Nutrien Ltd. (NTR) Q4 2022 Earnings Call Transcript

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Nutrien Ltd. (NYSE:NTR) Q4 2022 Earnings Conference Call February 16, 2023 10:00 AM ET

Company Participants

Jeff Holzman - Vice President, Investor Relations

Ken Seitz - President and Chief Executive Officer

Pedro Farah - Chief Financial Officer

Mark Thompson - Chief Commercial Officer

Jeff Tarsi - Executive Vice President and President, Global Retail

Trevor Williams - Interim President, Nitrogen and Phosphate

Jason Newton - Chief Economist and Head of Market Research

Trevor Williams - Interim President, Nitrogen and Phosphate

Chris Reynolds - President, Potash

Conference Call Participants

Andrew Wong - RBC Capital Markets

Jacob Bout - CIBC

Lucas Beaumont - UBS

Joel Jackson - BMO Capital Markets

Ben Isaacson - Scotiabank

Steve Byrne - Bank of America

Adam Samuelson - Goldman Sachs

Christopher Parkinson - Mizuho

Jeff Zekauskas - JPMorgan

Michael Tupholme - TD Securities

Will Tang - Morgan Stanley

Steve Hansen - Raymond James

Richard Garchitorena - Wells Fargo


Good morning, ladies and gentlemen and invited to nan Nutrien 2022 Q4 Earnings Conference Call. [Operator Instructions] This telephone is being recorded connected February 16, 2023 astatine 10 a.m. Eastern time. I would now for illustration to move nan convention complete to Jeff Holzman, Vice President of Investor Relations. Please spell ahead.

Jeff Holzman

Thank you, operator. Good greeting and invited to Nutrien’s 4th fourth 2022 convention call. As we behaviour this call, various statements that we make astir early expectations, plans and prospects incorporate forward-looking information. Certain worldly assumptions were applied successful making these conclusions and forecasts. Therefore, existent results could disagree materially from those contained successful our forward-looking information. Additional accusation astir these factors and assumptions are contained successful our quarterly study to shareholders arsenic good arsenic our astir caller yearly report, MD&A and yearly accusation shape revenge pinch Canadian and U.S Securities Commissions.

I will now turn nan telephone complete to Ken Seitz, President and CEO and Pedro Farah, our CFO, for opening comments earlier we return your questions.

Ken Seitz

Good greeting and convey you for joining america arsenic we recap our afloat twelvemonth results and talk nan outlook for our business going forward. 2022 was an unprecedented twelvemonth connected galore fronts. Geopolitical events, astir notably nan warfare betwixt Russia and Ukraine contributed to important proviso disruptions crossed agriculture, power and fertilizer markets. The proviso shocks were astir pronounced for world fertilizer markets starring to higher prices, accrued volatility and awesome shifts successful buying patterns passim nan year.

Nutrien delivered grounds net and rate travel successful this situation owed to nan advantages of our world-class production, distribution and unit network. We invested $2.9 cardinal to prolong our assets and turn our business, while returning $5.6 cardinal successful superior to our shareholders done stock repurchases and dividends. We progressed our sustainability priorities, and astir importantly, continued to execute manufacture starring information capacity crossed our business.

Nutrien Ag Solutions had different very beardown twelvemonth generating adjusted EBITDA of $2.3 billion. This consequence was driven by higher income and gross margins crossed astir each merchandise categories and regions wherever we operate. The maturation and comparative net stableness provided by our unit business is an advantage that differentiates Nutrien from our fertilizer peers. We completed 21 unit acquisitions successful our halfway geographies, pinch a attraction connected expanding our web successful Brazil. This region is 1 of nan fastest increasing cultivation markets successful nan world and we spot further opportunity to grow our web and supply full acreage solutions to Brazilian growers. We made important advancement connected our sustainable agriculture initiatives that are a cardinal constituent of gathering nan 2030 commitments successful our Feeding nan Future plan. We tripled nan acreage enrolled successful our c aviator programme compared to 2021 and are seeing fantabulous engagement from growers and strategical partners crossed nan agriculture worth chain.

Turning to potash, we generated adjusted EBITDA of astir $6 cardinal successful 2022 highlighting nan value of having debased costs operations that are backed by a reliable proviso chain. In nan first half, we sold grounds offshore volumes successful consequence to accrued request from our customers and achieved higher realized trading prices. As we anticipated, potash volumes successful nan 4th fourth were down from nan anterior twelvemonth arsenic buyers successful North America and Brazil constricted purchases and drew down inventory. We adjusted our accumulation plans accordingly and pulled guardant successful immoderate attraction activities during this downtime, preserving nan elasticity to quickly ramp up accumulation erstwhile stronger request reemerges.

Our nitrogen net were supported by higher world benchmark prices and nan advantaged costs position of our assets. Nitrogen income volumes successful nan 4th fourth were impacted by little accumulation volumes and cautious buying from some fertilizer and business customers. The mostly of nan accumulation losses were related to Trinidad state curtailments and utmost acold upwind events that caused outages astatine our North American plants. We completed emissions abatement projects astatine 3 nitrogen sites that correspond a awesome measurement towards gathering our extremity to trim CO2 balanced emissions by 1 cardinal tons by nan extremity of 2023.

In phosphate, we delivered higher net owed to accrued trading prices, successful particular, for our precocious worth provender and business products which much than offset a simplification successful income volumes. The structural shifts successful nan marketplace complete nan past twelvemonth highlighted nan value of being nimble and adaptable successful an uncertain world environment. We will return nan learnings from 2022 arsenic we beforehand our plans for 2023 and beyond.

Now, turning to nan outlook. The world atom stocks to usage ratio is astatine its lowest constituent successful much than 25 years and we expect it will return aggregate cropping cycles to reconstruct stocks to much capable levels. Crop commodity prices are trading good supra humanities mean levels and we expect accrued planted acreage and harvest input request successful North America and Brazil. In potash, sanctions connected Belarus and restrictions connected Russia person been successful spot for supra 1 year. And complete that time, nan measurement of potash exported has not materially improved. Belarus proviso successful peculiar remains constrained pinch shipments successful caller months reported to beryllium down much than 50% from nan anterior year. This illustrates nan value of having reliable entree to tidewater ports and nan challenges associated pinch reworking distribution channels were for a bulk commodity for illustration potash.

Further, we proceed to judge projects that were nether improvement successful Russia and Belarus will beryllium delayed. These description s comprised astir 60% of nan projected proviso entering nan marketplace complete nan adjacent 5 years extracurricular of our ain increases. We are forecasting nan world potash shipments betwixt 63 cardinal to 67 cardinal tons successful 2023, which is still good beneath our unconstrained request estimate of astir 70 cardinal tons.

In North America, we judge unit potash inventories are down 15% to 20% compared to nan anterior year, pursuing a patient autumn exertion play and constricted restocking. This estimate is based connected nan position of Nutrien Ag Solutions inventories and our appraisal of broader unit transmission inventories. We had a bully consequence to our wintertime capable programme that was released successful January, though we are still seeing immoderate level of purchaser caution. We expect an further activity of buying to meet request for nan outpouring play and this plays to nan spot of Nutrien’s starring accumulation and distribution web successful North America. Brazil has been nan astir progressive potash marketplace to statesman nan twelvemonth and prices person stabilized pursuing nan important destocking that occurred successful nan 2nd half of 2022. We forecast a beardown rebound successful Brazilian imports successful 2023 and much normal seasonal buying patterns, pinch request expanding successful nan 2nd and 3rd quarters.

Global nitrogen prices person softened owed to nan crisp driblet successful European state prices and purchaser deferrals. We expect North American nitrogen prices will patient arsenic we attack nan outpouring play owed to higher maize acreage and nan effect of accrued U.S offshore exports successful nan 2nd half of 2022. We judge location is simply a important magnitude of nitrogen that will request to beryllium delivered complete nan adjacent fewer months to meet request for outpouring exertion successful nan Northern Hemisphere.

I will now move it complete to Pedro to reappraisal our guidance assumptions and superior allocation plans for 2023.

Pedro Farah

Thanks, Ken and bully morning. Based connected marketplace conditions that Ken conscionable highlighted, we expect to present historically beardown net crossed each of our business segments successful 2023. Starting pinch Nutrien Ag Solutions, we expect a betterment successful fertilizer income volumes and a reset successful per ton margins akin to mean values achieved successful 2021. We are seeing beardown prices for astir harvest protection products and forecast separator percentages successful statement pinch humanities mean levels. The midpoint of our 2023 unit adjusted EBITDA guidance scope represents a 10% yearly maturation complaint since 2018, reflecting nan spot of ag fundamentals and beardown execution of our strategical maturation initiatives.

Our potash income volumes guidance of 13.8 cardinal to 14.6 cardinal tons presume accrued request successful our cardinal markets of North America and Brazil and continued world proviso restrictions. We person maintained nan elasticity to summation income volumes to astir 50 cardinal tons successful 2023 if we spot stronger engagement successful nan market. As demonstrated successful nan past, location is tremendous economical worth successful having nan capacity to meet surges successful request and Nutrien has an unmatched expertise to present erstwhile this occurs.

Our nitrogen guidance reflects nan caller diminution successful benchmark prices and assumes immoderate strengthening anterior to nan outpouring season. We expect higher nitrogen income volumes successful 2023 owed to beardown request successful accrued operating rates astatine our North American plants. We are forecasting Trinidad state curtailments of astir 20% akin to nan effect successful nan 2nd half of 2022.

Cash from operating activities is projected astatine $5.5 cardinal to $6.5 cardinal successful 2023. Our conversion ratio this twelvemonth is impacted by timing of rate taxation payments related to our grounds net successful 2022. Without this impact, our conversion ratio will beryllium estimated astatine astir 75%, which is much successful statement pinch our run-rate expectation. This is nan ground we will make superior allocation decisions done nan rhythm and tin utilize nan spot of our equilibrium expanse if basal to normalize timing related fluctuations successful rate flow. We stay assured successful nan semipermanent outlook for nan business and scheme to put astir $3 cardinal to prolong our assets and beforehand precocious return strategical maturation initiatives successful 2023.

In retail, our attraction is to fortify our web successful Brazil successful POS, grow our proprietary merchandise offerings and heighten our integer capabilities. This is very accordant pinch our unit finance priorities successful nan past. In potash, we proceed to advancement nan ramp up of our existing low-cost potash capacity, but person adjusted nan timing to optimize superior expenditures successful statement pinch nan gait of projected request betterment successful 2023. We will support a elastic attack and now expect to scope 18 cardinal tons of yearly operating capacity successful 2026. We person nan advantage of bringing connected this capacity successful increments astatine a very debased superior costs per ton and proceed to judge location is important worth successful having elasticity to summation accumulation erstwhile nan marketplace needs it.

Our nitrogen investments are focused connected concluding in-flight, low-cost brownfield description s, decarbonization projects and advancing front-end engineering activity for our projected Geismar cleanable ammonia plant. We intend connected making a last finance determination connected this task successful nan 2nd half of nan year.

Finally, connected our plans for returning superior to shareholders. We completed our 10% successful CIB successful early February and person purchased much than 150 cardinal shares since nan opening of 2018, reducing our number of shares outstanding by astir 23%. Over this period, we person besides demonstrated nan expertise and committedness to supply a competitive, unchangeable and increasing dividend done nan highs and lows of this cycle.

Moving forward, we intend connected factoring successful nan changes to nan stock count arsenic a portion of nan determination criteria for early per stock dividend growth. Yesterday, our Board of Directors approved a 10% summation successful our quarterly dividend and authorized a caller 5% stock repurchase programme that provides optionality for further stock repurchases successful 2023.

I will now walk it backmost to Ken.

Ken Seitz

Thanks, Pedro. I would conscionable make a fewer last comments. The outlook for our business remains strong. Global atom and oilseed inventories are tight, structural proviso issues persist and request for harvest inputs is expected to summation successful 2023. We will stay disciplined successful our superior allocation attack arsenic we position nan institution to service nan needs of our customers while delivering semipermanent worth for our shareholders.

Finally, I would for illustration to convey our astir 25,000 world labor for their difficult work, dedication and attraction connected information complete nan past year. It is done your efforts that we delivered grounds results successful 2022 and position nan institution for occurrence successful nan years ahead. We would now beryllium happy to return your questions.

Question-and-Answer Session


Thank you. [Operator Instructions] Your first mobility comes from Andrew Wong pinch RBC Capital Markets. Please spell ahead.

Andrew Wong

Hi, bully morning. So actually, I wanted to inquire a spot astir nan potash strategy present and conscionable really possibly marketplace conditions impact some your shorter word benignant of accumulation decisions and nan longer word ramp-up path? Like what benignant of awesome do you request for request and pricing earlier raising accumulation and ramping up capacity? And do you benignant of thin to hold for immoderate of these signals to show up first aliases do you possibly summation accumulation arsenic you mightiness expect immoderate of these signals to show up? I americium conscionable benignant of wondering if you tin elaborate a small spot much connected that? Thanks.

Ken Seitz

Good morning, Andrew and convey you for nan question. So yes, obviously, done 2022, we saw activity successful inventory and immoderate of nan reactions to nan proviso broadside challenges related to ongoing sanctions against Belarus and of course, this conflict successful Eastern Europe, which has created export challenges retired of Russia. And truthful arsenic we looked astatine nan impacts not only successful nan near-term of immoderate of those proviso disruptions, but besides arsenic we mentioned, nan effect connected caller projects that are nether development, 60% of nan caller accumulation coming into nan marketplace we judge is delayed. We judge that those benignant of underlying proviso challenges will persist. And we judge that they will persist into nan surely adjacent word and into nan mean word arsenic well.

On nan different broadside of nan equation pinch these very beardown ag fundamentals, we judge that we are heading into a beardown outpouring exertion play successful North America. But past besides not each request fits into nan almanac year. And again, pinch immoderate of these movements connected inventory, we are conscionable looking astatine nan needs of our customers. And arsenic we said passim 2022, we will look astatine those needs, we will look astatine our – nan improvement of those fundamentals and we will gait our investments successful that ramp up accordingly. So again, looking astatine 2022 and nan movements location 2023, beardown demand. But past pacing retired those investments, we thought it prudent to return immoderate of our offer, gait nan ramp-up of potash accumulation and meet nan needs of our customers. So that’s what we are doing. These investments are dispersed crossed dozens of projects astatine 4 excavation sites. So we do person that flexibility. We do person that optionality. And of course, we will beryllium watching nan signals successful nan marketplace and from our customers. Also, conscionable yet opportunity that successful position of being nimble, we tin execute against these superior programs and we do not person agelong lead clip items present wherever we really request those signposts to beryllium showing up years successful advance. In fact, we tin watch nan signposts successful nan much near-term and again execute against our superior plans and ramp up potash production.


Your adjacent mobility comes from Jacob Bout pinch CIBC. Please spell ahead.

Jacob Bout

Good morning. A mobility is conscionable connected this cautiousness that you person seen successful nan first 4th and nan consequence location could beryllium a snapback successful fertilizer markets successful nan U.S. outpouring season. We get into proviso concatenation issues successful overheated markets?

Ken Seitz

Yes, bully greeting Jacob. Yes, that is precisely what we are seeing astatine nan moment. You tin constituent to nitrogen, wherever we typically person a seasonal debased this clip of nan year. And we spot that successful potash arsenic well, but recognizing of people that erstwhile farmers get retired connected nan field, location is going to request to beryllium a important magnitude of measurement that needs to move done nan channel. So astatine nan moment, yes, we spot cautious buy. The reality is that nan fundamentals person improved for nan pharma, because nan backdrop connected nan ag basal broadside is beardown and of people fertilizer prices person travel off, truthful that affordability has improved. But I’ll manus it complete to Mark Thompson, our Chief Commercial Officer, to supply immoderate much color.

Mark Thompson

Sure. Hi, bully greeting Jacob. I’ll possibly make a fewer comments and past possibly person Jeff talk astir nan inventory positioning and web astatine nan unit level arsenic well. From a shaper standpoint, I deliberation what you pointed retired is perfectly correct we person seen be aware successful nan channel. It’s a small spot different connected potash and nitrogen. I deliberation from a potash standpoint, nan inventory destocking process we expected to spot successful North America, peculiarly and Brazil done nan extremity of Q4, really did return place. From a North America standpoint, we saw inventories arsenic we measure them astatine nan customer level down successful that scope of 15% to 20%. And I deliberation Jeff and nan Nutrien Ag Solutions squad to could corroborate that trend.

Our wintertime capable programme that was put retired early successful 2023 had a bully response. We filled astir 70% of nan program, which would beryllium modestly beneath humanities levels. And I deliberation that reflects nan wide be aware that you’re talking about. Of course, Jeff will beryllium capable to talk astir nan expectation. We do spot beardown grower request coming – but really, location is this cautious attack because of value volatility that’s delayed immoderate of that purchasing and assuming that we do spot beardown fundamentals emerge. We will put a strain connected nan proviso chain.

I deliberation this is an area successful potash successful particular, wherever Nutrien is exceptionally advantaged. Our terminal web and distribution assets arsenic it relates to potash are really unparalleled successful nan North American market. So we are group up very good to present erstwhile that outpouring request breaks. I deliberation nan aforesaid would beryllium existent from a nitrogen standpoint. In nitrogen, nan transmission is astir apt astir mean purchases comparative to humanities levels. But again, we person seen immoderate grower caution. Our web is positioned to meet that demand. We’ve sewage a bully information of nan 2nd 4th bid book that we’ve intentionally person uncommitted astatine this constituent to waste into what we expect to beryllium patient aliases fundamental. So notwithstanding nan be aware you’ve talked about, we deliberation we are very good positioned. But I’ll walk it to Jeff to possibly remark connected nan unit level position.

Jeff Tarsi

Yes. And I would evidently work together pinch comments some by Ken and Mark. If I look astatine our inventory levels coming successful our Ag Solutions business, we’re sitting a spot beneath wherever we would historically beryllium connected inventories, and we person to spell done it by product, peculiarly pinch potash. But I ever spell backmost and erstwhile I look astatine nan fundamentals and what I deliberation what’s going to beryllium request driven I’ll spell backmost first to prepay successful nan 4th quarter. We had very beardown prepay from our customer guidelines successful nan 4th quarter. If I look astatine our seed book to date, our seed book is very beardown arsenic well. So what I’m perfectly convinced of is we’re going to scheme a large harvest globally astir these commodities. We besides person nan expertise to look – we do extended star testing. And truthful we’ve sewage an expertise to look successful and spot what nan star fertility levels look like. If I look astatine a merchandise for illustration potash, I spot astir 40% of those tests that opportunity we’re beneath immoderate modular of wherever we request to beryllium successful bid to maximize yield. So to opportunity each of that, Jacob, it astir apt gets backmost to wherever he started this point is that we expect a batch of buying for nan spring. And you’re right, we could person immoderate proviso concatenation constraints and merchandise doesn’t commencement moving. And from my position wrong our unit organization, I consciousness powerfully because we’ve invested very heavy successful our proviso chain. But growers conscionable been a small spot slower successful a little costs situation to travel successful and perpetrate peculiarly arsenic it relates to nutritional.


Your adjacent mobility comes from Joshua Spector pinch UBS. Please spell ahead.

Lucas Beaumont

Good morning. This is Lucas Beaumont for Josh. So conscionable focusing connected potash deal. So could you conscionable fto america know, really overmuch of your first 4th bid book is locked successful currently? And what value is it benignant of locked successful astatine nan moment? And are you expecting immoderate sequential move up successful pricing from wherever it is now benignant of baked into your guidance? Thanks.

Ken Seitz

Yes. Good morning. And I’ll conscionable opportunity that conscionable echo what Mark shared astir our capable programme wherever successful North America, we were 70% subscribed and consciousness bully astir our position present successful nan first quarter. Offshore Canpotex is good committed into nan first quarter. We won’t remark connected prices. We don’t remark connected prices. But we’re guiding this twelvemonth to 13.8 cardinal to 14.6 cardinal tons for nan year. We do judge it’s a supply-constrained marketplace truthful that we’re saying shipments of 63 cardinal to 67 cardinal tons again this year. And truthful that – depending connected really nan twelvemonth unfolds and surely depending connected nan timing of India and China contracts, again, we’re preserving capacity, income capacity of 15 cardinal tons. Again, depending connected nan timing of immoderate of these settlements.


Your adjacent mobility comes from Joel Jackson pinch BMO Capital Markets. Please spell ahead.

Joel Jackson

Hi, bully morning, everyone. I was willing successful your comments connected unit expecting akin margins successful ‘23 arsenic you did a mates of years ago, and it’s astir $350 cardinal contraction successful unit net successful 2023. So tin you talk astir – erstwhile I deliberation astir $350 cardinal little net successful ‘23, really does that shingle retired for commodity prices versus measurement versus different things erstwhile I guess, partially offset by immoderate of nan M&A you’ve already done? And past really do you get unit margins that are successful statement pinch nan past mates of years successful a little commodity value situation wherever you’re not getting inventory gains?

Ken Seitz

Yes. Good morning, Joel. Thanks for that. Yes, truthful we person been increasing our unit business, some organically and inorganically. And truthful that’s surely reflected successful our position of 2023. But arsenic you say, we’re besides expecting a spot of a reset arsenic it relates to nutritionals arsenic it relates to fertilizer and those fertilizer margins, but besides arsenic it relates to harvest chemistry. But I’ll manus it complete to Jeff Tarsi to supply much color.

Jeff Tarsi

Yes, Joel. So astir of our emergence up past twelvemonth successful unit was successful – fundamentally successful nan North American market. And arsenic Pedro talked astir successful his commentary, we expect to reset connected margins successful our North American. So, almost each of our resettled travel successful our North American market. It will fundamentally autumn successful 2 buckets, it will autumn successful nan harvest chemistry bucket and nan fertilizer bucket. And basically, what we’re doing is we’re going backmost and anchoring ourselves to ‘21. And if I look astatine some of those 2 categories, for illustration connected a separator per ton ground for fertilizer, we’re going to beryllium somewhat supra wherever we were successful ‘21 for our projections for ‘23. And our harvest chemistry gross margins are going to beryllium fundamentally successful statement pinch wherever we were successful ‘21. So obviously, arsenic you talked astir earlier, we caught immoderate appreciation successful some those 2 categories complete – really complete nan past 18 months, and we don’t expect to spot that aforesaid appreciation successful ‘23. As Ken talked about, pinch things that we do, we’re perpetually trying to turn our stock by proprietary business. And past year, we had an exceptional proprietary year. Our gross was up complete $400 million. Our gross margins were up conscionable nether $175 million. And truthful – and caller merchandise launches contributed astir $10 cardinal of EBITDA. What I’m excited astir erstwhile we look into ‘23 and again, nan expertise to grow our margins past humanities is, we will beryllium launching six caller works nutrition products successful Australia. We’ll beryllium launching six caller harvest protection products successful nan U.S. and 7 caller products successful Brazil. So we’re going to proceed to stress our proprietary products. And look, our margins are going to still be, successful my opinion, very charismatic from a Nutrien standpoint and from a harvest protection standpoint, again, erstwhile you look astatine it connected a humanities basis. We expanded our margins past twelvemonth successful works nutrition substantially, and we look to proceed that maturation successful ‘23 arsenic well. So we person a batch of levers that we tin propulsion arsenic it relates to that.


Your adjacent mobility comes from Ben Isaacson pinch Scotiabank. Please spell ahead.

Ben Isaacson

Thank you very much. And bully morning. My mobility is astir world potash demand. We had 70 cardinal tons successful ‘21, astir 60 cardinal tons successful ‘22, and you’re calling for astir a rebound astir halfway. And nan mobility is, why aren’t we getting backmost to 70 cardinal tons? From what it sounds for illustration transmission inventories and/or ungraded inventories are either mean aliases beneath normal husbandman affordability for potash has improved, not conscionable because potash prices are lower, but because nitrogen and phosphate prices are little arsenic well. We had ray request past year. We had a drought past year. You talk astir be aware and deferral, that’s much of a timing issue. So why are we not getting backmost to nan afloat 70 cardinal tons? And if it’s conscionable because it’s proviso constrained, past why are you going down from nan 50 cardinal tons you talked astir successful November to astir 14 cardinal tons now? Thank you.

Ken Seitz

Yes. Those are awesome observations, Ben. Thank you. So we would work together pinch you that if we look astatine nan unconstrained request that we would spot connected nan planet, fixed this very beardown backdrop that we spot pinch nan Ag fundamentals and certainly, nan measurement husbandman affordability has improved pinch nan softening of price, that connected an unconstrained basis, we would beryllium astatine 70 cardinal tons. But we do believe, fixed these beautiful utmost proviso broadside challenges that shipments this twelvemonth would beryllium successful nan 63 cardinal to 67 cardinal ton range. But nan reality is that, that doesn’t – this doesn’t each fresh perfectly wrong nan almanac year. So that if we look astatine 2023 and we look astatine inventory levels astir immoderate of these awesome markets, certainly, we’ve seen destocking successful North America and Brazil, but we are watching inventory levels successful China, which would beryllium astir 2.3 cardinal tons today, truthful certainly, getting beneath humanities averages and successful India, for example, wherever for each aggravated inventory levels are low. But yet astatine nan aforesaid time, still haven’t seen present we are into nan mediate of February, we haven’t seen a contract. And truthful arsenic that statement is delayed, we look astatine 62 million, 67 cardinal tons, 70 cardinal tons unconstrained, it conscionable doesn’t fresh wrong nan almanac year. And hence, we’re moving difficult now to scheme our volumes to meet nan needs of our customers present successful 2023, but of course, looking into 2024 now arsenic well.


Your adjacent mobility comes from Steve Byrne pinch Bank of America. Please spell ahead.

Steve Byrne

Yes. Thank you. So Jeff Tarsi, you mentioned an summation successful ungraded testing and 40% of them were beneath capable levels successful potash. My mobility for you is, for those growers that are looking astatine information for illustration that, are they apt to return to possibly a normal exertion rate? Could they perchance spell higher than wherever they were successful 2021? And would you expect a akin business successful different parts of nan world, possibly pat into your transmission down successful Brazil and successful Australia? Are you seeing this inclination of below-normal potash levels successful ungraded successful different regions arsenic well?

Jeff Tarsi

Yes, Steve, bully question. And obviously, I person a batch much visibility into those results successful North America arsenic opposed to Brazil because arsenic you would know, we ain 1 of nan largest ungraded analytic lamps successful North America, limb analytical. So we person a batch of information that we tin heap done to look astatine that. And we provided interestingly enough, we provided that information for each of our divisions and moreover down to nan region level, wherever we tin simulate this data. I deliberation if I look backmost to nan fall, Steve, we really had a very beardown autumn exertion of some NPK successful North America. And I was rather satisfied pinch nan complaint growers we’re using. And I do agree, arsenic these products go much economical. Look, we had a batch of merchandise banked successful nan show complete nan past mates of years. You sewage nan past 3 falls person each 3 been grounds falls successful North America. And truthful I deliberation arsenic nan merchandise becomes much affordable, I would expect to spot immoderate rates summation crossed these products. I was doing immoderate mathematics today. And these growers are spending upward to $150 an acre connected their hybrid maize varieties. And these varieties are very temperamental pinch nan NPK levels. And truthful I don’t deliberation growers are going to consequence immoderate output from that standpoint.

As we get into Brazil, you talked astir Brazil. And arsenic you know, those solds are not capable to slope Nutrien for illustration we tin crossed nan maize loop there. So it’s much but conscionable successful clip market. Ken and I and Pedro were conscionable successful Brazil past week, and we had a chance to sojourn pinch immoderate growers arsenic good arsenic our group arsenic well. And nan Safrinha play looks strong. It’s a small spot slower, but it’s slower because upwind – arsenic it’s related to weather. So again, nan economics and nan fundamentals are beardown there. I deliberation nan growers will springiness nan harvest each nan juice it needs to maximize retired connected yields.


Your adjacent mobility comes from Adam Samuelson pinch Goldman Sachs. Please spell ahead.

Adam Samuelson

Yes. Thanks, bully morning, everyone. So a mobility connected potash request and really extracurricular of North America and really reasoning successful nan different parts of Asia and nan position you person connected transmission inventories successful nan cardinal importing regions of Southeast Asia, successful China, successful India that would pass benignant of importer behaviour that seems to beryllium benignant of mirroring nan benignant of slowness intensiveness that you’re seeing aliases person seen successful nan U.S. and Brazil? And past a 2nd question, if I may, conscionable connected nan maturation investments that you alluded to for nan year. There was a chat connected nan unit broadside astir digital. I was hoping if you could conscionable elaborate connected what that really encompasses particularly wherever that would look to beryllium a superior disbursal arsenic opposed to an operating expense? Thank you.

Ken Seitz

Yes. Adam, convey you for nan question. So we tin surely do nan market-by-market chat astir inventories. And yes, destocking again successful Brazil, U.S., and we tin talk astir India, China and Southeast Asia. I’ll manus it complete to Mark Thompson to supply immoderate colour there. And past we tin spell to nan integer mobility wherever – yes, we are seeing substantive maturation connected integer arsenic it relates to putting dollars done that level and surely nan type of investments we’re making there. But Mark, complete to you.

Mark Thompson

Yes. Thanks, Ken. Good morning, Adam. So possibly conscionable to screen a spot of crushed that Ken and I person talked astir already. Again, I deliberation from Brazil and a North America standpoint, nan destocking process passim Q4 did return spot I deliberation mostly arsenic we had anticipated successful November. We’ve talked astir North America estimating down 15% to 20% successful nan transmission comparative to nan extremity of 2021 astatine nan extremity of 2022. From a Brazil standpoint, we estimate that Brazil would person ended level to somewhat up aft a historical surge successful first half imports and an arsenic historical driblet successful 2nd half imports into Brazil. So we estimate Brazil astir apt ended betwixt 1.8 cardinal to 1.9 cardinal tons astatine nan extremity of 2022 successful inventories comparative to astir 1.7 cardinal tons and we’ve done immoderate heavy dive studies connected that marketplace to corroborate that number and evidently person seen really bully engagement to commencement nan twelvemonth successful Brazil and immoderate stabilization arsenic well.

To your mobility connected India, China, Southeast Asia, different markets, possibly we tin conscionable do a small spot of astir nan world. I deliberation from an India standpoint, again, India ended nan twelvemonth astatine historically tight inventory levels. And arsenic a result, we expect they’re going to beryllium nan first to settee comparative to China from a statement standpoint. Their inventory levels were astir 130,000 metric tons per port, which would beryllium astir level to 2021. So again, we position nan impetus arsenic being beardown for India to settee a statement successful nan comparatively near-term. From a Chinese perspective, we estimate that China would person ended pinch conscionable complete 2.5 cardinal tons astatine nan extremity of 2022. That would person been up modestly from nan anterior year, but again, beneath mean levels. And we besides estimate that those inventories person been drawn down to immoderate degree. We now estimate location are astir 2.3 cardinal tons. I deliberation importantly, successful each this from a Chinese perspective, their strategical reserves were drawn down by astir 1 cardinal tons successful 2022. We person nan position that those would request to beryllium rebuilt passim 2023. And I deliberation important to nan inventory equation successful China is besides production. And we position that Chinese accumulation levels successful 2022 astatine astir 7 cardinal tons are apt not repeatable. So we expect that number to driblet arsenic good successful 2023. So again, I deliberation a bully backdrop from an inventory standpoint successful China.

And past conscionable to information things retired successful Southeast Asia, our position would beryllium presently that Malaysian inventories are comparatively balanced and successful a bully spot. And Indonesia is very close. We spot Indonesia astir apt coming into equilibrium present complete nan adjacent mates of weeks, successful fact, and we expect very bully engagement from some of these markets arsenic we get into Q2. So of course, nan catalyst for this will beryllium continued activity of merchandise and liquidity successful Brazil, which we’ve seen, but besides nan colony of contracts, which will supply value find for these world markets to statesman to pull. So arsenic Ken said, each of these things don’t fresh perfectly into a almanac year, but we do judge that erstwhile we spot statement colony and this engagement reemerge, that we are going to deed a very beardown tally complaint for world potash demand. So I’ll conscionable walk connected mobility connected integer superior expenditures.

Jeff Tarsi

Yes. Thanks. And we do proceed to put successful our integer platform. And we deliberation that our integer level is basal to nan full level that we tally successful our Ag Solutions business. And if I look astatine our attraction today, which is centered astir becoming nan astir customer focused, being capable to supply nan astir customer-focused sustainable solutions to our growers. And integer is going to play an absolute cardinal portion successful nan decision-making process. And this requires a batch of information generation, and it requires a batch of information mining. And look, for instance, if I look astatine our seed displacement and nan maturation projections that we person astir seed, a batch of that growth, an amiable portion of increasing our stock successful that seed business is going to beryllium capable – is astir mining data, collecting information and being capable to supply that information backmost to our growers successful a really timely fashion. Also, we conscionable vanished – I person conscionable vanished a circuit astir our complete Ag Solutions business fundamentally since nan 2nd week of January and obscurity person we been and not immoderate husbandman group person we talked to that nan chat has not been astir sustainability and sustainable solutions going guardant successful agriculture. And I tin show you that you are not going to person a sustainability level without a integer platform. You person sewage to person it, beryllium capable to cod your data. You person sewage to person it to beryllium capable to validate that information arsenic good connected a harvest basis. So, we do consciousness very powerfully astir this, and we are very committed to it. And very committed to it being a cardinal portion of our platform.


Your adjacent mobility comes from Christopher Parkinson pinch Mizuho. Please spell ahead.

Christopher Parkinson

Very adjuvant floor plan connected Page 25 successful position of your expectations for accumulation crossed nan various geographies. Could you group connected a small spot much connected really this flows into your precocious and nan debased extremity of your potash guidance successful position of – if request starts trending towards nan precocious extremity of your, let’s say, world range? Is that – are those tons mostly going to beryllium coming I presume presumably from Canpotex? And what would benignant of beryllium your baseline anticipation for nan maturation successful North America erstwhile inventories normalize betwixt you and nan different North American producers? Just immoderate wide model connected really that flows into nan precocious extremity nan debased extremity to nan potash guidance would beryllium very helpful? Thank you truthful much.

Ken Seitz

Yes. Thank you for nan question. Yes. We person – nan large proviso challenges are nan ones we talk about, and that’s putting a scope present connected what we judge could hap successful 2023 retired of Russia and surely retired of Belarus pinch nan nimble, elastic proviso being our own. But I will manus it complete to Jason Newton to supply much detail.

Jason Newton

Thanks. Good greeting Chris. Yes. As we look astatine nan scope that we person for potash shipments globally, nan apical extremity of that range, successful particular, is restricted by nan level of potash accumulation globally. And truthful that’s really what caps that out. And if we look astatine nan scope we person for shipments from Belarus and Russia, that respectively expected to beryllium down 40%, 60% and 15% to 30% versus 2021 levels. And truthful that really constrains nan apical extremity of nan shipment range. And similarly, arsenic we look passim that range, fixed that wide level of uncertainty successful shipments from that Russia and Belarus, location is simply a number of scenarios that tin create wrong that scope that leads to nan imaginable for higher accumulation from Nutrien arsenic a plaything shaper wrong that level. So, it really continues to beryllium supply-constrained situation successful 2022, notwithstanding nan slow commencement to nan year, which besides limits nan production. And arsenic we look forward, and we show successful nan descent platform arsenic well, nan scope of shipments going forward, we don’t spot a imaginable midpoint of that scope of shipments going backmost to inclination levels until 2025. And if we look backmost complete nan past 20 years, location hasn’t been a play of much than 2 consecutive years wherever shipments person fallen beneath inclination levels. And truthful if proviso becomes available, we would expect hedge up demand...


Your adjacent mobility comes from Jeff Zekauskas pinch JPMorgan. Please spell ahead.

Jeff Zekauskas

Thanks very much. You commented connected ungraded testing for potash successful nan United States. Did you besides look astatine ungraded testing for phosphate that is phosphate nether applied? And successful nan first 4th of 2023, person you hedged your state successful nan United States and successful Canada, aliases is it much free flowing and you tin get nan benefits of nan state decreases?

Ken Seitz

So, pinch respect to ungraded sampling and phosphate levels successful nan soil, short reply is, yes, we do look astatine that. And I will manus it complete to Jeff Tarsi to supply that colour and past to talk astir hedging for gas, I will manus it complete to Pedro.

Jeff Tarsi

Yes. We look – erstwhile we are doing nan ungraded testing, we are not only testing for NP&K. we are testing for micronutrients arsenic good successful nan soil. So, they are very, very broad testing. We do spot a inclination that’s akin to nan potash. The potash benignant of stuck retired to maine a bit. Phosphate simplification wasn’t rather arsenic overmuch arsenic we saw crossed those states, but still we saw a important magnitude that we are nether immoderate desirable level there. But again, we are doing this testing, and we are penning technological prescriptions for nan harvest and nan assortment and nan hybrid and such. And truthful obviously, we tin return these tests and do a batch pinch arsenic acold arsenic building our solutions retired going forward. And this is not thing new. We person been doing this testing for a number of years. But we person seen nan testing summation complete nan past 3 years aliases 4 years because growers much kin, our agronomist much kin again to making science-based decisions connected what we are delivering.

Pedro Farah

Maybe Jeff, this is Pedro. I americium going to remark a small spot connected nan hedging. From a financial standpoint, our champion recreation to talk astir nan commercialized standpoint too, because we are fundamentally some financially and commercially hedged successful position of gas. But from a financial standpoint, we person been – now our hedges person been somewhat immaterial, I would say, little than 10% ebb and flowing done that. We spot greater opportunities to hedge astatine this constituent from a financial standpoint since we are reaching immoderate levels benignant of debased levels here. So, we are looking much intimately into that astatine this constituent successful time, but they person not been that worldly up until now. So, I will walk it connected to Trevor, because a bully information of our accumulation is hedged, but commercially so.

Trevor Williams

Yes. Thanks for nan question. In a precocious level, we are successful nan scope of astir 20%, that’s people hedged pinch immoderate of nan business contracts that we have, some successful North America and evidently successful Trinidad. But arsenic Pedro alluded, pinch immoderate of nan seasonably debased prices that we are seeing correct now, some successful Canada and U.S., we are evaluating opportunities to hedge and/or fastener successful immoderate of that position present going into nan remainder of 2023.


Your adjacent mobility comes from Michael Tupholme pinch TD Securities. Please spell ahead.

Michael Tupholme

Thank you. Ken, I cognize you said you don’t intend to remark excessively overmuch connected pricing. But erstwhile we look astatine nan 2023 guidance you provided, are you capable to talk astatine each astir what you person assumed successful position of realized pricing for some potash and nitrogen astatine nan precocious extremity versus nan debased extremity of nan guidance ranges you provided?

Ken Seitz

Yes. Thanks Michael. Yes, I tin speak successful wide position to opportunity that we are benignant of looking astatine potash pricing wherever it is today. So, you tin constituent to, for example, benignant of 500 to 520 successful Brazil. And reasoning astir that arsenic a spot of a benchmark and benignant of level pricing, let’s say, passim 2023 from those levels. Obviously, pinch each nan dynamics we conscionable talked about, we could spot volatility astir immoderate of those numbers, but that would beryllium our presumption today. And arsenic it relates to nitrogen, we do expect firming successful value from nan levels that we are seeing today, and it’s for each nan reasons that we talked about.


Your adjacent mobility comes from Vincent Andrews pinch Morgan Stanley. Please spell ahead.

Will Tang

Hi guys. This is Will Tang connected for Vincent. Thanks for taking my question. So, you person guided 2023 down crossed each your awesome business segments pinch nan objection of phosphate astatine nan midpoint. I americium wondering if you could thief maine span betwixt 2022 and 2023, what’s driving nan comparative spot there, particularly arsenic it looks for illustration nan underlying commodity fertilizer prices are going to beryllium down connected a year-over-year basis?

Ken Seitz

Yes. Well, I deliberation what I would say, Will, is conscionable what we person talked astir connected this call, and that is that nan large effect has been we person seen conscionable nan softening successful commodity prices from highest 2022 levels. And truthful if we are comparing crossed our business, our harvest nutrient business, potash, nitrogen, I mean that’s nan communicative is connected netbacks. So, if we are talking astir margins successful retail, it’s really nan reset connected harvest nutrients and harvest chemistry. It is offset by higher volumes crossed – connected nan NPK side, it is offset by higher volumes. But again, we person this netback effect. And past finally, I will conscionable say, again, we do person this timing point going connected wherever not everything fits wrong nan almanac year.


Your adjacent mobility comes from Steve Hansen pinch Raymond James. Please spell ahead.

Steve Hansen

Yes. Good morning. Thank you for nan time. A mobility for possibly Ken and Mark, I was conscionable hoping you could speak to nan opportunity for continued synergy extraction from nan integrated business exemplary that really does specify Nutrien now. We evidently saw an aggravated attraction connected synergies successful nan early years post-merger. Just funny connected whether you could remark connected if location is different information of synergies to travel aliases whether that’s much of a secondary attraction astatine this point? Thanks.

Ken Seitz

Steve, convey you for nan question. And yes, we surely do spot opportunity. In fact, we created nan building successful 2022 to found a commercialized portion wrong Nutrien that Mark Thompson, our Chief Commercial Officer, is heading up. And yes, and that is we are seeing opportunity there, and that’s evolving. But I will manus it complete to Jeff and to Mark to talk astir precisely immoderate of those opportunities we are seeing. And arsenic you say, Steve, what nan synergies mightiness be.

Jeff Tarsi

Yes. I will make a fewer comments and past I will move it complete to Mark. But Mark and I person worked very adjacent together complete nan past respective months. And from a unit perspective, I mean nan 2 buckets that I look successful are, number one, logistics. And what tin we do to return immoderate costs retired from a logistical broadside of it. In a batch of cases, upside of nan statement and utilizing immoderate of nan aforesaid carriers astatine different rates. And truthful really do we get much efficient, and from that standpoint, really do we touch merchandise little than we do today. And past overlaying a footprint of our assets together from a terminal and retention standpoint and really do we amended utilize those assets. And I can’t deliberation of anybody amended than Mark to excavation done those opportunities pinch myself and that’s what we scheme connected doing going forward. And Mark, I will fto you get successful a small spot much granular into immoderate of that.

Mark Thompson

Sure. Thanks Jeff and bully greeting Steve. Thanks for nan question. Yes, I wholeheartedly work together pinch everything that Jeff said. I mean we some believe, and I deliberation nan executive squad believes location is much opportunity successful integrated exemplary to proceed to extract worth for shareholders and really create competitory advantages for nan company. And truthful I spot those arsenic Jeff said, falling into a fewer different categories. I deliberation 3 primarily. I deliberation nan first is really connected optimizing nan procurement sourcing narration and income narration wrong nan company. And arsenic nan unit web continues to turn globally passim Nutrien arsenic we proceed to grow volumes successful our accumulation business, it does unfastened up caller opportunities to look astatine really we waste and procure wrong nan institution to optimize worth passim cycles. I deliberation a awesome illustration of that is successful nan 4th fourth that we conscionable saw successful a historically volatile period. Now, I americium looking astatine our proviso concatenation holistically and being capable to guardant spot merchandise is thing that nan Nutrien Ag Solutions and Nutrien squad worked connected to guarantee that we are maximizing transmission separator for nan company. I deliberation nan 2nd class that Jeff mentioned explained very good is astir web optimization, TD&L, vendor guidance and each these areas that we tin really optimize nan measurement merchandise is moving astir nan web and look astatine retention and distribution crossed nan Nutrien enterprise. And past I deliberation lastly, a existent opportunity astir specialty products growth. And I deliberation Jeff has talked this greeting connected nan telephone astir really nan improvement successful reasoning astatine nan grower level and nan request for specialty nutrition and much sustainable products. We person sewage awesome products wrong of Nutrien for illustration ESN and MAP MST and really continuing to activity together connected a web ground to put those products successful our customers’ hands. So, this is thing that’s ongoing complete time, and I deliberation we tin proceed to adhd worth to nan institution arsenic we move forward.


Your adjacent mobility comes from P.J. Juvekar pinch Citi. Please spell ahead.

Unidentified Analyst

Hi. This is Patrick Clingan connected for P.J. Good morning. What are your expectations for seed prices this season? And past for your Dyna-Gro seeds, what’s nan marketplace stock currently? And immoderate anticipation to turn marketplace stock this year? Thank you.

Ken Seitz

Yes. Thank you for nan question. We are surely constructive connected seed and I will manus it complete to Jeff to talk astir that.

Jeff Tarsi

Yes. I would opportunity that wide successful nan twelvemonth we conscionable vanished successful ‘22, we had astir a 30 ground constituent summation successful marketplace stock crossed our full seed portfolio. If I look astatine nan seed value for ‘23, we person seen location betwixt – let’s say, depending connected nan harvest location betwixt a 6% to 10% summation successful seed prices year-over-year and being reflective that successful nan ‘22 season, astir seed companies chose not to person immoderate value summation astatine all. So we were expecting an summation for ‘23 and again, location betwixt that 6% to 10% standpoint. Look, Dyna-Gro continues to beryllium an integral portion of our seed strategy and we proceed to activity to fortify our portfolio either done proprietary breeding aliases done our strategical relationships we person pinch our suppliers. We person had immoderate awesome successes this past year, peculiarly pinch rice, which is our Dyna-Gro 263 line, that’s a proprietary germplasm marque wrong our business. And we person had a batch of occurrence there. We proceed to person occurrence pinch our proven canola brand. And you mentioned Dyna-Gro, we would deliberation our stock increases would beryllium successful statement pinch what we saw crossed our wide portfolio pinch it.


Your adjacent mobility comes from Richard Garchitorena pinch Wells Fargo. Please spell ahead.

Richard Garchitorena

Good morning. Thanks for taking my questions. Just quickly connected nan potash strategy, I conscionable wanted to touch connected nan determination to hold nan ramp-up to 18 cardinal tons, perchance by 2026. Is your ramp-up – is it based connected nan presumption that we get unconstrained request of 70 cardinal tons astatine immoderate point? And past arsenic a follow-up truthful if we spot things continuing to stay constrained successful nan 63 cardinal to 67 cardinal tons, tin you proceed to defer nan ramp up, I guess? Is location immoderate issues related to that successful position of instrumentality orders aliases tract mentation that type of thing? Thanks.

Ken Seitz

Yes. Thank you for nan question, Richard. And I will commencement and past I’ll manus it complete to Chris Reynolds conscionable to talk astir optionality that we person arsenic it relates to nan ramp up. It’s conscionable to opportunity that and conscionable echoing Jason Newton’s comments earlier. We judge that we are going to beryllium successful supply-constrained situation present for a fewer years. And what’s nan logic for that? Well, we do spot request growing. I mean for each nan reasons we person talked about, nan fundamentals are strong, but we backmost formed complete nan past 20 years, value request has been increasing astatine complete 2.5% CAGRs. And truthful successful an situation wherever request continues to grow, unconstrained request continues to grow, but yet we person these proviso broadside challenges, we will beryllium successful a supply-constrained market. And hence our position of gathering nan needs of our customers ramping up potash production, but I’ll manus it complete to Chris Reynolds conscionable to talk about, again, immoderate of nan optionality that we person arsenic it relates to nan nimbleness of our ramp up superior program.

Chris Reynolds

Yes bully greeting Richard. Thanks for nan question. So arsenic you mentioned and arsenic we mentioned past twelvemonth erstwhile we first announced this ramp that we had already built successful galore off-ramps that we could trigger if marketplace conditions changed a small spot from our assumptions. And truthful this scheme to ramp up 18 cardinal tons involves dozens of projects, chiefly crossed 4 of our potash sites and instrumentality that’s chiefly related to our underground operations, truthful mining machines and conveyor belts. And truthful yes, we – these are not – arsenic Ken mentioned successful his opening remarks, these are not agelong lead clip items. And again if things were to alteration materially successful position of timing, we could hold nan purchasing of immoderate of this equipment. But again nan longer word outlook that we person and nan request that we judge nan world marketplace is going to person for 18 cardinal tons for Nutrien is still intact and we are really conscionable delivering connected what we had already explained erstwhile we first announced nan ramp.


There are nary further questions astatine this time. Please proceed.

Ken Seitz

Thank you, usability and acknowledgment everyone for joining america today. The Investor Relations squad is disposable for immoderate follow-up calls. Have a awesome day.


Ladies and gentlemen, this concludes your convention telephone for today. We convey you for participating and inquire that you please disconnect your lines.

Editor: Naga

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