Nutrien Ltd.

Greetings and welcome to the Nutrients 2023 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 is being recorded. I would now like to turn the conference over to Jeff Holtzman, VP of Investor Relations.

Thank you, Operator. Good morning and welcome to Nutrients First Quarter 2023 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 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, the President and CEO, and Pedro Farrar, our CFO, for opening comments before we take your questions.

Good morning. Thank you for joining us today. Nutrien's first quarter results reflect the impact of structural supply issues and shifting buying patterns that have contributed to an unprecedented period of market volatility. We delivered adjusted EBITDA of $1.4 billion, the second highest for any first quarter on record, continuing to demonstrate the advantages of our flexible, low-cost production assets and global distribution network. We invested $700 million to sustain and grow our assets and returned over $1.1 billion to shareholders in the first quarter. While our full year outlook is lower than previously expected, we are encouraged by the continued stabilization of crop nutrient markets and anticipate increased fertilizer demand in the second half of the year. We expect to generate strong cash flows in 2023 and maintain a balanced and disciplined approach to capital allocation. Shifting to the highlights from the first quarter. Nutrient Ag Solutions results were impacted by delayed grower purchases and lower margins compared to the exceptionally strong period in 2022. Retail fertilizer prices declined in the quarter, albeit at a slower pace than wholesale benchmark prices, and margins were below normalized levels as we worked through higher cost inventory. We ended the quarter with U.S. fertilizer inventory down 10% year over year, leaving a significant amount of our spring fertilizer volume to procure in the second quarter. Crop protection product margins were impacted by lower prices for certain herbicide products and later grower engagement compared to the previous year. This resulted in a temporary build of crop protection inventory, but this product is moving through the channel in the second quarter as field work has accelerated. Seed sales and margins improved. due to higher prices, increased crop acreage, and the strong performance of our proprietary seed lines. We completed eight retail acquisitions during the quarter in the US, Brazil, and Australia. In Brazil, our primary focus in 2023 is on the integration of acquisitions completed last year. The results for our potash, nitrogen, and phosphate business were impacted by lower benchmark prices compared to the exceptionally strong period in 2022. We had good initial uptake for our potash winter fill program in North America. However, volumes were down from the prior year as customers purchased on a just-in-time basis. Campotex sold record volumes to Brazil, driven by strong demand for the Safrania planting season, and to lower imports from Eastern European producers compared to Q1 2022. Potash shipments to spot markets in Asia declined as our customers worked down inventory and contract settlements with India and China were delayed as buying patterns continued to evolve. Global potash prices were relatively stable to begin the year, but declined later in the quarter due to the lack of consistent market engagement. We adjusted potash production across our low-cost network and pulled forward maintenance activities, preserving the flexibility to quickly ramp up production when stronger demand re-emerges. Nitrogen benchmark prices were highly volatile due to a sharp drop in European gas prices, lower Indian urea imports, and weaker industrial demand. Our North American nitrogen plants operated very well in the quarter and benefited from low natural gas costs in comparison to other global producers. Trinidad was impacted by gas curtailments of approximately 20%, which was in line with our previous expectations. We are progressing well on engineering work for our Geismar Clean Ammonia project and remain on track to make a final investment decision in the second half of 2023. In recent months, we have received significant external interest regarding co-investment or potential equity partnerships in the project. We plan to explore these options as we continue our evaluation of the project with a view of maximizing value for shareholders. Our phosphate business benefited from the stability of our feed and industrial product lines, partially offsetting the impact of lower sales volumes and fertilizer prices. We completed maintenance and reliability initiatives during the quarter and are targeting utilization rates above 90% in the second half of the year. Turning to the outlook. Geopolitical and weather related challenges continue to impact global agriculture commodity markets. The global grain stocks to use ratio is at its lowest point in more than 25 years and we expect it will take multiple cropping cycles to restore stocks to more adequate levels. Agriculture is a seasonal business, and there has been some near-term pressure on crop prices, resulting from a record Brazilian soybean harvest and favorable planting progress in the U.S. Even with this recent softening, new crop futures for corn, soybeans, and wheat are around 15% above the 10-year average. Growers are increasing acreage and have the incentive to invest in their crop, leading to strong demand for crop inputs as the planting season progresses in the northern hemisphere. To give you some context from a fertilizer demand standpoint, our second quarter U.S. retail fertilizer sales volumes are currently up 40% compared to the previous year. With product moving rapidly through the supply chain, we have seen some spot shortages in the U.S., in particular for potash and urea. This is highlighting the challenges that can emerge from just-in-time purchasing. Retail fertilizer inventories are projected to end the second quarter down significantly compared to last year, which supports the need for a strong summer refill. We expect second half global potash demand will be up significantly compared to the same period in 2022, with the majority of the increase in Brazil and North America, which are the two largest markets for our potash. The timing of a new China contract remains uncertain, but we do not view this as a significant impediment to our recovery in global demand. Global trade flows have evolved over the past year, and China's seaborne imports now represent only 5% of global shipments. For Nutrien, it also represents a relatively small percentage of our total sales, as we have shifted more volume to higher netback markets. On the supply side, Belarus has gradually increased potash exports through ports in Russia, partially offset by lower Russian production producer exports. We expect Eastern European potash shipments will be up approximately 15% in 2023 compared to last year, but still down 30% from 2021. We maintained our global potash shipment forecast at 63 to 67 million tons, which is well below the estimated trend demand of above 70 million tons. We expect increased demand as markets stabilize, driven by growth in global crop production, lower channel inventories, and the need to replenish potassium levels in the soil. I will now turn it over to Pedro to review our guidance assumptions and capital allocation plans for 2023.