Q4 2024 Nutrien Ltd Earnings Call

Greetings and welcome to Nutrien's 2024 fourth quarter earnings call. At this 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 Holzman, VP of Investor Relations.

Jeff Holzman: Thank you, operator. Good morning and welcome to Nutrien's fourth quarter 2024 earnings call.

Jeff Holzman: As we conduct 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 Holzman: Additional information about these factors and assumptions is contained in our quarterly report to shareholders as well as our most recent annual report MD&A and annual information form.

Speaker Change: I will now turn the call over to Ken Seitz, Nutrien's President and CEO, and Mark Thompson, our CFO, for opening comments.

Ken Seitz: Good morning, and thank you for joining us today to review our 2024 results, and that would look for the year ahead.

Ken Seitz: Nutrien has a world-class asset base and a resilient business model that is built to withstand economic uncertainty, geopolitical shifts, and perform in all sets of market conditions.

Ken Seitz: In a world that is increasingly complex, having a clear vision and strategy is vitally important. For Nutrien, this means strengthening our core business across the ag value chain and taking a disciplined and intentional approach to capital allocation.

Ken Seitz: To measure success against the execution of our strategy, we set 2026 performance targets that we believe provide a pathway for driving structural improvements to our earnings and free cash flow. In 2024, we made meaningful progress toward these targets.

Ken Seitz: In our upstream businesses, we increased fertilizer sales volumes by nearly 1 million tons compared to 2023. We sold record potash volumes and progressed nitrogen brownfield expansions at two of our North American sites.

Ken Seitz: We mined 35% of our potash ore tons using automation, progressing towards our 2026 target of 40 to 50 percent.

Ken Seitz: These advancements provide efficiency, flexibility, and most importantly, safety benefits at our sites.

Ken Seitz: We enhanced our midstream distribution capabilities, including the opening of a new potash terminal in the U.S. Corn Belt.

Ken Seitz: Investments in our global distribution network will continue to be a priority in the years ahead to ensure we can efficiently serve our customers and support our growth objectives.

Ken Seitz: Downstream, we increased retail product margins and lowered expenses through efforts to simplify our business and optimize our network.

Ken Seitz: In Brazil, our improvement plan is beginning to deliver results, as we saw green shoots in the region during the fourth quarter.

Ken Seitz: We remain confident in the growth platforms that support our 2026 retail adjusted EBITDA target of $1.9 to $2.1 billion.

Ken Seitz: We accelerated the timeline for achieving $200 million in annual cost savings and expect to achieve this target in 2025, one year earlier than our initial goal.

Ken Seitz: Lastly, we optimized capital spending in 2024, reducing total expenditures by $450 million compared to 2023.

Ken Seitz: Together, these actions position Nutrien to counter cyclically deploy capital towards high conviction opportunities that improve earnings and cashflow per share through the cycle.

Ken Seitz: Now, turning to a review of our 2024 financial results. Nutrien delivered adjusted EBITDA of $5.4 billion in 2024, as lower fertilizer prices more than offset increased downstream retail earnings, higher upstream fertilizer volumes, and lower costs.

Ken Seitz: Retail adjusted EBIT totaled $1.7 billion, up 16% from the prior year.

Ken Seitz: North American crop nutrient margins increased due to a stabilization of fertilizer markets and continued growth of our proprietary crop nutritional and biostimulant product lines.

Ken Seitz: This more than offset lower North American sales volumes, which were impacted by lower corn acres and wet weather during the spring and fall application seasons.

Ken Seitz: Crop protection margins improved in 2024, supported by proprietary product growth, strong operational execution, and the selling through of lower cost inventory.

Ken Seitz: Higher seed margins in North America more than offset the impact of dry weather and competitive market pressures in Brazil.

Ken Seitz: In Potash, we delivered adjusted EBITDA of $1.8 billion, down from the prior year due to lower net selling prices.

Ken Seitz: Low channel inventories and strong potash affordability supported increased customer demand and higher sales volumes.

Ken Seitz: We increased production from our low-cost 6-mine network and progressed mine automation, which contributed to a 7% reduction in our potash controllable cash costs per ton.

Ken Seitz: Our nitrogen segment generated adjusted EBITDA of $1.9 billion, relatively flat to the prior year as higher sales volumes and lower natural gas costs offset a reduction in net selling prices.

Ken Seitz: With the completion of GHG projects in our nitrogen business and changes to our product mix, we achieved a 15% reduction in our total Scope 1 and 2 GHG emissions intensity in 2024 compared to the 2018 base year.

Ken Seitz: In phosphate, we generated adjusted EBITDA of $384 million down from the prior year, primarily due to lower production, which was impacted by weather-related events and plant outages in 2024.

Now turning to the market outlook for 2025.

Ken Seitz: Global grain stocks-to-use ratios remain historically low, providing a supportive environment for ag commodities.

Ken Seitz: Demand for U.S. corn has been strong, tightening the projected supply and demand balance and supporting prices.

Ken Seitz: We expect U.S. corn acreage to increase to a range of 91 to 93 million acres and anticipate strong demand for crop inputs in the first half of the year.

Ken Seitz: For Ponash, we increased our 2025 global shipment forecast to a range of 71 to 75 million tons.

Ken Seitz: The high end captures the potential for stronger underlying global consumption, and the lower end captures the potential for reduced global supply availability.

Ken Seitz: We see potential for further supply tightness with limited global potash capacity additions this year and reported operational challenges and maintenance work in key producing regions.

Ken Seitz: Global nitrogen markets continue to be impacted by regional supply constraints, elevated natural gas prices in Europe, and seasonal buying patterns.

Ken Seitz: The U.S. nitrogen market is currently tight, as net import volumes through the first half of the fertilizer year were down 60% compared to the five-year average.

Ken Seitz: Nitrogen demand is expected to be strong in the spring due to the limited fall ammonia application season and higher projected corn acreage.

Ken Seitz: I will now turn it over to Mark to provide more details on our 2025 Guidance Assumptions and our Capital Allocation Plans.

Mark Thompson: Thanks, Ken. Good morning, everyone. As Ken highlighted, we made meaningful progress towards our 2026 performance targets this past year, and see continued opportunities in 2025 to create value through focused execution and disciplined capital allocation.

Mark Thompson: Our annual pot-ass sales volume guidance of 13.6 to 14.4 million tons is consistent with our global shipments outlook and accounts for some level of uncertainty regarding the potential impact of tariffs on Canadian exports as well as global supply availability.

Mark Thompson: In North America, our winter fill program was fully subscribed, and we have since increased reference prices by $45 per short ton to reflect tightening global market fundamentals.

Mark Thompson: In nitrogen, we expect continued reliability improvements to support higher operating rates and annual sales volumes of 10.7 to 11.2 million tons.

Mark Thompson: Our low-cost nitrogen assets remain geographically advantaged compared to major offshore production regions.

Mark Thompson: We project Henry Hub natural gas prices will average between $3.25 and $3.50 per MMDTU in 2025, and our Western Canadian nitrogen plants will benefit from gas prices well below these levels.

Mark Thompson: Our phosphate sales volume guidance of 2.35 to 2.55 million tons reflects the expectation for lower production at our White Springs facility in the first half of 2025 and improved operating rates in the second half compared to the prior year.

Mark Thompson: Our full year retail adjusted EBITDA guidance is $1.65 to $1.85 billion.

Mark Thompson: supported by higher anticipated crop nutrient sales volumes, continued growth of our proprietary products, and further margin recovery in Brazil.

Ken Seitz: As Ken mentioned, our improvement plan in Brazil is beginning to show encouraging results and we remain focused on initiatives that improve cash flow from the business.

Ken Seitz: We expect the benefits of these organic growth initiatives in retail will be partially offset by foreign exchange headwinds of approximately $25 million and the absence of asset sales and other income items realized in 2024 that totaled approximately $50 million.

Ken Seitz: Looking ahead from a sources of cash perspective, we are delivering downstream retail earnings growth, increasing upstream fertilizer volumes, and driving operational efficiencies and cost savings across our network.

Ken Seitz: We continue to explore ways to simplify and focus our portfolio. This includes optimizing investments in working capital and reviewing assets on our balance sheet that may not warrant maintaining.

Ken Seitz: From a uses of cash perspective, we expect to further optimize capital expenditures to a range of two to 2.1 billion in 2025.

Ken Seitz: We've committed capital to sustain safe and reliable operations and to progress a set of targeted growth investments 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.

Ken Seitz: Our focus is on investments in our proprietary products business, retail network optimization, nitrogen de-bottleneck projects, and mine automation and potash. We continue to target a stable and growing dividend.

Ken Seitz: With increase approved by our Board of Directors yesterday, Nutrien's dividend per share has now been increased seven times since the beginning of 2018, for a total increase of 36%.

Ken Seitz: Our annualized dividend payment has remained stable at approximately $1 billion due to the significant reduction in share count over this time period.

Ken Seitz: Additional free cashflow in 2025 will be allocated to a narrow set of incremental growth investments, including retail tuck-in acquisitions and to share repurchases. We'll maintain a disciplined approach to cash deployment that maximizes our risk-adjusted returns and supports growth in free cashflow per share.

Ken Seitz: Since the second half of 2024, we've deployed approximately $290 million towards share repurchases, retiring 5.8 million shares.

Ken Seitz: We intend on continuing to repurchase shares on a more routable basis under our renewed NCIB program that is authorized until the end of February 2026.

I'll now turn it back to Ken for closing remarks.

Mark Thompson: Thanks, Mark. The outlook for our business in 2025 is supported by expectations for strong crop input demand and firming potash fundamentals.

Speaker Change: We continue to monitor geopolitical events and are positioned to respond under any scenario. Nutrien has a world-class asset base and we remain focused on strategic priorities that strengthen the advantages of our business across the ag value chain. 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 1 on your phone. You'll hear a prompt that you are now in the question queue. If you are using a speakerphone, please lift the handset before pressing any keys.

Speaker Change: As a reminder, each caller may ask one question. If you wish to ask a follow-up or second question, please raise your hand again with star 1 to rejoin the queue should time permit. The first question comes from Ben Isaacson from Scotiabank. Your line is now open.

Thank you very much and good morning everyone.

A question on tariffs.

Speaker Change: Can you talk through how you think about tariff risk for nitrogen, potash and retail, both for Nutrien and for the industry? What are the factors that we should be considering when it comes to tariff risk? Thank you.

Speaker Change: Thanks Ben, you know among those and we've looked at the impact on tariffs across everything that you've said including you know some capital items that we look at across the border and by far the biggest discussion is about bought action.

Speaker Change: And, you know, of course, agricultural trade and agricultural productivity in the U.S. requires, and food security for that matter, requires

Speaker Change: the free flow of these commodities across the border. We've had these dialogues, a lot of them, with governments on both sides of the border, and we continue just to emphasize...

Speaker Change: how reliant the U.S. farmer is on something like Canadian potash, for example, where Canadians supply over 80% of that market. We've struck up a cross-functional team.

Speaker Change: which extends across our government relations group, our commercial organization to make sure we can serve our US customers in the way that we always have and of course in our finance group as we look at the mechanisms that might be in place to actually collect tariffs and how we would go about that.

Speaker Change: that for us, we have those mechanisms in place and frankly, that the cost of this would be borne by the U.S. farmer, that the tariff cost and tariff impact will be passed on.

Speaker Change: to the U.S. farmer. I will say that timing of this is all in question, of course, as we look at the 30 days and look at the April 1st review. So that it could be, or maybe even likely is the case, that

Speaker Change: that the U.S. farm will feel those impacts after the spring planting season here. For our part, we have been filling the channel right through to our downstream network and so that we're in a position to serve our U.S. customers in the way that we always have.

Speaker Change: But like I say, we're of the view that if tariffs are in place, it's going to be rising costs, it's going to mean rising costs for the U.S. grower.

Speaker Change: Thank you. Your next question comes from Steve Hansen from Raymond James. Your line is now open.

Steve Hansen: Thanks for the time. Your comments on improving Brazil results are quite encouraging. I was just hoping you could drill down a little further.

Speaker Change: and perhaps add some commentary around where you're at on any specific action items you're taking specifically and then any broader macro variables that you also see influencing the pace of the recovery.

Speaker Change: For sure. Thanks, Steve. We've talked about what we've done on the cost side of the equation.

Speaker Change: some of our actual retail distribution centers, but also our experience centers. We've shuttered over 50 of those, and we've talked about doubling down on proprietary products, and that being certainly a great business for us and a growing business in Brazil.

Speaker Change: You know, we put those all together and we find ourselves in a situation, yes, exactly as we described, we see green shoots in Brazil. You know, it's not necessarily true that the market is moving along the way that

Speaker Change: that I think the industry is hoping, and high interest rates are still a source of challenge for the Brazilian agricultural complex. But our actions, I would say, are, you know, we're seeing those green shoots now, and you see that reflected in our results.

Speaker Change: Thank you. Your next question comes from Andrew Wong from RBC Capital Markets. Your line is now open.

Andrew Wong: Hey, good morning. I just wanted to ask about potash. So, you know, we've seen prices strengthening recently. I'm just curious if you can just talk about some of the main factors that are behind that, how much of that is.

Andrew Wong: tariff-driven, with some maybe some purchases ahead of that potential outcome, and then how much of that comes from some of the supply issues that maybe came up earlier this year, and how sustainable would you say current prices are into like the pack-out this year? Thank you.

Yeah, thanks, Andrew.

Speaker Change: You know, I would say we don't see much of an impact, if any, as it relates to tariffs. And I think it's just so much uncertainty there that...

Speaker Change: in terms of how that plays out. It really is a story about the fundamentals, but I'll have to pass over to Chris Reynolds to talk about that. Yeah, thanks Ken. Andrew, good morning.

Andrew Wong: Yeah, no, as Ken said, you know, we look at 2024 and the strong shipments we saw reaching an all-time record globally

Andrew Wong: What's constructive for us is that, despite that strong shipment period through 2024, we came out of 2024 as we canvassed the markets and met with our customers, that there was really no material carryover inventories in any of these major markets, and I think that's representative of strong disappearance.

Andrew Wong: that we saw and so that's why we've seen increasing prices here as we exit at 24 and come into 2025 and you know you go around the world a little bit here you think about North America We came up with a winter fill program here domestically

Andrew Wong: to open the year had a very good response to that and so much so that we implemented two price increases since that winter fill program which has been absorbed into the market and validated with new orders.

Andrew Wong: because the affordability remains good for potash and obviously with the backdrop of some very strong corn price and prospective corn acres.

Andrew Wong: Also in Brazil, again, a record year for imports into Brazil in 2024, but then along with that still very healthy spot demand, which has seen prices continue to increase here through the start of 2025.

Andrew Wong: And then around the Asian markets, India, China, and Southeast Asia, again, characterized by no material or burdensome inventories.

Andrew Wong: But some really good demand particularly in Southeast Asia and again with that backdrop of some strong palm oil prices So, you know Andrew, I think we're we're feeling good to start the the calendar year with the tailwinds We're seeing and a very constructive on the potash market

Speaker Change: Thank you. Your next question is Joel Jackson from VMO. Your line is now open.

Hi, thanks for the question, a couple of things.

Joel Jackson: You know, your Henry Hub gas forecast between $3.25 and $3.50, obviously, as you're getting ready to get new forecasts, we've seen gas prices surge.

Speaker Change: I mean, Henry Hub's averaging above $4 now for the year, or about $4 for the year. Talk about that, how that may impact your thinking and your earnings and your outlook. And then also, it looks like ammonia is really underperforming other parts of the nitrogen complex. Can you talk about that?

pretty dramatic.

Speaker Change: You know, if you're $16 today and you're up, that's a $600, essentially, floor on what it costs to produce a ton of ammonia. So the delta is important, but to your question about Henry Hough pricing, I'll pass that over to Trevor Williams. And then the ammonia question, I'll pass it over to Chris Rennel.

Speaker Change: Hey, good morning, Joel, and thanks for the question. And really what we're seeing is North American prices obviously have been stronger, really as a result of some of the extreme weather that we've really seen over the course of the last number of months.

Speaker Change: And obviously, as a result, higher demand and some supply constraints on the downstream side or on the upstream side. Now, ultimately, though, the forecast for the end of winter is looking a little bit more mild as we get through this kind of last little spell over the course of the next couple of weeks.

Speaker Change: And then we expect, based on where we sit with storage, both storage as well as the production, we see those prices normalizing into the last part of the year.

Thank you.

Speaker Change: Oh, sorry, please go ahead. Yeah, no, just to comment on the ammonia market as we've seen it, and Joel, you're right, we did enter 2025 on a little bit of a declining trend in ammonia prices. Part of that was some weak application we saw in the fall season last year impacted by weather and also the prospect of some new supply coming onto the market. But

Speaker Change: We're constructive on nitrogen overall, you know, some of that ammonia that didn't go down last fall is going to go down in the form of urea.

Speaker Change: and UAN, particularly in North America. And so, but we think that market is very tight and short right now, and we're seeing that.

Speaker Change: in the price behavior of urea and UAN. So, again, optimistic as we enter this spring season on nitrogen application rates, particularly with the prospect of over 90 million acres of corn.

Speaker Change: Yeah, and I might just add that, you know, we closed the year with quite strong ammonia pricing, actually. And so, yes, while it's softened a bit, we still look at the ammonia price and are constructive and call that a strong price.

Speaker Change: Thank you. Your next question comes from Vincent Andrews of Morgan Stanley. Please go ahead.

Speaker Change: Thank you and good morning everyone. Wondering if you could just talk a little bit about the potash market.

Speaker Change: And in particular, over the last couple of years since the war in Ukraine, I think we've talked about the export costs for both Russia and Belarus having been increased materially and not having a favorable impact.

Speaker Change: on delivered costs around the world. If we do envision and get to a point where, you know, that war is ended and...

Speaker Change: You know, Russia has more access to financial markets and maybe freight's more willing to Transact with it and and there have been some headlines already about maybe Belarus has the sanctions taken away from it Maybe they get back to the Lithuanian ports

Speaker Change: Is it the case that we would see some decline in the cost curve and that would have an impact or would your view be that capacity utilization now is tight enough that that's what's determining the price rather than the underlying delivered cost? Thank you.

Speaker Change: Thanks, Vincent. And of course, it's been the case that potash prices have been below that last marginal cost time.

Speaker Change: And so we're just now seeing prices get to a level where you look at the right of the cost curve and we're sort of.

Speaker Change: We see demand meeting supply at that right side of the cost curve. You know, to release your question about...

Speaker Change: FSU production. Of course for the Russians those volumes were never sanctioned and we've seen all of that production back in the market for some time.

Speaker Change: It's a good question, Vincent, about Belarus and how that plays out in terms of lifting of sanctions, which I think is a big if. I mean, these are challenges that existed prior to the conflict in Eastern Europe.

Speaker Change: But to your question, if they were to be lifted, I think you said it, the pivotal question is

do the Belarusians can get access through

Speaker Change: the Port of Taipan in Lithuania again. I mean, that port is now fully utilized with other commodities. And so are the Belarusians able to wedge their way back into that port when Europe and the Lithuanians have been very clear about, you know, sanctions or no sanctions, that's not going to be made available. And so.

Speaker Change: the Belarusians who have been the marginal producer on a delivered basis.

Speaker Change: you know, would continue to face increased costs as they'd have to head north into Russia and likely the port of Murmansk.

Speaker Change: So, so it's just to say that, you know, if we saw those Belarusian volumes.

Speaker Change: the ones that continue to be shut and maybe a million times come back into the market. We think that happens slowly over time. We think that it continues to be more expensive for the Belarusians.

Speaker Change: and that for today and your question I think your point Vincent is very relevant we look at the fundamentals today and we say

Speaker Change: you know, with demand having returning to trend levels, and we've been talking about that for some time. And that's going to continue to be the case this year, we believe. And then looking at the supply side of the equation, assuming some balance in there, yet now with

Speaker Change: some announced maintenance programs in a key producing part of the world and some operational challenges in another part of the world. That's where we go to firming of the potash price.

Speaker Change: Thank you. Your next question comes from Kristen Owen of Oppenheimer. Please go ahead.

Kristen Owen: Hi, good morning. Thank you for taking the question. I wanted to return to the retail outlook and the strong performance in the past year. Certainly getting a lot of uplift from the improved CPC and seed environment. I'm wondering if you could double-click on those areas of the business and help us understand what your outlook assumes for 2025.

Yep.

Mark Thompson: Absolutely. You know, we've made some assumptions within our guidance range of 1.65 to 1.85 and it really speaks to exactly some of those points. I'll pass it over to Mark to talk about that range and our assumptions.

Thanks, Ken. Good morning.

Mark Thompson: So yeah, when we look at the bridge from 2024 to 2025, as Ken said, our midpoint of 2025 EBITDA guidance for retail is $1.75 billion.

Mark Thompson: But when we look at FWEC's headwinds in the retail business from a stronger U.S. dollar,

Mark Thompson: and the realization of some non-core asset sales and non-recurring other income items we experienced in 2024, we would say our underlying EBITDA is projected to grow by about $125 million at that midpoint of $1.75 billion.

Mark Thompson: At that midpoint, coming to your question, we assume continued growth in our proprietary products business. We assume higher crop nutrient sales volumes year over year, and we do assume a continued recovery in our Brazilian business.

and crop protection margins at roughly historical average levels.

Mark Thompson: If we look to the upside of that range, we would be looking at factors like stronger corn acreage potentially and ag fundamentals strengthening or continuing to strengthen.

and crop protection margin performance above historical average levels.

Mark Thompson: On the downside of that range, we would be looking to factors like adverse weather during key application periods.

Mark Thompson: weaker commodity pricing and a slower pace of recovery in Brazil. So from a bookend standpoint and at the midpoint, those are the factors that are the primary ones guiding our outlook for 2025 in retail.

Speaker Change: Thank you. Your next question comes from Steve Byrne of Bank of America. Please go ahead.

for potential

Speaker Change: growth drivers that come to mind and was hoping you could just rank them, one would be just increased...

Speaker Change: network density with bolt-ons. Another one would be you seem to be getting into more and more biologicals. Is that a meaningful longer-term growth driver for you?

The third one would be...

SG&As

Speaker Change: in that in this segment is 90% of the company SGA SG&A is this do you see ways to Reduce the headcount in that

Speaker Change: In that segment. And then just last one I understand you have access to aerial imagery for this coming year and in some of the corn belt is this.

Speaker Change: a longer term driver for you to help your customers and increase applications as necessary.

Speaker Change: Yeah, thanks for the question, Steve. And I think you pretty much rank ordered them. So we can certainly talk about all of those. Absolutely. Tuckins has been a feature of our business and growth.

you know, enabler for us.

Speaker Change: and we have a long history and track record of doing that quite successfully. Absolutely, biologicals and bio-stimulants, crop nutritionals and proprietary overall is a big growth driver. Network optimization, we've talked a lot about that, which is to your SG&A question, but I'll hand it over to Jeff Tarsi maybe to expand on each of those.

Yeah, good morning Steve and

Speaker Change: I'll kind of start with biologicals. We talked a lot about our nutritional and biostimulant business and

Speaker Change: Actually, last year was our second best year on our proprietary products business in history, only comparable to 22. Our nutrient and biostimulant business grew 8%.

year-over-year, and we're projecting just under 15% growth and

Speaker Change: in 2025. So that'll be a real headline for us in 2025. We're going to bring some new products into the market. We've talked about products like infinity

Speaker Change: From that standpoint, on the SG&A side of it, we've been quite vocal that

Speaker Change: We for 2025, we want to take $100 million of expense out of our retail business. We saw in the fourth quarter, we saw some of that come a little bit earlier than we anticipated from that standpoint. So we feel good about what we've talked about as far as

Speaker Change: rationalization of the network and controlling our controls, which is at the top of our list of priorities.

for 2025 and then.

Speaker Change: As you talk about aerial imagery, and we've been using that for some time, obviously, we're using a lot of technology today in our business. Our growers are using a lot of technology.

Speaker Change: coupling that with the technology that we have in the marketplace today to build the best solutions that we can build for our growers to give them the best chance of return.

Speaker Change: Thank you. Your next question comes from Richard Gargitorena of Wells Fargo. Please go ahead.

Richard Gargitorena: Great, thanks. Good quarter. My question is on the nitrogen segment. Had strong results.

Speaker Change: saw improvement in the natural gas reliability in North America, improved Trinidad operations. So maybe just give us an update in terms of where you think

Bye.

That segment is going into 2026 and in terms of.

Speaker Change: They're ramping up to that, to those 11.5 to 12 million ton target that depended, I think, on improved reliability of the infrastructure.

Speaker Change: Thanks Richard, and yes it is true that we have been making investments in reliability initiatives across the network. We've been unlocking new volumes with

Speaker Change: attractive brownfield investments that we could talk about some of those that are even coming online this year.

Speaker Change: and we've improved gas utilization in Trinidad. That's all true and that

Speaker Change: gives us confidence to be on this path when we talk about our investor day target of 11.5 million tons in 2026, and even 12 million tons if we were to get our full allocation of gas in Trinidad. But maybe I pass over to Trevor Williams to talk about that bridge.

Trevor Williams: and last year to this year, and then, you know, our 2026 target. Sounds good. Thanks, Richard. And I'll just build maybe on a few comments that Ken had made. So, as we look to our 2026 glide path, it really continues to reflect three, or focus in really three key areas.

Trevor Williams: The first one obviously being improved reliability, and just to call out a recent example is really, if you look at our Borger facility,

Trevor Williams: We're really seeing a step change in terms of its performance 2023 over 2024, and over the last 12 months in particular, you know, based on the team that the work that the team has done at the site, along with our central liability team.

Speaker Change: Second on top of that is really, as Ken mentioned, is really completion of a number of the bottlenecks that we have across our fleet. We completed a number last year, both in terms of at our Karzai facility, our Redwater facility in particular, and also at Geisler.

Speaker Change: And then we also have, coming up in 2026, a few other ones that will come online, both at our Cars Lab facility and some increased capacity at Augusta as well.

Speaker Change: And then finally, as Ken mentioned, it really comes down to some of the work that we've been doing at Trinidad where we've seen also a really great improvement in terms of gas utilization, making sure that every molecule of gas that's made available to the downstreamers ourselves is that we take advantage of that.

Speaker Change: And again, if you look at 2023 over 2024, we saw about a 10% increase.

Speaker Change: We were at about 95% gas utilization in 2024, and we see an opportunity to bring that up to about 98% in 2020, over 2025 and 2026.

Speaker Change: And then lastly, as Ken said, with the work that the Trinidad government has been doing, we continue to be optimistic that we'll hopefully start to see increased volumes towards the tail end of 2026.

Speaker Change: Thank you. Your next question comes from Jeffrey Zakoskis of J.P. Morgan. Please go ahead.

Jeffrey Zakoskis: Thanks very much. I was looking at your fact books and the number of selling locations for retail, if I read the data correctly, has been going down by about 4% a year for the last

a few years.

Jeffrey Zakoskis: you know, different online sources. And what's your idea about what the growth rate of your selling locations should be over time? And then secondly, can you just comment on how you see the crop chemical market in the United States for

Jeffrey Zakoskis: 2025. Do you think you'll make more than you did last year or less or how do things look?

Jeffrey Zakoskis: Thanks, Jeff. You know, with respect to selling locations, we think we think less about total quantum of selling locations, more about the productivity of each of those locations. And, you know, the reality is that agriculture is changing. We've seen a lot of on-farm consolidation and that the complexion of North American agriculture requires

Jeffrey Zakoskis: modern and higher throughput facilities. And so a key pillar of our growth platform

Jeffrey Zakoskis: in our retail network, our downstream network is what we call our network optimization. That is looking at what might be higher sustaining capex, lower productivity.

Jeffrey Zakoskis: storefronts and consolidating, you know, what might be three or four of them in a region.

Jeffrey Zakoskis: into one new modern throughput safer facility that can still provide all those service levels to the grower. That would be the reason for the change and in fact that's an improvement to our business.

Jeffrey Zakoskis: It's not that, you know, fewer selling locations means fewer service levels or less organic growth.

Jeffrey Zakoskis: It's actually the opposite of that. So that is what you would see happening there. And indeed, a key component of our tuck-in acquisition strategy is where we look at the opportunities to add to the network in some of these key regions.

Jeffrey Zakoskis: And as we do that, we look at the opportunities for network optimization, and again, serving SAR growers and improve service levels.

Ken Seitz: Yeah, with respect to crop protection, I'll pass that one over to Jeff Tersey. Yeah, thanks, Ken. I agree with everything you said on the rationalization of our network.

Speaker Change: We work on that each and every year. We're having to service larger growers today and their needs are different. And we're, you know, we're servicing out of fewer but more efficient.

Speaker Change: We built some growth into our top line on crop protection for

Speaker Change: 25, and that's looking to claw back at some business that we think we missed last year and made due to wet, cool weather.

Speaker Change: In the growing season, at the midpoint of our guidance range, we've, as Mark spoke to earlier,

We've penciled in historical propertation margins.

Speaker Change: of the 2025 year. We think we will, you know, there is some generic pressure out there. So we think that upfront margins.

Speaker Change: could get some pressure there. But again, and we've made significant improvements in our margins in the Brazilian market as well. And

Speaker Change: You know, we're sitting in a really good position from an inventory standpoint on crop protection. We've driven our inventory down in all of our major markets on crop protection on a year-over-year basis, so we feel good about where we're sitting for the spring.

Speaker Change: and the opportunities that we might have in front of us.

Speaker Change: Thank you. Your next question comes from Chris Parkinson from Wolf Research. Please go ahead.

Hey guys, good morning. It's actually Andrew on for Cress

Speaker Change: So, looking sort of towards capital allocation, can you speak to what you're seeing out there in the M&A environment and, you know, your appetite to add to, you know, bolt-ons in U.S. retail and, you know, smaller global tuck-ins? And how should we think about that versus...

you know, further share buybacks, dividend, etc.

Speaker Change: Yeah, thanks, Andrew, for the question. So you will have seen that we just increased our dividend.

Speaker Change: and that's increased on per share basis 36% since the company was formed and we use the word stable and growing and we can kind of think of it in that billion dollar range.

Speaker Change: As we continue to fund the dividend. Yeah, we can talk about sources and uses after that, but to your point

Speaker Change: you know, free cash flow and how we might look to utilize that. Certainly, we're watching the Tuckin Opportunity Pipeline, but maybe I'll pass over to Mark.

to talk more about that.

Mark Thompson: Thanks, Ken. Good morning, Andrew. And as Ken said, Andrew, maybe I'll just step back for a second. I think it's worth mentioning again.

Mark Thompson: just the intense focus we have on structurally growing sources of cash in the company.

Mark Thompson: So, the single biggest driver we have of that is continuing to grow cash flow from operations.

Mark Thompson: by progressing towards our 2026 targets. As we've said today, we made good progress on all fronts in 2024. We expect to continue moving forward in 2025.

Mark Thompson: And alongside that, progressing our review and monetization of non-core assets, and that's also something we plan to continue looking at in 2025, and being disciplined with working capital management and driving efficiency in our cash conversion ratio. So, growing sources of cash over time is the first objective.

Mark Thompson: And then on your question about how we're utilizing or deploying that cash, maybe just to walk through the capital allocation stack as we see it for 2025.

Mark Thompson: We expect to deploy total capital of about $2 to $2.1 billion, which we've optimized lower once again this year.

Mark Thompson: This is comprised of about $1.6 billion in sustaining capital, and we expect about $400 to $500 million in growth capital, and that's that narrowed and focused set of priorities that Ken and I both spoke to in our prepared remarks.

Mark Thompson: Beyond that, we expect to have about a half a billion in capital leases, and as Ken mentioned, about a billion dollars towards that stable and growing dividend per share, which for shareholders today provides just over a 4% return.

Mark Thompson: So when you take all of those things into account, that's about $3.5 to $3.6 billion in total uses.

Mark Thompson: And as Ken highlighted, really every dollar beyond that, we're looking at effectively two things, bolt-on acquisitions, primarily in the U.S., but continue to look in Australia, and we think in this environment, we are going to see more of those opportunities in the U.S. come our way.

Mark Thompson: as well as share repurchases. And you saw since the second half of the year through today, we've been in the market on a routable basis. We feel that's an attractive use of capital today on the share repurchase front that competes

Mark Thompson: quite attractively with other alternatives. We intend in 2025 for that to be a continued meaningful part of our return of capital and capital deployment framework. So we expect to be in the market going forward on a routable basis.

Edlaine Rodriguez: Thank you. Your next question comes from Edlaine Rodriguez of Mizuho. Please go ahead.

Edlaine Rodriguez: Thank you, good morning everyone. Just one quick one on Pardash. Your volume guide is essentially flat. The price, who knows, it will do what it does. Can you talk about your cost on a per ton basis? Should we expect any improvement there or should it be similar to what we saw in 2024?

Yeah, thanks, Adelaide.

Edlaine Rodriguez: Yeah, so you know, with respect to how we're positioning ourselves among this 71 to 75 million tons that we talked about, for global shipments for 2025, it really is

Edlaine Rodriguez: us expanding our volumes incrementally, as we've done last year and the last number of years, and maintenance and market share at about that, you know, sort of 19.5%.

Edlaine Rodriguez: That's how we're planning our movements, and so what that volume and volume range means for our cost of production, we've talked about, you know, it's kind of that $60 a ton as something that we point to.

Edlaine Rodriguez: It's something we pointed to for some time. In other words, we have been fighting back inflation and the biggest

Edlaine Rodriguez: The component of that has been and will be automating our mining machines as we improve productivity, as we improve asset utilization.

Edlaine Rodriguez: And that contributes, obviously, to fighting inflationary pressures, which are very real, in service of that $60 a ton.

Speaker Change: Thank you. Your next question comes from Lucas Bermont of UBS. Please go ahead.

Speaker Change: Thank you. Yeah, so I just want to get back to nitrogen.

Speaker Change: Prior to the war, the top of the cost curve there was about 40% below.

Speaker Change: where the European gas outlook is for this year. So now with the talk of things maybe normalizing there, could you walk us through your range of outcomes behind and see the cost curve kind of responding if we have a resolution there to the war in Europe? Thanks.

Speaker Change: Great. I will pass that over to Jason Newton, our Chief Economist, to talk about exactly the moving parts there.

Jason Newton: Yeah, good morning, Lucas. Yeah, you're right. We have seen an increase in the cost curve, particularly if we look at ammonia and UAN, but also urea just driven by the increase in the price of gas in Europe.

Speaker Change: And as Ken mentioned, we've seen that pretty volatile of late. I think as high as $18 per MBQ last week, it's down in the $15 per MBQ range today. And that curve's pretty flat.

Jason Newton: As we look throughout the year, we know that as we look through the end of

of 2025.

Jason Newton: Storage levels today are down significantly and it's the first time since the war began that there's been a normal winter in Europe with cool cold weather driving down storage levels and those will by regulation need to be rebuilt and so that's that's driving the outlook for gas.

Jason Newton: costs today. And so as we look through the end of the year, regardless of what happens with respect to sanctions, that gas supply in Europe is likely to be tight. That said, there's potential for volatility in that price. In any scenario, we'd expect that the cost curve will remain above

Jason Newton: where it was prior to the war beginning, just given the reliance on imported LNG into Europe.

Jason Newton: I think the other important point is that we've seen already significant permanent closures of ammonia capacity in Europe. It continues to be over 20 percent of the production shut down today due to high natural gas prices.

Jason Newton: And we wouldn't expect that to come on stream as we go through the year.

Jason Newton: And the other factor to watch as we go forward is just the limited amount of new supply coming on stream, particularly of urea. And so we'd expect the supply-demand balance to tighten.

Jason Newton: over the medium term, just given continued demand growth exceeding capacity additions.

Speaker Change: Thank you. Your next question is from Rahi Parikh of Barclays. Please go ahead.

Thank you for tuning in. We'll see you next time.

Rahi Parikh: Awesome, thanks so much for the question. You all touched on some dynamics in Brazil, but can you give a deep dive on progress into stocking at the distributor, retail, and farmer level, and also on the farmer credit environment?

Speaker Change: more. Are you becoming more particular on who you sell to down there similar to one of your competitors? Thank you.

Speaker Change: Yeah, thanks for the question, Rai. Yeah, I'll pass that over to Jeff Tarsi to talk about what we're actually seeing on the ground.

Speaker Change: Yeah, look, we and I'll tell you from our perspective within our business operations there, we we've had a very clear objective to drive by inventory down in that Brazilian market and actually

Speaker Change: On a year-over-year basis, we've driven our inventory down 46%, which puts us in a really good position, takes a lot of risk.

Speaker Change: out of our business from that standpoint. I would think that at the farm gate, there has been destocking over the last two years.

Speaker Change: in that market, and it's become more and more of a just-in-time marketplace in Brazil because of some of the events we've seen over the last...

Speaker Change: two to three years. And from a credit side of things, we're always gauging our credit as intensely as we possibly can. Brazil would be no exception to us in that marketplace, and we've stood up a very strong credit team there.

Speaker Change: We continue to analyze that and make really good decisions based on the P&L opportunities of the customer.

Speaker Change: Thank you. Your next question comes from Aaron Cacciarelli of Barenburg. Please go ahead.

Hello, good morning.

very supportive dynamics for

Speaker Change: for Ag in general after the recent rally in corn prices. Just wondering, maybe, can you talk a little bit about the lower end of the guidance for global pot achievements, where you mentioned reduced availability, but I would like to understand a little bit what does it mean. Thank you.

Yeah, thank you for the question, Aaron.

Speaker Change: So yes, it's absolutely true that we've seen two years of growth in potash demand and we're expecting a little bit more this year. It really is just that return to trend level demand that we'll talk about.

Speaker Change: on sort of pre-war levels and 2.5% average annual growth rates as the world seeks to grow more food.

Speaker Change: When we talk about the guidance range for this year, you know, at the top end we talk about strong egg fundamentals, a good spring planting season in North America.

Speaker Change: and some of the other strengths that we talked about in Southeast Asia and record.

record fertilizer consumption in Brazil last year.

Speaker Change: looking for that to increase again this year. So strong demand fundamentals, the low end of that range is really it is a supply side discussion and that is again we've seen some significant announcements this year of maintenance.

Speaker Change: and even operational challenges in some of those key producing regions, so that the limitation this year, we believe, in the face of strong demand, would be on the low end, would be availability of supply.

Michael Tupom: Thank you. Your next question is Michael Tupom from TD Cowan. Please go ahead.

Michael Tupom: Thanks. Earlier in the call, you talked about tariffs. In your 2025 potash sales volume guidance, you noted that the guidance range attempts to account for some uncertainty on the tariff front. So the question is, I'm wondering if you can expand on that and speak to what sort of tariff-related assumptions you've made in coming up with your own potash volume guidance for 2025.

Mark Thompson: Yeah, you bet, Mike. It really is a question of timing and maybe buyer behavior, but I'll pass it over to Mark to talk about our assumptions there. Yeah, yeah. Thanks, Ken. Good morning, Michael. I think Ken characterized the high and low ends of the global shipments range really well during the last question, so maybe just stick to what you've asked about on tariffs.

Mark Thompson: Really, if you look at our guidance range, 13.6 to 14.4 million tons, at that midpoint of 14 million tons, we assume relatively limited impact from potential tariffs and really no material supply chain disruptions to speak of. So that would generally characterize the midpoint of our guidance.

Mark Thompson: If you look to the upper end of our guidance, we would assume no impact from tariffs and really no supply chain disruptions.

Mark Thompson: On the lower end is really where the tariffs question comes into play, and it's really a lot, as Ken said, it's really the potential timing impacts that any tariffs would have.

Speaker Change: on demand in North America. And we do see that more as a timing related factor. And that would sort of characterize how we're thinking about that 13.6 million tons on the lower end of our guides.

Speaker Change: Thank you. As there are no further questions at this time, I will now turn the call back to Jeff Holzman for closing remarks. Please go ahead.

Jeff Holzman: Thank you for joining us today. The Investor Relations team is available if you have follow-up questions. Have a great day.

Speaker Change: Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for your participation, and you may now disconnect.