Nutrien Ltd. Common Shares 2026 Q2 Earnings Call

Please go ahead. Thank you, operator.

Good morning, and welcome to Nutrien's second quarter 2026 earnings call. As we conduct this call, various statements that we make about future expectations, plans, and prospects contain forward-looking information. Certain assumptions were applied in making these conclusions and forecasts, therefore, actual results could differ materially from those contained in our forward-looking information. Additional information about these factors and assumptions is contained in our quarterly report to shareholders, as well as our most recent annual report, MD&A, and annual information form. I will now turn the call over to Ken Seitz, Nutrien's President and CEO, and Mark Thompson, our CFO, for opening comments.

Good morning, and thank you for joining us today to review our first half performance, progress on our strategic priorities, and the outlook for our business. In the first half of 2026, Nutrien delivered record potash sales volumes, strong growth in proprietary products margins, and further enhanced the reliability and cost position of our nitrogen assets in a dynamic global operating environment. We raised the bottom end of our 2026 potash sales volumes guidance, lowered our capital expenditures guidance range, and increased the pace of share repurchases. Our results demonstrated strong performance against our strategic priorities that are strengthening our business, driving structural growth in free cash flow, and increasing cash returns to shareholders. In potash, we increased production from our low-cost six-mine network and utilized the capabilities of our extensive global supply chain to meet strong customer demand.

In the first half, we mined 53% of ore tons using automation, exceeding the top end of our 2024 investor day target. This result reflects the strong execution of our automation strategy, while also highlighting additional opportunities to further enhance deployment and performance across the network. These investments are delivering wide-ranging benefits beyond improvements in safety and productivity. Increased automation enables us to mine more ore with the assets already in place, helping to optimize capital expenditures and maximize returns on existing investments. In nitrogen, our low-cost North American assets remain well-positioned, with advantage natural gas costs and a continued focus on initiatives that increase upgraded product volumes and margins. Our first half production was consistent with our previous expectations, including a planned turnaround at our Carseland facility that demonstrated operational excellence in action.

The turnaround was the largest in the facility's history and included a debottlenecking project that increased the site's annual production capacity. Despite a much larger scope than the last major turnaround four years ago, we achieved higher productivity and contractor efficiency through improved planning and execution. The work was completed safely with zero lost time injuries, ahead of schedule, and under budget. Turning to our downstream retail business. Adjusted EBITDA increased by 4% in the first half of 2026, underpinned by execution of key growth initiatives that enhance our ability to serve growers with a broader set of products and services integrated through our network. Our proprietary products business delivered strong growth in the first half, including a 10% increase in proprietary crop nutrients gross margin despite softer fertilizer demand, as growers continued to prioritize solutions that enhance productivity.

Our performance reflects targeted investments we made to expand capacity and meet increasing customer demand with sales volumes for certain nutritional products increasing nearly tenfold compared to the prior year. Together, these results demonstrate how customer insights, targeted investments, and disciplined execution are driving earnings growth. Over the last two years, we have taken purposeful steps to optimize our portfolio following a comprehensive review of each asset's free cash flow contribution and returns on invested capital. Since June 2026, we completed agreements to sell non-core assets for gross proceeds of approximately CAD 90 billion. Including these agreements and prior divestments, we have generated approximately CAD 1 billion in gross proceeds since the fourth quarter of 2024. These actions are strengthening our portfolio quality while creating additional flexibility to reduce debt, increase shareholder returns, and allocate capital to businesses with superior long-term growth opportunities.

As previously announced, we are reviewing strategic alternatives for our phosphate business and are encouraged to have received numerous non-binding bids as part of the process. We also continue to review strategic options for our Trinidad nitrogen operations and each component of the Brazilian retail business. We remain on track to solidify the optimal path for these businesses in 2026. Overall, our first half results demonstrate progress on our strategic priorities and disciplined execution to enhance earnings quality and free cash flow per share. Across each of our businesses, we continue to focus on areas within our control, namely operational excellence, cost management, and capital efficiency. While the external environment remains dynamic, we believe Nutrien is well-positioned to create long-term value for our shareholders. Now, turning to the market outlook. Global agricultural markets are supported by robust grain and oilseed demand.

Risks to crop production and trade have increased due to geopolitical uncertainty and forecasts indicating El Niño conditions, which are expected to place upside pressure on crop prices. Potash margins remain constructive due to favorable affordability, healthy demand in all major global markets, and stable supply relative to other commodities. We've maintained our forecast for global potash shipments of 74 million-77 million tons in 2026, as projected shipment levels are expected to be consistent with consumption. Global urea prices declined in the latter half of the second quarter during a seasonal low for demand that was exacerbated this year due to evolving geopolitical developments. Global urea fundamentals have firmed in the third quarter, driven by ongoing trade flow disruptions, production outages, elevated energy prices, and increased demand. We expect these factors will continue to shape the outlook for nitrogen markets over the remainder of 2026.

In this environment, Nutrien's North American nitrogen assets are well-positioned to benefit from secure, low-cost feedstock supply, and dependable market access. With that overview, I'll now turn it over to Mark to provide more detail on our second quarter financial performance, guidance assumptions, and capital allocation priorities.

Thanks, Ken. Nutrien delivered adjusted EBITDA of CAD 2.4 billion in the second quarter of 2026, and first half adjusted EBITDA was CAD 3.5 billion, up 6% from the prior year. Cash provided by operating activities rose by 12% in the first half, providing opportunity to further advance our capital allocation priorities. At Potash, we generated adjusted EBITDA of CAD 658 million in the second quarter, reflecting higher global benchmarks and strong operational and supply chain execution. Our second quarter and first half Potash controllable cash cost of product manufactured was flat compared to the prior year, due to cost control measures and the benefits of our automation program that Ken articulated. We continue to target our controllable cash cost below CAD 60 per ton on a full-year basis for 2026.

We raised the bottom end of our 2026 Potash sales volumes guidance to 14.2 million tons-14.8 million tons due to the strength of first half sales and increased visibility on the second half order book. CapEx is fully committed for third quarter sales volumes, and we had a favorable response to our domestic summer fill program. We anticipate a similar split between offshore and domestic sales volumes in the third quarter compared to the prior year. Our nitrogen operating segment generated adjusted EBITDA of CAD 635 million in the second quarter. Net selling prices were in line with higher global benchmarks and the timing of order book sales, with approximately 35% of total segment volume sold prior to the onset of the Middle East conflict.

Nitrogen sales volumes were down from the prior year, reflecting no production from Trinidad and New Madrid, planned maintenance at Carseland, and some deferred customer purchases late in the quarter during a period of increased market volatility. Looking ahead, the majority of our Q3 nitrogen fertilizer sales volumes are now committed and aligned with summer fill values set in late June and early July. We maintained our 2026 nitrogen sales volume guidance of 9.2 million tons-9.7 million tons, with planned turnarounds scheduled at our Lima and Redwater nitrogen facilities in the third quarter, and higher ammonia operating rates expected in the fourth quarter. In phosphate, adjusted EBITDA declined in the second quarter due to elevated sulfur costs, which have placed unsustainable pressure on global phosphate producer margins.

We maintained our 2026 phosphate sales volume guidance, supported by reliability improvements achieved in the first half, while we continue to closely monitor customer demand and sulfur input costs in the second half of the year. Our downstream retail business delivered adjusted EBITDA of CAD 1.24 billion in the first half, up 4% compared to the prior year. Following a strong start to the application season in the first quarter, North American retail crop nutrient volumes declined in the second quarter, in particular for phosphate and nitrogen. The reduction in commodity fertilizer volumes was offset by strong proprietary products performance. We maintained our full-year retail adjusted EBITDA guidance of CAD 1.75 billion-CAD 1.95 billion, with the midpoint of the range underpinned by three key items. First, we continue to project high single-digit growth in our proprietary products gross margin in 2026, supported by organic growth in our core retail geographies.