Nutrien Ltd. (NTR) Q1 2015 Earnings Report, Transcript and Summary

Richard D. Downey - Vice President, Investor/Corporate Relations and Market Research Charles V. Magro - President, Chief Executive Officer & Director Steven James Douglas - Chief Financial Officer & Senior Vice President Ron A. Wilkinson - Senior VP & President-Wholesale Business Unit Stephen G. Dyer - Senior Vice President, President-Retail Business Unit Jason Newton - Head of Market Research, Agrium, Inc.

Andrew D. Wong - RBC Dominion Securities, Inc. Christopher S. Parkinson - Credit Suisse Securities (USA) LLC (Broker) Matthew James Korn - Barclays Capital, Inc. Joel D. Jackson - BMO Capital Markets (Canada) Ben Isaacson - Scotiabank GBM Don D. Carson - Susquehanna Financial Group LLLP Vincent Stephen Andrews - Morgan Stanley & Co. LLC Jacob Bout - CIBC World Markets, Inc. Steve Hansen - Raymond James Ltd. (Broker) Tim Tiberio - Miller Tabak + Co. LLC Ben A. Richardson - JPMorgan Securities LLC Mark W. Connelly - CLSA Americas LLC Yonah Weisz - HSBC Bank Plc (Tel Aviv Branch) John Chu - AltaCorp Capital, Inc. P.J. Juvekar - Citigroup Global Markets, Inc. (Broker) Michael Leith Piken - Cleveland Research Co. LLC Adam Samuelson - Goldman Sachs & Co. Chris Silvio Perrella - Bloomberg LP (Research)

And welcome to the Agrium's 2015 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Richard Downey, Vice President, Investor/Corporate Relations. Thank you, sir. You may begin. Richard D. Downey - Vice President, Investor/Corporate Relations and Market Research: Thank you, operator. Good morning, everyone, and welcome to Agrium's 2015 first quarter conference call. On the phone today to review and discuss our results is Mr. Chuck Magro, President and CEO of Agrium; Mr. Steve Douglas, our CFO; and Agrium's leadership team. 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. securities commissions to which we direct you. I will now turn the call over to Mr. Chuck Magro. Charles V. Magro - President, Chief Executive Officer & Director: Thanks, Richard. Good morning, everyone, and welcome to Agrium's first quarter earnings call. As I speak to you this morning, growers across North America are finally busy seeding and applying crop inputs as field activity is now well under way. Like last year, the start of this year's spring season was again delayed due to unfavorable weather conditions across key U.S. growing regions. However, our retail-distribution business has seen a very strong pickup in field work and grower demand across the U.S. and Canada over the past month. In fact, we have seen retail distribution revenues in April come in well above the same period last year. As the world's largest direct-to-grower agricultural retail distributor, we have excellent visibility into farmers' thinking and actions and we'll share our insights on the market during the call. In reviewing our first quarter results with you this morning, I'm pleased to report that we made good progress on our Operational Excellence initiatives achieved, particularly with respect to operating rates for nitrogen and phosphate this quarter. Our first quarter results were primarily impacted by headwinds in the retail business, which resulted from a very late start to field activity in the Eastern and Southern U.S. following extremely cold temperatures in February and excess precipitation in March. It's also important to keep in mind that as our retail footprint has expanded North and into the Corn Belt, a higher proportion of first-half earnings will be weighted into the second quarter. While we are seeing some increased competition in the current crop price environment, we believe that a significant amount of the shortfall in the first quarter for retail has been driven by the late spring and expect the solid grower demand will drive strong second quarter performance. We do not see anything in today's market that alters our view of the significant cash flow generation of this company or our strategic direction to which we are firmly committed. Turning to our results from the wholesale business, our earnings this quarter were supported by strong margins in our nitrogen and phosphate businesses. Our focus on Operational Excellence contributed to reduced cost and increased nitrogen operating rates. Our ammonia capacity utilization rate was 90%, a significant improvement over 2014 levels, and in line with our 2015 target. We saw a lower cost of production for nitrogen due to these higher on-stream times, much lower natural gas cost and the impact of the lower Canadian dollar. Phosphate margins were also strong again this quarter with lower production cost as a result of strong on-stream time and weaker Canadian dollar. As a reminder, both phosphate plants have major planned turnarounds in the second quarter which will result in lower phosphate production and higher cost per tonne for this period. We continued to ramp up the Vanscoy potash facility after completion of the tie-in late last year. We produced 256,000 tonnes of potash in the first quarter. And over the past 30 days, we have significantly accelerated production rates to over 170,000 tonnes which, on an annualized basis, is over 2 million tonnes. As such, our production target for the first half of the year remains unchanged at 700,000 tonnes, and the annual target remains at 2.1 million tonnes. We have made good progress on our nitrogen expansion projects, the first of the two new MOPCO nitrogen facilities will be in a position to produce ammonia later this month, subject to gas availability. Work on our border expansion project continues, and we still expect the additional nitrogen production from this facility to be available in early 2016. Retail results for crop nutrients and volumes were solid for the first quarter in spite of the late spring and declining nitrogen prices. Seed margins were impacted due to a combination of lower crop price environment, some growers trading down in traits this year, and the acreage shift out of corn to soybeans in the U.S. Overall, our Dyna-Gro Seed sales in the U.S. showed very good performance helping to mitigate some of these factors. In Canada, growers delayed seed purchases which pushed some of sales of our private label canola seed Proven into the second quarter. Crop products' margins were primarily impacted by a mix effect this quarter. Wet weather across much of the U.S. limited farmers' ability to till the land to control early weeds which led to increased glyphosate demand for burn-down. As a higher proportion of sales were from lower margin phosphate products, we anticipate crop protection margins to move closer to historical levels in the second quarter as the mix normalizes. Similarly, the wet late spring pushed sales and gross profit for our services and other segment from the first quarter into the second quarter this year. On a regional basis, Australia performed very well again this quarter, largely on continued cost efficiencies across the business. I will now turn to Steve Douglas to discuss the new disclosure guidance and Operational Excellence initiatives in more detail. Steven James Douglas - Chief Financial Officer & Senior Vice President: Thank you, Chuck, and good morning, everybody. On the Operational Excellence front, I will draw your attention to a couple of slides that we have included in the first quarter earnings presentation that show our progress on several related measures. Our G&A expense is noticeably lower as we continue to streamline our business and ensure cost efficiency across our operation. You will see that we have driven incremental sales volumes back to Western Canada, leveraging our retail position to increase netbacks. Regarding continued growth, our program of retail tuck-in acquisitions has been very successful this year. We've acquired 15 locations so far with an estimated $12 million of annual EBITDA, acquired at an average EV-to-EBITDA multiple of around 5.5 times pre-synergy. This is an unusually high volume of transactions for this time of year, and we anticipate a healthy pipeline of acquisitions for the remainder of the year. As part of our ongoing portfolio review, we have recently divested the Niota and Meredosia terminals associated with our purchase for resale business, the Reese Micronutrients facility, and have also announced our intention to sell our West Sacramento nitrogen upgrading facility. Our portfolio review has been very successful to-date, but there are now some completed asset sales resulting in about $250 million of sales proceeds including working capital. All of the divested operations and assets were non-core to our strategy with low-capital returns and where we did not hold a significant competitive advantage. Additionally, the earnings associated with these assets were negligible. I'd also like to reference the strength of our balance sheet. In the next five years, we only have about $600 million of long-term debt maturities and recently took the opportunity to offer an additional $1 billion of 10- and 20-year debentures at rates of 3.375% and 4.125%, respectively. The offering was 6 times over-subscribed, indicating the debt market's confidence in our future cash flows and allowed us to take advantage of the strong bond markets to secure historically low rates for long-term financial instruments and lowered our overall weighted cost of capital. This was used to pay down short-term debt, and has no material impact on our leverage ratios but does provide us with significant financial flexibility for the future. It is this disciplined approach to our business of clear capital allocation policies, significant free cash flow generation and the strength of our balance sheet that enabled us to announce a 12% increase in our dividend yesterday, bringing the annual payout to US$3.50 per share. We also started making purchases of our shares under the normal course issuer bid in April and have purchased approximately $75 million worth of shares or approximately 712,000 shares over the past five weeks. We have provided guidance for the first half and updated our guidance for the full year. The first half range is $4.75 to $5.25 per share with the annual guidance being narrowed slightly to $7 per share to $8.25. The narrowing of guidance is primarily based on the impact of Chinese urea exports on global urea prices, margin pressure on seed sales and lower crop input expenditures associated with the lower expected U.S. corn acres this year. This quarter, we initiated a supplementary information package with significant additional financial and operational data, which was published on our website simultaneously with our quarterly results. In this new supplementary schedule, you will find additional disclosure on free cash flow by business unit, EBITDA by nutrient, detailed depreciation schedules, balance sheet and debt metrics and a summary of our hedging positions, Operational Excellence tracking and much more. This is a comprehensive level of disclosure which further demonstrates our commitment to transparency and accountability, making it easier for the Street to track our underlying business performance. I will now turn over to Chuck for the outlook and concluding remarks. Charles V. Magro - President, Chief Executive Officer & Director: Thanks, Steve. The late season in the U.S. and lower corn prices are expected to impact seeded acreage this year. Our current expectations are for U.S. corn acreage to range from 87 to 89 million acres this year. As illustrated on slide 11 of our quarterly slide pack. If we are at the midpoint of this range and yields are at trend levels, it would tighten the corn market quite considerably in the second half of the year. Global nitrogen prices have been pressured by Chinese urea exports which reached over 4 million tonnes in the first quarter, more than double last year's level. Urea benchmarks have tested floor prices but have improved in recent weeks, partly due to the resistance by Chinese producers to sell below production costs. We expect Chinese urea exports to slow in the coming months. We also expect strong nitrogen demand across North America this spring. Regionally, Western Canada and the Northern Plains have seen dryer and earlier starts to the spring season than the Corn Belt, supporting a strong ammonia run in these regions. Given the compressed fall season and the later start to the spring season in the other regions of the U.S., we see the potential for nitrogen demand to run later than usual in the second quarter with the use of additional side- and top-dress. For phosphate and potash, we have seen some impact on growers being able to apply these two nutrients due to the very wet weather that has been present across the Eastern and Southern U.S. for the past few months. However, we expect overall demand this spring to be similar to last year's levels. Internationally, global potash markets stabilized after a delayed announcement of supply agreement with China and India, both of which have settled at slightly higher prices than last year. Agrium continues to benefit from our significant competitive strength across our products and business lines. We have access to some of the lowest cost natural gas in the world for our nitrogen manufacturing, and have a local production and distribution network that allows us to sell that product into higher-selling price regions. Our expanded potash business is expected to run at higher utilization rates than our peers due to our unmatched network of domestic distribution to growers. And our global retail business has the scale and depth to create meaningful procurement and logistics efficiencies. Looking at our first half and full-year guidance, it's evident that we have the ability to achieve strong results due to our competitive strength even in the face of some industry headwinds. More importantly, we have a clearly defined strategic direction for the company that remains firmly intact and which we believe will generate superior shareholder returns over the near and long term. I will now turn the call over for questions.

Thank you. At this time, we will conduct and question-and-answer session. Our first question comes from Andrew Wong with RBC Capital Markets. Please proceed with your question.

Hi. Thanks for taking my question. So, we've seen two dividend increases now in the past six months even while we're still in a pretty conservative ag environment. Can you just talk about the thinking with raising the dividend now versus later when maybe the ag environment improves a bit or – and can we expect maybe a more regular cadence of dividend increases going forward? Charles V. Magro - President, Chief Executive Officer & Director: Good morning, Andrew. Good question. So, let me tell you how the management and the board of directors are thinking about our dividend. Certainly, our objective is to have a growing and a sustainable dividend, so this is par for the course for us. But what I would tell you is it's more of a journey than a destination. Nothing has changed our view of the long-term value creation for the company. In fact, when we look forward, we get even more excited. And we are in alignment with what we communicated late last year and again earlier this year of targeting the dividend through the cycle at 40% to 50% of free cash flow after the sustaining capital. So, yesterday's announcement of 12% increase, it's sizable any way you look at it. It is reflective of our view and our confidence that the Vanscoy production is coming on nicely. It doesn't require any further capital cost. Now, our CapEx total for the year is unchanged at $1.3 billion, so it's still a relatively high CapEx year. But we will continue to look at the dividend. Our capital program is going forward and increase that dividend over time as earnings grow. That's the plan. That's the journey we're on. And I think that the move yesterday is reflective of a continued of our strategy.

Thank you. Our next question comes from Chris Parkinson with Credit Suisse. Please proceed with your question. Christopher S. Parkinson - Credit Suisse Securities (USA) LLC (Broker): Perfect. Thank you. Can you update us on your operational efficiency targets within the nitrogen segment, and then also any updates you have regarding the time line of the Borger expansion? So, basically just any intermediate to long-term thoughts on the fixed cost structure would be appreciated. Thank you. Charles V. Magro - President, Chief Executive Officer & Director: Good morning, Chris. I'll take the OpEx question and then I'll ask Ron Wilkinson to talk about the Borger update. So, if you recall late last year, we set a target of $475 million for Operational Excellence. $325 million of that – $350 million of that was through working capital reductions and then $125 million was really earnings. And on the working capital side, what I would tell you is we're making very good progress. Last year, retail was down about $200 million of working capital, so that's a great move forward. And then, the information that Steve Douglas shared in his prepared remarks, with the portfolio review, we have actually divested or announced divestments of about $250 million of assets, inclusive of working capital. So, those are the two primary buckets and I feel very good that we're going to achieve that $350 million or even exceed it through the next period of time. Now, on the $125 million, there's a whole bunch of moving parts in that, but I'd draw your attention to really three key drivers. The first is ammonia capacity utilization. And the first quarter was a solid quarter. We're going to see some ups and downs as we continue to refresh our assets, but 90% compared to the 79% last year is a real good improvement. And if you look at our footprint and today's margins and you annualize that number, that would be about $100 million of gross profit. So, a big part of it is nitrogen asset utilization and we've made a very positive step forward in the first quarter. The other piece of this, of course, is repatriation of nitrogen and phosphate volumes from the Pacific Northwest and into Western Canada with our target of being a total of 600,000 tonnes by the end of next year and the plan being about 150,000 tonnes this year. Overall, when we deliver that, that'll be another $30 million to $40 million of gross profit or margin enhancement. And we're well on track for that as well. And then the piece, which Steve Douglas hinted at, is our G&A, and it's down about 25% since 2003 (sic) [2013] of where we expect to be by the end of the year. As we rationalize the portfolio and trim the business lines, we are taking out our G&A costs in alignment with that. So, overall, we're making really good progress on OpEx and pleased with the journey. And every day, we're finding more and more opportunities to take costs out and lean out the company. And I'll turn it over to Ron now to talk about Borger. Ron A. Wilkinson - Senior VP & President-Wholesale Business Unit: Hi, Chris. It's Ron Wilkinson. Just a little more color on Borger. Construction, we're past 25% of completion. The major equipment is all in place. Going forward, it's going to be mainly a piping installation program. And obviously, I'll say the contractor efficiency during that period is going to be key. We have our turnaround scheduled for the ammonia unit where we'll tie in the portions of the expansion for it. That's scheduled in the latter half of the year. And as Chuck said, we're looking forward to increased nitrogen production there early next year.

Thank you. Our next question comes from Matthew Korn with Barclays. Please proceed with your question.

Hey. Good morning, everybody. Thanks for taking my question. You mentioned competitive pressures in seed, chemical and services this quarter, and seemingly that was a separate issue from the pushback from weather and a more cautious spending farmer. Did you see CPS losing share in certain areas? Is that changing or is that causing any change in your marketing practice or sales prices, or do you essentially think that the seasonal catch-up can normalize the competitive balance? Charles V. Magro - President, Chief Executive Officer & Director: Yeah. Matt, I'll start and then I'll turn it over to Steve Dyer and give you the details per shelf. So, certainly, when you have fewer acres and lower crop pricing and the season's late, the first quarter is always one of these quarters where people are looking at who's going to move first when it come to reduction of prices. I think that's normal. We've seen it before. But I would say overall, what we've seen since the first quarter and then now into April is our share is actually either holding or expanding a little bit as we move through some of the key regions with our new footprint and some of the new products and services that we have through our Loveland Products and our Dyna-Gro brand. So, no, we have not seen reductions in market share. But I'll have Steve go through each shelf and what he's seeing when it comes to the margin expectations in the first quarter and then into the second quarter.

Thanks, Chuck. Hi, Matthew. Yeah. In terms of – just to reiterate what Chuck said, from a revenue or top-line standpoint, we don't see any issue there across all of our shelves. So just going through the shelves, taking a look at fertilizer margins, we're actually tracking in line with last year and we see that continuing. So, again, we don't see any issue from that standpoint. If I move to chemistry, we've seen some early pressure there. But most of our change in margin has been related to, as Chuck mentioned in his commentary around, we did have a higher level of burn-down and weighted to other chemistry and the burn-down tends to be a lower margin as well. So, a lot of it was around mix effect. But we are seeing a little bit of chemistry pressure there – or margin pressure particularly around some of the broad acre crops. Taking a look at seed, that's where we are seeing most of our margin pressure. And again, there are several reasons for that. We have the late spring season. We have the commodity pressures and growers looking at trading down in some cases on seed quality, I'll call it, a slight shift in corn/soybean as well. But overall, we expect very good growth in our seed. As you know, we've had very good growth historically in our seed, and we expect to see strong growth again this year to – and taking some market share. And as well have mentioned, we expect stronger growth on our private label and our Dyna-Gro as well in the U.S. And then you mentioned service as well, I'll just touch quickly on that. That's strictly a timing issue, and this compressed season may actually create some additional service opportunities for us. When the farmer gets very busy, he does lean on us to help out, getting some of his work done as well.

Thank you. Our next question comes from Joel Jackson with BMO Capital Markets. Please proceed with your question.

Hi. Good morning. If I read right, I think that Vanscoy CapEx is now – the estimate is for $2.6 billion, not $2.3 billion, maybe you comment on that. And also on Vanscoy, do you still maintain your guidance which I think you do is for 1.4 million tonnes of production in the second half (22:31) proving run? And then why won't that be the rate that you go at, 2.8 million tonnes in 2016, why are – are you still guiding to lower than that and what's the reason for not going (22:41)? Charles V. Magro - President, Chief Executive Officer & Director: Hi, Joel. I'll have Ron answer your questions on the Vanscoy ramp-up and cost. But what I would tell you, so far, we're quite pleased and we're on our plan. So, Ron, why don't you talk about the numbers? Ron A. Wilkinson - Senior VP & President-Wholesale Business Unit: Good morning, Joel. It's Ron. As far as CapEx goes, our estimate is unchanged and if there's some disconnect you're seeing with the numbers, we can take that offline and discuss it with you. In terms of the production volumes, as we've said, it's ramping up as we expected. And while we were a little down on our expectations in the first quarter, we had a great April and a good start to May. And we are – we'll be moving into that Canpotex test run in the second half. And you're right, if you say 1.4 tonnes in the second half, and you annualize it, it's 2.8 tonnes whereas next year I think we have forecasted 2.65 (sic) [2.45] tonnes. Now, one of the things about a Canpotex test run is that you're trying to maximize your volumes and they're not necessarily sustainable for a full year or even for a full six months. It goes around mine planning and how you run your mills. So, we're standing pat with our forecast for 1.4 million tonnes for the second half of this year, 2.1 million tonnes for the full year, and then next year 2.65 (sic) [2.45] million tonnes.

Thank you. Our next question comes from Ben Isaacson with Scotiabank. Please proceed with your question.

Great. Thank you very much and congrats on the dividend bump. It's nice to see. My question is can you give us an update on your comfort level with respect to Chinese nitrogen capacity? What do you see in terms of net capacity growth? What is your view on the growing exports that we've seen year-to-date? And then what are your thoughts in terms of marginal cost? Charles V. Magro - President, Chief Executive Officer & Director: Good morning, Ben. I'll ask Jason Newton, our Head of Market Research to answer your questions on our views on China.

Good morning, Ben. Yeah, the Chinese capacity numbers are pretty difficult to forecast. In gross terms, if we look back 2014, there's around 5 million tonnes of capacity added in China. But because of the poor production economics in the second half of the year, particularly, we've heard that there have been pretty much a matching amount of shutdowns. So, as we look forward over the next couple of years, I think the gross capacity additions are expected to be in that 4-million-tonne range. And there have been project delays that have changed that number as we go through the year, but the shutdowns will be something to watch. Yeah, we did see 4.4 million tonnes of exports in the first quarter of this year. And on an annual basis, the last 12 months, that adds up to 16 million tonnes. So, China has been exporting a lot of urea offset to a large degree by strong demand and seeing strong demand on a fertilizer year basis in the U.S. India came into the market in a big way late in 2014 and early in 2015. But if we look at 2014, Chinese production was relatively flat year-over-year to 2013 levels. Exports were up over 5 million tonnes. So we think there was an inventory drawdown within China in 2014. They continue to have relatively flat production in the first quarter of this year. Exports were up significantly. So, we think there's probably more inventory drawdown taking place. And if they continue to produce at relatively flat rates, the exportable supply should tighten up in the second half of this year. From a marginal cost standpoint, of course, the big factor in the first half of this year is the reduction in the export tax from the first half of last year. So, that adds up to about a $25 per tonne reduction in cost for China. Additionally, if you compare the anthracite prices in the first half of last year to the first half of this year, that's another $20 a tonne. So, year-over-year, in the first half, they're about $45 per tonne lower on a cost standpoint. And if you look at prices year-to-date, they're just under $40 a tonne lower. So, it is tracking pretty closely with costs. Current costs are actually pretty close, we think, to where they were last year in the third quarter. We had slightly lower anthracite prices but higher freight costs. And we're seeing now some higher electricity costs. And so, as we look towards the second half of the year, I think from a cost standpoint, China should be fairly similar to where they were a year ago.

Thank you. Our next question comes from Vincent Andrews with Morgan Stanley. Please proceed with your question. Vincent, your line is live. Our next question comes from Don Carson with Susquehanna. Please proceed with your question.

Yes. Thank you. Just want to go back to retail side and your comments about grower caution as they're faced with lower margins. So, you talk about trading down on traits for seed, but what kind of pricing are you seeing on a like-for-like basis? And then, on P and K, are you seeing any evidence of lower application rates? And then, finally, if you could also talk a bit about glyphosate pricing given the strong demand we've seen there. Charles V. Magro - President, Chief Executive Officer & Director: Steve Dyer will handle your questions, Don.

Yeah. In terms of on seed, again, as we mentioned, we see – overall, we're seeing margin pressure across all of our seed. Again, if I look at, into April here, we see margins come up nicely from a seed standpoint. And, yes, obviously, the trading down, you're looking at lower value, as well as the shifting from corn to soybean. Soybean is a lower-margin seed than corn as well. So, there's – that's really where some of the pressures are coming from. In terms – or I'll just maybe flip through our proprietary seed, we're seeing still that roughly 50% uptick in seed margins on our private label. So, we are seeing solid margins from that standpoint across our private label as well. In terms of glyphosate, pricing is pretty much set for the year on – for the first half on glyphosate. So, we're seeing glyphosate steady. As I mentioned, we have seen a higher demand in glyphosate with some of the burn-down, but we see overall margins being steady through the rest of the year. Charles V. Magro - President, Chief Executive Officer & Director: And then, Don, on P and K, as we said, what we saw is the first quarter was light. We think that was weather-related in the South and Southeast. And our expectation for the year today as we sit here in front of you is that it will be similar to last year if there's a window to get the P and K on in the South and Southeast, which it looks like there will be, but the first quarter was light. And in terms of applications, we think it's because – primarily because of weather relations.

Thank you. Our next question comes from the line of Vincent Andrews with Morgan Stanley. Please proceed with your question. Vincent Stephen Andrews - Morgan Stanley & Co. LLC: Hi. Sorry about that before, I was on mute. (30:10-30:16) commodity prices, I think that's a little different view than some have. Can you just talk about what underlies that view? Charles V. Magro - President, Chief Executive Officer & Director: Vincent, you're going to have to repeat your question. We didn't catch it here in Calgary. Sorry. Vincent Stephen Andrews - Morgan Stanley & Co. LLC: Sorry. Hopefully, this is better. Your press release discusses a view that if we have trend line yields or lower, but trend line, that the commodity prices are likely to move higher from here. I'm just wondering what, in particular, in your view, of the balance sheet will get us to higher prices if yields come in as the market anticipates? Charles V. Magro - President, Chief Executive Officer & Director: That's a great question, Vincent. We spend a lot time studying this. So, we'll have Jason Newton talk about what he's seeing and how he got to that conclusion.

Hi. Good morning. Yeah. If we look at – we think trend yields are about 165 bushels per acre. So if we look at 80 million or 85 million (sic) [88 million or 89 million] acres of corn, we expect that production will be below where use is. And so, as a result, see ending stocks decline and stocks use lower, also. If you look at – I think there's a slide in the package as well that shows that. But if you look at this year's USDA, so the 2014, 2015 USDA forecast, has stocks used in the 13.5%, 14% range. At trend yields, we'd expect that to decline to the 11% range, so a pretty significant decline in stocks use at trend yields. Now if you get below that, it could tighten further.

Thank you. Our next question comes from Jacob Bout with CIBC. Please proceed with your question.

Hi. Good morning. I had a question on natural gas. I guess, first off, maybe talk a bit about your hedging, how far forward you hedge and at what price? And maybe talk a little bit about your appetite to lock in a bit further. Natural gas price is probably not going much lower, and just how you think about that? And then, maybe just lastly, just any comments about the NDP win last night. Is there any implication for Agrium? Charles V. Magro - President, Chief Executive Officer & Director: Well, I'll handle the NDP question, and then, I'll put the easier questions over to Ron for hedging and what our thoughts are in terms of locking in, Jacob. It's all fresh. Obviously, what we witnessed last night was quite historic in Alberta politics. We are a company that can work with any of the parties. We wish them the best. We think that now that they have a majority, they'll be able to act. And we just look forward to being part of the political process and working with the new government. They're going to have to get their organization together. They're going to seek input. And we'll be one of the companies, as a Canadian company and an Alberta-based company, that will work directly with them. But what you saw last night was historic.

Thank you. Our next question comes from... Charles V. Magro - President, Chief Executive Officer & Director: Hold on. We'll answer the hedging and... Ron A. Wilkinson - Senior VP & President-Wholesale Business Unit: It's Ron Wilkinson. I'll go on to the more mundane thing of gas and gas hedging. For the second quarter, Jacob, we're about 60% protected at a price U.S. dollars per MMBtu's of around $2.30, $2.35. As we look at the second half, it's about 45% to just above $2.50. And those numbers, the hedged numbers, include our natural hedges on the industrial volumes that we sell. Going forward, we've not increased our corporate hedge program. While we agree prices are very low, we don't see a real excess of gas – or, sorry, a shortage of gas, forcing prices up and therefore we've not moved any further with our corporate hedge program.

Thank you. Our next question comes from Steve Hansen with Raymond James. Please proceed with your question.

Oh, yes. Good morning, everyone. First off, thanks for the additional disclosure today. I think it's much appreciated by most. My question really pertains to the size of the guidance band. The tenor of your outlook commentary does suggest you're pretty confident in the 2Q outlook, I guess with a month already under your belt here. So I'm just curious whether there's any real reason that you didn't raise the lower-end of your guidance band. Or perhaps asking it another way, what are the key variables in your assumption that you're keeping at the lower end of that range is still intact? Thanks. Charles V. Magro - President, Chief Executive Officer & Director: Yeah. So, on the guidance, I think the statements will apply to the quarter and for the year. So, there's a couple of things, right? We're seeing – since we gave guidance a quarter ago, we did see lower fertilizer prices. We saw the full impact of China on nitrogen exports. And we now have a potash contract. So, all that's been factored into the guidance. The lower planted acres, our view is that the high value crops are going to be down about 2%. So, that's an adjustment that we've looked at. And then the applications which we've already talked about, so far they're light. We think some of that can be made back up but we're not entirely sure. And then crop prices. The December futures are lower than $4 and I think farmers in the second half of the year, they're going to watch their spending if crop prices stay that low. So, we look at that. Now, what's offsetting that and where were bullish is natural gas pricing, as Ron mentioned. The Canadian currency, the Australian currency is helping us. And our controllables, our lower G&A cost, the nitrogen operating rates, good growth in our proprietary products. And when we put all that together in the mix, the way I would look at our annual guidance is that we've narrowed the range. We're quite confident within that range. And we'll keep updating the market as we learn more as we move through the season. But overall, I wouldn't say we're pessimistic at all. In fact, what we've seen in April so far is very good from both a wholesale and a retail perspective. Very good demand for all of our products. We need the weather to cooperate. But so far, things look very good in the second quarter.

Thank you. Our next question comes from Tim Tiberio with Miller Tabak Research. Please proceed with your question. Tim, your line is live. Tim Tiberio - Miller Tabak + Co. LLC: Good morning and thanks for taking my question. In light of the overall retail environment, I just wanted to get your sense of how the Echelon platform is tracking to your initial expectations in 2015? Charles V. Magro - President, Chief Executive Officer & Director: Steve Dyer?

Thanks, Tim. In terms of our precision ag, and as we always talk about, our precision ag offering through Echelon is a very broad offering because we look at it from providing the analytics to the grower to providing precision services which would be – include soil sampling to our – tissue sampling that we do to variable rate application and then we have what I call our precision products or our proprietary products around nutritionals and biologicals and adjuvants. So, just a little bit on the product side. We've actually seen good growth in what I called our precision products particularly around our nutritionals year-over-year as well. And if I look at our broader Echelon offering in terms of data analytics, that type of thing, we continue to move forward on that. I think we continue to make good progress in the number of acres that we're serving across all of our services. Yes, the (38:15-38:17) a little harder than he was with lower commodity prices. But again, we see us continuing to make some good progress in that front.

Thank you. Our next question comes from Jeffrey Zekauskas with JPMorgan. Please proceed with your question.

Good morning. This is Ben Richardson sitting in for Jeff. Thanks for the question. Just wanted to ask about the phosphate turnaround in 2Q, any costs related to this and negative volume impact? Charles V. Magro - President, Chief Executive Officer & Director: Ron? Ron A. Wilkinson - Senior VP & President-Wholesale Business Unit: Hi. Good morning. It's Ron Wilkinson. We had a lot of things positive on the phos business in the quarter when we look at the difference year-over-year. Our production volumes of MAP, the dry product, were up 9% year-over-year. So, obviously, that helped our unit costs considerably. We continue to focus on Operational Excellence and reducing our fixed costs. And obviously, we were aided a little bit by the lower value of the Canadian dollar for our Canadian operation which is half of our business. And also, a little bit by lower gas costs in the ammonia feeding to the phosphate. So, it was a number of items that contributed to it along with higher pricing. I just want to remind everybody, again, that we do have turnarounds for both units scheduled in the second quarter, and we will see our costs up and our margins down because of that.

Thank you. Our next question comes from Mark Connelly with CLSA. Please proceed with your question.

Chuck, retail has had some issues with high leftover crop chemicals in the recent past. And I'm wondering with all the work you're doing to streamline there, can we expect that the risk of getting stuck with extra chemicals this year is lower or is it too soon? Charles V. Magro - President, Chief Executive Officer & Director: Good morning, Mark. I'll have, maybe Steve can just talk about our current inventory position across our shelves and then, specifically answer your question on chemicals.

Yeah, Mark. It's across all three shelves, going into the season here, we would have, I would call, normal inventory levels across fertilizer, seed and chemicals. If we look at chemicals, specifically, we haven't had an issue even coming out of last year with high chemical inventories. We had a little bit higher on fungicides after the first half of last year from that standpoint. But again, most of our chemical inventories are under terms with our suppliers as well. And in many cases, we have price protection in place as well. So, again, don't expect any issue with chemical inventory. We really haven't had an issue over the last couple of years.

Thank you. Our next question comes from Yonah Weisz with HSBC. Please proceed with your question.

Hi there. Thank you for taking my question. I wonder if you can talk a bit about small acquisitions or I think as you call them, tuck-ins in the retail business. What have you done so far this year and how the pipeline looks? And in addition, if I may, I know Viterra is already old news to an extent, but how has the integration of Viterra really turned out? Have you been able to build in, in Canada close to your production sites that type of, I guess, cross pollination or synergies and how has that come out as well? Thank you. Charles V. Magro - President, Chief Executive Officer & Director: Steve Dyer can address those questions for you.

And starting with the tuck-in, as Steve Douglas mentioned, we acquired 15 locations and that was 11 businesses that we acquired in the first quarter. That was unusually high. Typically, the first half of the year is very quiet for us in tuck-ins. A lot of retailers want to run through the first half where they tend to make money and then they look at selling their businesses if they're going to sell their business in the second half. So, we're very pleased with that performance. And again, as Steve mentioned, our cost for those before synergies was 5.5 times EV-EBITDA. That's roughly in the line – a little higher but roughly in line with what we've seen historically as well. So, again, that total contribution is around $12 million in EBITDA. So, we expect to see that continue through the rest of this year particularly once we get past the spring season here and expect a good pipeline of tuck-ins coming at us moving forward. In terms of Viterra, again, we're very pleased with where Viterra is today. Again, it's fully integrated. We have achieved the majority of our synergies. And today, we're – from that acquisition, we're approaching $100 million of EBITDA contribution as well. Charles V. Magro - President, Chief Executive Officer & Director: And maybe I'll just add two comments. So, we are, as Steve mentioned, very pleased with the Viterra acquisition and integration and we have our board meeting right after this meeting and we're going to share a full review with the board and really, the bottom line of the presentation is that we've hit our deal economics with very high IRRs, and we're delighted with the overall acquisition. The other thing that the acquisition has allowed us to do is repatriate wholesale volumes, and that's – really the driver is now we have an extra 210 facilities in Western Canada that is surrounding our production. And instead of railing, which is getting more and more expensive every day, nitrogen and phosphate into the Pacific Northwest, we're keeping it in our retail business. And that's allowing us to expand margins for the Agrium shareholder which I think is really important and a value of our integration.

Thank you. Our next question comes from John Chu with AltaCorp Capital. Please proceed with your question.

Hi. Good morning. Just a couple of things. Any way to break down the impact FX and lower natural gas prices had on the lower nitrogen production costs, maybe just ballpark? And then, secondly, just on the China urea exports, I know Jason touched on this a bit about higher freight rates. Have we seen the full impact of the higher freight rates in terms of the removal of the subsidy, and also, the impact of the value-added tax reflecting the floor price yet? Thank you. Charles V. Magro - President, Chief Executive Officer & Director: Hi, John. I'll have Steve Douglas talk about nitrogen and FX and costs, and then, I'll move it over to Jason Newton to answer your urea export impact question. So, go ahead, Steve. Steven James Douglas - Chief Financial Officer & Senior Vice President: Thanks, Chuck. John, thanks for the question. In general, obviously, the reset in the gas price from what we expected at the beginning of the year is a far more dramatic impact than did the change in the dollar. I guess if you think – if you contemplate that roughly 10% change in the FX rate, and you extrapolated that over – if you kind of played roughly 75% of our costs, and the nitrogen set is delineated by gas, you can probably extrapolate a number. It's not something that we specifically identified. But given the fact that we pay for our gas in Canadian dollars, clearly, the 10% decline would have driven, not as dramatic a change as the gas price, but clearly did have an influence on the outcome. Charles V. Magro - President, Chief Executive Officer & Director: Okay. Before we move over to Jason, Ron's got a comment as well. Go ahead. Ron A. Wilkinson - Senior VP & President-Wholesale Business Unit: Yes. I'd just add, John, that one of the factors impacting our cost was our production volumes. For ammonia and urea, we were up 6.5% year-over-year and, again, that spreads our fixed costs over a bigger volume. Charles V. Magro - President, Chief Executive Officer & Director: Okay. Jason, do you want to answer the China export question?

Yeah. Sure. John, I think the freight subsidy reduction has come into place. I believe that started in April. It's not really significant. I think it's in the $5 to $10 per tonne cost impact depending on how far the freight is and the imports – or the shipments of coal as well. And in terms of the value-added tax, we don't really have any additional information at this time. I think early on this year and late last year, we thought it might come into play in May. And it does not look like that's going to be the case. So, I think the latest rumors say it could come in some time in the second half of this year. We're unsure at this point what the net impact on costs will be as the value-added tax paid on raw materials is deducted from what's charged on sales of urea. And so, the impact of that value-added tax, I'd say, is a little bit uncertain.

Our next question comes from P.J. Juvekar with Citi. Please proceed with your question.

Yes. Hi. Good morning. Just a couple of questions on Brazil. The country is importing less fertilizer this year through the first few months. How do you see that market and do you think it picks up later in the year as they get ready for their summer planting? And the second question on Brazil is – some of your competitors have been picking up logistics assets in Brazil. What's behind that? And is that something that you would consider? Thank you. Charles V. Magro - President, Chief Executive Officer & Director: I'll have Jason answer your first question and then I'll answer the second one, P.J. Go ahead, Jason.

Good morning, P.J. Yeah, we have seen slower imports into Brazil at the start of this year which was expected, given the strength of imports last year. I think a little bit higher carry-in, but we did see pretty strong planting actually of the second crop of corn and shipments domestically have started to pick up in March. And so, I think we'll see more of what we historically would have seen for import pace and a higher proportion of the imports coming in in – late in the second quarter and through the third quarter. Charles V. Magro - President, Chief Executive Officer & Director: P.J., on your second question around acquisitions in Brazil, what Agrium's view is, look, if you step back, I think with the market conditions the way they are, it's very, very clear that having some sort of integration for distribution assets is paramount and Agrium has been saying that for quite a long time. So, if you look around the world on where the ag markets are attractive and where the distribution assets are available, Brazil would pop up. But I would argue that for Agrium, our view is a little different. One is we have our U.S., Canadian, Australia, South American retail business, and so you look at that and you say, we would prefer to grow that business probably in the United States is our first priority because we have market share opportunity and maximum synergies. We do like Brazil. We think Brazil, over the long term, is going to be a very healthy agricultural market, but it does have, as you mentioned, some challenges right now that are quite structural and will take some time to work through. So, we think we have time. We have bought one retail facility in Brazil. But you would see us go to market differently than our peers. We prefer to be closer to the farmer and to use our retail model which we think can help the growers maximize their yields and we can make some more money because buying a wholesale distribution business in Brazil unless you back it with production is a real challenge. And that's really not our business model. Our business model would be to move a little closer to the farmer so that we can work more closely with them and get paid for services and agronomic knowledge. So, that's our current view of the distribution space including Brazil.

Thank you. Our next question comes from Michael Piken with Cleveland Research. Please proceed with your question.

Good morning. Just want to take a step a little bit more on the retail environment for the second half of the year. What is your expectation for summer fill? And if there's a disconnect between maybe kind of where some of the manufacturers price their fertilizer and maybe where some of the dealers are comfortable buying, do you anticipate that there could be a period in which orders are slow in the third quarter or logistically is that not possible? Thanks. Charles V. Magro - President, Chief Executive Officer & Director: Okay. Michael, you've asked a question that can fit in either wholesale or retail. So, we'll have Ron talk about what he's hearing from the other retail customers in terms of summer fill which – it's a little early. But we'll give you our current thinking and then we'll give you our retail view of what we're going to do once the season is over. Go ahead, Ron. Ron A. Wilkinson - Senior VP & President-Wholesale Business Unit: Hi, Michael. I think this will be what I'll call a relatively normal year. All of our customers try and end the spring empty, and this year will be no different. And assuming we have the season we expect, I think that will happen. So, when you talk about fill, that's number one, the retailers are empty, that should promote good fill, and then it just becomes a timing issue. And the good news for Agrium Wholesale is that our own wholesale inventories we expect to end the quarter very low. So, that positions us very well in the case that there's any delay in the fill during the summer by our customers. Charles V. Magro - President, Chief Executive Officer & Director: Steve Dyer, how are you thinking about it?

Yeah. And I would echo what Ron said. If you look at it from our perspective – from a retail perspective, we expect to end the season quite empty. Again, as we mentioned, we see good strong demand there across N, P and K. So, at this point, we don't see anything different from that. And then, once we get through the season here, obviously, we're in the heat of the battle right now, once we get into that June timeframe, we'll start turning our minds to that fill for the fall season. But, again, we'll be anticipating empty inventories at the end of the season here, at the end of the spring season.

Thank you. Our next question comes from Adam Samuelson with Goldman Sachs. Please proceed with your question. Adam Samuelson - Goldman Sachs & Co.: Yes. Thanks. Good morning, everyone. Two questions. First, I think your corn acreage assumptions for 2015 have come down about 1 million acres from the last time you spoke to the 87 to 89 million acres. And maybe talk a little bit about why that is, where the acres are coming out – is it just going to beans? Or are they not getting planted? Just help us think through what's driving that. And then, second, maybe Michael's question a little bit differently, think about new capacity in North America that's expected in nitrogen in the second half and how you're positioning wholesale and retail to deal with that new market – those new plants. Charles V. Magro - President, Chief Executive Officer & Director: Okay. Adam. I'll have Steve Dyer talk about his thinking in corn acreage.

Yeah. In terms of the corn acreage, that 87 to 89 million acres, the way we're looking at that right now is most of the pressure would be in the Southern and Eastern parts of the U.S. where we've had a lot of wet weather that has deterred a lot of the planting. If we get – if you have good weather here for the next several weeks, we'll probably push closer towards the 89 million acres versus the 87 million acres. In the Corn Belt, again, the Western and Central Corn Belt would not see any decline from what we – being – tracking closer to an 89 million acres. The Eastern Corn Belt has been wet, so there could be a little bit there but we wouldn't see that being overly material. Charles V. Magro - President, Chief Executive Officer & Director: And to your question, Adam, on new capacities, specifically in nitrogen, this has been well-known. It's well-documented. The U.S. is still in that import market. So, it's going to change global trade dynamics, but we don't think that what's coming up and be produced in the second half of the year and then moving into 2016 is going to impact even North American premiums that we see because of logistics differentials. We think it's business-as-usual with pushing out some imports potentially.

Thank you. Our last question comes from Christopher Perrella with Bloomberg Intelligence. Please proceed with your question. Christopher, your line is live.

Yes. Thank you for taking my question. The corn seed – third-party corn seed sales, are pricing on an apples-to-apples basis down year-over-year excluding the downward trading on traits? Charles V. Magro - President, Chief Executive Officer & Director: Steve Dyer?

Yes. Yes, we are. And that's where seeing the margin squeeze. We are down a little bit on corn seed.

Thank you. Charles V. Magro - President, Chief Executive Officer & Director: Operator, I think that's the last question.

Yes. Charles V. Magro - President, Chief Executive Officer & Director: So, thanks everybody for joining us, and we'll talk soon.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation.