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.
Thank you, Operator. Good morning and welcome to Nutrien's fourth quarter 2024 earnings call.
Speaker Change: 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.
Speaker Change: 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 outlook 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: 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 cash flow per share through the cycle.
Now, turning to a review of our 2024
Ken Seitz: 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 EBITDA totaled $1.7 billion, up 16% from the prior year.
Ken Seitz: This result exceeded our most recent full year guidance due to stronger than expected crop protection margins in North America, improved Brazilian retail performance, and the benefit from cost savings and asset sales in the fourth quarter.
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 Potash, 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 potash 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. 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.
Mark Thompson: 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.
Mark Thompson: 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.
Mark Thompson: 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.
Mark Thompson: From a uses of cash perspective, we expect to further optimize capital expenditures to a range of $2 to $2.1 billion in 2025.
Mark Thompson: 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.
Mark Thompson: 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.
Mark Thompson: 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 percent.
Mark Thompson: Our annualized dividend payment has remained stable at approximately $1 billion due to the significant reduction in share count over this time period.
Mark Thompson: Additional free cash flow 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 cash flow per share.
Mark Thompson: Since the second half of 2024, we've deployed approximately $290 million towards share repurchases, retiring 5.8 million shares.
Mark Thompson: 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.
Ken Seitz: Thanks, Mark. The outlook for our business in 2025 is supported by expectations for strong crop input demand and firming potash fundamentals.
Ken Seitz: We continue to monitor geopolitical events and are positioned to respond under any scenario.
Ken Seitz: 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.
Ken Seitz: 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.
Ken Seitz: 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.
Ben Isaacson: Thank you very much and good morning everyone. A question on tariffs.
Can you talk through
Ben Isaacson: How you think about tariff risk for nitrogen, potash, and retail, both for nutrient 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 bot 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 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 and 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: some of our actual retail distribution centers but also our experience centers we've shuttered over 50 of those
Speaker Change: 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, 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, 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 more 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, in terms of how that plays out. It really is a story about the fundamentals, but I'll have to pass it over to Chris Reynolds to talk about that. Yeah, thanks, Ken. Andrew, good morning.
Chris Reynolds: You know as Ken said, you know, we look at 2024 and the the strong shipments we saw reaching an all-time record globally
Chris Reynolds: 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.
Chris Reynolds: that we saw and so that's why we've seen increasing prices here as we exited 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
Chris Reynolds: 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.
Chris Reynolds: Because the affordability remains good for potash and obviously with the backdrop of some very strong corn price and prospective corn acres
Chris Reynolds: 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.
Chris Reynolds: And then around the Asian markets, India, China, and Southeast Asia, again, characterized by no material or burdensome inventories.
Speaker Change: 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 BMO. 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?
Speaker Change: With respect to Henry Hub pricing, I'll pass it over to Trevor Williams to talk about our view there. It continues to be the case that the delta between what we're seeing in European gas prices and North America
pretty dramatic.
Speaker Change: You know, if you're a $16 city in Europe, that's a $600, essentially, floor on what it costs to produce a ton of ammonia. So the delta is important, but...
Speaker Change: to your question about Henry Hub pricing, I'll pass that over to Trevor Williams and then the ammonia question, I'll pass it over to Chris Rennel.
Trevor Williams: 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.
Trevor Williams: 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.
Trevor Williams: 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.
Trevor Williams: 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
Trevor Williams: 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 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.
Trevor Williams: 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.
Trevor Williams: 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.
Vincent Andrews: Thank you and good morning, everyone. Wondering if you could just talk a little bit about the potash market.
Vincent Andrews: 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.
Vincent Andrews: having been increased materially and not having a favorable impact on delivered costs around the world. If we do envision and get to a point where that war is ended and that we have a chance
Vincent Andrews: 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: Yeah, thanks, Vincent. And of course, it's been the case that potash prices have been below that last marginal cost, you know, 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...
FSU production.
Speaker Change: 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.
Vincent Andrews: 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.
Vincent Andrews: But to your question, if they were to be lifted, I think you've said it. The pivotal question is...
do the Belarusians can get access through
Vincent Andrews: the Port of Taipei 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 sanctions or no sanctions, that's not gonna be made available. And so...
Vincent Andrews: the Belarusians who have been the marginal producer on a delivered basis.
Vincent Andrews: would continue to face increased costs as they'd have to head north into Russia and likely the port of Murmansk.
Vincent Andrews: So, so it's just to say that, you know, if we saw those Belarusian volumes.
Vincent Andrews: 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.
Vincent Andrews: and that for today and your question I think your point Vincent is very relevant we look at the fundamentals today and we say
Vincent Andrews: 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
Vincent Andrews: some announced maintenance programs and 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.
Yeah.
Speaker Change: 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.
Steve Byrne: Yes, I'd like to follow that question with maybe a little bit of a longer term outlook on your retail business.
Thank you. Bye.
four potential
Steve Byrne: that come to mind and was hoping you could just rank them,
Steve Byrne: 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.
Steve Byrne: 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?
to help your customers and increase applications as necessary.
Speaker Change: Yeah, thanks for the questions, Steve, and I think you pretty much rank ordered them, so we can certainly talk about all of those.
Speaker Change: Absolutely, Tuckin's 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 Tarcy maybe to expand on each of those.
Yeah, good morning, Steve 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: 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.
Speaker Change: for 2025. And then, as you talked 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: as well. And I always say our challenge is to try to stay one step ahead of our growers from that standpoint, but we'll be employing, you know, what we know from a pure agronomy basis and coupling that with the technology that we have in the marketplace today to build
Speaker Change: 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. It had strong results.
Richard Gargitorena: 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 that segment is going into 2026 in terms of...
Richard Gargitorena: They're ramping up to that 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 gives us confidence to be on this path when we talk about our investor day target of
Speaker Change: 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'd pass over to Trevor Williams to talk about that bridge.
Speaker Change: 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 Kenneth made. So, as we look to our 2026 glide path, it really continues to reflect three, or focus in really three key areas.
Speaker Change: First one obviously being improved reliability, and just to call out a recent example is really if you look at our Borger facility, 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 reliability 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.
Speaker Change: We completed a number last year, both in terms of at our Karsland facility, our Redwater facility in particular, and also at Geismer. And then we also have coming up in 2026, a few other ones that will come online, both at our Karsland facility and some increased capacity at Augusta as well.
Ken Seitz: 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.
Ken Seitz: making sure that every molecule of gas that's made available to the downstreamers ourselves is that we take advantage of that. And again, if you look at 2023 over 2024, we saw about a 10% increase.
Ken Seitz: 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.
Ken Seitz: 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.
few years.
Jeffrey Zakoskis: Can you comment on that? You know, why is the number of selling locations going down? Is it that farmers have more access to?
Jeffrey Zakoskis: different online sources, and what's your idea about what the growth rate of your selling locations?
Jeffrey Zakoskis: 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?
Speaker Change: 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
Speaker Change: modern and higher throughput facilities. And so a key pillar of our growth platform
in our retail network, our downstream network, is...
Speaker Change: what we call our network optimization, that is looking at what might be higher sustaining capex, lower productivity.
Speaker Change: storefronts and consolidating, you know, what might be three or four of them in a region.
into one new, modern, throughput, safer,
Speaker Change: did an introduction on this at the beginning of the webinar. It's a great plugin for Facebook for anyone who would like to start signing up and get started. A coolbie flag as well. Thank you so much for joining us. Thank you, Brendan. Godspeed. See you all next time. Bye-bye. All right.
Speaker Change: 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.
It's not that you know
Speaker Change: Fewer selling locations means fewer service levels or less organic growth.
Speaker Change: 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.
Speaker Change: And as we do that, we look at the opportunities for network optimization. And again,
serving SAR growers and improve service levels.
Speaker Change: 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 servicing out of fewer, but more efficient.
Speaker Change: branches in order to meet the demand of those growers as they consolidate and get larger in size as well. From a crop protection standpoint,
Speaker Change: We've 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 we're sitting in a really good position. From an inventory standpoint on crop protection, we've driven our inventory, 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.
Chris Parkinson: Thank you. Your next question comes from Chris Parkinson from Wolfe Research. Please go ahead.
Hey guys, good morning. It's actually Andrew on for Cress
Chris Parkinson: 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, what's going on in the market?
you know, further share buybacks, dividend, etc.
Chris Parkinson: Yeah, thanks, Andrew, for the question. So you will have seen that we just increased our dividend.
Chris Parkinson: and that's increased on per share basis 36% since the since the company was formed and and We use the word stable and growing and you know, we can kind of think of it in that billion dollar range
Chris Parkinson: As we continue to fund the dividend. Yeah, we can talk about sources and uses after that. But to your point,
Mark Thompson: 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 it over to Mark.
to talk more about that.
Speaker Change: 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.
Speaker Change: just the intense focus we have on structurally growing sources of cash in the company.
Speaker Change: So, the single biggest driver we have of that is continuing to grow cash flow from operations.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: We expect to deploy total capital of about $2 to $2.1 billion, which we've optimized lower once again this year.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: So when you take all of those things into account, that's about $3.5 to $3.6 billion in total uses.
Speaker Change: 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.
Speaker Change: 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
Speaker Change: 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 radical basis.
Speaker Change: 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 what 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 the 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.
Edlaine Rodriguez: and maintenance and market share at about that, you know, sort of 19 and a half percent.
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 that, you know, it's kind of that $60 a ton as something that we point to.
And it's something we've pointed to for some time.
Edlaine Rodriguez: a 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.
Lucas Bermont: Thank you. Yeah, so I just want to go 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 sort of talk of things maybe normalizing there, could you walk us through your range of outcomes behind seeing 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 MBTU last week, it's down in the $15 per MBTU range today. And that curve's pretty flat.
Speaker Change: as we look throughout the year. We know that as we look through the end of
Speaker Change: 2025. 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 and so that's that's driving the outlook for gas.
Speaker Change: 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.
Speaker Change: That said, there's potential for volatility in that price. In any scenario, we'd expect that the cost curve will remain above
Speaker Change: where it was prior to the war beginning, just given the reliance on imported LNG into Europe.
Speaker Change: 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.
Speaker Change: And we wouldn't expect that to come on stream as we go through the year.
Speaker Change: 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.
Speaker Change: over the medium term, just given continued demand growth exceeding capacity additions.
Rahi Parikh: Thank you. Your next question is from Rahi Parikh of Barclays. Please go ahead.
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? Are you lending 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 to what we're actually seeing on the ground.
Jeff Tarsi: 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 our inventory down in that Brazilian market and actually
Jeff Tarsi: year-over-year basis we've driven our ambulatory down 46% which puts us in a really good position, takes a lot of risk.
Jeff Tarsi: out of our business from that standpoint. I would think that at the farm gate, there has been destocking over the last two years.
Jeff Tarsi: 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
Jeff Tarsi: two to three years. And from a credit side of things, we're always gauging our credit as intentionally 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.
Jeff Tarsi: We continue to analyze that and make really good decisions based on the P&L opportunities of the customer.
Aaron Cacciarelli: Thank you. Your next question comes from Aaron Cacciarelli of Barenburg. Please go ahead.
Hello, good morning.
Speaker Change: I think we come from two years of volume above long-term trend for potash and this year we have 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? 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 on sort of pre-war levels and 2.5% average annual growth rates as the world seeks to grow more food.
Speaker Change: and some of the other strength that we talked about in Southeast Asia in record...
Speaker Change: record fertilizer consumption in Brazil last year, looking for that to increase again this year. So strong demand fundamentals, the low end of that range is really it is a supply aside 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 in the limitation this year we believe in the face of strong demand would be on the low end would be availability of supply.
Speaker Change: 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.
Michael Tupom: Yeah, you bet, Mike. It really is a question of timing and maybe buyer behavior, but I'll pass it over to...
Mark Thompson: to Mark to talk about our assumptions there. 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.
Speaker Change: Really, if you look at our guidance range, 13.6 to 14.4 million tons.
Speaker Change: 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.
Speaker Change: If you look to the upper end of our guidance, we would assume no impact from tariffs and really no supply chain disruptions.
Speaker Change: On the lower end is really where the tariffs question comes into play and it's really a lot as Ken said It's 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.
Jeff Holzman: Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for your participation, and you may now disconnect.