Let's. We're good? Next up, we're gonna do a fireside with Nutrien, world's largest fertilizer producer, a very influential potash and nitrogen businesses, as well as a leading farm center network. Very happy to welcome Mark Thompson, CFO of Nutrien, who was stuck on an airplane for five hours yesterday flying to Teterboro, so he's recovered. Mark, why don't we kick off with a few minutes? Little state of the union and then we'll jump into questions. Again, please submit your questions on the app. I'd love to weave them in. Thanks.
Thanks, Joel. Good morning everyone. Joel, again, thanks for having us. Always good to be here with you. Yeah, I'll keep it pretty brief, maybe just a couple of minutes of comments to frame out how we're looking at the world right now. I know Joel will have lots of questions. We can jump into those. I think, first and foremost, just fresh off our first quarter earnings release, you know, I think the summary of that from our perspective would be strong performance across the company. We had record potash sales volumes. Our nitrogen reliability was strong and right on plan, and really good customer engagement, which resulted in strong performance in our downstream retail business.
Even for the things that we can control in the phosphate business, our sales volumes are up because of better production and reliability. I think importantly across the entire business, really good execution, and that continues to be a theme for Nutrien. Obviously, there's a lot going on in the world right now that we'll get a chance to talk about today, but the company just maintains a focus on the things that we can control, and for those things that we can control in terms of operating performance, cost discipline, capital discipline, continuing to be very focused on capital allocation.
For all those things, we continue to be on the right track and advance our portfolio review, which is really part and parcel with the company's focus on high quality assets, growing free cash flow per share, and a portfolio of assets that cash flow and are resilient in really any set of market conditions. For those factors within the four walls of Nutrien, we feel really good about where we are and company performance being strong. You know, as we look out at the world, we're obviously in very volatile market conditions here with what's happened in the Middle East, which has significantly disrupted energy supply, fertilizer supply, the availability of raw materials critical to certain production of fertilizers.
We continue to watch that situation evolve and with a focus on supporting customers through that environment, which we've done a good job of. As we look to the balance of the year, we're quite constructive that we continue to perform well in this market. I know we'll jump into all of that today, Joel. I think with that, probably just pass it over to you.
The BMO note last week said it's the most in-line of in-line quarters, right?
It did say that.
Like, you kind of touched on it, like, you guys maintained all your guidance, retail, EBITDA, as well as your different volume guidances for your wholesale businesses, but there's so much volatility going on in the world. Can you talk about that? I think some people thought you might raise some of your numbers, especially retail. Talk about what the different puts and takes have been the last few months on your business, you know, from everything going on?
Sure. As you said, we maintained all of our guidance ranges in line with the strong first quarter performance, which I mentioned. I mean, I think the reality of it is we're sitting here in the early part of May, which is one of our busiest months of the year. Planting is just starting to progress in North America, I think any preemptive changes to those guidance ranges would really be premature based on what we see, and maybe imprudent or irresponsible of us, and we always take that process really seriously in terms of giving investors our best expectations of what we see. As we move through spring, we'll obviously have a better view of things.
I think the punchline for us as we articulated on our earnings call is that we're very constructive on the remainder of the year. We're encouraged by what we see, and the performance of the business continues to be very strong. I mean, I think that's the high points. If we look at really the effects of what's happened in the Middle East, and I know we'll get into it on the business, starting with potash, you know, potash is really a demand-driven market still, and really is being driven by global supply-demand fundamentals and a tight market. We've seen just incremental improvements in the supply-demand balance, and that's led to incremental changes in global benchmark prices. Potash to date has been largely unaffected by the conflict, thankfully.
We continue to see really good demand across the world there. In nitrogen, obviously, the conflict has substantially disrupted nitrogen markets, and that's led to pretty dramatic increases across all global nitrogen benchmarks. From that perspective, obviously, we're going to see higher global benchmarks start to flow through in the second quarter. That was really not a first quarter event. We can see that quite clearly with what that's done to pricing and energy markets. From a phosphate standpoint, it's a little bit the opposite. We've seen the cost and price of sulfur and ammonia fly up quite a bit more significantly than finished phosphate pricing.
As, you know, I think Ken and I both articulated on our earnings call, we see this current situation as unsustainable, but it's not clear that it will immediately resolve itself. There are some meaningful headwinds for phosphate production globally right now because of that equation. I think you move on to the downstream retail business, and that business is all about supporting customers, and we were really encouraged by the customer demand that we saw in the first quarter. As investors who have been with us for a long time on the sell side knows, it's really a first half business, not a quarter business. We saw field activity start at the end of March, so some of the first half earnings show up in the first quarter. Really good customer engagement across the board.
In a environment like we're in today, growers are gonna look to maximize yield. We saw exactly the kind of behavior we would expect. I think more than that, probably lost in all of this has been corn and soybean prices for the December and November futures respectively, hitting 52-week highs, which is encouraging in this environment. You know, in the downstream retail business, as we said on the call, a lot of the guidance assumptions that we made to start the year are unchanged. We assume there could be potentially stronger per ton margins in crop nutrients, which should more than offset an assumption of probably lower phosphate volumes and higher fuel costs.
We feel really constructive about the outlook for the downstream business, and you take that as a whole, as I mentioned, constructive on the outlook for the entire business for the remainder of the year.
Okay, much going on in the U.S. and North American fertilizer market. Fertilizer shortages. Now, I don't think that's true in North America. I think we've seen the Midwest mostly stocked up. What is your view on that? Like, you guys, I guess if there were fertilizer shortages, you would've seen, you know, your prices move a bit quicker, like your realized prices. I'm assuming-
You know, what's your view on that?
I mean, these are globally traded commodities. I think what you've seen across the world is global benchmark prices doing exactly what they would, is rising to attract supply given the substantial deficit of crop nutrients, particularly in nitrogen phosphate, that we've seen emerge because of the Strait of Hormuz being shut off. I think global benchmarks are doing what you'd expect them to do. In terms of availability of nutrients, you know, we think that growers and customers are gonna have availability of nutrients, albeit global benchmarks have risen to attract that supply. Really what we can comment on is what we're seeing so far on the ground. I think on balance we're seeing crop nutrient volumes move through the distribution channel and down to the grower level in North America.
The one place where things are probably a little weaker is in phosphates, where we saw some demand issues at the grower level last fall. We're continuing to see through the spring phosphate application rates be below what we would have expected. I think nitrogen is about as expected, and actually on potash, maybe a little bit better than we expected domestically. When we take that as a whole, you know, fertilizer volume's not substantially different than we would've expected, but among the three nutrients, a little bit of diversity there.
Obviously because North America was so ready to go for spring when the time the conflict started, you know, we have to talk about this in terms of a second half year Southern Hemisphere, then fall, spring for the following year. This question speaks about potash. You said potash is going a bit better than expected. The question comes in, and I get this question almost daily now, by the way, in my office, is, you know, how do you think about potential potash demand destruction, not because of potash prices, because of challenged farm economics? You know, they're paying more for nitrogen and energy, therefore they're gonna have to, you know, allocate farmer dollars to something else, like nitrogen, whatever, and that gets pulled from potash.
Yeah, I mean, I think if you step back globally and you think about potash, I mean, our guidance range for global shipments is unchanged at 74-77. Our guidance midpoint for Nutrien is unchanged. I think if you think about the setup to start this year, this is truly a global market where demand is strong across the board. The precursors to that were very low inventories in China, which caused a historically early settlement, as everyone knows now. A five-year low in inventories entering the year for potash in Brazil, and really strong grower economics in key crops that need potash globally.
When you look at North America, which is about 10.5 million tons of a 75 million ton market, give or take, we're seeing, as I said, application rates actually a little bit stronger than we expected. That certainly tells a story where we're seeing strong and healthy potash fundamentals, and conversely it's not a demand destruction story. It's actually an affordability story from what we can see. We see no signs of that. In fact, we see the opposite, where it appears the potash market is set to grow globally for the 4th year in a row. When we talk about this with investors, we always talk about this sort of dashboard of key indicators of what's important to, you know, sort of a healthy, sustainable growing potash market.
If we look at price on a global basis, affordability is good, across the board and certainly on a relative basis versus other nutrients. When we look at inventories, as I mentioned coming into the year, they were below average or average really across all key markets. When we look at the pace of supply additions, this market from a supply standpoint globally is really just struggling to keep pace with demand that continues to grow. When you have an environment like that, we have the recipe or the ingredients for the potash market to continue to move along, which is what we expect over the next couple of years.
We're very encouraged by what we see in the potash market, and I think when you look at record first quarter sales volumes for us in a very strong global market, that would be a great signpost for that.
How do you think of potash academically demand? You know, potash demand never goes up three years in a row. Guess what? This year if it plays out, it will be four years in a row. I mean, I think I see what's out there. I see that Chinese inventories are not high. I see that Brazil end of the year, last year at low inventories, they have been importing a lot this year. Like, all the things that we all watch that says potash demand is great or should be great are there, yet this is the fourth year in a row of demand growth, right? Like, just academically go, When you plan your business, like how do you think about this?
I mean, you learn lessons from the past. I think these lessons have been there, that over very long periods, you go a couple of decades, that 2.5%-ish demand growth CAGR is pretty consistent, and it's there over time. Where you tend to see anomalies is because one of two things typically gets out of whack. One, prices reach extremes, either, you know, moving down to the marginal cost curve because of oversupply conditions, or, you have what happened during the Russia-Ukraine crisis, where supply was impacted so dramatically that prices fly up globally.
With sanctions against Belarusian potash
Yes
and they can-
And so when you get-
didn't have a home, yeah.
when you get those kind of extreme price movements that affect affordability, that either causes stocking behavior or de-stocking behavior, which can cause variations from year to year. As I mentioned just a couple of minutes ago, when you look at the current environment, potash price has been stable, very affordable, relative to global crops and the other nutrients, which creates those conditions the market can continue to grow. The comment I just made on price relates to inventory. The other key variable here is when we look at inventories, those years where stocking or de-stocking occurs tend to correlate really closely with changes in inventories globally, and we're just not seeing that.
When those two factors are in balance and they're in a healthy state, the potash market can continue to grow for years to come if we have those kinds of conditions on a very consistent basis. You couple that with the fact that there are not material amounts of supply to be added in excess of that demand growth. I think we have all the conditions that the potash market can plod along as we expect. Back to your original question, when we're looking internally, when we're planning the year, Chris Reynolds, our downstream EVP, is here with us when we're looking at grower demand, those are the factors that we look at.
You learn lessons from a year like 2022 when prices became unaffordable, inventories built in the first half of the year, and it took us 12 to 18 months to work through that. These conditions are very stable and healthy right now.
I got a question on phosphate. It's basically saying you talked about this last week, too. You're saying that phosphate, was it untenable, unworkable? I forget the exact word you said, but at these input prices. Where would you need ammonia and sulfur prices to be for phosphate economics to work? I assume this question is sort of asking at spot phosphate, you know, where would you need ammonia and sulfur to be at spot phosphate for it to work?
Yeah. Well, I mean, if you look at where spot phosphate prices are today, and you were just to use an industry proxy or some theoretical model, I mean, you need ammonia and sulfur prices both several hundred CAD lower, and particularly sulfur, which is the big cost driver from a phosphate standpoint.
In your mind, are you using the CAD 655 Q2 sulfur benchmark or using like, you know, spots like CAD 1,000? Like, when you're speaking about that.
To be honest, I don't think either are particularly sustainable.
Yeah. When you were saying CAD 200 lower, are you using like CAD 1,000 as a base or CAD 655 as a? I'm just trying to wonder what you're thinking.
Yeah. Well, I mean, I think honestly even at CAD 655 or CAD 1,000, you're out of the ballpark.
Okay
in terms of having sustainable profitability that can incent reinvestment in capital expenditures and assets. As we said on the call, the current economics from a macro standpoint, when you look across the chain, are unsustainable. We have seen demand continue to be rationed at the channel and at the grower level. We saw that last fall. We believe we're seeing signs of that right now. You know, at the same time, when we look at global demand for sulfur and what's happening for prices and the issues with the Strait, we've got an issue where those costs are flying up to make phosphate faster than finished phosphate prices. There will need to be some structural shifts in these variables in order to make this sustainable.
We know this won't last forever, but, you know, I think just to be clear, it is a very challenging time for phosphate production.
As you start thinking about we haven't talked about retail yet. Let's talk retail nitrogen. As we think about this summer, how might this summer in fill be different than prior years? Both because you're a nitrogen producer and, well, potash, well, let's talk about nitrogen, and you're also of course the largest retailer in the U.S., Australia, and Canada. How do you think about that?
I mean, I think to start the year, the objective is always to meet customer demand. That's what we've been working to do, and I think we've done that in two ways in the business to start the year. The first would be, nitrogen reliability has been really strong for the business. Obviously, as a producer of nitrogen in North America, with the reliability improvements we've made, the bottlenecks we've continued to bring online, we've been able to increase the supply of agricultural nitrogen to the domestic market, which is one part of it. You know, I think the second is in the retail business, we always have a very sophisticated way that we try to buy into the book in order to make sure we've got good availability for customers.
We did that again this year. I don't think the decision set is really any different than any other year. When you look at our business, one, as we get into the summer and we get through the spring, the objective, you know, from working capital optimization and investments in working capital for our downstream business is basically always to end the spring empty. It'd be highly anomalous that we wouldn't do that, and we're gonna do that again. We'll try to use all the inventory that we have to set the business up well as we move into the fall.
You know, I think it's just too soon to know about what fill's gonna look like because it's such a day-to-day situation in the Middle East. We suspect that the channel and the industry as a whole is gonna be looking to what happens there in terms of availability. What I can say is we'll continue to drive reliability improvements in the business to maximize availability of nitrogen upstream and downstream. As always, we'll manage inventory thoughtfully and look to end the season empty.
Now you're a bit different in that you, your nitrogen potash business, if you want, I apologize for that term, you could stuff your own channel, you know, with your own product. Do you think your retail customers, your retail customer of your potash and nitrogen businesses in North America, might they have different purchasing behavior? Might they not wanna empty the bins this year because they're worried about supply?
Again, I think it's just too soon to know. I mean, fill is, you know, at least a month or more away at this point, and a lot of this is gonna be the market's perception of what's going on with availability in the Middle East.
Yeah.
At the same time, I don't think we're really different than any other industry player. I mean, we're gonna maximize the efficiency of the business. We're gonna look at the economics of the decisions we're making. I think the real advantage that we have when you think about the combination of assets we have upstream and downstream, is really the ability to efficiently move supply and put it in market for customers when customers need it, while extracting logistics efficiencies through that supply chain. I mean, that's really what Nutrien's MO is in terms of extracting value, creating a better cost position, which makes us more efficient for customers. I think that decision set and that criteria for the industry is going to be heavily driven by what's going on in the Middle East when we get into June.
Before we hit retail, I did get a question about where do you see the largest remaining emissions reduction opportunities within nitrogen operations?
When we look back to what we've done, you know, we've made really good progress for those opportunities that were economic for us. Back in sort of the 2020, 2021 timeframe, certainly we had a view of the world which was dramatically increasing carbon price explicitly, the potential for higher voluntary carbon market incentives. Because of a variety of reasons, including policy factors, those things have not materialized. The way we might have expected. For us, all of those decisions are really about materiality. The projects that we did undertake, which got us over halfway to that target, were all economic projects that returned an attractive return on capital.
When we look at, you know, what would typically or historically have been called ESG type decisions, including climate and decarbonization, that's all based on materiality for us. At this point, with the landscape that we see out there and our cost to capital and the opportunities we have to deploy capital across the business, we've, you know, sort of executed on the opportunities that were available to us that were material, that provided a return on capital that was appropriate. We've got economics on the next projects that are out there, but we would require either a materially higher voluntary carbon price or a materially higher taxation burden for those to be economic to the point that they would beat other opportunities we see in our portfolio to deploy capital, including just giving that capital back to shareholders.
You know, I think, the history there is really to say we efficiently took out the opportunities that we saw. We don't see anything of material size today that would make sense. Obviously the landscape can change and we'd be prepared to look at those things again if it did.
Okay. Talk about like retail earnings durability, the growth algorithm. When commodity prices do normalize, like how can proprietary products contribute meaningful growth? What's happening in Brazil? I mean, you've been involved many years with the Agrium and Nutrien doing tuck-ins. You guys have been tucking in less than you have in the past. You know, is that the only meaningful real growth driver beyond proprietary products?
Yeah, I mean, I think if you go back to a multi-year period, say, you know, since the merger, the retail business has demonstrated at the EBITDA level the ability to grow on a fairly consistent mid-single digits kind of growth rate. It's been a combination of organic and inorganic growth since the creation of Nutrien that's done that. On a nearer term time horizon, obviously at the investor day that we undertook in June of 2024, the targets that we set out for 2026 at the time were based on a 2023 benchmark. If you look at the midpoint of our guidance this year, it implies about CAD 400 million of EBITDA growth since the investor day, which is a very healthy clip.
I think that shows the durability of earnings growth in the business through a variety of market environments, including fairly weak market environment over the last couple of years, really is there for us. When we look to the future, that mid-single digits EBITDA growth, we think is something that can continue structurally into the future here, at least for the foreseeable years to come. Even in a year like last year, which was pretty challenging in some core areas of the business, we grew the proprietary gross margin by about 4%. This year, when we talk to investors about what we expect, we're expecting high single digits growth in the proprietary products business, and that'll really be driven by crop protection and nutrition.
On proprietary in particular, we see that mid to high single digits growth being something that is possible over the next three to five years. Retail more broadly, that mid-single digits growth rate, we think is appropriate, and there's a few different levers. I think, one, proprietary, which we talked about. Two, we continue to optimize the network and the footprint of the business where we're rationalizing underperforming assets. We're putting larger, more efficient assets in our footprint that allow us to grow organically by growing revenue while taking cost out of the business. Of course, we are continuing to execute tuck-in acquisitions. If you look at the last four or five years, we've typically deployed between CAD 20 million and CAD 100 million of capital towards tuck-ins. I think that's a reasonable rate to assume going forward.
We did complete an acquisition sort of in that CAD 40 million-CAD 50 million enterprise value range to start the year in the Corn Belt. We'll still deploy capital there if it's the right thing to do to deploy capital. There's no arbitrary target for tuck-in acquisition. When I put all that together, we do feel confident there's a mid-single digits EBITDA growth clip that's possible for the business over the years to come.
Are you getting about six handle multiples on the retail tuck-ins?
Yeah.
Has it changed?
You know, it hasn't changed a lot. I think, you know, what you typically see again for a, let's call it a small to medium size tuck-in acquisition opportunity in the U.S., 6x-7x s ynergies. You know, for Nutrien, if we're gonna make an acquisition like that, there's typically one of three opportunities available from a synergy perspective for us. One, integrating proprietary products where there aren't any or upgrading the product portfolio. Two, we have some amount of footprint overlap where we can close redundant locations and be more efficient and provides cost synergies. The third would just be bringing the procurement leverage that Nutrien has to a business that didn't have it previously. If we do one or more of those things, you're typically talking about taking about two turns of EBITDA multiple out in synergies.
You end up typically in that 4x- 5x post synergy multiple basis. For us to really go after these acquisitions, it typically looks something like that.
Okay, sticking in retail a bit, lot of moving parts and crop protection's not been a great time if you're a crop protection OEM or producer the last few years, but things have seemed to stabilize. You know, what's going on crop protection, generics? What do you guys see from your side of it?
Yeah, I think, you know, if you look at our business over the last couple of years and think about where we sit. We've made billions of dollars of investment over the years in infrastructure. We've obviously worked hard to grow our relationship with customers and develop the trust and bring a total agronomic solution. When you look at our CP business in the downstream business over the last couple of years, it's actually a good news story all things considered. Our percentage gross margins have actually gone up, and we've continued to grow the proprietary business pretty consistently.
In a market where generic crop protection has continued to command a greater percentage of share, that distribution footprint, the relationship we have with suppliers, and the option to have that proprietary chemistry business have all put us in a position where despite declining pricing over the last couple of years, we've actually expanded percentage margins and been able to hold absolute gross profit pretty stable and continue to see our Loveland crop protection business grow. For all that's going on in the generic world and market mix, our CP business continues to perform well. As I said, when we looked at proprietary crop protection, we think that's an area that can continue to grow for us. You know, we feel confident and pretty constructive about what we've seen, you know, at Nutrien in that respect.
I mean, Agrium and Nutrien did a lot of big retail jumps. You did tuck-ins, and you did a lot of acquisitions. It's been more quiet in the past bunch of years. Tuck-ins have come down. You talked about goals back in the day of being at least, I think, what, 30% market share in the markets you serve. You're there in Canada. Right? You're there in Australia. You're not there in the States. You're what, maybe low to mid 20s% market share in the States. What do you How do you think about, like, the goals in retail going forward? Do you wanna try to hit 30%? Do you wanna pick away and try to get one of the big privates to sell to you eventually? Like, how do you think about retail?
Is it just going to be just, you know, mid-single digits, just wait that out? Not wait that out, just go along that path and not jumpstart up like maybe Agrium or Nutrien did it back in the day?
Yeah, I mean, I think obviously when you look back historically, I mean, when I joined the company in 2011, I remember really vividly, I think the year prior, we had done just over CAD 500 million of EBITDA.
It was CAD 100 million business, Agrium Retail, probably 20, 25 years ago.
Yeah. You know, when I joined in 2011, I think we had just done just over CAD 500 million of EBITDA.
Yeah.
Today, obviously, the midpoint of our guide is CAD 1.95 billion. It's been a business that's continued to grow. I think when you step back from all of that, we've got
You did lots of big acquisitions. You did God, I can't remember anymore. You did, you did Landmark, you did Viterra. You did so many thing. UAP, Royster-Clark. Back in the day. This is pre-Nutrien, they did a lot of things.
Yep. I think you named four of the large five that we did.
Yeah.
Um-
What was the fifth?
Ruralco.
Okay.
When we look at all of those, you're right. There's been inorganic and organic growth drivers. When we look to the future, as I just articulated, we've got a lot of confidence in a really good base plan that doesn't require significant deployment of capital or acquisition capital to achieve that kind of mid-single-digit growth rate. That's great news. You know, when you step back and think about capital allocation at Nutrien generally, we've been deploying capital in a very thoughtful, consistent, disciplined way so that we maximize return on capital for shareholders, and we're deploying that capital responsibly. You know, could acquisitions be part of that future mix?
They absolutely could be, but that's going to be under that framework of disciplined capital allocation and only if we get the confidence that's the right thing to do. There's no arbitrary target on share or anything else like that. It's the continued growth of free cash flow and free cash flow per share for the company, which we continue to optimize around. We see retail as being a great place to put, you know, investment in proprietary in our network to work today.
Any other incremental opportunities, we'd really be looking around at how does that look versus other opportunities to deploy capital in Nutrien, or just giving capital back to shareholders, which has become a big part of our capital deployment strategy that we like, particularly on that ratable share repurchase to be able to knock share count out and consistently grow free cash flow per share through cycles. It's all part of that broader framework in terms of how we would look at that.
Would you think, like, the tuck-in and opportunities are harder or easier than it was? I mean, you probably picked away at some of your best opportunities. I know things have changed. Like, there's a digital ag revolution, which had maybe a slowdown. There was more requirements around ammonia safety, things like that. You know, valuations. I mean, has things easier or harder, or is your ideal network now more sort of along the way than and harder to find opportunities?
I mean, if you look at the way that the market is composed, you've still got about a quarter of the U.S. retail market that would be independents. There is opportunity. I think the biggest change has actually been Nutrien. You know, we undertook acquisitions where we thought we had really substantial synergies, could bring cost efficiencies for customers, and that synergy prize was really what drove those acquisitions. I'd say for the most part, those large retail acquisitions we've undertaken were very successful, you know, really by any measure.
The Nutrien capital allocation philosophy and the consistency and the focus there is probably what's changed that, you know, we look today through a lens of just being so rigorous around where that capital dollar is gonna go, that those opportunities are still there, but they have to be the right one. I think at the same time, when we continue to look at our own network, I think it's still fair to say there's probably overbuilt infrastructure in general in the U.S. retail market. There's a lot of older assets, and so if we're gonna acquire physical assets versus reinvesting in our own, we wanna be really thoughtful that that's the right thing to do. Again, it just comes down to that return on capital, that militant focus on how we allocate capital.
Can you talk about some of the portfolio reviews you're doing now? Trying to maybe selling phosphate or changing how you deal with phosphate. You're talking about selling Brazilian assets. I think you said last week you've got Either have a deal in place for the Brazilian soybean seed business and other assets, how you're reviewing those. Then also, you know, Trinidad, whether you try to get a gas deal there, or I think the commentary last week was, like, now that you've shut down the operations in Trinidad, You've talked about maybe selling them, but it sounds like you're now focused on that and maybe not trying to get a new gas deal there. I said a lot there, sorry.
One thing-
You heard me.
Yeah.
You're fine.
I always joke that.
Yeah
I speak Joel, so I know exactly-
Yeah, you're fine.
what you're saying.
You're fine.
Yeah.
You're fine.
Um-
Yeah
you know, I think the theme of the question is really we've got a portfolio review underway at Nutrien. The core underlying theme of that whole portfolio review at Nutrien is just what I said. It's the focus on having a resilient portfolio of assets that cashflow in any market environment such that high commodity prices, low commodity prices, this'll be a portfolio that generates cash consistently. A big focus for the management team and me in my role over the last couple years has been really doing a rigorous look, asset by asset, geography by geography, on return on capital, how free cash flow generation looks across those assets. As we've talked to investors about over the last year, Trinidad phosphate and Brazil retail is really what fell out of that.
In terms of a status update on where we're at with each of those, when we look at the Brazil retail business, as you said, Ken mentioned on our call last week, we're out in the market testing a sale of the soybean seed business in that region, and continuing to evaluate the rest of the footprint in Brazil for the very reason that I talked about. When we look at the phosphate business, we are now actively in the market with our sales process, comparing that to alternatives we have internally to reconfigure the business.
Our goal for the phosphate review is to have a conclusion on the path forward for the business by the end of the year, the sales process is obviously going to provide us with indications of what the business is worth to a third party, which is a critical component of that assessment. From a Trinidad standpoint, as you said, you know, we've talked about exploring a potential sale of that facility. The issues in Trinidad are really beyond gas. It's structural. As we've continued to say, it's really four things. It's, one, we don't currently have a gas contract. two, gas availability continues to be a huge question on the island.
Three, there's been changes or posture changes in the port fee structure there, and then there's, you know, some disputes around fees related to historical port usage. We've continued to be very consistent in saying we would need a comprehensive solution to all of those to really understand a path forward, and that's not yet come. At the same time, like the other assets, we think it's incumbent upon us to test the value of those assets to a third party. You know, as we said, we are also exploring whether there's a potential sale of those assets. All of those processes we'd be hope- to get to a path forward, a conclusion, a direction by the end of 2026.
When we look on the other side of that, there's really a Nutrien portfolio that sits there that we'd be willing to invest in all the assets.
They fit that profile of resilient cash generation that I mentioned. That's really the goal is just continuing to reposition the company for strength in the years ahead.
In this phosphate and sulfur environment, you're trying to sell these assets or look at these assets in a very weird time. Could what's going on lead you to have to delay that process a bit or change the types of deals you might do? Earn-outs, optionalities, conditions, you know what I mean? Like, is that entering the conversation?
You know, for us, really we've had good interest from buyers in the assets and I think, you know, we've got sophisticated buyers that are interested in the assets in just the same way that, we're sitting here looking at the world saying the current economic construct is not sustainable. We would expect that a sophisticated large buyer who's looking at being a long-term owner of these assets would see through the current environment in looking at these assets on a going concern basis. Obviously, time will tell. The best indication of value for the phosphate business will be what someone's willing to pay for the phosphate business. We are proceeding with the sales process, you know, in the months ahead and, you know, we'll have more to report once we have better line of sight on what that all looks like.
I believe Nutrien earlier this year or last year pulled your support for the continuing of CVD phosphate duties against Moroccans. Is that accurate?
That would not be accurate in the sense, number one, we're proponents of free trade generally. We think the agricultural markets are so integrated globally that free trade in agricultural markets, whether it's crop inputs, crops themselves, you know, that's just such a critically important staple in our business that trade can flow freely. I think second, when we look at the unsustainable nature of the situation, including grower affordability on phosphates, you know, we have made comments more recently that we would be in favor of a removal of the CVDs, to create more sustainable affordability for growers.
The U.S. government's been very outspoken in recent months about the fertilizer and crop input industries and this administration. Do you think the U.S. government could create conditions to improve greenfield nitrogen ROI?
You know, what I can comment on would be that through this whole situation in the Middle East, and even prior to that, I mean, we've had really constructive discussions with policymakers in the U.S., in Canada. We do that in the markets that we operate across the world, I think, one, to create understanding and education, and two, to talk about the solutions that are out there. You know, we've heard a variety of potential solutions talked about by the administration and, you know, we're part of what we would consider to be really constructive discussions on how the industry works, how economics in the industry works, you know, how growers think about the market, how we think about the market. We'll continue to do that.
It's difficult to speculate at this point on what might be possible but, you know, clearly with the situation in the Middle East, which has cut off trade from a critical part of the world for these key commodities, there's a lot of discussion about the ramifications of that right now.
Let's have a fun question. Like, with the government out there talking, there's so much noise out there. You know, especially with potash being a bit of a political commodity now, because it's going with USMCA, but the government could take a stake in a Belarusian potash asset. The government could invest in Jansen Stage Two. All these things. Like, how do you think about all of these, you know, interesting theories out there?
Yeah, I mean-
Stories, sorry.
really difficult to comment on them.
Yeah.
I mean, I think you see things come and go in the news cycle. I mean, at the end of the day, it sounds cliché, but what we can focus on is running our business, you know, and looking at the factors around us. For us, it continues to be the story of looking inwards, doing the best possible job we can of running the assets reliably, producing crop nutrients, serving customers, continuing to rationalize the portfolio, reduce costs, be disciplined with capital. You know, you focus on the things that you can focus on, and I think that's what we're doing.
One of the things I wanted to ask you back on phosphate is we've seen the Moroccans who are at this conference curtail production in Q2 because of sulfur. We saw Mosaic announce the other day they were going to curtail production in Louisiana and Florida, a bit at Bartow in Florida and a bit in Brazil about 'cause of sulfur. You guys have not done that yet in Florida, North Carolina. You've talked about it being unworkable. Why haven't you yet done what peers have done or?
I mean, we continue to run the business as efficiently as we can. I think one of the boosts we had in the first part of the year here is we had some production challenges last year. On a year-over-year basis, we've actually seen reliability improve. In the first quarter, we had production up by about 20% in the phosphate business. This is a really difficult situation. We have not taken down any production. We continue to try to serve customers. It is a very difficult situation right now economically in phosphate, and so we continue to look at all the levers that we have to optimize the business inside of the company, reduce our cost structure, try to find efficiencies in how we're procuring, but it is very difficult right now.
In the minute we have left or so, what do you think is the one thing investors are missing about Nutrien these days?
Look, I think, you know, for those investors that have talked to us, we've got a really sophisticated shareholders and investors in capital markets. I think, you know, if I step back and I look at the things that are within our control, the levers that the company has to create value, and I look at the financial situation we're in, one, got a very strong balance sheet. Two, when we look at really any foreseeable environment in front of us, we believe that we'll generate significant free cash flow and enough free cash flow to fund all of our capital priorities, enough free cash flow to clearly pay the dividend and continue to support and grow our ratable share repurchase program over time and do that in a way that adds value for a shareholder by growing free cash flow per share over time.
I do believe our investors in the sell side really understand that. Obviously, the dynamic that's played out with the Middle East has created a lot of volatility in capital markets. You know, when I, when I look at, you know, say last week, really strong earnings, consistent outlook, great execution against the business, no change in capital priorities, we see a reaction like we did in the capital markets. You know, I always sort of joke, if you see the stock go down and it's your fault, there's a lot of look in the mirror moments on that. If you see the stock go down and you don't understand it, you buy the stock. I know Chris and I both bought the stock on Friday. That's all public in filings.
We believe in the future and the ability to grow shareholder value in the company.
Thanks, guys. Thanks a lot.
Thanks.