Q2 2021 Nutrien Ltd Earnings Call
And our CFO.
So have the heads of our business units can size for potash and <unk> for nitrogen and phosphate for retail we have Jeff <unk> and Mark Thompson, who leads our strategy and sustainability group and of course, our head of market research Jason.
As we conduct this call various statements that we make about future expectations plans and prospects contain forward looking information certain material assumptions were applied in making these conclusions and forecasts. Therefore actual results could differ materially from those contained on our forward looking information.
Additional information about these factors and assumptions are contained in our current quarterly report to our shareholders as well as our most recent annual report MD&A and annual information form filed with Canadian and U S security commissions to which we direct you I will now turn the call over to Mr. Mayo Schmidt.
Well, thank you Richard and I do want to pause to comment before I get into my prepared remarks, and nutrients team and I do want to wish you and your family all the best and your planned retirement, which will occur of course later this year and certainly recognize you and thank you for your 25 years of service and nutrients.
You have been and outstanding member of this team for many years and and enjoyed and exceptional career.
You are appreciated and and you will be missed.
And I know Youre very pleased to be passing your torch over to Jeff Holzman, who I know many of you already know is our vice president of Investor Relations.
So good morning, everyone and welcome to nutrients second quarter earnings call.
Today, I will recap the actions our teams have taken to fully benefit from excellent agriculture fundamentals and the demonstration of the advantages of our global integrated business structure, which together allowed us to execute on delivery of record performance for the quarter and for the first half of the year.
This morning, and will also provide and update on the outlook and decisive actions that we've taken that allowed us to increase our annual adjusted EBITDA guidance to a midpoint over $6 billion for 2021, and an increase of over 33%. Furthermore, we will illustrate the momentum that we.
We'll expect to carry forward well into 2022 and how the nutrient team are enhancing our unique market position to drive value.
So first of all I would like to thank all our employees for the dedication and commitment they demonstrate each and every day and support of our grower customers and the more than 40 countries that we serve and as we work to feed a growing and world.
These efforts are especially apparent through the busy application seasons on our approximately 3600 crop advisers are working directly with our grower customers as we produce and safely deliver and nearly 30 million tonnes of potash and nitrogen and phosphate globally.
Myself the board and all employees are very proud of how our potash team has responded to increased production significantly from our flexible reliable low cost 6 main network and the second half of the year to ensure our growers around the world have the potash they need to meet the ever growing demand for food.
So now turning to our results our first half adjusted EBITDA was over $3 billion up 36% over last year's level, we delivered excellent results across all businesses geographies and for most products and services.
And the key driver was impressive team execution with our well positioned assets higher prices for crop and fertilizers and robust global demand and our business also generated notable free cash flow of $1.9 billion and the first half of the year.
Yes.
Nutrient AG solutions, our retail operations achieved a 24% year over year increase and adjusted EBITDA for the first half of 2021.
In fact, almost all of our retail metrics showed significant improvement and we are on track to meet or exceed our longer term targets ahead of schedule.
And.
And when we look across our nutrient businesses, we generated a combined $1.2 billion and adjusted EBITDA and the second quarter.
Year over year potash earnings up 48%.
And nitrogen and phosphate business is up 45%.
The increase was due to continued focus on managing cost, making operational excellence core to everything we do supported by stronger pricing.
Our wholesale marketing and sales team execution was outstanding.
Our team ensured we did not get over committed too early and optimized our retail distribution system.
We evaluate our retail business on our first half and second half basis, representing the spring and fall application seasons and the first 6 months of this year, we witnessed strong year over year performance across all geographies and the majority of our product shelves.
Adjusted EBIT and the first 6 months and the U S, Canada, and Australia were up.
Over 20% driven by organic growth, while our South American teams EBITDA was nearly double last year driven by their strategic acquisitions.
Byproduct shelf the biggest increase and earnings was for our crop nutrients per ton margins benefiting from well placed inventories and a rising fertilizer price environment as well as record sales volumes.
Volume for crop protection and seed were higher year over year, helping drive a significant increase in gross profit.
The increase was also due to improved proprietary product performance across all geographies and products with profits from all proprietary products up and average of 13% year over year.
We also delivered excellent retail performance relative to our long term targets adjusted EBIT percentage of surpassing 11, 4% compared to 10, 3% and the first half of last year, partially supported by strategic fertilizer procurement.
Our working capital as a proportion of sales and cash operating coverage far exceeded our long term targets and our average EBIT per location and showed significant year over year improvement.
On the ongoing progress and these metrics is made possible by our continued focus on meeting growers' needs. While also rationalizing our network optimizing working capital and expanding our proprietary product line.
We also reported $1.6 billion and digitally enabled sales and the first half of the year nearly double the same period, and 2020 and process approximately $1.5 million lower payments through our system.
We also continue to grow our retail business in Brazil, and recently announced an agreement to acquire Terra Nova and the fourth value enhancing million acquisition and the past 18 months with this transaction, we operate 33 branches and Brazil and are well on our way to generating $100 million and run rate EBITDA by 2023.
Our retail team continues to demonstrate exceptional performance across the board and and all geographies and which we operate.
Our potash group performance has been outstanding.
And and his team responded to market conditions and have fully delivered commitments to our customers, while taking action to increase sales and production significantly to ensure our customers have the product they need.
We are the only producer globally with the capability to respond.
We delivered record volumes and the first half of 2021 and are on track to achieve a full year record.
We are focusing all time high global potash consumption and 2021.
And due to exceptional spot market demand and the U S and Brazil, and Southeast Asia, where we saw a significant market recovery. This year. The demand is positioned canpotex to place greater emphasis on these higher netback markets compared to contract markets of China, India.
Overall, we project to produce nearly 14 million tonnes of potash and 2021 in fact by the fourth quarter, we anticipate nutrient and potash production to approximately 17 million tonnes on an annualized equivalent basis.
We will continue to be proactive and flexible with our operating rate.
Race teams and nitrogen and phosphate delivered excellent results and the first half capturing much stronger prices and for nitrogen and achieved a 92% of ammonia operating rates, despite increased turnaround activity and weather related challenges.
Phosphate margins this quarter reached an impressive $195 per ton and nitrogen margins averaged $182 of non both were up almost 60% year over year, despite higher input costs.
We continue to benefit from the brownfield expansion projects completed over the past few years, which have both expanded production capability and increased product mix flexibility.
These results also demonstrate our ability to leverage the competitive advantages of our extensive production and distribution network to execute on emerging market opportunities.
For the near term outlook, there is a wide range of crop conditions across North America.
Crop maturity is generally ahead of normal which bodes well for the fall application window, we may see some pullback on fertilizer applications and severe drought areas such as Western Canada. This fall.
Overall, and North America, we expect solid crop input demand supported by continued above average crop prices and on.
Australia very favorable weather conditions also continue to support strong crop input demand.
Some ongoing weather challenges in Brazil have impacted yields for certain crops. This year, but the outlook for next season is a further expansion and seeded acreage, which will support demand for all crop inputs.
For fertilizers.
The current price environment as a result of robust demand for all nutrients driven by supportive of agriculture and industrial market fundamentals.
We expect these market dynamics will continue to support prices in the 2022.
That said fertilizer affordability is something we watch closely but even at todays elevated prices most for most fertilizer to crop price indices are close to average levels and grow our margins continue to be very favorable in the 2022.
We expect global potash demand in 2021 to be at record levels between 69% and 71 million tonnes and global inventory levels in key regions to remain very low.
There is no news at this point about a potential contract with China or India. However, we continue to believe that China will need to negotiate a new contract before the end of the year as their inventories continue to draw down as Chinese domestic demand has been seen as robust.
<unk> is already fully committed right into November and we will continue to focus on higher netback regions.
We believe the future outlook for our company is excellent.
We expect crop prices and remain well above historic levels and fertilizer markets to remain tight we will also benefit from our ongoing commitments to operational excellence execution, a keen focus on cost and and inventory management continued value added growth and is strengthening and return on investment.
As such we raised our consolidated annual adjusted EBITDA guidance by more than $1.5 billion or over 33% and our EPS by nearly 70%.
This is due to stronger earnings outlook across all business lines and executing on our competitive advantages.
We believe this positive earning outlook will continue into 2022 further strengthening our balance sheet.
We will maintain our discipline compete for capital approach, which includes the potential for further investment and the business deleveraging of the balance sheet and additional returns to our shareholders.
Our purpose is to help growers increase increased food production and in a sustainable manner. There is no. Better example of this commitment and our responsiveness of our team to quickly and safely bring on and additional 1 million tonnes of potash production to improve access of this important nutrient for growers globally.
These actions also deliver significant financial value for our shareholders as the increase in production accounted for approximately 25%.
Of the $900 million increase and our potash adjusted EBIT guidance for 2021.
Another example of executing in line with our purpose is our feeding the future plan and 2030 sustainability commitments, which includes our ongoing focus on improving carbon outcomes.
We are reducing the carbon footprint of our facilities, making great progress on our industry, leading carbon program at the farm level and our recent announcement on a partnership to develop a marine vessel that is powered by low carbon ammonia as a fuel.
Nutrient and is committed to ensuring our strategy and operations remained world class and successful over the long term, which is supported by strong integration and management of ESG risks and opportunities and to our strategy and our execution plans.
We believe the outlook for nutrient is exceptional.
With crop and fertilizer prices anticipated to remain well above historic levels in the 2022.
No. Other company has more advantageously positioned across the value chain to be a catalyst for positive change and the global crop production system and help growers around the world feed a growing world.
So I want to thank you for joining and the nutrient team today and we're all looking forward to your questions.
At this time with you and my question on your question. Please press Star followed by day number 1 on your telephone keypad.
And that is star 1 for our questions.
Your first question comes from the line of Ben Isaacson with Scotiabank.
Thank you very much and congrats on the beat and raise.
Question from mail and Pedro So youre going on.
Generate 665 billion and EBITDA this year and even if prices moderate a little bit.
And do something similar next year and Thats, a lot of free cash flow to generate especially considering you don't have any major capital projects so and.
That context, and rather than talking about your compete for capital philosophy can you give us some actual goalposts in terms of what you have planned how much debt reduction do you want to see over the next 18 months you have a buyback authorization do you expect to be finished within a year from now on how much have you earmarked for M&A and retail, but there can be on Brazil.
Thank you.
And then.
Sure happy to comment on that and then Pedro and I've had have those good discussions and actually quite frequently and it's it's an outstanding year with it gives us a number of opportunities, including both strategic and also as you mentioned and buyback relative to our strategic and.
Initiatives and so what I'll do is I'll ask Pedro if you'll just run us through some of the options.
That we have in front of us and we're very pleased to be able to have these choices.
Yes, Ben.
Nice.
Welcome to you again.
Hi.
Your point, we will continue our disciplined capital allocation approach.
Which would involve.
Basically sustaining on assets and on this 1 we we've kind of guided to a little bit more expenditure as we are a little bit depressed and the past due to COVID-19 restrictions that we couldnt.
Do what we needed to do and our different facilities.
We have increased dividend earlier this year.
And and we are looking into the balance sheet now that we are above mid cycle prices and terms of opportunities to delever that very much will depend on how much we will do will depend on how we look through the cycle.
And it will likely and positioning ourselves to have flexibility and the future. So I don't have a specific number for you as we are looking at our various options for the future but in terms of.
Compete for accounts of approaches as you mentioned.
We do we do have options there too.
Organically and Inorganically and we are already starting to deploy that you haven't seen us do some acquisitions and.
And Brazil, we're also investing some live and on our ESG projects for nitrogen and and we'll continue to look at those and the future and we are as you pointed out we still have and CIB option that we will be considering together with all the other months. So it is.
Yes.
Fluid.
<unk> kind of be analyzing our options and we will come back to you with more specific.
Points as soon as we have them and we can tell you and a more detail.
Your next question comes from the line of P. J <unk> with Citi.
Yes, hi, good morning.
And wondering if you can just talk about level of inventories and the retail channel.
And VK and literally stand post to the summer fill.
Sure be glad to talk.
Talk about inventory and 2 different capacities.
And that crop protection and I think you won't be more specific on.
The A&P case out of things and I guess, if we look at the end of quarter, 2 were probably a little bit higher on from a revenue perspective, what we've got and inventory today on N P and K about $150 million higher and the U S than last year, that's planned as we start and a load in.
To date for what we anticipate to be a good fall application season, and trying to get some product.
And you look at how much product we have to move through our system. We have to get a really early start from a logistics and supply chain side of things with it and then if you look at that higher inventories that you also got gift.
And you have credibility from our standpoint, we're looking at higher product pricing and we were looking at a year ago ASP.
Well on it but we feel really good where we sit right now from an inventory perspective on it and.
We basically plan to have a pretty normal fall application season.
David I don't know if you want to add anything else to that.
No Jeff I think I think you hit the utility side of things quite well on crop protection, we were just getting ourselves well positioned for our upcoming fungicides sprays So no Jeff.
Jeff I think Thats net.
Your next question comes from the line and Steve Byrne with Bank of America.
Yes. Thank you just wanted to.
And if you had any visibility on where you think third quarter realizations could be and potash and both offshore and North America do you have that visibility through canpotex on how much is already sold forward and.
And at what price.
Why don't I, just make a couple of comments and I'll ask Ken to comment as well, we certainly expect to see relatively limited new supply and the next couple of years and the majority of it is going to come from the.
Former Soviet Union producers, particularly Euro Kim.
And then of course, there's the issue around the byelorussia and political sanction. So we think we're very well positioned we are sold out for a period of time here and are continuing to look at these strong prices and Ken do you want to fill and some of your thoughts on that thanks, Neil and yes. Thank you Steve for the question.
And we do have visibility through Canpotex and fact, they just released a few weeks ago that they are committed and into November now so.
And the remaining volumes to be committed and the year are shrinking.
And in North America. Similarly, we are committed and right through October and again uncommitted volume is relatively small compared to what we're doing for the year. So with respect to third quarter realizations, we can fall a benchmark prices and theres always a lag between what to add and.
And benchmark prices are being reported at and what we're realizing and that has to do with it 2 to 3 months lag on contracting and delivery.
And I'll also say that and this rising price environment and times those reported prices are based on demonstrated volume. So it does it could take a few weeks for prices to firm up at that level as well. So yes, we do have good visibility and certainly we're expecting and strong third quarter.
Your next question comes from the line of Jacob bout with.
CIBC.
Good morning, My question is on on.
Potash demand and and also going back to inventory levels I guess first.
Spot pricing for potash and we're back to levels not seen since 2008.2009 are you seeing evidence any evidence of demand destruction and then maybe you can just you talked a bit about the U S. But what are you seeing in some of your other key global markets for.
Potash inventories at the retail level.
Thanks. Thanks for that question, Jason is with US today, and I think and offer some really valuable insights into your question.
Yes, good morning Jacob.
As we look around.
The world.
Demand and net inventory assets.
Starting with the <unk>.
Spot markets, we think that what's being sold as being.
Applied to ground and of course, as we look at that day.
U S market the weather during the fall season is extremely important to.
Driving the fall demand and and where.
Our inventories and up but as Jeff said, we are expecting.
Hi, good engagement and.
And just given the affordability right now and the stages of the crop which is at or ahead and average.
Spectrum and normal.
Application season, and then so we look at the contract markets.
And we're really seeing because they're priced out on the market at current levels inventories being drawn down both at portion within the domestic market and you can see within China that domestic prices are have been really firm and almost keeping pace with the Brazil and.
Spot market, so evident and <unk>.
On a tight.
And supply demand balance there and maybe pass it to Ken AT&T any other comments and I think you've summed it up well Jason heading into the fall here and assuming we have a reasonable fall.
And inventory levels to be lower which is I think a critical point so.
With our 1 million tons committed through October and November and certainly homes for the balance of our volume.
And lower inventories at the end of this year.
Hey, Jason and I might add 1 other component to it we talked about whether we talked about timing of harvest and I think it's been mentioned a couple of bad crop feels like its moving ahead, a little bit from maturity standpoint, but the other big factor is yield and if we look at what's being predicted from our yield.
Standpoint, we're looking at trend line yields or something right at that level and so what that tells me is we're going to have a real strong removal rate.
And as this crop comes off we'll obviously be out with our agronomists that field doing massive amounts of solo testing and and such with it which should drive.
And should drive demand for the fall.
Your next question comes from the line of Jeff Zekauskas with J P. Morgan.
Thanks very much.
There really wasn't any change in crop protection margins.
Why is that why shouldnt pricing be better and that.
Cost and what's your outlook for that business that sub business and.
And your retail operation over the coming year.
David do you take that question you leave that for our group. Please.
Yes, Thanks, and Jeff I appreciate the question.
And I think our our CPE sales volumes and our margin stayed fairly stable through half 1 really on the backs of <unk>.
On acreage expansion as well as some of our strategic purchasing and our long term relationships with suppliers.
The crop protection industry as a whole continues to be pressurized from a generic perspective and.
We continue to monitor that globally and look to strengthen our proprietary position to move margins and the right position I think.
And I'm going through half 1 our upfront margins on a proprietary business and strong and we will look to continue to make progress moving forward.
Your next question comes from the line of Adam Samuelson with Goldman Sachs.
Yes, thanks, and good morning, everyone.
I was hoping to get some color on retail performance and the.
First half and.
Significantly and the disclosures there.
And same store sales adjusted for movements and fertilizer pricing and FX was up 1% on a year on year basis and.
I'm trying to square that with the reported results and the segment overall with which look quite good but for 1 up 1% on on an organic basis. It doesn't actually seem like that much and the context of the market and we've been and is that a function.
Function of weather, and Western Canada, and California, and any additional color there.
And I thought there was and where evidence of share gain and then.
Hi, Jerry products and their reported sales number there.
Well thanks, Adam for the question and let me just start with saying, we're very pleased with the 2021 seats.
Seed selling season, Youre, correct and the Canadian crop has really been dry and that area and we might see some really strong follow through and next season from them, but we continue to build momentum and seed and we do expect and likely to grow between half and full share point on seat across the 4 major crops.
And that share growth and acreage increase we didn't see a lot of shifting between crops or brands, but David do you want to fill and some of that with the and your area.
Yeah, No I think mail you hit it well I mean, and the context and seeds, it's a major priority of ours to grow share and why.
And as I look to strategically.
Gain more of our customers' overall business across our 4 strategic crops, canola cotton and soybeans and corn as Matt said, we're seeing strength and those share gains going through this.
First half preparation underway heavily for 2022, as we speak and I think some of the underlying themes and soybeans was doing some price pressure relative to some new herbicide tolerant trait launches, but overarching Lee.
Our teams worked well through that and gained strength going into this next selling season.
Okay.
Your next question comes from the line of Vincent Andrews with Morgan Stanley.
Thank you and good morning, everyone.
May I just wanted to ask you on potash you referenced the 17 million ton run rate that youll reach from our product.
Perspective, and the fourth quarter.
Should we think about that production run rate going into next year, and I guess I'm asking sort of juxtaposition of you obviously have the capability.
You mentioned affordability and being sensitive to that but then there's also potentially maybe less belorussian tons coming into the north American market, which you, obviously advantaged and 2 from a distribution perspective, so I recognize that's a few variables, but but maybe just philosophically how are you thinking about how much you want to produce versus and how high on potash price you want to see on and go forward basis.
And.
Yes, Thanks Vincent.
Let me start with I think and important comment that we expect global demand to continue to grow by 2% to 3% a year. So if you do the math on that over the next 989 years as 14% to 23 million metric tons and that's why I would say that Ken and his group, we're thinking about as we talked about the annualized run rate of about 17 million tonnes.
The fourth quarter. So so we really look at this as the opportunity for our shareholders, but at the same time, there tends to be value destruction. When we get to these higher prices. When we have Brazil sitting at 680, those you get to a level of some level of concern whether they will simply mine the soil. So I think the additional for us the additional production.
<unk>.
The capability can be further leveraged in 2022, but I think that if the market needs. It and then we also have a good line of sight to about another 5 million tons of low cost brownfield case.
And <unk>, so we're going to continue to invest and already low cost position that we have and leading the industry and that with our flexible my network and.
And so our focus is time is going to be on our potash operations and how we are positioned to service the market while being price sensitive we are enjoying some prices and we want to continue to enjoy these prices and that's how we're going to think about servicing and our growers to keep them in the game and price Accordingly, and Kim do you want to add anything.
To that.
Thanks, Neal and thanks, Vince and Yeah, just a couple of comments, maybe everything that obviously Mayo said on the fundamentals and the expectation of strong demand.
Obviously through 2021 by 2022, as well and I think a critical point is 1 that we've discussed already and that is inventory levels and inventory levels at the moment and multiyear lows and with a reasonable fall and we expect that to continue on the supply side and we havent seen any new announcements of additional production other than our own and if there were to be announcements.
At these price levels that would have happened already mosaiq and we expect we'll be back but I think it is true that while this situation and Belarus and.
The consequences of sanctions or bid on known at the moment. It does create some uncertainty so.
And exactly as you may have said, if our customers are asking for it and 2022, we will be there for them and we can surge production beyond 2021 levels.
Yeah.
Your next question comes from the line of Mark Connelly with Stephens, Inc.
Thank you I was hoping you could help us understand what part of your retail portfolio.
As being the most impacted and California, so far and it and assuming this drought continues how does that impact progressed and how meaningful is it.
Jeff do you want to take that please for the California market share.
Sure be glad to yes, if I look at the California market.
From an impact standpoint, we haven't seen a dramatic impact obviously the majority of all of those crops are irrigated.
We're all reading it what the reservoir levels are there and they are very alarming right now I think the biggest the impact might be might come later as we get into a final planning season, now and a lot of it fall planning is going to depend upon how much water. They are going to release, but those growers to use with those planning we are seeing some.
<unk> that day that they will be down and obviously when you're in a very hot and dry conditions that really doesn't create a lot of disease, especially on our permanent crops. So I would say partly on fungicides been affected at the west more so than than anything our business is accurate.
And very well considering the circumstances that we've been in and out there, but I think we'll start to see it a little bit later into fall and as we get into follow on planning and then.
Hopefully we can get some of these reservoirs late levels up later in the fall and winter with some snow fall that's conducive to our business going into 2022.
Your next question comes from the line of Joel Jackson with BMO capital markets.
Hi, good morning, everyone.
Maybe you could talk about and you gave your guidance range for both EBITDA for the year and and for potash. It maybe because it's a very interesting time a lot on this call and talk about topics right now there's a lot of on.
Certainty and a couple of the moving parts. So I wanted to know when you think about the higher range and lowering the range and what are your assumptions youre, making on some of the bigger source of uncertainty so and that will fall, whether you talked about it's dry and in western Canada and fall lenders always important from Palo Russian sanctions or sanctions.
Seem to be stake.
<unk> and not really pushed back and what are your assumptions around our bpc's abilities.
Having production problems, but then the production you raised your volumes and <unk> protection problems aren't as bad as based on the way out of it.
And then you've got medium nation side, you have to make an assumption around whether they'll actually be Chinese fertilizer and export restrictions on our chest loss. So when you think of all those assumptions what are you seeing for the high and alone and <unk> ranges.
Thanks, Joe Let me, let me just make a couple of comments and you've got a lot of good questions and there and you talked about volatility and thats the commodity business that we're in.
I think the fundamentals for us are that we do expect to see strong follow through and and regardless of what happens with the Belo Russians I think we're still going to be and very strong position. It's just sort of creates an amplifier combination of results and the potash that we're capable of bringing on is to your point I mean, we delivered a new company record with an adjusted EBIT of 3.
$1 billion and the first half of the year, which was a 36% year over year. When you talk about the performance and the earnings perspective on.
And our significant increase in guidance with our full year EBIT.
EBIT as you would know is 6 months to $6.4 billion, so thats up 70%, but we do see the ability to follow through with this crop I mean, all the signals. When you look at the markets are trading flat there is a demand for corn to be delivered and the nearby yet at the same time the deferred I mean, there is not a it's not necessarily a big universe, there really demonstrating a strong corn.
Prices, even not only through this new crop, but into the next new crop. So we really see a real opportunity here.
To sustain these prices for an extended period of time and we get into these type of cycles. I mean, it's hard to tell when they and they and they and dramatically and quickly, but if you look at the supply and demand, particularly the this supply right now is on the low side, we've got certain countries that are almost down to there.
Level of food security in terms of what they have and their inventories both and crop and in terms of the crop inputs and we're already seeing that with China, where they were you.
And we're asking there.
Producers their production system, and withhold and look at focused internal to the system.
Happy to add some of our leaders here to contribute and do you want to chime in a bit and then perhaps ray if you want to make a comment or back over to Jason Okay. Thank you.
Yeah, great. Thanks, nail and Joel I agree there are a number of moving parts and the potash business at the moment and we've talked about some of those on the call today.
But I believe the net effect of those moving parts is that it's created an opportunity for us this year to the tune and 1 million tons.
And I think Thats, just really a demonstration and testament to our capabilities here.
For 2021, we're committed capex through November and domestically through October so and large part of the table set for US we do have some uncommitted volume. So if we look at our guidance range is that they are and opportunity to do some additional volumes.
And moving inventories to higher levels.
And but also price price continues to affirm and many markets and so and <unk>.
The ranges, but I will say that the confidence level in those range is quite high.
Yes, and the nitrogen and I'll, let Jason talk that Chinese exports to Asia, and just mystically cricket on.
Pricing has remained.
Third we thought there would be some some ratio that hasnt happened. We think the fundamentals are solid we think pricing will remain true.
True.
And second half across the suite of nitrogen products.
And we've committed out through the third.
Quarter of minutes.
So Ken says.
For years, and pretty close pretty pretty well baked at this point, so we're pretty comfortable that the range of government action on it.
Yes, sure and just to follow up on the Chinese export situation. We've seen several attempts by the Chinese government to pressure the domestic state owned enterprises and now.
And this week, we've seen that the industry Association separately and industry Association and step in and and put pressure on members not to export urea and phosphate.
I think we'll have to wait and see what impact that has I will say if you look at what action and the global urea market has taken on and we've seen a little bit of.
Prices come off of the highs over the last week the market doesn't believe that the restrictions will hold so I think if there are restrictions to come into place that's incrementally positive from.
Where we are today and.
It certainly seems from now mentioned from a food security standpoint, our priority is on supplying the Chinese market with the fertilizer they need and if the informal restrictions.
Don't work, we've seen in the past that more formal restrictions are put into place to take that action and which would also be positive.
Your next question comes from the line of John Roberts with UBS.
Hi, Good morning. This is Lucas Beaumont onto Jon I, just wanted to go back to Rachel on for Ken.
So your EBITDA per location. There is now set at about 15% above the 2023 targets on a year to date basis.
And it looks like it probably again to exceed the target day for the full year to spot and the first half Whiting.
And as that is that telling us that U S. Retail locations are temporarily over earning and the current environment and we should expect that to kind of trend back towards sort of your $1.1 million target or do you think you need to think about sort of raising the target share or any other factors we should consider.
So let me be just before I call and Jeff Let me just comment that the retail performance certainly delivered record results and first half we've had double digit growth and both revenue and margins and of course, you would know where supply and over 500000 farmers year round.
We're certainly pleased with the progress we've made in this area, we're going to be focused on driving value from when you think about the proprietary of over 2000 proprietary seeds and and that's supported by digital tools and services. So I think we're going to see real strong momentum in that area, Jeff or and then followed by David If you wish.
Would you like to fill and more of a local.
<unk> please.
Yes, sure and look we don't get too many opportunities to go backwards.
Really pleased with our performance this year in the marketplace I think what Youre seeing is youre seeing is really hit our stride and leveraging off of our platform and retail and too many times, we think about just.
Crop protection seed and fertilizer, but when I look at our retail platform. Those are the center pieces, but what I look at what we've invested in and what we flagged ourself with whether it's nutrient and financial whether it's on digital technology and it's our best in class proprietary business as to job and David and his group.
Supply chain and logistics I think we're hitting on extracts.
Across all of those areas and we're really able to leverage off of that.
We've had a really strong year without proprietary products group as <unk> mentioned several times, a day and if I look at and our growth this year.
5% of that growth has come across what we call our differentiated are focused products and.
Again, we look back at the investments, we've made and and.
And the plant nutrition business and companies like <unk> to grow in aggregate and that.
Those products are really given us a really great solution offering to our customers, it's given them a great opportunity for return on investment and.
And our agronomists drought really really pushing no solution or with our customers from an operational excellence standpoint, I don't think that every engine. It doesn't matter, where you are and the cycle.
On a day and we continue to scrub our business. We continue to look at opportunities to rationalize that business I think we basically rationalized 70 retail branches and North America over the last 3 years a lot of our Greenfield efforts that we've put together out there to day, all around Mike and our business more efficient.
And going forward. So I think we've got a lot of things we're hitting on 1 of note that we had some tailwind coming into this year, but we think allowed on the gains that we've made this year or sustainable and.
And we're going to work that as hard and as diligently as we can going forward David I don't know if you've got any additional comments.
Yes, Jeff I mean, I think you nailed it well and the only 2 things I can add to your commentary is to your point on proprietary products performing outstanding.
Particularly in our nutritional space Grover is willing to spend on products that have a high return on investment nutritional business trending well and I'd say lastly in the context of our strategic suppliers and the relationships. We built there both in terms of new products that they're launching how and how we're looking at.
Together and full end to end solutions as Jeff has talked about relative to interest and financial digital assets and then obviously, our agronomic capabilities on the farm, so only and that drove our relationship through our local agronomists has been key to so.
Jeff that's what I would add.
Your next question comes from the line of Andrew Wong with RBC capital markets.
Hey, good morning.
A quick 1 from me.
We've heard a lot on talked recently about inflationary pressures.
And on all commodity producers.
<unk> seen anything line yet.
And in terms of ramping up the production and the past production and Saskatchewan.
And any issues with <unk>.
Hiring people back.
On the labor shortage issues or pricing issues or anything like that thanks.
Yeah.
Thanks for that Andrew I'm going to pull and Pedro here and you may wish to make a comment first yes, Andrew and thanks for the question, Yes, we have seen some inflationary pressures.
Pressures.
Across us we as we kind of a scale up production and I'll do what I would say that as we also kind of a ramp up on volumes that has been an offset on.
Volume against those inflationary pressures, so I think in balance we do not view.
Does advantage at this point and time and Michael.
But perhaps I think most of those would be sales pie.
And so maybe idle assets, Ken and we'd like to.
And any comments here maybe thanks.
Thanks, Pedro and Andrew maybe just with respect to human.
<unk>, obviously and we.
Don't keep the additional people standing around to produce and.
And <unk> tons of potash. So we have been hiring but we're finding success and that so we've been we've been able to get the human resources and individuals we need.
To wrap up production as our confidence level is quite high.
Your next question comes from the line of Stephen Hanson with Raymond James.
Yes, good morning.
I can appreciate the prior commentary on your potash search capability and and recent decisions to add.
In terms of production, but I'm just curious on whether you would contemplate on adding another 500000 or perhaps more in the near term as it is.
Postal waiting just given the price levels were already at it just strikes me that high prices can create longer term problems and so just trying to understand what the decision vector might be in terms of adding new production sooner versus waiting into next year and any any limitations, maybe just on the operational side of that as well.
Yes, Thank you, Steve and Ken Seitz here and so yes, we did have a look at the opportunity and the market and frankly, what our customers are asking for and and that led to the conclusion that 1.
And in tons and extra production was appropriate.
And we've long talked about 18 million tonnes with a capability on an annualized basis. This year alone will demonstrate and 17 million times of that.
So we have the capability and certainly with enough lead time, we can get there and.
Again for 2021, we thought that was.
Our customers are asking for a lead to that million tons for next year could we serve additional production if the opportunity is there and our customers.
And fourth cut.
And.
Your next question comes from the line of Michael <unk> with TD Securities.
Thanks, and another question on the planned increase to potash production and the second half.
I guess first off can you talk about which mind you expect that incremental production and come from is that all expected to come from vanscoy or are there other mines and the mix.
And then secondly, how do you expect potash cost and production and the second half of the year to evolve as a result of that increased production and <unk>.
I'll shift and the mine mix.
Good Thank you Michael and Ken Seitz here again, so yes, you are correct that vanscoy is playing an integral role and that additional million tons, but were also getting additional tonnes from Corey and line again and so the work that we do is 1 that says and what is the market calling for what can we produce and what's our most local.
Cost and efficient path to production and that combination of.
And Vanscoy Korea, and learning and listening answer.
With respect to our own cost if we looked at and look at the full year. There is an opportunity for us here with additional volumes to bring our cash costs down and that said there is an offset this year with the strengthening Canadian dollar.
Given that we report on our cash cost of production.
And U S dollars on and Canadian dollar basis, I can tell you that production levels.
And costs will be at really competitive levels first quartile for share and probably similar to last year's.
Okay.
Your next question comes from the line of Michael Picken with Cleveland Research.
Yes, good line a couple of questions on.
On the nitrogen business.
For 1 gig narrow kind of the range of your guidance on what type of volume capacity could we be looking at in 2022, and what is kind of your turnaround schedule look like for the rest of the year and.
Nitrogen and then.
And then to next year as well.
Michael Thanks for that I'm going to ask Ralph to comment they've had a great year and I know he's keen to participate here so ralph over to you and Michael Thanks for the question appreciate it.
So look at it.
And despite of volumes and we've had a few.
<unk>.
And normal turnarounds. This year, we finished the 1 on borgata.
The largest 1 was EBITDA me and.
And third.
And third and went through a red water again largely on moving on this is because by sites.
Close to 50 years old and it's going to take care of some.
Major items.
I'd say going into next year, we should see volumes up over 11.
Probably closer to 11, 3 and 11.5 and we've also got some of the brownfield expansion projects coming in.
And coming in we finished them on our books and that will help us out as well and of course, we're trying to continue and addition to the banfield expansion and the 10 and on schedule. We are on continue that work on increasing reliability of the sites just to point Tonight, when we talk about and reliability numbers. They include the planned outages that we have to take and if you think about.
And our normal ammonia plant.
You've got to allow that 3% for planned outages on an average basis. So the maximum that you could see us reporting at some point is about 97 and youll see that over time trying to get towards $95.96, which would make us best in class.
Okay.
Your next question comes from the line of Duffy Fischer with Barclays.
Good morning, a couple more around nitrogen maybe 3 parter. So 1 on the you and your and anti dumping what's your view on the validity of that claim to if it is favorable for the U S producers what impact would that have either your wholesale business or re.
Tail kind of and the intermediate term and then.
And 3 if it is favorable would that open up any opportunities for you to invest and a different footprint around nitrogen.
Well good question I'm, not really sure I can comment on it I will tell you that.
And are answering questions that come from trade Commission.
As we did we mosaics countervailing duties.
Ice.
And as we did and <unk> countervailing duty case, we're not actively participating and this 1 just answering the question to come through we are taking a neutral stance on it okay.
Your next question comes from the line of Robin Patel with Exane BNP.
Oh, Thanks for taking my questions just 1 left from me on Vito.
And Youre able to hit the 10, 5% launch and yet to date and that's in line.
And I guess, the lower and if youll target for 2023.
Just curious if you could update us on I guess what the.
And the roadmap is to hitting that target on an annualized basis and by the given your hits from the 10, 5%.
Now, whether we should be a little bit more aggressive and what we're seeing you guys can can do that.
Yes. This is Pedro.
I think we're very pleased obviously with the progress to date and what we have been able to achieve and.
And even though we need to look at this through the cycle and we're planning to update all of our targets as we go into next year and probably half on a year.
Investor Day.
We'll be refreshing all of those targets. So that's right on the progress that we have made today and retail and on this.
And the parts of the business have accelerated so we're pleased about that but we need to reset and now for the future.
And your next question comes from the line of Adrian Day Magna with Greenberg.
Hello. Good morning, Thank you for taking my question.
And thats could be but he didn't deal and you just explain the rationale and why we could bring you in terms of market share locally and if it was related.
But with a kidney very deep and by doing the cocoa. Thank you.
Thanks, Adrian and I'm going to ask bring and Mark Thompson here head of our business development group and the sustainability. Thanks, Mark Yes.
Thanks Adrian.
Question. Good morning, So I think your question on pertaining to the recent announcement of the acquisition net.
And we signed and Brazil, now is Terra Nova and so.
As <unk> said in his commentary.
Continue to build out our focus on constructing a comprehensive retail model and Brazil similar to what we have and the U S and across North America and around the World. We've made very good progress.
And as Mayo said.
Have now announced 4 acquisitions and last 18 months that are helping contribute to our footprint there with respect.
And all of that specifically.
It's a 9 branch business operation very attractive footprint in the region of <unk>. We also do have a presence.
Already in this region and so this will continue to strengthen our footprint.
Whereas in the U S. We have a very strong market share, 20% to which gives us strong competitive advantages, where and the very early stages of our potential opportunity in Brazil, and so all of this does give us a good foothold and market Theres a lot of room for us to continue to expand our model and country both with retail.
And acquisitions, but also as Jeff described earlier, bringing our integrated model and that involves proprietary products and full Aker solutions for growers. So we're optimistic about the opportunity and continuing to look for value enhancing acquisition opportunities in Brazil.
Thank you. This does conclude the Q&A portion I will now turn the call back over to Richard Downey for closing remarks.
Thanks, everyone. Thank you for joining us this morning, and if theres any follow up questions Investor Relations is always available to to help you out.
Good day, thanks for joining us.
Thank you. This does conclude today's conference call you may now disconnect.
Yeah.