Nutrien Ltd (NTR) 2018 Q1 法說會逐字稿

Greetings, and welcome to the Nutrien First Quarter 2018 Earnings Call.

(Operator Instructions) And as a reminder, this conference is being recorded.

I would now like to turn the conference over to Richard Downey, Vice President, Investor Relations and Corporate Relations.

Thank you.

You may begin.

Thank you, operator.

Good morning, everyone, and welcome to Nutrien's 2018 First Quarter Conference Call to discuss our results and outlook.

On the phone with us today is Mr. Chuck Magro, President and CEO of Nutrien; Mr. Wayne Brownlee, our CFO; and the heads of our 4 business units.

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 the most recent annual report, MD&A and annual information form filed with Canadian and U.S. security commissions, to which we direct you.

I will now turn the call over to Mr. Chuck Magro.

Thanks, Richard.

Good morning, and welcome to Nutrien's First Quarter 2018 Earnings Call.

Today, I will recap first quarter results and provide insights on market conditions and our financial outlook for the year.

I will also provide an update on the progress we have made on integration and the actions we've taken on capital allocation, as these 2 items have been a major focus for the new board and management team.

The initiatives implemented during the first 4 months at Nutrien include a meaningful return of capital to shareholders and strong growth of our Retail business.

This will serve our shareholders well in the months and years ahead.

We believe, when you look at our company, the investment thesis is clear.

No other company in our sector has the combination of strength, stability, strong future cash position or our potential to invest and innovate.

And with over 26 million tonnes of fertilizer sales, no one can touch our leverage to an improvement in the market fundamentals.

Turning to our first quarter results, our wholesale operations performed well this quarter.

However, earnings were constrained by rail performance issues on West Coast potash exports.

Our Retail earnings were delayed due to the extremely wet and cold weather conditions across North America this spring, which has deferred applications, planting and associated crop input for purchases, similar to what occurred in 2015.

Our international retail business continued to deliver strong results with EBITDA up 46% from the previous year.

Potash EBITDA increased by nearly 40% compared to pro forma results for the first quarter of 2017, illustrating the earnings leverage that can be generated from our large low-cost potash assets.

Prices continued to strengthen in both domestic and offshore markets and sales volumes rose 11%, despite rail transportation issues.

Our cash cost of product sold declined to $60 per tonne this quarter as we benefited from continued ramp-up of the Rocanville facility, merger-related synergies and fewer overall downtime days.

The delayed start to the spring season impacted our nitrogen sales volumes, most notably for ammonia.

However, nitrogen EBITDA was up from the prior year, as we benefited from lower production cash costs and higher average realized prices.

Our nitrogen plants operated very well in the quarter, with ammonia utilization rates increasing to 96% compared to 84% in the fourth quarter of 2017.

Our phosphate business also demonstrated strong operational performance this quarter, as plant utilization rates increased 13%.

Our average realized phosphate price was up $10 per tonne this quarter, but was offset by sulfur costs that increased by approximately $50 per tonne, and this headwind is expected to remain in the second quarter.

Nutrien's adjusted net earnings for the quarter was $0.16 per share, excluding $74 million of incremental depreciation and amortization adjustments as well as merger-related costs of $66 million.

Adjusted EBITDA totaled $553 million, which was slightly up from the first quarter of 2017, even with the significant delay to the start of the spring season this year.

While there are still some moving parts with merger accounting, Q1 clearly shows the potential for this company.

Looking ahead, there are a number of market factors that support our positive outlook for the second quarter and full year of 2018 earnings.

First, let's look at the agricultural fundamentals.

Global crop prices have been supported by a delayed North American planting season and significantly lower corn and soybean production in Argentina.

Ag markets have also benefited from strong demand for grains and oilseeds globally.

Despite near record global crop production, the USDA projects that inventories will decline by nearly 3% during the crop year, the largest year-over-year decline since 2010.

Based on current 2018 futures prices, U.S. soybean and corn grower cash margins are projected to be 10% to 20% higher this year.

Trade tensions between China and the U.S. has created some market uncertainty.

However, we do not expect an impact on grower planting decisions this spring.

We also anticipate grower spend on crop inputs and services to be similar to the previous year, as farmer sentiment is generally very good.

While the late spring has delayed field work and retail earnings, we are well-prepared to meet the challenges of a compressed spring season, given an unmatched North American distribution network.

As weather conditions started to improve in late April, we have seen a significant increase in daily retail sales revenues compared to the previous year.

As a result, we expect first half 2018 Retail EBITDA to still exceed last year's level.

Moving to potash, where prices continue to firm in major spot markets.

The improvement in potash fundamentals is a demand story and more specifically, a direct result of very positive global consumption trends over the past few years.

During this period, the annual potash consumption growth rate was around 4%, which is well above the long-term historical average of 2.8%.

The key driver of this growth is a greater use of soil sampling and recognition of the importance of balanced fertilization and sustainable agriculture in developing countries.

We anticipate tight fundamentals through 2018 and have raised our global demand forecast to 64.5 million to 66.5 million tonnes.

We have also increased our annual potash sales volume guidance to 12 million to 12.5 million tonnes.

Canadian rail performance has improved lately, although the pending CP Union vote remains a near-term concern.

Our potash cash costs of products sold will benefit from the integration of the Vanscoy mine into the broader potash portfolio and a continued ramp-up at Rocanville.

We expect production at Rocanville will exceed 5 million tonnes in 2018 and could move closer to 6 million tonnes over the next few years.

In nitrogen, the delayed start to planting in North America resulted in some pricing pressure early in the second quarter.

However, urea and UAN fundamentals are expected to be tight through the spring in most regions, supporting prices and volumes.

We anticipate higher global energy prices and tighter supply will support nitrogen prices well above the lows witnessed last year.

Strong phosphate demand in India is expected to be largely offset by increased supply available from Saudi Arabia and Morocco this year.

Higher environmental and raw material costs in China are expected to support phosphate prices above 2017 lows and lead to reduced Chinese production.

Based on these market conditions and operational considerations, we have raised our annual earnings guidance to $2.20 to $2.60 per share, and EBITDA guidance to $3.3 billion to $3.7 billion.

This equates to an anticipated increase of greater than 20% in year-over-year adjusted EBITDA.

These figures exclude synergy implementation costs, which will start to wind down now, as well as excluding incremental depreciation related to purchase price allocation adjustments.

We have provided guidance for the first half of 2018 in the range of $1.50 to $1.65 per share.

Our EPS guidance includes earnings from equity investments now classified in discontinued operations, with the majority of these forecasted earnings expected to be realized in the second quarter.

As I mentioned earlier, our focus over the first 4 months has been on integration and setting Nutrien's capital allocation priorities, and we have made significant progress on all fronts.

In terms of integration, we remain confident in our ability to capture $500 million in annual operating synergies by the end of 2019.

We achieved a run rate total of $150 million at quarter end, with significant progress made on distribution and production optimization and procurement synergies buckets.

Corporate cost synergies were limited in the first quarter, given that staff reduction notices largely took place in March, and we took a $28 million charge for severance this quarter.

We achieved over $40 million in potash run rate synergies, primarily by eliminating maintenance capital redundancies and overtime costs.

In procurement, we executed on a multitude of initiatives to capture $24 million in synergies and have identified numerous additional avenues to further utilize our scale and drive down costs.

We advanced production and distribution optimization plans across all business units, achieving $52 million in synergies.

This quarter, we also announced our detailed synergy plan for our phosphate business.

The merger allows us to convert the Redwater plant to ammonium sulfate and move from 3 phosphate facilities down to 2. By repurposing the Redwater plant, we will be able to supply more ammonium sulfate to this growing market.

It will also allow us to increase utilization rates at our Aurora and White Springs phosphate facilities, which will drive down our rock costs and our delivered MAP costs into Western Canada.

We will also save on capital costs by operating only 2 phosphate facilities.

This plan is expected to allow us to capture $80 million in run rate synergies by the end of 2019, and we have commenced our capital projects to achieve this target.

With less than $80 million in investment capital, this is a highly capital-efficient project.

The second major integration item is the required divestiture of our equity investment.

We completed the sale of ICL for net proceeds of $685 million in the first quarter.

In terms of SQM and APC, the process remains on plan, and we expect to conclude those transactions this year.

With the potential for net proceeds from the equity stakes of $4 billion to $5 billion, plus $500 million in annual operating synergies, combined with our unparalleled leverage to the upside in crop nutrient markets, we expect to generate significant free cash flow in the future.

Therefore, it was important that we move quickly on our capital allocation priorities.

In February, we declared a quarterly dividend of $0.40 per share, which marked a 27% increase from our legacy companies' combined payout level.

Maintaining a stable and growing dividend is a top priority for Nutrien and we will target a payout ratio that represents 40% to 60% of free cash flow after sustaining capital through the cycle.

This dividend policy will return significant cash to shareholders, while allowing management ample resources to grow the company.

At the same time, we announced a 5% NCIB program and have moved aggressively to purchase shares.

As of May 7, we have completed 1/3 of this program, allocating $500 million to purchase over 10 million shares.

Given the point in the crop nutrient cycle, we believe the share repurchase program will provide excellent value to shareholders.

We also know it's important to grow the company in areas where we have strategic advantage.

Over the next few years, we will allocate a significant amount of CapEx to expand our retail footprint in our existing markets and to grow our presence in Brazil.

So far, in 2018, we have purchased 29 locations, primarily in the U.S., with total annual sales of $280 million, which is well above the normal for this point in the year.

We have a strong pipeline in place with increased resources targeted on this opportunity.

We also recently completed the acquisition of Agrichem that will expand our Loveland products portfolio significantly in Brazil.

Having access to proprietary product lines is a key component to implementing our retail model within growing regions of Brazil.

I would also like to touch on the investment we are making to enhance our digital capabilities.

Last month, we launched our new integrated digital platform that will enable our retail customers to interact with us when they want, where they want and how they want, providing year-round commercial and agronomic digital management.

We have a unique opportunity to combine this digital platform with our industry-leading distribution network to create an unrivaled experience for growers.

We expect a strong return on investment by increasing grower retention, increasing service offerings as well as enhancing our ability to attract new customers.

To conclude, we made good progress on our strategic and capital allocation priorities this quarter, but we're just getting started.

We're focused on executing our synergy plan and we will begin realizing G&A savings in the second quarter.

With grower margins strengthening and planting now well underway, we see good demand and firm prices for most crop inputs, which allowed us to increase our annual guidance.

With the ability to generate significant free cash flow, Nutrien is positioned to deliver excellent shareholder value in the months and years ahead.

Thank you, and I'd be happy to take your questions.

(Operator Instructions) Our first question comes from the line of Ben Isaacson with Scotiabank.

It's Oliver Rowe on for Ben.

So on the digital platform that you're launching, is that a response to some of the digital competitors that have popped up in the last couple of years?

Or is it just taking advantage of the general market opportunity that you saw?

And maybe could you highlight some of the key differences between this platform and its digital peers?

And on data, how much are you willing to share with farmers?

Yes.

Thank you for the question, Oliver.

I'll give you my views and then I'll turn it over to Mike Frank, who is really working directly with the team.

We're really excited about our digital platform.

This is all about our continued focus on not only being the best crop adviser in the world, but also be the easiest to do business with.

And we think that there's a really unique opportunity here to combine our distribution network, our 3,300 agronomists in North America, with a very unique digital offering.

And putting those 3 things together, I think, will provide significant value for farmers in North America, but our plans are more global in nature longer term.

So with that, Mike, maybe you can give us your perspective on where we're heading with the digital platform.

Sure.

Yes.

Thanks, Oliver, for the question.

So firstly, yes, it's not in response to other online offerings out there.

Really, we're taking a very different approach where we want to create a seamless experience for our customers, however they deal with us, whether they're doing it in person at the branch or online.

So we're really combining all of our assets, all of our offerings into 1 seamless approach for our customers.

We've seen other online-only platforms in the past.

They haven't been successful.

And when you think about what's going on right now with a compressed season, this is really where we shine, where our growers are really taking advantage of our custom application equipment, our people on the ground to make good decisions.

And we'll now offer them a more convenient way, if and when they want, to order products and services from us, and so that's the way we think about our digital offering.

Our next question comes from the line of Christopher Parkinson with Crédit Suisse.

Can you just give us an update on your acquired divestitures, including your degree of confidence to close in 2018 as well as the size and types of any suitors?

Also, do you have any color also on net proceeds and key strategic initiatives, just I'm assuming M&A is still front and center?

Chris, I'll have Wayne talk about the process for SQM and APC, and then I can come back and talk a little bit about priorities for capital allocation.

Go ahead, Wayne.

Hi, Chris.

So look, we've had an option process ongoing for both Arab Potash and SQM.

It's progressing well.

I'm hopeful that we will have transactions to announce by the end of the second quarter in both cases.

The timeline then for cash proceeds will really depend on regulatory approval, and that is a little bit like the Chinese potash contract.

You can speculate all you want, but we'll see where we get there, but the process has have been moving well.

We're derisking it as much as we can to get the certainty of proceeds.

And Chris, just to finish your question here in terms of capital allocation priority, so if you step back and you look, we are pretty confident that the SQM and APC process can close this year.

That will generate, in total with ICL, somewhere between $4 billion and $5 billion of cash.

On top of that, of course, we have the $500 million of synergies, and we'll talk a little bit about that today, of course.

But we're on track for that.

And then, if you just look at our base of operations and how they're generating cash after we paid the dividend and the sustaining capital, there's another $1 billion to $2 billion per year, even with today's prices, and maybe modestly up a little bit over the next couple of years, that the business will generate per year another $1 billion to $2 billion.

So think out the next 3 years, we have to allocate somewhere between $6 billion and $8 billion of capital all-in.

And our priorities for that capital will be, first and foremost, we want to sustain our asset base, and we think that the right number to sustain the asset base that we have is about $1 billion a year for sustaining or maintenance capital.

Our balance sheet is an important asset for us.

We are a strong investment-grade today.

We don't see any issues down the road, but that will always be a priority for us, is to maintain a strong and healthy balance sheet.

The next priority will be, of course, as I mentioned on my prepared remarks, a sustainable and growing dividend.

And we're going to allocate 40% to 60% of free cash flow through the cycle on growing that dividend.

And so that will be a major theme in terms of the capital allocation.

Beyond that, it will be growth.

And the growth can come in multiple areas, but the primary focus for us will be on retail growth.

We think that there's a good opportunity right now with where we are in the cycle.

We're seeing tremendous opportunities in North America, but also in Brazil, to allocate capital, but the capital will be allocated basically in 3 dimensions.

One will be in the existing retail footprint, the network itself.

The other will be in building out our Loveland products portfolio.

We've had just tremendous success in building that portfolio and we think there's a lot more we can do to consolidate that space.

And the third, as Mike mentioned, we are going to allocate capital to grow our digital capabilities.

So primary focus for a lot of the capital will be in retail, but that's not to say that if something opportunistically came in other products, in other -- of the producing businesses, we would absolutely have a look at that as well.

And our next questions come from the line of Andrew Wong with RBC Capital.

So just regarding your strategy with Brazil and growing retail there, how big can we expect Brazil retail to be eventually?

Could it be comparable or even bigger than some of your other non-U.

S. retail businesses?

And just in terms of timing, does buying something in Brazil depend on having capital available from selling the equity stakes?

Hi, Andrew.

So look, we're just getting started.

The first kind of process we went through to look at the opportunity and narrow the opportunity to [beat] Brazil is we wanted to make sure that our retail model creates value for Brazilian farmers, and we've spent a long time looking at that.

As you know, we have a pilot facility in Brazil, and it's been very, very successful.

So that brings us confidence that we have a unique offering for Brazilian farmers to create value for them.

And right now, we're looking at a lot of opportunities in Brazil.

And the first, I guess, entry beyond our pilot program was the acquisition of Agrichem, which brought over 30 proprietary products, about 300 employees, and it's the second largest products company by market share in Brazil.

And we thought that was a very unique way to enter the market because now we can bring Loveland products into Brazil.

We can bring those products into our other global operations.

But we think that, over the longer term, that Brazil will certainly be either, I'd say, the second largest retail business after the U.S. business as we allocate capital over the next few years.

Now we're going to also take our time, we're going to get this right, but right now, we're just seeing tremendous opportunity to create some value for shareholders, but also to grow value for farmers in Brazil by offering a pretty unique offering.

And our next question comes from the line of Don Carson with Susquehanna.

Chuck, a question on your potash rationalization plans or what strategy you've decided upon.

As you commented, Rocanville is ramping up, that's helping lower your production costs, but with Rocanville and Vanscoy, do you need some of these smaller mines that you have and would you look at perhaps, permanently closing some of your smaller potash facilities?

Yes.

Hi, Don.

I'll give you my perspective and then I'll turn it over to Raef Sully, our President, and he'll provide some specifics.

The thing that you have to remember is 2 of the facilities right now are running exclusively white potash.

So we really only have 4 facilities running red.

And those plants are at maximum capacity, they have very high margins because, of course, that's the premium product.

So I think you have to get into the -- a bit of the details on how we've optimized the network in terms of potash.

Bringing Vanscoy into the network now has afforded us tremendous synergies that we're seeing right now in the result.

If you look at the cash cost of overall products sold down to $60 a tonne, so it's down 10% from the first quarter of last year, and that's because of the optimization network.

So we think, given market conditions, where we are today, and we actually raised our potash sales volume this year, we're seeing really good synergies being delivered by the optimization of the network.

Right now, we're feeling comfortable with our current operating plan.

But Raef, maybe you can give your perspective as well.

Chuck, I think, you hit the main points.

Don, as Chuck mentioned, we only have 4 red-producing mines at the moment.

Patience Lake is white only and quite small.

Cory was put down -- ramped down to 800,000 tonnes of white only.

So aside to higher costs, we're getting higher margins for white product as well, they're doing quite well.

We only have 4 red mines to optimize.

Vanscoy is actually the smallest in terms of capacity of those 4. Our focus at the moment is on integration.

We've already generated some synergies at Vanscoy.

By bringing Vanscoy in and operating it as one of a system, we've been able to immediately lower maintenance costs, sustaining capital and overtime spend.

As Chuck said, we're looking forward, we're seeing higher sales in the first quarter.

In the back half of the year, we want to make sure we're there in the market to capture those.

We'll keep looking at what we think will happen in '19.

There's some potential volatility there as compared to this ramp up.

We're looking forward to what we think will happen in '20.

We'll make a decision as we get through the year.

One important thing to remember is putting a mine in care and maintenance is not a small decision.

If we do that, we're not going to do it unless we think we can keep it down for more than 12 months.

24 months would be better.

And so I guess, the summary is, at the moment, we think we need all 4 of them.

We'll keep an eye on it.

We always do.

It's something that's reviewed constantly.

And towards the back end of the year, we'll make a decision about what we do into '19.

And our next question come from line of P.J. Juvekar with Citigroup.

It's Dan Jester on for P.J. Obviously, there was an impact in the quarter on the retail side in crop protection and seed sales.

Can you -- you mentioned that going into April, there's been some acceleration.

Can you just walk through what you're seeing on Nutrien's crop protection seed in April and May, and how you think the first half is going to evolve for those buckets?

Yes, Dan.

So I'll turn it over to Mike Frank, our President.

Q1 is entirely a weather story.

It's that simple.

But he can walk you through what he's seeing on the specific shelves in the overall business.

Sure.

So Dan, really, the first 3 weeks in April were really a carryover of Q1 where it continued to be wet and cold through most of our core markets in the U.S. and in Western Canada.

But the back part of April really started to open up.

And so we've been actually running record days and record weeks over the last couple of weeks.

So we're really seeing it open up, especially in the core Midwest markets, Indiana, Illinois, Iowa.

It's still quite a bit behind, I would say, in the Northern U.S. states, you have the Dakota, Minnesota, Wisconsin and Western Canada.

So we are rapidly catching up across all of our shelves.

And so we're almost at the point where we're crossing over where we were last year and we still have a long ways to go and so we're really pleased with what's going on in the marketplace right now.

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

Can you talk how much the rail issues and the changes to the Canpotex revenue recognition policy impacted your first quarter potash volumes?

And maybe just as a secondary, what you're seeing on the demand side to increase your potash guidance?

Hi, Jacob.

I'll let -- since it was primarily a potash impact, I'll have Raef Sully talk a little bit about the impact we saw in the first quarter and how we think things are going to unfold in the second.

So go ahead, Raef.

For the rail impact?

Yes.

So we were behind offshore quarter 1. We started behind domestically quarter 1 but we made up.

I'd say, quarter 1, we finished whole domestically, but behind on export.

Quarter 3, we are running behind on export at the moment, but there has been improved performance from the railways.

We're seeing come to table and help take more tonnes to the East.

We're seeing CP put more trains on.

If that increased performance continues, we will be whole by the end of the second quarter, early third quarter.

If there is a strike, obviously, that's going to hurt us.

About 80%, 85% of our export volumes go by CP.

And I think it's important to say, Jacob, that our earnings guidance that we've outlined for the first half and the annual does not include anything that -- from a rail disruption.

So this thing is business as usual.

I know it goes without saying, but we just need to put that on the record.

Our next question come from the line of Steve Hansen with Raymond James.

Just a quick one, 2-part question on phosphate.

Just perhaps a bit better detail on the timeline associated with your phosphate restructuring down to 2 facilities and the Redwater conversion?

And then, as a second part, how do you feel about the division -- how do you feel the division will be positioned after this restructuring is complete and whether or not it's still core to the broader enterprise?

Steve, I'll have Susan Jones, our President of Phosphate, talk about the synergy delivery and the restructuring, and then I can come back and talk a little bit about strategically how we think about our phosphate business.

Go ahead, Susan.

Hi, Steve.

As Chuck Magro mentioned earlier, we are well on the way to our synergy plan in phosphate.

We do plan to capture $80 million in annual run rate synergies by only spending $80 million in capital.

And just as a reminder, we are going to -- when we repurpose Redwater, we're going to be moving from 350,000 tonnes of sulfate production to 700,000, and we're going to shift our mass production from White Springs, Florida, and our Aurora facilities in the U.S. to backfill that.

In terms specifically to your question on timing, this is going to be very efficiently sequenced, so we're going to be bringing the MAP train up in the first quarter of 2019, and we are going to be planning to do the full conversion in Q3 of 2019.

So we're going to have ample opportunity to bring product through to ensure it's in the bins, ready for customers in time for both spring through summer and ready for the fall.

And then, strategically, Steve, if you step back and you look at the phosphate business, moving from 3 facilities to 2, it makes the operations, I think, more efficient.

It allows us to run at higher capacity utilization rates.

And that $80 million, no matter what we choose to do, will go to our shareholders, which is the most important thing that we're focused on.

So I'd say, right now, the vast majority of our energy and attention is on getting that right, as $80 million capitalized is significant value creation.

I have said before that phosphate, as well as many parts of our portfolio, will be part of our overall portfolio review with our Board of Directors, that we will start that process most likely in the middle of this year.

But right now, it's a little too early to talk about what will happen through that process until we get through our analysis and have our discussions with our board.

And the vast majority of our energy right now, as I mentioned, is just delivering the $80 million of synergies.

And our next questions come from the line of Vincent Andrews with Morgan Stanley.

This is Neel calling in for Vincent.

Just had a question on your synergies.

You already achieved $150 million run rate after 3 months versus a $250 million run rate target by the end of the year.

Did that exceed your initial expectations?

And does your fast pace of 1Q imply any upside to the $250 million number as we get through the year?

Yes.

Hi, Neel.

I'll have Steve Douglas, our Chief Integration Officer, kind of give you how we're thinking about the synergies now and maybe even a few examples to make it real for you.

And then he can also address the question on is there some upside.

So go ahead, Steve.

Thanks, Chuck.

I think it's important to remember that, regardless of the fact that I think we've had some great successes in the beginning of the year, it's still early days relative to where we're at on the synergies.

That said, nothing we've seen in any way, shape or form leads us to believe we won't achieve the synergies we put out there, the $500 million of a run rate by the end of 2019.

The $150 million that we've realized on a run rate basis to date is reflective of both capital and income impacts by virtue of a lot of things.

And as Chuck alluded to, we have some examples of shedding over 900 railcars, 10 warehouses, incremental potash tonnes being put into retail that we wouldn't have otherwise generated sales for, reduce Vanscoy's sustaining capital.

Many of you will recall, when we were Agrium on a stand-alone basis, we had 1 mine that needed to run, so we probably took a lot of incremental costs that we wouldn't otherwise, when you look at it in the context of a broader portfolio that we have today.

Other savings include the credit facility savings that we've able to realize, insurance, just having larger pools to be able to put together, and a lot of other more granular examples that I think lead us to believe that we're going to be exactly where we said we were going to be.

We're not at this point suggesting that we're going to exceed the $500 million.

Again, it's still early days, and we've only really been together and able to look over the wall for the last -- well, for 5 months now, or 4 months now, and then 3 into the quarter.

But we remain very confident that the synergies we laid out at the beginning of all this are eminently achievable, and we're going to keep working to make it higher if we can.

Our next question is from the line of John Roberts with UBS.

Did your retail operations see any change in the competitive behavior from co-ops early in the season when it looked like the co-ops would get a tax windfall under grain operations?

I suppose that can drive the farmers to use the co-ops more for their inputs as well.

And do you think the U.S. tax laws have been fixed to address that?

Hi, John, Mike Frank can answer your questions.

Yes, John.

We didn't see any impact on crop inputs.

I know there was a lot of concern on the grain side.

And yes, what we understand now is that the tax issue has been fixed and so there's no chance it'll have any spillover impact on retail.

And your next question comes from the line of Joel Jackson with BMO.

I understand that your presentation of segment EBITDA now includes synergies where in the past, it didn't.

So you raised EBITDA guidance for both potash and nitrogen by $100 million each for EBITDA.

Can you talk about how much of that is just by layering on synergies now in that presentation?

How much is -- of $100 million each is you see better outlook for the business?

And then, you did a good job to break down the $150 million run rate synergies achieved so far by bucket.

You'll look to that break that down by segment as well.

Hi, Joel.

Look, so not to get overly granular on the guidance ranges, we raised potash and nitrogen EBITDA $100 million each, as you mentioned, and that's really because we're getting more optimistic about the performance of our business, about market conditions.

We're seeing higher sales volumes.

We're seeing higher market prices.

Certainly, some of the lower costs are due to synergy capture in those 2 big businesses.

They were always part of the plan.

And if you look at that, the increase of the $200 million of EBITDA fits pretty nicely inside of the overall consolidated $3.3 billion to $3.7 billion.

We did raise the bottom end of that range because we have growing confidence of the 2018 market conditions.

The reason we didn't touch the top end right now is because a lot of the conditions need to be determined in the second half of the year, namely around price.

So what we thought is we would just increase the bottom end of the range.

If the -- the businesses for potash and nitrogen fit very nicely into that range.

And then, once we get through the spring season in the second quarter, we'll have a good look at the range, we'll have a better feel for second half prices.

But I should remind you because this should go without saying, the midpoint of our EBITDA guidance range of $3.5 billion, it is up over 20% from last year's pro forma of $2.9 billion.

So it's excellent growth.

It does reflect about $200 million total of synergies and, of course, increased volume and higher market prices.

So everything is moving in the right direction.

Also, in my prepared remarks, expecting flat planted acres, higher farmer margins, we're expecting good input demand.

We're seeing that right now in Retail.

So right now, we're pretty optimistic about market conditions through 2018.

And our next question comes from the line of Steve Byrne with Bank of America.

Regarding your plans to sell Loveland products in Brazil, do you need product registrations to do that?

Or do you already have them?

And if not, how long will that take?

And do these newly acquired Agrichem locations represent a footprint for you to not just sell Loveland, but to expand to a more full service retail model at those sites?

And if so, would a fertilizer distributor like Heringer provide the same footprint to expand into full service?

I'll have Mike Frank talk about our plans for Agrichem and LPI in Brazil.

Go ahead, Mike.

Yes.

So Steve, on your question with respect to registrations, and so a lot of our Loveland products don't require registrations in Brazil, specifically our biologicals, microbials and nutritional products.

And so those are products that we can take directly into Brazil.

And the way Agrichem works is they don't have their own retail network.

They actually have a broad base of distributors across Brazil and beyond Brazil.

And so what we see here is an opportunity to take our Loveland products into their distribution system and get broad access across the country of Brazil.

Now the other opportunity gives us is it will get us closer to the retail industry in Brazil.

And so as we think about expanding our footprint, this also allows us to get to know the retailers better and we think that will be an opportunity as we think about our M&A strategy in Brazil as well.

Our next question comes from the line of Vincent Anderson with Stifel.

Thinking a little more long term, when you imagine your ideal retail and distribution asset in Brazil, would the addition of that asset to your portfolio material alter -- materially alter the math behind a possible restart of any of the New Brunswick potash assets?

And this is probably too reactionary, but have the recent rail issues in Canada added anything to your thoughts on the value of those assets in your portfolio?

Yes, so I'll try to answer your question the best I can.

So the retail growth in Brazil is really focused on value creation for farmers in Brazil, bringing them a full suite of product offering.

Of course, if that offering includes potash, we have significant underutilized capacity, and we would do what any other producer would do.

We would start to use up that capacity from our lowest cost production up.

We have still in Saskatchewan, as has already been mentioned today, we have underutilized capacity in Saskatchewan, a fairly significant underutilized capacity, that we could more immediately bring up than other production outside of that province.

So in order of priority, the growth of Brazil will stand on its own because of value creation for Retail and for growers in Brazil.

But if there's a potash synergy, we would bring up the capacity from the low-cost plant from Saskatchewan.

And our next question comes from the line of Mark Connelly with Stephens.

How differently are you positioning nitrogen through the system because of late planting?

And obviously, your footprint gives you a nice advantage, but does the shift to urea and UAN make your system more or less efficient?

Yes.

Thanks, Mark.

So I'll have Harry Deans talk about how we're preparing for the spring and the overall network.

It's been quite a nice situation to have the southeast part of the U.S. now and the northwest part of Canada in terms of a production profile in North America.

So go ahead, Harry.

Thanks for the question, Mark.

Mark, these 2 systems couldn't be more complementary.

We've got our western network, as we call it, in Canada, and our eastern network in the United States.

So what we've been busy doing, even though maybe the product hasn't been going to the field, we've been basically actually positioning all our tonnes in the right places.

So that when the demand does kick in, we can supply the markets.

And that's worked extremely well.

What we found out before this, we used to sub-optimally deliver to various places, but now, we've actually changed where we deliver from and that's actually helped us to reduce costs, reduce the lead time and improve the efficiency of the operation.

And our next questions come from the line of Michael Piken with Cleveland Research.

I was wondering if you could talk a little bit about what you're seeing in terms of the seed and crop protection markets in the U.S. And then, in particular, are you seeing any competitiveness toward the end of the season on soybean seed?

And then, on crop protection, just wondering what the delayed spring might mean for pre-emergents?

Hi, Michael.

Mike Frank can address your questions.

Yes, so firstly on crop protection, with the quick development of the spring, there is likely an impact on some of the early season residuals and even the first burn down marketing, and so we're watching that carefully.

When we look at our product mix, we're actually pleased from a margin standpoint as to how the markets are developing at this point in time.

But from a herbicide standpoint, which is really the big part of the crop protection market right now, there probably is an impact with growers going directly into planting.

On the seed side, the seed market has been highly competitive this year.

When we look at our overall book of business on the corn side, our average corn selling price is down about $2, and so you can almost call that flat.

Soybean is flat.

And canola seed is actually down a bit this year.

And so the seed market has been very competitive.

And from a soybean standpoint, we're expecting about half or so of our mix to be dicamba traits, which again, we're in a unique position because of our custom application equipment to really serve that market.

So -- but the seed market has been competitive, for sure.

Our next questions come from the line of Jonas Oxgaard with Bernstein.

So you talked a little bit in the beginning of the Q&A about your [digital ag], but one of the other competitive aspects out there is supposedly this website for price comparison.

Can you talk a little bit about -- I mean, what kind of price differentiations do you actually have between individual products right now?

And then, how do you see the competition for this website evolving?

So I'll have Mike give you his perspectives, Jonas.

And then I'll talk -- I'll give you mine as well.

Yes, so Jonas, when you look at competitive sites, and I think the one you're referring to, so firstly, from a product standpoint, if you look at their site, probably 80% or so of their portfolio is not available.

And so as I've talked to our customers across the market, I mean, they're really not getting any value from that site because it's not reliable from a supply chain standpoint.

From a price discovery standpoint, growers know that there are different prices in the marketplace, whether you're prepaying for cash well in advance of the season, buying it in season with net 30-day terms, buying it in season with longer terms, or you're getting it bundled with application services.

And so what our customers have seen when they've looked at the data is that it really isn't helpful.

And so from our perspective, we're taking a very different approach again with our omni-channel approach, building a site that provides both the convenience of online ordering and managing your account online, but also giving a full suite of agronomic advisories as well.

And so we're taking a different approach based on all of our feedback from our customers and through our beta testing, the feedback's been very positive and so we feel -- we're confident in the approach we're taking.

Yes, Jonas, my perspective on these websites, so price discovery or price transparency, it's good for any business, and we're a big believer in that.

But it has to be on an apples-to-apples basis.

So it can't be just several smaller generic products with no service that really are not really relevant in terms of the market price.

So in our business, we're really focused on not just the cost of any one product, but we're trying to work directly with the growers to provide value, to provide a profit per acre, and so to provide the service, the agronomic knowledge, the digital tools so that they maximize their business performance, whether that's yield or profit.

And there will always be a subsection of our customer base that will want just the lowest cost.

But really, our business model is not geared towards that.

It's really geared to working with growers that are wanting more than that.

They want profit, they want yield, they want to maximize their business, they need a partner.

And we think that, given our distribution capability, the skill set we have inside of our retail business and now our new digital offering, there's really going to be nothing that we can't provide a grower in terms of value creation.

And our next question comes from the line of John Chu with Laurentian Bank.

Just on the Redwater repurposing, I understand that the ammonium sulfate capacity is probably going to double once you do that.

So what's the destination for that product?

If I recall, a few years ago, you were repatriating quite a bit of volume back into Canada.

So I'm just curious where the market is you're going to be focusing on for that AS product?

Thanks, John.

I'll have Susan Jones talk about our plans for ammonium sulfate.

Yes.

Thanks, John.

Yes, the Canadian market is obviously a key market for ammonium sulfate.

It is expected to be a growing market with canola acres and also application rates.

We do expect to have a large chunk of that going into the Western Canadian market, but we're also going to be positioning within the PNW and the northern plains.

And the nice point of that is we've got a key distribution network, not only in Western Canada, but also in the U.S. through our own retail and also what we've already got established, and so it will be a combination of those 3.

That is the end of the call today.

If you have any follow-up questions, Investor Relations is available to take -- field any calls.

And thanks for joining us today, and we'll talk to you shortly.

Bye-bye.