Nutrien Ltd. Q2 FY2025 earnings call

• First half results featured record potash sales volumes and nitrogen operating rates, lower expenses, reduced capital expenditures, and increased returns of cash to shareholders.
• Raised 2025 full year guidance for potash sales volumes while maintaining other operational guidance ranges.
• Progressed strategic initiatives across the portfolio to structurally improve earnings and free cash flow, with significant progress towards Investor Day targets.
• In potash, advanced mine automation projects with over 40% of potash ore mined using automation in first half of 2025.
• In nitrogen, completed brownfield debottlenecking efforts at Redwater and Geismar plants adding 150,000 tonnes of annual production capacity.
• In Retail, progressed growth opportunities and network optimization initiatives resulting in 6% reduction in expenses in first half, ahead of schedule on $200 million cost savings target.
• Allocated $786 million to dividends and share repurchases in first half, a 49% increase from prior year.

Potash

• Second quarter adjusted EBITDA: $630 million, well above prior year due to record sales volumes and higher offshore net selling prices.
• Full-year potash sales volume guidance raised to 13.9 million to 14.5 million tonnes.

Nitrogen

• Second quarter adjusted EBITDA: $667 million, up from last year due to higher net selling prices and sales volumes.
• Nitrogen plants operated very well, achieving a 98% ammonia operating rate in the quarter and first half; maintenance scheduled in third quarter will reduce second half ammonia operating rates to around 85%.
• Nitrogen sales volumes guidance maintained at 10.7 million to 11.2 million tonnes.

Phosphate

• Second quarter adjusted EBITDA: $92 million, higher net selling prices offset by lower sales volumes and higher sulfur input costs.
• Completed two successful turnarounds and positioned to deliver increased sales volumes and lower operating costs in the second half.

Retail

• Second quarter adjusted EBITDA: $1.15 billion, up 2% from prior year.
• Full-year Retail adjusted EBITDA guidance: $1.65 billion to $1.85 billion, with midpoint underpinned by strong North American crop input demand in July, projected 5% increase in fertilizer volumes, improved winter crop planting prospects in Australia, and margin improvement plan in Brazil on track.

• Raised 2025 full year global potash shipment forecast to 73 million to 75 million tonnes.
• Maintained nitrogen sales volumes guidance at 10.7 million to 11.2 million tonnes.
• Maintained Retail adjusted EBITDA guidance of $1.65 billion to $1.85 billion.
• Anticipate solid backdrop for business in second half of 2025 with strong market fundamentals supporting the business.

• Phosphate markets remain tight due to limited supply, including Chinese export restrictions, which could impact demand if grower affordability is affected.
• Weather conditions in key markets (e.g., dry weather in Australia, wet weather in Southern U.S.) can impact planted acres and crop input demand.
• Project delays and supply chain challenges in the potash, nitrogen, and phosphate sectors could affect supply and market dynamics.

Q: At the beginning of the year, there was a debate on potash supply being offline and market price appreciation being supply-driven, but later it became more demand-driven. What are updated thoughts on these dynamics, especially out of the FSU and for 2026?

A: Globally, very strong demand for potash, with raised expectations for market to 73-75 million tonnes. Inventories not elevated, potash remains affordable. For 2026, given inventory levels and affordability, growers will look to replace nutrients pulled out of the soil with large crops.

Q: Touching on affordability, what's the sense on farmer sentiment and health today, and how does fertilizer affordability impact purchasing, especially between nitrogen, phosphate, and potash?

A: Seeing some pressure on ag commodity prices and grower margins. Strong uptake in third quarter, with potash remaining the most affordable nutrient. Customers preparing for good fall application period across NP&K, watching how pricing balances in fall.

Q: Harping on retail demand or fall demand in North America, are comments just about weather being good as the largest determinant? And how confident are you in Brazil Retail shifting to positive EBITDA run rate next year?

A: Heading into fall, dependent on weather; expecting open application season and 5% increase in fertilizer volumes. Brazil improvement plan on track, expecting to be in positive EBITDA next year with continued focus on cost reductions and operational improvements.

Q: Thinking about 2026, if corn and soy prices hold, what are risks to segments if farmer economics stay in Americas, and how much downside in divisions?

A: Ongoing strength in potash demand, strong demand in nitrogen markets with supply challenges, phosphate prices elevated with watch on grower reaction. Overall constructive, but watching international grower sentiment and North American market dynamics.

Q: Talk about potash production expectations for next year, incremental capacity to take market share?

A: Have 15 million tonnes of installed capacity, will grow with market and maintain market share by bringing on operators as market evolves.

Q: Broader question on portfolio optimization, any more to do on divesting noncore items?

A: Continuously looking at portfolio to optimize free cash flow per share, have done work on divesting noncore items like Profertil and smaller assets, will continue to review and optimize.

Q: Gross profits per tonne in North America and crop nutrients flat, any shifts in back half of year?

A: Crop protection margins better than anticipated, opportunity to expand in second half; fertilizer margins flat due to strategic decisions in Brazil, but expecting margin per tonne to pick up with strong July start and focus on controlling controllables.

Q: Potash is the most affordable nutrient but lags behind others, do you prefer being in that position, and was recent potash price drop in Brazil a blip?

A: Constructive on potash market, when affordable, sees record demand. Recent price softening in Brazil seen as seasonal lull, expecting volume to move again with soybean planting in Brazil.

Q: With better pricing for ammonia over upgraded nitrogen products in North America, potential for shift to greater ammonia use in fall?

A: Dependent on grower plans for next year; don't see material shift, but low inventory levels of UAN suggest strength in price towards fall.

Q: Seed sales weak in 1H Retail, clarity on price volumes and expectation for next year?

A: Seed revenue affected by prevent plant in Southern region and crop mix changes. Anticipate 100% of prevent plant acres to return next year, and some cotton acres to return depending on commodity pricing.

Q: Average selling price in Retail crop nutrient segment up 2% year-on-year, is there catch-up pricing benefit in second half?

A: Well positioned going into fall, with large corn and soybean crops removing nutrients, expecting opportunities to expand margins in back half with open fall application season.

Q: Looking to 2026, if normal demand growth, where will supply come from and when to push button on staffing for potash production?

A: Strong demand meeting supply, with a few producers able to expand production on margins. Plan to grow with market and maintain market share by bringing on operators as market evolves.

Q: Capital allocation, improvement in free cash flow but slowdown in share repurchase? How think about dividend vs investments and share repurchases?

A: No slowdown on share repurchases, running at ~$45 million per month. Focus on generating structural cash, rigorous working capital optimization, and balanced capital allocation with dividends and share repurchases to strengthen balance sheet and grow dividends per share over time.

Q: Cost progress, almost $200 million cost savings expected this year, should we expect additional buckets and further upside potential in 2026?

A: Ahead of schedule on $200 million cost savings target, with about half from Retail and half from corporate SG&A. Tangible evidence of expense rationalization showing through, with more opportunities for cost savings as continue to explore and optimize portfolio.