North American gas withdrawals from storage during the first quarter of 2023 were lower than normal, leading to end-of-quarter storage levels that were 32% higher than one year ago and 20% higher than the five-year average.

For the first three weeks of April 2023, the average daily market price of natural gas at the Henry Hub was $2.11 per MMBtu.

North American natural gas prices were lower on average during the first six months of 2023 than during the first six months of 2022.

Warmer-than-normal temperatures in the first quarter of 2023 drove lower heating demand for natural gas, while North American supply remained strong, as there were few weather-related production disruptions.

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 half of 2023, the ongoing outage at the Freeport LNG facility as well as planned maintenance at several other LNG facilities limited total gas exports, supporting domestic supply.

As a result, North America entered the second quarter of 2023 with above-average volumes of gas in storage and was able to inject at higher-than-average rates, leading to end-of-quarter storage levels that were 25% higher than one year ago and 15% higher than the five-year average.

For July 2023, the average daily market price of natural gas at the Henry Hub was $2.54 per MMBtu.

Our Billingham U.K.

nitrogen manufacturing facility is subject to fluctuations associated with the price of natural gas in Europe.

nitrogen manufacturing facility has been subject to fluctuations associated with the price of natural gas in Europe.

Russia’s invasion of Ukraine in February 2022 disrupted European energy markets and threatened security of supply, driving natural gas prices in Europe upward to unprecedented levels.

During the first quarter of 2023, Europe benefited from warmer-than-normal temperatures along with increased LNG imports, which were used to fill local storage capacity, decreasing the risk of natural gas shortage.

This resulted in lower natural gas prices in the United Kingdom during the first quarter of 2023, despite lower European natural gas imports from Russia.

Throughout the first quarter of 2023, storage levels remained well above historical averages, putting the market in a strong position to refill stocks in preparation for the next winter season and contributing to lower prices.

For the three months ended March 31, 2023, the daily closing price at the NBP reached a low of $11.00 per MMBtu on March 21, 2023 and a high of $21.51 per MMBtu on two consecutive days in January 2023.

For the first three weeks of April 2023, the average daily market price of natural gas at the NBP was $12.84 per MMBtu.

In the first quarter of 2023, our cost of natural gas used for production, which includes the impact of realized natural gas derivatives, increased 2% to $6.62 per MMBtu from $6.48 per MMBtu in the first quarter of 2022.

This increase in natural gas costs resulted in a decrease in gross margin of approximately $28 million compared to the first quarter 2022.

The higher cost of

In the three and six months ended June 30, 2022, the average daily market price of natural gas at the National Balancing Point (NBP), the major trading point for natural gas in the United Kingdom, was $16.00 per MMBtu and $23.06 per MMBtu, respectively.

In September 2022, as a result of extremely high and volatile natural gas prices and the lack of a corresponding increase in global nitrogen product market prices, we idled ammonia production at our Billingham complex.

Since that time, we have imported ammonia for upgrade into AN and other nitrogen products at that location.

In the second quarter of 2023, our cost of natural gas used for production, which includes the impact of realized natural gas derivatives, decreased 61% to $2.75 per MMBtu from $7.05 per MMBtu in the second quarter of 2022.

This decrease in natural gas costs resulted in an increase in gross margin of approximately $360 million compared to the second quarter of 2022.

In the first half of 2023, our cost of natural gas used for production, which includes the impact of realized natural gas derivatives, decreased 33% to $4.56 per MMBtu from $6.79 per MMBtu in the first half of 2022.

This decrease in natural gas costs resulted in an increase in gross margin of approximately $332 million compared to the first half of 2022.

CF INDUSTRIES HOLDINGS, INC.

natural gas reflects the impact of losses realized on natural gas derivatives that settled during the first quarter of 2023.

In 2022, in response to high North American natural gas prices and continued price volatility, we entered into certain natural gas derivatives in order to reduce our exposure to further natural gas price volatility in the winter of 2022/2023.

Financial Executive Summary

We reported net earnings attributable to common stockholders of $560 million for the three months ended March 31, 2023 compared to $883 million for the three months ended March 31, 2022, a decrease in net earnings of $323 million.

The decrease in net earnings for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 reflects a decrease of $835 million in gross margin to $863 million for the three months ended March 31, 2023.

The decrease in gross margin was due primarily to a decrease of 28% in average selling prices to $444 per ton in the first quarter of 2023 from $620 per ton in the first quarter of 2022, which decreased gross margin by $804 million.

Lower gross margin was partially offset by a decrease in interest expense of $201 million due primarily to interest expense on tax liabilities related to Canadian-U.S.

transfer pricing matters in the first quarter of 2022 that did not recur in 2023 and a decrease in the income tax provision of $232 million due primarily to lower earnings in the first quarter of 2023.

Diluted net earnings per share attributable to common stockholders decreased $1.36 per share, to $2.85 per share, in the first quarter of 2023 compared to $4.21 per share in the first quarter of 2022 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 program.

We reported net earnings attributable to common stockholders of $527 million for the three months ended June 30, 2023 compared to $1.17 billion for the three months ended June 30, 2022, a decrease in net earnings of $638 million.

The decrease in net earnings for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 reflects a decrease of $1.19 billion in gross margin to $804 million for the three months ended June 30, 2023.

The decrease in gross margin was due primarily to a 49% decrease in average selling prices to $359 per ton in the second quarter of 2023 from $701 per ton in the second quarter of 2022, which decreased gross margin by $1.66 billion.

The impact of lower selling prices was partially offset by lower natural gas costs, which increased gross margin by approximately $360 million.

In addition, lower gross margin was partially offset by pre-tax impairment and restructuring charges related to our U.K.

operations of $162 million in the second quarter of 2022 that did not recur in the second quarter of 2023 and a decrease in the income tax provision of $223 million due primarily to lower earnings in the second quarter of 2023.

Diluted net earnings per share attributable to common stockholders decreased $2.88 per share, to $2.70 per share, in the second quarter of 2023 compared to $5.58 per share in the second quarter of 2022 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.

Items Affecting Comparability of Results

For the three months ended March 31, 2023 and 2022, we reported net earnings attributable to common stockholders of $560 million and $883 million, respectively.

In addition to the impact of market conditions discussed above, certain items affected the comparability of our financial results for the three months ended March 31, 2023 and 2022.

For the three months ended June 30, 2023 and 2022, we reported net earnings attributable to common stockholders of $527 million and $1.17 billion, respectively.

For the six months ended June 30, 2023 and 2022, we reported net earnings attributable to common stockholders of $1.09 billion and $2.05 billion, respectively.

In addition to the impact of market conditions discussed above, certain items affected the comparability of our financial results for the three and six months ended June 30, 2023 and 2022.

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.

Three Months Ended March 31,

Pre-Tax After-Tax Pre-Tax After-Tax

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Pre-Tax After-Tax Pre-Tax After-Tax Pre-Tax After-Tax Pre-Tax After-Tax

(in millions)

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(Gain) loss on foreign currency transactions, including intercompany loans (2)

(1) — 5 3 (2) (1) 11 8

long-lived and intangible asset impairment — — 152 115 — — 152 115

operations restructuring — — 10 8 2 2 10 8

3 unchanged sentences

Interest income — — (2) (1) — — (38) (29)

Income tax provision (3)

Income tax (benefit) provision (3)

— — — (20) — — — 52

Loss on debt extinguishment — — 8 6 — — 8 6

______________________________________________________________________________

(1) Included in cost of sales in our consolidated statements of operations.

(2) Included in other operating—net in our consolidated statements of operations.

(3) For the three months ended March 31, 2022, the after-tax income tax provision amount of $72 million reflects an income tax provision of $78 million, consisting of the $76 million income tax provision referenced below under “Canada Revenue Agency Competent Authority Matter” and the $2 million of income tax provision referenced below under “Transfer pricing positions,” net of $6 million of income tax provision that is reflected in the after-tax interest expense and interest income amounts shown in this table.

(3) For the three months ended June 30, 2022, the after-tax income tax benefit amount of $20 million reflects an income tax benefit of $19 million, consisting of the $2 million income tax provision referenced below under “Canada Revenue Agency Competent Authority Matter” and the $21 million of income tax benefit referenced below under “Transfer pricing positions,” net of $1 million of income tax provision that is reflected in the after-tax interest income amount shown in this table.

For the six months ended June 30, 2022, the after-tax income tax provision amount of $52 million reflects an income tax provision of $59 million, consisting of the $78 million income tax provision referenced below under “Canada Revenue Agency Competent Authority Matter” and the $19 million of income tax

CF INDUSTRIES HOLDINGS, INC.

benefit referenced below under “Transfer pricing positions,” net of $7 million of income tax provision that is reflected in the after-tax interest expense and interest income amounts shown in this table.

Unrealized net mark-to-market gain on natural gas derivatives

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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, 2023 and 2022, we recognized unrealized net mark-to-market gains of $72 million and $33 million, respectively.

CF INDUSTRIES HOLDINGS, INC.

In the three months ended June 30, 2022, we recognized an unrealized net mark-to-market gain of $17 million.

In the six months ended June 30, 2023 and 2022, we recognized unrealized net mark-to-market gains of $72 million and $50 million, respectively.

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

In the three months ended March 31, 2023 and 2022, we recognized a (gain) loss on foreign currency transactions of $(1) million and $6 million, respectively.

In the six months ended June 30, 2023 and 2022, we recognized a (gain) loss on foreign currency transactions of $(2) million and $11 million, respectively.

Gains and losses on foreign currency transactions consist 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 were not permanently invested.

operations restructuring

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 second quarter of 2022, we approved and announced our proposed plan to restructure our U.K.

operations, including the planned permanent closure of the Ince facility, which had been idled since September 2021, and optimization of the remaining manufacturing operations at our Billingham facility.

As a result, we recorded total charges of $162 million related to the Ince facility as follows:

• asset impairment charges of $152 million consisting of the following:

◦ an impairment charge of $135 million related to property, plant and equipment that is planned for abandonment at the Ince facility, including a liability of approximately $9 million for the costs of certain asset retirement activities related to the Ince site;

◦ an intangible asset impairment charge of $8 million related to trade names;

◦ an impairment charge of $9 million related to the write-down of spare parts and certain raw materials at the Ince facility;

• a charge for post-employment benefits totaling $10 million, which is included in the U.K.

operations restructuring line item in our consolidated statements of operations, related to contractual and statutory obligations due to employees whose employment would be terminated in the proposed plan.

See Note 5—United Kingdom Operations Restructuring for additional information.

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

Transaction costs related to acquisition agreement

On March 20, 2023, we entered into an asset purchase agreement with DNLA and IPL to acquire DNLA’s ammonia production complex located in Waggaman, Louisiana, as described above under “Agreement to Purchase Ammonia Production Facility.” In the three months ended March 31, 2023, we incurred $13 million of transaction costs related to the acquisition agreement.

On March 20, 2023, we entered into an asset purchase agreement with DNLA and IPL to acquire DNLA’s ammonia production complex located in Waggaman, Louisiana, as described above under “Agreement to Purchase Ammonia Production Facility.” In the three and six months ended June 30, 2023, we incurred $3 million and $16 million, respectively, of transaction costs related to the acquisition agreement.

Canada Revenue Agency Competent Authority Matter

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The letters of credit served as security until the matter was resolved.

In 2018, the matter, including the related transfer pricing topic regarding the allocation of profits between Canada and the United States, was accepted for consideration under the bilateral settlement provisions of the U.S.-Canada tax treaty (the Treaty) by the United States and Canadian competent authorities, and included tax years 2006 through 2011.

In 2018, the matter, including the related transfer pricing topic regarding the allocation of profits between

CF INDUSTRIES HOLDINGS, INC.

Canada and the United States, was accepted for consideration under the bilateral settlement provisions of the U.S.-Canada tax treaty (the Treaty) by the United States and Canadian competent authorities, and included tax years 2006 through 2011.

In the second quarter of 2021, the Company submitted the transfer pricing aspect of the matter into the arbitration process under the terms of the Treaty.

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See Note 9—Income Taxes for additional information.

In the three months ended March 31, 2022, as a result of the impact of these events on our Canadian and U.S.

In the six months ended June 30, 2022, as a result of the impact of these events on our Canadian and U.S.

federal and state income taxes, we recognized an income tax provision of $78 million, reflecting the net impact of $129 million of accrued income taxes payable to Canada for tax years 2006 through 2011, partially offset by net income tax receivables of approximately $51 million in the United States, and we accrued net interest of $104 million, primarily reflecting the impact of estimated interest payable to Canada.

Of the $78 million of income tax provision and $104 million of net interest expense recognized in the six months ended June 30, 2022, $2 million of income tax provision and $5 million of net interest expense was recognized in the three months ended June 30, 2022.

Transfer pricing positions

In the first quarter of 2022, as a result of the outcome of the arbitration decision discussed above, we also evaluated our transfer pricing positions between Canada and the United States for open years 2012 and after.

Based on this evaluation, we recorded the following:

• liabilities for unrecognized tax benefits of $319 million, with a corresponding income tax provision, and accrued interest of $91 million related to the liabilities for unrecognized tax benefits, and

• noncurrent income tax receivables of $329 million, with a corresponding income tax benefit, and accrued interest income of $28 million related to the noncurrent income tax receivables.

In the three months ended March 31, 2022, the impact of this evaluation of transfer pricing positions on our consolidated statement of operations, including a $12 million deferred income tax provision for other transfer pricing tax effects, was a $2 million income tax provision and $63 million of net interest expense before tax ($69 million after tax).

As a result of the outcome of the arbitration decision discussed above, we also evaluated our transfer pricing positions between Canada and the United States for open years 2012 and after.

Based on this evaluation, for the six months ended June 30, 2022, we recorded the following:

• liabilities for unrecognized tax benefits of approximately $314 million, with a corresponding income tax provision, and accrued interest of approximately $116 million related to the liabilities for unrecognized tax benefits, and

• noncurrent income tax receivables of approximately $359 million, with a corresponding income tax benefit, and accrued interest income of approximately $30 million related to the noncurrent income tax receivables.

In the six months ended June 30, 2022, the impact on our consolidated statement of operations of the amounts recorded as a result of this evaluation of transfer pricing positions, including $26 million of net deferred income tax provision for other transfer pricing tax effects, was $19 million of income tax benefit and $86 million of net interest expense before tax ($93 million after tax).

Of the $19 million of income tax benefit and $86 million of net interest expense recognized in the six months ended June 30, 2022, $21 million of income tax benefit and $23 million of net interest expense ($24 million after tax) was recognized in the three months ended June 30, 2022.

Loss on debt extinguishment

On April 21, 2022, we redeemed in full all of the $500 million outstanding principal amount of the 3.450% senior notes due June 2023 (the 2023 Notes) in accordance with the optional redemption provisions in the indenture governing the 2023 Notes.

The total aggregate redemption price paid in connection with the April 2022 redemption of the 2023 Notes was $513 million, including accrued interest.

As a result, we recognized a loss on debt extinguishment of $8 million, consisting primarily of the premium paid on the redemption of the $500 million principal amount of the 2023 Notes prior to their scheduled maturity.

CF INDUSTRIES HOLDINGS, INC.

Consolidated Results of Operations

The following table presents our consolidated results of operations and supplemental data:

Three Months Ended March 31,

The following table presents our consolidated results of operations for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 v.

(in millions, except per share and per MMBtu)

2022 2023 2022 2023 v.

(dollars in millions, except per share and per MMBtu amounts)

Net sales $ 1,775 $ 3,389 $ (1,614) (48) % $ 3,787 $ 6,257 $ (2,470) (39) %

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Selling, general and administrative expenses 71 73 (2) (3) % 145 137 8 6 %

operations restructuring 2 — 2 N/M

Transaction costs 13 — 13 N/M

long-lived and intangible asset impairment — 152 (152) (100) % — 152 (152) (100) %

operations restructuring — 10 (10) (100) % 2 10 (8) (80) %

Transaction costs 3 — 3 N/M 16 — 16 N/M

Other operating—net 3 6 (3) (50) % (32) 8 (40) N/M

2 unchanged sentences

Operating earnings 734 1,778 (1,044) (59) % 1,560 3,436 (1,876) (55) %

Interest expense—net 10 205 (195) (95) %

Other non-operating—net (3) 1 (4) N/M

Interest expense 36 82 (46) (56) % 76 323 (247) (76) %

Interest income (40) (8) (32) (400) % (70) (44) (26) (59) %

Loss on debt extinguishment — 8 (8) (100) % — 8 (8) (100) %

Other non-operating—net (2) — (2) N/M (5) 1 (6) N/M

Earnings before income taxes 740 1,696 (956) (56) % 1,559 3,148 (1,589) (50) %

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Dividends declared per common share $ 0.40 $ 0.40 $ — — % $ 0.80 $ 0.70 $ 0.10 14 %

___________________________________________________________________________

N/M—Not Meaningful

CF INDUSTRIES HOLDINGS, INC.

The following table presents certain supplemental data for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 v.

2022 2023 2022 2023 v.

(dollars in millions, except per MMBtu amounts)

Natural gas supplemental data (per MMBtu)

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Average daily market price of natural gas Henry Hub (Louisiana) $ 2.12 $ 7.40 $ (5.28) (71) % $ 2.40 $ 6.01 $ (3.61) (60) %

Average daily market price of natural gas National Balancing Point (United Kingdom) $ 16.20 $ 30.20 $ (14.00) (46) %

Unrealized net mark-to-market gain on natural gas derivatives $ — $ (17) $ 17 (100) % $ (72) $ (50) $ (22) (44) %

14 unchanged sentences

(3) Gross ammonia production, including amounts subsequently upgraded on-site into granular urea, UAN, or AN.

CF INDUSTRIES HOLDINGS, INC.

First Quarter of 2023 Compared to First Quarter of 2022

Our total net sales decreased $856 million, or 30%, to $2.01 billion in the first quarter of 2023 compared to $2.87 billion in the first quarter of 2022 due to decreases in average selling prices and sales volume.

Our average selling price was $444 per ton in the first quarter of 2023, or 28% lower compared to $620 per ton in the first quarter of 2022, due to lower average selling prices across all of our segments, primarily driven by an increase in global supply availability as lower global energy costs drove higher global operating rates.

Our total sales volume of 4.5 million product tons in the first quarter of 2023 was 2% lower compared to 4.6 million product tons in the first quarter of 2022, as lower sales volume in our UAN, Ammonia, AN and Other segments was partially offset by higher sales volume in our Granular Urea segment.

Second Quarter of 2023 Compared to Second Quarter of 2022

Our total net sales decreased $1.61 billion, or 48%, to $1.78 billion in the second quarter of 2023 compared to $3.39 billion in the second quarter of 2022 due primarily to a decrease in average selling prices.

Our average selling price was $359 per ton in the second quarter of 2023, or 49% lower compared to $701 per ton in the second quarter of 2022, due to lower average selling prices across all of our segments.

The impact of lower average selling prices was a decrease in net sales of approximately $1.66 billion for the second quarter of 2023 compared to the second quarter of 2022.

The decrease in average selling prices reflects the impact of an increase in global supply availability as lower global energy costs drove higher global operating rates.

Our total sales volume of 4.9 million product tons in the second quarter of 2023 was 2% higher compared to 4.8 million product tons in the second quarter of 2022 due primarily to higher sales volume in our UAN segment, partially offset by lower sales volume in our AN segment.

Gross ammonia production for the three and six months ended June 30, 2023 was 2.4 million tons and 4.7 million tons, respectively.

We expect gross ammonia production for 2023 will be in a range of 9.0 million to 9.5 million tons as we have a proposed plan to permanently close the ammonia plant at our Billingham, U.K.

Cost of Sales

Our total cost of sales decreased $21 million, or 2%, to $1.15 billion in the first quarter of 2023 from $1.17 billion in the first quarter of 2022.

The decrease in our cost of sales was due primarily to a decrease in sales volume of 2%, which decreased cost of sales by $30 million, and lower costs for ammonia purchased from PLNL, our joint venture in Trinidad.

The factors that decreased cost of sales were partially offset by higher costs for natural gas, including the impact of realized derivatives, which increased cost of sales by $28 million, and higher costs for imported ammonia for our operations in the United Kingdom.

Higher costs for natural gas were due primarily to losses on natural gas derivatives settled in the first quarter of 2023, partially offset by lower costs for natural gas in the United Kingdom as we imported ammonia for upgrading to AN.

Cost of sales also includes the impact of a $72 million unrealized net mark-to-market gain on natural gas derivatives in the first quarter of 2023 compared to a $33 million gain in the first quarter of 2022.

Cost of sales averaged $254 per ton in the first quarter of 2023 compared to $253 per ton in the first quarter of 2022.

The cost of natural gas used for production includes the impact of natural gas derivatives used to reduce the volatility of natural gas prices.

The cost of natural gas increased 2% to $6.62 per MMBtu in the first quarter of 2023 from $6.48 per MMBtu in the first quarter of 2022.

The higher cost of natural gas reflects the impact of losses realized on natural gas derivatives that settled during the first quarter of 2023.

Our total cost of sales decreased $427 million, or 31%, to $971 million in the second quarter of 2023 from $1.40 billion in the second quarter of 2022.

The decrease in our cost of sales was due primarily to lower costs for natural gas, which

CF INDUSTRIES HOLDINGS, INC.

decreased cost of sales by $360 million, including the impact of realized derivatives, and lower costs for ammonia purchased from PLNL, our joint venture in Trinidad.

Lower natural gas costs were partially offset by the cost to import ammonia in the second quarter of 2023 for our U.K.

Cost of sales averaged $196 per ton in the second quarter of 2023 compared to $289 per ton in the second quarter of 2022.

Our cost of natural gas decreased 61% to $2.75 per MMBtu in the second quarter of 2023 from $7.05 per MMBtu in the second quarter of 2022.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $10 million to $74 million in the first quarter of 2023 as compared to $64 million in the first quarter of 2022.

The increase was due primarily to higher costs related to certain corporate initiatives, including amortization of our recently implemented enterprise resource planning (ERP) system, and higher salaries and incentive compensation.

Selling, general and administrative expenses were $71 million in the second quarter of 2023, essentially unchanged from $73 million in the second quarter of 2022.

In the three months ended June 30, 2022, we recognized total charges of $162 million consisting of $152 million of asset impairment charges primarily related to property, plant and equipment at our Ince, U.K.

facility and $10 million of post-employment benefits related to contractual and statutory obligations.

See “Items Affecting Comparability of Results—U.K.

operations,” above, for further discussion.

Transaction Costs

Other Operating—Net

Other operating—net was $35 million of income in the first quarter of 2023 compared to $2 million of expense in the first quarter of 2022.

The $35 million of income in the first quarter of 2023 consists primarily of a gain on sales of emission credits.

On March 20, 2023, we entered into an asset purchase agreement with DNLA and IPL to acquire DNLA’s ammonia production complex located in Waggaman, Louisiana, as described above under “Agreement to Purchase Ammonia Production Facility.” In the three months ended June 30, 2023, we incurred $3 million of transaction costs related to the acquisition agreement.

Equity in Earnings of Operating Affiliate

Equity in earnings of operating affiliate was $17 million in the first quarter of 2023 compared to $26 million in the first quarter of 2022.

Equity in earnings of operating affiliate was $7 million in the second quarter of 2023 compared to $28 million in the second quarter of 2022.

The decrease was due primarily to a decrease in the operating results of PLNL as a result of lower ammonia selling prices, partially offset by lower natural gas costs.

CF INDUSTRIES HOLDINGS, INC.

Interest Expense—Net

Net interest expense was $10 million in the first quarter of 2023 compared to $205 million in the first quarter of 2022.

The decrease of $195 million was due primarily to $162 million of net interest expense recorded in the first quarter of 2022 related to income tax matters, which are described under “Items Affecting Comparability of Results—Canada Revenue Agency Competent Authority Matter” and “Items Affecting Comparability of Results—Transfer pricing positions,” above.

In addition, the decrease in net interest expense was due to higher interest income on investments and lower interest expense on borrowings due to the redemption of $500 million principal amount of 3.450% senior notes due June 2023 in April 2022 prior to their scheduled maturity.

For the three months ended March 31, 2023, we recorded an income tax provision of $169 million on pre-tax income of $819 million, or an effective tax rate of 20.6%, compared to an income tax provision of $401 million on a pre-tax income of $1.45 billion, or an effective tax rate of 27.6%, for the three months ended March 31, 2022.

Interest Expense

Interest expense was $36 million in the second quarter of 2023 compared to $82 million in the second quarter of 2022.

The decrease of $46 million was due primarily to $42 million of tax-related interest expense recorded in the second quarter of 2022, including $30 million of interest expense related to income tax matters described under “Items Affecting Comparability of Results—Canada Revenue Agency Competent Authority Matter” and “Items Affecting Comparability of Results—Transfer pricing positions,” above.

Interest Income

Interest income was $40 million in the second quarter of 2023 compared to $8 million in the second quarter of 2022.

The increase of $32 million was due primarily to higher interest income on short-term investments, which are included in cash and cash equivalents in our consolidated balance sheet.

Loss on Debt Extinguishment

Loss on debt extinguishment of $8 million in the second quarter of 2022 is described under “Items Affecting Comparability of Results—Loss on debt extinguishment,” above.

For the three months ended June 30, 2023, we recorded an income tax provision of $134 million on pre-tax income of $740 million, or an effective tax rate of 18.2%, compared to an income tax provision of $357 million on pre-tax income of $1.70 billion, or an effective tax rate of 21.1%, for the three months ended June 30, 2022.

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, 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 $90 million of earnings attributable to the noncontrolling interest.

Our effective tax rate for the three months ended March 31, 2022 of 27.6%, which is based on pre-tax income of $1.45 billion, including $168 million of earnings attributable to the noncontrolling interest, would be 3.7 percentage points higher, or 31.3%, if based on pre-tax income exclusive of the $168 million of earnings attributable to the noncontrolling interest.

Our effective tax rate for the three months ended June 30, 2023 of 18.2%, which is based on pre-tax income of $740 million, including $79 million of earnings attributable to the noncontrolling interest, would be 2.1 percentage points higher, or 20.3%, if based on pre-tax income exclusive of the earnings attributable to the noncontrolling interest of $79 million.

Our effective tax rate for the

CF INDUSTRIES HOLDINGS, INC.

three months ended June 30, 2022 of 21.1%, which is based on pre-tax income of $1.70 billion, including $174 million of earnings attributable to the noncontrolling interest, would be 2.4 percentage points higher, or 23.5%, if based on pre-tax income exclusive of the $174 million of earnings attributable to the noncontrolling interest.

See Note 13—Noncontrolling Interest for additional information.

In addition, for the three months ended March 31, 2022, our income tax provision includes $20 million of income tax benefit due to share-based compensation activity and $78 million of income tax provision related to the Canada Revenue Agency Competent Authority Matter and certain transfer pricing reserves recorded in the period, which are described above under “Items Affecting Comparability of Results.”

Net Earnings Attributable to Noncontrolling Interest

Net earnings attributable to noncontrolling interest decreased $78 million to $90 million in the first quarter of 2023 compared to $168 million in the first quarter of 2022 due to lower earnings of CFN driven by lower average selling prices as described above under “Net Sales.”

Net earnings attributable to noncontrolling interest decreased $95 million to $79 million in the second quarter of 2023 compared to $174 million in the second quarter of 2022 due to lower earnings of CFN driven by lower average selling prices as described above under “Net Sales.”

Diluted Net Earnings Per Share Attributable to Common Stockholders

Net earnings per share attributable to common stockholders decreased $1.36 to $2.85 per diluted share in the first quarter of 2023 from $4.21 per diluted share in the first quarter of 2022.

Net earnings per share attributable to common stockholders decreased $2.88 to $2.70 per diluted share in the second quarter of 2023 from $5.58 per diluted share in the second quarter of 2022.

This decrease was due primarily to a decrease in gross margin, driven by lower average selling prices.

Lower gross margin was partially offset by a decrease in interest expense due primarily to interest expense on tax liabilities in the first quarter of 2022 related to Canadian-U.S.

transfer pricing matters and a decrease in the income tax provision resulting from lower profitability.

Additionally, diluted weighted-average common shares outstanding declined 6% from 209.9 million shares for the three months ended March 31, 2022 to 196.9 million shares for the three months ended March 31, 2023, due primarily to repurchases of common shares under our share repurchase program.

The impact of lower selling prices was partially offset by lower natural gas costs, which increased gross margin by approximately $360 million.

In addition, lower gross margin was partially offset by pre-tax impairment and restructuring charges related to our U.K.

operations of $162 million in the second quarter of 2022 that did not recur in the second quarter of 2023 and a decrease in the income tax provision resulting from lower profitability.

Additionally, diluted weighted-average common shares outstanding declined 7% from 208.9 million shares for the three months ended June 30, 2022 to 195.0 million shares for the three months ended June 30, 2023, due primarily to repurchases of common shares under our share repurchase programs.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Our total net sales decreased $2.47 billion, or 39%, to $3.79 billion in the first six months of 2023 as compared to $6.26 billion in the first six months of 2022 due primarily to a decrease in average selling prices.

Our average selling price was $400 per ton in the first six months of 2023, or 39% lower compared to $661 per ton in the first six months of 2022, due to lower average selling prices across all of our segments, primarily driven by an increase in global supply availability as lower global energy costs drove higher global operating rates.

The impact of lower average selling prices was a decrease in net sales of approximately $2.47 billion for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.

Cost of Sales

Our total cost of sales decreased $448 million, or 17%, to $2.12 billion in the first six months of 2023 from $2.57 billion in the first six months of 2022.

The decrease in our cost of sales was due primarily to lower costs for natural gas, which decreased cost of sales by $332 million, including the impact of realized derivatives, and lower costs for ammonia purchased from PLNL, our joint venture in Trinidad.

Lower natural gas costs were partially offset by the cost to import ammonia in the first six months of 2023 for our U.K.

Cost of sales also includes the impact of a $72 million unrealized net mark-to-market gain on natural gas derivatives in the first six months of 2023 compared to a $50 million gain in the first six months of 2022.

Cost of sales averaged $224 per ton in the first six months of 2023 compared to $271 per ton in the first six months of 2022.

Our cost of natural gas decreased 33% to $4.56 per MMBtu in the first six months of 2023 from $6.79 per MMBtu in the first six months of 2022.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $8 million to $145 million in the first six months of 2023 as compared to $137 million in the first six months of 2022.

The increase was due primarily to higher costs related to certain corporate initiatives, including higher amortization due to our recently implemented enterprise resource planning (ERP) system.

In the first six months of 2022, we recognized total charges of $162 million consisting of $152 million of asset impairment charges primarily related to property, plant and equipment at our Ince, U.K.

facility and $10 million of post-employment benefits related to contractual and statutory obligations.

See “Items Affecting Comparability of Results—U.K.

operations,” above, for further discussion.

CF INDUSTRIES HOLDINGS, INC.

Transaction Costs

On March 20, 2023, we entered into an asset purchase agreement with DNLA and IPL to acquire DNLA’s ammonia production complex located in Waggaman, Louisiana, as described above under “Agreement to Purchase Ammonia Production Facility.” In the six months ended June 30, 2023, we incurred $16 million of transaction costs related to the acquisition agreement.

Other Operating—Net

Other operating—net was $32 million of income in the first six months of 2023 compared to $8 million of expense in the first six months of 2022.

The $32 million of income in the first six months of 2023 consists primarily of gains on the sales of emission credits.

Equity in Earnings of Operating Affiliate

Equity in earnings of operating affiliate was $24 million in the first six months of 2023 compared to $54 million in the first six months of 2022.

The decrease was due primarily to a decrease in the operating results of PLNL as a result of lower ammonia selling prices, partially offset by lower natural gas costs.

Interest Expense

Interest expense was $76 million in the first six months of 2023 compared to $323 million in the first six months of 2022.

The decrease of $247 million was due primarily to $240 million of tax-related interest expense recorded in the first six months of 2022, including $228 million of interest expense related to income tax matters described under “Items Affecting Comparability of Results—Canada Revenue Agency Competent Authority Matter” and “Items Affecting Comparability of Results—Transfer pricing positions,” above.

In addition, the decrease in interest expense was due to lower interest expense on borrowings due to the redemption of $500 million principal amount of the 2023 Notes in April 2022 prior to their scheduled maturity.

Interest Income

Interest income was $70 million in the first six months of 2023 compared to $44 million in the first six months of 2022.

The increase of $26 million was due primarily to a $52 million increase in interest income on short-term investments in the first six months of 2023 and interest income recorded in the first six months of 2022 that did not recur in the first six months of 2023, which was related to income tax matters described under “Items Affecting Comparability of Results—Canada Revenue Agency Competent Authority Matter” and “Items Affecting Comparability of Results—Transfer pricing positions,” above.

Loss on Debt Extinguishment

Loss on debt extinguishment of $8 million in the first six months of 2022 is described under “Items Affecting Comparability of Results—Loss on debt extinguishment,” above.

For the six months ended June 30, 2023, we recorded an income tax provision of $303 million on pre-tax income of $1.56 billion, or an effective tax rate of 19.5%, compared to an income tax provision of $758 million on pre-tax income of $3.15 billion, or an effective tax rate of 24.1%, for the six months ended June 30, 2022.

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.

Our effective tax rate for the six months ended June 30, 2022 of 24.1%, which is based on pre-tax income of $3.15 billion, including $342 million of earnings attributable to the noncontrolling interest, would be 2.9 percentage points higher, or 27.0%, if based on pre-tax income exclusive of the earnings attributable to the noncontrolling interest of $342 million.

In addition, for the six months ended June 30, 2022, our income tax provision includes $22 million of income tax benefit due to share-based compensation activity and $78 million of income tax provision related to the Canada Revenue Agency Competent Authority Matter, which is described above under “Items Affecting Comparability of Results.”

CF INDUSTRIES HOLDINGS, INC.

Net Earnings Attributable to Noncontrolling Interest

Net earnings attributable to noncontrolling interest decreased $173 million to $169 million in the first six months of 2023 compared to $342 million in the first six months of 2022 due to lower earnings of CFN driven by lower average selling prices as described above under “Net Sales.”

Diluted Net Earnings Per Share Attributable to Common Stockholders

Net earnings per share attributable to common stockholders decreased $4.23 to $5.55 per diluted share in the first six months of 2023 from $9.78 per diluted share in the first six months of 2022.

This decrease was due primarily to a decrease in gross margin, driven by lower average selling prices.

Lower gross margin was partially offset by a decrease in interest expense due primarily to interest expense on tax liabilities in the first half of 2022 related to Canadian-U.S.

transfer pricing matters that did not recur in the first half of 2023, a decrease in the income tax provision resulting from lower profitability, and pre-tax impairment and restructuring charges related to our U.K.

operations of $162 million in the first half of 2022 that did not recur in the first half of 2023.

Additionally, diluted weighted-average common shares outstanding declined 6% from 209.4 million shares for the six months ended June 30, 2022 to 195.9 million shares for the six months ended June 30, 2023, due primarily to repurchases of common shares under our share repurchase programs.

Operating Results by Business Segment

5 unchanged sentences

Ammonia Granular Urea (1)

(in millions)

Three months ended March 31, 2023

(dollars in millions)

Three months ended June 30, 2023

Net sales $ 525 $ 460 $ 548 $ 104 $ 138 $ 1,775

2 unchanged sentences

Gross margin percentage 42.3 % 51.7 % 47.3 % 22.1 % 44.9 % 45.3 %

Three months ended March 31, 2022

Three months ended June 30, 2022

Net sales $ 1,115 $ 833 $ 976 $ 253 $ 212 $ 3,389

2 unchanged sentences

Gross margin percentage 60.4 % 56.8 % 64.9 % 40.3 % 51.9 % 58.7 %

Six months ended June 30, 2023

Net sales $ 949 $ 1,071 $ 1,215 $ 263 $ 289 $ 3,787

Cost of sales 583 549 635 185 168 2,120

Gross margin $ 366 $ 522 $ 580 $ 78 $ 121 $ 1,667

Gross margin percentage 38.6 % 48.7 % 47.7 % 29.7 % 41.9 % 44.0 %

Six months ended June 30, 2022

Net sales $ 1,755 $ 1,598 $ 1,991 $ 476 $ 437 $ 6,257

Cost of sales 722 630 688 322 206 2,568

Gross margin $ 1,033 $ 968 $ 1,303 $ 154 $ 231 $ 3,689

Gross margin percentage 58.9 % 60.6 % 65.4 % 32.4 % 52.9 % 59.0 %

_______________________________________________________________________________

6 unchanged sentences

The following table presents summary operating data for our Ammonia segment:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 v.

2022 2023 2022 2023 v.

(dollars in millions, except per ton amounts)

17 unchanged sentences

Nutrient tons represent the tons of nitrogen within the product tons.

First Quarter of 2023 Compared to First Quarter of 2022

Net sales in our Ammonia segment decreased by $216 million, or 34%, to $424 million in the first quarter of 2023 from $640 million in the first quarter of 2022 due to a 26% decrease in average selling prices and a 10% decrease in sales volume.

Average selling prices decreased to $650 per ton in the first quarter of 2023 compared to $880 per ton in the first quarter of 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates.

Sales volume was lower due primarily to lower demand compared to a robust ammonia sales environment in the first quarter of 2022.

Second Quarter of 2023 Compared to Second Quarter of 2022

Net sales in our Ammonia segment decreased by $590 million, or 53%, to $525 million in the second quarter of 2023 from $1.12 billion in the second quarter of 2022 due to a 54% decrease in average selling prices, partially offset by a 2% increase in sales volume.

Average selling prices decreased to $499 per ton in the second quarter of 2023 compared to $1,077 per ton in the second quarter of 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates.

Sales volume was higher due primarily to higher beginning inventory.

Cost of Sales.

Cost of sales in our Ammonia segment averaged $429 per ton in the first quarter of 2023, an 11% increase from $385 per ton in the first quarter of 2022.

The increase was due primarily to higher realized natural gas costs, including the impact of realized derivatives, partially offset by a lower cost per ton for purchased ammonia from PLNL, our joint venture in Trinidad.

Cost of sales in our Ammonia segment averaged $288 per ton in the second quarter of 2023, a 33% decrease from $427 per ton in the second quarter of 2022.

The decrease was due primarily to lower realized natural gas costs, including the impact of realized derivatives, and a lower cost per ton for ammonia purchased from PLNL, our joint venture in Trinidad.

Gross Margin .

Gross margin in our Ammonia segment decreased by $216 million to $144 million in the first quarter of 2023 from $360 million in the first quarter of 2022, and our gross margin percentage was 34.0% in the first quarter of 2023 compared to 56.3% in the first quarter of 2022 .

The decrease in gross margin was due primarily to a 26% decrease in average selling prices, which decreased gross margin by $144 million, a 10% decrease in sales volume, which decreased gross margin by $63 million, and an increase in realized natural gas costs, including the impact of realized derivatives, which reduced gross margin by $47 million.

The factors that decreased gross margin were partially offset by a $25 million net decrease in manufacturing, maintenance and other costs, driven by lower purchased product costs.

Gross margin also includes the impact of a $21 million unrealized net mark-to-market gain on natural gas derivatives in the first quarter of 2023 compared to an $8 million gain in the first quarter of 2022.

Gross margin in our Ammonia segment decreased by $451 million to $222 million in the second quarter of 2023 from $673 million in the second quarter of 2022, and our gross margin percentage was 42.3% in the second quarter of 2023 compared to 60.4% in the second quarter of 2022 .

The decrease in gross margin was due primarily to the following:

(i) a 54% decrease in average selling prices, which decreased gross margin by $605 million, (ii) the impact of changes in sales volume and mix, which decreased gross margin by $28 million, and (iii) an $8 million net increase in manufacturing, maintenance and other costs.

These factors that decreased gross margin were partially offset by a lower cost per ton for purchased product, which increased gross margin by $109 million, and a decrease in realized natural gas costs, including the impact of realized derivatives, which increased gross margin by $83 million.

Gross margin in the second quarter of 2022 included the impact of a $2 million unrealized net mark-to-market gain on natural gas derivatives.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Net sales in our Ammonia segment decreased by $806 million, or 46%, to $949 million in the six months ended June 30, 2023 from $1.76 billion in the six months ended June 30, 2022 due to a 44% decrease in average selling prices and a 3% decrease in sales volume.

Average selling prices decreased to $557 per ton in the six months ended June 30, 2023 compared to $996 per ton in the six months ended June 30, 2022 due primarily to an increase in global supply availability as

CF INDUSTRIES HOLDINGS, INC.

lower global energy costs drove higher global operating rates.

Sales volume was lower due primarily to lower supply availability resulting from lower production.

Cost of Sales.

Cost of sales in our Ammonia segment averaged $342 per ton in the six months ended June 30, 2023, a 17% decrease from $410 per ton in the six months ended June 30, 2022.

The decrease was due primarily to a lower cost per ton for ammonia purchased from PLNL, our joint venture in Trinidad, and lower realized natural gas costs, including the impact of realized derivatives.

Gross Margin .

Gross margin in our Ammonia segment decreased by $667 million to $366 million in the six months ended June 30, 2023 from $1.03 billion in the six months ended June 30, 2022, and our gross margin percentage was 38.6% in the six months ended June 30, 2023 compared to 58.9% in the six months ended June 30, 2022 .

The decrease in gross margin was due primarily to a 44% decrease in average selling prices, which decreased gross margin by $749 million, a 3% decrease in sales volume, which decreased gross margin by $91 million, and a $12 million net increase in manufacturing, maintenance and other costs.

These factors that decreased gross margin were partially offset by a lower cost per ton for purchased product, which increased gross margin by $138 million, and a decrease in realized natural gas costs, including the impact of realized derivatives, which increased gross margin by $36 million.

Gross margin also includes the impact of a $21 million unrealized net mark-to-market gain on natural gas derivatives in the six months ended June 30, 2023 compared to a $10 million gain in the six months ended June 30, 2022.

Granular Urea Segment

1 unchanged sentence

Produced from ammonia and carbon dioxide, it has the highest nitrogen content of any of our solid nitrogen fertilizers.

Granular urea is produced at our Donaldsonville, Port Neal and Medicine Hat nitrogen complexes.

Granular urea is produced at our Donaldsonville, Port Neal and Medicine Hat complexes.

The following table presents summary operating data for our Granular Urea segment:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 v.

2022 2023 2022 2023 v.

(dollars in millions, except per ton amounts)

17 unchanged sentences

Nutrient tons represent the tons of nitrogen within the product tons.

First Quarter of 2023 Compared to First Quarter of 2022

Net sales in our Granular Urea segment decreased $154 million, or 20%, to $611 million in the first quarter of 2023 from $765 million in the first quarter of 2022 due primarily to a 34% decrease in average selling prices, partially offset by a 21% increase in sales volume.

Average selling prices decreased to $462 per ton in the first quarter of 2023 compared to $698 per ton in the first quarter of 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates, and an increase in global supply availability resulting from new global production coming online.

Sales volume was higher due primarily to greater supply availability resulting from higher production.

Second Quarter of 2023 Compared to Second Quarter of 2022

Net sales in our Granular Urea segment decreased $373 million, or 45%, to $460 million in the second quarter of 2023 from $833 million in the second quarter of 2022 due primarily to a 43% decrease in average selling prices and a 3% decrease in sales volume.

Average selling prices decreased to $401 per ton in the second quarter of 2023 compared to $705 per ton in the second quarter of 2022, due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates and new global production came on line.

Sales volume was lower due primarily to lower supply availability resulting from lower beginning inventory and lower production.

CF INDUSTRIES HOLDINGS, INC.

Cost of Sales.

Cost of sales in our Granular Urea segment averaged $247 per ton in the first quarter of 2023 compared to $246 per ton in the first quarter of 2022, as higher realized natural gas costs, including the impact of realized derivatives, were partially offset by the impact of lower production costs.

Cost of sales in our Granular Urea segment averaged $194 per ton in the second quarter of 2023 compared to $304 per ton in the second quarter of 2022.

The decrease was due primarily to lower realized natural gas costs, including the impact of realized derivatives.

Gross Margin .

Gross margin in our Granular Urea segment decreased by $211 million to $284 million in the first quarter of 2023 from $495 million in the first quarter of 2022, and our gross margin percentage was 46.5% in the first quarter of 2023 compared to 64.7% in the first quarter of 2022.

The decrease in gross margin was due primarily to a 34% decrease in average selling prices, which decreased gross margin by $313 million, and an increase in realized natural gas costs, including the impact of realized derivatives, which reduced gross margin by $19 million.

The factors that reduced gross margin were partially offset by a 21% increase in sales volume, which increased gross margin by $104 million , and a $4 million net decrease in manufacturing, maintenance and other costs.

Gross margin also includes the impact of a $20 million unrealized net mark-to-market gain on natural gas derivatives in the first quarter of 2023 compared to a $7 million gain in the first quarter of 2022.

Gross margin in our Granular Urea segment decreased by $235 million to $238 million in the second quarter of 2023 from $473 million in the second quarter of 2022, and our gross margin percentage was 51.7% in the second quarter of 2023 compared to 56.8% in the second quarter of 2022.

The decrease in gross margin was due primarily to a 43% decrease in average selling prices, which decreased gross margin by $360 million.

The decrease in average selling prices was partially offset by a decrease in realized natural gas costs, including the impact of realized derivatives, which increased gross margin by $106 million, the impact of volume and price mix, which increased gross margin by $15 million, and a $5 million net decrease in manufacturing, maintenance and other costs.

Gross margin in the second quarter of 2022 included the impact of an unrealized net mark-to-market gain on natural gas derivatives of $1 million.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Net sales in our Granular Urea segment decreased $527 million, or 33%, to $1.07 billion in the six months ended June 30, 2023 from $1.60 billion in the six months ended June 30, 2022 due primarily to a 38% decrease in average selling prices, partially offset by an 8% increase in sales volume.

Average selling prices decreased to $434 per ton in the six months ended June 30, 2023 compared to $702 per ton in the six months ended June 30, 2022, due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates and new global production came on line.

Sales volume was higher due primarily to greater supply availability resulting from higher production and higher beginning inventory.

Cost of Sales.

Cost of sales in our Granular Urea segment averaged $223 per ton in the six months ended June 30, 2023 compared to $277 per ton in the six months ended June 30, 2022.

The decrease was due primarily to lower realized natural gas costs, including the impact of realized derivatives.

Gross Margin .

Gross margin in our Granular Urea segment decreased by $446 million to $522 million in the six months ended June 30, 2023 from $968 million in the six months ended June 30, 2022, and our gross margin percentage was 48.7% in the six months ended June 30, 2023 compared to 60.6% in the six months ended June 30, 2022.

The decrease in gross margin was due primarily to a 38% decrease in average selling prices, which decreased gross margin by $673 million.

The decrease in average selling prices was partially offset by an 8% increase in sales volume, which increased gross margin by $119 million , a decrease in realized natural gas costs, including the impact of realized derivatives, which increased gross margin by $87 million, and a $9 million net decrease in manufacturing, maintenance and other costs.

Gross margin also includes the impact of a $20 million unrealized net mark-to-market gain on natural gas derivatives in the six months ended June 30, 2023 compared to an $8 million gain in the six months ended June 30, 2022.

CF INDUSTRIES HOLDINGS, INC.

1 unchanged sentence

UAN, a liquid fertilizer product with a nitrogen content that typically ranges from 28% to 32%, is produced by combining urea and ammonium nitrate.

UAN is produced at our Courtright, Donaldsonville, Port Neal, Verdigris, Woodward and Yazoo City nitrogen complexes.

UAN is produced at our Courtright, Donaldsonville, Port Neal, Verdigris, Woodward and Yazoo City complexes.

The following table presents summary operating data for our UAN segment:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 v.

2022 2023 2022 2023 v.

(dollars in millions, except per ton amounts)

17 unchanged sentences

Nutrient tons represent the tons of nitrogen within the product tons.

First Quarter of 2023 Compared to First Quarter of 2022

Net sales in our UAN segment decreased $348 million, or 34%, to $667 million in the first quarter of 2023 from $1.02 billion in the first quarter of 2022 due to a 28% decrease in average selling prices and a 9% decrease in sales volume.

Average selling prices decreased to $401 per ton in the first quarter of 2023 compared to $555 per ton in the first quarter of 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates.

Sales volume was lower due primarily to lower supply availability resulting from a decrease in production.

Second Quarter of 2023 Compared to Second Quarter of 2022

Net sales in our UAN segment decreased $428 million, or 44%, to $548 million in the second quarter of 2023 from $976 million in the second quarter of 2022 due to a 50% decrease in average selling prices, partially offset by an 11% increase in sales volume.

Average selling prices decreased to $303 per ton in the second quarter of 2023 compared to $600 per ton in the second quarter of 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates and an increase in Russian imports into the United States.

Sales volume was higher due primarily to the impact on second quarter 2022 sales volume of delayed crop planting and fertilizer application driven by unfavorable weather conditions in the second quarter of 2022.

Cost of Sales.

Cost of sales in our UAN segment averaged $208 per ton in the first quarter of 2023, an 11% increase from $188 per ton in the first quarter of 2022, due primarily to the impact of higher realized natural gas costs, including the impact of realized derivatives, and higher production costs.

Cost of sales in our UAN segment averaged $160 per ton in the second quarter of 2023, a 24% decrease from $211 per ton in the second quarter of 2022, due primarily to the impact of lower realized natural gas costs, including the impact of realized derivatives.

Gross Margin .

Gross margin in our UAN segment decreased by $349 million to $321 million in the first quarter of 2023 from $670 million in the first quarter of 2022, and our gross margin percentage was 48.1% in the first quarter of 2023 compared to 66.0% in the first quarter of 2022.

The decrease in gross margin was due primarily to a 28% decrease in average selling prices, which decreased gross margin by $259 million, a 9% decrease in sales volume, which decreased gross margin by $63 million, an increase in realized natural gas costs, including the impact of realized derivatives, which reduced gross margin by $29 million, and a net increase in manufacturing, maintenance and other costs, which reduced gross margin by $11 million .

Gross margin in our UAN segment decreased by $374 million to $259 million in the second quarter of 2023 from $633 million in the second quarter of 2022, and our gross margin percentage was 47.3% in the second quarter of 2023 compared to 64.9% in the second quarter of 2022.

The decrease in gross margin was due primarily to a 50% decrease in average selling prices, which decreased gross margin by $539 million, and a net increase in manufacturing, maintenance and other costs, which reduced gross margin by $2 million.

These factors that decreased gross margin were partially offset by a decrease in realized natural gas costs, including the impact of realized derivatives, which increased gross margin by $87 million, and an 11% increase in sales volume, which increased gross margin by $80 million .

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Net sales in our UAN segment decreased $776 million, or 39%, to $1.22 billion in the six months ended June 30, 2023 from $1.99 billion in the six months ended June 30, 2022 due primarily to a 39% decrease in average selling prices.

Average selling prices decreased to $350 per ton in the six months ended June 30, 2023 compared to $576 per ton in the six months ended June 30, 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates and an increase in Russian imports into the United States.

CF INDUSTRIES HOLDINGS, INC.

Cost of Sales.

Cost of sales in our UAN segment averaged $183 per ton in the six months ended June 30, 2023, an 8% decrease from $199 per ton in the six months ended June 30, 2022, due primarily to the impact of lower realized natural gas costs, including the impact of realized derivatives, partially offset by higher production costs.

Gross Margin .

Gross margin in our UAN segment decreased by $723 million to $580 million in the six months ended June 30, 2023 from $1.30 billion in the six months ended June 30, 2022, and our gross margin percentage was 47.7% in the six months ended June 30, 2023 compared to 65.4% in the six months ended June 30, 2022.

The decrease in gross margin was due primarily to a 39% decrease in average selling prices, which decreased gross margin by $798 million, and a net increase in manufacturing, maintenance and other costs, which decreased gross margin by $13 million.

The factors that decreased gross margin were partially offset by a decrease in realized natural gas costs, including the impact of realized derivatives, which increased gross margin by $58 million, and an increase in sales volume, which increased gross margin by $17 million .

Gross margin also includes the impact of a $21 million unrealized net mark-to-market gain on natural gas derivatives in the six months ended June 30, 2023 compared to an $8 million gain in the six months ended June 30, 2022.

Our AN segment produces ammonium nitrate (AN).

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AN is used as nitrogen fertilizer and is also used by industrial customers for commercial explosives and blasting systems.

AN is produced at our Yazoo City and Billingham nitrogen complexes.

AN is produced at our Yazoo City and Billingham complexes.

The following table presents summary operating data for our AN segment:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 v.

2022 2023 2022 2023 v.

(dollars in millions, except per ton amounts)

17 unchanged sentences

Nutrient tons represent the tons of nitrogen within the product tons.

First Quarter of 2023 Compared to First Quarter of 2022

In September 2022, as a result of extremely high and volatile natural gas prices and the lack of a corresponding increase in global nitrogen product market prices, we temporarily idled ammonia production at our Billingham complex.

Second Quarter of 2023 Compared to Second Quarter of 2022

Since that time, we have imported ammonia for upgrade into AN and other nitrogen products at that location.

Net sales in our AN segment decreased $64 million, or 29%, to $159 million in the first quarter of 2023 from $223 million in the first quarter of 2022 due to an 18% decrease in average selling prices and a 13% decrease in sales volume.

Average selling prices decreased to $425 per ton in the first quarter of 2023 compared to $521 per ton in the first quarter of 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates.

Net sales in our AN segment decreased $149 million, or 59%, to $104 million in the second quarter of 2023 from $253 million in the second quarter of 2022 due to a 51% decrease in average selling prices and a 15% decrease in sales volume.

Average selling prices decreased to $282 per ton in the second quarter of 2023 compared to $580 per ton in the second quarter of 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates.

Sales volume declined due primarily to weak domestic demand in the United Kingdom.

Cost of Sales.

Cost of sales in our AN segment averaged $278 per ton in the first quarter of 2023, a 31% decrease from $400 per ton in the first quarter of 2022.

The decrease was due primarily to lower production costs in the first quarter of 2023 as purchased ammonia was used for upgrading into AN as compared to the higher-cost natural gas used to produce ammonia to upgrade into AN in the first quarter of 2022.

Cost of sales in our AN segment averaged $220 per ton in the second quarter of 2023, a 36% decrease from $346 per ton in the second quarter of 2022.

The decrease was due primarily to lower production costs for our Billingham complex in the second quarter of 2023 as purchased ammonia was used for upgrading into AN as compared to the higher-cost natural gas used to produce ammonia to upgrade into AN in the second quarter of 2022.

In addition, the decrease in cost of sales

CF INDUSTRIES HOLDINGS, INC.

per ton reflects lower realized natural gas costs in North America in the second quarter of 2023 compared to the second quarter of 2022.

Gross Margin .

Gross margin in our AN segment increased $3 million to $55 million in the first quarter of 2023 from $52 million in the first quarter of 2022, and our gross margin percentage was 34.6% in the first quarter of 2023 compared to 23.3% in the first quarter of 2022.

The increase in gross margin reflects the following:

• a decrease in realized natural gas costs, due primarily to the idling of the Billingham ammonia plant, which increased gross margin by $55 million, partially offset by a net increase of $25 million in manufacturing, maintenance and other costs, driven by the cost for purchased ammonia for upgrade, partially offset by lower production costs;

• favorable location product mix, which increased gross margin by $2 million;

Gross margin in our AN segment decreased $79 million to $23 million in the second quarter of 2023 from $102 million in the second quarter of 2022, and our gross margin percentage was 22.1% in the second quarter of 2023 compared to 40.3% in the second quarter of 2022.

The decrease in gross margin reflects the following:

• a decrease in average selling prices of 51%, which decreased gross margin by $84 million;

• a decrease in sales volume of 15%, which decreased gross margin by $27 million;

• a decrease in realized natural gas costs, which increased gross margin by $51 million, due primarily to the idling of our Billingham ammonia plant;

• a net increase of $8 million in manufacturing, maintenance and other costs, driven by the cost for purchased ammonia for upgrade at our Billingham complex, partially offset by lower production costs;

• the impact of an $11 million unrealized net mark-to-market gain on natural gas derivatives in the second quarter of 2022.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Net sales in our AN segment decreased $213 million, or 45%, to $263 million in the six months ended June 30, 2023 from $476 million in the six months ended June 30, 2022 due to a 36% decrease in average selling prices and a 14% decrease in sales volume.

Average selling prices decreased to $354 per ton in the six months ended June 30, 2023 compared to $551 per ton in the six months ended June 30, 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates.

Sales volume declined due primarily to weak domestic demand in the United Kingdom.

Cost of Sales.

Cost of sales in our AN segment averaged $249 per ton in the six months ended June 30, 2023, a 33% decrease from $373 per ton in the six months ended June 30, 2022.

The decrease was due primarily to lower production costs for our Billingham complex in the first half of 2023 as purchased ammonia was used for upgrading into AN as compared to the higher-cost natural gas used to produce ammonia to upgrade into AN in the first half of 2022.

In addition, the decrease in cost of sales per ton reflects lower realized natural gas costs in North America in the first half of 2023 compared to the first half of 2022.

Gross Margin .

Gross margin in our AN segment decreased $76 million to $78 million in the six months ended June 30, 2023 from $154 million in the six months ended June 30, 2022, and our gross margin percentage was 29.7% in the six months ended June 30, 2023 compared to 32.4% in the six months ended June 30, 2022.

The decrease in gross margin reflects the following:

• a decrease in average selling prices of 36%, which decreased gross margin by $110 million;

• a decrease in realized natural gas costs, which increased gross margin by $106 million, due primarily to the idling of our Billingham ammonia plant;

• a net increase of $33 million in manufacturing, maintenance and other costs, driven by the cost for purchased ammonia for upgrade at our Billingham complex, partially offset by lower production costs;

• a decrease in sales volume of 14%, which decreased gross margin by $25 million;

• the impact of a $3 million unrealized net mark-to-market gain on natural gas derivatives in the six months ended June 30, 2023 compared to a $17 million gain in the six months ended June 30, 2022.

CF INDUSTRIES HOLDINGS, INC.

• the impact of a $3 million unrealized net mark-to-market gain on natural gas derivatives in the first quarter of 2023 compared to a $6 million gain in the first quarter of 2022.

Other Segment

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• diesel exhaust fluid (DEF), an aqueous urea solution typically made with 32.5% or 50% high-purity urea and the remainder deionized water;

• urea liquor, a liquid product that we sell in concentrations of 40%, 50% and 70% urea as a chemical intermediate and

• urea liquor, a liquid product that we sell in concentrations of 40%, 50% and 70% urea as a chemical intermediate;

• nitric acid, a nitrogen-based mineral acid that is used in the production of nitrate-based fertilizers, nylon precursors and other specialty chemicals.

The following table presents summary operating data for our Other segment:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 v.

2022 2023 2022 2023 v.

(dollars in millions, except per ton amounts)

16 unchanged sentences

(1) Nutrient tons represent the tons of nitrogen within the product tons.

First Quarter of 2023 Compared to First Quarter of 2022

Second Quarter of 2023 Compared to Second Quarter of 2022

In June 2022, we approved and announced our proposed plan to restructure our U.K.

2 unchanged sentences

We produced compound fertilizer products (NPKs), which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus and potassium, only at our Ince facility, and closure of this facility resulted in our discontinuation of the NPK product line.

Since that time, we have imported ammonia for upgrade into AN and other nitrogen products at that location.

Net sales in our Other segment decreased by $74 million, or 33%, to $151 million in the first quarter of 2023 from $225 million in the first quarter of 2022 due to a 30% decrease in average selling prices and a 4% decrease in sales volume.

Net sales in our Other segment decreased by $74 million, or 35%, to $138 million in the second quarter of 2023 from $212 million in the second quarter of 2022 due to a 35% decrease in average selling prices, partially offset by a 1% increase in sales volume.

The decrease in average selling prices was due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates.

The decrease in sales volume was due primarily to lower nitric acid and NPK sales volumes in the first quarter of 2023, partially offset by higher DEF sales volumes.

Cost of Sales.

Cost of sales in our Other segment averaged $175 per ton in the first quarter of 2023, an 8% decrease from $191 per ton in the first quarter of 2022, due primarily to the idling of the Billingham ammonia plant and its usage of purchased ammonia for upgrading, and lower other manufacturing costs.

Cost of sales in our Other segment averaged $135 per ton in the second quarter of 2023, a 27% decrease from $184 per ton in the second quarter of 2022, due primarily to lower production costs for our Billingham complex in the second quarter of 2023 as purchased ammonia was used for upgrading into other nitrogen products as compared to the higher-cost natural gas used to produce ammonia to upgrade into other nitrogen products in the second quarter of 2022.

In addition, the decrease in cost of sales per ton reflects lower realized natural gas costs in North America in the second quarter of 2023 compared to the second quarter of 2022.

CF INDUSTRIES HOLDINGS, INC.

Gross Margin .

Gross margin in our Other segment decreased by $62 million to $59 million in the first quarter of 2023 from $121 million in the first quarter of 2022, and our gross margin percentage was 39.1% in the first quarter of 2023 compared to 53.8% in the first quarter of 2022.

Gross margin in our Other segment decreased by $48 million to $62 million in the second quarter of 2023 from $110 million in the second quarter of 2022, and our gross margin percentage was 44.9% in the second quarter of 2023 compared to 51.9% in the second quarter of 2022.

The decrease in gross margin reflects the following:

• a decrease in average selling prices of 35%, which decreased gross margin by $76 million;

• a net increase of $13 million in manufacturing, maintenance and other costs, driven by the cost for purchased ammonia for upgrade, partially offset by lower production costs, which net increase was partially offset by a decrease in realized natural gas costs, due primarily to the idling of the Billingham ammonia plant, which increased gross margin by $12 million;

• a decrease in sales volume of 4%, which decreased gross margin by $2 million;

• the impact of a $7 million unrealized net mark-to-market gain on natural gas derivatives in the first quarter of 2023 compared to a $4 million gain in the first quarter of 2022.

• a decrease in realized natural gas costs, which increased gross margin by $33 million, due primarily to the idling of our Billingham ammonia plant;

• a net increase of $6 million in manufacturing, maintenance and other costs, driven by the cost for purchased ammonia for upgrade at our Billingham complex, partially offset by lower production costs;

• an increase in sales volume of 1%, which increased gross margin by $4 million;

• the impact of a $3 million unrealized net mark-to-market gain on natural gas derivatives in the second quarter of 2022.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Net sales in our Other segment decreased by $148 million, or 34%, to $289 million in the six months ended June 30, 2023 from $437 million in the six months ended June 30, 2022 due to a 33% decrease in average selling prices and a 2% decrease in sales volume.

The decrease in average selling prices was due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates.

The decrease in sales volume was due primarily to lower nitric acid, NPK and urea liquor sales volumes in the six months ended June 30, 2023, partially offset by higher DEF sales volumes.

Cost of Sales.

Cost of sales in our Other segment averaged $155 per ton in the six months ended June 30, 2023, a 17% decrease from $187 per ton in the six months ended June 30, 2022, due primarily to lower production costs for our Billingham complex in the first half of 2023 as purchased ammonia was used for upgrading into other nitrogen products as compared to the higher-cost natural gas used to produce ammonia to upgrade into other nitrogen products in the first half of 2022.

Gross Margin .

Gross margin in our Other segment decreased by $110 million to $121 million in the six months ended June 30, 2023 from $231 million in the six months ended June 30, 2022, and our gross margin percentage was 41.9% in the six months ended June 30, 2023 compared to 52.9% in the six months ended June 30, 2022.

The decrease in gross margin reflects the following:

• a decrease in average selling prices of 33%, which decreased gross margin by $138 million;

• a decrease in realized natural gas costs, which increased gross margin by $45 million, due primarily to the idling of our Billingham ammonia plant;

• a net increase of $19 million in manufacturing, maintenance and other costs, driven by the cost for purchased ammonia for upgrade at our Billingham complex, partially offset by lower production costs;

• a decrease in sales volume of 2%, which increased gross margin by $2 million due to favorable product mix.

CF INDUSTRIES HOLDINGS, INC.

8 unchanged sentences

We may also from time to time access the capital markets or engage in borrowings under our revolving credit agreement.

As of March 31, 2023, our cash and cash equivalents balance was $2.83 billion, an increase of $502 million from $2.32 billion at December 31, 2022.

At March 31, 2023, we were in compliance with all applicable covenant requirements under our revolving credit agreement and senior notes, and unused borrowing capacity under our revolving credit agreement was $750 million.

As of June 30, 2023, our cash and cash equivalents balance was $3.22 billion, an increase of $896 million from $2.32 billion at December 31, 2022.

At June 30, 2023, we were in compliance with all applicable covenant requirements under our revolving credit agreement and senior notes, and unused borrowing capacity under our revolving credit agreement was $750 million.

Cash Equivalents

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Shares repurchased, including those repurchased under share repurchase programs, are retired as approved by the Board.

In the three months ended March 31, 2023, we repurchased approximately 1.1 million shares under the 2021 Share Repurchase Program for $75 million, of which $21 million was accrued and unpaid as of March 31, 2023.

As of March 31, 2023, there was approximately $80 million of authorization remaining under the 2021 Share Repurchase Program.

The 2021 Share Repurchase Program was completed in the second quarter of 2023.

The following table summarizes the share repurchases under the 2022 Share Repurchase Program and 2021 Share Repurchase Program.

2022 Share Repurchase Program 2021 Share Repurchase Program

Shares Amounts (1)

(in millions)

Shares repurchased in 2022:

First quarter — $ — 1.3 $ 100

Second quarter — — 5.3 490

Third quarter — — 6.1 532

Fourth quarter — — 2.2 223

Total shares repurchased in 2022 — — 14.9 1,345

Shares repurchased as of December 31, 2022 — $ — 14.9 $ 1,345

Shares repurchased in 2023:

First quarter — $ — 1.1 $ 75

Second quarter 0.8 50 1.2 80

Total shares repurchased in 2023 0.8 50 2.3 155

Shares repurchased as of June 30, 2023

0.8 $ 50 17.2 $ 1,500

______________________________________________________________________________

(1) As defined in the share repurchase programs, amounts reflect the price paid for the shares of common stock repurchased, excluding commissions paid to brokers and excise taxes.

CF INDUSTRIES HOLDINGS, INC.

In the six months ended June 30, 2023, we completed the 2021 Share Repurchase Program with the repurchase of approximately 2.3 million shares for $155 million.

In the six months ended June 30, 2023, we repurchased approximately 0.8 million shares under the 2022 Share Repurchase Program for $50 million.

Capital Spending

We make capital expenditures to sustain our asset base, increase our capacity or capabilities, improve plant efficiency, comply with various environmental, health and safety requirements, and invest in our clean energy strategy.

Capital expenditures totaled $69 million in the first three months of 2023 compared to $63 million in the first three months of 2022.

Capital expenditures totaled $164 million in the first six months of 2023 compared to $129 million in the first six months of 2022.

We currently anticipate that capital expenditures for the full year 2023 will be in the range of $500 to $550 million, which includes capital expenditures related to green and blue ammonia projects.

4 unchanged sentences

The facility has a nameplate capacity of 880,000 tons of ammonia annually.

The parties will allocate $425 million of the purchase price to a long-term ammonia offtake agreement providing for us to supply up to

CF INDUSTRIES HOLDINGS, INC.

200,000 tons of ammonia per year to IPL’s Dyno Nobel, Inc.

The parties will allocate $425 million of the purchase price to 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.

We expect to fund the balance of the purchase price, representing the $1.675 billion purchase price, as adjusted, less $425 million, with cash on hand.

8 unchanged sentences

operations, including the permanent closure of our Ince facility and optimization of the remaining manufacturing operations at the Billingham facility.

In August 2022, the final restructuring plan was approved, and decommissioning activities were initiated.

Production of AN and other nitrogen products continues at our Billingham facility using imported ammonia, a portion of which is imported from our other ammonia production sites.

There remains uncertainty regarding the future cost of natural gas and electricity, selling prices for the products we produce in the United Kingdom and U.K.

government policy, which could necessitate, among other things, additional funding to support the cash needs of our U.K.

operations and recognition of further losses and could have a material adverse impact on our results of operations and cash flows.

In August 2022, the final restructuring plan was approved, and decommissioning activities at our Ince facility were initiated.

As of June 30, 2023, the decommissioning of our Ince facility and other approved restructuring actions have been completed.

With the ammonia plant idled since September 2022, production of AN and other nitrogen products has continued at our Billingham facility using imported ammonia, a portion of which is imported from our other ammonia production sites.

In July 2023, we approved and announced our proposed plan to permanently close the Billingham ammonia plant.

There remains uncertainty regarding the future cost of ammonia used for upgrading, natural gas and electricity, and selling prices for the products we produce in the United Kingdom.

These factors, in addition to any remaining disposition activities at our Ince facility, could necessitate, among other things, additional funding to support the cash needs of our U.K.

operations and recognition of further losses and could have an adverse impact on our results of operations and cash flows.

CF INDUSTRIES HOLDINGS, INC.

Revolving Credit Agreement

4 unchanged sentences

Borrowings under the Revolving Credit Agreement may be denominated in U.S.

dollars, Canadian dollars, euros and British pounds, and bear interest at a per annum rate equal to an applicable eurocurrency rate or base rate plus, in either case, a specified margin.

dollars, Canadian dollars, euros and British pounds, and bear interest at a per annum rate equal to, at our option, an applicable adjusted term Secured Overnight Financing Rate or base rate plus, in either case, a specified margin.

We are required to pay an undrawn commitment fee on the undrawn portion of the commitments under the Revolving Credit Agreement and customary letter of credit fees.

The specified margin and the amount of the commitment fee depend on CF Holdings’ credit rating at the time.

As of March 31, 2023, we had unused borrowing capacity under the Revolving Credit Agreement of $750 million and no outstanding letters of credit.

There were no borrowings outstanding under the Revolving Credit Agreement as of March 31, 2023 or December 31, 2022, or during the three months ended March 31, 2023.

As of June 30, 2023, we had unused borrowing capacity under the Revolving Credit Agreement of $750 million and no outstanding letters of credit under the Revolving Credit Agreement.

There were no borrowings outstanding under the Revolving Credit Agreement as of June 30, 2023 or December 31, 2022, or during the six months ended June 30, 2023.

The Revolving Credit Agreement contains representations and warranties and affirmative and negative covenants, including financial covenants.

As of March 31, 2023, we were in compliance with all covenants under the Revolving Credit Agreement.

As of June 30, 2023, we were in compliance with all covenants under the Revolving Credit Agreement.

Letters of Credit

In addition to the letters of credit that may be issued under the Revolving Credit Agreement, as described above, we have also entered into a bilateral agreement with capacity to issue up to $350 million of letters of credit.

As of March 31, 2023, approximately $201 million of letters of credit were outstanding under this agreement.

CF INDUSTRIES HOLDINGS, INC.

Long-term debt presented on our consolidated balance sheets as of March 31, 2023 and December 31, 2022 consisted of the following debt securities issued by CF Industries:

Effective Interest Rate March 31, 2023 December 31, 2022

As of June 30, 2023, approximately $205 million of letters of credit were outstanding under this agreement.

Long-term debt presented on our consolidated balance sheets as of June 30, 2023 and December 31, 2022 consisted of the following debt securities issued by CF Industries:

Effective Interest Rate June 30, 2023 December 31, 2022

Principal Carrying Amount (1)

11 unchanged sentences

(1) Carrying amount is net of unamortized debt discount and deferred debt issuance costs.

Total unamortized debt discount was $7 million as of both March 31, 2023 and December 31, 2022, and total deferred debt issuance costs were $27 million and $28 million as of March 31, 2023 and December 31, 2022, respectively.

Total unamortized debt discount was $7 million as of both June 30, 2023 and December 31, 2022, and total deferred debt issuance costs were $26 million and $28 million as of June 30, 2023 and December 31, 2022, respectively.

(2) Effective August 23, 2021, these notes are no longer secured, in accordance with the terms of the applicable indenture.

1 unchanged sentence

Under the terms of the indenture governing the 4.500% senior secured notes due 2026 (the 2026 Notes), the 2026 Notes are guaranteed by CF Holdings.

Until August 23, 2021, the 2026 Notes were guaranteed by CF Holdings and certain subsidiaries of CF Industries.

The requirement for subsidiary guarantees of the 2026 Notes was eliminated, and all subsidiary guarantees were automatically released, as a result of an investment grade rating event under the terms of the indenture governing the 2026 Notes on August 23, 2021.

Prior to the investment grade rating event, subject to certain exceptions, the obligations under the 2026 Notes and related guarantees were secured by a first priority security interest in collateral consisting of substantially all of the assets of CF Industries, CF Holdings and the subsidiary guarantors.

As a result of the investment grade rating event, the liens on the collateral securing the obligations under the 2026 Notes and related guarantees were automatically released on August 23, 2021, and the indenture covenant that had limited dispositions of assets constituting collateral no longer applies.

Interest on the Public Senior Notes and the 2026 Notes is payable semiannually, and the Public Senior Notes and the 2026 Notes are redeemable at our option, in whole at any time or in part from time to time, at specified make-whole redemption prices.

CF INDUSTRIES HOLDINGS, INC.

Forward Sales and Customer Advances

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Any cash payments received in advance from customers in connection with forward sales contracts are reflected on our consolidated balance sheets as a current liability until control transfers and revenue is recognized.

As of March 31, 2023 and December 31, 2022, we had $284 million and $229 million, respectively, in customer advances on our consolidated balance sheets.

As of June 30, 2023 and December 31, 2022, we had $9 million and $229 million, respectively, in customer advances on our consolidated balance sheets.

While customer advances are generally a significant source of liquidity, the level of forward sales contracts is affected by many factors, including current market conditions, our customers’ outlook of future market fundamentals and seasonality.

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If the level of sales under our forward sales programs were to decrease in the future, our cash received from customer advances would likely decrease and our accounts receivable balances would likely increase.

CF INDUSTRIES HOLDINGS, INC.

Additionally, borrowing under the Revolving Credit Agreement could become necessary.

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Volatility in reported quarterly earnings can result from the unrealized mark-to-market adjustments in the value of the derivatives.

As of March 31, 2023, our open natural gas derivative contracts consisted of natural gas fixed price swaps, basis swaps and options for 18.9 million MMBtus of natural gas.

As of June 30, 2023, our open natural gas derivative contracts consisted of natural gas fixed price swaps, basis swaps and options for 43.8 million MMBtus of natural gas.

As of December 31, 2022, our open natural gas derivative contracts consisted of natural gas fixed price swaps, basis swaps and options for 66.3 million MMBtus of natural gas.

Defined Benefit Pension Plans

We contributed $7 million to our pension plans in the three months ended March 31, 2023.

We contributed $13 million to our pension plans in the six months ended June 30, 2023.

Over the remainder of 2023, we expect to contribute approximately $34 million to our pension plans, which would result in our making total contributions of approximately $47 million to our pension plans for the full year 2023.

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Distribution to Noncontrolling Interest in CFN

On January 31, 2023, the CFN Board of Managers approved semi-annual distribution payments for the distribution period ended December 31, 2022 in accordance with CFN’s limited liability company agreement.

On January 31, 2023, CFN distributed $255 million to CHS for the distribution period ended December 31, 2022.

The estimate of the partnership distribution earned by CHS, but not yet declared, for the first quarter of 2023 is approximately $110 million.

Net cash provided by operating activities during the first three months of 2023 was $947 million, a decrease of $444 million compared to $1.39 billion in the first three months of 2022.

On July 31, 2023, the CFN Board of Managers approved semi-annual distribution payments for the distribution period ended June 30, 2023 in accordance with CFN’s limited liability company agreement.

On July 31, 2023, CFN distributed $204 million to CHS for the distribution period ended June 30, 2023.

Net cash provided by operating activities during the first six months of 2023 was $1.66 billion, a decrease of $621 million compared to $2.28 billion in the first six months of 2022.

The decrease in cash flow from operations was due primarily to lower net earnings, partially offset by changes in net working capital.

Net earnings for the first three months of 2023 was $650 million as compared to $1.05 billion for the first three months of 2022, a decrease of $401 million.

The decrease in net earnings was due primarily to a decrease in gross margin, driven by lower average selling prices and sales volume.

During the first three months of 2023, net changes in working capital increased cash flow from operations by $213 million, while in the first three months of 2022, net changes in working capital increased cash flow from operations by $110 million.

The increase in cash flow from working capital changes was attributable primarily to higher cash collections from customer advances and lower levels of accounts receivable in the first three months of 2023 as compared to the first three months of 2022.

Net cash used in investing activities was $34 million in the first three months of 2023 as compared to $62 million in the first three months of 2022.

The decrease was due primarily to an increase in proceeds from the sale of emission credits, as proceeds from the sale of emission credits was $35 million in the first three months of 2023 compared to $9 million in the first three months of 2022.

Capital expenditures totaled $69 million during the first three months of 2023 compared to $63 million in the first three months of 2022.

Net cash used in financing activities was $410 million in the first three months of 2023 compared to $339 million in the first three months of 2022.

The increase was due primarily to proceeds from issuances of common stock under employee stock plans of $97 million in the first three months of 2022 that did not recur in the first three months of 2023.

In addition, the increase reflects an increase in dividends, as the dividend declared and paid in the first quarter of 2023 was $0.40 per common share compared to $0.30 per common share in the first quarter of 2022.

Dividends paid on common stock was $79 million in the first three months of 2023 compared to $64 million in the first three months of 2022.

These factors were partially offset by a decrease in share repurchases.

In the first three months of 2023, we paid $54 million for share repurchases compared to $98 million for share repurchases in the first three months of 2022.

In the first three months of 2023, share repurchases totaled $75 million, of which $21 million was accrued and unpaid as of March 31, 2023.

Net earnings for the first six months of 2023 was $1.26 billion compared to $2.39 billion for the first six months of 2022, a decrease of $1.13 billion.

The decrease in net earnings was due primarily to a decrease in gross margin, driven by lower average selling prices.

During the first six months of 2023, net changes in working capital increased cash flow from operations by $146 million, while in the first six months of 2022, net changes in working capital reduced cash flow from operations by $731 million.

The increase in cash flow from working capital changes was attributable primarily to favorable movements in accounts receivable, inventory and customer advances in the first six

CF INDUSTRIES HOLDINGS, INC.

months of 2023 as compared to the first six months of 2022.

Net cash used in investing activities was $127 million in the first six months of 2023 as compared to $121 million in the first six months of 2022.

Capital expenditures totaled $164 million during the first six months of 2023 compared to $129 million in the first six months of 2022.

Proceeds from the sale of emission credits was $36 million in the first six months of 2023 compared to $12 million in the first six months of 2022.

Net cash used in financing activities was $639 million in the first six months of 2023 compared to $1.40 billion in the first six months of 2022.

The decrease was due primarily to a decrease in share repurchases.

In the first six months of 2023, we paid $205 million for share repurchases compared to $577 million paid for share repurchases in the first six months of 2022.

In addition, we paid $507 million in connection with the redemption of the 2023 Notes in the first six months of 2022.

Critical Accounting Estimates

During the first three months of 2023, there were no material changes to our critical accounting estimates as described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

During the first six months of 2023, there were no material changes to our critical accounting estimates as described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Forward-Looking Statements

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• the seasonality of the fertilizer business;

CF INDUSTRIES HOLDINGS, INC.

• the impact of changing market conditions on our forward sales programs;

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• our ability to manage our indebtedness and any additional indebtedness that may be incurred;

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• our ability to maintain compliance with covenants under our revolving credit agreement and the agreements governing our indebtedness;

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• risks associated with the operation or management of the CHS strategic venture, risks and uncertainties relating to the market prices of the fertilizer products that are the subject of our supply agreement with CHS over the life of the supply agreement, and the risk that any challenges related to the CHS strategic venture will harm our other business relationships.

CF INDUSTRIES HOLDINGS, INC.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis