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What Tax Cuts in the US Meant for CF Industries


Nov. 20 2020, Updated 12:47 p.m. ET

US tax cuts

Along with companies such as CVR Partners (UAN), Mosaic (MOS), and Scotts Miracle-Gro (SMG) that benefited from the Tax Cuts and Jobs Act of 2017, CF Industries’ (CF) bottom line also benefited from these tax cuts.

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Tax gains impact profitability

During 4Q17, CF Industries received a one-time tax benefit of $491.0 million, or $2.09 per share, from the lowered corporate taxes in the US. Including this tax benefit, the company’s net income was $465.0 million, or $1.98 per share.

This tax benefit came from the reevaluation of tax liabilities at the statutory rate of 21.0% from the earlier 35.0%. The chart above shows that CF Industries used its 2017 tax break to pay off its debt.

During its 4Q17 earnings call, CF Industries’ management stated that the “new tax law will create a more level playing field for U.S.-based manufacturers like CF.”

Because the tax benefits positively impact the profitability of the company, fertilizer producers (XLB) could position themselves more competitively in the global arena.

With a rise in nitrogen selling prices and lower exports coming out of China and Europe on the back of an increase in energy costs, CF Industries may see margin expansion with the addition of lower tax benefits.

For more industry updates, check out Market Realists’ Agricultural Fertilizers page.


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