Q1 2025 Nutrien Ltd Earnings Call
Greetings and welcome to nutrients 2025 first 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 Holtzman VP of Investor Relations.
Jeff Holtzman: Thank you operator, good morning, and welcome to nutrients first quarter 2025 earnings call.
Jeff Holtzman: As we conduct this call various statements that we make about future expectations plans and prospects contain forward looking information.
Jeff Holtzman: Certain assumptions were applied in making these conclusions and forecasts. Therefore actual results could differ materially from those contained in our forward looking information.
Jeff Holtzman: Additional information about these factors and assumptions is contained in our quarterly report to shareholders as well as our most recent annual report MD&A.
Jeff Holtzman: All information for.
Speaker Change: I will now turn the call over to Ken Seitz nutrients, President and CEO and Mark Thompson, our CFO for opening comments.
Speaker Change: Good morning, Thank you for joining us today as we review our Q1 performance.
Speaker Change: Do you think priorities and the outlook for our business.
Speaker Change: First quarter results were supported by the execution of operational efficiency and cost savings initiatives. We maintained our 2025 full year guidance ranges its operating performance and capital allocation priorities are consistent with previous expectations.
Speaker Change: In recent months geopolitical events and trade disruptions have created volatility in global financial markets.
Speaker Change: However to this point these issues have not impacted the outlook for our business.
Speaker Change: Fertilizer market fundamentals have strengthened supported by strong global demand and tight supplies.
Speaker Change: Canadian fertilizer products that are critical for crop production and food security continues to move across the border tariff free and.
Speaker Change: And our downstream retail network is well positioned on fertilizer and crop protection suppliers to meet demand for the current growing season.
Speaker Change: U S farmers intend to increase corn acres by approximately 5% in 2025, which is positive for crop input demand.
Speaker Change: We're seeing strong fertilizer application rates this spring and our U S retail fertilizer sales volumes were up 8% in April compared to the same period in 2024.
Speaker Change: As we plan for the remainder of the year, we will continue to position our supply chain to efficiently serve our customers in a dynamic market environment.
Speaker Change: Yeah.
Speaker Change: Now turning to potash global supply and demand fundamentals have strengthened significantly.
Speaker Change: Spot market prices have increased by 10% to 20% since the beginning of 2025.
Speaker Change: We have maintained our annual global potash shipment forecast in a range of 71 to 75 million tonnes with the current level of demand testing existing global operating and supply chain capabilities.
Speaker Change: Canpotex is fully committed for the second quarter due to strong demand in all major offshore spot markets.
Speaker Change: In China, a step change in potash consumption in recent years combined with lower imports to begin 2025 has led to an estimated $1 1 million ton reduction in its strategic reserve.
Speaker Change: Yeah anticipated favorable consumption trends and lower inventories will support strong import requirements in the second half of the year.
Speaker Change: Although ureter and nitrogen solutions markets have also strengthened considerably in 2025 due to seasonal demand and supply restrictions.
Speaker Change: In the U S. The combination of higher corn acres unlimited in nitrogen applications. This past fall.
Speaker Change: Supporting demand well trade flow shifts and constrained logistics have impacted supplies.
Speaker Change: Neutrolin is well positioned to optimize product mix from our low cost nitrogen network to meet demand. This spring.
Speaker Change: The other fundamentals our focus is to enhance our core business across the energy value chain and progress towards our 2026 performance targets, which provide a pathway for driving structural improvements to our earnings and free cash flow.
Speaker Change: In our upstream business, we are leveraging our world class asset base to bring on incremental low cost fertilizer volumes as demand grows.
Speaker Change: This includes initiatives that enhance the safety reliability and low cost position of our assets.
Speaker Change: Investments in our midstream distribution network will continue to be a priority to ensure we can efficiently serve our customers and support our growth objectives over the long term.
Speaker Change: Trade disruptions in recent years have further highlighted the importance of our leading global supply chain.
Speaker Change: And our downstream retail business, we have well defined growth opportunities, including expansion of our proprietary products business execution of network optimization projects and tuck in acquisitions.
Speaker Change: In the first quarter, we completed two acquisitions in the U S, adding high quality assets with a strong strategic fit within our retail network.
Speaker Change: Through actions to simplify our business and focus on core assets in markets. We have made meaningful progress on our cost savings and capital expenditure targets.
Speaker Change: We remain on track to achieve our $200 million target for consolidated annual cost savings in 2025, one year earlier than the original goal.
Speaker Change: We have further optimized the capital this year with planned extended expenditures down more than 500 million compared to 2023 levels.
Speaker Change: In addition, the divestiture of noncore assets has provided us with incremental cash flow.
Speaker Change: In the first quarter.
Speaker Change: First at our remaining position inside of FERC, which was a passive equity ownership stake.
Speaker Change: Total proceeds from the divestiture during the fourth quarter of last year in the first quarter of 2025 amounted to $223 million.
Speaker Change: These actions further support nutrients ability to deploy capital towards high conviction priorities.
Speaker Change: And improve earnings and free cash flow per share through the cycle.
Speaker Change: I will now turn it over to Mark to review, our Q1 results 2025 guidance and provide additional details on our capital allocation priorities.
Mark Thompson: Thanks, Ken as Ken described our operating performance has progressed in line with our previous expectations.
Speaker Change: In the first quarter, which is typically a seasonally slower period for our downstream retail business nutrient delivered adjusted EBITDA of $852 million.
Speaker Change: Retail adjusted EBITDA totaled $46 million this weather related delays reduced crop input sales in the U S and Australia.
Speaker Change: Retail expenses were down 5% compared to the prior year as we progressed cost savings initiatives in Brazil, we are demonstrating greater stability in our business performance supported by the execution of our margin improvement plans.
Speaker Change: We've maintained our full year retail adjusted EBITDA guidance range of $1 65 to 185 billion.
Speaker Change: Given the pace of field activity through early May we expect the slower start to applications in the first quarter will be made up in the second quarter.
Speaker Change: At the midpoint of our annual range, we anticipate year over year growth your crop nutrient sales volumes increased proprietary products' gross margin and continued recovery in Brazil.
Speaker Change: Really offset by a return to historical average crop protection product margins.
Speaker Change: In potash, we delivered adjusted EBITDA of $446 million in the first quarter.
Speaker Change: From the prior year due to lower net selling prices.
Speaker Change: Our realized potash price in North America reflected the reset and values for the winter fill program.
Speaker Change: While the improvement in our offshore selling price was driven by higher international benchmark values and lower logistics costs.
Speaker Change: Our North American reference price increased three times following the completion of our winter fill program, which we expect will support higher domestic selling prices in the second quarter.
Speaker Change: We utilized our extensive midstream distribution network to deliver $3 4 million tonnes of potash in the quarter.
Speaker Change: Similar to the record level sold in the same period of 2024.
Speaker Change: We expect annual potash sales volumes of $13 six to $14 4 million tonnes in line with our historical average share of global shipments.
Speaker Change: Our nitrogen operating segment generated adjusted EBITDA of $408 million in the first quarter down from the prior year due to higher natural gas costs and lower equity earnings from our investment in <unk>.
Speaker Change: Benchmark prices for urea and other upgraded nitrogen products has strengthened since the beginning of the year.
Speaker Change: While ammonia values have declined from historically strong levels in the fourth quarter of 2024.
Speaker Change: Our ammonia operating rates increased to 98% in the first quarter supported by reduced maintenance downtime and improve reliability at our sites.
Speaker Change: We expect annual nitrogen sales volumes in the range of 10, 7% to $11 2 million tonnes with higher quarterly volumes for the remainder of 2025 compared to the prior year.
Speaker Change: Given the recent volatility in global natural gas markets. We now project Henry hub natural gas prices to average between $3 25, and $4 per <unk> in 2025.
Speaker Change: Our western Canadian nitrogen plants continue to benefit from low gas costs due to a wider price spread to Henry hub compared to historical average levels.
Speaker Change: In phosphate, we generated adjusted EBITDA of $61 million in the first quarter.
Speaker Change: Down from the prior year, primarily due to the impact of lower production volumes and higher input costs.
Speaker Change: We continue to expect lower production levels in the first half of 2025 compared to last year and improved operating rates in the second half following the completion of planned turnaround activity.
Speaker Change: Our capital allocation priorities also remain consistent.
Speaker Change: We are focused on initiatives that support the achievement of our 2026 performance targets optimizing investments in working capital and continuing to review noncore assets on our balance sheet all of which we expect will enhance sources of cash flow over time.
Speaker Change: From our uses of cash perspective, we've committed two to $2 1 billion in capital to sustain safe and reliable operations and to progress a set of targeted growth investments that are aligned to the priorities that Ken previously described.
Speaker Change: This includes investments in our proprietary products business retail network optimization nitrogen debottleneck projects and potash mine automation.
Speaker Change: February we indicated that additional free cash flow in 2025 would be allocated to a narrow set of incremental growth opportunities and to share repurchases priorities that we expect will increase free cash flow per share.
Speaker Change: We have deployed capital on both fronts in 2025 completed two U S retail acquisitions in the first quarter and repurchasing $3 6 million shares for a total of $188 million as of May six.
Speaker Change: We intend on continuing to repurchase shares on a ratable basis under our renewed and CIP program. That's authorized until the end of February 2026.
Speaker Change: Now I'll turn it back to Ken.
Ken Seitz: Thanks Mark.
Ken Seitz: To summarize we have a constructive outlook for our business as global fertilizer market fundamentals have tightened in 2025.
Ken Seitz: Supported by growing demand and tight supplies.
Ken Seitz: We continue to monitor potential risks related to trade disruptions and have built a resilient business that is well positioned to respond and under any scenario.
Ken Seitz: We are taking a disciplined and intentional approach to capital allocation prioritizing high value investment opportunities divesting noncore assets and returning cash to shareholders.
Ken Seitz: We have demonstrated progress in each of these areas in 2025, and we will continue to focus on actions within our control that we believe maximize long term value for our shareholders.
Ken Seitz: 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 followed by the number one on your Touchtone phone you will hear from that your hand has been raised should you wish to withdraw your question. Please press star followed by the number too.
Ken Seitz: If you are using a speaker phone please lift the handset before pressing any keys.
Speaker Change: Our first question comes from Joel Jackson from BMO capital markets. Please go ahead.
Joel Jackson: Hi, good morning, everyone.
Joel Jackson: So you don't give guidance for EBITDA, you gave just to retail.
Speaker Change: And I don't want to give me a guy who I wanted to if you are not going to ask you is that if I look at versus three months ago. What you have for your commodity price deck and don't even tell us that but would you agree and if you mark to market your earnings.
Speaker Change: You would expect that you are looking at higher outlook now than you would've thought three months ago, because all the commodity prices have moved to good use spring like could you talk about that that the outlook is improving or not where you should be earning more than maybe what you would've thought three months ago, and youre not going to tell us what those numbers are in that cycle.
Speaker Change: <unk>.
Speaker Change: Yeah.
Speaker Change: Good morning to all and thank you for the question. The short answer is yes, we agree.
Speaker Change: With your assessment of now versus three months ago.
Speaker Change: Yes, it's related to a number of things that it does go back to what we're seeing.
Speaker Change: Across what we do the strength of demand across our fertilizer products and we can talk about potash, where we issued our view of 71 to 75 million times.
Speaker Change: Demand this year and what we're seeing we believe is the intersection of the market the ability to supply that so it'd be the supply stack yet logistics constraints. So that as a result, we are seeing strength in Asia.
Speaker Change: Our price in every market that we serve I mean, even in our own domestic volumes, we increase the price three times since our winter fill program to your point that's within the last three months.
Speaker Change: Sure, we're 90% committed through Q2 in our domestic volumes are fully committed.
Speaker Change: With Canpotex through Q2 so.
Speaker Change: Could talk about what's happening in Korea in UAS, and where we've seen the supply disruptions as strong to bed.
Speaker Change: With our retail business as we've talked about.
Speaker Change: It's a story.
Speaker Change: As opposed to quarter et cetera, where are we.
Speaker Change: With some weather delays in the first quarter, we're now above 50% why is it dead.
Jeff Holtzman: We can hand, it over to Jeff, Turkey things are going strong.
Speaker Change: The planting season that when we're seeing significant volume go underground. So we're very encouraged by what we're seeing at the moment.
Joel Jackson: So again, Joel it's just to say that we agree with you.
Speaker Change: Certainly constructive on the balance of the year.
Speaker Change: Your next question comes from Andrew Wong from RBC Capital markets. Please go ahead.
Andrew Wong: Hey, good morning, Thanks for taking my questions.
Speaker Change: Maybe can you provide an update on Brazil retail like are we on track to see that business get back to breakeven and just going forward now.
Speaker Change: Now that you've spent some time on the turnaround in Brazil.
Andrew Wong: It is.
Andrew Wong: That looks like for nutrient as you kind of get into like let's say 2026 and beyond.
Speaker Change: Yes, Thanks, Andrew So again the short answer is yes, we are on track.
Speaker Change: At the macro level, the Brazilian farmer had a strong soybean crop and soybean prices strengthen.
Speaker Change: Of course.
Speaker Change: Watching their community of corn crop grow at the moment, but all indications are that it'll be a strong corn crop as well sort of Brazilian farmers that a bit better place and of course, you combine that with what we've been doing with our own business and we've talked about I think as we've talked about head count reduction we talked about the closure of unproductive locations.
Speaker Change: How we're focusing on collections, how we're focusing on proprietary products and that's all planned to bring us back to a cash neutral position. This year, which is absolutely on track Jeff do you want to say a few words about that cannot just reiterate.
Speaker Change: Some of the comments that you made yokels macro standpoint, the growers came out very strong soybean yields there, which soybean harvest they got off to a good start with second crop corn.
Speaker Change: That's progressing nicely not a lot of weather scares there.
Speaker Change: That market, we have seen as we saw last year, we continue to see pressure in that crop protection market. They.
Speaker Change: Big influence of generics.
Speaker Change: And that in that market as well and our focus with our business can you state, we're really focused very intently on our controllable expense manage but a heavy.
Speaker Change: Heavy heavy focus on margins would.
Speaker Change: We've been very focused on bringing our inventory down and we've been successful at that and then again a lot of attention to our receivables book.
Speaker Change: We expect to deliver a notable improvement over last year.
Speaker Change: I want to see those benefits start to show up.
From a margin standpoint, and from an expansion standpoint, as well and we we plan to carry that momentum forward through.
Speaker Change: Through the remainder of the year.
Speaker Change: Jean just mentioned that we've idled our blending facilities.
Speaker Change: We've taken at our assets that Werent, giving us return for months, whether we're talking about locations or experience centers and we reduced our head count by about 400. So we've done a lot of work there over the last 12 to 18 months and we're starting to see the results of that thanks, Joe and Andrew as we look into 2026, I think you can expect more of that.
Speaker Change: But it will be watching the market evolution.
Speaker Change: You know the health of the Brazil, Brazilian farmer and at the same time continuing to execute on our improvement plan.
Speaker Change: I think Jeff fair to say, we're watching crop chemistry quite closely if there is one.
Speaker Change: Theres, one shelf of ours.
Speaker Change: Caught up yet is chemistry.
Speaker Change: We'll be looking at the 2026 to see that but we're still seeing competition from generics and that's certainly stressing prices in that part of the world. Yeah Kian I failed to mention it now I don't want to leave us out, but we still see a lot of opportunity on the proprietary product side of our business, especially with that plant nutritionals and biological products.
Speaker Change: Well on the proprietary receipts that business, what we're very focused in those two areas.
Vincent Andrews: Your next question comes from Vincent Andrews from Morgan Stanley. Please go ahead.
Vincent Andrews: Alright, thank you.
Vincent Andrews: Could you talk a little bit about just sort of how youre seeing the first half shape up in wholesale and I'm just trying to think through you said about 90% of the book is filled domestically can you give us a sense of sort of how much sequential price improvement you'll see it's obviously been a rising price environment. So just trying to understand.
Vincent Andrews: How much of that you might have captured.
Vincent Andrews: And <unk>.
Vincent Andrews: Yes, Thanks Vincent.
Speaker Change: Again, I would say that the first half in terms of our upstream businesses.
Vincent Andrews: We're constructive.
Vincent Andrews: I can start with potash, where again with such strong global demand. We can go from market to market, where again in China, we're seeing very strong consumption.
Vincent Andrews: Quite low inventory levels.
Vincent Andrews: India with its applied subsidy, but one that.
Vincent Andrews: At today's prices would encourage probably 4 million tons of demand in that part of the world in the U S. We talked about what we're seeing in supply chain season here.
Vincent Andrews: In the second quarter and things are going quite strong domestically.
Vincent Andrews: We can talk about what we're seeing in Indonesia, Malaysia, albeit 4000 bring it.
Vincent Andrews: Per ton palm oil prices come off a bit but still at a level that encourages strong demand that we're seeing that.
Vincent Andrews: We get about a $360 pricing is southeast Asia at the moment for standard grade product.
Vincent Andrews: So again in Brazil of course, where we just talked to you last year $47 million tightens of crop nutrient demand and we're expecting something similar this year. So we can go on the demand side market to market and it certainly gives us that confidence in the 71 to 75 million tons and again, if you look at what's happening on the supply side of the equation and the market's ability to deliver where believe we.
Vincent Andrews: Leave those two are meeting ended their meeting.
Vincent Andrews: With a result of strengthening prices in just about every market that we serve.
Vincent Andrews: With you over to <unk> to nitrogen products were here in the planting season.
Vincent Andrews: We've had really strong urea UA and prices.
Vincent Andrews: Tony at some softening with new supply coming on we're all watching China as it relates to export volumes, but at the moment in the planting season, we're seeing quite a bit of strength.
Vincent Andrews: So again market to market and we can talk about phosphate phosphates phosphate prices, particularly stroke market to market wholesale business ups, our upstream business, we're constructive on the first half and frankly into the balance of the year.
Richard <unk>: Your next question comes from Richard <unk> from Wells Fargo. Please go ahead.
Speaker Change: Great. Thanks for taking my question just wondering on the nitrogen segment. It looks like you had higher costs as a headwind in the quarter. Just wondering how much of this was related to Trinidad.
Richard <unk>: Was this across all your facilities, obviously higher natural gas price.
Speaker Change: North America as well.
Speaker Change: Then also just maybe on tariffs I guess, how are you thinking about handling that if if there are going to be some tariffs on material coming into the country from other regions, let's just try that thank you.
Speaker Change: Yeah. So.
Speaker Change: Two questions there one on cost what I'm tariffs up maybe I'll hand, it over to Mark to talk about.
Speaker Change: We're seeing first quarter first half were a cost center nitrogen network and then labor to Chris just talk a little bit about I guess, 10% tariffs.
Speaker Change: Some of the other regions produce nitrogen.
Speaker Change: Thanks, Jen good morning, Rich on your first question on nitrogen costs Q1 is pretty straightforward answer.
Speaker Change: Obviously, when we came into the year, we had expected to see Henry hub prices in a range.
$3 25 to $3 50.
Speaker Change: To begin the year and natural gas prices.
Speaker Change: Began the year higher than we anticipated and more volatile fashion than we anticipated. So the majority of the cost that you're referring to.
Speaker Change: In the quarter.
Speaker Change: That would've been driven by higher <unk>.
Speaker Change: <unk> prices in North America that said, we've seen gas prices ease off somewhat.
Speaker Change: While there is still volatility in the market, we've widened our range for the remainder of the year to be $3 25 to $4 as we've moved through the winter, we'd seen gas prices eased a little bit.
Speaker Change: Albeit it's still volatile going forward I would just point out that obviously, we continue to benefit from a wider than historical spread with our plants up in Alberta and continue to expect to reap the benefits of that through the remainder of the year, so with that I'll pass it over to Chris.
Chris: Yes, Thanks, Bob Good morning, as it relates to tariffs.
Speaker Change: Some of the price increase was saying whether it be <unk> baby from the imposition of tariffs for most countries that had the 10% it posed to them, but generally the story is much more about demand and as you heard from from Ken in these opening remarks about the impact of planning 95 million acres of corn, a little bit of catch up now.
Speaker Change: Trojan application that was missed in the fall and Thats, the real factor thats driving the prices, particularly those of those two products.
Speaker Change: Your next question comes from Ben Isaacson Scotiabank. Please go ahead, okay. Thank you very much and good morning.
Speaker Change: You you gave global potash shipment guidance of 71% to 75 million tons 75, being strong demand 71 being weak supply.
Speaker Change: You don't have weak supply and so my question is with prices now starting to move.
Speaker Change: <unk> and through mid cycle, you've talked about canpotex being sold out in Q2.
Speaker Change: <unk> peer yesterday nudged up the volume a little bit in potash, how should we think about nutrient responding to prices is it too early or our price is too low for nutrient to start increasing volume when could we expect you to to respond to higher prices. Thank you.
Speaker Change: Yeah. Thank you Ben and know where prices are not to blow, but we're encouraged by again by what we're seeing in all of the markets that we serve but it is early in the year and we are in the middle of the planting season here in North America.
Speaker Change: And we have a guidance range that we've put out and we've maintained that guidance range. So could we find ourselves.
Speaker Change: Era unfolds and in an environment, where we're somewhere between the midpoint and the top end of that guidance range, we could and as you know we.
Speaker Change: Certainly have the ability to do without with there are six months, our flexible network our ability to surge capacity when we need to in an environment, that's calling for our times. So we're talking to our customers every day about their needs their demand.
And again, we're constructive on what we see for the balance of the year.
Speaker Change: Your next question comes from Chris Parkinson of Wolfe Research. Please go ahead.
Chris Parkinson: Great. My question kind of straddles two prior questions, but in the beginning of the year on the potash side.
Chris Parkinson: There was this presumption that the market would benefit from Belo, Russia, and Russian curtailments, perhaps a little bit shy.
Chris Parkinson: China, you know decent matter out of Chile, and then obviously it allows it's been a bit of a debate.
Chris Parkinson: But all in all it looks like supply has actually been quite healthy out of that this year, especially in Belarus versus prior expectations, Russia, perhaps a little bit less so but that it further indicates that this is a demand driven environment. So if we take that into consideration.
Chris Parkinson: Whether or not you got correct as part of this.
Chris Parkinson: How should we think about the sustainability of higher prices because I think previously people were thinking hey, you could get a little bump up but would then we're just gonna give everything back in the second half and I think it's looking increasingly less so so can you just help us can compartmentalize your way of thinking and how that plays in your strategy for the balance of the year. Thank you so much.
Speaker Change: Yeah, Chris Thank you for the question.
Speaker Change: Again I go back to the way demand is materializing this year and.
Speaker Change: The global grower and the affordability of crop nutrition.
Speaker Change: As they try to maximize yield.
Speaker Change: That's happening in North America, as we speak Chris mentioned 95 million acres of corn, which is again constructive for crop nutrition going to grab but we can go market to market and we're seeing really really record level demand in there that gives us confidence in that 71 to 75 million times, we've talked about the constraints on the top.
Speaker Change: End of our guidance rates global shipments as being a supply constraint.
Speaker Change: Even without the curtailments, perhaps that were announced in places like Russia, and Belarus maintenance downtime, which.
Speaker Change: We may yet see yes, we've had seen some volume reductions out of Chile at the margin in that perhaps not all of the incremental tons that were announced coming out at a loss. So there have been so display supply disruptions, but what we believe we're seeing is again this intersection where global demand is beating the market.
Speaker Change: <unk> ability to supply a ship and as a result, we have seen again strengthening.
Speaker Change: Yeah and prices.
Speaker Change: What market that we serve China, and India contracts, obviously havent been settled so then we look over the balance of the year and.
Speaker Change: How we're thinking about the remainder of 2025 and again, that's where we say we're quite constructive.
Speaker Change: Your next question comes from Steve Byrne from Bank of America. Please go ahead.
Steve Byrne: Yes. Thank you I have a couple of retail questions.
First the two bolt ons, where do you think EBITDA contribution could be post synergies.
Steve Byrne: Another one being your proprietary brands.
Steve Byrne: With our Loveland and Donna grow are you are you are you gaining share in those brands would you say versus.
Steve Byrne: Other other brands out there and then lastly, any update on the launch of the.
Steve Byrne: Infinity product.
Steve Byrne: Absolutely Steve. Thank you for the questions I'll hand, it over to Mark to talk about.
Steve Byrne: Your first question as it relates to the acquisitions and then over to <unk>.
Speaker Change: To Jeff to talk about <unk>. So certainly we can we have a we can talk about what's happening with infinity.
Ken Seitz: Yes, Thanks, Ken Good morning, Steve So, Steve maybe just to take a step back.
Ken Seitz: Continued to say that over the past couple of years, we've been cautious in our deployment of capital and ensuring that where we're putting capital to usage.
Ken Seitz: Highest return opportunities to continue to grow free cash flow per share than we had expected, but as we entered 2025, we would begin to see our U S retail tuck in acquisitions come back into focus given the moderation in earnings profile and multiples and so we've made good on that side beginning some of that activity again, and we continue to be thoughtful and prudent in how we do that.
Ken Seitz: These two acquisitions were relatively modest in size, we deployed just over $10 million in capital on these two acquisitions, but as always when we complete. These they are located in a very strategic area of the U S. The larger of the two.
Ken Seitz: As a distributor called Welch and <unk>.
Ken Seitz: It's a very nice fit with our network of business, we know very well and we continue to see a profile of its traditional for us we see the ability to take a turn or two of synergies from proprietary products expense management, and just bringing our procurement advantages to bear so as we said earlier in the call as we move through.
Jeff Holtzman: The year that incremental dollar is really going to be allocated among tuck in acquisitions to the extent, that's the prudent place to deploy capital and share repurchases and we'll continue to evaluate those opportunities. So I'll pass it over to Jeff on your other questions. Yes, good morning, Steve It out.
Yes, a couple of questions you asked around proprietary and <unk>.
Jeff Holtzman: Started off a little bit as it relates to as you know we got off to a delayed start in the first quarter of this year now I'll remind you. We don't remember last year was phenomenal store whether standpoint in the first quarter compared to a we didn't get the weather the last two weeks of March.
Jeff Holtzman: In the in the campaign, we're in right now, but from a seed standpoint, our revenue at a mark and jump in the first quarter and Steve that's predominantly because of the shift we've seen from soybeans to corn, particularly in the south.
Jeff Holtzman: We're up about 25% hold acreage corn acreage in the south and now across the whole U S. That's not a material number but it is certainly going to contribute to that 5 million acre growth, we're projecting for the year.
Jeff Holtzman: Doing very well with our corn varieties with data growth and so this has given us a good opportunity to get there.
Jeff Holtzman: As well we continue to be really excited about our about our proprietary business as a whole we've got a we.
Jeff Holtzman: We forecasted about an 8% increase eight 9% increase in gross margins this year across that portfolio of products and we think with the increased corn acres and in our attention to our <unk> Nutritionals and bio stimulant products. We think are going to have a really good campaign. This year.
Jeff Holtzman: I might also add that we've added 12 new products.
Jeff Holtzman: For this year and we plan to introduce.
Jeff Holtzman: As many as 20, new products going into 2026.
Jeff Holtzman: From that standpoint, you asked about infinity.
Jeff Holtzman: Specifically.
Jeff Holtzman: Having a nice amongst their product we're right in the right.
Jeff Holtzman: Right in the throes of it put to ground right now and I'm just design choices you are see what our results look like as we get our nitrogen applications put down as you notice nitrogen attachment too. So yeah, we feel we're excited about our opportunities and our proprietary.
Jeff Holtzman: Product portfolio, we're expecting a lot of growth out of that segment over the next two years.
Edlin Rodriguez: Your next question comes from Edlin Rodriguez of Mizuho. Please go ahead.
Edlin Rodriguez: Thank you and good morning, everyone.
Speaker Change: And also Mark. This is a question I've asked before and someone was intriguing to get your insight there and also put you on the Odyssey.
Speaker Change: Potash and phosphate, but when you look at the fundamentals over the next six months or the next 12 months, which one you think is a better position and please you can see you like both for your children understand do you have to choose one over there.
Speaker Change: We like both but no. Thank.
Speaker Change: Thank you for the question.
Speaker Change: Obviously, we've seen.
Speaker Change: <unk> strong phosphate fundamentals strong demand and limited supply and we expect that that will continue over the course of this year. So.
Speaker Change: We sit in the historically high phosphate prices, we don't see any reason why we would see softening over the course of 2025.
Speaker Change: Potash is a story of.
Speaker Change: The vessel is coming together from the start of the year that makes us a constructive on perhaps forbid throughout.
Speaker Change: The balance of 2025, I mean, we've seen 20% increases in potash prices since the start of the year again, we've increased our own domestic price three times and so.
Speaker Change: As suppliers are certainly buyers in China, and India are starting to think about formulating price ideas.
Speaker Change: Again, we're constructive so it's just to say that phosphate we think it will stay strong and potash is becoming stronger.
Speaker Change: Your next question comes from Samir Patel from CIBC capital markets. Please go ahead.
Samir Patel: Hi, good morning.
Samir Patel: Can you speak to the M&A pipeline for retail.
Samir Patel: In terms of the scale of opportunities you're seeing.
Samir Patel: Vendor price expectations and just given your latest tuck ins do you think you can hit the 2 billion objective for 2026 with the existing platform.
Samir Patel: Yeah, no. Thanks Amir.
Samir Patel: Certainly as we think about our 2026 target. We believe we're on track there and we don't think about it.
Samir Patel: These couple of acquisitions that we did at the start of this year as a necessity to get within that range, we're thinking more about frozen dairy products about cost savings initiatives, many of which we have already achieved and we've talked about that in a year ahead at our 200 million dollar SG&A savings, we think about network.
Speaker Change: Should we think about yes, the potential for tuck ins.
Speaker Change: And certainly it gets us gives us confidence in getting into the bottom end of our one nine to $2 1 billion dollar EBITDA range for by 2026 for our downstream business.
Speaker Change: With some cooperation from a weather pattern.
Speaker Change: Modern prices, sorry, you could find yourself well within that range, but maybe I'll hand, it over to.
Jeff Holtzman: So Jeff to talk about.
Jeff Holtzman: The opportunities that we're seeing in the pipeline and.
Mark Thompson: Maybe mark can talk a little bit about how we're thinking about price expectations.
Jeff Holtzman: Yes.
Jeff Holtzman: We're in that period of the year, where we've been slow and they took the upside of think breaking starting into the spring planting season in North America, and so but I do expect to see the opportunities increase as we get through the season, especially as we get to the back half of the year.
Jeff Holtzman: We want to be very opportunistic when it comes to Turkey and stuff.
Jeff Holtzman: In my mind, I've kind of got sweet spot.
But what good took against looked like for us, we particularly like to grow in the corn belt.
Jeff Holtzman: If we can find the right opportunities there.
Jeff Holtzman: I might also mentioned that we were seeing the pipeline pick up a bit in Australia as well with.
Jeff Holtzman: We've had a good history of doing tuck ins in that market, but I think you asked the question around valuation does well, we're going to be very disciplined.
Jeff Holtzman: When it comes to the valuation of the Turkey M said it in my opinion I think we've seen the value come down so.
Jeff Holtzman: Over the last 18 months.
Jeff Holtzman: Very disciplined and prudent as we look at these opportunities just as the two we just we just closed.
Jeff Holtzman: Just prior to the spring season.
Jeff Holtzman: Yeah, Thanks, Jeff Yeah, I don't know.
Speaker Change: I have a lot that I think Amir just to your to your question specifically on valuation I would say to Jeff's point, we've seen valuations come back in line with where we are comfortable historically.
Speaker Change: As an example, we continue to see high quality acquisitions in that small to medium size range, that's sort of a six to seven times EBITDA on a pre synergy basis and as I mentioned in a prior response, we continue to see the levers to be able to take one to two turns of EBITDA out of those acquisitions.
Speaker Change: With the synergy opportunities that we have and to Jeff's point.
Speaker Change: Continue to be quite selective and Theres no.
Speaker Change: Pre determined are necessary amount of capital that needs to be deployed to tuck in acquisitions as Curt said, it's really where is that dollar most prudent that's going to generate shareholder returns and maximize free.
Speaker Change: Free cash flow per share growth. So we'll continue to evaluate these as we move through the second half of the year opposite the other activities and opportunities we have for capital.
Speaker Change: Your next question comes from Duffy Fischer from Goldman Sachs. Please go ahead.
Duffy Fischer: Yeah. Good morning, guys a question around crop protection and retail so we've had a number of the producers already come out with their earnings and you know it seems like pricing has been weak or kind of across the board. So within your business how difficult as pricing band is that part of the down Bar chart.
Speaker Change: They're from slide six.
Speaker Change: Is that something structural do you think or is that just a hangover from the oversupply that we had the last couple of years.
Speaker Change: And then just the third part of that would be a number of the generics to come into the U S start in China are you seeing the tariffs have an impact on those generics, where maybe that would be beneficial to you that the importers theyre going to have to pay a high tariffs and maybe price them out of the market.
Yes.
Speaker Change: I'm not sure Kian mode.
Speaker Change: Go ahead please.
Speaker Change: No.
Speaker Change: I think our routes.
Speaker Change: Part of your question there if people look at crop protection for the first quarter and obviously revenue resolved.
Speaker Change: Per se it dictated about weather, both in North America, and Australia, as well, but can drive us there and if I look at it from a margin perspective in the first quarter.
Speaker Change: We were off some low margin, but we had planned to be awful margin, we anticipated that we would see more pressure.
Speaker Change: And this crop protection market I think is twofold some of it some of it is.
Speaker Change: Hangover from inventory that was in the channel probably the bigger part of it is as you just mentioned a minute ago is generic pressure.
Speaker Change: We did see more generics come into this market, especially in North America, I mentioned, Brazil earlier, but we are starting to see that 12 to 18 months ago I do think that they live.
Speaker Change: I have no answer when repairs.
Speaker Change: How long they might be around but we're going to start to see pricing move up on the generics and we're already starting to see that from the generic suppliers today on that.
Speaker Change: Same time that'll affect affect the multinationals as well from that standpoint, and so that that could slow some of the flow of generics, particularly into this into this north American.
Mark Thompson: Mark, but growers have been a bit more selective.
Mark Thompson: This year been a little bit more pricey old products as they go into but that's to be expected.
Mark Thompson: We plan for that going into the year. We have to me, we have great offset to that and that is our proprietary products that we offer in that in that generic space.
Mark Thompson: We were in a very good position coming into this year and that we had already secured our inventory and had it over so we're not tariff affected.
Mark Thompson: On the majority of that volume and we've got very good offering in those markets, where they want to go a bit more to the generic side of it.
Speaker Change: He and I don't know if you had anything.
Jeff Holtzman: Thank you Jeff.
Mark Thompson: Just to say that.
Mark Thompson: We have assumed a 4% reduction in margins for crop protection this year.
Mark Thompson: We talk about our guidance range of $1 six to $1 85, there are some assumptions about everything you just described.
Mark Thompson: Yep.
Speaker Change: Your next question comes from Jeff Zekauskas of Jpmorgan. Please go ahead.
Jeff Zekauskas: Thanks very much.
Speaker Change: In crop protection your proprietary products.
Jeff Zekauskas: Quarter, we're down about 30%.
Jeff Zekauskas: <unk> gross profits were down about 35.
Jeff Zekauskas: But for your and non proprietary crop protection, maybe things were down about 10%.
Jeff Zekauskas: Why is it different.
Jeff Zekauskas: Secondly, what's the state of the Indian and Chinese potash negotiations.
Jeff Zekauskas: And third in your nitrogen business can you talk about how much nitrogen gets exported.
Jeff Zekauskas: Nitrogen and in retail.
Jeff Zekauskas: Can you talk about how much goes into the United States and whether that's being penalized in any way by tariffs.
Jeff Zekauskas: Thank you.
Jeff: Great. Thanks, Jeff So I'll hand, it over to Jeff tertiary to talk about.
Jeff Zekauskas: Proprietary.
Jeff Zekauskas: Particularly crop protection proprietary products.
Chris Parkinson: Then over to Chris to talk about China and India.
Jeff Zekauskas: <unk> products.
Mark Thompson: And then to Mark to talk a little bit about tariffs.
Jeff Zekauskas: E Jets.
Jeff Zekauskas: On the.
Jeff Zekauskas: Protection side of it as it relates to proprietary versus non proprietary and margin.
Jeff Zekauskas: It's strictly a timing in it.
Jeff Zekauskas:
Jeff Zekauskas: Predicting that we're in right now.
Jeff Zekauskas: Ken mentioned earlier, we've seen a very.
Jeff Zekauskas: Robust dark April that night.
Jeff Zekauskas: In our marketplace net increased crop protection market as well.
Jeff Zekauskas: In the first quarter because of the weather delays that we sold our custom application was down substantially in any products, whether we move them through whether they're a branded product or non branded product when we're able to put up their own reach we have different bar can structure for those products as well and and it's.
Jeff Zekauskas: Also affected by some of the higher the high margin API product experts in surfactants and such so when you've got a reduced reduction in body of it kind of offsets that whole margin structure as it relates to that we would expect to see that level itself out as we go into second quarter and we're seeing evidence of that now.
Chris Parkinson: The question over to Chris the second part, yes, Thanks, Jeff.
Chris Parkinson: Good morning, Jeff. Thanks for the question regarding China, and India kept chicks hatched out that engagements on those two contracts, but really big job against the backdrop that you've heard during the call of some very very strong market fundamentals, but perhaps more encouragingly no fundamental buildup of inventories anywhere in the world.
Chris Parkinson: As Ken alluded to there's some southeast Asia pricing right now that are that folks are looking to as an indicator and.
Chris Parkinson: So we're encouraged by by all of those all of those market fundamentals, but really.
Chris Parkinson: As you go around the world, whether it's North America, what we're seeing in Brazil, Southeast Asia, all steady and sustainable price increases on the back of that good demand some concerns about the production side and some very constructive and commodity prices.
Mark Thompson: Was that a mark will hand, it over to you.
Speaker Change: Yeah. Thanks, Chris Good morning, Jeff. So just on your third question I think the short answer is on a direct basis.
Mark Thompson: Our retail business is not being directly impacted by.
Tariffs on nitrogen products coming into North America.
Mark Thompson: Obviously as you know one of the benefits of our downstream retail business as the supply chain and procurement capabilities that we've set up and so whether that's.
Mark Thompson: The integration and the synergies, we're able to drive with our upstream business in terms of domestic nitrogen supply or the ability to source and procure nitrogen from other domestic producers were very well positioned for the spring season today and not seeing a direct impact from tariffs more generally as both Ken and Chris has spoken to on the call.
Mark Thompson: Are seeing North America in a position where it's come into this spring on a net short basis for products like <unk> and urea and we can see the supply demand squeeze having an impact on prices. So to the extent that that continues we're going to see strength in the market, but we're continuing to operate we're very well positioned for the spring.
Speaker Change: Your next question comes from Steve Hansen of Raymond James. Please go ahead.
Steve Hansen: Yeah. Good morning, guys. Thanks for the time.
Steve Hansen: You deserve some credit I think for hitting the synergy targets early.
Speaker Change: The successful divestitures of four is it too early to put another targets on that for us to think about in terms of cost synergies.
And just secondarily what else do you view as sort of a priority review in terms of the noncore. Thanks.
Speaker Change: Yes, Thank you Steve.
Speaker Change: Yeah with respect to what we've achieved to date.
Speaker Change: We talked about our $200 billion target.
Speaker Change: That being sort of a year ahead on that target and to your point actually confidence as we look closer at that this confidence you better confidence to do more theres a talking about specific numbers, we'll have more to talk about but at this stage, we're assessing that and we're going after some of that but like I say, we are we do.
Speaker Change: Do have confidence in our ability to do more.
Speaker Change: Courage by certainly encouraged by progress to date.
Speaker Change: With respect to our review of non core assets.
Speaker Change: Yes, that's something that we're looking very closely at the moment, we've talked about how we're viewing our Latin American south retail assets sit.
Speaker Change: For the market to cooperate with us a bit as we think about divestiture, albeit not material for us we've talked about the process that we're in as it relates to approach retail and just going through that process at the moment.
Speaker Change: We've talked about.
Speaker Change: A tour of our Cytosorb shares, which was a passive equity stake that theres really not strategic for us in the $223 million proceeds that we realized in Q4 of last year at the start of this year and yes. There are some other things that we're looking at at the moment that would meet that definition of noncore.
Speaker Change: Looking at that at the moment, yes, we will have more to talk about as it relates to.
Speaker Change: Again looking at additional divestiture opportunities.
Speaker Change: Your next question comes from Ben Theurer of Barclays. Please go ahead.
Ben Theurer: Yes. Thank you very much for taking my question wanted to go back real quick.
Ben Theurer: You had some of that in the prepared remarks, but on phosphates volume clearly you had some unplanned outages that.
Ben Theurer: That impacted your volumes, but at the same time, we've seen a very strong price.
Ben Theurer: Overall in phosphate.
Speaker Change: Just wondering as it relates to achieving your guidance after that software started volume in one Q. How confident are you that there is going to be enough demand on the phosphate side just given the prices are you seeing any signs of potential demand destruction because of these crisis and how should we think about the potential outcome low end versus.
Ben Theurer: With the high end of the guidance for the volume side and phosphate. Thank you.
Speaker Change: Yes, Thanks, Ben for the question.
Speaker Change: Challenge, we don't think all of the demand side of this equation that we still see strong demand and frankly, that's what's translating to strong price environment as it relates to our own production, yes, we had some production challenges.
Speaker Change: The first half of the year here weather related.
Speaker Change: Other production challenges, while we're taking turnarounds at both our White Springs at Aurora sites here in May June.
Speaker Change: And expecting a greater reliability of rates as a result in the second half. So it really is a bit of a story of two halves for our phosphate business, but.
Speaker Change: When you put those two has together it does give us confidence that we'll be within that.
Speaker Change: Our guidance range and had 70 maintained their guidance range.
Speaker Change: Okay.
Lucas Beaumont: Your next question comes from Lucas Beaumont of UBS. Please go ahead.
Lucas Beaumont: Hi, Good morning, I, just wanted to go back to the.
Lucas Beaumont: Crop chem kind of tariff exposure in retail. So I was just wondering could you size for us out of the four $5 billion to $5 billion you have there in cost of sales on the crop Ken pace.
Lucas Beaumont: How would you size I guess the exposure to tariffs going forward.
Lucas Beaumont: Meda purchases of finished goods intermediate products.
Lucas Beaumont: Assuming that the tariffs remain in place.
Lucas Beaumont: Standard issue and you've got inventories thats, probably not going to impact 25.
Lucas Beaumont: I mean, you have to go through another cycle I guess, how would you size the impact and then just lastly, just nutrient import.
Lucas Beaumont: Finished formulations and how large is that four years youre doing that thanks.
Lucas Beaumont: Yeah.
Speaker Change: Thank you Lucas for the question and yes, you're right that we have purchased it.
Lucas Beaumont: Cover ourselves.
For the most part for this year, but.
Lucas Beaumont: Yeah. It's also the case that we're watching the trade dispute between China and the U S quite closely.
Lucas Beaumont: Crop protection is it's obviously a big part of that story now a number of those products have been accepted.
Lucas Beaumont: When we look at the exception list and so.
Lucas Beaumont: For those that are exempted obviously.
Lucas Beaumont: We're encouraged by that but there are products that haven't been so maybe I'll hand, it over to Jeff just talk a little bit more about that.
Jeff Holtzman: So, especially if we're talking in the range of our proprietary products and as you would know.
Lucas Beaumont: The proprietary seed piece out of that.
Lucas Beaumont: 98% of those products would be.
Lucas Beaumont: So there are generic products.
Lucas Beaumont: We do multi source those products in many instances, we so were so active ingredients from from our multinationals and we also source directly out of China, and India as well.
Lucas Beaumont: Matt standpoint, and I think you asked the question.
Lucas Beaumont: Do we do we so we're Spanish goods versus active ingredients and yes, we do both.
Lucas Beaumont: On that end of it. So obviously, we're spending a lot of time right now as we focus will start back just follow obviously on building our inventories back up for the 26 year and we will focus very heavily on.
Lucas Beaumont: It puts us what puts our brokers into best position going forward on.
Lucas Beaumont: One that we're expecting we're.
Lucas Beaumont: We're expecting price increases on branded products anywhere from five to seven 5% and I think on the generic side of the business. I think you could you could probably start with that higher number and it move up Kim mentioned that there are a lot of ingredients that are exempted.
Lucas Beaumont: Exhibit steel will come with the base, 10% and it's a complicated matter because you use these products made up sometimes with 10 to 15 different components and not all of those components are coming out of one of these particular area. So.
Lucas Beaumont: Spending a lot of time right now they'll spend a lot of time in the next 60 days from a diligent standpoint, we're going to assume right now all the sudden we got tariffs. If we worked through store positioning ourself going forward on that but I think long story short is we're going to see price increases we don't I think you might've been mentioned earlier.
Lucas Beaumont: We don't see this being material to our earnings for the 25 year.
Lucas Beaumont: And where were experienced in some of these price increases are plans to pass those price increases.
Lucas Beaumont: Through to our customers.
David Simons: Your next question comes from David Simons of BNP. Please go ahead.
Lucas Beaumont: Yeah.
Lucas Beaumont: Oh, Yeah, just just one more follow up on the phosphates business place talked about sofa cost hampering the earnings in that business, but if I look at headline prices I would've thought that would've been pass through.
Lucas Beaumont: So it is it.
Lucas Beaumont: Is there some kind of timing issue helped by your strip margins in Q1 in Memphis sulfur costs were for.
Lucas Beaumont: Factor and how will that evolve into Q2.
Speaker Change: Yeah. Thank you for the question, David Yeah, I would say that.
Speaker Change: The phosphate price at the moment is more a story about supply and demand fundamentals and whats happening on both sides of that equation as opposed to.
Speaker Change: The ability to pass through cost increases.
Speaker Change: Sulfur is part of the story, but and like others, we're experiencing inflationary pressures on other things as well so the idea of a pass through versus just the supply demand fundamentals that we're seeing it. It's certainly a story of the ladder, but maybe.
Speaker Change: I'll hand, it over to Jason Newton, our Chief economist just to talk a little bit.
Speaker Change: What we're seeing in the software market and yes, some of the impact that we've experienced there.
Speaker Change: Hey, Good morning, David Yes, Ken mentioned, we're seeing a sulfur market fundamentals tightening or seen those tighten this first half of the year and campus sulfur prices in the second quarter.
Speaker Change: For $270 a ton so a pretty significant increase.
Speaker Change: Over quarter and definitely an increase from where we saw a sulfur prices in 2024, which were historically discounted relative to market prices.
Speaker Change: Actually low from a marginal cost of the headquarter cost perspective, or producers, which meant that they were.
Speaker Change: <unk> products offer predict project inventory rather than exporting so I've taken the supply and coming into 2025, we've seen strong demand in China.
Speaker Change: Strong demand from base metal perspective in southeast Asia, and so the combination of reduced export supply and higher demand to support prices.
Speaker Change: We expect that that will start to change as we look towards the second half of the year and offer prices have remained pretty stable, but supplies are increasing and the level of demand is decreasing so we expect more normal relationship with phosphate price changes.
Speaker Change: Second half.
Speaker Change: I will now turn the call back to Jeff Hoffman for closing remarks.
Speaker Change: Thank you for joining us today Investor Relations team is available for 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.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay.