Nutrien Ltd.

Welcome to Nutrien's 2022 Second 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 Mr. Jeff Holtzman, VP of Investor Relations. Please go ahead, sir.

Thank you, Operator. Good morning and welcome to Nutrient's second quarter 2022 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 Seif, Interim President and CEO, and Pedro Farrar, our CFO, for opening comments before we take your questions.

Good morning, and I will also welcome you to Nutrien's second quarter earnings call. Before we get into the discussion of our results and outlook for the remainder of 2022, I would like to highlight three key messages. First, we believe structural changes to global energy, agriculture, and fertilizer markets will provide a supportive environment for Nutrien well beyond 2022. Second, we are accelerating strategic growth initiatives that leverage the unique advantages of our integrated business generate excellent returns on invested capital, and enhance our ability to provide sustainable solutions to help feed a growing world. And third, we are committed to a balanced approach to capital allocation that supports growth and the sustainability of our business, while also returning meaningful capital to shareholders. In 2022, we expect to invest around $3 billion on sustaining and growth initiatives. and distribute approximately $6 billion in capital to shareholders. Pedro will walk through our plans in more detail later on in this call. Now, turning to our results and outlook. Nutrien delivered record first half earnings driven by the strength of market fundamentals, the advantaged position of our global production assets, and the excellent performance of retail. We continue to progress our sustainability priorities and had excellent safety performance across the company, including strong engagement in our serious injury and fatality prevention efforts, which is the most important work we do. Nutrien Ag Solutions had a record first half, with adjusted EBITDA of nearly $1.7 billion, up 38% from the prior year. The retail team delivered higher margins across nearly all products and geographies, supported by the strength of our global supply chain, and expanded offering of high-value products and services to growers. Crop nutrients and crop protection margins were very strong due to strategic procurement in a rising price environment and growth in our proprietary nutritional products. North American fertilizer volumes were down in the first half due to a combination of a very strong fall season in 2021, some crop mix shifts, and a condensed application window this spring. Fertilizer sales volumes outside of North America were up from the prior year, reflecting growth in our Brazilian retail network. Potash adjusted EBITDA increased to $3.4 billion in the first half, supported by higher realized prices and record offshore sales volumes. Potash production increased by more than 5% compared to the first half of 2021, and controllable cash costs were relatively flat. The increase in production reduced our per ton fixed costs and largely offset the impacts of inflation. Swap prices in Brazil and Southeast Asia were up significantly compared to the previous year, and Canfatex continued to prioritize its available volumes to these higher net pack offshore markets. In nitrogen, adjusted EBITDA in the first half increased to $2.2 billion. Its higher realized prices more than offset lower sales volumes, and higher natural gas prices. The delayed start to the North American spring season impacted sales volumes, in particular ammonia and UAN, and was a major contributor to the decline in nitrogen benchmark prices that occurred in the second quarter. We had record phosphate adjusted EBITDA of $423 million in the first half, as higher realized prices more than offset the large increase in ammonia and sulfur input costs. In the second quarter, we recognized a non-cash impairment reversal of $450 million, which was driven by improved market fundamentals and a more favorable view of phosphate margins. Turning to the outlook, global grain and oilseed inventories remain historically low. The recent deal to reopen Ukrainian exports through the Black Sea would be a positive development for global food security if there is a sustained increase to shipments. However, analysts believe volumes will continue to be challenged by labor and logistical constraints, in addition to ongoing military strikes in the region. Ukraine's grain production and export levels are projected to be down dramatically compared to 2021, leaving little buffer for any supply issues in other regions this growing season. U.S. growing conditions are generally favorable. However, high temperatures in July likely cap to yield potential and record high temperatures in Europe have reduced summer crop yields. Crop commodity prices have been impacted over the past month by broader market volatility, but are still 25 to 35% above the 10-year average. Futures are trading at elevated levels on a multi-year basis. In North America, we expect strong grower demand in the third quarter for top dress nitrogen, specialty nutritional products, and crop protection products. The crop was planted late but is maturing rapidly with the recent hot weather and we are planning for a normal application window this fall. In Brazil, grower margins are strong and soybean planted areas expected to increase by 2 to 4 percent. Fertilizer inventories have been slow to move from port to inland positions as buyers look to purchase on a just-in-time basis. but we anticipate strong movement over the next two months to ensure product is available for the upcoming planting season. In potash, much of the focus remains on supply challenges in Eastern Europe. Shipments from Russia and Belarus were down an estimated 25 and 50% effectively in the first half of 2022. Russian potash is not currently sanctioned, but has been impacted by restrictions on financing activities that facilitate exports. The impact of sanctions on Belarus' supply has been more significant due to the loss of access to tidewater through Lithuania. Belarus is reportedly shipping small volumes via container, which for a bulk commodity is a more costly and logistically challenging option. We narrowed our global flat ash shipment forecast to between 61 and 64 million times in 2022, and expect shipments to be constrained by restrictions on exports from Russia and Belarus. Beyond the existing supply challenges, we see the potential for delays in the development of new potash capacity from this region, which was projected to be the source of approximately 60% of new potash supply, excluding nutrients, over the next five years. We expect nitrogen prices to strengthen in the second half, supported by high European gas prices, as well as restricted Chinese urea and Russian ammonia exports. European gas prices averaged close to $50 per mm BTU in July, which equates to an ammonia cash production cost of over $1,700 per ton. More than 20% of Europe's ammonia production is estimated to be curtailed, and there are concerns over gas pricing and availability through the winter in Europe. Many buyers had delayed purchases given recent market volatility, and we anticipate a seasonal resurgence of demand in the second half that could further tighten supply. I will now turn it over to Pedro to review our financial guidance and capital allocation plans.