Nutrien Ltd.

Greetings and welcome to Nutrient's fourth quarter earnings call, 2021 fourth 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 is being recorded. I would now like to turn the conference over to Jeff Holzman, VP of Investor Relations.

Thank you, operator. Good morning and welcome to Nutrient's fourth quarter 2021 conference call. As we conduct this call, various statements that we make about future expectations, plans and prospects contain forward-looking information. Certain material 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 are contained in our current quarterly report to shareholders, as well as our most recent annual report MD&A and annual information form filed with Canadian and U.S. Securities Commissions. I will now turn the call over to Ken Seitz, Interim President and CEO, and Pedro Farr, our CFO, for open comments before we take your questions.

Thanks, Jeff. Good morning and welcome to Nutrien's fourth quarter earnings call. I look forward to recapping our 2021 results, our outlook for the business in 2022, and how we are positioning the company to deliver superior long-term value for our shareholders. 2021 was truly an extraordinary year as the world continued to navigate through challenges related to the COVID-19 pandemic, supply chain disruptions, heightened concerns over global food security, and the impacts of climate change. Our strong performance this past year demonstrated that Nutrient can positively address these challenges and deliver sustainable solutions that benefit all of our stakeholders. I'm proud to report that we achieved an all-time best safety performance in 2021 with no fatalities or life-altering injuries. To our employees listening today, a heartfelt thank you. Your commitment to safety and our culture of care has a meaningful impact on the well-being of all our colleagues at Nutrien and the communities where we live and operate. Now turning to our financial results and outlook. Adjusted EBITDA nearly doubled to $7.1 billion in 2021, and we generated cash flow from operating activities of $3.9 billion. This performance was underpinned by the strong execution of our teams, competitive advantages of our integrated business model, and the benefit of robust market fundamentals. Nutrien Ag Solutions delivered record adjusted EBITDA of more than $1.9 billion, with strong earnings growth in each of our core geographies. We continued to strengthen our direct relationship with the grower through the reliability of our supply chain, delivery of innovative products, expanded digital capabilities, and sustainability solutions. Our ability to deliver on each of these strategic initiatives was a major contributor to our robust organic growth in 2021. Gross margin from our proprietary products increased by more than 20% in 2021, and now exceeds 1 billion. Our retail business sold record fertilizer volumes due to favorable market conditions and the strength of our global network. North American digital platform sales reached 2.1 billion, and we are building out our digital agronomy tools to support the delivery of long-term, sustainable agriculture solutions for our customers. We also expanded our network through the completion of 14 retail acquisitions. We continue to diversify our earnings outside of North America with a focus on growing our business in Brazil. More than one-third of our retail earnings now reside outside of the U.S., and we expect that share will continue to grow over the next five years. Our potash business delivered $2.7 billion in adjusted EBITDA, supported by higher realized prices and record sales volumes. We safely and efficiently increased production by nearly one million tons which represents a small portion of our low-cost available production capacity. We utilized the strength of our North American distribution system to increase volumes in the domestic market, and Capotex's ability to access four marine terminals on the west and east coast was critical to ensuring a reliable supply of potash to our offshore customers. In nitrogen, we generated adjusted EBITDA of $2.3 billion, supported by higher prices and to the advantaged position of our assets. The nitrogen team completed two large plant turnarounds and phase one of our low-cost brownfield expansions, delivering these projects on time and on budget. We progressed several initiatives during the year that will enhance the long-term growth and sustainability of our nitrogen business. This includes the launch of phase two of brownfield expansion projects, as well as GHG emissions reduction projects at several of our nitrogen sites. Finally, in phosphate, our team capitalized on improved market fundamentals to deliver record adjusted EBITDA of $540 million. Our focus in phosphate is to maximize the free cash flow of the business by improving the reliability of our operations and leverage the flexibility of our plans to increase volumes of higher margin industrial and premium fertilizer products. Turning to the outlook, global grain and oilseed supplies are well below historical levels, which continues to support crop prices. In the U.S., corn and soybean prices increased by 10 to 15 percent over the past month due to global supply uncertainties. U.S. corn grower cash margins are projected to be 70 percent above the 10-year average based on current new crop futures. Prospective returns for key crops in Brazil and Australia are also very strong and we expect this will support crop input demand in these markets. In 2021, our retail business generated above average per tonne fertilizer margins due to the timing of procurement in a rising price environment. Our retail adjusted EBITDA guidance assumes a return to more historical average commodity fertilizer margins in 2022. We had a very strong fall fertilizer application season and anticipate this led to some pull forward of volume and earnings. We expect our specialty crop nutritional and crop protection product margins will remain strong and anticipate growth in our seed business, particularly in Brazil. Our strategy in potash is to utilize our world-class network of six mines to respond to changes in market conditions and we see significant opportunity for growth again in 2022. We expect to ship record potash volumes between 13.7 to 14.3 million tons, assuming sanctions on Belarus have a temporary impact on supply. If we were to see more significant long-term impact, Nutrien has the capability to further increase production by hiring additional employees and incurring some small incremental capital expenditures. Campotex is fully committed through the first quarter due to the strength and demand from customers in Latin America and Southeast Asia. Earlier this week, Campotex also signed new contracts with customers in India and China at $590 per ton, with shipments expected to occur April through December. Our domestic order book is now closed for the first quarter, and we recently announced a $25 per short-ton increase for deliveries in the second quarter. The increase reflects the current strength in global potash market fundamentals, in particular for granular grade product. In nitrogen, we expect high global energy prices, Chinese export restrictions, and heightened geopolitical risks will support prices in 2022. We entered the year with relatively low nitrogen inventory levels and have incurred a few plant outages in the first quarter. However, we expect our sales volumes will increase due to the completion of our border expansion project in 2021 and higher full-year operating rates. I will now turn it over to Pedro to review our capital allocation priorities. Pedro.

Thank you, Ken. As Ken just highlighted, 2022 is set out to be an excellent year for the company given the strength of the market fundamentals and the competitive advantages we have in each of our businesses. We guided to an adjusted EBITDA of 10 to 11.2 billion dollars, which at the midpoint represents a 50% increase from our record earnings in 2021. The key drivers of this growth are higher expected selling prices and our ability to utilize existing capacity to increase sales volumes in potash and nitrogen. Although retail earnings are expected to be lower in 2022, due to the normalization of commodity fertilizer margins and some pull forward in Q4, the underlying trends and key financial metrics for the business are still very strong. We expect a substantial increase in our cash provided by operating activities this year and have provided a scenario of this opportunity earnings presentation posted on our website. Based on our adjusted EBITDA guidance range, and a conversion ratio of approximately 75%, we have the potential to generate operating cash flow of $7.5 to $8.4 billion this year. This scenario illustrates the significant opportunity we have to advance our capital allocation priorities in 2022. We expect sustaining capital expenditures in the range of $1.2 to $1.3 billion, which reflects the impacts of inflation over the past year the prioritization of projects that were deferred during the pandemic, and replacement of some end-of-life assets at our nitrogen sites. In 2021, we reduced long-term debt by $2.1 billion, and we do not expect the need to reduce nominal debt any further. Our balance sheet is now very well positioned to take advantage of value-enhancing opportunities through the cycle. In terms of growth capital, we have a well-defined set of retail opportunities that include growing our network in Brazil, tuck-in acquisitions in other core markets, expanding our proprietary product business, and enhancing our digital capabilities. The Brazilian market, in particular, provides a significant opportunity for targeted growth due to its rapidly expanding agriculture production and fragmented retail structure. In nitrogen, we have embarked on a phase two ground field expansion plan that is expected to add an additional half million tons of low cost, environmentally efficient capacity for a total investment of 260 million. We are also evaluating options to increase the production of low carbon ammonia and have approved $50 million in projects that are aimed at eliminating approximately 10% of our current scope one and two emissions in hydrogen by 2023. Our global potash position is unmatched, and we expect to make small annual investments for mine development and underground equipment that would enable us to increase production from existing capacity. We are making moderate investments to increase self-generated power, autonomous mining, and other technologies that will enhance the safety and efficiency of our potash sites. In total, we expect to allocate approximately $1 billion to investment projects across our businesses in 2022 with attractive projected returns. Lastly, I would address shareholder distributions. Since 2018, Nutrien has allocated $9 billion to shareholders through dividends and share repurchases, including $2.1 billion return in 2021 alone. We have demonstrated the ability to pay a stable and growing dividend under the most difficult market conditions and distribute excess cash through share repurchases. Yesterday, the Board of Directors approved a 4 percent increase in the quarterly dividend to 48 cents per share and the purchase of up to 10 percent of our nutrients common shares over a one-year period. We plan to allocate a minimum of $2 billion to share repurchases in 2022 on a balanced cadence throughout the year. Given the strength of our projected cash flow, we believe there is a potential for additional capital to be allocated beyond the opportunities I just outlined. We will evaluate the most value-enhancing uses for this cash and provide an update to our shareholders as the year progresses. And now I'll pass it back to Ken.

Thanks, Pedro. Just a few final comments before we get to your questions. The outlook for our industry and our company has never been stronger. Global grain and oil seed inventories remain well below historical levels and crop prices are supportive of demand in the key regions where we operate. We entered 2022 with significantly higher prices for our products and the capability to bring on additional potash and nitrogen volumes. We have well-defined strategic plans for each of our business, and the executive leadership team is focused on advancing the key priorities that will maximize long-term value for all stakeholders. We have an extremely talented group of employees throughout the organization that helped deliver record results in 2021, and I am highly confident in their ability to rise to the occasion once again in 2022. I'm joined today by members of our leadership team, and we would be happy to take your questions.

We will now begin the Q&A session. To ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Per the company's request, there will be one question per analyst. Your first question will come from the line of Joel Jackson with BMO. Please proceed with your question. Hi.

Good morning, everyone. Obviously, the Belarus BBC issue is quite fluid and crazy. I have a couple of questions on this. So, if Belarus has significant sales restrictions for an extended number of months, they can't do their million tons a month, they're going to do a fraction of that, what do you think the market will do? Do potash prices have to rise to induce demand destruction to balance the market? Because nobody can balance the market unless demand goes down. And the second part is longer, is what do you need to see to hire a bunch of miners and spend the small investment to bring on the millions of tons you have sitting idle? I imagine it's going to take you a year to ramp, and you probably want, what, two or three years to think that BPC is in trouble, and you can't conclude that right now. So is it fair to say you're nowhere near really making the decision to bring back those extra tons?

Great. Well, thanks for the questions, Joel. And, yeah, we're watching the situation in Belarus quite closely. You know, we're guiding and suggesting 68 to 71 million tons worth of potash shipments in 2022 and that is you know we're taking into account what's happening in Belarus when we say that you know for our part we sort of had anticipated that it would be difficult for BPT to get access to tidewater with you know difficulties getting through Lithuania obviously and then also difficulties finding other port access and even rail to the east so You know, we're looking at this and wondering, with all the uncertainty around it, you know, how long will this last? In the meantime, your question about what market prices will do. Well, if anything, on that 68 to 71 million tons of shipments, the top end could be capped by the actual availability of supply. And so, yes, we could see some additional pressure on pricing. Of course, Campotex concluded contracts with India and China at $590 per ton, but it's It is true we could see some additional pressure on pricing. In the meantime, for our part, what do we need to see? So, you know, we have always planned our production capability for 2.5% to 3% average annual growth rates. We've talked about our 18 million tons of existing capacity and the ability to bring on additional brownfields when the market's calling for it. So, you know, we're looking at the Bellaration situation, and we would need to see some prolonged challenges in that part of the world in order to make those investments on opening up ground, putting mining machines in spaces, and hiring people, exactly as you say, Joel. In the meantime, you know, we're guiding 13.7 to 14.3 million tons, you know, which is an increase from 2021. And certainly at the top end, you know, it's an opportunity for us to put more material into the market. And I'll also say, in addition to that, we're preserving additional flex capacity for this year should our customers need more volume. You know, for the longer term, again, Joel, you know, we would need to see, in order to make the investments of opening up the ground and hiring people, we would need to see some prolonged challenges in Belarus in order to make those investments.

Your next question will come from the line of Jacob Bout with CIBC. Please proceed with your question.

Good morning. I have some questions. Looking for some further granularity on the retail guidance for 2022. You're guiding for EBITDA to be down year on year. Can you talk a bit about what your organic versus M&A growth assumptions are? How big is that pull forward effect? And are we going to feel that in the first quarter, first half? And then when we're looking at proprietary products, and I guess to a lesser extent, digital sales. When I look at, you know, 2023 targets, in particular proprietary sales, I was surprised it was actually lower year on year and well down from 2023 targets at 29%.

Great. Thanks, Jacob. So I think you identified the moving parts there. You know, we did have some meaningful fertilizer margins in 2021 with the with fertilizer prices escalating the way that they did we had a very strong fall application season so there was some pull forward into q4 but we also had significant market share gains uh that we intend to carry through to 2022 but i'll hand it over to jeff tarsi to provide some more color yeah jacob and look obviously we we had a very strong fall and

I might mention on that strong fall, we really needed that strong fall to occur with some of the supply chain constraints and things that we've seen in the marketplace. And so we were quite happy about the fall that we had. We think it sets us up really early for the spring and spring planting season as it relates to that. And obviously, our margins per ton last year on fertilizer were up. We were able to take advantage of our strategic network efficiencies that we have and storage capabilities and things like that. So we will see margins return to something that's of a more normal basis in 22. But if I look at it from a commodity fertilizer margin standpoint, they'll be above what they were in 20. And one other thing I'll point out on fertilizer margins that anywhere from 20 to 25% of those margins are made up by our proprietary nutritional products. And We don't see those going back. We've actually built in increases for 22 from a margin standpoint. If we look at organic growth, we've got organic growth built into our plan in 22. I think we got just over $90 million of organic EBITDA built into that plan for 2022. And look, our focus for our organic growth in 22 will rely very heavily on on our proprietary business, as well as organic growth. Ken just mentioned just a minute ago, we were up pretty amazing in 21. We grew market share and grew margins across all three shelves of our business. And we certainly have in our plan for 22 that we'll keep those share gains and From a seed perspective, we've got a pretty healthy plan built together. We really expect to continue to expand our share in the seed shelf of our business. So I hope that answers your questions.

Your next question will come from the line of Christopher Parkinson with Mizuho. Please proceed with your question.

Great. Thank you very much. Just given the incredibly healthy potash demand outlook, just how should we be thinking generally about the cost per ton outlook? I'm assuming you're already getting the full benefit from Rokenville and Lanigan, but how should we be thinking about the near to intermediate term about Corey, Allen, and Vanscoy? Will the operates be, let's say, noticeable to us on the cost line? And if we could circle back to Joel's question, you know, what would be kind of the characterization of the current plan embedded in your guidance and what would be the characterization of if things potentially change with the BPC outlook? Thank you so much.

Great. Thanks, Chris. Yeah, with respect to cash costs per ton, I mean, we're experiencing a few pressures at the moment. Obviously, foreign exchange has worked against us a bit. We're also paying higher royalties given where potash prices have gone. And I'll have to say that we're also – It's experiencing some inflationary pressures. That said, we were able to make up those pressures in 2021 with increased volume so that I don't, I wouldn't say that you should expect, you know, material changes in our cash costs per ton 21 to 22. With respect to our plans for potash in 2022, I'll just say again, we're guiding 13.7 to 14.3 million tons, and we are preserving additional capacity above that, maybe another half a million tons that we would be able to bring on if we see that our customers are calling for it, if there's a gap in the market created by this Belarusian situation. Again, an ability to bring on sustained volumes if some of these supply side events persist.

Your next question will come from the line of Ben Isaacson with Scotiabank. Please proceed with your question.

Thank you very much and good morning everyone. Just another potash question for you, maybe just a two-parter. Ken, I was a little surprised to hear you say that Campotex is sold out six weeks ahead or I think you said to the end of Q1. Most of 2021 it felt like camp attacks were sold out anywhere from three to four and a half months ahead due to strong demand. So the first part of the question is, is this a sign of demand destruction starting, especially as we're going into the spring? My second part of this question on potash is you just mentioned you would want to see a prolonged issues in Belarus in order for you to start investing more money with respect to potash development. Yet you've been talking about 5 million tons of, incremental expansion for a number of years. And so I would have thought that now that you have the cash and there's incremental issues out of Belarus, you would have accelerated that. But it doesn't sound like that's the plan. Can you elaborate on that?

Yeah, you bet, Ben. Thanks for the question. So, you know, I definitely wouldn't say that this is a sign of demand destruction. Again, if we go region to region, you know, grower sentiments are strong and margins are strong. You know the commitments out through the first quarter offshore really related to just demand in the key regions where we operate and actually low inventory levels and just about every region where where we sell as well, and so we sort of go to market to market a big. A big market for granular sorry standard grade product in the first quarter this year has been southeast Asia, where. You know, we're seeing really incredibly strong palm oil prices, record palm oil prices, and so demand there is strong, and certainly Camputex has meaningful commitments of standard-grade product into Southeast Asia. Then turning to the US, again, we had a very strong fall application season. So, you know, growers in the US are looking into the spring here now and looking to shore up supply. And then Brazil, again, record demand in 2021. We're anticipating very strong demand in 2022 again. And while inventories have grown a little bit in Brazil, the inventory growth is small compared to the overall growth in the market. you know, the Brazilian grower also looking to shore up supply. So, no, at this stage, we are not seeing demand destruction. In fact, grower margins are strong. Now, your question about our 5 million times, and, you know, I just say, Ben, we just want to take a very pragmatic approach to this. You know, when we increase production, we have to go open up ground, which is expensive. We have to install infrastructure. We have to maintain that ground if Demand comes off. We still have to maintain that ground. We have to hire people. We have to put mining machines at faces. And so we absolutely, in a planned and thoughtful way, can ramp up from, you know, our 13.7 to 14.3 million tons. So we can ramp that up on a paced basis, but we're going to do it in a very pragmatic way because, you know, if the supply side issues you know, go away quickly, then we don't want to be left with all these costs. So, you know, we can bring on production in a planful way, and that's the way we're going to do it.

Your next question will come from the line of Vincent Andrews with Morgan Stanley. Please proceed with your question.

Thank you, and good morning, everyone. Wondering if you could give a little more color on your nitrogen guidance for the year, and in particular, how you see the shape of the year, and maybe more specifically how you're thinking about the second half, maybe some of the energy or cost curve assumptions that are baked into it.

Yeah, great. Thanks, Vincent. So, again, it's, you know, strong backdrop in the ag fundamentals, some supply-side events in nitrogen as well. But I'll hand that over to Rafe Sully to provide more color.

Thanks, Vincent. So, look, let me start just with an overall perspective of the ammonia market. You know, supply and demand there, underlying supply and demand is tight. That market has been growing at something like two to three million tons a year, and we have not seen that additional production build out at the same rate. And then of course, to make matters worse, we saw the spike in gas prices in Europe that led to some shut-ins, and so it was a very tight situation. Now, going forward, we would think that I think the forecast for gas prices in Europe remain above $20 for the rest of the year. That of course puts a floor under ammonia going forward. Urea, similarly, very tight global supply and demand situation. We're seeing restrictions on exports from China. That was about 2.5 million tonnes last year that won't be in the market this year. We're seeing increased demand in India, good, strong demand, growth economics in North America. So again, very tight market. New England, similar picture. What I would suggest is that in North America, sorry, in Europe, we'll see gas pricing above $20. In North America, I think we'll see gas prices in the U.S. be in that range of $3.75 to $4.25, providing us a very good advantage position. So overall, I think we see some really good strong pricing throughout the year. We do think there'll be a reset in summer as there normally is. There's normally a lull in demand at that point. It's hard to get product out the door, so we'll see some pricing reset. But we think overall we'll see some good strong pricing continue in the second half. And overall... Average pricing for this year will be higher than last year, and we'll see the nitrogen business performing better. We've got the forecast out there at the minute. I think it's going to be a good, strong year for us.

Your next question will come from the line of Steve Byrne with Bank of America. Please proceed with your question.

Yes, thank you. I was wondering if your retail business has visibility into two items – One would be nutrient application rates, either from increased soil sampling, a service that you have, and maybe orders for more variable rate application, or from farmer calculations to increase returns by trimming application rates. Do you expect much of that for this spring? And then the other item that I was hoping you'd share some visibility on would be your forecast for planning intentions. You have a forecast for U.S. corn and soybean acreage. Is that based on your own economic analysis or is that based on seed orders from your retail business?

Great. Thank you, Steve. So I'll pass the first question over to Jeff Tarcy, our head of retail and then interim head of retail, and then over to Jason Newton, our chief economist, for your second question. So, Jeff.

Yeah. Good morning, Steve. And, you know, I'll take these questions in part as it relates to application rates. And obviously, I would base that today off of what we saw this fall in the fourth quarter. And, Steve, we certainly saw no pullback on rates, particularly across the corn belt. And as you well know, a lot of those rates are dependent on what the size of the crop was and how much MP and K we had removed based on that. And yields were very strong in most areas last year. And so growers, what we saw this fall was growers went right in with their with their programs like they've done over the last two or three years. As it relates to soil testing, I looked at some numbers the other day, and soil testing is very strong. If I look at a year-over-year number out of Waypoint Analytical, our total number of soil tests that ran through there were up somewhere between 3% and 5%. And you've got to remember that that came off an extremely strong year in 2020. So we continue to see the direction move really strong in that capacity. And I think we'll see a lot more testing this spring as well for those that didn't get in this fall and make some applications as it relates to that. From a standpoint of variable rate, look, we've seen that increase over the last 10 or 15 years. The days of blanket rate applications just really don't exist that much anymore. And our machinery is set up today to run variable rate. Our digital platform we have today and some of the tools that we have to be able to go in and map those acres and build those prescriptions specifically off of the soil testing that we're doing. We're able to take that information and slingshot it back to an applicator and vary our rates as we go across any individual field. So we're very optimistic about what we're seeing there. We're optimistic In late summer, we're going to release Echelon 2.0, which is our new digital tool as it relates to precision agriculture, and that will give us even more capabilities with our growers and allow our agronomists more real-time information as we sit with our growers and build these prescription plans for them to help them maximize ROI. From a crop standpoint, and I'll let Jason expand on this a little bit more, but, Steve, we just don't see a lot of movement today. Today, you know, corn to me looks basically flat to what it looked like last year. Soy the same. And, yes, we base that off of what our seed book looks like. We started booking seed last year in September. So, obviously, we're well into that process. And what we're looking at it, you know, what we're looking at and what we've got booked today, we just don't see a lot of movement. Movement, if it comes, will come fast. will be more prevalent in the south, and that's probably where they've been a little bit slower to make some decisions because they have so many crop options in that area. Jason, I don't know if you want to add something to that.

No, just to give our range for crop acreage, expect 91 to 93 million acres of corn, 87 to 89 million acres of soybeans. We're really basing that range off a combination of economic analysis, looking at the economics of growing crops and we know today the prospective margins for both corn and soybeans are historically high. Strong competition for acreage and also look at the SMDs and what's needed from an acreage standpoint and then we're really fortunate to have Jeff and his team to run the economics assumptions by and get the in-market intelligence on seed sales and so on that help to make the forecast more robust.

And I don't want to leave out our important Canadian market because the fundamentals around canola are very strong as well. And we've seen a very strong booking on our proven seed varieties in Canada and the same with our down and growing corn and soybeans in the U.S. market.

Your next question will come from the line of Jeff Tsikoskis with J.P. Morgan. Please proceed with your question.

Thanks very much. What do you think about the ability of Belarus Kali to ship out of Ust-Luga in Russia? Do you know of any cargoes that have gone out or any commitments? Have you received any inquiries from Belarusian customers or typical customers? Do you see as much of their product on the water as you would normally see?

Yeah, thanks, Jeff. And I missed which sort of broke up there, which port on Russia, but I'll just say that we've looked very closely at that. And the port of St. Petersburg is obviously the closest, but I think it's clear that there's not a lot of capacity at the port of St. Petersburg. There's already a lot of product moving through that port. And then further to the north is Murmansk. Again, we've looked at that one closely. It's 2,000 kilometers from the Belarusian production, and I think a challenge as well. And there's rail to the east, but that track is a very long track, 7,000 kilometers to China. And so the options, we think, are limited for BPC getting access to tidewater at the moment. I'm sure they're working very hard on that. With respect to what we're seeing in the market, it is absolutely the case that we have had some traditional BPC customers inquiring about volumes, and it is also the case that we're seeing less BPC volumes shipping at the moment.

Your next question will come from the line of Adam Samuelson with Goldman Sachs. Please proceed with your question. Hello, Adam. Your line is open. You may unmute from your end at this time. We will move on to the next question in queue from P.J. Juvicar with Citi. Please proceed with your question.

Yes. Hi. Good morning. You know, I was wondering why wouldn't you ramp up your potash production more aggressively to take advantage of this Belarus situation, higher grain prices, low inventories? I mean, you know, you've been waiting for this kind of situation to ramp up your production for years. years if not decades carrying that excess capacity so uh just can you talk a little bit about why wouldn't you you know bring on this capacity faster in potash thank you great thanks pj you know i just we are we are uh ramping up capacity again with this additional million tons that we did in 2021

and now building off of that into 2022 and again preserving additional capacity over and above our 13.7 to 14.3 million tons what we're trying to do and say it again walk a very practical and pragmatic line here of getting product to our customers and we're doing that at the moment watching the market in this bellarussian situation and how long this may last And then, you know, always important staying to the left on the cost curve and managing our costs. And so it's trying to strike that balance. And, again, I'll say that, you know, I always say we're trying to avoid building churches for Easter Sunday because opening up ground and maintaining infrastructure, hiring people only to see some of these potentially near-term supply-side events go away yet stuck with all those costs. So that's the practical approach we're trying to take.

Your next question will come from the line of Michael Tupolm with TD Securities, Inc. Please proceed with your question.

Thanks. Related to the last question and answer, regarding the potash business, if you do decide to add incremental production, can you talk about how quickly you can ramp up that both in terms of the 500,000 tons of flex capacity and then anything also more significant beyond that? And then just as a follow-on along the same lines, can you also talk about expected timing for bringing on the incremental 500,000 tons of nitrogen production based on the Phase 2 expansions?

Yes, good. Well, you know, again, with respect to pot, I should now hand it over to Ray for nitrogen, but Again, 14.3 million times is the top end of what we're guiding to today and preserving an additional half a million times at least after that that we could bring on in the second half of this year. I think in terms of pacing, that's how we can sort of think about it is increments in sort of that ballpark as, again, we're making these decisions, mine development, open up ground, hire people, some capital expenditures as we watch the market unfold, as we watch some of these near-term supply-side events, and as our customers are looking for more volume.

So, Michael, just in relation to the nitrogen expansions, I think it was mentioned we've finished our Phase 1 projects. The last major component of that was Borga, which was finished in September. It's now operating at the higher rates. So this year should be the first year we see the full benefits of those phase one brownfield expansions. The second phase has started, but completion of the projects will be a three-year period for 23, 24, and 25. The bulk of it should be finished by 24. The last project will be in 25. So we just bring those on gradually. It's a good mix of urea. and UAN, as well as the ammonia to supply those additional downstream products.

Your next question will come from the line of Adam Samuelson with Goldman Sachs. Please proceed with your question.

Yes, thank you. Good morning, everyone. Sorry about that. I guess my question is on capital allocation and really just trying to think about the new buyback authorization you've committed to at least $2 billion dollars this year, radably and upside beyond that, um, implied by the 10% of shares. Can you help us think about kind of alternative uses of cash that would be waiting in the wings? And is it really just a question of what cashflow and EBITDA looks like this year that would dictate the upside? Is there, does the M&A pipeline kind of give you some line of sight to potentially some, some larger things coming through, um, to try to get a sense of where the major capital allocation outcomes really lies.

Yes. Great. Thanks for the question, Nolan. I'll pass it over to Pedro.

OK, Adam, thanks for the question. Yes, I think we are in a very strong cash position, not only from a point of view of EBITDA generation, but also cash conversion this year. our cash conversion has fluctuated over time. And we think at this point in time, it's like 75%. And we, uh, we are fairly confident of course, on, on the first, uh, $2 billion of the, uh, share buyback. And, uh, we are, um, kind of a balancing those throughout the year. We're going to be doing those throughout the year. Um, and, um, And that's the reason why we committed to that. In respect to the additional $2 billion, frankly, when we started doing this forecast, since we did that, there was a few things that actually firmed up in the market, specifically the Indian and China contracts and some of the geopolitical risks that we have here. So it makes us even more confident on our guidance for the year. So should that additional cash materialize throughout the year, we do have an option of $2 billion that we are seeing there. And of course, you know, we'll see how the year develops. But This $2 billion, we are going to evaluate some of the options that we have for investment throughout the year, in specific, some opportunities in retail that we have. There's also the evaluation of some low-carbon ammonia that we're evaluating as a project. And we'll try to utilize as much as possible for very attractive projects that we have and Should we not be able to allocate those this year? Our intent is always not to hoard cash, but to distribute to the shareholders as we have done historically. And therefore, we'll overlay additional share buybacks on top of that. So that's what's behind the additional 5% NCIB that we have, because we're committing to five and with an additional cash flow that will be used for the other five.

Your next question will come from the line of John Roberts with UBS. Please proceed with your question.

Thanks. Welcome, Ken, and good luck. On slide 22 in the stocks-to-use ratio, could you give us your view on what the global stocks-to-use ratios are, whether they're higher or lower than the U.S.? And do you think constraints on nitrogen outside North America could constrain global crop yields?

Great. Thank you, John. So I'll pass the first question to Jason Newton, our chief economist, and then over to Rafe on the nitrogen question.

Good morning, John. As we look around the world at the stocks use ratio, they are really tight as well. And actually, if you look at grain stocks outside of China, they're at the lowest level since 2007. So really historically tight. As we know, there's crops growing in multiple seasons given northern and southern hemispheres, and we already know Brazil and Argentina are having struggles with soybean production. So as we look forward to the coming year, there's already major growing regions with production challenges that will be supportive to maintaining a tight supply-demand balance going forward. whether we're looking at corn or wheat or soybeans, palm oil, really across the board, across major crops, supply-demand balances are tight currently by historical standards.

So the second part of the question was, will we see any demand destruction tightness there? Look, I think a lot depends on how quickly the season starts and the length of it. I am a little bit concerned that within North America, for example, There may be constraints from a transportation and distribution perspective. I think globally, if we don't have any constraints around transportation and distribution, I think most of the people will be able to get most of what they need. But to previous comments, it'll be at a good price because there's an underlying tightness in the supply there.

Your next question will come from the line of Michael Piken with Cleveland Research. Please proceed with your question.

Yeah, good morning. Just wanted to get your sense for the retail guidance and whether there's any tuck-in acquisitions built in and kind of your growth strategy for both internationally and domestic in this environment where it seems like a lot of retailers just came off a pretty good year.

Thank you, Mike. Over to you, Jeff. Sorry about that, Ken. Yeah, hey, good morning, Michael. And we do have, we're pretty conservative in what we have built in in our plan for just tucking in acquisitions. As you know, we're at the top of the cycle right now, so we're a little bit more judicious when we're looking at those opportunities. I will say that I think that pipeline is still there, and there are opportunities there as well. Obviously, and we continue to see a pretty rich pipeline in Australia, and obviously Brazil's a growth area for us, and so we wouldn't necessarily turn those as tuck-ins. So when I look at tuck-in acquisitions, I'm primarily looking at North America and Australia. And again, those opportunities are there. We want to be careful with where we are in this point in the cycle and the valuations we put on them. But we continue to look at those opportunities and act on them.

Your next question will come from the line of Stephen Hansen with Raymond James. Please proceed with your question.

Yeah, good morning, guys. Just a quick question on the allocation of your tons into different end markets here. Just looking at the Campotex data and the report, it does show a pretty marked shift away from China and India last year towards Southeast Asia and LATAM. You've got a couple of new contracts signed here this week, so I think we'll see some normalization in that data, but we've also got to consider the vacuum created by the BPC tons that could be created. So I guess the question is, how should we think about the allocation of those tons going forward into the higher better use markets versus the past? Thanks.

Yeah, no, great question, Stephen. Thanks for that. Yeah, I think what you can expect is with the China and India contract settled now, you can expect a return to sort of historical market share for Capitex in each of the major markets that they serve. And so historically, you know, they've been about a third of the Brazilian market. They've been you know, about a quarter of the Chinese market, you know, around a third of the Indian market. And then in North America, you know, about 44%. And so, again, in terms of allocation among the offshore markets, given those contracts, we will expect more standard rates going into China and India. It is true that last year, 2021, With that contract settled at well below market, Captex was diverting volumes to other markets. That's true. But again, with these latest settlements, you can expect to return to more sort of traditional market shares.

We do have time for one final question in queue, which will come from the line of Adrian Tocmano with Barenburg. Please proceed with your question.

Hello. Good morning. Thank you for taking my questions. I have two actually. First, on Belarus, do you see actually the sanctions having an impact on their growth project, not the existing capacity? Because it could be that under sanctions, the country might not be able to actually handle well its supply chain and not be able to deliver on its growth in the coming years. or you think this will not be the case and they are well integrated domestically? And secondly, for the low-carbon ammonia, do you see appetite from a farmer perspective currently, or we need carbon pricing to be more than just voluntary for this to really take off? Thank you.

Great. Thanks, Adrian, for the questions. And so, yeah, with respect to your question about Belarus, I mean, we are expecting some additional volume new volume in the market here in 2022. But I'll pass it over to Jason Newton for the long-term view. Sure.

Good morning, Adrian. We did see some ramp-up, we believe, at least of the PetroCop project in 2021 in Belarus. And I think one of the It's uncertain whether their sanctions will have any impact on them expanding or ramping up production further. But with the constraints on shipping, they may be restricted in how much they can actually produce within Belarus, which could slow the ramp up depending on how they allocate the volume. within their systems. I think probably the sanctions and restrictions on their exports may have a bigger impact than sanctions with respect to construction of the project.

Yes, and then on the low-carbon ammonia question, Adrian, over to Rafe.

Thanks, Adrian. So, look, you know, we're all watching this carefully. What's apparent, I think, to us is that the first place we'll see low-carbon ammonia used will be as an energy substitution. So power generation in countries that don't have access to other sources and also in transportation. And you will have seen that we signed an agreement that the next vessel we get will be ammonia powered. We think that that's a good application for it. I do think there is growing demand in the agriculture sector driven by the need for some of the crops to go or be classified as renewable or lower carbon. And I think you will see that grow So the answer is small today, but growing. And in the meantime, we'll see, I think, strong demand from those other sources that we talked about.

All right. And we have reached the end of the allotted time for our Q&A session. I would now like to turn the call back over to Jeff Holzman for closing remarks.

Thank you for joining us today. If you have follow-up questions, feel free to reach out to Investor Relations. Have a good day.

This concludes today's conference call. Thank you for participating. You may now disconnect.