CF Industries

Moat composition and weights: cost advantage 55%, efficient scale 30%, switching costs 10%, intangibles 5%.

Cost advantage (85/100): CF benefits from North American low‑cost gas, high asset utilization, multi‑product flexibility, and a broad distribution system, underpinning attractive spreads vs higher‑cost imports, particularly when overseas gas rises.

Management consistently runs assets above peers and ships more than 18 million tons annually across a deep network with pipeline connectivity and 3 million tons of storage. Efficient scale (75/100): New world‑scale ammonia capacity requires multibillion‑dollar capex, permitting, CO2 handling, and export logistics.

CF’s plants at Donaldsonville, Port Neal, Verdigris, Yazoo City, Medicine Hat, and Waggaman sit in advantaged corridors with pipeline and deep‑water access, limiting profitable entry at scale. 2025 gross ammonia production expected around 10 million tons reinforces scale.

Switching costs (30/100): Product is a commodity and farmers can switch sources, but CF’s forward sales, reliability, storage, and pipeline proximity create practical frictions and availability premiums at peak seasons. Intangibles (20/100): Brand and patents play minor roles; operational know‑how and safety culture matter but are not exclusive.

Network effects (0/100): Not applicable. Weighted result supports a narrow but durable moat primarily from cost and scale.

Fertilizers are globally priced commodities, so absolute pricing power is limited. CF’s advantage is the ability to price at import parity while enjoying structurally lower costs, preserving margin even when prices normalize.

In 2025, CF reported that certified low‑carbon ammonia cargoes sold at a premium to conventional ammonia, and Donaldsonville CCS began generating 45Q credits that further support economics.

The Blue Point JV targets 1.4 million tons per year of low‑carbon ammonia with long‑lead demand from Japan supported by subsidies to bridge the coal‑to‑ammonia price gap. These elements add incremental, policy‑supported price realization beyond traditional fertilizers, though still nascent relative to group volumes.

CF’s earnings are inherently cyclical, driven by nitrogen product prices, agricultural demand, and Henry Hub gas. EIA expects U.S. gas to average roughly 3.5 to 4.0 dollars per MMBtu over 2025–2026, implying some input cost variability.

Still, CF’s U.S. gas exposure is a positive relative to Europe, and the company increasingly uses forward sales and multi‑year industrial offtakes.

The clean‑energy platform (45Q credits, premium low‑carbon cargoes, and the Blue Point JV with JERA/Mitsui) should add a more contracted, policy‑backstopped layer over time, modestly improving visibility versus past cycles. Overall, revenue and cash flow remain tied to commodity cycles despite these offsets.

Balance sheet is strong with ample liquidity. As of September 30, 2025, long‑term debt carrying amount was about 2.974 billion dollars against 1.838 billion dollars of cash and equivalents (including 233 million dollars consolidated at Blue Point), implying net debt near 1.14 billion dollars.

With trailing twelve‑month free cash flow around 1.70 billion dollars, net debt could be repaid in well under a year if management chose. The maturity ladder is long‑dated, and Fitch affirmed CF’s BBB profile in November 2025 tied to low leverage expectations and ample cash flow even while funding growth and buybacks.

Track record is disciplined: CF completed the 1.675 billion dollar Waggaman ammonia acquisition in 2023, integrating it into the network with additional ammonia sales and optional CCS.

The company returned 1.9 billion dollars to shareholders in 2024 and executed large buybacks in 2025, completing a 3 billion dollar authorization and initiating a new 2 billion dollar program through 2029. Dividend remains steady at 0.50 dollars per quarter.

Growth capex is focused on high‑return decarbonization (45Q and low‑carbon premiums) and Blue Point, where partners fund their shares. The approach balances reinvestment, resilient growth, and meaningful per‑share compounding.

Leadership transition appears well‑planned. Long‑time CEO Tony Will retired effective January 4, 2026, with COO and former CFO Chris Bohn appointed CEO. Under this team, CF executed significant capacity, reliability, and capital return programs while advancing clean‑energy projects and commercial offtakes.

CFO responsibilities transitioned in 2024 to Gregory D. Cameron, adding external energy technology experience. Safety and operational metrics remain strong by industry standards. Overall alignment and continuity look solid, though we will monitor execution on Blue Point and ongoing capital discipline under the new CEO.