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How CF Industries’ Product Mix Is Shifting

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UAN dominates

Earlier in this series, we saw that CF Industries’ (CF) overall shipments rose 24% year-over-year (or YoY) to 17 million tons in 2016. CF’s nitrogen fertilizer product portfolio includes ammonia, urea, UAN (urea ammonium nitrate), and AN (ammonium nitrate).

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The UAN segment contributed the majority of CF’s shipments, accounting for 39% in 2016, a fall from 43% in 2015. The Ammonia segment’s shipment share also fell from 22% to 17%.

Over the same period, the Granular Urea segment’s share accounted for 21% of shipments, a rise from 18% in 2015. The AN segment’s shipment share rose from 9% to 13%, and the Other Nitrogen Products segment’s shipments rose from 8% to 10% YoY.

Over the past five years, on a CAGR (compound annual growth rate) basis, the AN and Other Nitrogen Products segments’ shipments have grown much faster than the remaining three segments’ shipments at 21% and 22%, respectively. The Granular Urea segment has grown at a CAGR of 7%, the UAN segment has grown at a CAGR of 2%, and the Ammonia segment has grown at a CAGR of 1% over the past five years.

Why is this important?

The above analysis gives us a view into CF’s product mix strategy. Fertilizer companies (MXI) such as CF, PotashCorp (POT), The Mosaic Company (MOS), and Agrium (AGU) will likely lean toward products that generate higher margins.

Next, we’ll discuss another important driver of sales: realized prices.

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