Nutrien Ltd.

Greetings and welcome to Nutrien's 2024 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 call is being recorded. I would now like to turn the conference call over to Jeff Holtzman, VP of Investor Relations.

Thank you, Operator. Good morning and welcome to Nutrien's Fourth Quarter 2024 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.

Good morning, and thank you for joining us today to review our 2024 results and the outlook for the year ahead. Nutrien has a world-class asset base and a resilient business model that is built to withstand economic uncertainty, geopolitical shifts, and to perform in all sets of market conditions. In a world that is increasingly complex, having a clear vision and strategy is vitally important. For Nutrien, this means strengthening our core business across the ag value chain and taking a disciplined and intentional approach to capital allocation. To measure success against the execution of our strategy, we set 2026 performance targets that we believe provide a pathway for driving structural improvements to our earnings and free cash flow. In 2024, we made meaningful progress toward these targets. In our upstream businesses, we increased fertilizer sales volumes by nearly 1 million tons compared to 2023. We sold record potash volumes and progressed nitrogen brownfield expansions at two of our North American sites. We mined 35% of our potash ore tons using automation, progressing towards our 2026 target of 40 to 50%. These advancements provide efficiency, flexibility, and most importantly, safety benefits at our sites. We enhanced our midstream distribution capabilities, including the opening of a new potash terminal in the U.S. Cornwell. Investments in our global distribution network will continue to be a priority in the years ahead to ensure we can efficiently serve our customers and support our growth objectives. Downstream, we increased retail product margins and lowered expenses through efforts to simplify our business and optimize our network. In Brazil, our improvement plan is beginning to deliver results, as we saw green shoots in the region during the fourth quarter. We remain confident in the growth platforms that support our 2026 retail adjusted EBITDA target of 1.9 to 2.1 billion. We accelerated the timeline for achieving $200 million in annual cost savings and expect to achieve this target in 2025, one year earlier than our initial goal. Lastly, we optimized capital spending in 2024, reducing total expenditures by $450 million compared to 2023. Together, these actions position Nutrien to countercyclically deploy capital towards high conviction opportunities that improve earnings and cash flow per share through the cycle. Now turning to a review of our 2024 financial results. Nutrien delivered adjusted EBITDA of $5.4 billion in 2024 as lower fertilizer prices more than offset increased downstream retail earnings, higher upstream fertilizer volumes, and lower costs. Retail adjusted EBITDA totaled $1.7 billion up 16% from the prior year. This result exceeded our most recent full year guidance due to stronger than expected crop protection margins in North America, improved Brazilian retail performance, and the benefit from cost savings and asset sales in the fourth quarter. North American crop nutrient margins increased due to a stabilization of fertilizer markets and continued growth of our proprietary crop nutritional and biostimulant product lines. This more than offset lower North American sales volumes, which were impacted by lower corn acres and wet weather during the spring and fall application seasons. Crop protection margins improved in 2024, supported by proprietary product growth, strong operational execution, and the selling through of lower cost inventory. Higher seed margins in North America more than offset the impact of dry weather and competitive market pressures in Brazil. In potash, we delivered adjusted EBITDA of $1.8 billion, down from the prior year due to lower net selling prices. Low channel inventories and strong potash affordability supported increased customer demand and higher sales volumes. We increased production from our low-cost six-mine network and progressed mine automation, which contributed to a 7% reduction in our potash controllable cash costs per ton. Our nitrogen segment generated adjusted EBITDA of $1.9 billion, relatively flat to the prior year as higher sales volumes and lower natural gas costs offset a reduction in net selling prices. With the completion of GHG projects in our nitrogen business and changes to our product mix, We achieved a 15% reduction in our total Scope 1 and 2 GHG emissions intensity in 2024 compared to the 2018 base year. In phosphate, we generated adjusted EBITDA of $384 million down from the prior year, primarily due to lower production, which was impacted by weather-related events and plant outages in 2024. Now turning to the market outlook for 2025. Global grain stocks to use ratios remain historically low, providing a supportive environment for ag commodities. Demand for U.S. corn has been strong, tightening the projected supply and demand balance and supporting prices. We expect U.S. corn acreage to increase to a range of 91 to 93 million acres and anticipate strong demand for crop inputs in the first half of the year. For potash, we increased our 2025 global shipment forecast to a range of 71 to 75 million tons. The high end captures the potential for stronger underlying global consumption, and the lower end captures the potential for reduced global supply availability. We see potential for further supply tightness with limited global potash capacity additions this year and reported operational challenges and maintenance work in key producing regions. Global nitrogen markets continue to be impacted by regional supply constraints, elevated natural gas prices in Europe, and seasonal buying patterns. The U.S. nitrogen market is currently tight, as net import volumes through the first half of the fertilizer year were down 60% compared to the five-year average. Nitrogen demand is expected to be strong in the spring due to the limited fall ammonia application season and higher projected corn acreage. I will now turn it over to Mark to provide more details on our 2025 guidance assumptions and our capital allocation plans.

Thanks, Ken. Good morning, everyone. As Ken highlighted, we made meaningful progress towards our 2026 performance targets this past year and see continued opportunities in 2025 to create value through focused execution and disciplined capital allocation. Our annual potash sales volume guidance of 13.6 to 14.4 million tons is consistent with our global shipments outlook and accounts for some level of uncertainty regarding the potential impact of tariffs on Canadian exports, as well as global supply availability. In North America, our winter fill program was fully subscribed, and we have since increased reference prices by $45 per short ton to reflect tightening global market fundamentals. In nitrogen, we expect continued reliability improvements to support higher operating rates and annual sales volumes of 10.7 to 11.2 million tons. Our low-cost nitrogen assets remain geographically advantaged compared to major offshore production regions. We project Henry Hub natural gas prices will average between $3.25 and $3.50 per MMDTU in 2025 and our Western Canadian nitrogen plants will benefit from gas prices well below these levels. Our phosphate sales volume guidance of 2.35 to 2.55 million tons reflects the expectation for lower production at our White Springs facility in the first half of 2025 and improved operating rates in the second half compared to the prior year. Our full year retail adjusted EBITDA guidance is 1.65 to 1.85 billion. supported by higher anticipated crop nutrient sales volumes, continued growth of our proprietary products, and further margin recovery in Brazil. As Ken mentioned, our improvement plan in Brazil is beginning to show encouraging results, and we remain focused on initiatives that improve cash flow from the business. We expect the benefits of these organic growth initiatives in retail will be partially offset by foreign exchange headwinds of approximately $25 million and the absence of asset sales and other income items realized in 2024 that totaled approximately $50 million. Looking ahead from a sources of cash perspective, we are delivering downstream retail earnings growth, increasing upstream fertilizer volumes, and driving operational efficiencies and cost savings across our network. We continue to explore ways to simplify and focus our portfolio. This includes optimizing investments in working capital and reviewing assets on our balance sheet that may not warrant maintaining. From a uses of cash perspective, we expect to further optimize capital expenditures to a range of 2 to 2.1 billion in 2025. We've committed capital to sustain safe and reliable operations and to progress a set of targeted growth investments that have a strong fit with our strategy, provide returns in excess of our hurdle rates, and have a relatively low degree of execution risk. Our focus is on investments in our proprietary products business, retail network optimization, nitrogen de-bottleneck projects, and mine automation and potash. We continue to target a stable and growing dividend. With increase approved by our board of directors yesterday, Nutrien's dividend per share has now been increased seven times since the beginning of 2018 for a total increase of 36%. Our annualized dividend payment has remained stable at approximately $1 billion due to the significant reduction in share count over this time period. Additional free cash flow in 2025 will be allocated to a narrow set of incremental growth investments including retail tuck-in acquisitions and to share repurchases. we'll maintain a disciplined approach to cash deployment that maximizes our risk-adjusted returns and supports growth in free cash flow per share. Since the second half of 2024, we've deployed approximately $290 million towards share repurchases, retiring 5.8 million shares. We intend on continuing to repurchase shares on a more ratable basis under our renewed NCIB program that is authorized until the end of February 2026. I'll now turn it back to Ken for closing remarks.

Thanks, Mark. The outlook for our business in 2025 is supported by expectations for strong prop input demand and firming potash fundamentals. We continue to monitor geopolitical events and are positioned to respond under any scenario. Nutrien has a world-class asset base, and we remain focused on strategic priorities that strengthen the advantages of our business across the ag value chains. We would now 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 one on your phone. You'll hear a prompt that you are now in the question queue. If you are using a speakerphone, please lift the handset before pressing any keys. As a reminder, each caller may ask one question. If you wish to ask a follow up or second question, please raise your hand again with star one to rejoin the queue should time permit. The first question comes from Ben Isaacson from Scotiabank. Your line is now open.

Thank you very much and good morning, everyone. A question on tariffs. Can you talk through how you think about tariff risk for nitrogen, potash and retail, both for nutrient and for the industry? What are the factors that we should be considering when it comes to tariff risk? Thank you.

Yeah, thanks, Ben. You know, among those, and we've looked at the impact on tariffs across everything that you've said, including, you know, some capital items that we look at across the border. And by far, the biggest discussion is about pot action. And, you know, of course, agricultural trade and agricultural productivity in the U.S. requires, and food security for that matter, requires the free flow of these commodities across the border. We've had these dialogues, a lot of them, with governments on both sides of the border, and we continue just to emphasize how reliant the U.S. farmer is on something like Canadian potash, for example, where Canadians supply over 80% of that market. We've struck up a cross-functional team, which extends across our government relations group, our commercial organization, to make sure we can serve our US customers in the way that we always have. And of course, in our finance group, as we look at the mechanisms that might be in place to actually collect tariffs and how we would go about that. Today, we're confident as Nutrien that for us, we have those mechanisms in place. And frankly, that the cost of this would be borne by the US farmer, that the tariff costs and tariff impact will be passed on to the U.S. farmer. I will say that timing of this is all in question, of course, as we look at the 30 days and look at the April 1st review, so that it could be, or maybe even likely is the case, that the U.S. farm will feel those impacts after the spring planting season here. For our part, we have been filling the channel right through to our downstream network, and so that We're in a position to serve our U.S. customers in the way that we always have. But like I say, we're of the view that if tariffs are in place, it's going to be a rising cost. It's going to mean rising costs for the U.S. grower.

Thank you. Your next question comes from Steve Henson from Raymond James. Your line is now open.

Yeah, good morning, guys. Thanks for the time. Your comments on improving Brazil results are quite encouraging. I was just hoping you could drill down a little further and perhaps add some commentary around where you're at on any specific action items you're taking specifically and then any broader macro variables that you also see influencing the pace of the recovery. Thanks.

For sure. Thanks, Steve. We've talked about what we've done on the cost side of the equation and and headcount reduction and focusing on our most productive salespeople. We've talked about the idling of our five lenders in Brazil. We've talked about the closure of unproductive locations, and that's some of our actual retail distribution centers, but also our experience centers. We've shuttered over 50 of those. And we've talked about doubling down on proprietary products, and that being certainly a great business for us and a growing business in Brazil. You know, we put those all together and we find ourselves in a situation, yes, exactly as we've described, we see green shoots in Brazil. You know, it's not necessarily true that the market is moving along the way that I think the industry is hoping and high interest rates are still a source of challenge for the Brazilian agricultural complex. But our actions, I would say, are, you know, we're seeing those green shoots now and you see that reflected in our results.

Thank you. Your next question comes from Andrew Wong from RBC Capital Markets. Your line is now open. Hey, good morning.

Just wanted to ask about potash. So we've seen prices strengthening recently. I'm just curious if you can just talk about some of the main factors that are behind that, how much of that is tariff-driven with maybe some purchases ahead of that potential outcome.

um and then how much of that comes from some of the supply issues that maybe came up earlier this year and how sustainable would you say current prices are into like the back up this year thank you yeah thanks andrew you know i would say we don't see much of an impact of any from as related as it relates to tariffs and i think it's just so much uncertainty there that in terms of how that plays out it really is a story about the fundamentals but I'll have to pass over to Chris Reynolds to talk about that.

Yeah, thanks, Ken. Andrew, good morning. Yeah, no, as Ken said, you know, we look at 2024 and the strong shipments we saw reaching an all-time record globally. What's constructive for us is that despite that strong shipment period through 2024, we came out of 2024 as we canvassed the markets and met with our customers, that there was really no material change. carry over inventories in any of these major markets. And I think that's represented a strong disappearance that we saw. And so that's why we've seen increasing prices here as we exit at 24 and come into 2025. And, you know, you go around the world a little bit here, you think about North America, we came up with a winter fill program here domestically to open the year, had a very good response to that. And so much so that we implemented two price increases since that winter field program, which has been absorbed into the market and validated with new orders. Because the affordability remains good for potash and obviously with the backdrop of some very strong corn price and prospective corn acres. Also in Brazil, again, a record year for imports into Brazil in 2024. But then along with that, still very healthy spot demand, which has seen prices continue to increase here through the start of 2025. And then around the Asian markets, India, China and Southeast Asia, again, characterized by no material or burdensome inventories, but some really good demand, particularly in Southeast Asia. And again, with that backdrop of some strong palm oil prices. So, you know, Andrew, I think we're feeling good to start the calendar year with the tailwinds we're seeing and are very constructive on the potash market.

Thank you. Your next question is Joel Jackson from BMO. Your line is now open.

Hi, thanks for the question. A couple of things. You know, your Henry Hub gas forecast between 325 and 350, obviously, as you're getting ready to give new forecasts, we've seen gas prices surge. I mean, Henry Hub's averaging above $4 now for the year, about $4 for the year. Talk about that, you know, how that may impact your thinking and your earnings and your your outlook, and then also it looks like ammonia is really underperforming other parts of the nitrogen complex. Can you talk about that?

Yeah, so with respect to Henry Hub pricing, I'll pass it over to Trevor Williams to talk about our view there. You know, it continues to be the case that the delta between what we're seeing in European gas prices and North America is pretty dramatic. You know, if you're at $16 today in Europe, that's a $600 essentially floor. on what it costs to produce a ton of ammonia. So the Delta is important, but to your question about Henry Health Pricing, I'll pass that over to Trevor Williams. And then the ammonia question, I'll pass it over to Chris Reynolds.

Hey, good morning, Joel, and thanks for the question. And really what we're seeing is North American prices obviously have been stronger, really as a result of some of the extreme weather that we've really seen over the course of the last number of months. And obviously, as a result, higher demand and some supply constraints on the downstream side or on the upstream side. Ultimately, though, the forecast for the end of winter is looking a little bit more mild as we get through this kind of last little spell over the course of the next couple of weeks. And then we expect, based on where we sit with storage, both storage as well as the production, we see those prices normalizing into the last part of the year.

Thank you. Thanks. Oh, sorry, please go ahead.

Yeah, no, just to comment on the ammonia market as we've seen it. And Joel, you're right. We did enter 2025 on a little bit of a declining trend in ammonia prices. Part of that was some weak application we saw in the fall season last year impacted by weather and also the prospect of some new supply coming onto the market. But we're constructive on nitrogen overall. Some of that ammonia that didn't go down last fall is going to go down in the form of urea. and UAN, particularly in North America. But we think that market is very tight and short right now, and we're seeing that in the price behavior of urea and UAN. So again, optimistic as we enter this spring season on nitrogen application rates, particularly with the prospect of over 90 million acres of corn.

Yeah, and I might just add that we closed the year with quite strong ammonia pricing, actually. And so yes, while it's often a bit we still look at the ammonia price and are constructive and call that a strong price.

Thank you. Your next question comes from Vincent Andrews of Morgan Stanley. Please go ahead.

Thank you and good morning everyone. Wondering if you could just talk a little bit about the potash market and in particular, you know, over the last couple of years since the war in Ukraine, I think we've talked about the export costs for both Russia and Belarus having been increased materially and that having a favorable impact on delivered costs around the world. If we do envision and get to a point where, you know, that war is ended and, you know, Russia has more access to financial markets and maybe freight's more willing to transact with it. And there have been some headlines already about maybe Belarus has the sanctions taken away from it and maybe they get back to the Lithuanian ports. Is it the case that we would see some decline in the cost curve and that would have an impact? Or would your view be that capacity utilization now is tight enough that that's what's determining the price rather than the underlying delivered cost? Thank you.

Thanks, Vincent. And of course, it's been the case that potash prices have been below that last marginal cost ton. And so we're just now seeing prices get to a level where you look at the right of the cost curve and we see demand meeting supply at that right side of the cost curve. As it relates to your question about FSU production, Of course, for the Russians, those volumes were never sanctioned, and we've seen all of that production back in the market for some time. It's a good question, Vincent, about Belarus and how that plays out in terms of lifting of sanctions, which I think is a big if. I mean, these are challenges that existed prior to the conflict in Eastern Europe. But to your question, if they were to be lifted, I think you've said it. The pivotal question is, do the Belarusians get access through the port of Klaipeda in Lithuania again? I mean, that port is now fully utilized with other commodities, and so are the Belarusians able to wedge their way back into that port? When Europe and the Lithuanians have been very clear about sanctions or no sanctions, that's not going to be made available. And so the Belarusians, who have been the marginal producer on a delivered basis, you know, would continue to face increased costs as they'd have to head north into Russia and likely the port of Murmansk. So it's just to say that, you know, if we saw those Belarusian volumes, the ones that continue to be shut and maybe a million times come back into the market, we think that happens slowly over time. We think that it continues to be more expensive for the Belarusians and that for today, and your question, I think, your point, Vincent, is very relevant, We look at the fundamentals today and we say, you know, with demand having returning to trend levels, and we've been talking about that for some time, and that's going to continue to be the case this year, we believe. And then looking at the supply side of the equation, assuming some balance in there, yet now with some announced maintenance programs and a key producing part of the world and some operational challenges in another part of the world. That's where we go to firming of the potash price.

Thank you. Your next question comes from Kristen Owen of Oppenheimer. Please go ahead.

Hi, good morning. Thank you for taking the question. Wanting to return to the retail outlook and the strong performance in the past year, Certainly getting a lot of uplift from the improved CPC and seed environment. I'm wondering if you could double-click on those areas of the business and help us understand what your outlook assumes for 2025. Yep.

Absolutely. You know, we've made some assumptions within our guidance range of 1.65 to 1.85, and it really speaks to exactly some of those points. I'll pass it over to to Mark to talk about that range and our assumptions.

Thanks, Ken. Good morning. So yeah, when we look at the bridge from 2024 to 2025, as Ken said, our midpoint of 2025 EBITDA guidance for retail is $1.75 billion. On a headline basis, this is up about $50 million versus 2024. But when we look at FX headwinds in the retail business from a stronger U.S. dollar and the realization of some non-core asset sales and non-recurring other income items we experienced in 2024, we would say our underlying EBITDA is projected to grow by about $125 million at that midpoint of $1.75 billion. At that midpoint, coming to your question, we assume continued growth in our proprietary products business. We assume higher crop nutrient sales volumes year over year. And we do assume a continued recovery in our Brazilian business and crop protection margins at roughly historical average levels. If we look to the upside of that range, we would be looking at factors like stronger corn acreage potentially and ag fundamentals strengthening or continuing to strengthen and crop protection margin performance above historical average levels. On the downside of that range, we would be looking to factors like adverse weather during key application periods. weaker commodity pricing and a slower pace of recovery in Brazil. So from a bookend standpoint and at the midpoint, those are the factors that are the primary ones guiding our outlook for 2025 in retail.

Thank you. Your next question comes from Steve Byrne of Bank of America. Please go ahead.

Yes, I'd like to follow that question with maybe a little bit of a longer-term outlook on your retail business. I've got four potential customers growth drivers that come to mind and was hoping you could just rank them. One would be just increased network density with bolt-ons. Another one would be you seem to be getting into more and more biologicals. Is that a meaningful longer-term growth driver for you? The third one would be SG&As. in this segment is 90% of the company SG&A. Do you see ways to reduce the headcount in that segment? And then just last one, I understand you have access to aerial imagery for this coming year in some of the Corn Belt. Is this a longer-term driver for you to help your customers and increase applications as necessary?

Yeah, thanks for the question, Steve. And I think you pretty much rank ordered them. So we can certainly talk about all of those. Absolutely. Tuckins has been a feature of our business and growth, you know, enabler for us. And we have a long history and track record of doing that quite successfully. Absolutely. Biologicals and bio stimulants, crop nutritionals and proprietary overall is a big growth driver. Network optimization, we've talked a lot about that, which is to your SG&A question. But I'll hand it over to Jeff Tarcy maybe to expand on each of those.

Yeah, good morning, Steve. And I'll kind of start with biologicals. We talked a lot about our nutritional and biostimulant business. And Actually, last year was our second-best year on our proprietary products business in history, only comparable to 22. Our nutrient and biostimulant business grew 8% year over year, and we're projecting just under 15% growth in 2025, so that'll be a real headline for us in 2025. We're going to bring some new products into the market. We've talked about products like Infinity. From that standpoint, on the SG&A side of it, we've been quite vocal that for 2025, we want to take $100 million of expense out of our retail business. We saw in the fourth quarter, we saw some of that come a little bit earlier than we anticipated from that standpoint. So we feel good about what we've talked about as far as rationalization of the network and controlling our controllers, which is at the top of our list of priorities. for 2025. And then, as you talked about aerial imagery, and we've been using that for some time. Obviously, we're using a lot of technology today in our business. Our growers are using a lot of technology as well. And I always say our challenge is to try to stay one step ahead of our growers from that standpoint. But we'll be employing, you know, what we know from a pure agronomy basis and coupling that with the technology that we have in the marketplace today to build the best solutions that we can build for our growers to give them the best chance of return.

Thank you. Your next question comes from Richard Gargiorena of Wells Fargo. Please go ahead.

Great. Thanks. Good quarter. My question is on the nitrogen segment. Had strong results. saw improvement in the natural gas reliability in North America, improved Trinidad operations. So maybe just give us an update in terms of where you think that segment is going into 2026 in terms of ramping up to those 11.5 to 12 million ton target that depended, I think, on improved reliability of the infrastructure.

Thanks, Richard. And yes, it is true that we have been making investments in reliability initiatives across the network. We've been unlocking new volumes with attractive brownfield investments that we could talk about some of those that are even coming online this year. And we've improved gas utilization in Trinidad. That's all true. And that gives us confidence to be on this path when we talk about our investor target of 11.5 million tons in 2026, and even 12 million times if we were to get our full allocation of gas in Trinidad. But maybe I'd pass over to Trevor Williams to talk about that bridge last year to this year, and then our 2026 target.

Sounds good. Thanks, Richard. And I'll just build maybe on a few comments that Ken had made. So So as we look to our 2026 glide path, and it really continues to reflect three or focus in really three key areas. First one, obviously being improved reliability. And just to call it out, a recent example is really, if you look at our Borger facility, we're really seeing a step change in terms of its performance 2023 over 2024. And over the last 12 months in particular, you know, based on the team that the work that the team has done at the site, along with our central reliability team, Second on top of that is really, as Ken mentioned, is really completion of a number of the bottlenecks that we have across our fleet. We completed a number last year, both in terms of at our Cars Land facility, our Redwater facility in particular, and also at Geismar. And then we also have coming up in 2026, a few other ones that will come online, both at our Cars Land facility and some increased capacity at Augusta as well. And then finally, as Ken mentioned, it really comes down to some of the work that we've been doing at Trinidad, where we've seen also a really great improvement in terms of gas utilization, making sure that every molecule of gas that's made available to the downstreamers ourselves is that we take advantage of that. And again, if you look at 2023 over 2024, we saw about a 10% increase. We ran at about 95% gas utilization in 2024, and we see an opportunity to bring that up to about 98% in 2020, over 2025 and 2026. And then lastly, as Ken said, with the work that the Trinidad government has been doing, we continue to be optimistic that we'll hopefully start to see increased volumes towards the tail end of 2026.

Thank you. Your next question comes from Jeffrey Zakowskis of JP Morgan. Please go ahead.

Thanks very much. I was looking at your fact books and the number of selling locations for retail if I read the data correctly, has been going down by about 4% a year for the last few years. Can you comment on that? Why is the number of selling locations going down? Is it that farmers have more access to different online sources? And what's your idea about what the growth rate of your selling locations should be over time? And then secondly, can you just comment on how you see the crop chemical market in the United States for 2025? Do you think you'll make more than you did last year or less? How do things look?

Yeah, thanks, Jeff. You know, with respect to selling locations, we think less about total quantum of selling locations, more about the productivity of each of those locations. And Yeah, the reality is that agriculture is changing. We've seen a lot of on-farm consolidation and that the complexion of North American agriculture requires modern and higher throughput facilities. And so a key pillar of our growth platform in our retail network, our downstream network, is what we call our network optimization. That is looking at what might be higher sustaining capex, lower productivity, storefronts and consolidating what might be three or four of them in a region into one new modern throughput safer facility that can still provide all those service levels to the grower. That would be the reason for the change. And in fact, that's an improvement to our business. It's not that fewer selling locations means fewer service levels or less organic growths. It's actually the opposite of that. So that is what you would see happening there. And indeed, a key component of our tuck-in acquisition strategy is where we look at the opportunities to add to the network in some of these key regions. And as we do that, we look at the opportunities for network optimization and, again, serving our growers and improve service levels. And with respect to crop protection, I'll pass that one over to Jeff Tarcy.

Yeah, thanks, Ken and Doug. I agree with everything you said on the rationalization of our network. We work on that each and every year. We're having to service larger growers today, and their needs are different. And we're servicing out of fewer but more efficient branches in order to meet the demand of those growers as they consolidate and get larger in size as well. From a crop protection standpoint, we built some growth into our top line on crop protection for – and that's looking to claw back at some business that we think we missed last year and may due to wet, cool weather in the growing season. At the midpoint of our guidance range, as Mark spoke to earlier, we penciled in historical crop protection margins for the 2025 year. We think we will. There is some generic pressure out there, so we think that up front margins could get some pressure there. But again, and we've made significant improvements in our margins in the Brazilian market as well. And we're sitting in a really good position from an inventory standpoint on crop protection. We've driven our inventory down in all of our major markets on crop protection on a year-over-year basis. So we feel good about where we're sitting for the spring and the opportunities that we might have in front of us.

Thank you. Your next question comes from Chris Parkinson from Wolf Research. Please go ahead.

Hey, guys. Good morning. It's actually Andrew on for Chris. So looking sort of towards capital allocation, can you speak to what you're seeing out there in the M&A environment and your appetite to add to bolt-ons in U.S. retail and smaller global tuck-ins? And how should we think about that versus further share buybacks, dividend, et cetera?

Yeah, thanks, Andrew, for the question. So you will have seen that we just increased our dividend, and that's increased on per share basis 36% since the company was formed. And we use the word stable and growing, and we can kind of think of it in that billion-dollar range as we continue to fund the dividend. Yeah, we can talk about sources and uses after that, but to your point, free cash flow and how we might look to utilize that, certainly we're watching the tuck-in opportunity pipeline, but maybe I'll pass over to Mark to talk more about that.

Yeah, thanks, Ken. Good morning, Andrew. And as Ken said, Andrew, maybe I'll just step back for a second. I think it's worth mentioning again. Just the intense focus we have on structurally growing sources of cash in the company. So the single biggest driver we have of that is continuing to grow cash flow from operations by progressing towards our 2026 targets. As we've said today, we make good progress on all fronts in 2024. We expect to continue moving forward in 2025. And alongside that, progressing our review and monetization of non-core assets. And that's also something we plan to continue looking at in 2025 and being disciplined with working capital management and driving efficiency in our cash conversion ratio. So growing sources of cash over time is the first objective. And then on your question about how we're utilizing or deploying that cash, maybe just to walk through that capital allocation stack as we see it for 2025. We expect to deploy total capital of about $2 to $2.1 billion, which we've optimized lower once again this year. This is comprised of about $1.6 billion in sustaining capital, and we expect about $400 to $500 million in growth capital. And that's that narrowed and focused set of priorities that Ken and I both spoke to in our prepared remarks. Beyond that, we expect to have about a half a billion in capital leases. And as Ken mentioned, about a billion dollars towards that stable and growing dividend per share, which for shareholders today provides just over a 4% return. So when you take all of those things into account, that's about 3.5 to 3.6 billion in total uses. And as Ken highlighted, really every dollar beyond that, we're looking at effectively two things. Both on acquisitions, primarily in the U.S., but continue to look in Australia. And we think in this environment, we are going to see more of those opportunities in the U.S. come our way. as well as share repurchases. And you saw since the second half of the year through today, we've been in the market on a roundable basis. We feel that's an attractive use of capital today on the share repurchase front that competes quite attractively with other alternatives. We intend in 2025 for that to be a continued meaningful part of our return to capital and capital deployment framework. So we expect to be in the market going forward on a roundable basis.

Thank you. Your next question comes from Edlein Rodriguez of Mizuho. Please go ahead.

Thank you. Good morning, everyone. Just one quick one on Pradesh. Your volume guide is essentially flat. The price, who knows? It will do what it does. Can you talk about your costs on a per ton basis? Should we expect any improvement there, or should it be similar to what we saw in 2024?

Yeah, thanks, Elaine. Yeah, so, you know, with respect to how we're positioning ourselves among the 71 to 75 million tons that we talked about for global shipments for 2025, it really is us expanding our volumes incrementally, as we've done last year and for the last number of years, and maintenance and market share at about that, you know, sort of 19.5%. That's how we're planning our movements. And so what that volume and volume range means for our cost of production, we've talked about kind of that $60 a ton as something that we point to. And it's something we pointed to for some time. In other words, we have been... fighting back inflation. And the biggest component of that has been and will be automating our mining machines as we improve productivity, as we improve asset utilization. And that contributes, obviously, to fighting inflationary pressures, which are very real in service of that $60 a ton.

Thank you. Your next question comes from Lucas Bermont of UBS. Please go ahead.

Thank you. Yes, I just want to go back to nitrogen. So I mean, prior to the war, the top of the cost curve there was about 40% below where the European gas outlook is for this year. So now with sort of talk of things maybe normalizing there, could you walk us through your range of outcomes for how you see the cost curve kind of responding if we have a resolution there to the war in Europe? Thanks.

Great. I will pass that over to Jason Newton, our chief economist, to talk about exactly the moving parts there.

Yeah, good morning, Lucas. Yeah, you're right. We have seen an increase in the cost curve, particularly if we look at ammonia and UAN, but also urea, just driven by the increase in the price of gas in Europe. And as As Ken mentioned, we've seen that pretty volatile of late, I think as high as $18 per MBQ last week. It's down in the $15 per MBQ range today. And that curve's pretty flat as we look throughout the year. We know that as we look through the end of 2025, Storage levels today are down significantly, and it's the first time since the war began that there's been a normal winter in Europe with cold weather driving down storage levels, and those will, by regulation, need to be rebuilt. And so that's driving the outlook for gas costs today. And so as we look through the end of the year, regardless of what happens with respect to sanctions, that gas supply in Europe is likely to be tight. That said, there's potential for volatility in that price. In any scenario, we'd expect that the cost curve will remain above where it was prior to the war beginning, just given the reliance on imported LNG into Europe. I think the other important point is that we've seen already significant permanent closures of ammonia capacity in Europe. It continues to be over 20% of the production shut down today due to high natural gas prices. And we wouldn't expect that to come on stream as we go through the year. And The other factor to watch as we go forward is just the limited amount of new supply coming on stream, particularly of urea. And so we'd expect the supply-demand balance to tighten over the medium term, just given continued demand growth exceeding capacity additions.

Thank you. Your next question is from Rahi Parikh of Barclays. Please go ahead.

Awesome. Thanks so much for the question. You all touched on some dynamics in Brazil, but can you give a deep dive on progress into stocking at the distributor, retail, and farmer level, and also on the farmer credit environment? Are you lending more? Are you becoming more particular on who you sell to down there, similar to one of your competitors?

Thank you. Yeah, thanks for the question, Rai. Yeah, I'll pass that over to Jeff Tarcy to talk about what we're actually seeing on the ground.

Yeah, look, and I'll tell you from our perspective within our business operations there, we've had a very clear objective to drive our inventory down in that Brazilian market. And actually, year over year basis, we've driven our inventory down 46%, which puts us in a really good position, takes a lot of risk out of our business from that standpoint. I would think that at the farm gate, there has been destocking over the last two years. in that market. And it's, it's become more and more of a just in time marketplace, uh, in Brazil because of some of the, some of the events we've seen over the last two to three years. And from a credit side of things, we're, we're always gauging our credit, uh, as intentionally as we possibly can. Brazil would be no exception to us in that marketplace. And we, we've got a, we we've stood up very strong credit team there. And, uh, We continue to analyze that and make really good decisions based on the P&L opportunities of the customer.

Thank you. Your next question comes from Aaron Cacciarelli of Berenberg. Please go ahead.

Hello. Good morning. I think we come from two years of volumes above long-term trend for potash. And this year we have very supportive dynamics for potash. for ag in general after the recent rally in corn prices. Just wondering, maybe, can you talk a little bit about the lower end of the guidance for global port achievements, where you mentioned reduced availability, but would like to understand a little bit what does it mean? Thank you.

Yeah, thank you for the question, Aaron. So, yes, it's absolutely true that we've seen two years of growth in potash demand, and we're expecting a little bit more this year. It really is just that return to trend level demand that we talk about on sort of pre-war levels and 2.5% average annual growth rates as the world seeks to grow more food. And when we talk about the guidance range for this year, at the top end, we talk about strong egg fundamentals, a good spring planting season in North America, and some of the other strength that we talked about in Southeast Asia and record growth record fertilizer consumption in Brazil last year and looking for that to increase again this year. So strong demand fundamentals. The low end of that range is really, it is a supply aside discussion. And that is, again, we've seen some significant announcements this year of maintenance and even operational challenges in some of those key producing regions. So that The limitation this year, we believe, in the face of strong demand, would be, on the low end, would be availability of supply.

Thank you. Your next question is, Michael, to Holm from TD Cowen. Please go ahead.

Thanks. Earlier in the call, you talked about tariffs. In your 2025 potash sales volume guidance, you noted that the guidance range attempts to account for some uncertainty on the tariff front. So the question is, I'm wondering if you can expand on that and speak to what sort of tariff-related assumptions you've made in coming up with your own potash volume guidance for 2025.

Yeah, you bet, Mike. It really is a question of timing and maybe buyer behavior, but I'll pass it over to Mark to talk about our assumptions there.

Yeah, thanks, Ken. Good morning, Michael. I think Ken characterized the high and low ends of the global shipments range really well during the last question, so maybe just stick to what you've asked about on tariffs. Really, if you look at our guidance range, 13.6 to 14.4 million tons. At that midpoint of 14 million tons, we assume relatively limited impact from potential tariffs and really no material supply chain disruptions to speak of. So that would generally characterize the midpoint of our guidance. If you look to the upper end of our guidance, we would assume no impact from tariffs and really no supply chain disruptions. On the lower end is really where the tariffs question comes into play. And it's really a lot, as Ken said, it's really the potential timing impacts that any tariffs would have on demand in North America. And we do see that more as a timing related factor. And that would sort of characterize how we're thinking about that 13.6 million tons on the lower end of our guides.

Thank you. As there are no further questions at this time, I will now turn the call back to Jeff Holtzman for closing remarks. Please go ahead.

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, and you may now disconnect.