Q1 2020 Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the nutrient 2020 first quarter earnings conference call at this time. All participants are in a listen-only mode after the speaker's presentation. There will be a question-and-answer session to ask a question during the session. You will need to press star one on your telephone know. If you require any further assistance, please press * 0. I would now like to hand the conference over to your speaker today which Downey vice president of investor relations, please go ahead sir.

And our current quarterly report to our shareholders as well as the most recent annual reports mdna and annual Information Form filed with Canadian and US security conditions to which we direct home. I will now turn the call over to mister Chuck Nagel.

from the start of the year

Is also considering funding for ethanol producers and nutrient is working with our biofuel Partners to support this effort.

The current situation has highlighted also highlights benefits from our recent investment in our industry-leading digital platform. We've had tremendous engagement off as the tool provides a more convenient highly efficient and safe way to conduct business.

Also phase one of the US China agricultural trade deal is being implemented as highlighted by recent corn exports to China and we believe the deal will be highly supportive for Shack hours. However, no company is immune to the recent volatility for our business. We believe the uncertainty is is predominantly in the second half of the year. We have lowered our 28th Annual adjusted ebitda Guidance the three and half to three point nine billion incorporating the risks as we see them today. The biggest change has been to our potash business where we've lowered five-year ebitda guidance by about three hundred million dollars despite solid potash demand in the cautious buying and international markets has weighed on global demand and prices.

Thank you operator. Good morning, everyone and welcome to nutrients conference call to discuss our first quarter 2020 results in Outlook on the phone with us. Today is Mister Chuck magro president and CEO of nutrients are paid off our CFO and the heads of our three.

Thanks, Richard and good morning everyone and welcome to nutrient first quarter 2020 earnings call. Our management team is calling from various locations around North America ensuring We are following month distancing protocols. And we sure hope that you are listening in from somewhere safe as well. You don't need to look any further than your local community to be reminded how important the agricultural industry is to our daily lives as a grocery stores experience lineups and empty shells crop input companies like nutrient were designated and essential or critical service by governments around the world for Clear reasons.

In the first quarter, we had over two hundred million dollars of orders come in through the digital platform which $36 million was from our newly-launched seat at about 40% off of our retail products that were available online were ordered through the digital platform nearly four times higher than our 2019 results.

We said that we have the world's best agricultural e-commerce platform and our numbers are clearly showing this.

We intend to build on the strengths and have allocated about sixty million dollars and twenty twenty-two accelerate new functionality and tools for our customers and our grandmas also bought out of an abundance of caution. We move very quickly to increase our financial flexibility first, we enhanced our liquidity and cash position by increasing short-term debt facilities and drawing of an available credit lines. This ensures our business can operate efficiently through these unprecedented times and was done as a precaution for working capital requirements facilitating sales office and managing our capital structure at the end of the quarter. We had over 3 billion of cash on hand with access to another 2 billion of credit lines.

Nutrients top priority is ensuring the safety and health of our more than 25,000 employees globally and the communities in which we live and operate.

The recent China potash contract is expected to add Clarity to the market and should accelerate offshore shipments over the next couple of months. However, we've lowered our 2020 Global potash shipment forecasts by about a million tons to 65 to 67 million times to reflect China market dynamics a relatively slow start to the year outside of the home and expected impact from lower biofuel demand.

This is fundamental to nutrients culture. And is that the heart of every decision that we have made to manage through? This Global pandemics are covid-19 team has been working with world-class supervisors to develop policies practices and business continuity plans that can help safeguard.

All of our stakeholders this commitment to our stakeholders extends to the twenty million dollars of community investment program where we recently increased funding to food-related program by a million dollars. Additionally, we donated protective equipment to local Health authorities and began producing hand sanitizer at select facilities to share with local communities.

We are working with our with Tampa to determine our next steps in terms of volumes and length of contract in China, but it does provide a floor and we have already seen more dead and and higher prices in markets like Brazil in retail are we maintained our 2020 ebitda guidance of 1.4 to 1.5 billion dollars given the choice the mental resilience of the business and what we are seeing so far in Q2, this is despite an estimated twenty-five to fifty million dollars of FX headwinds foreign on US based retail operations as a result of a much stronger US dollar

Today, we've added an additional one and a half billion dollars of committed credit facilities as such we are well-positioned from a cash and liquidity perspective to whether any potential storm.

Nutrient continues to produce and deliver crop inputs in a safe and efficient manner and covid-19 has so far had limited direct impact on our operations or on-demand for crop inputs. I would like to take a

Our leverage remains within our targeted range of two to three times of annual ebitda through the cycle are single financial debt. Covenant of debt-to-capital is 41% down below the Covenant ratio limit of 65%

Second we deferred more than half a billion dollars of capital projects that don't pack our safety or reliability of our operations.

We are monitoring The increased risk in the second half of the Year from impacts to parts of the food supply chain, including fruit and vegetables Dairy and livestock which has the potential to impact of inputs overtime in nitrogen. Some of our industrial customers are experiencing lower demand for their products as a result of covid-19 impacts on the broader economy as such we've lowered our expectations for ammonia and nitrates demand in 2020 and due to the current ammonia prices. We made the decision to temporarily curtail production at one of our plants in Trinidad.

While we continue to adapt to the current situation nutrient strategy remains on course and the company is in solid financial position with a strong balance sheet exceptional quality aspect of a stable and growing dividend an apple liquidity. Now, let's turn to the results for the quarter and the market update nutrient delivered 508 million dollars of adjusted ebitda off and what is a seasonally slope order retail sales were up 30% in the first quarter despite lower crop nutrient prices this year sixty percent of the growth was from acquisition at 40% from organic growth, which was supported by strong performance from our extensive proprietary product line and our online platform.

Well a lot has changed over the past few months what remains constant is food security is vital many of us have come to expect that food would always be available at the grocery store. The current situation is a stark reminder that this is something we can no longer accept as a given as always nutrient is there to support our customers to ensure they have inputs. They need to Supply World food through this challenging time nutrients integrated model is designed to perform. Well, despite economic volatility. This is supported by our people are strange the quality and mix of our assets and the importance of the demand for food and crop inputs. We have a strong balance sheet the stable and growing dividend and significant money flow generation potential. We remain focused on long-term value-creation which includes continuing to grow our business to feed the future and returning Capital to our chef.

Australia

And retail business performed extremely well and we are making great progress on integrating the realco business and we are well ahead of our plans Synergy Target by over $35 in Australian dollars. We also continue to advance our growth strategy in Brazil announced in the acquisition of tech Agro a leading retailer and soybean seed producer with the facts and we expect our existing investments in Brazil to contribute half a billion dollars of annual revenue.

In potash our ebitda decline this quarter do to lower selling prices strong North American Sales volumes largely offset weaker International volumes wage increase in North American Sales reflect the increase in seeded acreage and solid application rates supported by soil fertility requirements after several seasons of mist applications.

Finally, we are committed to Leading The Way in sustainability.

Before our industry we issued our twenty-twenty EST report in April highlighting our approach and future plans, and I'm pleased to announce Charlotte hilderbrandt recently joined our leadership team as Executive Vice President of stakeholder relations and will be our chief sustainability officer. She brings exceptional experience to the role and makes nutrient one of only a small group of companies in the fortune five hundred to have a CSO at this level given our position as the world's largest provider of crop inputs and solutions are access to technology package or deep relationship with Growers. We are in a unique position to take a leadership role in Innovative and sustainable agronomic practices and we have every intention of doing that with that operation. I'll turn it over for questions as a reminder to ask a question. You will need to press star one on your telephone to withdraw your question, press the pound key. Yep.

Offshore sales declined about 10% do too cautious spot purchasing and some International markets and we continue to be focused on our controllables reporting a stable potash production cost $60 per ton.

Turning the nitrogen and phosphate nitrogen. Ebitda was down due to lower nitrogen prices. We grew sales volumes by about three hundred thousand tons this quarter supported by recent Brownfield capacity expansions, and we also benefited from lower North American Gas costs.

Our phosphate ebitda was down slightly from last year while our industrial phosphate business performed. Well, it could not fully offset the impact from lower death in math prices compared to last year.

There are several factors that will support solid crop input demand the spring. In fact, we are seeing excellent crop input demand across North America and Australia this season while crop prices have recently come under pressure from a Slowdown in non-food demand us farmers are still expecting to plan an additional 15 million Acres this year and planting is progressing. Well, despite covid-19. We expect you at Karne courage to come in between 94 and 96 million Acres this year slightly lower than the usda's March estimate in ninety-seven million Acres the Harvest in Brazil, it's nearly complete and most Growers have locked in profits on their current soybean crop indications are they've also forward contract at a greater portion of next year's crop Brazilian grower economics continue to age and despite some dry conditions there. We expect strong soybean acreage growth again this year. There are also several.

One question per person. Please stand by while we compiled the Q&A roster.

Our first question comes the line of Jacob of CIBC, please go ahead your line is open. Good morning.

So we're seeing some storm clouds brewing for us corn, you know concerns and clubs and ethanol demand meet demand and and further ramp and and tradewars here. How should we be thinking about the farmer response input demand in the second half of 2020 and in 2021? Yeah. Good morning, Jacob. I'll turn that question over to Mike Frankie's closest to it. And then I'll I'll give you a couple of high-level questions after that. So go ahead and like

Yeah, good morning, Jacob. Obviously, you know new crop corn right now is Futures are around 3:30 a bushel, which is down from about $4 just off of months ago. You know, that does change the economics obviously for our our customers in the you know, so I think as they think about the economic threshold for products like fungicides and insecticides there is a bit of a change in calculation. So you know what we're we're seeing extremely strong demand out of the gate. Our first quarter was strong as Chuck mentioned were real strong right now in our second quarter. We we are seeing you know intentions to follow through on on the planting of you know of ninety-four to ninety-six million acres of corn fertilizer sales have been really strong. There's been more pre-plant herbicides this year. So, you know, so so far everything is is gone. Well,

I think from a retail standpoint, but I do think you know, once we get into the summer months depending on what commodity prices do what kind of programs come out from the government, you know that I will have some impact on on how Farmers think about finish finishing off the crop and Jacob just a little bit more. So obviously when when corn approaches $3 and beans that $8 off if you step back and you look at just basic far more economics Growers that have rented land there there are underwater. If you have your own land and your own land you you're you're still making a a margin on it, but it's not a great margin. So in other words what what we think will happen is of course these these pricing levels are not sustainable in overtime. You'll start to see acreage shift.

Which I think will be naturally.

And be healthy for the market, but what we also think will happen specifically this year as Mike mentioned is there is a lot of government support programs right now. So we don't think it's a liquidity issue from a farmer perspective. In fact, their behavior right now is one of of getting the crop in and investing quite well in the crop, but over time if these prices persist and we don't have the government support programs. We will be we would expect that we would see acreage shift to tighten up the supply-demand and all of that we believe is healthy for the market.

And our next question comes from the line of PJ from Seattle you please go ahead your line is open.

Yes. Hi. Good morning.

What do you think, you know and are you attending any?

PJ we're having a hard time hearing you. Can you just repeat your question? Maybe get a little closer to the mike.

Hello, that's better PJ. Thanks. Hey, I'm sorry. Sorry about that. Did you hear my question or should I repeat them know can you please repeat it? Yes. Yes. Sorry about that. So you mentioned liquid in the system, but what do you think is liquidity or credit availability for Gulf Coast planting as if this virus were to extend the impacted virus and are you extending any credit to Growers? And if you guys can you give us some more details about expected wage potential for bad debt? Excetera? Thank you. Thank PJ. So look, we are standing credit to Growers. We I think we've got a great Insight on that with our our new nutrient financing, and I know Pedro for her and his credit team have been all over this page, or why don't you take that question? Yes. Thank You Chuck, and thank thanks for the question. Yep.

We have not seen yet abnormal behavior in of course pretty much like your question. We are monitoring very closely because we are we're expecting some of the credit to be withdrawn from from Banks. But so far the the both the request before this were credit had been normal and the payment has been a normal. So the liquidity it seems to be adequate for our customers. We have not seen an increase in the overdose or delinquencies as a matter of fact, even after a bad year like last year's was in which we had record bad weather. We were able to improve our our collections our delinquency and we actually reverse some of our reserves so long so far so good, but we weren't paying very alert as we go forward if the situation changes but so far that seems to be adequate liquidity and we intend to continue birth

stamp liquidity to our

customers

thank you. And our next question comes from the line of Adam Samuelson of Goldman Sachs, please go ahead your line is open.

Yes, thank you. Good morning. Everyone was hoping to get just a little bit more color on the potash kind of Outlook and and the changes and I did trim down your your your expectations from from market growth, which makes sense. I'm just trying to think about the producer response and it just took it seemed that the guidance implies both yourself and other producers are going to take more meaningful down time again in the in the second half of the year as they did last year. I mean Thursday at least a million tons of new capacity coming in the market between between Europe him and K&S and some of the stuff that has come in on and I'm just trying to make sure I'm reading that right and it have your how you're thinking about the production Outlook this year.

Good morning, Adam. So we we did as you rightly point out lowered our our view that the demand for potash this year will be down about a million times. I believe that the driver for that is biofuel demand. So especially from palm oil will we believe is going to reduce demand in South East Asia off, of course, the China situation and the the China contract now has provided some clarity to the market and we're starting to see an increase in demand in slightly higher prices as well off their market. So that's a good news. But we're just at the pricing levels that that we we saw China settle. We're not sure we're going to want to put a lot of demand into China the second half of the year. So we pulled back at least from from our perspective sales demand just from that market and then that from the previous question, you know, if you think start thinking about Thursday,

Dollar corn we're having a very good application season right now, but that'll be determined what happens in the United States and in the second half of the year for the fall application season. So when we roll it's our view is at the Market's going to come off about a million times and and and then if you look at our our guidance from a production perspective in sales perspective, you know, we said we we've reduced our our sales book as well simply because the global demand is going to slow down but it's but I think it we we're still expecting to sell more than we did last year. And and so we will balance Supply that we're going to have with the market demand like we we normally do and you know right now what I say is that we're seeing a decent movement and so far in the first from the first quarter we saw very good movement about a month and and that continued in the second quarter, but there is more risk in the second half and we've tried to reflect that in our annual guidance.

And our next question comes the line of been Isaacson Scotiabank, please go ahead.

Thank you very much. You guys have talked about week industrial demand for nitrogen. Uh, and on the supply side. We're seeing a coil prices moved lower. Can you talk about the supply and demand is shaping up for the rest of the year and what's marginal costs right now. Thank you. Yes, so Sally can answer those questions for you then.

And so look I don't I think it's too early to to call exactly what's going to happen on the industrial side. I think on the agricultural side resting a very strong spring as you saw we took three hundred thousand times a year over year in the first quarter that's continuing in the second quarter. There may be a there are some industrial projects out there that are tied to GDP if there's a rejection coming out of covid-19. We may see a fall-off in those but I think it's too early to give you an indication of what we expect to happen. Obviously, we will move product around if they need some softness and Industrials in the third and fourth quarter, it may impact egg prices in the third and fourth quarter and we'll do our best to try and move the industrial product. We have in the monia and other products offered to a culture Market where we can

Taco Time, if you want to add anything know look I think you captured it then look with the the general slowdown and the broader economy, you know, it just stands to reason that there's going to be less dust real production. And that's going to have an impact on Industrial demand for nitrogen and nitrates and and so we've we've tried to factor that in and and and we're looking at our sales book for them to half of the year if the economy starts to come back in the second half of the year, then we probably won't have that the impact that we're expecting but based on what we see today in a slower recovery assumption wage and the second half of the Year from General broader economy, you know, we think that there's going to be just a less demand for our industrial nitrogen which could have a spillover effect into the egg markets.

Thank you. And our next question comes from the line of Steve Byrne of Bank of America, please go ahead your line is open.

Hi, good morning. This is Luke washer on for Steve. You talked a little bit about your the strength of your online platform earlier. I wanted to ask how do you think covid-19 may have accelerated interest in this platform? And do you think this is relatively sticky in that cut your existing customers to start using that more often in subsequent years and could that present maybe month in our market share opportunity for you? Thank you. Good morning Luke. Yeah, so my friend can take that question.

Yeah, good morning Luke. So when you think about covid-19 the first thing I would say having a trusted relationship with our customers is more important than ever, you know, even though we've seen significant uptick in the use of our digital tools. It's also clear that having a deep relationship with our customers where we we know their fields. We know their priorities change makes a huge difference now, obviously, we we do think that the digital platform which is beyond simply e-commerce. It's also about planning the field providing sustainability metrics providing as field specific insights on on weather and and moisture conditions. This all comes together in in a school that our customers are getting a lot of utility from as well as our sales people. And in fact, if if anything I think it's driving a deeper relationship between our field sales team and wage.

And so we we really see.

These things fitting together and you know, the the outcome will be more efficiency and ultimately it'll drive organic growth. In fact, we're seeing that already because it's providing more convenience for our customers obviously allows them to deal with us in a very safe manner today from a a cobra 19 standpoint off and and convenience and scalability for our our sales organization. So, you know, the the Investments that we're making have definitely paid off and you know, as you can see from the the same presentation, there's a number of enhancements that were also bringing through the rest of the year that are also going to continue to drive the the stickiness of the platform.

And our next question comes from the line of Chris Parkinson of Credit Suisse, please go ahead your line is open. Thank you very much. You know you talk about just your outlook for the m&a shredded the retail m&a strategy for the remainder of the year and into Twenty One in both the US Brazil just any updates on your thought process there and then just also the core layer of you know, how do you feel your competitive positioning is in terms of the digital A supplier relationship versus some of your larger peers. Thank you very much. Good morning. Mike Frank. Why don't you take those?

Sure. Y'all. Let me start with the m&a side. So firstly you know, what what we're seeing right now. Is that the Acquisitions we made last year or performing very well Roco as we talked about is is off to a great start. The integration is well underway, and the Synergy capture plan is is also wage clearly available for us and so a rural Cohen Australia, which really does transform our business in Australia is performing very well act to grow which was a large acquisition down here in the u s is also performing extremely well, we we've announced in Brazil a couple of Acquisitions. This year, is an acquisition that that closed in the first quarter. It's just so off to a great start or agrichem business, which we closed last year is performing well and we recently announced another acquisition a larger acquisition of a company called Tech Agro dead.

And we expect that to close here very soon as as well, which is not only a retail business but it's also has a a very substantial proprietary see business office. Now now going forward look typically on tuck-ins the especially in the there's there's more activity in the second half of the year, you know, so depending on how the covid-19 situation plays out. I think that could have an impact on you know, our ability to do due diligence and and close deals. And so we're we're watching that we're having a lot of conversations right now with prospective targets. And so we we do think there's a pipeline available and there's also more Targets in Brazil as well. But when you think about Brazil, you know, we've talked in the past about having eventually about a billion dollar business in Brazil with the Acquisitions that we've made including Tech Agro when it closes will have a a business that will have a run rate of about a half a billion dollars wage.

So we're we're already well on.

Away in Brazil. So that's on the m&a front in terms of digital egg. I would say we're well out in front of the industry from a retail standpoint. I you know, we're really the as Chuck mentioned in the in the opening comments. We're really the the only National company that that has a platform that combines e-commerce digital insights at the field level and tools that our sales organization can really leverage to create scalability and convenience for our customers and so often they were were well out ahead of the rest of the industry from a digital egg standpoint.

And our next question comes in the line of Steve Hansen from Raymond James, please go ahead your line is open.

Yeah, good morning. Chuck your comments earlier on the China pada settlement and seen suggests. The price point might be a little lackluster relative to your expectations. I think you suggest you should be during the volumes away from there. Uh, just trying to get a sense for how you guys feel about, you know, the pricing environment that there was spoken to demand of it, but maybe just give us some context around the spot Market behaved in seeing after the settlements and why you think prices are probably opportunities might be better elsewhere relative to the broader picture and and China. Thanks.

Yes, so thank Steve. Look, I think that the price in China is too low, you know, I'm not going to mince a lot of words around that off China atop their strategic reserves during the negotiation a country can do that when you're negotiating with a country and that provided them with leverage. Also the fact that in this is no surprise to anyone on the call that you know, there's there's excess capacity of potash in the market right now.

So where we are right now is we're trying to get our head around and we're working with camping text to determine our next steps, but given how unattractive the prices for nutrient. It's going to be difficult for us to provide a long-term commitment at least price levels. Now what it has done though is it's pretty clear. Now that that the there's been Clarity in the market. We're seeing a pickup now in demand in in other markets say like Brazil and prices of also started to rise in those core markets. So I I think there's there's two things about the China contract one is wage like the price and we'll have to determine you know, what we do and it comes to the length of the contract and the volume but the other markets are starting to pick up because there's now some clarity in the global market so that there's some good news to that as well and it's best that I probably leave it there since we don't have an arrangement with China yet, but those would be my my thoughts.

Appreciate it. Thanks.

And of Cleveland research, please go ahead your line is open.

Yeah, good morning. Just wanted to touch base a little bit on how the retail business is going to be approaching Phil season presumably with you know, good, you know spring season you'll probably end with fairly low inventories. I would imagine on most fertilizer products, but just wondering, you know, given the uncertainties in the back half of the year how retail thinking about participating until the summer.

Yes, Mike Frank. Why don't you take that question, please?

Yeah, so Michael, we were very focused on working capital and you know, we're also watching appreciation in the fertilizer markets. And so right now I am you know based on our our commitments for the the spring and summer months will we expect that will be going into the The Fall season, you know right now with with empty shed. So we'll position ourselves with the ability then to to restock for The Fall season ahead. So, you know, look there's been very strong demand wage in q1 alone, you know are are tons rep almost 30% and all of those tons, you know went went on the ground and we continue to see strong demand here in Q2 home. And so, you know, we're we're going to have our our powder dry going into the fall season to refill our our fertilizer sheds and I would say it's the same from a crop protection standpoint dead.

You know, we're we're committed through the the the spring and and mostly through the summer right now, but you know, we anticipate that there's going to be significant the inventory in in our our total of working capital from both a crop protection and a fertilizer standpoint.

Our next question comes in the line of Joel Jackson of BMO Capital markets, please. Go ahead your line is open. Hi. Good morning, Chuck.

Want to suck your partner without a different incremental potash man forecast this week only expecting but a million times of year ago this month and what you are obviously a lot of your sales are tied your Camp attacks together. So if that scenario plays out would you expect nutrients? Is that more bear case scenario plays out. Would you expect to have little or no volume growth yourself easier considering, you know, the time the inventory built in Europe Ally and the new X in Europe em, and any other players that have more violent this year things.

Yeah, yeah, so we we certainly don't communicate or discuss our views you can clearly see that they're different and certainly from a nutrient perspective. We would stand by six numbers in terms of $65 to $67 and as such when we look at that and we look at our customer commitments and in the demand that we're expecting we we're pretty transparent with our life planned sales Joel. So I'll leave it there to say that we we are expecting slightly weaker Market than we thought in February for the reasons. I've already outlined but still birth year over year and as such when we see global growth year-over-year, we expect our sales to be year-over-year as well.

Our next question comes in line of Michael.

And our next question comes from the line of John Roberts, please go ahead your line is open. Yeah, thank you and glad you all sound. Well your partner in Camp attacks also made the June 2016 makes for a lot of parallels with the current potash Market. Do you have a view on that?

Certainly. I I don't know. I think maybe what I'll do is I'll put you over to to Ken who was sort of running Camp attacks at that point and took the probably the best perspective. So Ken. Why don't you take that question? Yeah. I don't know that my answer is so much better than yours Chuck and and that is okay. We sit here at the beginning of first month behind us in 2020. And yes, we're seeing some stability in the market is Chuck said with China contract. We're seeing prices up in Brazil. So that's kind of analogous to what we saw in and Thursday 16, but at the same time I think as the year unfolds, there's some real unknowns that have been talked about on this call and and biofuels being one. So, you know, I think you'll have to talk to Mosaic further of both your comparisons to 2016. I think it's suffice it to say that we'll just stick with our view here of our current guidance. That trucks been talking about 12 points off.

12.5 million tons on on demand that's in that sort of 65 to 67 million time range and avoid full comparisons to happen in 2016. Yeah. Maybe I'll have Jason who's on her line. Who's our chief Economist? You know, he he studied his stuff for a living. So Jason you have any further thoughts?

Yeah, John, the one thing I had I think I think there are a number of of parallels in in terms of what we see in demand and swap market. So if you look at Brazil, for example in the drawing inventories, and we think there's some pent-up demand there which is similar to what the case was in 2016. And I think also similar to 2016. We got down to similar levels and and we know there's you're approaching the marginal costs and there's quite a few producers that are cash negative at or below where current thoughts are. So that's that's a lot the same as as with the case in 2016 and the market is quite a bit bigger today than it was in 2016 as well. I guess from a differences standpoint and the big one is the the uncertainty regarding palm oil and biofuels as mentioned and then yep.

For all economic uncertainty as we look forward to the second half a year.

And our next question comes from the line of Vincent Andrews of Morgan Stanley, please go ahead your line is open.

Hi, this is Jeremy Rosenberg. I'm for Vincent. Thanks for taking my question. I'm just wondering looking at your guidance. If you could just help us frame up what gets you to the high end of your your sales ton ranges for four votes, potash and nitrogen. Thank you.

Yeah, so at a high level if you look at the guidance range, you know when we set our guides back in February, we weren't thinking of the impact of course of covid-19.

Biofuel becomes economic again and you start to see demand for biofuel pulling through corn and and ethanol and then of course potash in South East Asia off. So that's sort of some of the color that that we would articulate for the top end of that that the guidance range is is that you start to see the the economy open at 5. And then along with that will become the Believers and the connection that we have to the a complex.

Our next question comes the line of Jonas of Bernstein, please go ahead your line is open.

Hi, this is Jackson coolest on for Jonas. Thanks for taking my question guys, so I have two quick questions. If you don't mind. The first is that several crop inputs companies have indicated that strong demand is caused Farmers to pull forward purchases from the second quarter into the first. Have you seen this in your retail business, and if so, can you quantify the impact and the second question is just can you just talk about what projects you delay to achieve your five hundred million dollars in uh-uh plant capex reduction and what you would need to see to resume activity there. Thanks.

Okay, well how Mike Frank answered the full-forward question and then we'll have Pedro for her answer the projects question. So go ahead Mike.

Sure Jackson, so, you know you're referring to obviously the the suppliers to retail talking about pushing a little bit of inventory into the channel in q1 Europe potentially because of both covid-19 and anticipation of a larger market and I would say you know, what we did with our suppliers is is we pulled forward products that that we anticipated wage going to need based on the the the larger acreage and and in Australia the the really good weather and and the rains that they got that really set up a a a much better year in Australia. If you think about the retail side of the equation our side it's really hard to pull forward fertilizer and chem sales because you know those go go on the ground, you know, most of our our chem is bulky a lot of its custom applied and the same with fertilizers really there's you know, very little ability for Farmers to store fertilizer. When you look at our seed sales, you know, our seats sales rep about 11% off.

in the first quarter and

And again that's consistent with our expectation of a larger market. So, you know, we we didn't see a material pull forward. We did see good whether we saw a good weather in Australia. We saw good weather package much of the that allowed us to get more fertilizer down and more crop protection on the ground. And so that really is what drove our 30% increase in Revenue quarter-over-quarter.

Schedule take the Capital Grille. Certainly. Thanks Jackson. What what we are delaying is the two types of interests with number one is being bad habit, very long payback typically associate with productivity gains. Um, and we are favoring a shorter payback type projects at this point in time. And the other one is there is a natural delay because of timing on some other projects that we have because of supply chain issues with particular equipment package or the need for social distancing as we execute on those projects and to preserve social distancing. We we cannot implement the projects that the time that we had originally. So those work out of sliding into next year. So that is the bulk of our $500 delay.

Our next question comes from the line of the cost of JPMorgan, please go ahead your line is open. Good morning until Cooper. How are you? I'm good. I have a question of the North American market and it has two parts. Like the first one is could lower 8021 have any impact as to how much potash North American farmers, you know might want to buy at the end of the year in the fourth quarter and like do you think about that? And the second question is a North American potash prices that is priced. The first quarter was like $196 a tonne flb, and that's what it was like $226, and I was wondering if you could just talk about the trajectory of Oddish prices domestically in April and May. Thank you.

Okay, it's best to have Jason Newton. I think our economy is just answer those questions.

Yeah, sure. So on the lower corn acreage, I think obviously for an acreage is expected to be lower which we would expect to be in in twenty Twenty-One. It would have a negative impact on on overall Finance man and new Trans man in general but it is important to note that there is off debts. And we we expect that a lot of the Lost corn acreage would be replaced by soybeans. And so if you think of a million tonne shift from from one product the other it's worked out to about I mean a lot about forty thousand tons of a product for corn but you gain 25 or 30,000 that back in in terms of wage. I mean demand so it's it's not a it's it's there is an offset with the soybean Supply uh for fall demand what really drives Farm level fall demand wage.

Weather and so that's probably the biggest driver of the second half, but we would expect.

The retail end of the supply chain to be cautious with inventory as we go into the second half of the year, which is what impacted our Outlook in that time. In terms of the potash prices that the US market really followed what happened in the rest of the world. Although prices have held up better and and in fact price in the office at a premium to what was the case in Brazil, but prior to the recent Brazilian prices starting to increase so we have seen over time that the the US market is down a little bit behind where the rest of the world is and as we look into the second half of the year, we expect normal seasonality with Phil season through the summer and then and see how it demand develops in the fall. Maybe just a couple of other comments at the at the highest level in terms of our view of potash pricing going forward whether it's dead.

A 2021 or 2022 so our view is constructive. We we believe that what we're seeing right now part of it is is the economy and jobs in nineteen related part of it is we have new capacity coming into the market but generally speaking the demand has been growing quite nicely on average and we would expect that if potash demand continues to grow globally at that two and half percent per year level. Once we see the covet situation and the oil prices stabilize a little you're going to see the supply demand for potash Titan quite readily and as the market supply demand starts to tighten. I think you're going to see prices to follow. So we're we're quite constructive on potash still. It's a it's a a market though that has had a tough year and in terms of 20 20 20, and I think what we seeing right now in terms of birth.

the China potash contract settlement at the level that it did we are starting to see some constructive behavior in the market when it comes to increased demand wage and price momentum and I think longer term we expect that that will continue because we do see that demand for potash over time will will continue to grow

and there are no further questions in the queue at this time. I will turn the call back over to Chuck magro. See you.

Oh, okay. Well, thank you all I think that was all the questions in the queue. Look IR is available for any follow-ups that you have really appreciate the interest in the the company and I am that you're all well and safe that take care of and we'll we'll talk soon. Well, ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now just