Nutrien Q3 2024 Earnings Report

Nutrien EPS Results

• Actual EPS: $0.39
• Consensus EPS: $0.43
• Beat/Miss: Missed by -$0.04
• One Year Ago EPS: $0.35

Nutrien Revenue Results

• Actual Revenue: $5.35 billion
• Expected Revenue: $5.26 billion
• Beat/Miss: Beat by +$88.96 million
• YoY Revenue Growth: -5.00%

Nutrien Announcement Details

• Quarter: Q3 2024
• Date: 11/6/2024
• Time: After Market Closes
• Conference Call Date: Thursday, November 7, 2024
• Conference Call Time: 10:00AM ET

Nutrien (NYSE:NTR) (NYSE:NTR) is a global provider of crop inputs and agricultural services. The company produces and distributes essential nutrients, including potash, nitrogen and phosphate products, which farmers use to support crop growth and improve yields.

Through its retail operations, Nutrien supplies farmers with seed, crop protection products, fertilizers and agronomic services. Its retail network also provides farm management recommendations, application services and other solutions designed to help growers manage their operations and use agricultural inputs more efficiently.

Nutrien was formed in 2018 through the merger of Potash Corporation of Saskatchewan and Agrium. Headquartered in Saskatoon, Saskatchewan, the company serves agricultural customers in North America, South America, Australia and other international markets. Its production, distribution and retail businesses give Nutrien a presence across multiple stages of the agricultural supply chain.

Nutrien Q3 2024 Earnings Call Transcript

Key Takeaways

• We have accelerated the timeline for achieving $200 million in annual operational efficiency and cost savings to 2025, one year ahead of schedule, with reductions evenly split between retail and corporate.
• Upstream sales volumes are on track to rise by 2–3 million tonnes by 2026 relative to 2023, with a 1.3 million tonne increase already delivered in the first nine months of 2024.
• Our downstream retail business faces headwinds from a prolonged recovery in Brazil and softer North American field activity, which also drove lower seed margins in Q3 due to adverse weather and delayed planting.
• We have raised our full-year 2024 global potash shipment forecast to 70–72 million tonnes and expect potential supply tightness in 2025 given limited new capacity additions.
• Capital expenditures are to be further optimized to $2.0–$2.1 billion in 2025, while free cash flow will be directed toward share repurchases and high-return growth initiatives to boost free cash flow per share.

Presentation

[Operator]

Greetings and welcome to Nutrien's 2024 third quarter earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded. I would now like to turn the conference call over to Jeff Holzman, VP of Investor Relations.

[Jeff Holzman, VP of Investor Relations at Nutrien]

Thank you operator. Good morning and welcome to Nutrien's third quarter 2024 earnings call. 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.

[Jeff Holzman, VP of Investor Relations at Nutrien]

Therefore, actual results could differ materially from those contained in our forward-looking information. Additional information about these factors and assumptions are contained in our Quarterly Report to Shareholders as well as our most recent Annual Report, MD&A and Annual Information Form. 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, CEO at Nutrien]

Good morning and thank you for joining us today to review our third quarter results, the progress on our strategic priorities and the outlook for our business. At our Investor Day in June, we outlined a set of 2026 performance targets that provide a pathway for driving structural improvements to our earnings and cash flow through the cycle.As highlighted in our third quarter release, we have made significant progress on a number of these priorities in 2024.

[Ken Seitz, CEO at Nutrien]

This includes accelerating the timeline for achieving 200 million in annual operational efficiency and cost savings. We now expect to achieve this target by 2025, one year earlier than our initial goal. With cost reductions evenly split between retail and corporate, Nutrien is in a unique position to expand production and sales of potash and nitrogen with limited capital expenditures.

[Ken Seitz, CEO at Nutrien]

We set a 2026 target to increase upstream sales volumes by two to three million tons compared to 2023 levels, and through the first nine months of 2024 we have increased sales volumes by 1.3 million tons in our downstream retail business. We have faced some headwinds associated with a more prolonged recovery in Brazil and softening in North American ag commodity prices.

[Ken Seitz, CEO at Nutrien]

However, we remain confident in the growth platforms that support our 2026 retail financial targets which include an expansion of our proprietary products, business network optimization, tuck-in acquisitions and the execution of our improvement plan in Brazil.

[Ken Seitz, CEO at Nutrien]

Through a focused and disciplined approach to executing our capital projects, we expect to further optimize capital expenditures in 2025 to a range of $2 billion-$2.1 billion. This total includes the capital required to maintain our world-class asset base and meet our growth objectives.

[Ken Seitz, CEO at Nutrien]

We will continue to pursue each of these performance targets with a focus on how we can enhance our offering of products and services to the grower, all while structurally growing our earnings and Free Cash Flow.

[Ken Seitz, CEO at Nutrien]

Now, turning specifically to our 2024 results, Nutrien generated Adjusted EBITDA of $4.3 billion through the first nine months of 2024, supported by increased downstream retail earnings, higher upstream fertilizer volumes and lower operating costs. Retail Adjusted EBITDA totaled $1.4 billion in the first nine months, up 10% from the prior year.

[Ken Seitz, CEO at Nutrien]

North American crop nutrient margins increased by $17 per ton compared to 2023, supported by a stabilization of fertilizer markets and continued growth of our proprietary crop nutrient and biostimulant product lines.

[Ken Seitz, CEO at Nutrien]

The improvement in per ton margins was partially offset by lower North American crop nutrient sales volumes which were impacted by wet weather in May, lower corn acres and reduced field activity in the third quarter. Crop protection margins in North America have improved in 2024 while seed margins were lower primarily due to the impact of dry weather and delayed planting on our proprietary seed business in Brazil.

[Ken Seitz, CEO at Nutrien]

We ended the third quarter with crop protection inventory down 13% compared to the prior year as we focus on tightly managing working capital levels. Turning to potash, we generated adjusted EBITDA of $1.6 billion in the first nine months down from the prior year due to lower benchmark prices. We increased potash production across our six mine network and lowered our controllable cash cost of production to $52 per ton over this period.

[Ken Seitz, CEO at Nutrien]

The reduction in per ton costs was primarily driven by higher production volumes and the benefits of mine automation investments. We sold record potash volumes in response to increased demand from our customers. We achieved this performance despite a short-term disruption in Canadian rail service during the third quarter, highlighting the advantages of our industry-leading supply chain and effective planning by our commercial teams.

[Ken Seitz, CEO at Nutrien]

In nitrogen, we delivered adjusted EBITDA of $1.4 billion in the first nine months down from the prior year as the benefit of lower natural gas costs was more than offset by lower nitrogen prices in the first half of 2024. Our North American nitrogen assets remained very well positioned on the global cost curve and we continue to progress reliability initiatives that have contributed to higher production volumes in 2024.

[Ken Seitz, CEO at Nutrien]

Nitrogen selling prices in the third quarter increased compared to the prior year, reflecting tight global supply, in particular for ammonia, phosphate fertilizer. Benchmark prices have remained strong, contributing to higher net selling prices in the third quarter compared to the prior year. Weather-related events impacted our phosphate operating rates, resulting in lower sales volumes and incremental costs.

[Ken Seitz, CEO at Nutrien]

Now turning to the market outlook for the remainder of 2024, we have seen a good start to the fall application season in North America, with crop nutrient sales in October above the historically strong levels achieved in the same month of 2023. The increase in demand has been driven by a relatively early harvest and the significant need to replenish soil nutrients following this year's record harvest.

[Ken Seitz, CEO at Nutrien]

Global grain stocks remain below historical average levels, supporting export demand for North American crops and firm prices for key agricultural commodities such as rice, sugar and palm oil. Global potash consumption is projected at a record level in 2024, supported by strong agronomic need and relative affordability. We have raised our full year global shipment forecast to a range of 70 to 72 million tons and expect continued growth in 2025.

[Ken Seitz, CEO at Nutrien]

We anticipate limited new global capacity additions next year, creating the potential for incremental supply tightness compared to 2024. Global nitrogen markets have remained firm in the fourth quarter due to continued Chinese urea export restrictions, ammonia supply outages and project delays. U.S. nitrogen inventories are estimated to be well below historical average levels,

[Ken Seitz, CEO at Nutrien]

which we expect will support strong demand for the fall season and into 2025. I will now turn it over to Mark to provide more details on our full year 2024 guidance assumptions and our capital allocation plans.

[Mark Thompson, CFO at Nutrien]

Thanks, Ken. Good morning everyone. As Ken highlighted, Nutrien delivered record potash volumes through the first nine months of 2024 and we've raised our annual potash sales volume guidance to 13.5-13.9 million tons. The range reflects our scheduled maintenance downtime in the fourth quarter and the assumption of a relatively short duration labor disruption at the Port of Vancouver that's currently impacting Canpotex shipments through the Neptune Terminal for the full year.

[Mark Thompson, CFO at Nutrien]

We expect our potash controllable cash cost of production to be down approximately 5% compared to 2023, strengthening our position as one of the world's lowest cost producers in nitrogen. We revised our annual sales volume guidance to 10.6-10.8 million tons. The range reflects the impact of extended turnarounds and unplanned outages in the third quarter, including the impact of weather-related events.

[Mark Thompson, CFO at Nutrien]

We expect higher operating rates in the fourth quarter, with turnarounds at select North American nitrogen sites now complete for retail. Our full-year adjusted EBITDA guidance was revised to $1.5-$1.6 billion as favorable growing conditions in North America reduced pest pressure and limited field activity in the third quarter.

[Mark Thompson, CFO at Nutrien]

Grower demand increased in October and we expect North American crop nutrient sales in the fourth quarter to be similar to the historically strong levels achieved in 2023. As Ken outlined, we're focused on strategic priorities that support the achievement of our 2026 performance targets, which we believe provide a pathway for enhancing earnings and free cash flow.

[Mark Thompson, CFO at Nutrien]

Looking ahead, we see several levers available to optimize sources and uses of cash across Nutrien. From a sources standpoint, Ken described the areas we've identified to drive increased cash flow from operations.

[Mark Thompson, CFO at Nutrien]

This includes increasing upstream fertilizer volumes from existing assets, delivering downstream retail earnings growth and driving operational efficiencies and cost savings across our network. To ensure we maintain a low cost position, we continue to evaluate ways to simplify and focus our portfolio, optimizing our investments in working capital and reviewing assets on our balance sheet that may not warrant maintaining.

[Mark Thompson, CFO at Nutrien]

With the objective of improving cash flow conversion through the cycle. In terms of uses of cash, we are allocating $2.2-$2.3 billion in 2024 to sustain and enhance our assets, a reduction of over $400 million compared to 2023. We expect to further optimize CapEx in 2025 to a range of $2-$2.1 billion, strengthening free cash flow and positioning the company to counter cyclically deploy capital toward high conviction opportunities.

[Mark Thompson, CFO at Nutrien]

We have a long track record of providing a stable and growing dividend as a core part of the return we deliver to our shareholders, and our dividend per share has increased by 35% since the beginning of 2018 while maintaining a total dividend payment of around $1 billion due to the significant reduction in share count over this time period.

[Mark Thompson, CFO at Nutrien]

The allocation of our remaining free cash flow is currently focused on a narrow set of growth investments and on share repurchases with the goal of maximizing our risk adjusted returns and growing free cash flow per share. From a growth standpoint, we're focused on projects that have a strong fit with our strategy, provide returns in excess of our hurdle rates and have a relatively low degree of execution risk. These are growth platforms where we've proven our ability to execute and deliver value.

[Mark Thompson, CFO at Nutrien]

Today, this includes investments in proprietary products, network optimization, tuck-in acquisitions, nitrogen debottleneck projects, and mine automation in Potash. We've also repurchased 1.5 million shares for approximately $75 million since late September and intend on repurchasing shares on a more ratable basis under our NCIB program that's authorized through February 2025. I'll now turn it back to Ken for closing remarks.

[Ken Seitz, CEO at Nutrien]

Thanks, Mark. We remain focused on strategic priorities that strengthen the advantages of our business across the Ag value chain. Our results through the first nine months of 2024 demonstrate progress towards our 2026 targets on a number of these priority areas. This includes accelerating the timeline for delivering operational efficiency and cost savings, optimizing capital expenditures, expanding upstream fertilizer sales volumes, and advancing high return downstream retail growth opportunities.

[Ken Seitz, CEO at Nutrien]

As Mark highlighted, we are focused on allocating capital on a countercyclical basis towards a targeted set of growth initiatives and share repurchases that enhance free cash flow per share. We would now be happy to take your questions.

[Operator]

Thank you, ladies and gentlemen. We will now begin the question-and-answer session. Should you have a question, please press star one on your phone. You will hear a prompt that you are now in the question queue. If you're using a speakerphone, please lift the handset before pressing any keys. As a reminder, each caller may ask one question.

[Operator]

If you wish to ask a follow-up or second question, please press star one again after the conclusion of your first question to rejoin the queue should time permit. The first question comes from Andrew Wong of RBC Capital Markets. Your line is now open.

[Andrew Wong, Equity Research Analyst at RBC Capital Markets]

Hey, good morning. Thanks for taking my questions. I was just wondering if you could provide any update on how you plan on implementing a buyback program going forward with maybe more regular or systematic programmatic type repurchases and just given how your shares traded today. How would you view buybacks versus any spending on growth? Thanks.

[Ken Seitz, CEO at Nutrien]

Thanks Andrew. Yeah, we can certainly talk about what we mean by ratable. Of course we bought back some stock this year and we're going to continue with that through the balance of the year. You know, as we look now into 2025, we've been using the word counter-cyclical. We've pulled back on capital. We have, and that's on the investing side. And now we've pulled back optimizing across the capital portfolio and a number of other measures that are going to liberate free cash flow.

[Ken Seitz, CEO at Nutrien]

As we look at that, we look today at the highest and best use for that to improve free cash flow per share growth. And at the moment, yes, we're buying back our stock when we do that analysis. But Mark, maybe you want to provide some more color on our plans and why we use the word ratable.

[Mark Thompson, CFO at Nutrien]

Yep, absolutely. Thanks, Ken. Good morning, Andrew. So look, I think just to step back and reiterate, Andrew, a bit of what Ken said. I mean, our capital allocation priorities, they're going to continue to follow the strategic direction of simplifying and focusing the organization and really exercising the discipline and both cost and capital management,

[Mark Thompson, CFO at Nutrien]

and these are things that we control regardless of market conditions, so this intensified focus on both optimizing sources of cash and uses of cash with the objective of growing free cash flow per share is something that is really top of mind for us. With respect to your question on share repurchases specifically, I think just to highlight and recap, we commenced share repurchases in the second half of September, and if you look at that time period, we've purchased about $75 million worth of stock over the last month and a half.

[Mark Thompson, CFO at Nutrien]

As we said, we intend to continue ratable repurchase activity at a general similar run rate to what we've done so far through the end of that authorization in February 2025. I think, as Ken's highlighted, we sit here today and that set of growth objectives that we have has been narrowed. They're focused, they're things we've done before. A number of them are accretive to free cash flow.

[Mark Thompson, CFO at Nutrien]

But the reason we've continued to make progress on the buyback here over the last couple of months and intend to continue doing so is we do see compelling value, not only from a risk reward standpoint, but the ability to grow free cash flow per share independent of market conditions as we look at alternatives at this point in the cycle. Obviously, agricultural commodities have turned down somewhat over the last few months.

[Mark Thompson, CFO at Nutrien]

And if we look to past cycles, particularly in the retail business, that has presented us with opportunities at weaker points in the commodity cycle where we can continue to consolidate in those market conditions. We've been quite disciplined over the last couple of years in stronger market conditions, but we anticipate some of those tuck in acquisitions, particularly in North America, will come back to us. So we'll be looking to those alternatives opposite share buyback. But today the buyback is compelling to us.

[Operator]

Thank you. The next question comes from Ben Isaacson from Scotia Capital. Your line is now open.

[Ben Isaacson, Managing Director research Analyst at Scotiabank]

Good morning and thank you for taking my question. I just have one question on potash. It's quite rare that we see three years of consecutive growth in potash demand, especially following a year of global shipments. Sorry.

[Ben Isaacson, Managing Director research Analyst at Scotiabank]

Especially following a year of record global shipments, which we're seeing this year as the channel gets restocked in light of your comments about softening field activity as crop prices will roll. Can you talk about your confidence level that potash demand will grow next year in line with your new forecast? Thank you.

[Ken Seitz, CEO at Nutrien]

Thank you, Ben. Yeah, good morning. Yeah. You know, for 2024 potash volumes have been strong. And you've seen that we've changed our own global shipments range to 70-72 million tons. That is true. But there are a number of reasons that were constructive for 2025. You know, you can start with global inventories and you look around the world and you could say that global inventories are at average or below average levels in just about every major market on the planet, with perhaps the exception of Brazil.

[Ken Seitz, CEO at Nutrien]

But even with Brazil they continue to return to record level demand consumption of crop nutrients, NPK this year probably about 46 million tons, which would be similar to previous record levels. Similarly, China is consuming record levels of NPK.

[Ken Seitz, CEO at Nutrien]

We've seen that in potash. We're seeing that in nitrogen at the moment, and we're seeing it in phosphate as well. It is true that we've seen a very strong crop in North America, and that commodity prices have come off. That's true. But at the same time, that strong crop has pulled a lot of crop nutrients out of the ground, and so those nutrients are going to need to be replaced. And in fact, even here in the fall, we've had an early harvest.

[Ken Seitz, CEO at Nutrien]

The fall is open, and we're looking at a lot of activity in the fall application season, getting ready for what farmers will see as being a good growing season next year. Again, with North American farm margins being about at the 10-year average. It's also the case that the softer input prices have stimulated some demand.

[Ken Seitz, CEO at Nutrien]

So we're seeing strong demand in this price environment and importantly, we're still returning to trend level demand in potash. I mean, we're just getting now to what we would consider to be trend level post this conflict in Eastern Europe and everything that that brought. So there's, I would say a number of things that are going on at the moment that you know, we have a now a range for next year of 71 to 74 million tons. Again looking to return to that trend level demand growth. But Chris, anything you wanted to add?

[Chris Reynolds, EVP and Chief Commercial Officer at Nutrien]

Yeah, thanks, Ken. Good morning, Ben. The only thing maybe to reiterate is that as we look around the world and these major potash markets that we're not really seeing any inventory build that's concerning to us. And as we talk to customers in each of those markets, they're also optimistic about demand for 2025, particularly as Ken said, with these prices remaining at affordable levels.

[Chris Reynolds, EVP and Chief Commercial Officer at Nutrien]

And even if we were to see, for example in China inventories grow to around three million tons, you put that into the context of apparent consumption at around 18-19 million tons. And again we don't see that concerning, so we do see the good consumption levels that we've seen in 2024 continuing into 2025.

[Operator]

Thank you. Your next question comes from Joel Jackson from BMO Capital Markets. Your line is now open.

[Joel Jackson, Equity Research Analyst at BMO]

Hi. I'm going to follow up on that potash question with a couple maybe mini questions if you don't mind. I don't think you mentioned Southeast Asia oil palm. It seems like palm oil prices are.Really, really doing well. It looks like in a recent tender this week in Southeast Asia, it looks like you got maybe a little bit higher price but not massively higher. So first question there is why should we not see some greater pricing there with palm oil?

[Joel Jackson, Equity Research Analyst at BMO]

Also why I didn't mention it on some of the drivers 25 and then second question would be when you look at supply for 25, what more supply do you see coming on? Are you anticipating more supply from Laos? Anticipating more tons get through St. Petersburg and Bronka? From Belarus company, BPC? Any other supply drivers? Thanks.

[Ken Seitz, CEO at Nutrien]

Thanks, Joel. That's a couple of great observations. Thank you. Yeah, I would say with respect to Southeast Asia, we haven't mentioned it yet, but you're absolutely right. In fact, for 2024, part of the rebound to trend level demand that we just talked about, part of that story is certainly Southeast Asia and it's for the reasons that you cite.

[Ken Seitz, CEO at Nutrien]

Affordability is strong when we see palm oil prices at MYR 4,000 per ton, but there's also strong rice prices in the region that we expect strong demand and for an important standard grade market, like I say, that's certainly part of the story for 2024. And if you look at the biodiesel mandate that's coming in 2025 and again with strong prices, we expect that Southeast Asia for 2025 will continue to be an important part of the story.

[Ken Seitz, CEO at Nutrien]

On the supply and demand balance, I think you make a good observation as well. When we talk about 2024, we call it more or less a balanced market, you know, 71, 70-72 million tons and supply more or less meeting demand as we, as those volumes grow, as consumption demand grows into 2025 and for all the reasons we've talked about, we think that it will. We do see some potential tightening in the market.

[Ken Seitz, CEO at Nutrien]

That is because as you say, if we look around there could be some small incremental additions on the supply side, but we don't see much. So you know, when we've said that there's the potential for some firming in 2025. You know, the reason we say that is exactly that we expect demand to grow without incremental supply necessarily being added to meet that incremental demand.

[Operator]

Thank you. Your next question is Vincent Andrews from Morgan Stanley. Your line is now open.

[Vincent Andrews, Managing Director research Analyst at Morgan Stanley]

Thank you and good morning, everyone. Question in nitrogen. One of your slides shows that you think the product inventory levels in nitrogen are at low levels as we go into the fall season. Curious what your anticipation is in the retail business in terms of what you want to do about that, in terms of do you see this as an opportunistic time for you to build inventory and hold it through the winter, or do you still intend to exit the fall season with kind of empty bins?

[Ken Seitz, CEO at Nutrien]

Yeah, I would say that what we're seeing in our retail business is nothing unusual there, and we do expect, we do expect to head through the season here with inventories flowing through our channel, but Jeff, do you want to talk about what you're seeing on the ground? Yeah.

[Jeff Tarsi, EVP and President, Global Retail at Nutrien]

So first of all, I mean, we're seeing. We're greatly encouraged by the activity we're seeing this fall. As Ken mentioned earlier, we've had very strong nutrient removal with really large crops, particularly in North America, from an inventory position. We like the position we're in right now. We came into the third quarter a little heavier than we would have been last year, but that's reflective of an early harvest and early start to fall application. And as it relates to nitrogen, we desperately needed some moisture across the Corn Belt.

[Jeff Tarsi, EVP and President, Global Retail at Nutrien]

We got that in most areas last week. And so we're getting. I'm really encouraged by what we're kicking off across North America from an NH3 application standpoint. But you know, my desire in retail is normally to buy what we need for the season ahead and not carry over into the year.I would like to, I would like from a retail perspective to end the fall with low inventory levels.

[Operator]

Thank you. Your next question comes from Steve Byrne, Bank of America, Merrill Lynch. Your line is now open.

[Steve Byrne, Senior Chemical analyst at Bank of America]

Yes. Thank you, Ken. I wanted to drill a little bit into potash pricing. You know, you got, you know, you're looking for another couple percent higher volumes in 2025, but yet, you know, your offshore price has been running almost $100 a ton less than the North American price. It used to be closer to $30.

[Steve Byrne, Senior Chemical analyst at Bank of America]

You know, you get even Lukashenko complaining about potash pricing. My question for you, given your current role, your prior role at Canpotex, what is the value proposition to Nutrien, to be part of Canpotex, you have one partner and BHP can't join it. Would you negotiate differently if you were on your own and not part of Canpotex?

[Ken Seitz, CEO at Nutrien]

Yes, Steve, thanks for the question. And yeah, there's a lot to unpack there. But, you know, I'll just start by saying, in fact, tomorrow we are. Today we're celebrating Nutrien's 65 years of producing potash in Saskatchewan. We've been doing this for a long time, and for 55 of those years we've been doing them with Canpotex. Canpotex has established a customer base in the market in all these key regions that, you know, you can't reproduce. And that comes with developing relationships over that period of time.

[Ken Seitz, CEO at Nutrien]

Part of the value proposition for those customers is that they have access to all of these Saskatchewan mines. It's high quality, it's reliable, and it's competitive. And so, you know, those relationships continue to be incredibly important to us, incredibly important to Canpotex. And behind that customer.

[Ken Seitz, CEO at Nutrien]

We have built out a supply chain in this business to get volumes from landlocked Saskatchewan. I keep saying to the jungles in Malaysia, that supply chain doesn't exist anywhere on the planet.

[Ken Seitz, CEO at Nutrien]

So there's just so much infrastructure, so many relationships, so much history, and a history of good commerce, good trade with these customers that as we look to move our volumes, Canpotex has been just an extraordinary partnership and it has taken us into new markets over 40 countries around the world. And obviously we've always been competitive. So I think Canpotex offers us a lot. Steve, what I would say is, you know, we look into the future now.

[Ken Seitz, CEO at Nutrien]

We have seen trade flows that have been imbalanced in certain parts of the world in light of the conflicts in Eastern Europe, even some impact perhaps on what's happening in the Middle East. So, yes, you do have markets like Brazil that are easier for global producers to get to at the moment. So we have seen volumes go into Brazil and you see the impact on price which creates the delta between that market and markets that might be more difficult to get to.

[Ken Seitz, CEO at Nutrien]

I think as these trade flows normalize, as we look at a stable supply demand balance in 2024, as we look at potential firming into 2025, and we look at the role that Canpotex is going to play in all that, that's where we say we see demand growing, maybe outpacing supply a bit in 2025 and even beyond.

[Ken Seitz, CEO at Nutrien]

That's where we say opportunity for some additional tightening, firming here in price. But of course, you know, Canpotex is going to continue to be playing a significant role in getting our volumes around the world.

[Operator]

Thank you. Your next question comes from Jacob Bout from CIBC World Markets. Your line is now open.

[Jacob Bout, Managing Director research Analyst at CIBC Capital Markets]

Good morning. Question on retail. Second quarter here that you've trimmed your 2024 retail guidance despite, you know, a pretty large crop coming off in the U.S. Curious, you know, what would your, your view of normalized retail EBITDA would be in a $4 corn price environment? Yeah.

[Ken Seitz, CEO at Nutrien]

Good morning, Jacob. Yeah, we have a number of things that we've talked about at the moment: a few headwinds in our downstream business. And those in North America would be, as we talked about, our wet May, as we've talked about the ideal growing conditions here in the third quarter that led to less pest pressure and less overall field activity.

[Ken Seitz, CEO at Nutrien]

That's true. But I would say the bigger story is Brazil and the ongoing work that we're doing to recover both with the market and certainly with our business in Brazil. But I'll hand it over to Jeff to provide some more color around all of that.

[Jeff Tarsi, EVP and President, Global Retail at Nutrien]

Yeah, thanks. And look, our guidance down in the third quarter was more a reflection of what occurred in the third quarter than what we expect going forward in the fourth quarter is, as Ken mentioned just a minute ago, irregardless of the corn price. You know, Brazil has been a headwind again this year.

[Jeff Tarsi, EVP and President, Global Retail at Nutrien]

We expected more recovery there in that market than we've seen year to date. North America and Australia have performed really well, in my opinion, in 24. And so, you know, we expect earnings growth next year just by stabilizing things in Brazil going forward. We expect earnings growth that we've talked quite a bit Investor Day about, you know, our strategic actions around LPI and how we want to expand our margins in that area as well. And I also think that we had some things that we missed this year.

[Jeff Tarsi, EVP and President, Global Retail at Nutrien]

We talked about low field activity in the third quarter, some of that related to some applications that we actually missed in the spring with a cold and delayed planting for corn. And we think, we think those things will come back to us. We thought we'd get a bit more of it in the third quarter, but ideal weather conditions really led to extremely low pest pressure and low trips across the field for our growers. And so we think those things will come back to us next year.

[Operator]

Thank you. Your next question comes from Edlain Rodriguez from Mizuho Securities. Your line is now open.

[Edlain Rodriguez, Director and Equity Research Analyst at Mizuho Securities]

Good morning. Good morning, everyone. I mean, just one quick question on retail in Brazil. The former debt should be hurting a little bit. There's like a lot of disruption in the marketplace in terms of, you know, people going bankrupt. Does that create medium-term or long-term opportunities for you in terms of retail acquisitions, given that it's a long-term attractive market over there?

[Ken Seitz, CEO at Nutrien]

Good morning and thanks for the question, Edlaine. Our focus at the moment in Brazil is on our current core business and the things that we've talked about by stabilizing the business. I would say today that that is our exclusive focus.

[Ken Seitz, CEO at Nutrien]

When we talk about rationalizing some infrastructure, some unproductive infrastructure like blenders, like some selling locations, when we talk about optimizing our cost footprint from a human resources perspective in light of some of the challenges in Brazil,

[Ken Seitz, CEO at Nutrien]

we talk about focusing on inventory and inventory management, bringing down working capital levels. You know, those things are all in flight. There is an extraordinary amount of effort in Brazil at the moment and that is our exclusive focus. We've talked about working through all of that through 2025.

[Ken Seitz, CEO at Nutrien]

We think that you know, for these, for the work that's taking place, you know, that's going to continue through 2025. And then you know, among all that, continuing to focus on proprietary products and growing that proprietary business, which, you know, that's for our future in Brazil, certainly that's going to be a core part of it as we see opportunity there with our agrochem business. So it's a long way of saying our focus today. No, we're not looking at expanding in this environment. We're looking at and focusing on our current business.

[Operator]

Thank you. Your next question comes from Richard Garchitorena from Wells Fargo. Your line is now open.

[Richard Garchitorena, Senior Equity Reseach Analyst at Barclays]

All right, good morning everybody. So my question: another strong quarter of potash sales volume this quarter, despite a short rail strike. It raised the guidance this year to 13.5-13.9 million. But obviously a third quarter run rate would imply over 16 million potential annualized production. So that's well above the 14-15 million target that you gave for 2026 of your investor day.

[Richard Garchitorena, Senior Equity Reseach Analyst at Barclays]

So my question is, are you currently at that operational capability rate at this time to get to that 14-15 million? Could you produce that if the market demand was there for it? You mentioned that you expect demand growing in 2025 for potash and don't really see many other supply coming on in other regions. So would you be the one company that could potentially meet that demand?

[Ken Seitz, CEO at Nutrien]

So I'll maybe start with your last question first and then work back from there. Richard? Yes, we can meet growing demand, and we've talked about our ability to produce 15 million tons. In that, you know, we need to do between now and then is bring on people, bring on operators. You know, you look at our guidance range today. We would say that the capacity and our complement of operators at our six mine network has been built for exactly those times, our guidance range, and not beyond.

[Ken Seitz, CEO at Nutrien]

We don't want people standing around at our operations. So yes, we can get to 50 million tons. We need to hire some people. Yeah. You know, it's always the case that on any given day, on any given month, we might be producing above what appears to be a 15 million ton annualized rate.

[Ken Seitz, CEO at Nutrien]

But when you take those daily or monthly and annualize them, you know, it's going to, it's not representative of what we can do in the year. And that's just related to what's happening at a particular mine, how maintenance turnarounds fit into the schedule. We have some high days in our business where we're in good ground and everything's working well, but we'll have some days where we'll hit anomalous ground and you will see probably a run rate that would be less than our 14 million tons of capacity.

[Ken Seitz, CEO at Nutrien]

So it's not a case of looking at those days or months and annualizing them. What we say today is what's true in that is capacity has been built to meet the needs of our global customers. That kind of 19%-20% market share that we talk about often and that yes, we can certainly expand our volumes to 15 million tons.By bringing on people and we can do that relatively quickly.

[Operator]

Thank you. Your next question comes from Chris Parkinson of Wolfe Research. Your line is now open.

[Christopher Parkinson, Senior Equity Reseach Analyst at Wolfe Research]

Great. Just a quick question on your perspective on nitrogen supply dynamics. Just when you take a step back, I mean, there's one school of thought that's concerned about oversupply. Just given the number of MOUs and kind of project concepts, I'll call them, you know, things out of Russia, which I personally think is wrong, but it.Is what it is.

[Christopher Parkinson, Senior Equity Reseach Analyst at Wolfe Research]

And then the other school of thought is looking at, you know, higher costs, a lot of maintenance bills coming up in Europe, CBAM in Europe, and you know, potential further rationalization. So as you sit here today, you know, even versus a couple of quarters ago, kind of what are your core puts and takes in terms of how you're thinking about that business over the next, you know, let's say three to five years? Thank you.

[Ken Seitz, CEO at Nutrien]

Yeah, great question, Chris. You know, I'll say a couple things and pass it over to Chris Reynolds. But yeah, if it's on the clean ammonia side, the industry and the number of announcements that we've seen on projected new plants, you know, as we've looked at those announcements and if we looked at the evolution of the potential there and our own experiences with looking at clean ammonia, we would say that, you know, we don't see speculative new plant coming, being built, being greenlit.

[Ken Seitz, CEO at Nutrien]

And you know, right now it's a question about really the pacing of the energy transition and how you would then in behind that pace the clean ammonia complex and, and what kind of risks you'd be willing to take in a market that you might be able to grab a premium on the energy side of the business.

[Ken Seitz, CEO at Nutrien]

That's still evolving and timing of all of that is still very unclear. So again, we don't expect any new plant to be backed by some form of offtake or some form of bankable contract that gives you the confidence to deploy the capital.

[Ken Seitz, CEO at Nutrien]

And indeed, that seems to be playing out that way. If we look at, you know, the industry and the nitrogen complexes as it is today across the various nitrogen products, we don't see a lot of new build a new plant that's being deployed, especially on some of the downstream products. But Chris, maybe you want to provide a little bit more color on the sort of supply, demand, balance in nitrogen, how you see that evolving.

[Chris Reynolds, EVP and Chief Commercial Officer at Nutrien]

Yeah. Thanks, Ken. Good morning, Chris. As Ken said, if we break it down by supply and demand, the nitrogen market and how we see the next couple of years on the demand side, it's been pleasing to see that trend sort of return to about a 2% compound annual growth rate globally. So that's been fairly consistent over the years.

[Chris Reynolds, EVP and Chief Commercial Officer at Nutrien]

And then you look specifically at examples like in China today that, you know, urea consumption there on the ground, as I said earlier, we've got folks there this week has grown by 14% year over year, taking apparent consumption to 60 million tons of urea. So, you know, the Chinese government remains very focused on domestic agricultural production there and similarly around the world, whether it's Brazil or India, some good steady growth on the demand side.

[Chris Reynolds, EVP and Chief Commercial Officer at Nutrien]

And then on the supply side, you know, what we're watching obviously is what's happening in Europe and those natural gas prices. We would probably mention that, you know, the last couple of winters in Europe have not been too bad, but if we get a harsh winter in Europe, you know, those natural gas inventories could be quickly depleted and you could see that price move even higher.

[Chris Reynolds, EVP and Chief Commercial Officer at Nutrien]

And we've seen some production curtailments there as a result. And then as Ken alluded to, you know, some delays in new production coming online has kept this market fairly well balanced.

[Chris Reynolds, EVP and Chief Commercial Officer at Nutrien]

But on top of all of that is our, you know, our position here in North America with low cost gas both in the U.S. and Canada and the advantageous locations of those plants, particularly inland in the U.S. which we like. So I would say again as we look out over the next three to four to five years, feeling good about the nitrogen market.

[Operator]

Thank you. Your next question comes from Benjamin Theurer from Barclays Capital Inc. Your line is now open.

[Rahi Parikh, Analyst at Barclays]

Hey, this is Rahi filling in for Ben from Barclays. My question was kind of on geopolitical issues. Any updates on how it's impacting fertilizer shipments? Is it still just a hit towards like shipment costs or are there any quantity of volumes impacted and how is the update on Red Sea shipment process just kind of on an overall fertilizer market view? Thank you.

[Ken Seitz, CEO at Nutrien]

Yeah, no, a lot going on in the world obviously and some geopolitical events that are impacting our business. Yeah, we look at the war in Eastern Europe. What we would say and have talked about is the fact that those volumes for the most part are getting to pre-conflict levels with those export volumes. It's probably all true with the exception perhaps of the Belarusians who continue to struggle getting access to port capacity in a cost-effective way.

[Ken Seitz, CEO at Nutrien]

It's absolutely the case that those suppliers, and particularly Belarus probably struggling with cost to serve as well as they send shipments via rail across Russia and into the north of China where we know that on a landed basis that's probably putting all-in costs for the Belarusians at kind of $270-$280 a ton.

[Ken Seitz, CEO at Nutrien]

That's, those are, those are definitely challenges in light of this conflict in Eastern Europe. You know, some of those challenges are going to persist for a bit yet. As those volumes find their way into the market, you know, some rebalancing trade flows that we've talked about that really we've obviously finding a home for our volumes with our customers as well.

[Ken Seitz, CEO at Nutrien]

That has been the case right through all of this turmoil on the Red Sea. You know, I think it's fair to say that our colleagues at ICL and APC have found alternative routes and so that the challenges through the Red Sea that ICL has experienced probably continues to experience that they found alternative routes through the Mediterranean. We're seeing ICL volumes come in, come into the market as well, which is good.

[Ken Seitz, CEO at Nutrien]

And those trade flows relatively balanced as well. But those will continue to watch these things very, very closely because as you say, it has had impacts on trade flows in some respects, continues to do, certainly has raised the cost to serve for the industry and therefore the overall cost basis for the industry. And you know, as soon as these conflicts evolve, we'll continue to watch that.

[Operator]

Thank you. Your next question comes from Joshua Spector from UBS. Your line is now open.

[Josh Spector, Executive Director, Chemical research Analyst at UBS]

Good morning. Yeah, this is Lucas Beaumont for Josh. So just going back to nitrogen. So you've sort of taken your shipment volumes down a little bit for this year obviously due to some specific factors there. But I just wonder if you kind of give us your latest thoughts and frame how you're thinking about the incremental uplift into next year and then the pathway to your 11.5-12 million target in 2026. Thanks.

[Ken Seitz, CEO at Nutrien]

Yeah, no, good, thanks, Josh. Yeah, we've had some weather-related effects this year. We've had some extended turnarounds at a power outage that our power supplier at our Fort Saskatchewan facility in Alberta, you know, unexpected for us and some mechanical issues. So you put that all together and yes, we're just a little bit below, you know, where we had expected to be this year.

[Ken Seitz, CEO at Nutrien]

That said, heading into 2025 and beyond. We've talked about our 11 and a half million ton 2026 investor day target and 11 and a half. And with Trinidad cooperating on natural gas, it would be 12 million tons. But I'll hand it over to Trevor Williams to give us the breakdown on where we're going to get those new volumes and how we get from here to there.

[Trevor Williams, EVP and President, Nitrogen and Phosphate at Nutrien]

Hey, thanks, Ken, and good morning. Yeah, just a couple thoughts here. If I look back and just compare to 2023, we're approximately 200,000 tons ahead year over year versus where we sat last year, and if you normalize, Lucas, over our turnarounds, which is a very heavy year this year, we're almost 300,000 tons on a normalized basis.

[Trevor Williams, EVP and President, Nitrogen and Phosphate at Nutrien]

Obviously this is a result of some of the improvements that we talked about that we announced last year before Trinidad. As Ken alluded to though, it's on a full year basis this year. We had several externally related outages across the quarter and in addition to that, you know, a couple of turnarounds that did go a little bit longer.

[Trevor Williams, EVP and President, Nitrogen and Phosphate at Nutrien]

Now this has been one of our heaviest turnaround years that we've had for quite a while with four major turnarounds executed here in 2024, with one wrapping up here in Trinidad here in the last quarter, but as Ken said, as we look forward to our investor day target of 11.5 and above, there's really three components there.

[Trevor Williams, EVP and President, Nitrogen and Phosphate at Nutrien]

There's continued reliability improvements across the fleet, and there's about 300,000 tons in terms of what we look at there, the bottlenecks that both we completed in 2023 and what we have scheduled for 2024 and 2025, you know, there's in the order of about 300,000 tons there as well, and then finally, as Ken mentioned, we have about 500,000 tons in terms of what we're doing with respect to Trinidad in terms equipment.

[Trevor Williams, EVP and President, Nitrogen and Phosphate at Nutrien]

But with that, the one thing that we'll call out as an example is if you look in 2023, we utilized about 82% of our gas that was available to us in 2023. In 2024, we're projected right now we're going to be between 93% and 94% of the gas available utilized. And that's really the result of our 3 out of 4 strategy that we put in place late last year.

[Operator]

Thank you. Your next question comes from Lawrence Alexander from Jefferies. Your line is now open.

[Daniel Rizzo, Analyst at Jefferies]

Hi, this is actually Dan, Dan Rizzo on for Lawrence. So you achieved 100. I'm sorry, you achieved your cost cutting goals early and were expected to be achieved in 2025. Would that suggest that maybe you can kind of expand the goals, that there's more that can be done as we push into 2026 and 2027? I guess that would be my question.

[Ken Seitz, CEO at Nutrien]

Yeah. No, absolutely. And yes, we have been incredibly focused on our cost base. And as we talked about in Investor Day, we had looking in through 2025, 2026, we did see an opportunity to reduce SG&A, both in our retail business and our corporate functions by $200 million. As we've said, we're ahead of schedule on that.

[Ken Seitz, CEO at Nutrien]

You know, and as we continue to look at that cost base, we do see some potential for additional savings. We're working on that at the moment. At the moment, yes, we have confidence around achieving that $200 million and now achieving it earlier than we talked about. And we're always looking at the opportunity to continue to optimize refined costs, keep ourselves as the low cost producer and competitive in everything that we do.

[Operator]

Thank you. Your next question comes fromAron Ceccarelli from Berenberg. Your line is now open.

[Aron Ceccarelli, Equity Research Analyst at Berenberg]

Hello. Hi, good morning. Thanks for taking my question. Earlier this week we got some comments from Belarusian President Lukashenko on a potential combined 10% production cut with Russia. I was wondering how credible are these comments in your view considering these guys are low cost producers and don't really need to cut production. And my second question is on ag retail and specifically on seeds in.

[Aron Ceccarelli, Equity Research Analyst at Berenberg]

If I look at your sales of seeds that they declined 16% in Q3 but the gross margin dollar terms collapsed to 4 million tons. Sorry, to $4 million. So I wanted to understand how much of this should continue into Q4 or it was just a one off for Q3. Thank you.

[Ken Seitz, CEO at Nutrien]

Good. You know, thanks for the questions. Yeah, in Belarus and BPC we saw that announcement as well. We don't speculate on those sorts of things. I think you would want to talk to them and understand better what the plan is there.

[Ken Seitz, CEO at Nutrien]

You know, all I would say is we've talked about this impact of shifting trade flows and the challenges perhaps in that part of world of not getting access to efficient and nearby tidewater and that raising the global cost curve as a result. So the cost of service gone up. That's true, that's clear and probably will continue to be the case as those producers look for port capacity. Like I say, that is nearby.

[Ken Seitz, CEO at Nutrien]

So you know, won't speculate on anything that any prognostications or anything that's coming out of the press in that part of the world, you'd have to talk to them. But what we would say is yes, we do see that floor both in terms of inflationary pressures on the industry probably added $50 a ton and then for certain producers who are having challenges, probably could be another $50 a ton on the cost curve. And then the question as it relates to retail and seed. I'll pass that over to Mr. Tarsi. Yeah, thanks Ken.

[Jeff Tarsi, EVP and President, Global Retail at Nutrien]

The third quarter is a slow quarter for us. With seeds, as it relates to the margin reduction in the third quarter, Latin America is the primary driver of the reduction. As it relates to seed margins prior to Q3. This is due to some unfavorable weather conditions which cause seed production challenges and compressed margins for us in that region. We do consider that to be a one-time event.

[Operator]

Thank you. There are no further questions at this time. So I will now turn the call back to Jeff Holtzman for closing remarks.

[Jeff Holzman, VP of Investor Relations at Nutrien]

Okay, thank you for joining us today. The investor relations team is available if you have any follow up questions. Have a great day.

Participants

Executives

• Jeff Holzman, VP of Investor Relations
• Ken Seitz, CEO
• Mark Thompson, CFO
• Chris Reynolds, EVP and Chief Commercial Officer
• Jeff Tarsi, EVP and President, Global Retail
• Trevor Williams, EVP and President, Nitrogen and Phosphate

Analysts

• Andrew Wong, Equity Research Analyst at RBC Capital Markets
• Ben Isaacson, Managing Director research Analyst at Scotiabank
• Joel Jackson, Equity Research Analyst at BMO
• Vincent Andrews, Managing Director research Analyst at Morgan Stanley
• Steve Byrne, Senior Chemical analyst at Bank of America
• Jacob Bout, Managing Director research Analyst at CIBC Capital Markets
• Edlain Rodriguez, Director and Equity Research Analyst at Mizuho Securities
• Richard Garchitorena, Senior Equity Reseach Analyst at Barclays
• Christopher Parkinson, Senior Equity Reseach Analyst at Wolfe Research
• Rahi Parikh, Analyst at Barclays
• Josh Spector, Executive Director, Chemical research Analyst at UBS
• Daniel Rizzo, Analyst at Jefferies
• Aron Ceccarelli, Equity Research Analyst at Berenberg