Q3 2024 Nutrien Ltd Earnings Call
You are in listen only mode. If you wish to ask a question I'll start one time all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded I would now like to turn the conference call over to Jeff Holtzman V P of Investor Relations.
Jeff Holtzman: Thank you operator good morning.
Jeff Holtzman: And welcome to new insurance third quarter 2024 earnings call.
Jeff Holtzman: This call various statements that we make about future expectations plans and prospects contain forward looking information certain assumptions were applied in making these conclusions and forecasts. Therefore actual results could differ materially from those contained in our forward looking information.
Jeff Holtzman: Additional information about these factors and assumptions are contained in our quarterly report to shareholders as well as our most recent annual report MD&A and annual information form.
Speaker Change: Now I'll turn the call over to Ken Seitz nutrients, President and CEO and Mark Thompson, our CFO for opening comments.
Speaker Change: Okay.
Speaker Change: Good morning, and thank you for joining us today to review our third quarter results the progress on our strategic priorities and the outlook for our business.
Speaker Change: At our Investor Day in June we outlined a set of 2026 performance targets that provide a pathway for driving structural improvements to our earnings and cash flow through the cycle.
Speaker Change: As highlighted in our third quarter release, we have made significant progress in a number of these priorities in 2024.
Speaker Change: This includes accelerating the timeline for achieving 200 million in annual operational efficiency and cost savings.
Speaker Change: Now expected to achieve this target by 2025, one year earlier than our initial goal with cost reductions evenly split between retail and corporate.
Speaker Change: <unk> is in a unique position to expand production and sales of potash and nitrogen with limited capital expenditures.
Speaker Change: We set a 'twenty 'twenty six target to increase upstream sales volumes by two to 3 million tons compared to 2023 levels.
Speaker Change: The first nine months of 2024, we have increased sales volumes by one 3 million tons.
Speaker Change: And our downstream retail business, we have faced some headwinds associated with a more prolonged recovery in Brazil.
Speaker Change: And softening in North American AG commodity prices.
Speaker Change: However, we remain confident in the growth platforms that support our 2026 retail financial targets, which include an expansion of our proprietary products business network optimization tuck in acquisitions and the execution around improving plant in Brazil.
Speaker Change: Yeah.
Speaker Change: Through our focused and disciplined approach to executing our capital projects, we expect to further optimize capital expenditures in 2025 to a range of two to $2 1 billion.
Speaker Change: This total includes the capital required to maintain our world class asset base.
Speaker Change: Our growth objectives.
Speaker Change: We will continue to pursue each of these performance targets with a focus on how we can enhance our offering of products and services to the grower all while structurally growing our earnings and free cash flow.
Speaker Change: Now turning specifically to our 2024 results.
Speaker Change: No she and generated adjusted EBITDA of $4 3 billion through the first nine months of 2024.
Speaker Change: Courted by increased downstream retail earnings higher upstream fertilizer volumes and lower operating costs.
Speaker Change: Retail adjusted EBITDA totaled $1 4 billion in the first nine months up 10% from the prior year.
Speaker Change: North American crop nutrient margins increased by $17 per ton compared to 2023 supported by a stabilization of fertilizer markets and continued growth of our proprietary crop nutrients and bio stimulant product lines.
Speaker Change: The improvement in per ton margin was partially offset by lower north American crop nutrient sales volumes.
Speaker Change: Which were impacted by wet weather it may.
Speaker Change: Lower corn acres and reduced field activity in the third quarter.
Speaker Change: Crop protection margins in North America have improved in 2024, while seed margins were lower primarily due to the impact of dry weather and delayed planting on our proprietary seed business in Brazil.
Speaker Change: We ended the third quarter with crop protection inventory down 13% compared to the prior year as we focus on tightly managing working capital levels.
Speaker Change: Turning to potash, we generated adjusted EBITDA of $1 6 billion in the first nine months down from the prior year due to lower benchmark prices.
Speaker Change: We increased potash production across our six main network and lowered our controllable cash cost of production to $52 per ton over this period.
Speaker Change: The reduction in per tonne costs was primarily driven by higher production volumes and the benefits of mine automation investments.
Speaker Change: We sold a record potash volumes in response to increased demand from our customers.
Speaker Change: We achieved this performance despite a short term disruption in Canadian rail service during the third quarter, highlighting the advantages of our industry, leading supply chain and effective planning by our commercial teams.
Speaker Change: In nitrogen we delivered adjusted EBITDA of $1 4 billion in the first nine months down from the prior year as the benefit of lower natural gas cost was more than offset by lower nitrogen prices in the first half of 2024.
Speaker Change: Our north American nitrogen assets remained very well positioned on the global cost curve and we continued to progress reliability initiatives.
Speaker Change: Tribute into higher production volumes in 2024.
Speaker Change: Nitrogen selling prices in the third quarter increased compared to the prior year, reflecting tight global supply in particular for ammonia.
Speaker Change: Phosphate fertilizer benchmark prices have remained strong contributing to higher net selling prices in the third quarter compared to the prior year.
Speaker Change: Weather related events impacted our phosphate operating rates, resulting in lower sales volumes and incremental costs.
Speaker Change: Now turning to the market outlook for the remainder of 2024.
Speaker Change: We have seen a good start to the fall application season in North America with crop nutrient sales in October above the historically strong levels achieved in the same month of 2023.
Speaker Change: The increase in demand has been driven by a relatively early harvest and a significant need to replenish soil nutrients. Following this year's record harvest.
Speaker Change: Global grain stocks remained below historical average levels supporting export demand for North American crops.
Speaker Change: And firm prices for key agricultural commodities, such as sugar Palm oil.
Speaker Change: Global potash consumption is projected at a record level in 2024 supported by strong agronomic need and relative affordability.
Speaker Change: We have raised our full year global shipment forecast to a range of 70 to 72 million tonnes and expect continued growth in 2025.
Speaker Change: We anticipate limited new global capacity additions next year, creating the potential for incremental supply tightness as compared to 2024.
Speaker Change: Global nitrogen markets have remained firm in the fourth quarter due to continued Chinese urea export restrictions.
Speaker Change: To your supply outages and project delays.
Speaker Change: U S nitrogen inventories are estimated to be well below historical average levels, which we expect will support strong demand for the fall season and into 2025.
Speaker Change: I will now turn it over to Mark to provide more details on our full year 2024 guidance assumptions and our capital allocation plans.
Mark Thompson: Thanks, Ken Good morning, everyone as Ken highlighted nutrient delivered record potash volumes through the first nine months of 2024, and we've raised our annual potash sales volume guidance to $13 five to $13 9 million tonnes.
Speaker Change: The range reflects our scheduled maintenance downtime in the fourth quarter and the assumption of a relatively short duration labor disruption at the port of Vancouver is currently impacting canpotex shipments through the Neptune terminal.
Speaker Change: The full year, we expect our potash controllable cash cost of production to be down approximately 5% compared to 2023 strengthening our position as one of the world's lowest cost producers.
Speaker Change: In nitrogen, we revised our annual sales volume guidance to Gen six to $10 8 million tonnes.
Speaker Change: <unk> reflects the impact of extended turnarounds and unplanned outages in the third quarter, including the impact of weather related events.
Speaker Change: We expect higher operating rates in the fourth quarter with turnarounds at select North American nitrogen sites now complete.
Speaker Change: For retail our full year adjusted EBITDA guidance was revised to one five to $1 6 billion.
Speaker Change: As favorable growing conditions in North America reduced pest pressure and limited field activity in the third quarter.
Speaker Change: Grower demand increased in October and we expect North American crop nutrient sales in the fourth quarter to be similar to the historically strong levels achieved in 2023.
Speaker Change: As Ken outlined we are focused on strategic priorities that support the achievement of our 2026 performance targets, which we believe provide a pathway for enhancing earnings and free cash flow. Looking ahead, we see several levers available to optimize sources and uses of cash across nutrients.
Speaker Change: From a sourcing standpoint, Ken described the areas we've identified to drive increased cash flow from operations. This.
Speaker Change: This includes increasing upstream fertilizer volumes from existing assets delivering downstream retail earnings growth and driving operational efficiencies and cost savings across our network to ensure we maintain our low cost position.
Speaker Change: We continue to evaluate ways to simplify and focus our portfolio optimizing.
Speaker Change: Our investments in working capital and reviewing assets on our balance sheet that may not warrant maintaining with the objective of improving cash flow conversion through the cycle.
Speaker Change: In terms of uses of cash we are allocating to point you to $2 3 billion in 2024 to sustain and enhance our assets a reduction of over $400 million compared to 2023.
Speaker Change: We expect to further optimize capex in 2025 to a range of two to $2 1 billion stress.
Speaker Change: The strengthening free cash flow and positioning the company to counter cyclically deploying capital toward high conviction opportunities.
Speaker Change: We have a long track record of providing a stable and growing dividend is a core part of the return we deliver to our shareholders. Our dividend per share has increased by 35% since the beginning of 2018, while maintaining a total dividend payment of around 1 billion due to the significant reduction in share count over this time period.
Speaker Change: The allocation of our remaining free cash flow is currently focused on a narrow set of growth investments and on share repurchases with the goal of maximizing our risk adjusted returns and growing free cash flow per share.
Speaker Change: From a gross standpoint, we're focused on projects that have a strong fit with our strategy provide returns in excess of our hurdle rates and have a relatively low degree of execution risk.
Speaker Change: These are growth platforms, where we've proven our ability to execute and deliver value. Today. This includes investments in proprietary products network optimization tuck in acquisitions nitrogen debottleneck projects.
Speaker Change: Mine automation and projects.
Speaker Change: We've also repurchased one 5 million shares for approximately $75 million since late September and intend on repurchasing shares on a more ratable basis under our NCI V program, that's authorized through February 2025.
Speaker Change: I'll now turn it back to Ken for closing remarks.
Ken Seitz: Thanks Mark.
Ken Seitz: We remain focused on strategic priorities strengthening the advantages of our business across the AG value chain.
Speaker Change: Our results through the first nine months of 2024 demonstrate progress towards our 2026 targets on a number of these priority areas.
Ken Seitz: This includes accelerating the timeline for delivering operational efficiency and cost savings.
Ken Seitz: <unk> capital expenditures.
Ken Seitz: Spanning upstream fertilizer sales volumes and advancing high return downstream retail growth opportunities.
Speaker Change: As Mark highlighted we are focused on allocating capital on a counter cyclical basis towards a targeted set of growth initiatives and share repurchases that enhanced free cash flow per share.
Ken Seitz: We would now be happy to take your questions.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star one on your phone you will hear a prompt that you are now in the question queue, if you're using a speaker phone. Please lift the handset before pressing any keys as a reminder, each caller may ask one question. If you wish to ask a fall.
Speaker Change: Blow up or second question. Please raise your hand again with star one after the conclusion of your first question to rejoin the queue should time permit. The first question comes from Andrew Wong of RBC capital markets. Your line is now open.
Andrew Wong: Hey, good morning, Thanks for taking my questions. I was just wondering if you could provide any update on how you plan on implementing a buyback program going forward, but maybe more regular or stomach silverman.
Speaker Change: Romantic type purchases.
Ken Seitz: And just given where your shares trade today, how would you view buybacks versus any opex spending on growth.
Speaker Change: Yes, Thanks, Andrew.
Speaker Change: Yes, we can certainly talk about what we mean by rate of all of course, we bought back stock. This year, we're going to continue with that through the balance of the year.
Speaker Change: As we look now into 2025, we've been using the word counter cyclical we've pulled back on capital we have.
Ken Seitz: And that's on the investing side and now we've pulled back optimizing across the capital portfolio.
Ken Seitz: And a number of other measures that are going to liberate free cash flow as we look at that we look today at the highest and best use for that to improve.
Mark Thompson: Free cash flow per share growth and at the moment, yes, we are buying back our stock when we do that analysis, but mark maybe you want to provide some more color on our plans are and why we use the word ratable.
Mark Thompson: Thanks, Ken.
Mark Thompson: Andrew So look I think just to step back and reiterate Andrew a bit of what Kent said, I mean, our capital allocation priorities.
Mark Thompson: To continue to follow this strategic direction of simplifying and focusing the organization and really exercising the discipline in both cost and capital management and these are things that we control regardless of market conditions. So.
Mark Thompson: This intensified focus on both optimizing sources of cash and uses of cash.
Mark Thompson: <unk> of growing free cash flow per share is something that is really top of mind for us with respect to your question on share repurchases, specifically, yes, I think just to highlight and recap.
Mark Thompson: We commenced share repurchases in the second half of September and.
Mark Thompson: I mean, if you look at that time period, we purchased about $75 million worth of stock over the last month and a half and as we said we intend to continue ratable repurchase activity at a general similar run rate to what we've done so far through the end of that authorization in February 2025, and I think as Ken highlighted we sit here today and that.
Mark Thompson: Set of growth objectives that we have has been narrowed their focus there's things we've done before a number of them are accretive to free cash flow, but the reason we've continued to make progress on the buyback here over the last couple of months and intend to continue doing so as we do see compelling value not only from a risk reward standpoint, but the ability to.
Mark Thompson: Free cash flow per share independent of market conditions as we look at alternatives at this point in the cycle, obviously agricultural commodities have turned down somewhat over the last few months and if we look to past cycles, particularly in the retail business that has presented us with opportunities that weaker points in the commodity cycle, where we can continue to consolidate.
Mark Thompson: In those market conditions, we've been quite disciplined over the last couple of years and stronger market conditions, but we anticipate some of those tuck in acquisitions, particularly in North America will come back to us. So we'll be looking to those alternatives opposite share buyback, but today that the buyback is compelling to us.
Speaker Change: Thank you. The next question comes from Ben Isaacson from Scotia Capital. Your line is now open.
Speaker Change: Yes.
Speaker Change: Good morning, and thank you for taking my question I just have one question on potash.
Speaker Change: It's quite rare that we see three years of consecutive growth in potash demand, especially following a year of global shipments.
Speaker Change: Sorry, especially following a year of record global shipments, which were seeing this year is just trying to get sweet spot in light of your comments about softening sales activity as crop prices are low and you talk about your confidence level that potash demand will grow next year.
Speaker Change: In line with your before thank you.
Ben Isaacson: Thank you Ben and good morning.
Ben Isaacson: For 2024.
Speaker Change: Volumes have been strong and you've seen that we've changed our own shipments range to 70 to 72 million tonnes that is true.
Speaker Change: But there are a number of reasons that we're constructive for 2025.
Speaker Change: We can start with global inventories and you look around the world and you could say that global inventories are at average or below average levels in just about every market major market on the planet with perhaps the exception of Brazil, but even with Brazil. They are they continue to return to a record level.
Speaker Change: Consumption.
Speaker Change: Of crop nutrients and VK this year, probably about 46 million tonnes, which would be similar to previous record levels.
Speaker Change: <unk>, China is consuming record levels of N P K.
Speaker Change: <unk> seen that in potash, we're seeing that in nitrogen at the moment and we're seeing in phosphate as well.
Speaker Change: True that we've seen a very strong crop in North America in that.
Speaker Change: Commodity prices have come off that's true, but at the same time.
Speaker Change: That strong crop has put a lot of crop nutrients out of the ground and so those nutrients are going to need to be replaced and in fact, even here in the fall.
Speaker Change: Early harvest the fall is open and we're looking at a lot of activity in the fall application season, getting ready for what farmers will be a good SC as being a good growing season next year again with North America.
Speaker Change: Third farmer margins being about at the 10 year average.
Speaker Change: It's also the case the softer input prices have stimulated some demand. So we see strong demand in this price environment and importantly, we're still returning to trend level demand in potash.
Speaker Change: We're just getting now to what we would consider to be trend level post this conflict.
Speaker Change: In eastern Europe, and everything that that broad so there's I would say a number of things that are going on at the moment.
Speaker Change: That we have a narrow range for next year of 71 to 74 million tons again looking to return to that trend level demand growth, but Chris anything you wanted to add.
Chris: Yeah. Thanks, Kent.
Speaker Change: Good morning, Ben the only thing maybe to reiterate is that as we look around the world at least major potash sponsorships that we're not really seeing any inventory build that's concerning to us and as we talk to customers in each of those markets. They are also optimistic about demand for 2025, particularly as Kevin said the fees right.
Speaker Change: <unk> remaining at affordable levels and even if we wanted to see for example in China inventories grow to around 3 million tons, you put that into the context of apparent consumption at around 18 to 19 million tons and again, we don't see that concerning so we do see the good consumption levels that we've seen in 2024.
Speaker Change: Continuing into 2025.
Speaker Change: Thank you. Your next question comes from Joel Jackson from BMO Capital markets. Your line is now open.
Joel Jackson: Hi, I'm going to follow up on that potash question with a couple of many many questions. If you don't mind.
Joel Jackson: I don't think you mentioned southeast Asia oil plummet seems like palm oil prices are really really doing well it looks like on a recent tender. This week in southeast Asia. It looks like you got maybe a little bit higher price, but not massively higher. So first question. There is are.
Speaker Change: Why should we not see some greater pricing bear with Palm oil and also I Didnt mentioned on some of the drivers 25, and then second question would be.
Joel Jackson: We look at supply for 25, what more supply do you see coming on are you anticipating more supply and low anticipating more tons get through St. Petersburg, and Bronco for Skylake BPC any other supply drivers. Thanks.
Joel Jackson: Thanks Joel.
Speaker Change: So a couple of great observation. Thank you yeah, I would say with respect to South East Asia, We haven't mentioned it yet, but you're absolutely right. In fact for 2024 part of that rebound to a trend level of demand that we just talked about part of that story is certain to southeast Asia.
Speaker Change: And it's for the reasons that you cite affordability is strong when we see palm oil prices at 4000 Rand per tonne, but there's also strong rice prices in the region.
Speaker Change: At Oh, we expect strong demand in for an important standard grade market.
Speaker Change: Yeah, that's certainly part of the story for 2024, and if you look at the biodiesel mandate that's coming in 2025.
Speaker Change: And again with strong prices, we expect that southeast Asia for 2025.
Speaker Change: It continues to be an important part of the story.
Speaker Change: On the supply and demand balance I think you make a good observation as well when we talk about 2024, we call it more or less a balanced market.
Speaker Change: 70, 170 to 72 million tonnes.
Speaker Change: And supply more or less meeting demand as we as those volumes grow.
Speaker Change: <unk> is consumption demand grows into 2025 and for all the reasons, we've talked about we think that well.
Speaker Change: We do see some potential tightening in the market and that's because as you say if we look around there could be some small incremental additions on the supply side, but we don't see much and so when we've said that there's the potential for some firming in 2025.
Speaker Change: The reason, we say that it's exactly that and we expect demand to grow without incremental supply necessarily being added to meet that incremental demand.
Speaker Change: Thank you. Your next question is Vincent Andrews from Morgan Stanley. Your line is now open.
Vincent Andrews: Thank you and good morning, everyone question in nitrogen one of your slides shows.
Speaker Change: Sure I think the product inventory levels of nitrogen are.
Speaker Change: Our low levels as we go into the fall season, I'm curious what your anticipation is in the retail business in terms of what you want to do about that in terms of or do you see this as an opportunistic time for you to build inventory and hold it through.
Speaker Change: Through the winter or do you still intend to exit the fall season.
Speaker Change: <unk>.
Speaker Change: Yeah, I would say that what we're seeing in the retail business, there's nothing unusual there and we do expect.
Speaker Change: We do expect to hit through the season here.
Speaker Change: Inventory is flowing through our channel, but but Jeff do you want to talk about what youre seeing on the ground.
Jeff Holtzman: So first of all I mean, we're seeing we're greatly encouraged by the activity we see at this fall.
Speaker Change: As Kim mentioned earlier, we paid very strong nutrient removal.
Jeff Holtzman: With really large crops, particularly in North America from an inventory position, we like the position we're in.
Jeff Holtzman: Right now we came into the third quarter, a little heavier than we would have been last year, but desk reflective.
Jeff Holtzman: An early harvest and an early start to fall application and as it relates to nitrogen we desperately needed. Some moisture rushed corn belt, we got that most serious last week and so we're getting I'm really encouraged about what we're kicking off across North America from an NIH three application standpoint, but.
Speaker Change: March Saar.
Speaker Change: Retail is normally to buy what we need for the season ahead and not carry over into the year and so I would like to I would like from a retail perspective too in the fall with low inventory levels.
Speaker Change: Yeah.
Speaker Change: Thank you. Your next question comes from Steve Byrne Bank of America Merrill Lynch. Your line is now open.
Steve Byrne: Yes. Thank you Ken I wanted to drill a little bit into potash pricing.
Speaker Change: You got it.
Speaker Change: Youre looking for another couple of percent higher volumes in 2025.
Speaker Change: But yes.
Speaker Change: Your offshore price.
Speaker Change: It's been running almost $100 a ton less than the North American price.
Speaker Change: Used to be closer to 30.
Speaker Change: You could even lukashenko complaining about potash pricing.
Speaker Change: Question for you given your current role your prior role in Canpotex.
Speaker Change: What is the value proposition to nutrients to be part of Canpotex.
Speaker Change: We have one partner.
Speaker Change: BHP can join in.
Speaker Change: Would you negotiate differently. If you were on your own and not part of Canpotex.
Speaker Change: Yes, Steve Thanks for the question.
Speaker Change: Yeah, there's a lot of time back there, but you know.
Speaker Change: I'll start by saying in fact tomorrow, we are today, we're celebrating.
Speaker Change: <unk> 65 years of producing.
Speaker Change: Producing potash in Saskatchewan, we've been doing this for a long time and for 55 of those years, we've been doing them with Canpotex Canpotex says.
Speaker Change: I believe the customer base in the market and all of these key regions that you can't reproduce.
Speaker Change: That comes with that with developing relationships over that period of time.
Speaker Change: Part of the value proposition for those customers is that they have access to all of you Saskatchewan mines, It's high quality, it's reliable and it's competitive.
Speaker Change: And so.
Speaker Change: Those relationships continue to be.
Speaker Change: Incredibly important to us incredibly important to canpotex in behind that a customer we've built out a supply chain in this business to get volumes from landmark, Saskatchewan, I keep saying to the jungles in Malaysia.
Speaker Change: Our supply chain doesn't exist anywhere on the planet. So there's just so much infrastructure. So many relationships so much history and.
Speaker Change: And our history of a good commerce could trade with these customers that.
Speaker Change: We look to move our volumes Canpotex as has been just an extraordinary partnership and it has.
Speaker Change: Taking us into new markets over 40 countries around the world and obviously, we've always been competitive. So so I think that Ah I think canpotex offers us a lot.
Steve Byrne: Steve I, what I would say as we look into the future now.
Speaker Change: Have seen trade flows have been imbalanced in certain parts of the world in light of the conflicts in eastern Europe, even some impact perhaps on what's happening in the middle East. So yes, you do have in markets like Brazil that are easier for local producers to get to at the moment. So we have seen volumes go into Brazil, and you're seeing the impact.
Speaker Change: Act on price at which creates the delta between that market and markets that might be more difficult to get to I think as these trade flows normalized as we look at a stable supply demand balance in 2024, as we look at potential firming into 2025, and we look at the ROI Canpotex is going to play and all that that's where we say.
Speaker Change: Demand growing maybe outpacing supply a bit in 2025, and even beyond and so that's why we say opportunity for some additional tightening firming here in price but of course.
Speaker Change: <unk> is going to continue to be playing.
Speaker Change: Playing a significant role in getting our volumes around the world.
Speaker Change: Okay.
Speaker Change: Thank you. Your next question comes from Jacob bout from CIBC World Markets. Your line is now open.
Speaker Change: Good morning.
Speaker Change: Question on retail.
Speaker Change: Second quarter here that you've turned your 24 retail guidance, despite a pretty large crop coming off in the U S.
Speaker Change: What would your view of normalized retail EBITDA would be $4 corn price environment.
Speaker Change: Yes, good morning, Jacob and we have a number of things that.
Speaker Change: We talk about at the moment.
Speaker Change: A few headwinds.
Speaker Change: Our downstream business it and there was a north America would be as we've talked about our west may as we've talked about the ideal growing conditions here in the third quarter that led to less pest pressure and less overall field activity, that's true, but I would say the bigger story is Brazil.
Speaker Change: The ongoing work that we're.
Speaker Change: We are doing to recover.
Jeff Holtzman: Both with the market certainly with our business in Brazil, but I'll hand, it over to Jeff to provide some more color around all of that.
Jeff Holtzman: Thanks, and look I've got down in the third quarter was more a reflection of what occurred in the third quarter than what we expect going forward in the fourth quarter as Ken mentioned, just a minute ago.
Jeff Holtzman: Regardless of the oil price you know, Brazil has been a hit we had again this year, we expect more recovery there.
Speaker Change: Yeah in that market than we've seen year to date.
Jeff Holtzman: North America and Australia.
Jeff Holtzman: Performed really well.
Jeff Holtzman: In my opinion in 'twenty four.
Jeff Holtzman: And so we expect earnings growth next year, just by stabilizing things in Brazil.
Jeff Holtzman: Going forward, we expect our earnings growth that we've talked quite a bit investor day about our.
Jeff Holtzman: Our strategic actions around <unk>, and how we will expand our margins.
Jeff Holtzman: In that area as well and I also think that we had some things that we missed this year, we talked about low field activity in the third quarter some of that related to some applications that we actually missed in the spring with the cold and delay.
Jeff Holtzman: Planning for core and we think we think those things will come back to us we thought we'd get a bit more of it in the third quarter, but ideal weather conditions really lay it to extremely low pest pressure and low trips Crouch the field for our growers. It. So we think those things will come back to this next year.
Jeff Holtzman: Okay.
Jeff Holtzman: Okay.
Speaker Change: Thank you. Your next question comes from Edlin Rodriguez from Mizuho Securities. Your line is now open.
Edlin Rodriguez: Good morning.
Edlin Rodriguez: Good morning, everyone I suppose one quick question on retail in Brazil.
Speaker Change: Former gas should be hurting a little bit there's like a lot of disruption in the marketplace.
Edlin Rodriguez: So.
Edlin Rodriguez: People go on Bank Corp.
Speaker Change: Does that create medium term or long term opportunities for you in terms of retail acquisitions, given that is too long to them what attractive market over there.
Edlin Rodriguez: Yeah.
Speaker Change: Good morning, and thanks for the question Atlanta, So we our focus at the moment on in Brazil is on our current core business and the things that we've talked about but stabilizing the business and I would say today that that is our exclusive focus so when we talk about rationalized.
Speaker Change: And some infrastructure some unproductive infrastructure like blenders like some selling locations when we talk about optimizing our cost footprint from human Resourcing perspective in light of some of the challenges in Brazil, when we talk about focusing on inventory and inventory management Britney done working capital though.
Speaker Change: <unk> levels.
Speaker Change: Those things are all in flight.
Speaker Change: An extraordinary amount of effort in Brazil at the moment and that is our exclusive focus and we've talked about working through all of that through 2025, we think that that.
Jeff Holtzman: Firstly for the work that's taking place.
Jeff Holtzman: That's going to continue through 2025, and then you know among all of that continuing to focus on proprietary products that growing that proprietary business, which you know that's a for our future for the sale of certain if that's going to be a core part of it because we see opportunity there with our agro Kevin business, So and so long way of saying our focus today is noteworthy.
Jeff Holtzman: Not looking at expanding in this environment, we're lucky it yet and focusing on our current business.
Jeff Holtzman: Right.
Speaker Change: Thank you. Your next question comes from Richard <unk> from Wells Fargo. Your line is now open.
Speaker Change: Alright, good morning, everybody.
Speaker Change: So my question is another strong quarter of potash sales volumes this quarter. Despite a short rail strike you raise the guidance this.
Speaker Change: This year to $13 five to $13 9 million, but obviously, a third quarter run rate.
Speaker Change: It would imply over 16 million potential annualized production.
Speaker Change: So that's well below well above the $14 million to $15 million target that you gave for 2020 from your Investor Day. So my question is are you currently at that operational capability right. At this time to get to that <unk> 50 million.
Speaker Change: Cause you produce that if the market demand was therefore it you mentioned that you expect demand growing in 2025 for potash and <unk>.
Speaker Change: Don't really see many other supply.
Speaker Change: Coming on in other regions. So.
Speaker Change: Would you be the one company that could potentially meet that demand.
Speaker Change: So I'll maybe start with your last question first and then work back from there Richard Yes, we kit to meet growing demand that we've talked about our ability to produce 15 million tons and that we need to do between now and then it is bringing on people bring on operators.
Speaker Change: You look at our guidance range today, we would say that.
Speaker Change: The capacity and our complement some operators that are six main network.
Speaker Change: It's been built for exactly those types of our guidance range and not beyond we don't want people standing around at our operations.
Speaker Change: Yes, we can get to 50 million times, we need to hire people.
Speaker Change: It's always the case at on any given day on any given month, we might be producing.
Speaker Change: Above what appears to be a 15 million ton annualized rate, but when you take those daily or monthly annualize them.
Speaker Change: It's going to it's going to it's not representative of what we can do in the year and that's just related to what's happening at a particular mine how maintenance turnarounds fit into the schedule.
Speaker Change: We have some some some.
Speaker Change: Some ideas in our business, where we are in good ground.
Speaker Change: And everything is working well, but we'll have some days where will it anomalous ground and you will see a probably a run rate it would be less than then.
Speaker Change: Then our aircraft 14 million tons of capacity. So it's not a case of looking at those days or months at Annualizing them. What we say today is what's true and that is our capacity has been built to meet to meet the needs of our global customers that kind of 19% to 20% market share that we talk about often and that yes. We are.
Speaker Change: Can certainly expand our volumes at 15 million tonnes.
Speaker Change:
Speaker Change: But people who can do that relatively quickly.
Speaker Change: Thank you. Your next question comes from Chris Parkinson of Wolfe Research. Your line is now open.
Chris Parkinson: Great just a quick question on your perspective on nitrogen supply dynamics, just when you take a step back I mean, there's one school of thought that's concerned about oversupply just given the number of M O use and kind of project concepts I'll call them.
Chris Parkinson: Things out of Russia, which I personally think is wrong, but it is what it is and then the other school of thought is looking at higher costs, a lot of maintenance bills coming off in Europe C band in Europe.
Speaker Change: And potential further rationalization. So as you sit here today, even versus a couple of quarters ago kind of what are your puts and takes in terms of how youre thinking about that business over the next let's say three to five years. Thank you.
Speaker Change: Yeah, Great question Chris.
Speaker Change: Ill say, a couple of things and pass it over to Chris rentals, but if.
Chris rentals: If it's on the clean ammonia side of the industry.
Speaker Change: The number of announcements that we've seen on prognosticated, a new plant.
Speaker Change: And as we've looked at those announcements that if we looked at the evolution.
Speaker Change: Of.
Speaker Change: The potential there and our own experiences with looking at clean ammonia, we would say that you know.
Speaker Change: We don't see speculative new plants being built being great glad to.
Speaker Change: Right now.
Speaker Change: So it is a question about the pacing of the energy transition in how you with that and then behind that pace.
Speaker Change: The clean ammonia complex said and what kind of risks you'd be willing to take in a market that you might be able to grab a premium on.
Speaker Change: On the energy side of the business that.
Speaker Change: That's still evolving and timing of all of that is still very unclear. So again, we don't we expect any new plant to be backed by some form of offtake or some form of bankable contract that gives you the confidence to deploy the capital in and indeed that seems to be playing out that way. If we look at you know the.
Speaker Change: During the.
Speaker Change: Nitrogen complex is as it is today across the various nitrogen products, we don't see a lot of new building and new.
Chris Parkinson: Plant, that's being deployed especially on some of the downstream products, but Chris maybe you want to provide a little bit more color on the sort of supply demand balancing and nitrogen how do you see that evolving yes. Thanks, Ken Good morning, Chris Yes, as Kent said, if we break it down by supply and demand the nitrogen market until we see the next couple of years.
Chris Parkinson: Inside.
Chris Parkinson: It's been pleasing to see that trend sort of return to about a 2% compound annual growth rate.
Chris Parkinson: Globally. So that's been that's been fairly consistent over the years and then you look specifically at examples like in China today.
Speaker Change: Urea consumption there on the ground as I said earlier, we're good folks. This week has grown by 14% year over year, taking a pair of consumption to 60 million tons of urea. So the Chinese government remains very focused on domestic agricultural production.
Speaker Change: And similarly around the world, whether it's Brazil, or India. So some good steady growth on the demand side and then on the supply side you know what we're watching obviously is what's happening in Europe and those natural gas prices.
Speaker Change: We would probably mentioned that the last couple of winters in Europe have nothing too bad, but if we get if we get a harsh winter in Europe, there's natural gas inventories could be quickly depleted and you could see that price move even higher and we've seen some production curtailments there as a result, and then as Ken alluded to some delays in new.
Speaker Change: Auction coming online.
Speaker Change: This market fairly well balanced.
Speaker Change: On top of all of that is L. You know how position here in North America with low cost gas both in the U S, Canada and the advantaged locations of those plants, particularly in land and in the U S, which we liked so I would say again as we look out over the next three to four to five years feeling good about the nitrogen market.
Speaker Change: Thank you. Your next question comes from Benjamin Theurer from Barclays Capital, Inc. Your line is now open.
Speaker Change: Hi, This is Ryan filling in for Dan from Barclays.
Speaker Change: My question is kind of I mean.
Speaker Change: Do you have political issues any updates on how it's impacting fertilizer shipment diligence.
Speaker Change: Hello, just a hint towards towards like you sit in a car or are there any quantity of volumes impacted.
Speaker Change: How does the Afghan Betsy shipment process, just kind of on our overall fertilizer.
Speaker Change: Yeah. Thank you.
Speaker Change: Yeah, no a lot a lot going on in the World obviously had some geopolitical.
Speaker Change: Got it cool events that are impacting our business, yes, we look at the war in Eastern Europe, what we would say.
Speaker Change: Talk about is the fact that those volumes for the most part are getting to pretty constant gloves. This export volumes yes.
Speaker Change: Probably all true with the exception perhaps of the Belorussian Sue.
Speaker Change: Continue to struggle getting access to port capacity in a cost effective way, it's absolutely the case that those.
Speaker Change: Those suppliers and particularly Belarus.
Speaker Change: Probably struggling with cost to serve as well as certain shipments via rail.
Speaker Change: Cross, Russia into the North of China, where we know that on a landed basis, that's probably put a all in costs for the Belo rush into that kind of 270 $280 a ton. So that's those are those are definitely challenges in light of this conflict in eastern Europe as you know.
Speaker Change: Some of those challenges are going to persist for a bit yet.
Speaker Change: But as those volumes find their way into the market. Some rebalancing trade flows that we've talked about that.
Speaker Change: That really we've obviously finding a home for our volumes with our customers as well and that has been the case right through all of this turmoil, but on the Red Sea.
Speaker Change: It is fair to say that or.
Speaker Change: Our colleagues at ICL and APL have found alternative routes.
Speaker Change: And so that the challenges through the Red Sea that our ICL has experienced probably continues to experience that they found alternative routes through the Mediterranean. So we're seeing ICL volumes coming come into the market as well which is good.
Speaker Change: And those those trade flows relatively balanced as well, but those will continue to watch. These things are very very closely because as you say it hasn't had impacts on trade flows. Some respects continues to do certainly has raised the cost to serve for the industry in there for the overall the overall.
Speaker Change:
Speaker Change: Cost basis for the industry.
Speaker Change: And.
Speaker Change: As soon as these conflicts evolve we'll continue to watch that.
Speaker Change: Thank you. Your next question comes from Joshua Spector from UBS. Your line is now open.
Speaker Change: Hi, Good morning, Yeah, It isn't Quaker spun on for Josh.
Speaker Change: So just going back to an oxygen.
Speaker Change: Sort of taking your shipment volume is down a little bit for this year, obviously created some.
Speaker Change: Specific cycles.
Speaker Change: I was just wondering if you can kind of give us your latest thoughts and frame how you're thinking about the incremental uplift into next year and then the pathway to your 11 five to 12 million target in 2026.
Speaker Change: Okay.
Speaker Change: Yeah no. Good thanks, Josh Yeah, we've had a we've had some weather related effects. This year, we've had some extended turnarounds.
Speaker Change: The power outage that a power supplier or at airports, Saskatchewan facility in Alberta.
Speaker Change: Unexpected for us and as a mechanical issue. So you put that altogether and yes, we're just a little bit below.
Speaker Change: Where are we would expect it to be this year.
Speaker Change: That said heading into 'twenty 'twenty, five and beyond we talked about there are 11 5 million.
Speaker Change: Ton 2026, Investor day target at 11, and a half and with Trinidad cooperating on natural gas it would be 12 million tonnes, but I'll hand, it over to to Trevor Williams to give give us the breakdown.
Speaker Change: And we're going to get those new volumes and how we get from here to there.
Trevor Williams: Thanks, Scott and good morning.
Speaker Change: Yeah, just a couple of thoughts here, if I look back and just compared to 2023 were approximately 200000 tons.
Speaker Change: Year over year for spirit with the South last year.
Speaker Change: Normalized Lucas over our turnarounds, which is a very heavy year. This year, we're almost 300000 and sets us on a normalized basis. Obviously this is a result of some of the improvements that we've talked about that we announced last year turned out.
Speaker Change: As Ken alluded to though is a full year basis issue, we had several externally related outages across the quarter and in addition to that you know a couple of turnarounds. It takes a little bit longer now. This has been one of our heaviest turnaround years that we've had for quite a while with four major turnarounds executed here is actually 24 with one wrapping up.
Speaker Change: Trinidad out here in the last quarter, but as Ken said, you know as we look forward to our Investor day target for $11 five and.
Speaker Change: But theres really three components. There just continued reliability improvements across the fleet and there's about 300000 tons in terms of open talk out there.
Speaker Change: Bottlenecks that supposed to be completed in 'twenty three if all we have scheduled for 2445. It was in the order of about a 300000 tons there as well and then finally as Ken mentioned, we have about 500000 tonnes in terms of what we're doing with respect to Trinidad troops gas improvement, but without the one thing that won't call. It out as the example is if you like in 2000.
Speaker Change: Three we utilized about 82% of our gas that was available to us in 2023, and 2024, where project right. Now we are going to be between 93% 94% of the gas available are utilized and that's really the result of our three out of four our strategy that we put in place late last year.
Speaker Change: Thank you. Your next question comes from Laurence Alexander from Jefferies. Your line is now open.
Speaker Change: Hi, This is actually Dan on for Dan Rizzo on for Laurence.
Speaker Change: So you achieved 100, I'm sorry, you achieve your cost cutting goals early and were expected to be achieved in 2025.
Speaker Change: Would that suggest that maybe you can kind of expand the Gulf that there's more that can be done as we pushed into 'twenty six 'twenty seven I guess that would be my question.
Speaker Change: Yeah, no absolutely and yes, we have been incredibly focused on our cost base and.
Speaker Change: As we talked about at Investor Day, we had looking through 'twenty five 'twenty six we did see an opportunity to reduce SG&A, both in our retail business and our corporate functions by $200 million as we said we're ahead of schedule on that.
Speaker Change: And as we continue to look at that cost base, we do see some potential.
Speaker Change: For additional savings we're working on that at the moment at the moment, yes, we have confidence around achieving that 200 million in and now achieving it earlier than that and we've talked about and we're always looking at the opportunity to continue to optimize refining costs keep ourselves as the low cost producer.
Speaker Change: And competitive in everything that we do.
Speaker Change: Thank you. Your next question comes from Erin catcher rally from Barron. Your line is now open.
Speaker Change: Hello, Hi, good morning, Thanks for taking my question.
Speaker Change: We've got some comments from Belarusan President Lukashenko on a potential combined 10% production cut with Russia.
Speaker Change: Just wondering how credible is how are these commenting a few considering these guys are low cost producers and don't really need to cut production.
Speaker Change: My second question is on Agri stats.
Speaker Change: Specifically on seats, if I look at your face and seems to be declined 16% in Q free by the gross margin dollar.
Speaker Change: At times collapsed, two 4 million tonnes sorry, two for me. So I wanted to understand how much of this should continue into Q4 or it was just a one off for Q3. Thank you.
Speaker Change: But thanks for the questions, Yeah, and Belarus are in D. C. We saw that announcement as well.
Speaker Change: We don't speculate on those sorts of things I think you would want to talk to them and understand better what the plan is there.
Speaker Change: All I would say is.
Speaker Change: We've talked about this impact of shifting trade flows.
Speaker Change: And the challenges perhaps in that part of world of not getting access to efficient at nearby Tidewater and that raising the global cost curve as a result, so the cost to serve is gone up.
Speaker Change: That's true that's clear.
Speaker Change: Probably we will continue to be the case.
Speaker Change: As those producers look for port capacity I can't say that is nearby so I won't speculate on anything that.
Speaker Change: Any prognostications, where anything is coming out of the press and in that part of the world you'd have to talk to them, but what we would say is yes, we do see that for both in terms of inflationary pressures on the industry, probably added $50 a ton and then for certain producers who are having challenges could probably could be another $50 a ton.
Speaker Change: On the cost curve.
Speaker Change: Yes.
Speaker Change: Hey, Thanks, Nick.
Speaker Change: And as it relates to retail in seed I'll pass it over to Mr. Tariffs yeah. Thanks, Ken.
Speaker Change: Yeah, so the third quarter small quarter for us which seats as it relates to the market.
Speaker Change: <unk> in the third quarter.
Speaker Change: Latin America is the primary driver puzzled reduction as it relates to see barges before to three this was due to smoking unfavorable weather conditions, which caused the production challenges and compressed margins for us in that region and we do consider that to be a one time a bit.
Speaker Change: Thank you there are no further questions at this time, so I will now turn the call back to Jeff Holtzman for closing remarks.
Jeff Holtzman: Okay. Thank you for joining us today, the Investor Relations team is available if you have any follow up questions have a great day.
Speaker Change: Please standby and enjoy this music.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change:
Speaker Change: Uh huh.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Meeting has ended goodbye.