NTR

Greetings and welcome to Nutrien's 2026 first quarter earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded. I would now like to turn the conference call over to Jeff Holzman, Senior Vice President of Investor Relations and FP&A.

Thank you, operator. Good morning, and welcome to Nutrien's first quarter 2026 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, therefore actual results could differ materially from those contained in our forward-looking information. Additional information about these factors and assumptions is contained in our quarterly report to shareholders, as well as our most recent annual report, MD&A, and annual information form. I will now turn the call over to Ken Seitz, Nutrien's President and CEO, and Mark Thompson, our CFO, for opening comments.

Thank you for joining us today to review our first quarter results and the outlook for our business. The ongoing Middle East conflict has disrupted global fertilizer and energy markets, resulting in higher global benchmark prices and input costs. Despite heightened geopolitical uncertainty, Nutrien's strategic priorities, capital allocation approach, and full year guidance remain unchanged. We continue to focus on what we can control, including operating our assets safely and reliably and serving our customers efficiently. Our first quarter results reflect this focus on operational excellence. We increased upstream sales volumes to 6.5 million tons, lowered controllable cash costs, and delivered strong performance in our downstream retail business. These results highlight the capabilities of our world-class operations, extensive distribution network, and strong customer relationships built over many decades.

In potash, we achieved a record sales volume of more than 3.5 million tons in the quarter, an indicator of the continued strength in global demand. We increased production from our low-cost six-mine network and progressed mine automation investments that have proven to deliver safety and cost benefits. Our potash assets position Nutrien as the most reliable global supplier with a high quality and low risk resource base. In nitrogen, we attained an ammonia operating rate of 92% in the first quarter and increased sales volumes of upgraded nitrogen products to agricultural markets from our North American plants, demonstrating the benefits of recent debottleneck projects. Our reduced natural gas cost reflects having 100% of our production from low-cost North American nitrogen plants. In retail, our network was well-positioned to meet strong crop input demand in our core markets.

We continued to execute growth initiatives, including expansion of our proprietary products business, network optimization projects, and tuck-in acquisitions. In the first quarter, we allocated approximately CAD 45 million to complete a high-quality tuck-in acquisition located in the U.S. Corn Belt with a strong strategic fit within our distribution network. We also progressed portfolio reviews that are being pursued to enhance asset quality and provide greater focus and investment to assets with the strongest returns, free cash flow contribution, and competitive advantages. As previously announced, we are reviewing strategic alternatives for our phosphate business and remain on track to solidify the optimal path in 2026. The review includes completing a detailed assessment of individual assets and alternative configurations for our phosphate business. In parallel, we are progressing a sale process and received significant initial expressions of interest.

Second, we continue to evaluate all strategic options for our Trinidad nitrogen operations, including exploration of a sale of the facility. This work is aligned with our focus on strengthening our core North American asset base. Lastly, we are reviewing each component of our Brazilian business as we assess the best way to participate in the market's long-term growth. As part of this review, we have commenced a sales process for our Brazilian soybean seed business that is expected to be completed in the second half of 2026. Now, turning to the market outlook. Middle East exports are a critical part of global fertilizer and energy trade, with the ongoing conflict having the most direct impact on nitrogen and phosphate supply, as well as associated feedstock cost and availability.

The conflict has directly impacted over 30% of global urea trade and approximately 25% of ammonia and phosphate trade that relies on the Strait of Hormuz to access global markets. Elevated natural gas costs and reduced LNG availability have also impacted nitrogen production and costs for producers in Asia, Europe, and other key regions. For phosphate, higher sulfur and ammonia input costs have pressured margins and resulted in lower global operating rates. Looking ahead, the path of supply normalization will be shaped by this pace of 3 key factors. First, a full reopening of the Strait of Hormuz and key trade routes is required to allow stranded product to reach global markets. Second, in the event that the conflict is resolved, production assets that have been idled would require additional time to restart, albeit with some level of operational uncertainty.

Finally, a portion of capacity that is currently offline due to damage, either at production sites or upstream, will take several months, and in some cases, years to return. Taken together, we expect the normalization of nitrogen and phosphate supply is likely to be uneven. The conflict has not directly impacted potash supply, and we continue to see strong potash demand across all key global regions. We maintain our forecast shipment range of 74 million to 77 million tons, with demand trends expected to test existing global operating and supply chain capabilities through 2026. Global potash benchmark prices increased over the past few months have been commensurate with the strong fundamentals as well as increased freight costs. With that overview, I'll now turn it over to Mark to provide more detail on our first quarter financial performance, guidance assumptions, and capital allocation priorities.

Thanks, Ken. As Ken described, our operating performance has progressed well to start the year, and our full year guidance ranges remain unchanged. Adjusted EBITDA in the quarter increased to CAD 1.1 billion, reflecting strong customer demand, higher global benchmark prices, and solid execution in our upstream and downstream businesses. Retail Adjusted EBITDA totaled CAD 108 million in the first quarter, which is typically a seasonally slower period for our retail business. We saw increased demand across our core geographies in the first quarter, resulting in higher crop nutrients sales volumes and stronger proprietary products gross margins in the U.S. and Australia. Importantly, our expense reductions achieved over the last 2 years have been maintained as first quarter expense changes were driven by higher downstream sales volumes.

We've maintained our full year retail adjusted EBITDA guidance range of CAD 1.75 billion-CAD 1.95 billion. We continue to expect high single-digit growth in our proprietary products gross margin in 2026, supported by the launch of new products, organic growth in our core retail geographies, and the expansion of our international business. Similar to prior years, we expect first half retail earnings to account for approximately 70% of the full year total. In potash, we delivered adjusted EBITDA of CAD 578 million in the first quarter, driven by higher global benchmarks and record sales volumes. Nutrien has an extensive midstream distribution network serving key markets across North America and internationally, one of our key competitive advantages.

We utilized this network to deliver over 3.5 million tons of potash in the quarter and expect annual sales volumes of 14.1 million-14.7 million tons, in line with our historical average share of global shipments. Canpotex is fully committed through the end of June, and we anticipate a similar split between offshore and domestic sales volumes in the second quarter compared to the prior year. Our nitrogen operating segment generated adjusted EBITDA of CAD 482 million in the first quarter, primarily due to higher global benchmarks. Our sales volumes reflect no production from Trinidad and New Madrid, as reflected in our annual guidance assumptions. This was partially offset by higher upgraded product sales volumes directed to domestic agricultural markets from recently completed debottleneck initiatives.

We maintain our annual nitrogen sales volume guidance range of 9.2 million-9.7 million tons, which includes execution of planned turnarounds at 3 facilities in 2026. Prior to the onset of the conflict in late February, approximately 35% of our second quarter planned nitrogen sales volumes were committed, a similar percentage compared to the prior year. In phosphate, we generated adjusted EBITDA of CAD 57 million in the first quarter. Higher sulfur input costs offset the benefit of higher global benchmark prices and sales volumes compared to the same period of 2025. The business demonstrated reliability improvements in the quarter, with a 20% increase in production volumes compared to the prior year. Our phosphate sales volume guidance remains unchanged. However, we expect further pressure on phosphate margins in the second quarter due to elevated sulfur and ammonia input costs.

As we look forward to the remainder of 2026, we expect free cash flow to be supported by tight global fertilizer supply and demand fundamentals, business improvement and organic growth drivers, combined with a rigorous focus on optimizing our portfolio. Alongside strong operational performance, we view consistent capital allocation as essential to enhancing our competitive position. To that end, our capital expenditures guidance for 2026 remains unchanged at CAD 2 billion-CAD 2.1 billion. Last year, we completed share repurchases of approximately CAD 550 million and reduced adjusted net debt by approximately CAD 600 million. We intend on continuing to repurchase shares on a ratable basis with a pace of approximately CAD 55 million per month thus far in the second quarter, and we see opportunity to further strengthen the balance sheet in 2026. I'll now turn it back to Ken for final comments.

Thanks, Mark. Nutrien is well-positioned to generate value for shareholders under any market scenario. We operate low cost and reliable upstream assets, a midstream network that has the reach and flexibility to capture efficiencies across the value chain, and a downstream network that is positioned to reliably serve growers with a comprehensive portfolio of value-added products and services. We continue to take purposeful steps to simplify the business, strengthen and grow our core asset base, and improve capital efficiency. These priorities are designed to drive structural free cash flow growth and generate sustainable returns through the cycle. To close, I'm encouraged by the team's execution in the first quarter and positioning of the business for the remainder of 2026 as we continue to stay the course on our strategic and capital allocation priorities. With that, we'll be happy to take your questions.

Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by number 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by number 2. If you're using a speakerphone, please lift up the handset before pressing any keys. First question comes from Andrew Wong from RBC Capital Markets. Please go ahead.

Hey, good morning. Thanks for taking my questions. I wanted to ask about the longer term implications that you see from the Iran war and the Strait being closed. We've had two major fertilizer food shocks now in less than five years. Are you seeing countries that are net fertilizer and food importers looking to build up more inventories? Could that drive more demand that's a little bit more elevated in the next year or two?

Good morning, Andrew, and thanks for the question. Yeah, there's a lot to unpack there, obviously, given that it's still early days, and we're, in terms of questions like building inventory, we're still short of product given what's going on in the Middle East. We sort of think about it, given the impacts with more than 30% of global urea trade being impacted, 25% of ammonia, 25% of phosphate. We sort of think of it over 3 time horizons, where we're watching milestones for each, signposts for each.

Of course, the first one is just the opening of the Strait of Hormuz and the inventory that's caught upstream and up the strait in the Persian Gulf and the pace at which once, of course, the war is over, and we're all hoping and watching for that, the pace at which those volumes come to the customer, unload and then get back into being filled back up again. Another one where it's sort of normalization of logistics and trade following the opening of the Strait of Hormuz. So that's one. Two is, of course, we know that a significant swath of production in the Middle East is not operating at the moment. We'll be watching very closely for signposts that say those facilities are starting back up.

We know that startup of those type of facilities can be bumpy. We have experience with that ourselves. The pace at which we sort of see normalization of operations to the extent that that's possible, you know, on the back of normalized logistics. That would be the second piece, and that, of course, would be a bit further out in time. Third would be watching for actual damage of physical infrastructure, whether that's on nitrogen production facilities themselves or on natural gas production. Of course, the damage in the South Pars gas field, 20% of the Qatar LNG facility that won't be back up online for three to five years.

That has serious implications, obviously, for these huge export markets, Europe and South Asia and Southeast Asia, that are dependent on Qatar gas. Those three things and, you know, the pace at which that happens and what that means for volumes, we can't say at the moment. What we can say is we believe it's going to be tight for a period of time here, given just the huge role that the region plays.

You know, I will say that other ones to watch in the market, I think consistent with what you're saying about inventory building is, for example, you know, India has established a task force now on nitrogen and devising plans in light of how much natural gas they import and their own nitrogen infrastructure to ensure that they get the volumes. Similarly, China looking to restrict urea exports. We're seeing 3 million-4 million tons perhaps compared to the 5 million tons last year. Europe facing $16 TTF pricing and, you know, depending on type of ammonia, whether that's an economic endeavor or not. There's a lot of moving parts there.

Andrew, again, we're watching those sort of three, those three, sort of milestones as it relates to opening of the strait, normalization of production, and then what happens with actual infrastructure damage. We would say that, we expect prices to be tight, for, you know, some period of time.

Your next question comes from the line of Vincent Andrews from Morgan Stanley. Please go ahead.

Thank you and good morning. I'm wondering if you could speak a little bit more to what you're seeing in retail, both for the remainder of the, you know, northern hemisphere season, but also how you think the back half of the year would play out. You know, we're definitely sensing some investor concern about, you know, farmers' economics and thrifting and things like that. If you could talk about sort of what, if anything, you're seeing on that and what gives you the confidence to stay within the guidance range for the year. And maybe just a reminder of what we saw last time around, when maybe in the, you know, post Russia, Ukraine time period when we had some high prices as well. Thank you.

Thanks, Vincent. Maybe I'll just say a few words about what we're seeing thus far into the year and then hand it over to Mark for our guidance assumptions and what gives us confidence to maintain our guidance range of CAD 1.7 billion to CAD 1.95 billion EBITDA of our downstream business. I'd start by saying notably corn prices have been hovering for December corn up to $5 and that is a bit of a tailwind, and that's true for soybean prices as well. We've seen strengthening. Thus far into 2026 we've had strong customer engagement with our grower customers, and that's been in line with price expectations, prior expectations.

It, you know, it's supported by above average planting progress for this time of the year and the need to replenish crop nutrients in the soil given the huge corn and soybean crop that was taken off last year. We're maintaining our estimate of acres, 94 million-90 million acres of corn, 84 billion-86 billion acres of soybeans. You know, this far into the year we're not seeing farmers switching, so again, maintaining those ranges and therefore maintaining our own guidance ranges. I'd just say again, growers are going to do what they need to do to maximize yields in this environment. We saw that with our proprietary products business in the first quarter and in April as well.

We've seen healthy, again, healthy crop input demand over the first four months of 2026. On balance up to this point, and on average, that's what we've seen so far in 2026. For the balance of the year and our guidance assumptions, I'll hand that over to Mark.

Thanks, Ken. Good morning, Vincent. Look, I think Ken summed it up pretty well. I think the main punchline is that the business is performing well. We've seen strong customer engagement year to date. We feel very confident in the midpoint of our guidance and the range that we laid out to start the year. The majority of the assumptions that we laid out at the start of the year actually remain the same across the business. Just to reiterate, we expect high single-digit growth in our proprietary products gross margin this year. Again, that's coming from new product launches in North America, increased demand in core retail geographies, and the expansion of our international business and our business in Australia.

We assume that favorable weather in Australia and a stronger livestock market over last year will result in some improvement there and of course our continued efforts to manage cost across the business. If there's been any changes or small shifts, it's that, you know, I think relative to February, we would now anticipate that higher crop nutrient gross margins on a per ton basis would be ahead of our prior expectations. We think that will at least offset any product potential reduction in demand we might see, which is primarily in phosphate as we talked about, and some higher fuel expenses as a result of the war in the Middle East.

If you step back and look at the business as a whole, we don't really see any change to margin expectations across our other product segments and we've largely maintained our acreage projections as Ken said. You sum all that up, and we feel really good about the guidance for the year and what we're seeing from customers so far this spring.

Your next question comes from the line of Joel Jackson from BMO Capital Markets. Please go ahead.

Hi, good morning. I know you don't give a lot of guidance, but could you talk about, like, you would think with the better price we've seen in nitrogen, there's lots of puts and takes, the better price with nitrogen, some better price in potash. Like, are you feeling better about this year's outlook and earnings than you were three months ago? Maybe you can try as best as possible to kind of bucket some of that. Why didn't you raise the retail EBITDA guide? It would seem like you may get some markup in inventories. It would seem like the, you know, you get something better from a higher commodity price environment. Maybe you can just elaborate on that please.

Good morning, Joel, thanks for the question. Yes, I think it's fair to say we are feeling better than at the start of the year. As you, I think, appropriately put it, there's a few reasons for that. If we talk about potash at a very strong global demand that we're seeing are 74 million-77 million tons that we're maintaining, and that's, you know, low inventory starting the year in Brazil at multi-year lows. We saw that in China as well with a very early settlement in February at $349 and yet Chinese inventory is gonna remain low at sort of 2 million tons at the port. You know, I mentioned the huge crop that came off in 2025 and the need to replenish that.

For our part, you know, we had a fully subscribed winter fill at $355 a short ton, and our latest posted price is $385 a ton. Southeast Asia demand is strong. You know, we look around the world and on potash. We're constructive and, you know, we've seen that in some firming in the price, and that really is owing to the potash fundamentals, the fact that potash continues to be the most affordable of the crop nutrients and the fact that potash is certainly less impacted than other crop nutrients given what's going on in the Middle East. As you said, you know, looking at the different sort of buckets, that's one, and we're constructive. Nitrogen, our plants are running well in this environment.

With prices where they're at, given this conflict in the Middle East and some of the discussion that we've had about the duration, the potential duration of that, yes, we've been constructive on nitrogen. Our focus will continue to be to safely and reliably run those plants now with half of them, you know, enjoying Henry Hub pricing and the other half enjoying AECO pricing. Phosphate's a different story. We've talked about that. Phosphate is challenged, you know, for all the reasons that we talk about, sulfur pricing, ammonia pricing, in a market that was frankly tight, even prior to this conflict in the Middle East. You know, that will continue to be a challenge for us. Retail, and you mentioned our retail guidance. Yeah, you know, we're watching the spring.

We're not through the planting season yet. There are a lot of things can happen yet through the planting season. We are absolutely constructive on our retail business. That's the reason we've maintained our guidance range. You know, we're not going to at this stage in the planting season and in the year, you know, start to make prognostications about how the balance of the season can go. We are just confident in that range.

Your next question comes from Hamir Patel from CIBC Capital Markets. Please go ahead.

Hi. Good morning. In Brazil, you pointed to a process for the soybean seed business coming to fruition in the back half. What's your latest thinking on the total opportunity to improve returns in Brazil? What portion of that would be the soybean seed business?

Thanks, Hamir. You know, what I'll say is that the soybean business itself, we'd sort of say is immaterial in the context of materiality. Yeah, we are pursuing a sale of that. If we look at the, the broader business that we have on the ground in Brazil and the actions that we've taken, which we've talked about, you know, idling blenders, idling 5 blenders, have sold 3. The steps that we've taken on cost reduction and reducing headcount in that part of the world to focus on collections, the idling of unproductive locations, 64 of them. And getting that business into a position where it's, albeit small, generating a bit of EBITDA. And in the backdrop of all that, yes, making portfolio decisions.

Seeds is one of them. You know, our proprietary products business continues to do well in Brazil, and we continue to focus on that, which leaves our retail operations in Brazil. You know, that really is going to be the focus of the balance of 2026, is how it is that, you know, we think about exiting that retail business. We're just working on that at the moment. You know, Brazil continues to be a core market for us. It's a growing agricultural region.

We supply a lot of potash to that part of the world, one of the largest, and we know that that's going to continue to grow as the Brazilians open up more acres, which they do every year, and with all the infrastructure build-out required to get those volumes inland onto the acres. Brazil, very important for us. The supply of fertilizer, potash, and proprietary products, the balance of it. We intend to have some conclusions on at least the plan by the end of this year.

Your next question comes from Ben Isaacson from Scotiabank. Please go ahead.

Thank you very much, and good morning. Just a quick question on rising freight logistics and overall cost inflation. Can you talk about your ability to keep your net backs stable or rising? Once the Iran war winds down and the Strait of Hormuz opens up, will there be improvements or do you expect to see structural changes? Ultimately, will this just be passed on to customers, or will there be a temporary risk to your margins? Thank you.

Yeah. Thanks, Ben. You know, the reality for our upstream business is that these are highly commoditized competitive markets. As we look at moving products around the world and increased freight prices, which is true, that plays into sort of the commodity space and the industry's cost to serve. You know, at the moment, we would say that certainly for potash and for nitrogen, the increased freight costs are being more than offset by what we're seeing with prices. Again, that, you know, potash, that's the fundamentals at work, and those were at work prior to any conflict in Middle East. Then for nitrogen, that is clearly a result of what's gone in, on in the Middle East. So that's more than offsetting the freight costs.

You know, whether it's a structural shift in freight costs, I think it's fair to say we don't know. You know, we're watching that closely, but the questions around any risk premium Product that comes out of the Middle East now, and even in a post-war environment, and insurance costs and crewing ships and all those things, we'll be watching that closely. I think it's fair to say at this stage, we don't know. Maybe I'll pass over to Mark. We are, Ben, we are watching our own fuel costs closely and freight and shipping costs closely, in order to make sure that we're managing that to the best of our ability. Mark, maybe you wanna say a few things about that.

Yeah, thanks, Ken. Good morning, Ben. I don't have a lot to add. I think, you know, Ken really nailed it at the beginning of the conflict as it relates to our own fuel consumption in the business. As we mentioned this morning, in retail, we've been really looking at finding efficiencies, optimizing and offsetting those cost increases where we're seeing them, and we think we're doing a good job of that. As we mentioned, it really hasn't affected our view of the business, as we're still very constructive on our retail outlook and have maintained our guidance at midpoint, as Ken said. On the potash side, Ken also framed it very well. It's really the supply-demand fundamentals that are at work, and we've seen a slowly firming price prior to the conflict, and that's continued.

While we've seen some marginal increases internationally, primarily in the cost to serve, we think those are being more than offset by the recent strengthening in prices we've seen as a result of tight supply-demand fundamentals in international markets. At this point, we feel like it's really the market forces at play. As Ken Seitz said, we can't really look beyond the conflict to what will happen, but at this point, we see positive signs for the business.

Your next question comes from Chris Parkinson from Wolfe Research. Please go ahead.

Great. Thank you. I just wanna get back to the global potash markets. You know, when you take a step back and, you know, you look at whether it's Latin American off-season, it seems like things are doing better than expected. Southeast Asia, I thought you initially thought it could be down. It seems like it could actually be flat to up. The United States had a little bit of delayed reaction, but products are moving. Is there any reason to, you know, believe that would be below the midpoint of your guidance? Is there potential upside? I'd love to hear your perspectives on that, especially given, you know, Tampa, Texas sold out through the end of the second quarter. Thank you.

Yeah, Chris, I think you characterized it quite well. If you look market to market, we are seeing strong shipments, and we're seeing low inventories, which means that, you know, product is going to ground. If we look at the markets where we had anticipated growth this year, markets like Latin America, like India, like China, and even a little bit in North America, you know, we see that coming out, you know, happening. It's playing out that way. It does give us confidence in that sort of 74-77 million ton range. I will say that when you get to the higher end of that range, we start to see operating rates and global logistics being tested, you sort of start to hit a ceiling here.

You get to that upper end, you know, it could be that the constraint then becomes operating rates and logistics. In the meantime, yes, Southeast Asia is strong. They had built some inventory last year, so we had sort of flat from last year. To your point, palm oil is 4,000 MYR per ton. There's, you know, palm plantations are doing well, and we have $390 per metric ton for standard grade in that part of the world. We're seeing some strengthening there. Again, it's the most affordable of the crop nutrients. Chris, that has given us the confidence to maintain our 74 million to 77 million tons. Last year it was 74.5. Do we think it's going to be more than last year? Things appear to be playing out that way.

Your next question comes from Steve Hansen from Raymond James. Please go ahead.

Yeah. Thanks for the time, guys. Appreciate it. I just wanna follow up on the prior question, actually. Just in the event that the sales prospects do improve through the year, how do you feel about your ability to flex at the operational level, just considering all parts of the value chain and the actual operations themselves, the logistics to the West Coast, et cetera? I mean, how do you feel about the ability to flex up if their demand warrants? Thanks.

Yeah, thanks for the question, Steve. You know, we feel good. We feel good about our ability to produce. You know, that we've guided this year, you know, 14.1 to 14.8. We've talked about sort of the 15 million ton operating capacity. Of course, given our warehousing and volume of product that sits under roofs all over the continent, I mean, we have the ability to flex inventory as well. We have our turnaround schedule in our potash business laid out. We always have a little opportunity perhaps to flex that as well. We have some tools in the toolbox that we can flex and meet the needs of our customers.

You know, when we think about that top end of 77 million tons, for example, and the role that we would play in that, which sort of reflects the top end of our own guidance, you know, we feel confident.

Your next question comes from Duffy Fischer from Goldman Sachs. Please go ahead.

Yeah. Good morning, guys. Question just around two of your strategic reviews. Your phosphate business in Trinidad. The events in the Middle East obviously are making the pie in Trinidad a lot bigger. You know, whether that's, you know, to split that and share that with the government or, you know, to offload that asset to somebody else. Is that helping the process there, do you think? Is it demonstrable enough to move the needle? Same question for phosphate. I mean obviously it's a little bit more mixed there. You've limited global supply of phosphate with what's happening in the Middle East, but you've, you know, hurt the cost position on sulfur. Is the Middle East stuff changed either the direction of either of those two strategic reviews in your mind?

Yeah, thanks for the question, Duffy. I, you know, I would say that, first of all, we're in the market with both of those portfolio reviews. We'll see. We're testing the market as we speak. With respect to Trinidad, you know, I think the question becomes, is there confidence around developing additional gas in the region in light of what's going on in the Middle East? Of course, some of the major LNG companies are having that discussion. You know, does that give someone who might be interested in acquiring the asset more confidence? It could, that remains to be seen as we test the market. It's the same story in phosphate. We're out. We're testing the market. Remains to be seen.

You know, we know that in this and given the current environment, something has to change. It's an unsustainable environment for the phosphate business. We'll be watching that closely. In the meantime, we have significant interest in our phosphate assets that we saw that immediately after we talked about testing a sales process, and that interest has remained ever since. Yeah, we'll see what happens. It's early days in those discussions. We'll see what happens. You know, given the interest in our phosphate assets, given the potential for gas development in and around Trinidad, we'll be working hard on maximizing the value of those assets.

Your next question comes from Jeffrey Zekauskas from JPMorgan. Please go ahead.

Thanks very much. Your urea prices moved up very nicely. When I look at your ammonia prices year over year, maybe they're up CAD 60 a ton. Is the reason, is there a reason why they're not up more in that, you know, the ammonia market has really been pretty strong? I, I think the movement at some of your competitors has been a little bit higher. Can you talk about your general ammonia values? Is there something constraining? Is there opportunity coming up?

Yeah, thanks for the question, Jeff. Yeah, I mean, urea, ammonia, ag, industrial, different movement there, but I'll pass it over to Chris Reynolds.

Yeah, good morning, Ben. Thanks for the question. You know, what we do like about our nitrogen business is the diversity we have between those finished ag markets and also the industrial markets. As you know, about 60% of the products we produce in our nitrogen portfolio go towards that ag market and 40% industrial. You know, we like that. We like, obviously, the cost position we have in North America given the gas fundamentals. We've got good diversity there. You know, in terms of that mix between ammonia, urea, UAN pricing, you know, we're not concerned about that. We have industrial contracts that are linked to the Tampa index and obviously that moved up quite significantly recently.

Again, we feel good about our position in both of those main markets and also our cost position. No concerns there. As Mark mentioned in his prepared remarks, have been really pleased with our operational reliability in nitrogen as well.

Your next question comes from Benjamin Theurer from Barclays. Please go ahead.

Yeah. Good morning, and thanks for taking my question. A lot of ground being covered, but I wanted to get your views as to what potential implications, weather phenomena and being talked about, some of things such as Super El Niño could have as it relates to the demand, particularly in South America, which tends to be, hit hard if something like that were to happen. What does that do to, like, your outlook, particularly in retail as we think through, the main planting season that is yet to come, in South America? Thank you very much.

Great. Thank you, Ben. As usual, we're looking into the different parts of the world and bread baskets of the world and the markets that we serve and the weather. It's once again, a mixed bag, but maybe I'll hand it over to Jason Newton, our Chief Economist, to talk about sort of our assumptions and what we're seeing.

Good morning, Ben. As we look at our markets that we're in, we don't expect to see any major impacts in North America or South America, particularly in the growing season that we're going into now. No major areas of concern driven by typical trends from El Niño. The areas where you typically see impacts from a weather perspective from El Niño are Southeast Asia, in some cases India and Australia. Australia's going into planting season much better soil moisture generally than was the case a year ago.

Your next question comes from Edlain Rodriguez from Mizuho. Please go ahead.

Thank you, good morning, everyone. A quick one for you. I mean, there are concerns out there that as nitrogen prices have surged, like farmers will try to lower the fertilizer basket cost. Typically this might come at the expense of potash or, and phosphate in terms of application rates. Like, what's your view of that? You know, is that a risk that you contemplated for the rest of the year or early next year?

Great. Yeah, thank you, Edlain Rodriguez. You know, what I can say is we are not seeing that across nitrogen and phosphate, you know, the crop nutrients you mentioned. I will say we've seen some of that in phosphate and we've seen a bit of that here in the spring in phosphate as well. As it relates to nitrogen and potash, again, we have not seen that. We've seen what we would call an active, normal spring thus far into the year. We've had strong grower engagement and the volumes are moving. We have corn acres, you know, seeing shifts there. 94 million-96 million acres and, you know, that has a certain nitrogen requirement right there. You know, we look out over the balance of the year and, you know, sort of the post-emergent application.

You know, we're expecting a constructive setup here for the balance of the year. You know, farmers again just looking to maximize yields in this environment, especially in a year after significant crop nutrients were extracted from the soil from this huge corn and soybean crop. That's what we're seeing, Ed Lane, and, you know, that's how we're kind of thinking about the balance of the year.

Your next question comes from Michael Sison from Wells Fargo. Please go ahead.

Hey, guys. Thanks. When you think about 2022 and kind of where nitrogen, urea prices are setting up, do you sense that, you know, these levels are peakish in nature? When you think about, you know, beyond the conflict and things start to normalize a little bit, you know, do you think that prices because of the damages that potentially are out there and the time it takes to bring it to get everything back on, that they could stay elevated into maybe potentially next year and beyond? How do you see the longer term impact, you know, from the conflict? Thank you.

Yeah. Mike, thanks for the question. I think I'd just, I would go back to what we talked about earlier in terms of the signposts that we're watching for as things, if we can use the word normalize in the region. You know, the reality is again, these are highly commoditized markets. Frankly prior to the conflict in the Middle East, markets that were relatively balanced with exception of phosphate. If it's nitrogen we're talking about, relatively balanced. This is a huge supply shock that we're experiencing at the moment I think. There's no question about that, especially at the time of the year when in the Northern Hemisphere, farmers are getting out and planting their crops. You know, how this plays out into the future I think is related to those signposts.

I think the big one, Mike, to your question is just how much, you know, perhaps two things. Just how much infrastructure damage there is in the region. For a market that was balanced prior to that damage, what does that mean for the tightness of supply and demand? Perhaps two, any risk premium that the world might place on, you know, for the time being on shipping out of that region and what does that mean for freight costs, insurance costs, all those things. Even geographic diversification to the extent that that's possible among the customer base. I think to your question, we would say duration we don't know as this plays out and could be uneven in terms of opening of the Strait of Hormuz, normalization of production, and then ultimately repair of infrastructure.

To your point, could we see an elevated price environment into 2027? That's certainly one of the possibilities.

Your next question comes from Lucas Beaumont from UBS. Please go ahead.

Hi. Good morning. Thanks for taking my question. I just wanted to talk about retail. I guess both for yourselves and for the industry more broadly there. As we kind of come out of the season here, I mean, are you anticipating challenges, I guess, in refilling inventory into the channel, I guess, for the industry and for growers, given just where the pricing dynamics are currently on nitrogen and phosphates? I guess with growers kind of potentially expecting that, you know, prices are high and then they may come down as we sort of go through the year, it seems like I guess the incentive to sort of purchase and retail in the near term is gonna be depressed.

I just wanted to kind of get your view on how you see that flowing back into the wholesale market on the nitrogen side. Is that gonna create a large kind of demand air pocket as we sort of move into the middle part of the year, that we should think, consider as well? Thanks.

Thanks, Lucas. You know, I'll say coming into the season, of course, we had purchased all of the product that we needed for our grower customers right through the channel. From an inventory perspective, we were well set up for the spring planting season. As we come through the spring planting season, again, we turn back to, you know, Nutrien that reaches right through that value chain. You know, our upstream business producing potash and our nitrogen business, which North American plants and servicing North American customers, reaching right through onto farms in North America. How it is we think about refilling the channel. You know, we have a lot of confidence. Chris, maybe you wanna say a few more words about that.

Yeah, good morning, Lucas, thanks for the question. You know, as Ken alluded to, you know, you think about the infrastructure we have from a distribution point of view, we're expecting not just our own distribution from a retail point of view, but that of our wholesale customers as well to be very empty as we come towards the end of the spring. We're not concerned about, you know, containment or things backing up. There's gonna be room to put that product, even if there is a little hesitancy to start filling immediately after the spring season. I think, like everyone, like we've talked about on this call, a lot's gonna depend on, you know, the length of the conflict in the Middle East, when does the strait fully reopen, get a better understanding of those production facilities and that supply of product.

I think the industry as a whole is gonna be watching that and then making those purchasing decisions based on that. We feel very confident in terms of our production, our capability, but then more importantly our distribution network that can be ready to be deployed, even if, as I said, there's a little hesitancy at the start of that summer fill period.

Your next question comes from Mazahir Mammadli from Rothschild & Co Redburn. Please go ahead.

Thank you for taking my question. I just have one question on the nitrogen segment. I appreciate you've communicated that the nitrogen, the Trinidad operations, have been shut down and the gas supply agreement has expired. I'm just curious, is there a scenario where perhaps Nutrien strikes up an agreement with the Trinidad government, perhaps in coordination with U.S. or Canada government, to temporarily at least restart production because those volumes are kind of desperately needed in the market? I'd be curious to hear your opinion. Thank you.

Yeah. Thank you, Mazahir. You know, what I'd say is, we are in the market in a sales process at the moment and, you know, in the meantime, you know, gas availability and gas pricing continues to be a challenge in Trinidad. Some port fees that are being charged to us that remain, continue to be a challenge and the access to the port associated with those sort of back fees, continue to be a challenge. We have conducted a safe shutdown of the facility and, like I say, in the market now and through a sales process.

That's our focus at the moment is engage with prospective buyers, you know, in the region or otherwise to see and kind of what the value of those assets could be.

Your next question comes from Laurence Alexander from Jefferies. Please go ahead.

Good morning. You alluded to the impact of higher sulfur costs and sulfuric acid. Could you break out kind of what your sensitivity is there? More importantly, could you dig into how you think the industry could handle or adapt to the Strait of Hormuz being closed for longer? When we've talked with other companies with exposure to sulfur, everyone seems to have the view that the fertilizer complex is the one that's going to adjust. I'm curious how you think that such an adjustment might happen.

You know, thanks, Laurence. I, you know, just in terms of a specific sensitivity to sulfur costs, you know, it does take, and then I'll hand it over to Mark to talk more broadly about, you know, some of the potential adjustments that you cited. It's a kind of a 1-to-1 ratio, sulfur to a ton of P2O5. When you do the math, and this is just a general sensitivity kind of rule of thumb, there's a $25 increase in sulfur costs, it's about a $35 million reduction, earnings reduction for our phosphate business. $25 increase, up $35 million down. Mark, do you wanna maybe talk a little bit about the second part of Laurence's question?

Sure. Thanks Ken. Good morning, Laurence. Laurence, I think Ken answered your direct question in terms of how the sensitivity feels within the Nutrien phosphate business. I think more generally we just reiterate the comments from an overall industry perspective that when we look at our business and we look at what's happened with the conflict in the Middle East, the reality is that ammonia and sulfur benchmark prices or input costs have risen more than finished phosphate pricing since the beginning of the conflict. Hence our comment in our prepared remarks that ultimately we believe that as we enter the second quarter, we're going to see elevated pressure on phosphate margins. As Ken also alluded to in a prior question, we don't see the situation as sustainable, and ultimately we don't believe that this can be sustained for a long period of time.

In the near term, that is the challenge, and Ken laid out the financial sensitivity. On your second question about the fertilizer complex adjusting or, you know, adapting to a new reality around the Strait of Hormuz closure, I think when you go back to the comments that Ken's made earlier in the call, the reality is the world is just so dependent on fertilizer and inputs for fertilizer, including sulfur and energy and raw materials coming from the Middle East, that there's no easy adjustment to what we've seen here. Given the sheer volume across nitrogen products, phosphate products, and energy that we have exiting the region, it really is on that time horizon that Ken has laid out. Even with a reopening of the strait, that could take some period of time to normalize.

In the absence of that, we expect that you'll continue to see very tight supply-demand fundamentals for nitrogen and phosphate.

There are no further questions at this time. I will now turn the call back over to Jeff Holzman.

Thank you for joining us today. The investor relations team is available if you have follow-up questions. Have a great day.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.