Good day, and thank you for standing by. Welcome to the Nutrien 2021 Q3 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Jeff Holzman. Please go ahead.

Thank you, operator. Good morning, and welcome to Nutrien's third quarter conference call. On the call today is Mayo Schmidt, President and CEO; Pedro Farah, CFO; Ken Seitz, Executive Vice President of Potash; Raef Sully, Executive Vice President of Nitrogen and Phosphate. For retail, we have Jeff Tarsi and David Elser. We also have Mark Thompson, Executive Vice President of Strategy and Sustainability; and Jason Newton, our Head of Market Research. 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 shareholders, as well as our most recent annual report, MD&A and annual information form filed with Canadian and U.S. Securities Commission. I'll now turn the call over to Mayo for opening comments before we take your questions.

Good morning, and welcome to Nutrien's third quarter earnings call. Our exceptional results this quarter highlight our team's strong execution, significant competitive advantages and leverage the strengthening market fundamentals. 2021 has been a remarkable year for global agriculture, supported by strong demand and tight supply for most crops. Grain and oilseed prices are well above the historic average and food security remains a top global priority. We expect crop input markets will remain tight as we move into 2022 due to the significant supply-related outages and constraints that occurred in 2021. What sets Nutrien apart in this environment are the competitive advantages of our integrated model, our top quartile assets, and the decisive actions that we have taken across each of our business units. In potash, we quickly ramped up production by 1 million tonnes to meet the needs of our customers. This represents a portion of our low-cost available production capacity and is optionality that no other potash producer has today. Our low cost and strategically-located nitrogen assets are generating higher margins and escalating feedstock cost and production curtailments impact producers in other regions. We continue to make investments to enhance our nitrogen position, including strategically expanding our capacity and completing projects that will support the achievement of our GHG emissions reduction targets and the commitments in our Feeding the Future Plan. Our retail team effectively navigated a number of global supply chain challenges by utilizing the scale of our world-class network and strategic partnerships to supply or grow our customers with the products and services they need, when they needed it. These efforts have resulted in impressive market share gains and margin growth in 2021. Key to this performance is the dedication and focus of Nutrien employees around the world. I'm extremely proud of how our team has…

[Operator Instructions] Your first question comes from the line of Vincent Andrews of Morgan Stanley.

Mayo, I was just wondering if you can talk about -- you mentioned the 17 million-tonne run rate in potash in the fourth quarter. And maybe you can just talk about sort of what your expectations are for potash production in 2022? And in particular, whether that run rate is sustainable or if that’s just something that could be achieved quickly in a short period of time, but you can’t just keep doing it all the way through next year. So if you want to add more capacity for next year, it’s a little more of a complex decision. So maybe you could just help us understand how those dynamics take shape. A – Mayo Schmidt: Sure. No, we’d be happy to address that very -- very good question. One is our run rate of 17 million tonnes has been due to the very quick reaction that we had. And I think you’ll remember when we understood there was a loss of production on that Friday night, our potash team led by Ken Seitz was able to, over a period of the weekend, identify another 500,000 tonnes by labor and mechanical machinery, et cetera, to be able to address that. And then frankly, in another 72 hours, was able to continue that study and that analysis and undertaking come up with another 500,000 tonnes. And that’s really what that is, is that standby production that we’ve been talking about for a number of years. We feel it is sustainable, only affected by turnarounds, necessary maintenance and that we would do in our mines. But we think about the flexibility and the automation that we have in the 6 mines that we have and that ability to address the demand, and what I’d like to do is just take a second…

Your next question comes from the line of Christopher Parkinson of Mizuho.

Great. So to the best of your ability, can you quickly comment on how you believe nitrogen trade dynamics will evolve just given the situations in both, I'd say, broader Europe as well as China as it sets up for the first half of 2022? And then also just for China, and just what's your opinion on the intermediate to long-term export tonnage, if any at all?

Raef, do you want to take that question, please?

Yes. Thanks. So look, nitrogen trade is tight and will continue to be so. It was tight at the start of this year, and was exacerbated by mature energy prices spike in Europe. Now I think our outlook for energy prices are for them to come back to more normal levels in the next 6 to 12 months. In the U.S., that would be $3 -- $3.50; in Europe, in the $8 range or something around that. Even so, while that's been happening, demand is continuing to grow. Just to put some perspective on this, the global ammonia market is about 170 million tonnes, of which about 20 million is traded. That market has been growing at 1.5% to 2% per annum for the last 30 years, and was continuing to grow at that pace. That means every year, there's 2 million to 3 million tonnes of additional demand required to be supplied by the market. That demand is continuing. And so despite the fact that there's been some curtailments this year in Europe because of the high energy prices, if you look forward for the next 3 years, you'll see that there are some projects coming on, but those projects do not offset the growth in demand. So we expect to see good tight market in nitrogen through next year and beyond. I'm going to pass it now to Jason, who's got some additional color, we'd like that.

Okay. Thanks, Raef. Yes, just to touch on the trade flow question, it is interesting and dynamic market to try to project at this point. The situation in Europe, with respect to the shutdowns that have taken place, that's obviously in the short term, it's been supportive for ammonia imports flowing into Europe. Longer term, you expect that ammonia production will need to come back on, will need to be bid into the market by higher prices. But in the meantime, we're losing nitrate production and the result of that will be more positive urea imports into Europe. And that's why we're seeing strength in global urea prices led by Egyptian prices. In terms of the Chinese exports, we see 2021 exports between 4.5 million and 5.5 million tonnes. And we know that in the first half of this year, they exported about 1.7 million tonnes, and that will be down in 2022, just given the export restrictions. Historically, when export restrictions have been put in place, we've seen a weighting of exports from China more in the third quarter of the year, which we expect to be the case next year, and we need to see to balance supply and demand likely somewhere in the 4 million to 5 million-tonne range of exports from China going forward. So without that supply, the market will be relatively tight. And we know the area of supply/demand balance after 2022 tightens globally.

Your next question comes from the line of Joel Jackson of BMO Capital Markets. Q – Joel Jackson : I’ll come back to the potash production commentary you gave. So if I understand what you said, you produced about 14 million tonnes of potash this year, and you expect to maybe produce 15 million tonnes next year. That’s 1 million tonnes more obviously. And your Canpotex partner has suggested that demand for potash might grow next year about 1.5%. That’s about 1 million tonnes. So if I understand what you’re saying if all this is true, are you implying that you would expect to get all of the incremental demand next year in potash? You know Mosaic got more, other competitors have more? Or do you have a higher demand growth forecast in that 1.5%? Or is it something else and I’m off base? A – Ken Seitz: Yes, it’s Ken here, Joel. Thanks for the question. So yes, just to clarify, we’re preserving that production capability. Again, we have stable global demand, we think, heading into 2022. We know that inventory is really in all of the markets that we serve are quite low at the moment. And of course, we have these supply-related issues in the market. So it’s just to say that we have this network of 6 low-cost mines and we want to preserve the capability to do what we did in 2021 and potentially do that in 2022. And so again, it’s -- we’re just formulating our plans now for 2022 as we’re watching the China and India situation and inventories depleting there, a contract likely to come our way, if not later this year, early next, and formulating our plans. But again, it’s just preserving that capability among our network of 6 low-cost mines.

Your next question comes from the line of Ben Isaacson of Scotia Bank.

Perhaps a question for Ken and Jason and I apologize it's another potash question. Recurring farmers moan and groan worldwide about high prices, which is nothing new. In potash, we -- while we haven't seen any evidence of demand destruction yet, perhaps a bit of weakness in India, but we haven't really seen demand destruction, but we know prices will eventually soften. So with that context, can you also walk through what your expectations are for '22? Ken, you mentioned stable demand. Is it possible to see growth in various regions next year? And in terms of pricing, do you expect to see the lower prices in 1 year from today in key potash markets? Would you be satisfied if Brazil was $600 in a year from now?

Ben, just to comment on the demand expectations, point to direction to Slides 19 and 20 in the deck, where we do have a couple of slides on grower economics. And I think you've hinted at it, and we're seeing definitely some resistance in terms of seeing the higher prices at the grower level. But if we look at the underlying economics of growers and especially in market-driven markets, like the U.S. and Brazil, is still really positive. In fact, significantly higher than they were a year ago at this time when they were pretty strong. So we wouldn't see, in advance of spring, any demand destruction in those spot markets. And we've seen the market for crop prices strong, and we'd expect it to remain strong through the growing season in order to attract sufficient acreage to balance global crop supply and demand. I think where we've already seen some rationing is in the major contract markets. And India is a great example where imports are down year-to-date because of constrained supply. And what that means is that the inventories as we go into 2022 are relatively tight, and we expect that to present a tailwind in demand. But at the same time, those nonmarket economies looking at India or Sub-Saharan Africa where there's more subsistence farming, that's where we think that the supply constraints will start to lead to some demand rationing.

Your next question comes from the line of Stephen Byrne of Bank of America.

Yes. So you’re potash pricing, net realized price mine gate was in the low 300s in the quarter. When was that essentially booked? How many months back? And maybe more importantly, as you look forward at your forward sales in fourth quarter and more importantly, in the first half of ‘22, would you say your forward sales are more or less than they would have been historically? A – Ken Seitz: Stephen, yes, it’s Ken. Thank you for the question. Yes. With respect to the lag that you’re seeing in realized prices versus posted benchmark prices, given the sort of rapid run-up in potash prices in really all of the major markets over the course of the last several months and that lag is to be expected. And it could be that volumes are contracted 2 to 3 months prior to them being lifted from our mines, which is when we recognize revenue. So that lag is something that we experience all the time and certainly familiar to our realized price versus revenue recognition. But I can tell you, as we head into the fourth quarter here, we are fully committed. All of our volumes are committed to our customers. And as we head into Q1, we are now placing volumes into Q1. And I can tell you that we’re placing those volumes at sort of posted benchmark prices. And so that lag will catch up to the market. And to the extent that prices are stable, and you’ll see that gap close. So Q1 starting to commit volumes at posted prices.

Your next question comes from the line of Michael Piken of Cleveland Research. Q – Michael Piken : A question on retail. If you can talk -- you mentioned that you’re benefiting from some of the markups in fertilizer and crop protection prices that may not continue for next year. But if you could talk just in terms of your expectations for volume growth in retail organically? And then also just -- do you think that there are going to be any products on the chemistry side, most notably like glyphosate or glufosinate that might be tight that it might impact the number of acres that are planted either in Brazil or the U.S.? A – Mayo Schmidt: We’ve got David Elser and Jeff Tarsi on the phone. Jeff, if you would comment first and then follow up with David, please. A –Jeff Tarsi: Yes. Thanks, Michael. I think Mayo mentioned early on in his comments that we would expect retail margins to -- especially on the commodity fertilizers NP&K to return to something more of a historical nature going forward. But I’d also like to point out the fact that when you look at our margin on a per tonne basis as it relates to fertilizer, our proprietary nutritional products make up 30% of that. And we’ve had an outstanding year in ‘21 with our proprietary nutritionals, and we actually expect to see some growth in ‘22 with those products going forward, which kind of supports the margin side of things. When you look at product specific, Michael, and how that might relate crops and such, look, we dealt with those challenges throughout ‘21. We actually weren’t alerted to them until about March of this year. And if you look at where we are today, and David can comment…

Your next question comes from the line of Adam Samuelson of Goldman Sachs. Q – Adam Samuelson : Yes. Maybe a question on capital allocation, just thinking about profitability we’re tracking in the second half of this year and where we look to be tracking in the first half of next year, the EBITDA and the cash flow generation here is very sizable. You’re buying back stock. You talked about a $2 billion reduction in long-term debt over the next 6 months. But can you help us think about kind of what the internal kind of CapEx opportunities would look like, where -- what inorganic or scope or size of inorganic opportunities that might be out there versus an acceleration of cash return to shareholders? I’m just trying to think about how these kinds of prices and cash flow kind of get deployed over the medium term. A – Mayo Schmidt: Sure. No, thanks for that question. I think what I would point to, and I’ll pull in Pedro in a moment, but when we think about our integrated platform, we have a number of avenues, several to drive value for shareholders. And I think that quite frankly, that’s evidenced more pointedly this year than ever before relating to execution. We’ve been growing the business strategically. You’ve seen us down in Brazil. And then in the past, obviously, Australia has worked out very, very well, meeting our return standards and it’s driving value through our entire cycle because when you think about the vertical integration we have between the supply chain in terms of production all the way through the retail and the agronomists in the field, providing the guidance to the producers to our farmers that can ultimately make them successful in the soil chemistry, it puts us in…

Your next question comes from the line of Steve Hansen with Raymond James. Q – Steve Hansen : Yes. Just curious how proprietary products play into the capital deployment strategy here. I’m thinking back to the 2019 acquisition of Actagro, for example, I’m wondering if you might also be targeting similar type deals? Or perhaps even if there might be specific capabilities or products that you might be looking to target in Brazil? A –Mark Thompson: Steve, it’s Mark. Thanks for the question. Yes. So Steve, as you noted, the proprietary products business has been a very attractive platform for Nutrien and Nutrien Ag Solutions in particular. We spent many years over the past decade in North America, building out that model, building our Loveland Products business, which is our specialty chemistry and specialty nutrition lines. And then as you noted, we completed the acquisition of Actagro, which is performing very well a few years ago. And we’ve taken a similar approach to Brazil as well. So you’ve seen us acquire Agrichem several years ago to provide us with a platform in nutrition. And we also completed the acquisition of Tec Agro just recently, which provided us with a really attractive soybean seed platform in Brazil, and that’s a real differentiator for us when you think of how we’ve added value through core retail distribution in our business but also bolting on specialty and products and services that really provide that full acre solution for growers. With the portfolio that we have, we feel we’ve got a great organic growth opportunity in expanding the penetration of the existing Loveland products portfolio, the Actagro portfolio and then the Brazil acquisitions as well as we continue to grow that network out. So a really good organic opportunity that doesn’t require further capital investment. But of course, as we look to geographic expansion of the retail business over time, it’s an area for us that’s extremely high margin. It differentiates us at the farm gate. So we’ll continue to look opportunistically in that area as it is, of course, a strategic fit, but we’re very happy with what we’ve got today. And obviously, it’s contributing in a meaningful way to our growth.

Your next question comes from the line of Jeff Zekauskas, JP Morgan. Q – Jeff Zekauskas: They are high, natural gas prices in Europe, Eastern Europe and Russia. How much end capacity do you think is offline on a global basis? And in the phosphate area, what do you think China phosphate exports will be in 2022? A – Jason Newton: Jeff, if we look in Europe itself, the capacity of ammonia in Western Central Europe is about 20 million tonnes. And we think there’s about 40% offline. And so that equates to roughly 8 million tonnes of ammonia capacity currently offline. And that would exclude Ukraine, and there’s additional capacity in Ukraine, that’s also offline at the current time. As we look toward 2022 in terms of phosphate exports from China, we expect China to be somewhere about 9.5 million tonnes of exports this year, but they export about 5 – a little over 5 million tonnes in the first half of 2021. And given the constraints right now in terms of export restrictions, we wouldn’t expect them to be at that level next year. And so it’s a bit early to estimate where those will be in 2022 and still uncertain how those export restrictions will be applied. We certainly need from a supply-demand perspective, need volumes of exports to keep moving from China, but exports in the range of 8 million to 9 million tonnes sort of similar to where they were in 2020, is likely a realistic level given the increased constraints.

Your next question comes from the line of Jacob Bout, CIBC.

I wanted to go back to that discussion on retail organic growth. And I think same-store sales were up a little bit more than 5% year-to-date. How sustainable is this? And can you talk a bit about what you've been seeing this year? I know you hinted out supply chain certainly helped. But how should we be thinking about that from a normalized perspective?

I'm going to maybe just first comment that we continue to see opportunity in this market. We've, I would say, outachieved our expectation in terms of our ROIC on those. But what I'd like to do then is probably pass that along and have the next leader look at that, Jason or to Mark?

Yes, Jacob, maybe I'll just make a few comments. This is Mark, and then I'll have Jeff comment from our retail business. So in terms of the organic growth that we've delivered in the business this year, of course, the print was very attractive and strong. I think that's part and parcel of the strong fundamentals that we've seen generally in agriculture in the market. We've seen strong growth in demand for crop inputs, which of course, belies our performance from a same-store sales standpoint. I think as Jeff and Mayo both alluded to in the prepared commentary and some of the earlier remarks, we've also seen share gains across input shelves and made up some attractive ground continuing to build our leadership position in the market, expanding market share across several of the shells. Jeff, maybe I'll pass it to you to provide a little bit more detail.

Yes, sure, Mark. And Jason, thanks. And look, when I look at this business and organic growth was a tremendous focus for us in both 2020 and 2021, it will again be at the top of the radar in 2022. And if I look at this past year, I think we've mentioned we've had great success with our proprietary products. When I look a little bit deeper into it, we saw growth in all 4 ships this past year with proprietary products, our adjuvants crop protection, plant nutrition and seed treatments, revenue increases of 14% and gross profit of 21% in that segment. If I look at it from a pure market share standpoint, as Mark just said, we feel like we grew our market share in all 3 of our primary shelves there, fertilizer, crop protection and seed. And seed and fertilizer somewhere between 40 and 50 basis points. And look, seed has been a major focus for us from an organic growth standpoint. As a matter of fact, that's our largest opportunity going forward from an organic growth standpoint is to grow our seed shelf. And we've got an initiative in place. It's a 5-year initiative. We got off to a great start this past year, and we expect to increase that even more in 2022. And that's one of the areas, Jacob, that there's not a supply concern. All indications in talking with all of our major suppliers is that the seed shelf is going to be in really good shape. We actually think we have an opportunity to trade up when it comes from a trait and variety standpoint in 2022, just because of some of the issues that we've seen this past year around disease and corn rootworm pressure and things like that. We're also in an excellent position with both our Dyna-Gro and proven varieties as well as it relates to availability for 2022, and we had just tremendous results and what we're seeing coming off right now. So I feel really good about the organic growth opportunities that we still have in the U.S., even stronger in Canada, in that market. And obviously, Rob and what he's doing in the Australian market and increasing our proprietary business there as well with it. So we feel real good from an organic growth standpoint. I think you'll continue to see that increase over time.

Your next question comes from the line of P.J. Juvekar, Citi. Q – P.J. Juvekar: Just a couple of quick questions. First for Ron, can you talk about sort of the price mix in seeds? What are the price cuts indicating this year? And where do you see that going into the growing season? And secondly, for Mayo on potash, you ramped up your potash production by 1 million tonnes. And I guess you have at least 3 million tonnes of low-cost capacity left, when would you like to activate that capacity if this tightness continues, especially in light of the Jansen project that’s coming online in, say, 5 to 7 years? A –Mayo Schmidt: Thank you. Jeff, I’ll let you take the first half, which was I think directed to you, and then I’ll be happy to start on the second. A – Jeff Tarsi: Yes. I think from a seed standpoint, a pricing standpoint, we saw modest increases that were released late summer, early fall, and we would expect those increases to obviously carry into the ‘22 season. We’re just getting started really heavily with our fall booking of the seed business. But I think we were probably pleasantly surprised the way the increases came out in some indications were that maybe they would be a little bit heavier than they were. But there have been increases across all the major lines for seed and modest, and I think that speaks well for what we want to do in 2022 as far as increasing our share. David, you might have a few more comments on the seed piece. A – David Elser : Yes, Jeff. And P.J., thanks for the question. When you look at seed price cards, particularly across corn soybeans as Jeff said, probably a little…

Your next question comes from the line of John Roberts, UBS. Q – John Roberts: Congratulations on a nice quarter. Alberta is promoting carbon sequestration. We’ve had recent blue syngas plant announcements by Air Products and Dow, and then we also had the blue ammonia project in the Gulf Coast. Do you expect Nutrien to be pursuing bigger sequestration-related projects than what you currently have underway? A –Raef Sully: John, I appreciate the question. I guess to start, we would think that low-carbon ammonia will be an important part of global efforts to decarbonize. And if you think about agriculture or energy alternatives, whether that’s the marine transportation or power generation revenues at hydrogen carrier, our low-carbon ammonia certainly fits into that puzzle. There are different technologies available out there from electrolysis through to the carbon sequestration that you talked about. And so we’re in an interesting position here. We’ve got some competitive advantages, particularly if you look at a couple of the sites we have. So let me start with Geismar in Louisiana. We already do CO2 sequestration there. So we have an existing pipeline to the site. We have existing relationships with the company through the sequestration for us. We’ve got deepwater access. So if anybody is able to build low carbon ammonia to be part of that global decarbonization, we certainly have an advantaged position. So we’re looking hard at that. Obviously, there are some technical discussions to be had around which technology to choose coupled with the sequestration. And then there’s the commercial discussions to be had as well. We already have about 1 million tonnes of low-carbon production out there. So in that regard, we’re ahead of our competitors. We also had the Alberta site around Edmonton locations at Redwater and Port of Saskatchewan and at Carson. So we’re certainly in a position there to be able to tie into trunklines in Nigeria as well. So I think the answer is we’re certainly looking at this. I think we’ve got an advanced position. And when we’re ready to talk about some definitive projects, we’ll be back out to the market.

Your next question comes from the line of Andrew Wong, RBC Capital Markets.

I just wanted to go back a little bit on the potash quickly. And I wanted to ask the potash inventories. So there's been a lot of concern from the potash buyers around Belarusian sanctions and maybe the potential for limited availability coming out of there, and we've seen some of that impact on prices and the recent purchasing activity. So in your view, is there any build-up of inventory from these buyers that have these concerns and we have been active in the market? And is there any possible risk that if the sanctions aren't as strict that there may be some overhang afterwards?

Let me just start the comment by I think just clearly potash consumption is far exceeding shipments in many of the key regions around the world. And that, of course, is leading to a drawdown in these global inventories. And when we think about China port inventory between 2.3 million to 2.5 million metric tonnes, which includes their strategic reserves which they begin to already begin to auction. So they haven't been able to sustain those elevated levels at the port, and it is reflecting on, I think, some of the global benchmark and whether Jason or Ken would like to further comment.

Yes. I think Mayo touched on the Chinese situation. We also see extremely low inventories right now in India, which as mentioned earlier, we think that will be a tailwind as we move into 2022. In Brazil, inventories really are right in line with where they have been over the past couple of years, and we'd expect them to finish the year in line with where they have been. Right now, they're about 1.6 million tonnes. And in the U.S., we're just in the midst of the fall application season, the supply chain is in good supply, and we expect a strong fall application season just given the early harvest, which tends to lead to low carryout inventories at the end of the year. So overall, we haven't seen a build-up in inventories globally. And in some markets, especially the contract markets, we've seen them come down pretty significantly year-over-year.

Your next question comes from the line of Adrian Tamagno of Berenberg.

I have a question about nitrogen. When is it fair to expect the incremental 500,000 tonnes of new Phase 2 expansion? And all in all, you will have 1 million tonnes extra products for nitrogen when this will be achieved. So can you give more color around which products that will be directed to the [indiscernible].

Yes, Adrian, certainly. So the first phase of our brownfield expansions were announced in 2018. That's when we started them. So it's taken us this time to get them in place. So they will help us get production up to about 11.3 million tonnes next year. As Pedro mentioned, we have started on our Phase 1 projects. That's another 0.5 million tonnes. You can expect most of those online by the time we get through 2024. So at the time we finish the 5-year plan, we should be pushing close to 12 million tonnes. Now in addition, those expansions are targeted on downstream products from ammonia. So while there is some small ammonia, while there are some ammonia increases there, that's to help us produce more urea, more UAN, more DEF in those products where we feel the market is growing, where we need some added flexibility to improve profitability. So that's the expansion. In addition to those expansions, we've been working quite hard on reliability improvements. And so over time, you should see capacity utilizations increase. Drawing -- pulling against those 2, the increased turnarounds that we're having to undertake, we had a couple of the largest ever turnarounds we've done this year at Borger and at Redwater. That's because the plant is over 50 years old as we get into these turnarounds now. We're seeing an increased scope of work as we try and replace these components, the 50 years old and keep the plants in top condition. So working against us, we've got the age of the plants, but then we've got the expansion projects, as I mentioned, 0.5 million tonnes, now 0.5 million tonnes at the time we get into 2024. And there may be further. We're certainly open to looking at additional expansions beyond that. And as I said, the downstream products predominantly, so Urea, UAN. I hope that answers your question.

There are no further questions at this time. Presenters, do you have any closing remarks?

Thank you, operator. The Investor Relations team will be available for any follow-up questions.

This concludes today's conference call. You may now disconnect.