CF Industries, which last week announced it was in merger talks with Norway’s Yara International, has aggressively reinvested in itself.
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Deerfield-based CF Industries’ capital spending of $824 million last year equaled 15.1 percent of its sales, compared with 8.6 percent the year before. That’s at least a seven-year high.
Much of that money is being spent on new nitrogen production plants in Donaldsonville, La., and in Port Neal, Iowa. Its spending includes engineering and design, new equipment, construction, and infrastructure improvements.
CF Industries, which went public in 2005, has said it expects capital expenditures this year to be $2.2 billion, with most of the spending occurring on the two projects.
“When complete, the projects will increase our production capacity by 25 percent,” CF Industries spokesman Dan Swenson said. The expansion is warranted by rising demand for nitrogen fertilizer and by North America’s relatively low cost of natural gas. Natural gas is a key ingredient in producing nitrogen fertilizers, and it accounts for about 40 percent of CF Industries’ cost of sales.
“Demand for nitrogen is expected to grow approximately 2 percent globally for the next several years,” Swenson said. That equates to the need for about 20 new plants between now and 2018, he said.
CF Industries hasn’t neglected its shareholders, either, he said.
Over a recent 18-month period, it bought back $3 billion in stock and paid $236 million in dividends.
Last year, CF Industries’ stock lagged both the Standard & Poor’s 500 index and the 30-member S&P 500 Materials Index. Its total return was 16 percent, compared with 32 percent for the wider market and 26 percent for its S&P peer group.
But year to date in 2014, CF Industries has outperformed both, with an 18 percent total return, compared with 9 percent for the overall market and 11 percent for its S&P peers.
Neither CF Industries nor Yara would comment on the merger talks beyond short statements issued Tuesday.
Twitter @beckyyerak