High Grade Chemicals: Mid-Year Outlook Updates and Ratings Changes

Research evidence excerpt

High Grade Chemicals: Mid-Year Outlook Updates and Ratings Changes

m Overweight). Nitrogen fertilizer prices have retreated from the Middle East conflict highs (U.S. NOLA urea weekly spot price

-48% v. high of $710/st in mid-April, -9% y/y; U.S. Cornbelt ammonia weekly spot price -9% v. high of $975/st across April through early June, albeit +43% y/y). Risks to

farmer and planting economics in 2H26 (Brazil) and for U.S. farmers (for the 2027 season) are notable. CF’s earnings profile benefits from its advantaged U.S. natural gas

position, and the company’s balance sheet is in solid shape overall. Excess cash generation is likely allocated towards returning cash to shareholders and the company is also

investing in growth capacity. Upward rating agency actions are possible, though Moody’s last month stated that nitrogen fertilizer pricing volatility and elevated growth

capex limits upside potential. CF risk trades today at or near the five-year tights with current levels indicative of fair value in our view, and we are therefore downgrading

CF to Neutral. Risks to our rating include natural gas price volatility, geopolitical risks, and weather risks.

We are downgrading NTRCN to Underweight (from Neutral). The company’s asset base is in flux with NTR evaluating the fate of its Phosphate business, its Trinidad

nitrogen operations (shut in October 2025), and “each component” of the Brazilian business. On the 1Q call, management indicated “significant initial expressions of

interest” regarding the Phosphate sale process (running in parallel with the strategic review) and announced the sale process for the Brazilian soybean seed business (2H26e

closing). NTR’s capital allocation has favored returning cash to shareholders over debt repayment.