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CF Industries (CF) to Buy Waggaman Ammonia Production Facility

CF Industries Holdings Inc. CF has announced a definitive purchase agreement with Incitec Pivot Limited ("IPL”) for the latter’s ammonia production facility in Waggaman, LA. The facility has an annual capacity of 880,000 tons of ammonia.

Per the agreement, CF Industries will pay $1.675 billion for the Waggaman ammonia plant and related assets. The company will allocate roughly $425 million of the purchase price to a long-term ammonia offtake agreement wherein it will supply up to 200,000 tons of ammonia per year to IPL's Dyno Nobel subsidiary. CF Industries aims to fund the remaining $1.25 billion of the purchase price with cash on hand.

The transaction has been unanimously approved by both companies' boards of directors and is subject to necessary regulatory approvals and other customary closing conditions.

This deal with IPL leverages industry-leading ammonia production capabilities and generates long-term value for shareholders of both companies. The Waggaman facility is expected to fit seamlessly into the company's network and strategic focus on ammonia as a clean energy source. Prior to synergies, which the company intends to achieve through increased capacity utilization and operational and logistics optimization, CF Industries predicts that the plant will provide a gross margin per ton equivalent to its existing ammonia segment.

Shares of CF Industries have decreased 27.4% in the past year compared with a 31% decline of the industry.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

CF Industries, on its fourth quarter call, said that it expects global nitrogen prices to gain support from abundant agricultural demand. The company also expects the global nitrogen supply-demand balance to remain tight into 2025, supported by agricultural-led demand and persistently high energy prices in Europe and Asia. Demand for nitrogen continues to be driven by the need to replenish global grains stocks, per the company. CF believes it will take at least two years for harvests to fully replenish global grain stocks, which will support strong grain plantings aiding nitrogen applications further.

CF Industries Holdings, Inc. Price and Consensus

CF Industries Holdings, Inc. price-consensus-chart | CF Industries Holdings, Inc. Quote

Zacks Rank & Key Picks

CF Industries currently carries a Zacks Rank #5 (Strong Sell).

Better-ranked stocks to consider in the Basic Materials space include Nucor Corporation NUE, Steel Dynamics STLD and Yamana Gold Inc. AUY.

Nucor currently sports a Zacks Rank #1 (Strong Buy). NUE’s earnings beat the Zacks Consensus Estimate in all the last four quarters. It has a trailing four-quarter earnings surprise of roughly 7.7% on average. NUE has gained around 2.7% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Steel Dynamics currently carries a Zacks Rank #1. STLD’s earnings beat the Zacks Consensus Estimate in all the last four quarters. It has a trailing four-quarter earnings surprise of roughly 11.3% on average. STLD has rallied around 27.8% in a year.

Yamana Gold currently carries a Zacks Rank #2 (Buy). AUY’s earnings beat the Zacks Consensus Estimate in all the last four quarters. It has a trailing four-quarter earnings surprise of roughly 22.5% on average. AUY has gained around 5.3% in a year.

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