CF Industries Holdings Earnings Call Insights: Nitrogen Outlook and Inventory Levels Analysis
Don Carson – Susquehanna International Group: Steve, just wanted to get an update on your supply demand outlook for U.S. nitrogen. We’ve seen as you mentioned two cancellations by some of your peers due to soaring construction costs and there’s likely to be another one soon. So, can you comment on cost escalation in general and what you are doing to mitigate that whether you are going to come in on budget as originally expected and what’s your current view on how many significant expansions we might see in the U.S. either greenfield or brownfield and what that does to the sustainability of the net import status of the U.S. in nitrogen?
Stephen R. Wilson – Chairman, President and CEO: Okay. So far, on our two major projects, we have made great progress in specifying the engineering costs and nailing down the cost of major components that are being fabricated for us. And with respect to those two sections of the project costs, we are very comfortable with how they are coming in relative to our budget. They are essentially in line with our expectations. We are in the process now of looking at the – entering into competitive bidding for the construction costs element of the projects. That represents roughly half of the total project cost and we will have more clarity on that aspect of the project cost when we complete the competitive bidding process. With respect to the number of projects that are likely to be built, there’s certainly a lot of discussion about that. There are a number of projects that are moving along; there are others that have been cancelled; there are others that are in decision mode. We don’t have any more clarity than the general market has on that point.
Don Carson – Susquehanna International Group: Just to clarify, how long would you expect the U.S. to remain a net importer of nitrogen and I realize it varies across the three major product types, but how long do you think that window will remain?
Stephen R. Wilson – Chairman, President and CEO: Well, certainly, our projects are coming on line in 2015 and ’16. We expect there to continue to be substantial imports of nitrogen at the time we complete our projects and we actually don’t see anything on the horizon that’s going to flip that for a number of years.
Inventory Levels Analysis
Vincent Andrews – Morgan Stanley: Just two questions. First, Steve, if we can think ahead to the fall season in the U.S., can you speak a little bit about the timing of the U.S. harvest and how important that will be relative to the size of the fall application and I guess sort of as a follow through if we have a long or short fall application season, what does that mean for the setup going into spring next year in terms of where inventory levels may shake out over the winter?
Stephen R. Wilson – Chairman, President and CEO: Okay. Bert Frost (will answer that).
Bert A. Frost – SVP, Sales and Market Development: This is Bert. In regarding the fall, and the harvesting the size of the harvest and the timing of the applications, what we expect to see is obviously with the late maturing crop, it may come off later, but I think that farmers would take advantage of drying capabilities and be buying and utilizing propane to dry down the corn and get it in the silo. I actually think this moves to our advantage because as that timing is compressed and there are certain areas of the United States where fall applications make more sense than the spring that those areas then will need to utilize our capabilities, which is a rapid response and the ability to quickly supply product to the market and then resupply again in as short as a two-week window and so that’s where we would leverage our terminal system and pipeline and rail service to those terminals to allow the farmers to pull product as quickly as possible and apply it. Obviously, that’s weather-driven later in the quarter. In Q4, you could see if we do see an early snow that would be a negative impact, but we had that problem every year. So weather goes to spring or not? Some markets are naturally spring applicators and some are naturally fall applicators, but we are projecting a robust fall and a robust fall application of ammonia.
Vincent Andrews – Morgan Stanley: Then just as a follow-up – not as a follow-up, but as a housekeeping question. The CapEx number that you gave in the press release – there were two numbers. There was the one for the brownfield or new plants, and then there was a $450 million number. Is that a maintenance number or does that have some debottlenecks or other type of activity in it as well?
Stephen R. Wilson – Chairman, President and CEO: Go ahead Dennis.
Dennis P. Kelleher – SVP and CFO: Yeah. If you look at our gross spending for the quarter, what we’ve got in this quarter is we got $250 million of spending, of which $115 million, $116 million was for the expansions in Donaldsonville and in Port Neal. The other part of the $250 million is going to have to do with turnarounds and to some degree some debottleneck projects that we have ongoing in the system. If we look at it, Vincent, year-to-date, we’ve got $402 million of gross spending, $181.5 million of which are applicable to the expansion projects at D’ville and at Port Neal, and then the balance of which again is devoted to maintenance sustaining CapEx and also some debottleneck projects as well and some other construction projects at the plants like tank construction and what have you. So that sort of what’s happened so far this year. As we look ahead to the balance of the year, what we’re looking at is a total – for the guidance for total year is between $1 billion and $1.3 billion of total CapEx spend, and we believe that about $0.6 billion to $0.8 billion of that will be for the big projects at D’ville and in Iowa and then the balance again is going to be between sustaining and debottlenecking and other construction projects that aren’t associated with the big projects.
Stephen R. Wilson – Chairman, President and CEO: Vincent, with respect to the $450 million, that is above trend line for a maintenance CapEx because of the number of turnarounds we have and because of some discretionary projects, including some small debottlenecks that are in there.
Vincent Andrews – Morgan Stanley: Just what would you think that number would be going forward for next year or too soon to tell?
Dennis P. Kelleher – SVP and CFO: I think if you look at our maintenance CapEx going forward, we’re probably looking at between $300 million and $350 million a year.
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