More presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to Richard Downey, VP of Investor and Corporate Relations.
Thank you, operator. Good morning, everyone, and welcome to Nutrien's conference call to discuss our Q4 results and outlook. On the phone with us today is Mr. Chuck Magro, President and CEO of Nutrien, the heads of our three business units, and Mr. Pedro Farah, our new Chief Financial Officer. As we conduct this conference 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 our shareholders, as well as our most recent annual report, MD&A, and annual information form filed with Canadian and U.S. Security Commissions, to which we direct you. I will now turn the call over to Mr. Chuck Magro.
Thanks, Richard. Good morning, everyone, and welcome to Nutrien's Q4 2018 earnings call. This quarter marked the first full- year for Nutrien. It was a year in which we delivered on all of our strategic priorities and generated significantly higher earnings. Before I touch on our Q4 and full- year financial results, I would like to review the performance of our key priorities. First is the progress we made on synergies and the value we generated from the merger. At the end of 2018, we achieved run rate synergies of CAD 521 million, exceeding our initial two-year target in just 12 months. We also increased our run rate synergy target by 20% to CAD 600 million. The realization of synergies has made a meaningful impact on our costs, and we expect to capture further improvements across our business units going forward.
The second priority in 2018 was to complete the required sale of our equity investments. I would like to acknowledge the exceptional work of the team on this progress as we generated net proceeds of CAD 5.3 billion from the sale of our stakes in SQM, ICL, and APC, which exceeded our initial estimates of CAD 4.5 billion-CAD 5 billion. The equity proceeds, along with strong operating cash flows, provide a significant opportunity to return cash to shareholders and grow our business. In 2018, we returned CAD 2.8 billion to shareholders through share buybacks and dividends. We paid nearly CAD 1 billion in dividends, representing a 17% increase from our legacy companies' combined payout, and we announced a further 7.5% increase in our dividend for 2019. We also increased our existing share buyback program in December from 5% of shares outstanding to 8%.
We have been very active with this extended buyback program and have now repurchased 42 million shares at an average price of $50.80 per share. We accomplished a lot in 2018 and are well-positioned to generate significant value for shareholders as we move forward. I will now turn to our financial results for the quarter and the full- year. Retail results were impacted by one of the wettest Q4 s in the U.S. in over 100 years. The business was also impacted by grower caution related to the ongoing trade uncertainty. Q4 retail EBITDA was down 11% from the same period last year, primarily due to lower crop nutrient and crop protection applications. On a full- year basis, retail EBITDA was up by 5%, supported by earnings from recent acquisitions and optimization of our extensive platform.
Most of our operating metrics were relatively flat year-over-year. We maintained EBITDA margins of nearly 10%, despite challenging weather conditions and pressure on grower margins. Retail also had a very successful year in terms of delivering on its strategic initiatives. We acquired over 50 locations in the U.S. and Australia, representing approximately $400 million in annual sales. In July, we launched our integrated digital platform. By the end of 2018, we had over 50% of our North American revenue base signed up. The platform is leading edge and complements our existing supply chain, agronomist network, and our product offerings, creating value for our customers. We will provide more details on our retail strategy, including a demonstration of our digital platform at our Investor Day in Toronto on May 28th.
Moving to our crop nutrient business, where we generated significantly higher earnings in the Q4 compared to the previous year. Potash EBITDA increased by almost 60% as we benefited from higher prices, record Q4 sales volumes, and lower cash cost per ton. The strength of Q4 potash volumes illustrates our ability to respond to market opportunities by flexing our operational and supply chain capabilities. We benefited from higher prices in all major markets and continue to lower our costs through merger synergies and increase production from our lowest cost mines. Potash adjusted EBITDA for the year was up 48% compared to 2017. We increased potash sales by 1.3 million tons and lowered our cash cost of product manufactured by 9% to $60 per ton. This places us as the largest and one of the lowest cost producers in the world.
Turning to nitrogen, our EBITDA increased by nearly 65% in the Q4 as we benefited from higher market prices and increased volumes. We were able to offset a weaker fall application season in the U.S. with healthy nitrogen sales in Western Canada and our stable industrial customer base. Our ammonia utilization rate increased by six percentage points in 2018, which helped drive our cost per ton and increased sales volumes. Combined with stronger year-over-year nitrogen prices, we increased nitrogen EBITDA by over 40% in 2018. We also generated higher earnings from our phosphate business both for the quarter and on a full- year basis. Higher realized prices, in particular for fertilizer products, more than offset the impact of increased ammonia and sulfur input costs.
We closed our small Geismar phosphate facility at the end of 2018 and completed the final purchase of phosphate rock, moving towards a simpler and more cost-effective phosphate platform. Nutrien's adjusted EBITDA totaled $932 million in the quarter, up 50%, and we generated an impressive $2 billion in cash from operations. Our annual adjusted EBITDA was $3.9 billion, up 32% compared to 2017, reflecting the strength of our integrated business model, merger synergies, and improving market fundamentals. We ended the year with a very strong balance sheet and a net debt to adjusted EBITDA ratio at approximately 1.6 x. The strength of our balance sheet puts us in an excellent position to execute on our strategic priorities. As we look forward, we see a supportive environment in the H1 of 2019. Global trade uncertainties have impacted the ag sector, but the underlying fundamentals for most crops are improving.
The USDA is currently projecting the lowest U.S. corn inventories since 2013. U.S. soybean and corn prices are up 15%-20% from harvest time lows. In December, corn futures are back around $4 per bushel. We expect U.S. growers to increase corn area by 2 million to 4 million acres in place of soybeans, and we also expect higher cotton acreage. The shift in acreage is supportive of crop input demand, as per acre expenditure on corn and cotton is roughly double the average spend for soybeans. U.S. grower prepay, which we consider to be a barometer of farmer sentiment, is above last year's level, and we anticipate a very busy spring season. In potash, we forecast record demand of 67 million to 69 million tons, supported by steady consumption growth and low inventory levels in key markets such as China and Brazil.
We expect potash markets will remain tight through at least the H1 of the year. Canpotex has a strong order book in place and is fully committed until April. We recently announced a $10 price increase in the domestic market, reflecting our expectation for a strong spring season, assuming normal weather conditions. Nutrien's potash sales volumes are expected to range between 13 million and 13.4 million tons in 2019, up modestly from last year. We maintain strong production flexibility in 2019 should market opportunities arise and have approximately 5 million tons of incremental operational capacity in Saskatchewan that we can bring on with limited capital as global demand grows. Nitrogen markets have weakened over the past few months, resulting in more cautious view on pricing through the early part of 2019.
We believe the market is overcorrecting and still anticipate a seasonal recovery in prices driven by strong demand this spring and limited new capacity additions. As such, we see the opportunity for higher global utilization rates and a continued improvement in nitrogen prices over time. North American gas prices are expected to remain low, particularly compared to other key nitrogen-producing regions such as Europe. This provides a significant competitive advantage for our North American nitrogen assets. In phosphate, we expect a balanced market and relatively stable pricing across our diverse product lines. We anticipate a small reduction in our phosphate sales volumes as we complete our synergy plan, including the conversion of our Redwater plant to ammonium sulfate in the Q3 . In 2019, we will report ammonium sulfate results in the nitrogen segment, resulting in an approximately $50 million shift in EBITDA from phosphate to nitrogen.
Based on improving market conditions and increased synergy realization, we expect higher earnings across our retail and crop nutrient businesses in 2019. Our annual adjusted earnings guidance is $2.80-$3.20 per share and our adjusted EBITDA at $4.4 billion-$4.9 billion, both up significantly year-over-year. Sustaining capital expenditures are projected to be similar to last year, and we expect free cash flow in 2019 to exceed the $2 billion generated in 2018. Our guidance includes the impact of the new IFRS lease accounting standard, which will result in an increase to EBITDA of approximately $225 million and finance cost of $30 million. It also includes incremental depreciation from the merger-related purchase price allocation adjustment of about $350 million, which we no longer exclude from our adjusted earnings guidance. Our focus in 2019 remains on the execution of our strategic priorities and prudent allocation of capital.
We continue to work towards the achievement of our synergy targets and drive operational efficiencies across the organization. We will provide more detailed operational targets for each of our business units at our investor day in May. We are very well-positioned to enhance shareholder value with a healthy balance sheet and the strong cash generation of the company. Retail will be the primary focus of growth capital, and we continue to have a strong pipeline of highly accretive acquisition opportunities in North America and Australia. We had a strong start to the year, with two U.S. retail acquisitions completed in January, representing a total of $170 million in revenue. This week, we also announced the definitive agreement to purchase Actagro, a leading developer and producer of proven environmentally sustainable soil and plant health products and technologies.
The acquisition is aligned with our strategy to invest in proprietary products that increase our margins and deliver strong value to growers. The acquisition is expected to be accretive to earnings in the first year and to generate approximately $55 million in run rate EBITDA two years after close. In terms of returning cash to shareholders, we are focused on providing a stable and growing dividend that is underpinned by growth in our retail business and will review the renewal of the share buyback program when it concludes later this month.
This is an exciting time for Nutrien. We accomplished a lot in the first 12 months, and we look forward to delivering on the significant opportunities that lie ahead. Finally, I would like to welcome our new CFO, Pedro Farah, who joined us at the beginning of the month. Pedro brings extensive global experience in both financial and retail services and is well-positioned to lead our finance organization. With that, operator, we will now be happy to take questions.
If you would like to ask a question during this time, simply press star, then number one on your telephone keypad. If you would like to withdraw your question, press the pound key. As a courtesy, Q&A will be limited to one question per caller. Your first question comes from the line of Ben Isaacson with Scotiabank. Your line is open.
Thank you, and good morning. Chuck, there was an article in The Wall Street Journal yesterday that talked about rising bankruptcies in the U.S. Farm Belt, near record debt levels, negative median farm income. I guess this is partially being blamed on lower crop prices, increased competition, and the trade war. Can you provide your thoughts on what's happening on the ground? What data points should we be watching for red flags? Then as it relates to Nutrien specifically, can you frame the risk to retail in terms of volume and your 9.5% EBITDA margin that you've realized in each of the past two years? Thanks.
Good morning, Ben. We have seen the article in The Wall Street Journal. Look, maybe I'll start with just the overall comments. Farmer bankruptcies, especially when it's family farm bankruptcies, we never want to see that. I've said it many times before that we make money when our farmer customers are profitable and healthy financially. You have to put that data in the context. When we look at the overall bankruptcy situation for farmers in the U.S. as a whole, actually the number of bankruptcies in 2018 was actually lower than the 10-year average. The 2018 number has actually improved. It is lower than the 2017 numbers. Now, when you look at the debt that farmers are carrying, the increase is really driven by real estate, by their acquisition of land.
Land values have actually held up fairly well over the last few years. So their balance sheets from a balance sheet perspective on the farm are relatively stable, and what we have to worry about or be concerned with is really the liquidity and the cash flow from the farms. What we're seeing is that comes down to farmer margins, and last year in 2018, it wasn't a great year for farmers. Crop prices started to recover early in the year. The fundamentals have improved for most crops, cotton, corn, around the world, and that is good news. The trade uncertainty hit. That provided a significant amount of pressure on crop prices, and that has hurt our farmer customers, and we've said that before. When we look at the fundamentals of crop around the world, especially stocks to use ratios, they are getting better.
When I look at it from a 2019 perspective, here's what we expect. We do expect farmer economics to improve in 2019. Crop prices are actually up, I said that in my prepared remarks, from the lows we saw in 2018. We do expect the mix change for more corn planted acres to really help farmer economics. If you look at our prepay, this is directly involving now Nutrien and our customers that we deal with, the prepay is up year-over-year, approaching CAD 1.6 billion, which is a really good sentiment. I think that our customers are certainly expected to spend more on crop inputs this year. We do need a trade settlement, Ben. I think it is important to suggest that if we had a trade settlement, we do expect crop prices to rise. Overall, we still expect 2019 to be a better year than 2018.
Your next question comes from the line of Jacob Bout with CIBC. Your line is open.
Good morning.
Jacob?
On your retail EBITDA guidance, how much is organic versus acquisition growth? How aggressive do you expect to be on U.S. retail acquisitions in 2019 and in retail overall?
I'll have Mike Frank, our head of retail, answer the question for you, Jacob. Then I'll provide some color as well.
Yeah. Good morning, Jacob. Look, based on our guidance, we would expect that our EBITDA growth from acquisitions will be a bit stronger this year than it has been historically. We would estimate that probably $30 million-$50 million of the growth in our EBITDA will come from acquisitions. Obviously, we're also expecting a good bounce back, especially in the H1, following a Q4 that was very tough for our customers, and we didn't get on the herbicides or the fertilizer that growers wanted to get on. We expect a strong performance in our base business. We do expect some growth from acquisitions as well. I would just say in terms of the opportunities that lie ahead from an M&A standpoint are strong. As Chuck mentioned in the opening comments, we've already made a couple of acquisitions this year that are really good acquisitions.
On the footprint side, we acquired a company called Security Seed and Chemical, which is based in Kentucky that has 14 branches, and it's a high-quality business. We expect to have some additional mid-size acquisitions on footprint like that through this year. We're also very pleased with the acquisition of Actagro. Obviously, that has to go through regulatory approval. We expect it to close sometime in the H1 of the year. This is an acquisition that really fits really well with our proprietary product strategy, where we can take really good products, help our customers improve their performance on their fields. These products also have strong margins. It's exactly the type of acquisitions that we're looking for.
Yeah. Jacob, just a couple more comments on this one. The guidance range for retail at CAD 1.3-CAD 1.4, it really does, as Mike suggests, include really a normal or historical M&A activity as part of that number. It certainly does not include a significant step-up in capital spending for acquisitions. The reason is just look at the Actagro acquisition. That's a phenomenal acquisition. We're very pleased to have the employees and the products of those companies join Nutrien.
That has to go through an antitrust review process, and most likely, we won't have that integrated and contributing to retail's earnings by the spring season, which, of course, is the largest season from an earnings perspective. These things take time to integrate and to close. Certainly, when you look forward to 2020 and 2021, the capital that we plan to allocate into retail will be very accretive, and I think you'll see that in the years to come.
Your next question comes from the line of Don Carson with Susquehanna Financial. Your line is open.
Yes, Chuck, just wanted to get your thoughts on the upcoming nitrogen season. You mentioned that obviously last fall was the wettest fall season in the U.S. in over 100 years. How much demand do you think got pulled from Q4 into the H1 of this year in terms of either volumes or the percentage of ammonia that wasn't applied versus what was normally applied? I guess logistically, how do you see the prospects of squeezing a season and a half into one season? Could we see logistical tie-ups and hence tightness in supply and demand that could lead to a fly-up in prices?
Yeah. I'll give you my comments. Then I'll have Raef Sully, our head of nitrogen, provide his, Don. Look, you framed it very well. When I've traveled through the U.S., and I was at the Michigan Ag Conference just a few weeks ago, what is being reported is that in the key nitrogen areas in the Q4 , they really did not have a season, and especially when it comes to ammonia. That's been very well documented, I think, and pointed out, and that has led to the volatility and the uncertainty we're seeing in terms of pricing right now. As I said in my remarks, we think the nitrogen prices have over-corrected. Now, if we get normal weather patterns in the spring season, we expect to get all of it back.
If the window is there for growers, especially with the mix moving to more corn acreage, farmers will not gamble in terms of their nitrogen applications. The answer to your second question, I think is depending on weather, it would be nice to get an early spring, but even a normal spring. We are anticipating and planning to get all of the deficit back, assuming that the weather cooperates. Now, with the distribution system that Nutrien has in place in the U.S., a season like this is going to take to our benefit. We've invested heavily in our distribution system. We have our retail business plus our wholesale distribution network, one of the best, I think, in North America, and that will play to our strength. Raef, do you have more comments?
No, just to reinforce the point that the distribution system is there. We've had seasons in the past where they've been very tight. We've got the volumes out. As Chuck mentioned, there are areas where there was no ammonia applied. There's areas where 25% went down. As long as we get a couple of good windows through the spring season, we'll see that go out and get to ground.
Our next question comes from the line of Andrew Wong with RBC Capital Markets. Your line is open.
Hey, good morning. Maybe a question both for Chuck and Pedro. Could you talk about your views on an optimal capital structure and leverage ratio? Because obviously Nutrien has a lot of financial flexibility now, much lower net debt to EBITDA ratio. In what scenarios would you be looking to increase leverage? Thanks.
Yeah, Andrew, I'll give you my comments and then I'll have Pedro make a comment or two. Recognize this is his first week on the job, but he has vast experience from the different business he's been with, and it would be good to get his perspective. Our view really hasn't changed when it comes to leverage and the capital structure for the company. We want to maintain our investment grade rating. We think it's very important to do that. Our leverage ratios will depend on where we are within our cycle. At the top of the cycle, having two or below is something that we're not uncomfortable with. Then at the bottom of our cycle, getting up to 3 x debt to EBITDA, again, is not something that we would be uncomfortable with.
The movement between 2x to 3 x debt to EBITDA is sort of where we think. Obviously, at the end of this year, we were at 1.6x. We have, I think, capacity and opportunity. That will be dependent on where we can allocate capital to grow shareholder value. Certainly, we're not going to rush out and do anything that we don't think will create long-term value. We've been very active with our share buyback program. If you look at what we've been able to do so far, purchasing 41 million shares at just less than $51 a share, we think that that is a great use of our capital, and we would be prepared to allocate even more capital to the buyback program. Maybe now I'll turn it over to Pedro for a few comments.
Yeah. As Chuck said, this is day four for me, there is a lot to learn about the business. I think the company is in a very privileged position from a cash standpoint. The balance sheet is so strong that I think it will provide, in the short term, room for all that we want to do in terms of share repurchase dividends and the acquisitions that we have in the radar at this point in time. As we go forward, I think there will be more room, and we can consider something of different sizes. Right now, I think we're sitting well-positioned to take advantage of everything we have in the pipeline.
Your next question comes from the line of Christopher Parkinson with Credit Suisse. Your line is open.
Good morning, everyone. This is Graham Wells on for Chris. I just had a quick question on the nitrogen segment. Curious to hear your views on how you are thinking about global cost curves given the volatility we have seen in energy prices outside of the U.S. You mentioned the fact that you see Chinese exports being roughly stable year-on-year. I am curious to get your views as well on what you think Chinese production costs will look like in 2019 relative to 2018 and the impact that that could have on pricing for the year going forward.
Graham, hi. I will give you the overall overarching comments. Then I will have Jason Newton, our head of economists, just talk about China and the specific production costs for you. The way we are looking at the nitrogen supply-demand is a continuation of what we saw last year. There is not a lot of excess capacity coming into the market. Demand has been growing at a steady rate. We see a continued improvement in the overall supply-demand for nitrogen. We do not think that we see much more exports from China than we saw in 2018, simply because of the cost structure, which Jason will address. Probably as equally important is their environmental reforms that they are trying to put through in China. We like the overall fundamentals of the nitrogen business. We think they are supportive, they are tightening.
If you look at it from a cost-to-serve perspective, when you have a third of our nitrogen business based on AECO gas up here in Western Canada, then another third based on NYMEX, then a third in Trinidad, we are really well-positioned globally in terms of our cost curve. I think we can compete very well, and we think that that will improve even more as we go through 2020, 2021, where the supply-demand situation, I think, will get even tighter. Jason, do you just want to address the cost of production in China?
Yeah. Good morning. Just looking at the cost of production in China, it's relatively flat to where it was throughout much of the H2 of last year, particularly the anthracite-based urea production, which really drives the marginal cost. We still believe those costs are in the range of $250-$300 per ton FOB port in China. The tremendous prices have come down and are now lower than they were a year ago. If we look at where Chinese production rates are, they're really very flat to year-ago levels. Inventories at port also remain relatively flat to year-ago levels, which were relatively tight. While the export pace picked up at the end of 2018 and early 2019, we really don't see the export volumes from China being significantly different in 2019 than they were in 2018.
European gas costs are also an important driver, particularly for ammonia and UAN. We have seen the hub-based gas prices in Europe come down, but really right pretty close in line to where we were a year ago. They're down from the highs, but in line to year-ago levels. Really, I think as we go through the year, the direction of those prices will drive the floor price as we move midway through the year. The formula-based prices driven by crude oil have also declined, but they're actually up about $1 per MMBtu compared to where prices were a year ago. Overall, I think that the cost structure remains pretty much stable to average 2018 levels, but down from the highs that we saw in the H2 of the year.
Your next question comes from the line of Steve Byrne with Bank of America. Your line is open.
Yes, thank you. How do you expect and envision your digital ag program to drive value for your retail business? Perhaps more specifically, what fraction of your members' digital data do you think you'll be able to access yield data by genetics that you could then build a predictive tool to help your members buy the best genetics for their soil type?
Good morning, Steve. I'll have Mike Frank answer your questions, then I'll provide some color as well.
Good morning, Steve. As Chuck mentioned in his comments, since we've launched our digital platform to our customers last July, we've been very pleased with the uptake and the engagement that we've seen from our customers. With over half of our customers now signed up onto the customer portal and engaging, managing their account and now buying products. The way we think about our digital platform that's customer-facing, it really has three big buckets. One is around what we call the omni-channel piece of it. This is the area that growers can come in, they can manage their account, they can look at what they've done in the past, they can pay their invoices online, and now they can also order products online. That's a very important convenience tool that we've now put in the hands of our customers online.
The second big area of focus for us is around crop planning. This is a tool that allows our agronomists to sit down with our growers at the end of the season, look back to what happened on their farm and field by field, then plan the next year based on the opportunities, the weather, the crop prices, and technologies that we have that we can help our customers be successful. That's a second big bucket that we're well-advanced in. The last area, and probably the area you were asking about, was more around digital agronomy. This is an area that we will build, buy, and partner in. We have some great tools today around variable rate fertilizer and variable rate planting prescriptions, where we can go into a field and prescribe a specific planting rate or fertilizer variable rate script.
We also have other tools. We announced a partnership with Lindsay Corporation recently on water and irrigation management. This is an area that we'll continue to build out over time. I would say it's the third leg to the stool, and we won't develop all these tools ourselves. There's a lot of partnership opportunities. For example, on the seed side, with the Agrible acquisition we made last year, they have a great tool called Find My Seed. We've got that seed selection tool also now up and running on our digital platform where customers can go in and on a field-by-field basis, select the right genetics for their field. We feel like we're on the leading edge of this. Again, based on the feedback and the engagement we're getting from our customers, it's showing up that way for them as well.
Steve, just a few more comments. Mike covered the details really well. The high-level strategy is we plan to lead the industry. We're going to be very smart about what that means, but we want to be able to work with our customers when they want, how they want, and where they want. This integrated platform is connected to our 3,500 agronomists, our extensive supply chain capability, and our proprietary products. When we put it all together, I think we're going to have so much leverage, we'll be able to create tremendous value for not only our customers, but our shareholders.
Your next question comes from the line of P.J. Juvekar with Citi. Your line is open.
Yes, hi, good morning.
PJ.
Just a couple of questions on potash. You talk about low potash inventories in Brazil and China, but you also mentioned high retail inventories in North America. What are the magnitudes of these low and high inventories in different regions, and could they potentially offset each other? Secondly, related to potash, you talked about 5 million tons of flex capacity in potash. Is that sort of your new strategy to flex your capacity with demand and that replaces the old strategy of price over volume? Thank you.
I'll answer the second question and I'll have Susan talk about inventories. Look, P.J., we don't subscribe to any one specific strategy. I want to make that as clear as I can. We never have. We adjust our strategy based on market demand and where we are in the cycle and what our competitors are doing, like every other company would. When we look at 2019, though, we're very constructive on how it's unfolding. If you look at last year, we had 2% increase in demand again, up to 66.5 million tons. This year, our guidance and our view is that the market will continue to grow to somewhere between 67 and 69 million tons. If you just take the midpoint of that, we think that the demand around the world will grow an incremental 1.5 million tons.
If you look at what's been announced by our peers in the industry and what we believe will come into the market, it's something less than 1.5 million tons. Because we have, I think we're one of the few companies that have incremental capacity, we will service our customers like we always have and look at the supply-demand, and make sure that we can supply our customers. That's what we've done, and our production guidance and sales volumes numbers that we gave is reflective of that.
The strategy really has not changed. I think we were very constructive last year. We grew our sales volumes by over a million tons. As well, we saw good momentum when it comes to pricing, we met our customers' needs, and that's what we're trying to do, and that's what we'll do in 2019. Susan, do you want to just talk about how you're seeing inventories globally?
Good morning, P.J. You're absolutely right. What we've talked about is the low inventories in both China and Brazil, in particular. Canpotex indicated before we went out of 2018 that they were sold out through the Q1 . We are seeing the same thing in North America. Potash, no different than the rest of the nutrients, was impacted by the wet season in the fall. However, having said that, from a domestic standpoint, this is no different than the nitrogen story we talked about earlier, which is the fact that if we see a normal season, we expect those inventories to clear out. We expect to have good demand throughout the spring season, and we are perfectly positioned with both our upstream warehouse and distribution capacity and our downstream retail capacity to pull that potash into the market.
I don't think this is a situation where the domestic will offset the low inventories globally. We do expect to see good demand. Just on the flex capacity, the one piece that I just want to add to Chuck's comments are that the way we look at this is stable prices are what we want for the grower. We do not want to see volatility in prices. You will have seen last year we met the demand as it was needed, and we are well-positioned to do so if we see further demand going into the H2.
Your next question comes from the line of Mark Connelly with Stephens Inc. Your line is open.
Thank you. More than one domestic seed producer has talked about seeds pulled forward into the Q4 , but we're not seeing that very clearly in your numbers. I'm wondering how you're thinking about the timing of seed sales this spring. On a related note, outside of the Central Corn Belt, many of the farmers we're talking to are looking pretty aggressively for alternative crops rather than just shifting to corn or cotton. I would assume you'd get a pretty good sense of that. The question is: Is that a significant trend, and would it help you or hurt you if it becomes significant?
Hi, Mark. I'll have Mike Frank answer your questions for you.
Yeah. Good morning, Mark. I think on the seed side, when you hear from other suppliers, again, I think you need to parse through what is building channel inventory and what is actually being sold through to the grower. Obviously, our numbers show what's being sold to growers. What we saw in Q4 is that our corn seed sales were strong, and it lines up with our expectation that corn acres are going to be up a little bit next year. Selling of soy seed was soft as growers are really, I think, taking their time to figure out what they're going to do this spring.
Again, as Chuck mentioned, the fact that we've got prepay that's up over last year is a strong indication that growers are going to invest in their crop, but they are delaying some of their purchases and some of their planting decisions, I think, to see how the trade dispute plays out. Your question outside the Corn Belt, we're not seeing a big shift that's material there. The wheat acres are pretty much baked based on what was planted last year, and that was pretty flat. As Chuck mentioned, we do expect cotton to be up a little bit. If you look at West Texas, which had a significant drought last year, they will definitely plant more cotton, and so that's constructive to our business. We're not seeing a shift to other crops that would be material in any way to our business.
Super helpful. Thank you.
Your next question comes from the line of Joel Jackson with BMO Capital Markets. Your line is open.
Hi, good morning. I'd like to go back to retail. It seems like if you sort of parse the numbers, you're projecting kind of organic growth in retail to be flat, right? $150 million more retail EBITDA this year, maybe $75 more from the IFRS change, $40 more from acquisitions, some deferred demand from the fall to the spring. It looks like there's not much organic growth going on in retail. Can you just speak to that point? Can you maybe, in that commentary, talk about different regions and different product groups, the different puts and takes? Thanks.
Good morning, Joel. Mike, go ahead.
Yeah. Joel, we are expecting a strong year in retail as per our guidance. After a very challenging 2018, we were very pleased through Q3 last year where we were running ahead about 10% on the EBITDA line. Obviously, we gave some of that back in Q4 because of the tough conditions, but ending up 5% year-over-year, we know we outperformed the market. In fact, on a look-back basis, we know that we grew our share in the U.S. on the crop protection shelf by at least a half a point. We're up slightly on seed, and we also grew share probably over 1% in fertilizer. We feel very good about that, and most of that is just organic growth based on how we performed in the marketplace.
As we said in the previous comments, we are expecting a bounce back in the market, which will look like organic growth because of the weak Q4. We're also very pleased with the progress we're making. We're transforming our supply chain to get more efficient in terms of how we operate. With our vast network of operations in a busy spring, we know that'll benefit our business. We feel good about the guidance range for next year, and I think when we're there, we'll look back and it'll be a strong year of performance.
Your next question comes from the line of Steve Hansen with Raymond James. Your line is open. Steve Hansen, your line is open.
Good morning, guys. Just a quick one in terms of the retail growth outlays for this year. Your recent announcements through January, Actagro, et cetera, and the comments I think Mike made earlier suggest you're off to a pretty good start. Most of the announcements do tilt very heavily towards the domestic opportunity. I'm just trying to get a sense for the full-year outlook. How do you expect the outlays to sort of tilt on a relative basis between domestic and international, particularly around Brazil and a lot of the work you've been doing down there? Should we really think it's going to be domestically heavy this year, or how should we think about it? Thanks.
Good morning, Steve. Mike, go ahead.
Steve, look, I think, we would expect that the majority of our M&A activity is going to continue to be domestic, with just a significant runway of opportunities that we see unfolding in the U.S. as the independent side of the retail business continues to look for opportunities to exit in this very tough market and the changing dynamics around digital and everything else that's going on in the retail space. As Chuck mentioned, we also see opportunities in Australia, and we made some very nice acquisitions last year in Australia. We see some opportunities continuing to unfold there. In Brazil, the way we're thinking about Brazil is over the next three to four years, we'll likely invest about $1 billion, this will likely unfold on a slower basis than a big bang basis. We are now down there prospecting the market.
We made a very nice acquisition last year of Agrichem. We would expect to make some acquisitions this year of retail footprint, where we'll actually start expanding our retail presence. We'll also continue to look for opportunities to add content in the Brazil market from a proprietary standpoint that will also build out our business there. I think there'll be some movement in Brazil in 2019. We'll go there slow and steady, and we'll build it over time.
Your next question comes from the line of Duffy Fischer with Barclays. Your line is open.
Maybe if I could sneak in two quick. One just on your slide where you talk about the IFRS 16 impact on EBITDA of $225. Can you do a bridge of that $225 from EBITDA to free cash flow or to cash flow, how that affects that? Chuck, if you would just talk about what do you think the delta would be in North American purchasing, whether we have a deal or no deal by the time we're planting in April?
Good morning, Duffy. I'll have Fred Thun, our Head of Finance, talk about the IFRS conversion. I'll try to address your question on trade.
Hi, Duffy. Yeah, just talking about the IFRS conversion. The beauty of this is that it's simply an accounting change, and it's a realignment of certain lines on our financial statements. I wouldn't anticipate any change to cash flow whatsoever as a result.
Duffy, your question on whether we have a deal, what would happen for grower sentiment and purchasing, that's pretty tough to call. Our conversations with our growers, I think Mike framed it really well. Right now, farmers are in the mindset of kind of wait and see, and they're going to wait as long as they can before they have to make planting and crop decisions because they simply don't know. I think what would happen is if we had a deal, two things most likely would happen. First is I think you'd see clarity in terms of their purchasing decisions and maybe the timing accelerated a bit, which would be good news for all of us. I want to caveat that Nutrien has the supply chain capability and the infrastructure to go with the farmer when they choose to go.
It doesn't have to be in early spring. We can still get a lot of business done with them. The second, I think, though, which is probably more important, is that once the trade deal is done, and assuming that there's success there will be this cloud of uncertainty that will be lifted over the crop pricing, and the crop prices will be allowed to trade more on the fundamentals. We believe that when that happens, you'll see higher prices, which are going to be good for everybody, but farmers first in terms of their profitability. That's why we're really concerned in watching the trade progress is because we think that it will be constructive for the overall ag complex, starting with crop pricing.
Your next question comes from the line of John Roberts with UBS. Your line is open.
I realize this is not big, but hopefully it'll be insightful to me. When you buy something like Actagro, how do they go to market? Would Actagro product be available in an Agrium store and also available at a competitor store down the road? I don't know if they're currently held by FBN, but would you pull them from FBN if they were there?
Hi, John. I'll have Mike Frank answer your questions for you.
Good morning, John. We know Actagro very well. In fact, we're by far their largest customer. We've been working with them for over 10 years, and we really like the products and technologies. We like how they perform in the field and their value adding to us as a retailer, and once we close the deal, we'll get the full margin opportunity. Actagro also does sell to other third parties, and we intend to continue to service that business as well. That is an opportunity for us. When we look at the synergy opportunity, there will be some cost synergies
The sales synergies will be significant. We'll start driving this harder across our whole retail footprint, both domestically and internationally. We see a number of opportunities. Regarding FBN, they do not distribute through FBN today. As you probably know, FBN's product portfolio is very thin and it's a very small part of their business. We wouldn't expect any change there.
John, just to fill that out for you. We do have a wholesale proprietary products business that we sell to other retailers. We're selective on what those products are, but that is part of our business, there would be no change with the Actagro go-to-market strategy.
Your next question comes from the line of Jeff Zekauskas with JPMorgan. Your line is open.
Thanks very much. Your EBITDA in 2018 was about $4 billion, your cash flow from operations was $2 billion, there was a large working capital use, maybe by about $1 billion. Can you speak to what your normal level of cash flow from operations is? Is it $3.2 or $2.7 or $3? What's a more normal number? Secondarily, how many people work at Actagro?
Okay, Jeff. We'll have Fred Thun answer your question on the conversion in terms of free cash flow, just to answer your second question quickly here, Actagro has about 100 employees. Fred, go ahead.
Thanks, Chuck. In terms of our cash flow, both operating and free cash flow, number one, Jeff, is we're focusing on the strength of balance sheet and focusing on maintaining a strong balance sheet there. You will see ups and downs, particularly in the non-cash working capital line, primarily seasonally, but then also with the commodity cycle. It's difficult, given that, to predict what the annual cash flow provided by operations should be. Instead, we prefer to focus on free cash flow. We delivered $3.16 per share of free cash flow in 2018, about $2 billion, and our free cash flow is going to rise proportionately with the growth in our business in 2019. Overall, ultimately, we're focused primarily on the strong balance sheet and maintaining that investment-grade credit rating.
Yeah. Jeff, just to give you a perspective on how I think about the company as a whole. We usually convert somewhere between 70% and sometimes it'll get a sizable 73% of EBITDA to free cash flow. That's a good kind of walking around proxy. Now, what happened in 2018 was we had a working capital build. The reason we had the working capital build is, as we've articulated, is one of the wettest four quarters in our history and really did not have a fall application season. That'll work its way through the system. Generally, we see a conversion from EBITDA to free cash flow in that 70%-73% ratio.
Your next question comes from the line of Michael Piken with Cleveland Research. Your line is open. Michael Piken, your line is open.
Hello, can you hear me?
Yes, Michael, I can hear you now.
Hi. Sorry about that. Just wanted to get a feel for how you're thinking about the two competing platforms, how big you think the launch of the new soybean wheat platform will be this year, and what is your expectation for selling both products in the future?
We'll have Mike Frank answer those questions.
Good morning, Michael. We were really pleased to see the Chinese government finally approve a number of new biotech traits that will be important tools for U.S. growers in corn and soy and in canola. I think you're referencing specifically the Corteva Enlist trait that just got approved, and how it's going to stack up to Xtend. I think our research would say growers are very interested in both technologies. They have unique features and benefits, and like a lot of traits, it really depends on the quality of the underlying germplasm. For 2019, we don't expect to see much of a market for Enlist.
I think it'll be a very slow introduction to the technology, but we'll get our hands on it and we'll test it with some of our growers. In 2020 and beyond, it'll be more commercially available throughout the marketplace. We're working with both Corteva and Bayer, and again, we like both technologies. We think there's going to be a fit for both. We think Corteva is going to push hard on Enlist and Bayer is going to push hard on Xtend, and that'll be good for our customers and probably an opportunity for us as well and on the retail space.
Your next question comes from the line of Vincent Andrews with Morgan Stanley. Your line is open.
Thank you, and good morning, everyone. Maybe to build a little bit on that. You talked about the seed order book is kind of coming in ahead of schedule a little bit on prepays. Are you seeing any unusual promotional activity in seeds and I guess maybe in crop chemistry as well, that might be encouraging that larger prepay? I guess some more comments on soybeans would be helpful because I just recall last year one of the consolidated competitors apparently got quite promotional with soy. Are we seeing that again, particularly as maybe we're about to enter a more competitive dynamic with trade competition as well? Thanks.
Good morning, Vincent. Go ahead, Mike.
Vincent, as you know, the last several years, the seed market's been very competitive, and there's been lots of programs that have been offered from the suppliers. We're not seeing anything unique. That continues. It's a very competitive marketplace. From a seed availability standpoint, we've got very strong availability, so farmers don't feel rushed right now to make those decisions. We're not seeing anything unusual, which I think is at the core of your question, on either crop protection or seed. As you know, our margins last year on both seed and crop protection were roughly flat. We think that we're going to continue to drive hard our proprietary products business this year, which will be constructive to margins. The seed business will likely be similar to last year from an overall margin perspective.
Your next question comes from the line of Adam Samuelson with Goldman Sachs. Your line is open.
Thanks. Good morning, everyone. Maybe a question and a follow-up on potash. Just want to make sure on the guidance, it would seem that the guidance implies unit margins and pricing reasonably flat to up slightly year-over-year in the EBITDA range that you've given. Is that accurate? Along those lines, just from a demand perspective, it sounds like from a global growth perspective, it's almost all China, is how you're thinking is going to drive the global basis and just the confidence level and the H1, H2 dynamics embedded in that assumption.
Good morning, Adam. I'll have Susan Jones answer your questions for you.
Good morning, Adam. The way we're looking at from a directional pricing perspective is we are seeing firm pricing, assuming a normal spring season through the H1. As I mentioned earlier on the call, Canpotex has a very firm book of business. When we get into the H2, pricing we expect to be flat to a little bit down, but a lot's going to depend on how quickly some of these ramp-ups happen. We do expect to see demand growth consistent with what we've seen last year and some of the years, 2.5%-3% demand growth continue.
That is not only out of China, but we see that other Asian markets, we see that in Brazil, and we see that maybe a little bit of flat in India. I think that from an overall volume perspective of where we're directionally positioning, it would be keeping our market share pretty well flat year-over-year, meaning around that 19.5% market share.
Just one other comment, Adam. We are seeing good growth in Africa, and we don't talk a lot about Africa, but the work that some of our peers have done on phosphate in Africa, it's having certainly a good strong effect when it comes to potash demand in that area as well. China is by far the largest in terms of leading the growth in 2019. We're really pleased with how demand for fertilizer is improving and increasing in Africa, which could be helpful in the future.
Operator, there's time for just one more question.
Our final question comes from the line of Jonas Oxgaard with Bernstein. Your line is open.
Well, thank you for sneaking me in there. Thinking more broadly about your retail strategy, it seems that you have three main directions, footprint, proprietary content, and digital ag. Can you talk a little bit about how you rank order those priorities? If I may, if you had three choices, the returns is about the same on all three, which one would you pick?
Yeah, Jonas, I'll try to answer your question. Look, the way we think about it is we have a channel, we have a direct relationship to the grower. We're investing heavily to continue to build out that channel. That's the traditional retail footprint, the facilities that we buy. We also want to either own or rent or lease content, we've been investing heavily in that as well. That's the Actagro acquisition, Agrichem down in Brazil, and the Loveland Products portfolio. We have this notion of our digital platform, which is another tool to enable the relationship with the grower.
I don't think we actually internally, we don't prioritize them. We don't say one is more important than the other. It's a strategy of execution on all three of those because we think that that's the way to maximize value creation for the farmer and for our shareholders. That is in essence the strategy, is continue to build the channel and the content while looking at what services, solutions, and opportunities can we bring for our growers.
I will now turn the call over to Mr. Richard Downey for closing remarks.
Thank you, operator, and thanks everyone for joining us. Iris is available for any calls you may have, and we'll talk to you shortly. Thanks.
This concludes today's conference call. You may now disconnect.