Nutrien Ltd. (NTR) Earnings Call Transcript & Summary

All right. Good morning to day 2 of the Mining Conference, day 4 for some of us. Our first session this morning with Nutrien is -- with Nutrien, of course, the largest fertilizer producer, a large retail player as well. Let's welcome Ken Seitz, President and CEO, to the stage. We're going to do a fireside chat. So if you want to submit questions, please go on the app, and we'll weave them in. Ken, why don't you kick off maybe like a few minutes, state of the union, what's going on with Nutrien in the markets?

Yes. So thanks, Joel. Thanks for the invitation. Good to see you, and thanks, everyone, for joining. Yes. So Nutrien, we're in the agriculture business, and it continues to be the case that the world demands more food. And we sort of talk about that from time to time, but we like to remind that there's still 800 million food insecure people on the planet and that every year, farmers, governments, families learn how to do more with the land that they have. And they do that by agronomically choosing better practices. And so that's seeds and germplasms and killing weeds and killing bugs and of course, balanced fertilization. And we see that. We see that every year that as farmers get better, as they become more knowledgeable, as they apply best practices, they frankly use more of what we produce. So that -- and among all that, we have and we really believe and are proud of the fact that we have the highest asset quality to serve those growers as they seek to improve yields. And so that starts with our downstream business, access to over 500,000 grower accounts where we're serving those customers, those farmers every day with all the inputs and services that they need to maximize yield. And that, that downstream business then built out with supply chains, logistics, transportation, unparalleled, I would say, on the planet to serve those customers and then wholesale customers in over 50 countries around the world. And then, of course, that -- all of that infrastructure backed up by, as you say, Joel, the largest network, highest asset quality for fertilizer production on the planet. We're proud of those things and find ourselves in a growing market where, again, our volumes continue to grow and our earnings in our retail business continue to grow. We believe that, that's structural. We saw that in 2025, again, where we added 1.7 million -- 1.3 million tons of fertilizer volumes, structurally grew our retail earnings by $300 million and pulled another $200 million out of cost. Entering 2026 and looking at guidance, we believe that there's opportunity, again, to structurally grow those earnings out of our downstream business to maintain improved asset quality and to grow our fertilizer volumes once again, and we've guided accordingly. I would say that sitting above all of that work as it relates to margin improvement, as it relates to pulling out cost and growing -- structurally growing earnings and volumes and free cash flow, we're focusing on ongoing capital allocation discipline. And that comes in, obviously, mindset around the dividend, stable and growing. We returned 30% more cash to shareholders last year, buying back our stock and with the dividend. We pulled $600 million out of CapEx to date where we continue to guide at that $2 billion to $2.1 billion and the balance sheet in a place that we're really quite comfortable. The last thing I'll say, Joel, is particular focus at the moment is on the portfolio. When I talk about asset quality, quality of earnings, free cash flow conversion, always looking to upgrade that. And as we comb through the portfolio, we see opportunity to upgrade. And so we've done some things last year, $900 million in divestiture proceeds. And this year, working through another set of strategic reviews on Brazil, on Trinidad and on our phosphate business.

Definite to talk about the portfolio because you've been very active in talking about things you want to do. But let's maybe start a little high level there are questions here, and thanks for -- questions, keep doing it. I've seen -- look, the sentiment for the U.S. farmer right now seems negative. There's lots of negative articles written every week. I feel like I'm reading about whether it's liquidity or balance sheets, whatever. How do you at Nutrien view the state of the U.S. farmer? And how does that affect your business and how you plan?

Yes. So it has been challenged. There's no question, and you go to a few parts in the U.S. and the South where weather challenges combined with commodity prices that coming out of the last few years are obviously quite a bit lower. We're just talking about this yesterday and looking at our retail business and how farmers are thinking about the spring planting season, we're saying 94 million to 96 million acres of corn again and whether we're going to see some of the challenges that farmers are having in our business. And a couple of things. I would say in terms of challenged accounts with growers, again, we've got our nutrient financial business and our downstream business that really is in -- across North America, Australia, Brazil. We're not seeing sort of bad accounts that would be above what would be typical for this point in the cycle. So it's usually 0.5% to 2%. We'd like to be at 1.4% today. We're not seeing anything that's majorly alarming. So that's one. Two is, yes, there was some bad weather in the fall. So you're looking at how farmers are going to put down crop nutrients. And because of the bad weather, we weren't able to get on to the land here in the spring here, they're going to catch that up. Indeed, we're expecting even seeing volumes move now. We ran our winter fill program in our potash business. It was oversubscribed. And so we're seeing volumes move now that would tell us that farmers are planning to plant the way that they always do. In the meantime, yes, you're looking at a little bit of strength in soybean prices, corn prices that would kind of be at the 10-year average. So they're not $6 at the moment, but at the 10-year average. And so you put it all together, combined with some government assistance and certainly in the U.S., that $11 billion that the Trump administration announced just prior to the holidays there and perhaps some additional dollars coming from Congress this year. And then again, some help from the One Big Beautiful Bill. There's enough there that we believe that farmers are staring into the spring again, looking at their pocket books and saying, I'm going to plant corn the way that I always do, and I'm going to do the things I need to do to maximize yields in this environment. So as the sort of the current cycle bottomed out, let's see. Grain stocks-to-use ratio is kind of back at the 10-year average. But what we're seeing heading into the spring here is we're expecting it to be a normal spring.

You talked about governments. There's a lot going on in the U.S. government, obviously, every day. But we see a lot that sort of are impacting on the periphery, what you guys do, right? We see potash and phosphate, they're critical minerals. We see DOJ, USDA talk, let's go look at if there's oligopolistic structure, any kind of structures across crop inputs. Sometimes yourself and other peers get named. What do you think about all that? And does it mean anything for you? Or you're not sure?

Yes, it's definitely meaningful, and we take that all very seriously. I think what we say is that we exist in a highly competitive world. And that's just a fact. You see that in all of the work that we do on cost discipline and we can talk about mine automation in potash, for example, where we're making those investments so we can stay on the left of the cost curve because we need to compete. We're talking about building a new terminal on the West Coast of North America, and that is related to costs and the need to compete. This is a highly competitive environment. It wasn't that long ago, as you know, Joel, that -- if we're talking about potash prices, we're below that top producer at the end of the cost curve. Those things happen in a commoditized world. We're in a point in the commodity cycle now where we would call it sort of on potash, a little below mid-cycle pricing. Yes, phosphate is certainly above and nitrogen is somewhere on mid-cycle pricing. These things ebb and flow. We go in when we get asked the question by any government go in and we say, here it is. This is a highly competitive market, a highly competitive world. We need to compete. These are the things that we do. And by the way, making investments to the tune of hundreds of millions of dollars every year to expand those volumes in a growing market, we make investments to add additional volumes to the market. And we can do that economically because of where we sit on the cost curve. So the story for us is you put that all together and you say, I mean, there's nothing in the form of anything untoward here. In fact, it's the opposite of that. We're doing everything in our power to compete.

If you talk about the portfolio and really trying to look at if you can whittle down the lower-performing assets from a returns perspective, talk about selling phosphate or restructuring phosphate, you're doing work on that, looking -- rethinking Brazilian retail and other Brazilian businesses, what you're going to do with Trinidad now that you're still in negotiations for a gas contract. Can you talk about progress you made on those initiatives? How do you think the year is going to play out? What might we hear about first?

Yes. So just going one by one, if we just talk about phosphate. So we are doing all of the things that you would expect that we would be doing in the context of a strategic review. And so as we -- the last quarter sort of announced or talked about our plans for strategic review, it was everything from restructured operations. And so what could restructured operations look like? It's looking at product mix and does this make sense? It's looking at life of mine at these different assets that we have and asking the question, do we extend those reserves because we can in the region? Do we think about progressing toward decommissioning here or there? Or is there a possible sale of these assets at the other end of the continuum and everything in between. We are pulling together all of the data information that we need to for the one end of the continuum, and that is a possible sale. Information memorandum and data room and pulling together all of the operational data capital, all those things you need to assemble where somebody can come and have a look and make an educated estimate of whether that can make sense for them or not or again, on the other end of the continuum, restructured operations. Where are we at? We expect that next quarter, we'll be able to come to the market and start testing. On Trinidad, yes, continue to -- the operation is shut down, continues to be shut down. We are talking to the Trinidad government, which is in the midst of negotiating with the upstreamers at the moment. And so not able to really understand their cost base before they can come talk to us about provision of supplying of natural gas to our plant, talking about access to the port, which, as we talked about in 2025 was limited for us given increased port fees. And so working with the Trinidad government to better understand, is there a package here, port fees, access to port, cost of natural gas that can make sense for Nutrien. And that we -- I don't know the answer to that. We're still talking to the Trinidad government about that. In the meantime, we're exploring all of the alternatives for Trinidad. What we saw last year, though, is that the balance of the network had stepped up. We were operating rates above 90%. We're able to meet all of our customer needs with our network ex Trinidad. This year, we're staring at natural gas costs that are 50% Henry Hub, 50% AECO. That is a structural advantage in our business that without Trinidad improves. Those margins improve. We're looking at all this. In the meantime, we're in a buoyant nitrogen market, the buoyant ammonia market, buoyant urea market. And so let's see about Trinidad. But again, the priority at the moment is working through some of these challenges with the Trinidad government, which has been a slow process. Then finally, you mentioned Brazil, Joel. Yes, we've been soul searching, looking at each other at Nutrien, asked the question, how do we best access this exciting agricultural market. We're obviously the biggest supplier of potash into that part of the world, and we'll continue to be. And looking at infrastructure, investment, customers, how do we preserve that ability to continue to grow with the Brazilian market. They're going to add more acres again this year, 2% probably to the current complement of arable land. So we know when we're going to do potash. We know we're going to do proprietary products and particularly crop nutritionals in that part of the world. It's this retail question that, as you know, Joel has been challenged. And at the moment, we're just -- we're assessing whether -- how and whether that retail presence is required and necessary for us to achieve our overall objectives in Brazil. And we expect to have some conclusions on all of these files this year, 2026.

Lots of questions on potash. Let's talk about that. So like you said potash prices are sitting around good, below mid-cycle, but good, maybe Goldilocks. Can you talk about the markets a bit? Like it looks like price a little bit weaker in U.S., pretty strong offshore markets. How would you look at it?

Yes, I think that's right. I mean I mentioned our winter fill program in the U.S. that was oversubscribed. We were quite pleased with that. And when it was done, we went up 20. And so on a short ton basis, yes, a little bit less than the 3 -- equivalent of a metric ton at the sort of $370 that it is in Brazil. But these markets sort of ebb and flow depending on what's going on internationally and supply and demand regionally. What I would say is Brazil, as you say, Joel, has been kind of just a bit below mid-cycle. I mentioned $370. It might move up or down $3 a ton, it seems every week, but we're in and about that range. And we -- they ended their season with historically low inventories in Brazil. And hence, that's some of the strength in pricing as the Brazilians seek to rebuild inventory. It still continues to be the case that it's a bit hand to mouth in that part of the world. So it's why we see some of the increased volatility in Brazil that we might -- as we compare to previous years, we're seeing a bit more volatility because when the Brazilian step out of the market, they step out of the market, when they step in sort of step in a big way and replenish those inventories. And again, inventory is being replenished. We had a historically early contract with the Chinese that $349 helped us set the floor as usual globally, but it just speaks to the low inventories that we're sitting at ports and inland in China and the need for the Chinese to come get that contract in place, get those volumes flowing. We know that Chinese domestic production is declining. It's been that way for years. It continues to decline. We know that the [indiscernible] supply into China has been challenged, geotechnically challenged production challenges. And you put that all together and the Chinese continue to look to seaborne imports, continue to look for rail from Russia and hence, with depleted inventories, the early contract settlement. We expect the Indians to follow here soon that, again, as it relates to inventory and the need to get volume into the country. Chinese are taking it all at the moment because they have a contract and the Indians are going to have to step in and do the same. So market to market, you step back from all that, Joel, and you say, we talked about North American agriculture. You go globally, palm oil continues to be very strong. Coffee cocoa continues to be very strong. You can go region to region. And we're expecting, again, we're saying 74 million to 77 million tons, again, potash volume growth, demand growth globally again this year. This will be the fourth year in a row. And of course, we're going to play our part in increasing our production.

I don't necessarily want to ask the Jansen question, but the people want to ask Jansen question in different permutations. Jansen was always so far off. Now it looks like they're going to have first tons -- reiterate its first tons and maybe by the second half of '27, maybe become meaningful end of '28 in potash or 2029. It's getting there. How does that change the market, your positioning? Or do you have to wait until they're on the market and then reassess that?

No. Again, you sort of step back, look at the potash industry over the last, I don't know, 15, 20 years and ask the question, is it growing? And it just continues to grow. And it's not linear. But on average, it's kind of that 2.5% average annual growth rate. And that has been, on average, extraordinarily consistent, again, 4 years in a row. We're back to trend level demand, what we would call trend level demand and demand growth after all the volatility associated with the conflict in Eastern Europe. When you look now to the end of the decade, early next and you say, well, probably an 80 million to 85 million ton market continues to grow. It's going to need additional tons. And so we do all the demand growth we stack and where we see the tons coming from. And we have our own lens that we look through for that. We don't just take everyone's publicly announced volume growth. We haircut as we see fit, and we factor that into the supply and demand stack and then what role Nutrien plays in the context of supply-demand in a balanced market. And through now end of this decade, early next, we see a balanced market. And we would say we're in a balanced market today, and we see a balanced market through that time period. I think importantly is we apply our lens, we do. But if you look at every 10 years announced plans, what people expect to do, there's usually about 6 million to 7 million tons of supply destruction of some form in that decade-long period, and that is mine floods or collapses.

Did you find a sinkhole or...

Well, I'm not -- I wouldn't wish that on anyone. I'm just saying on average, those are the things that happen. So as we apply our lens, but then once we do everything kind of has to work pretty well in order to meet that growing demand. And so while we call it a balanced market, there's a version of this future and probably skewed to that where actually, it could be even tighter.

If I think about how you model potash forecast, typically, you'll come up with a global shipment number and then you'll say, well, Nutrien should get 19% to 20% market share, something like that. As Jansen comes on in the next couple of years, is it safe to say your projections would be 19%, 20% becomes -- I don't know the number, 18% to 19% or something like that. Like, you'd still say 19% to 20% is...

No, we're not changing our plans. I mean, again, you look at our ability to expand this kind of the $200 a tonne CapEx, brownfield investments at our current 6-mine network. And we're not talking about lead times that are measured in the decades or we're talking about lead times and it's mining machines and conveyance. I mean, the shops are built, the mills are built, some infrastructure investments on surface as it relates to loadout capability required. But you add that all up, it's $200 a tonne, that would be an order of magnitude less than a greenfield site. You can ask the question, in that mix, can Nutrien compete? And we can absolutely compete. And you look at that cost curve, I mean, there's some production to the right of that cost curve that we'll see. But in the meantime, no Nutrien plans to -- we plan to be in the market the way that we always have been.

I got a question on long-term retail segment growth algorithm. Before doing that, maybe you could talk about 2 or 3 years ago, you gave a 2026 retail guide of getting around $2 billion EBITDA, $1.9 billion to $2.1 billion. You're going to come in this year now in your latest guidance around $1.85 billion. So maybe $150 million below your kind of expectations. Can you first explain sort of what you thought a few years ago, what ended up happening to be a little bit lower? And then maybe we'll talk about going forward.

Yes. I would say probably the assumptions that we made a few years ago, and we started talking about this at the start of this, Joel, was some assumptions about just a bit better ag environment compared to the one that we've maybe just coming through and the challenges facing obviously, the North American farmer, whether it's corn in the U.S. or whether it's canola in Canada and other challenges globally that agriculture has faced with some assumptions about just a bit better ag environment that -- how does that translate then translates into our proprietary products and the uptake of those things. It translates in our ability to continue to organically grow. And so when we talked about the $1.9 billion to $2.1 billion last year and how we're -- sorry, in 2024 as a target for this year and how we're guiding this year, the delta is probably mostly just the ag environment. I think importantly, if you look at what we have done over that period, I mean, it is growing and we believe structurally growing earnings by $400 million in that business over that time frame. You look at how we're guiding this year, again, it's growth -- earnings growth in our retail business, and that's organic growth, it's network optimization. It's continuing to grow our proprietary products that we continue to stack and we call structural in nature. That we get excited about. We're talking about -- we're planning an Investor Day again this year in the fall, and we'll be talking about exactly that at our Investor Day again this year.

So if I think about the growth algorithm going forward in retail, let's say, let's ignore tuck-ins for a second. What would you think is kind of the growth algorithm? You may have to talk about whether Brazil is in and out of that, but it's not that big part of the business. And then if we layer on tuck-ins, how would the growth algorithm change?

Yes. I mean, I don't like to hardwire sort of tuck-ins as something that's going to stack earnings only because we're very selective about that. It depends on the environment that we're in and the opportunities that come our way. What I would say, Joel, is one is, again, proprietary network optimization. We continue to see the opportunity to grow probably at the same kind of rate. If you look at the last 5 years, we can probably project that forward as a similar growth rate. I think importantly is part of the equation in earnings growth in our retail business has been the opportunity to pull out cost. And it's really, really very significant. That comes in the form of looking at unproductive branches and closing them. It comes in the form of just overall SG&A and efficiency and productivity. We've had a particular focus on that in our retail business. We believe there's more there to be done. And it's in the context of a competitive landscape, changing ag environment, but it's also in the context of just productivity and efficiency, the investments we're making in technology that are going to improve productivity, pull out costs. And so I think when you put it all together, we can sort of say we believe in the same kind of growth rates in our retail business that we've seen over the last 5 years projecting that forward.

So the stock has been working quite nicely lately. People are starting to hit the story a bit more, hopefully, the last little while. What do you think wrapping up the next minute here, what do you think people get wrong on Nutrien that you'd like to speak about?

I think -- I don't know that people are getting it wrong, Joel. I think it's just continuing to talk about what I started with, that is we're in a growing market, and that has been quite ratable for some period of time. And yes, it doesn't happen, like I say, linearly, but it has been happening. Among that, we believe we have the highest quality assets in the business upstream of that acre. That quality is -- we can talk about asset quality from a number of perspective, quality of earnings, really to convert to cash. That quality is growing, and that's by continuing to comb that portfolio and ask the question, can we improve? In the meantime, pulling out cost. I think that when you put that all together, it's a story that says there's an opportunity here with what Nutrien currently has under its roof just to continue to improve. And then there's an opportunity for Nutrien to continue to grow in a market that's growing. Those 2 things put together has been, I think, certainly part of the story.

Thanks, Ken.

Yes. Pleasure, Joel. Thank you.