Earnings Call Transcript - NTR Q4 2025

Operator, Operator

Greetings, and welcome to Nutrien's fourth quarter earnings call for 2025. Please note that this call is being recorded. I would now like to hand it over to Jeff Holzman, Senior Vice President of Investor Relations and FP&A.

Jeff Holzman, Senior Vice President of Investor Relations and FP&A

Thank you, operator. Good morning, and welcome to Nutrien's fourth quarter 2021 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'll now turn the call over to Ken Seitz, Nutrien's President and CEO; and Mark Thompson, our CFO, for opening comments.

Kenneth Seitz, President & CEO

Good morning, and thank you for joining us today to review Nutrien's 2025 results and the outlook for the year ahead. At our Investor Day in 2024, we outlined an ambitious 3-year plan with clear performance targets that included increasing upstream fertilizer sales volumes, growing downstream retail earnings, reducing operating costs, and optimizing capital expenditures. Our results reflect the strong execution of this plan, contributing to higher earnings and free cash flow, lower net debt, and increased cash returned to shareholders. In 2025, we generated adjusted EBITDA of $6.05 billion, up 13% from the prior year. We delivered record fertilizer sales volumes of 27.5 million tonnes, utilizing the strength of our end-to-end supply chain to efficiently serve our customers. We raised our potash sales volume guidance twice during the year as strong offshore demand offset a shortened fall application window in North America. We achieved 49% potash mine automation, a significant accomplishment that provides safety benefits and further strengthens our low-cost advantage. Our Potash controllable cash cost averaged $58 per tonne for the year, below our $60 per tonne goal. We increased nitrogen sales volumes to 10.9 million tonnes and achieved a 4 percentage point improvement in ammonia operating rates supported by reliability initiatives and the completion of low-cost debottlenecks. Excellent performance from our North American nitrogen plants helped offset the impact of a controlled shutdown of our Trinidad operations in the fourth quarter. In phosphate, our operating rate averaged 87% in the second half of reliability improvements, and a strong commercial footprint enabled us to deliver within our guidance range despite lower North American demand in the fourth quarter. Our downstream retail adjusted EBITDA increased to $1.74 billion through decisive cost reductions, strong proprietary margins, and solid execution of our Brazil margin improvement plan. Our unwavering focus on controllables allowed us to manage through weaker agricultural commodity markets and persistent geopolitical volatility, ultimately delivering results consistent with our guidance set at the beginning of the year. We surpassed our $200 million annual cost savings target and reduced capital expenditures to $2 billion, well below our Investor Day target of $2.2 billion to $2.3 billion. As a result of these efforts, we have structurally grown free cash flow, strengthening the company today and providing significant headroom for capital deployment going forward. At our Investor Day, we also communicated a plan to simplify our portfolio with the goal of concentrating our capital on assets with the highest quality earnings and cash flow streams. We initiated this journey in 2024 by canceling our Geismar clean ammonia project and divesting smaller non-core assets. In 2025, we intensified the analysis of our portfolio by comprehensively evaluating each asset based on free cash flow contribution, return on invested capital, and relative competitive position. This review highlighted assets that could be optimized or monetized while sharpening our focus on improving capital efficiency. Where an asset did not meet our threshold or was not a strategic fit, we took action and generated approximately $900 million in gross proceeds from divestitures. We utilized the increased free cash flow and proceeds from non-core asset divestitures to progress two key capital allocation priorities. We reduced short-term debt by over $600 million compared to the prior year and continue to position the balance sheet as a strategic asset that provides flexibility to act counter-cyclically. We also delivered a 30% increase in cash returned to shareholders in 2025. This achievement was realized through the execution of ratable share repurchases throughout the year, an approach that aligns with our focus on driving growth and free cash flow per share. The reduction in share count also supports our long-standing track record of providing shareholders with a reliable and growing dividend per share while keeping total dividend expense broadly stable. To summarize, our performance in 2025 demonstrated resilience and consistency in an evolving environment. We expect to build on this momentum in 2026 with a focus on delivering growth from our core businesses and maintaining capital allocation discipline. In addition, we will continue to advance portfolio initiatives in three key areas. First, as previously announced, we launched a review of strategic alternatives for our phosphate business in the fourth quarter of 2025, and we are on track to solidify the optimal path in 2026. Second, we continue to assess options for our Trinidad nitrogen operations and focus on enhancing our core North American assets, improving the margin profile of our nitrogen business. Lastly, we made significant progress on our retail margin improvement plan in Brazil over the past year. However, macroeconomic headwinds have kept returns below what we would view as appropriate to support the capital deployed there. We will continue to take actions to drive improved performance in 2026 while actively reviewing alternatives for each component of our Brazilian business and the optimal way to participate in the long-term growth in this market. I will now turn it over to Mark to speak in more detail on our 2026 outlook and capital allocation plans.

Mark Thompson, CFO

Thanks, Ken. As Ken highlighted, our 2025 results reflect excellent operating performance paired with prudent cost management and capital optimization across the company. As we look ahead to 2026, we see constructive fundamentals for our business. Potash demand is projected to grow for the fourth consecutive year in 2026, supported by strong relative affordability, large nitrate removal, and low channel inventories. We've seen good engagement across all major markets with most benchmark prices approximately 20% higher compared to 12 months ago. We anticipate relatively tight fundamentals through 2026 as trend line demand growth is testing existing global operating and supply chain capabilities. Our potash sales volume guidance of 14.1 million to 14.8 million tonnes is consistent with our global demand projection. Canpotex was committed through the first quarter much earlier compared to the past several years, and our domestic winter fill program was very well subscribed. As a result, we expect first quarter sales volumes similar to the same period of 2025 and selling prices that reflect the year-over-year increase in benchmark values. On a full-year basis, we expect controllable cash cost per tonne at or below our goal of $60 per tonne. Global nitrogen markets are currently being influenced by supply issues, while demand is expected to grow in line with historical rates driven by increasing use in agricultural markets such as Asia and Latin America. Global ammonia markets remained tight due to project delays in plant outages, while strong seasonal urea demand and geopolitical uncertainty have pushed urea values higher. Our nitrogen sales volumes guidance of 9.2 million to 9.7 million tonnes is supported by reliability initiatives and low-cost debottleneck projects and assumes no production from Trinidad and New Madrid in 2026. These facilities accounted for approximately 1.6 million tonnes in 2025 or approximately 15% of our nitrogen segment sales volumes. However, they contributed minimal free cash flow. Our cost structure in nitrogen now reflects production tied entirely to AECO and Henry Hub gas, raising the margin profile of our business and providing greater stability to our cash flow. In phosphate, we expect continued reliability benefits to support higher sales volumes with guidance of 2.4 million to 2.6 million tonnes. The majority of the year-over-year volume growth is projected in the first half. However, we also anticipate elevated input costs to pressure margins in the near term. Retail adjusted EBITDA of $1.75 billion to $1.95 billion represents continued growth in our downstream business consistent with historical rates. The midpoint of our range is underpinned by four key items. First, we expect high single-digit growth in our proprietary products gross margin in 2026, supported by the launch of new products, organic growth in our core retail geographies, and the continued expansion of our international business. Second, we expect a mid-single-digit increase in our North American crop nutrient sales volumes with margin rates similar to 2025. The recovery in volumes is driven by the need to replenish soil nutrients following a record crop and a shortened fall application window. Third, we assume improved weather conditions in Australia that are expected to drive higher crop input demand compared to the first half of 2025. And finally, we continue to drive cost management efforts across all of our geographies, which is expected to support incremental EBITDA margin improvement. We see the majority of these drivers as structural and supportive of growth in retail earnings beyond 2026. Now turning to capital allocation. For 2026, our priorities remain unchanged. We expect cash from operations to be supported by constructive fertilizer market fundamentals and organic growth drivers that I highlighted in each of our operating segments. Furthermore, we ended 2025 with a working capital build due to the delayed timing of customer purchases. We expect the majority of this to unwind in 2026, supporting a meaningful improvement in cash conversion. Our capital expenditures guidance of $2 billion to $2.1 billion is consistent with 2025 and approximately $200 million below our Investor Day target. We've committed capital to sustain safe and reliable operations and to progress a set of targeted growth investments that have a strong fit with our strategy, provide returns in excess of our hurdle rates, and have a relatively low degree of execution risk. Our most recent dividend declared yesterday marks the eighth consecutive year we've raised the dividend per share, and Nutrien's Board of Directors has also authorized the repurchase of up to 5% of our outstanding common shares over the next 12 months. We've repurchased shares at a pace of approximately $50 million per month year-to-date, and shareholders should continue to expect that ratable repurchases will be a consistent staple in our capital allocation framework going forward. I'll now turn it back to Ken for closing remarks.

Kenneth Seitz, President & CEO

Thanks, Mark. Over the past 18 months, we have taken purposeful steps to position our organization as one that is committed to excellence and determined to deliver industry-leading results. We have streamlined the leadership structures, established clear accountabilities, and centralized functions and decision-making. As a result, Nutrien today is an organization that is leaner, more disciplined, and better positioned than ever to deliver on its potential. We have aligned the company around a proven set of strategic priorities, simplifying our business, driving operational improvements, and maintaining a disciplined approach to capital allocation. I believe our unrelenting focus on these strategic priorities is delivering clear results and positioning Nutrien for long-term success. I'm proud of what we have achieved and excited about the extraordinary potential to build on this momentum. In closing, 2025 has been a defining year, and our focus in 2026 remains unchanged. I want to express my sincere appreciation to our 25,000 employees for their focus, hard work, and dedication. Thank you all for your time, and we would be happy to take your questions.

Operator, Operator

The first question comes from Joel Jackson from BMO Capital Markets.

Joel Jackson, Analyst

Wonder if you could bridge us. I know you for a couple of years, held the guidance range for this year for retail to $1.9 billion to $2.1 billion. So let's call it about $2 billion, you're planning to deliver $1.85 this year. It's a $150 million, could you bridge us when you think about the last couple of years, the differences there? And maybe when you do that, would you please highlight proprietary products, Brazil, North America, retail tuck-ins that got you to $1.85 for this year.

Kenneth Seitz, President & CEO

Yes, thank you. The 2026 target is around $150 million higher than our current midpoint guidance. The main reason for this is that we had anticipated the macro fundamentals to be somewhat better than they actually are. As a result, we are experiencing slower growth in proprietary products and have been more selective with tuck-ins, compounded by slightly lower agricultural fundamentals. We have taken steps to enhance our EBITDA for 2020. We have aligned our market growth with the current market conditions, which is why we are accelerating our cost reductions. This includes restructuring efforts in Latin America and improving margins in Brazil. We have closed more than 50 underperforming locations in North America and Australia, reduced our workforce by over 400 positions, and restructured non-core, unprofitable businesses. We have made significant moves on the cost reduction front and optimized our capital expenditures. Contributions from Nutrien Financial have increased, along with better management of working capital. Since 2023, we have boosted earnings in our retail business by $400 million, and we believe that this growth is sustainable. We expect a 6% growth rate going forward until 2026 and beyond. Despite agricultural fundamentals being somewhat below our previous expectations, we have responded with cost reductions and business improvements, leading to a structural increase in EBITDA in our retail business by $400 million since 2023.

Operator, Operator

Your next question comes from Chris Parkinson from Wolfe Research.

Christopher Parkinson, Analyst

Could we just go over real quick the demand dynamics that you're seeing in potash markets? I think most people are pretty decent on the supply. But just what surprised you? What's been in line with your expectations? Where do you think inventories are? It seems like there are a couple of moving parts, which we did to keep track on. So any color there would be very helpful.

Kenneth Seitz, President & CEO

We are projecting 74 million to 77 million tonnes this year, which is an increase of about 1 million tonnes compared to last year. At this level, we are beginning to reach thresholds that put pressure on our operations and supply chain capabilities. We believe that consumption is matching shipments, so there hasn't been a significant build-up in inventory. In China, the early settlements suggest depleted inventories, and Brazil is also experiencing domestic inventories at multi-year lows. This balance of shipments and consumption at 74 million to 77 million tonnes indicates no inventory accumulation. Consequently, prices have been strong, with Brazil at $375 and low inventory levels. Our U.S. winter fill program reached full subscriptions, with the current price at $355 per short tonne. Southeast Asia remains steady at $375, although there is some inventory due to strong purchases last year. In India, prices are at $349, and we anticipate earlier settlements there as they need to respond to the export volumes to China. Canpotex is also committed with volumes moving offshore through Q1. For the fourth consecutive year, we are observing demand growth returning to trend-level figures for 2026, reflecting a recovery from the disruptions of 2022. The figures of 74 million to 77 million tonnes suggest that consumption is matching shipments, and we are nearing a point where our supply chain and operational capabilities are being tested, which has contributed to the recent price increases.

Operator, Operator

Your next question comes from Hamir Patel from CIBC.

Hamir Patel, Analyst

Ken, considering that the upper end of your potash production guidance aligns closely with your current capacity, how do you view the speed at which you could expand additional potash brownfield capacity in your system? Additionally, when do you anticipate moving forward with further capital projects in this area?

Kenneth Seitz, President & CEO

Yes. Thanks, Hamir. Yes, the beauty of having six mines is that we have just a solid understanding of where that next tonne is going to come from and certainly at what cost. And so as we map out our trajectory of volumes, not just this year and next, but over the medium term, we have a very strong sense of where they're going to come from, when we can bring them on, and at what cost. And so yes, Hamir, this year, we have 15 million tonnes of capability. And as the market grows, we have line of sight today to just continue to grow with it. When we say 19% to 20% market share in a growing market, again, we have line of sight to continue to expand our volumes as the market grows. Six mines investing is rather granular. It's conveyance underground, it's mining machines. And so we can do those as long as we get the purchase orders in for those mining machines in time turnaround and installation of those things, we can move that relatively quickly. Incredibly low capital costs. Again, we talked about that $150 to $200 per tonne. That would be, what, 10% of what a greenfield investment would be. The last thing I'll say is not to underestimate the benefits of mine automation as we expand our production volume. As we said in the comments, we cut half of our ore in either fully autonomous or tele-remote mode. The safety benefits are evident, but the productivity benefits and flexibility benefits associated with automating these mines are really proving out so that when we talk about, as you say, we're expanding volume consistent with the way the market is growing and our maintenance and market share, our ability to do that pace it a low capital and maintaining our $60 cash cost per tonne. We see that all coming together very nicely as we sort of innovate on mine automation.

Operator, Operator

Your next question comes from Ben Isaacson from Scotiabank.

Ben Isaacson, Analyst

Just a quick question on Brazil. You generated a loss, I believe, in '24, and you were close to breakeven in '25. Can you talk about the expectations for '26? What is the upside case, or what are the swing factors there? What should we expect out of Brazil?

Kenneth Seitz, President & CEO

Yes. Thank you for the question, Ben. The Brazilian market continues to be challenged, I would say. Yes, we have been making great progress on our margin improvement plan. We've talked about idling blenders and closing unproductive locations and rationalizing workforce and focus on collections. And that's all yielded results that, as you say, Ben, took us from a loss-making position in 2024 to making a bit of money in 2025. If we look into 2026, again, given the ongoing challenges in that country, I would describe it as sort of modest improvement over what we did in 2025. In light of some of those modest improvements and in light of the ongoing challenges in Brazilian agriculture, we continue to assess and reassess our presence there, whether it be with seeds, certainly with proprietary products where we see opportunities to grow. But on the retail front as well, what is the best way to approach the Brazilian market? We know we're going to be supplying potash there forever, and we're going to be a meaningful supplier there. When we put that all together, I suspect there will be changes to how we operate in Brazil in 2026, and we're just working through that now.

Operator, Operator

Your next question comes from Vincent Andrews of Morgan Stanley.

Unknown Analyst, Analyst

This is Justin Pellegrino on for Vincent. I was just hoping you could kind of discuss the proprietary product mix in retail again. Is there a level that you're looking to achieve at some point in the distant future? Is there a target percentage mix? And then can you kind of just for 2026 and beyond what the drivers of below or above expectations would be for that percentage mix?

Kenneth Seitz, President & CEO

Yes. So thank you for the question, Justin. And yes, we do have growth aspirations as it relates to proprietary products. I mean it's growing to a gross margin of about $1.2 billion to date. And we've been experiencing sort of high single-digit growth rates over the last 5 years. We expect that to continue for all kinds of reasons. Yes, we do have growth aspirations, and that's true for the shelves that we currently put those products on, the innovations associated with new products, and we are introducing new products this year and then looking abroad as well, international markets where we're seeing some green shoots in terms of our ability to supply in different agricultural regions.

Christopher Reynolds, CRO

Yes. Justin, thanks for the question. Part of that growth story also is that, for example, we're going to be introducing 26 new products here in 2026 as part of the proprietary products range. And as we look across the health of the grower today, their focus is very much on yield. And when you think about sort of the average to maybe a little below average commodity prices today, that's where their focus is. Their growing confidence in these proprietary products to help that yield outcome just continues to grow, as we said, not just domestically in North America, but also growing internationally as well. So a big component of our growth, as we've mentioned this morning, is around the proprietary products range, and we feel very good about that long into the future.

Operator, Operator

Your next question comes from Andrew Wong of RBC.

Andrew Wong, Analyst

So in the retail guidance, you're assuming a mid-single-digit growth in crop nutrient volumes in North America. Just curious, how does that in your view across like nitrogen, potash, and phosphate? And how does that take into factors such as crop switching between corn and soybean and versus the need for net replenishment after the really strong yields last year?

Kenneth Seitz, President & CEO

Yes. Thank you, Andrew, and yes, we're saying for core 94 million to 96 million acres and for soybeans 84 million, 86 million acres. So, and then we're now staring down at some catch-up with crop nutrients going down on the ground from a wet fall or weather-challenged fall. Indeed, we had about a $300 million working capital build in the fourth quarter, which we expect to be released onto the ground here in the first half of the year. In terms of fertilizer mix, I wouldn't say that it's going to be different than what we've seen in previous years. I think it will be a balanced fertilizer mix. I mean it's true that North America took a record crop out of the ground last year right across the board. So there was a lot of crop nutrients removed out of the ground last year, and those need to be really in place. So I wouldn't say that we're looking at a mix that's anything different than we've seen in historical years. So that we expect that the gross margin contribution from fertilizer in our retail business this year should be about $1.5 billion.

Operator, Operator

Your next question comes from Steve Hansen of Raymond James.

Steven Hansen, Analyst

I recognize it's still early here, but any incremental thoughts on the optimal path for the phosphate strategic review? And maybe just give us an update on where you're at and timelines that you might be starting to put together. Again, recognizing it's still early.

Kenneth Seitz, President & CEO

Thank you, Steve. We haven't reached any conclusions on the best path forward. As you mentioned, we are still in the process of a strategic review. When we announced this last quarter, we indicated that it could lead to anything from changes in operations to a potential sale. Our team is preparing to conduct the usual market testing to assess interest in these assets. So far, we've received considerable interest from parties wanting to discuss those assets. However, we need to ensure that we have all necessary data, information, and a clear characterization of the assets before proceeding. We anticipate being ready to begin market testing and engaging with interested parties in the next quarter. In the meantime, we're also examining what we mean by revised operations. We have different assets to consider, such as Aurora, which has an extended mine life, and White Springs, which will enter the next decade with additional resources in the vicinity. When we talk about revised operations, we're looking at various possibilities for these assets, including potential sales and operational adjustments. We aim to reach conclusions soon and share our plans, but we're currently working through these details.

Operator, Operator

Your next question comes from Lucas Beaumont of UBS.

Lucas Beaumont, Analyst

So I just wanted to follow up on the potash costs. So on the controllable costs, kind of came in at $58 a tonne this year. I mean, it was a bit up year-on-year, but similar to sort of what you've done in a couple of years before that. So, I mean, just going forward with the increasing production profile, sort of what you're doing on the automation front. How do you sort of see those costs trending into 2026 and beyond?

Kenneth Seitz, President & CEO

Our goal is to maintain the cost at $60 per ton. We see that as a controllable cash cost moving forward. This is particularly important as we are currently in an inflationary environment. We've successfully managed to combat inflation through mine automation, which allows our mining machines to operate further from our conveyance shafts. We can either set our machines to telemode, so operators don’t have to travel long distances underground to reach them, or operate them in fully autonomous mode. These advancements lead to significant productivity gains that help us achieve our target cash cost of $60 or less per ton. We’ve discussed our market share in a growing market and how we are expanding volume while maintaining a fixed cost base, which also helps us manage inflation to meet our $60 target. We are proud of our ability to sustain costs at $60 or less, and our intention is to keep it there.

Operator, Operator

Your next question comes from Matthew DeYoe of Bank of America.

Matthew DeYoe, Analyst

I have two for you. So I wanted to gauge your thoughts on the Trinidad asset, and particularly, given the changeover we've seen in Venezuela. I know the Dragon pipeline could have a potential implication on Trinidadian gas supply, but I also don't know how much stock you want to put into something like that? And then on the retail business, if I look on a 2-year stack, seed sales are down like 7.5%. And maybe this is overly simplistic, but if I were to assume prices in there, too, maybe volume is down 10%, that's not right. But why do we seek to this kind of headwind on the seed side, specifically for revenues in retail?

Kenneth Seitz, President & CEO

Good. I will share a few thoughts on Trinidad and then I'll hand it over to Mark and Chris to provide some thoughts on seed. Regarding Trinidad and gas availability, it's a significant issue. There is much activity in the Caribbean, but also considerable uncertainty. The ability for Trinidad to operate its industrial plants on the coast and supply energy domestically, along with LNG, depends on a consistent gas supply from Venezuela. Discussions have been ongoing for years about addressing what was sanctioned in oil and gas, building a pipeline to the industrial complex in Trinidad, and accessing Venezuelan gas for either LNG or the coastal industrial complex, including our plant. I lack significant confidence in the near to medium term for receiving ample gas supply from Venezuela to Trinidad, due to this uncertainty in the region. Our plant has been operating at 80% capacity for a while due to a lack of gas. We are also facing rising gas costs. The national gas company has indicated that gas prices are increasing in a situation where the Trinidad plant isn't generating substantial income—it represents 3% of earnings and 1% of cash flow. This is not sustainable for us, and we plan to shut it down. We're discussing with the Trinidad Government whether there's a way to access affordable gas at reasonable fees to allow us to operate, even with slim margins. In the meantime, we've adjusted our operations to maintain our idle plant with a core workforce. Over the next few months, we will continue exploring alternatives and pursuing arrangements to run this plant, but we will see how things develop. More to come on that front.

Mark Thompson, CFO

Matthew, it's Mark speaking. So on your second question regarding retail seed sales, yes, I think there are two primary drivers of that. One of them would be intentional and strategic and within our control, and the second, probably more out of our control and weather-related. So on the first factor, as we've implemented the margin improvement plan that Ken spoke to in Brazil, some of that has involved moving away from lower-margin seed business, managing our expense profile, which, while seed sales have declined, has made the overall business healthier as you've seen and generated significant improvement in Brazil, and that was a very intentional choice to improve the nature of our business operations there. The second would be the historic weather events that we saw in the U.S. South in the first half of 2025, which really resulted in a complete washout of some of the areas of the Delta and other places where we tend to have very high seed share and strong proprietary cotton and rice businesses. As we discussed in the first half of last year, that clearly had an impact on seed sales, and we would expect some of that to reverse this year. If we step back from seed and we go back to some of the comments that Ken made this morning, over the past two years, notwithstanding those challenges, we look at the broader retail business, earnings have grown $300 million of EBITDA despite those challenges. When we look at the broader proprietary business, we grew by about 5% in 2025, and as we've said, we think that business will grow again by high single digits in 2026. Again, we think some of the seed sales related to weather will reverse themselves. From a broader retail standpoint, for those items within our control, we continue to drive strong business performance and growth.

Operator, Operator

Your next question comes from Edlain Rodriguez of Mizuho.

Edlain Rodriguez, Analyst

Ken and Mark, I mean, we've seen what happened with flotate when prices were too high. There was a pullback in demand in 4Q. Any concerns that something like that could happen in potash? Or is it that potash supply-demand is balanced enough that we are unlikely to see a ramp-up in prices.

Kenneth Seitz, President & CEO

Yes. Thanks, Edlain. Yes, I mean, I think you're absolutely right. We saw that in the fourth quarter as it related to phosphate. Indeed, for our phosphate business, we felt that as well. We were able to manage through that with our commercial team and still stay within our guidance range. But it is true that farmers pulled back on phosphate. On potash, it continues to be the most affordable crop nutrient. If we look at the supply and demand balance for 2026, we do see demand growth, and you can see that as we look to our estimate of shipments being 74 million to 77 million tonnes, up from the numbers from last year at 74 to 75. Demand growth, but we also see some new tonnes coming into the market from various places. Some would be our own, but we see some additional tonnes coming in from FSU countries, maybe a little bit from others, but we expect that, that combination of small tonnage from these places, including our own when we talk about increasing production by 200,000 tonnes from last year, that we find ourselves in a somewhat balanced market. Let's see if we get into the higher end of that demand range, what the supply chains are able to handle. We do believe we're getting up to some of those more challenged numbers when you're at the top of the range for supply chains and maybe even for operating rates, but in the meantime, we're experiencing what we'd call a balanced market, and you see that reflected in the price of $375 in Brazil, $348 in China, $375 in Southeast Asia, and a relatively stable market. I think it is a different story than the phosphate story.

Operator, Operator

Your next question comes from Kristen Owen of Oppenheimer.

Kristen Owen, Analyst

I wanted to come back to the topic of your Brazil retail channel. And just sort of ask you with the long-term strategic value is there. Just given some of the previously discussed market challenges. I think, Ken, you've alluded that, that business doesn't meet your internal hurdle rates. Is there some action that you could take to further narrow the gap versus your initial 2024 Investor Day guidance or maybe even recap those targets ex-Brazil so we can understand what that stand-alone business looks like?

Kenneth Seitz, President & CEO

Yes. Thank you, Kristen. I would say that given that Brazil is really not contributing anything in terms of earnings or cash, that the retail number is 1 ex-Brazil. But at the same time, I take your point about our future there and whether everything we're doing in Brazil makes sense for us. That's the work of 2026. We've been pleased with our Brazil improvement plan. We've talked about that, and it met expectations for last year, it certainly did. It's a lot of heavy lifting, but we got there. We're on a similar path in 2026, but we are reviewing our seeds business and whether that's appropriate, whether it is within Nutrien or maybe better off in someone else's hands. We do have conclusions on our proprietary product business in Agricen down there, where we do see opportunity to grow, and it is certainly synergistic with everything we're doing, everything else we're doing with Loveland products. We can sell those products on shelves all over Brazil, not just necessarily our own. We know that we will be a large supplier of potash into Brazil and a growing supplier, and that will continue. That leaves really the retail business, and yes, we're struggling with how to think about our retail presence in Brazil, whether that business can meet our financial thresholds that we expect when we deploy capital and whether there are better places to deploy capital. If we come to that conclusion, we will consider what to do with those retail assets. That's the work underway at the moment, and we'll have more to talk about that through 2026 and certainly, some conclusions on those answers in 2026.

Operator, Operator

Your next question comes from Duffy Fisher of Goldman Sachs.

Unknown Analyst, Analyst

Just a question around your U.S. retail business. Investors have quite a lot of concern about the increase in Chinese generics in ag chem. We've seen a lot of pressure in Asia and Latin America so far. Do you see them trying to come direct in the U.S. trying to get labels one? And then two, if they're not doing that, do you see them just kind of putting more pressure with lower price generics running through the retail chain here, but kind of dragging down ag chem? Is there a structural change happening there in your view?

Kenneth Seitz, President & CEO

Yes. Thank you, Duffy. We do see some generic pressure, not the likes of what we see in other parts of the world like Brazil, but we do see some. I'll hand it over to Chris.

Christopher Reynolds, CRO

Thanks for the question. As Ken said, we are seeing a little bit of that in the market today, some of that direct-to-grower model. But what we really like there, as we think about the future is our proprietary products range. As I said, the introduction of 26 new products this year, we've got a decent pipeline, and we're going to continue to develop going forward with our current supply partners. We like our position. We like the breadth of our network. We like the relationship we have with our growers as we continue to move those products. So I don't see that sort of direct model today as a significant threat, and we enjoy our position with our proprietary product range.

Operator, Operator

Your next question is from Ben Theurer of Barclays.

Benjamin Theurer, Analyst

I wanted to discuss capital allocation, particularly regarding the share buyback. Over the past two years, we've repurchased 5% of our outstanding shares, and now you’re indicating that we could buy back another 5% this year, which appears to be a notable increase. What are the other internal options, such as possibly increasing the dividend or focusing more on share buybacks? What are the considerations, especially given the current stock price?

Kenneth Seitz, President & CEO

Yes, thank you, Ben. We have renewed the NCIB, which the Board approved yesterday at a level of 5%. Last year, we were repurchasing our stock at a rate of approximately $50 million a month. For 2026, depending on how the year progresses, that appears to be a reasonable figure to consider as we observe the year unfold. We are evaluating the balance between returning cash to shareholders through stock buybacks versus dividends. While we continue to describe the dividend as stable and growing, the stock buyback has allowed us to effectively reduce the dividend. Mark, would you like to provide any further insights on this?

Mark Thompson, CFO

Sure. Good morning, Ben. Yes, I'll just add a few points to what Ken mentioned. First and foremost, our approach to capital allocation in 2026 will be entirely consistent with what shareholders have seen from us in 2025. We will have total CapEx once again of $2 billion to $2.1 billion. That will be comprised of roughly $1.65 billion of sustaining CapEx and roughly $400 million of investments in growth CapEx. Capital leases are expected to be consistent at about $0.5 billion. As Ken said, keeping dividend expense roughly stable at about $1 billion, and that leaves share repurchases. A real focus for us since the latter part of 2024 has been introducing ratability in that share repurchase program. The 5% authorization is really just our authorization to be in the market. Last year, we bought back about 2% of the stock. And when we look at our run rate so far in 2026, we've been doing about $50 million a month in repurchases. We think that level of ratability makes sense for us. Those would be the major capital allocation priorities. It's worth noting that this is all anchored by a very strong balance sheet and through strong performance in asset sales in 2025. We've been able to tidy up the balance sheet and position ourselves by paying down over $600 million in debt. We feel good about where that sits right now and that will support our capital allocation priorities through the cycle, across all types of market environments. So I'd say the punchline here is just to continue to expect from us what you've seen from us so far over the last year.

Operator, Operator

Your next question comes from Jeff Zekauskas of JPMorgan.

Jeffrey Zekauskas, Analyst

It looks like your inventories were, I don't know, $500 million higher in the fourth quarter than you wanted them to be. What is it that happened at the end of the year that led to that inventory build, and are there implications for the first quarter?

Kenneth Seitz, President & CEO

Yes. The big one, Jeff, would be weather. Farmers just weren't able to get out and put down a normal fall application season, so it wasn't normal. As a result of that, those inventories working capital carried through into 2026. So that would be one. Two is proprietary products. We held some proprietary product inventory that is still on the books that again, we expect in 2026 that we'll release those products, and that will be released working capital. Those would be the big ones.

Operator, Operator

Your next question comes from Mike Sison of Wells Fargo.

Michael Sison, Analyst

Just curious, I appreciate the EBITDA sensitivity for potash and nitrogen. It feels like the base case is somewhere in the middle of those charts. But is that the case? And then what sort of gets you since you've given the wider range? What do you think drives it to the higher end of the charts and to the lower end of the start this year, if at all?

Kenneth Seitz, President & CEO

Yes. As we look at our guidance ranges, when we talk about volume on potash, it really is good weather, at least a strong demand in the regions that we serve, and outgoes more crop nutrients. The lower end of that range would be the opposite of that, would be challenged weather and an inability to get on the land. So it's on the volume side on the price side of potash; it's the classic supply and demand discussion. We just talked about 74 million to 77 million tonnes: weather, if you get into the higher end of that range, puts pressure on supply chains and operating rates and whether the market can actually supply those volumes, which of course would put pressure on price and hence be at the top of that range. Regarding nitrogen for us, it's at our plants, it's operating rates. Higher operating rates correspond to higher volumes and lower operating rates correspond to lower volumes. It's true that we have three turnarounds this year, which we'll be executing. That's a heavy turnaround year for us. We planned well for those, so we expect strong operating rates analogous to those we observed last year. On the pricing side, for urea, there is strong Indian demand and demand across the table, but we also have some supply uncertainty, particularly due to geopolitical circumstances. Urea prices are tight currently, given those supply and demand dynamics, and we see a world where that could persist for a bit longer here in 2026. On ammonia, we observe seasonally lower volumes now. We've had some production come back online in the Gulf Coast, although going for a planned shutdown. In summary, yes, you are looking at the right charts, and as volume and price, we think we would say we're constructive across the board.

Operator, Operator

Your next question comes from Dave Symonds of BNP Paribas.

David Symonds, Analyst

Just a bit of a conceptual one. I noticed that LNG Canada is ramping up. Are you expecting any impact on AECO gas prices from that? And is there anything you can do to mitigate the impact?

Kenneth Seitz, President & CEO

With the reduction of Trinidad's operations, we are now benefiting from 50% of our fleet being aligned with AECO gas and the remainder with Henry Hub. Previously, when Trinidad was active, about 20% of our operations were linked to Trinidad, which is tied to Tampa ammonia, while 80% was distributed between Henry Hub and AECO. The decrease in Trinidad's output and our current focus on North American natural gas has significantly lowered our effective gas prices. Given North America's ongoing structural advantages in cash costs compared to Europe, we are very confident about the location and performance of our high-quality assets. Regarding LNG and LNG Canada, we have discussed the overall trends in natural gas pricing and LNG distribution worldwide. This indicates that North America's structural advantage remains strong, mainly because there is an almost limitless supply available at very cost-effective extraction rates. While LNG Canada and similar projects could lead to some market adjustments, we are pleased with the enduring competitive edge we hold.

Operator, Operator

There are no further questions at this time. I will now turn the call back to Jeff Holzman for closing remarks.

Jeff Holzman, Senior Vice President of Investor Relations and FP&A

Okay. Thank you for joining us. The Investor Relations team is available if you have follow-up questions. Have a great day.

Operator, Operator

Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for your participation, and you may now disconnect.