Nutrien Ltd (NTR) Q3 2021 Earnings Call Transcript

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Nutrien Ltd (NTR 0.95%)
Q3 2021 Earnings Call
Nov 2, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

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

Jeff Holzman -- Vice President, Investor Relations

Thank you, operator. Good morning, and welcome to Nutrien's Third Quarter Conference Call. On the call today is Mayo Schmidt, President and CEO; Pedro Farah, CFO; Ken Seitz, Executive Vice President of Potash; Raef Sully, Executive Vice President of Nitrogen and Phosphate. For retail, we have Jeff Tarsi and David Elser. We also have Mark Thompson, Executive Vice President of Strategy and Sustainability; and Jason Newton, our Head of Market Research. As we conduct this conference call, various statements that we make about future expectations, plans and prospects contain forward-looking information. Certain material assumptions were applied in making these conclusions and forecasts, therefore, actual results could differ materially from these -- those contained in our forward-looking information. Additional information about these factors and assumptions are contained in our current quarterly report to shareholders as well as our most recent Annual Report, MD&A and Annual Information Form filed with Canadian and US Securities Commissions. I'll now turn the call over to Mayo for opening comments before we take your questions.

Mayo Schmidt -- Mayo Schmidt

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

Now turning to our third quarter results. Adjusted EBITDA exceeded $1.6 billion in the quarter, an increase of nearly $1 billion compared to the same period last year. Nine months adjusted EBITDA increased by 61% to $4.7 billion. We generated free cash flow of $2.8 billion over this period. Retail delivered a record third quarter driven by higher sales and increased margins with significant earnings growth achieved in each of the geographies in which we operate. Sales growth was supported by excellent agriculture fundamentals and market share gains across all major product categories. Due to our strategic inventory positioning and close connection with our customers via our 3600 agronomists, we were able to capitalize on the strong demand for crop, nutritional, and fungicides in the quarter. Adjusted EBITDA margins increased by 1.5 percentage point driven by strategic procurement in a rising price environment and stronger proprietary product results. Our adjusted average working capital to sales ratio remains at an all-time low of 12% due to strategic supplier management.

We have grown our retail businesses outside the US with adjusted EBITDA from these regions up $150 million in the first nine months of 2021 accounting for over 30% of total retail EBITDA. We expect our proportion of retail earnings outside the US will continue to grow over the next five years through both organic and inorganic growth initiatives, providing us with further diversity and stability in our earnings base through exposure to geographies that are critical to global agriculture production. Our recent transactions in Brazil are performing quite well, and we have a robust pipeline of targets and a strong team in place to execute our growth plans.

The potash team delivered a record third quarter with adjusted EBITDA up 131% from last year. Potash supply is tight and prices have increased significantly in all key spot markets. We expect a surge to an annualized run rate of 17 million tons during the fourth quarter and are on pace for a record production and sales in 2021. Due to the flexibility provided by our low cost six mine network, we were able to significantly increase production of granular grade potash in response to strong demand and higher prices for this premium product.

Canpotex increased shipments through its Portland and Eastern Canadian Port facilities in the third quarter to mitigate temporary restrictions on rail service to [Indecipherable] port in DC. Having access to multiple mines in offshore port facilities is a significant competitive advantage for Nutrien and underscores our leadership position in the Potash business. Nitrogen and phosphate generated nearly $700 million in combined adjusted EBITDA in the third quarter, supported by higher selling prices across all product lines. These results demonstrate the benefit of our lower cost nitrogen assets, in-market production facilities, and extensive distribution network. Nitrogen sales volumes were up 5% in the quarter despite our production being impacted by weather-related downtime and planned maintenance projects. We completed two large nitrogen plant turnaround projects over the past six months, and I want to thank the teams at Borger and Redwater for their efforts. These are critical sustaining projects that will enhance our safety, efficiency and reliability for our sites over many years to come. In addition, we completed the first phase of our nitrogen expansion projects that were started in 2018 and expect to fully benefit from this expanded capacity in 2022. These are projects that were completed on time, on budget, and we expect will generate very attractive returns on investment.

Now turning to the outlook for the business. We have prepared a few slides in the presentation posted to our website to help frame our view of the market and expectations going into 2022. Global grain and oilseed inventory is well below historic levels and crop prices and grower margins remain strong. We expect this will support crop input spending in key regions where we operate. In North America, sentiment remains positive and growers are investing in their soils and actively preparing for next year's crop. We have seen a strong start to the fall application season due to the relatively early harvest and favorable yields in most regions. We expect this robust demand to continue in the fourth quarter, weather permitting and our retail network is well positioned to meet our customer needs. We expect growers to maximize planted acreage in 2022, as projected US corn and soybean margins are approximately 60% and 35% respectively, above 10-year average levels. IF the planning [Indecipherable] start to ship before spring, we anticipate future markets will respond to ensure adequate acreage.

Growers in Australia experienced a second consecutive year of historically high crop yields and margins driven by ideal weather and higher ag commodity prices. Growers in Brazil are making good progress on planting their soybean and corn crops with acreage expected to be up 5 million to 7 million acres. The strength in Brazilian ag fundamentals is fueling demand for all crop inputs while with fertilizer consumption projected to grow by more than 10% in 2021. Similar to our third quarter results, we expect to generate exceptional Retail fertilizer and crop protection margins in the fourth quarter due to strategic purchasing in a rising market. And while we expect strong agriculture fundamentals next year, we anticipate Retail fertilizer margins will return to more historic levels.

As it relates to the global fertilizer markets, supply is very tight and prices moved significantly higher throughout the year. While there is potential for reduced demand in some markets due to limited supply availability, we believe there is a number of factors that could contribute to an extended period of market strength. Some of these factors are unique to each nutrient, but overall we expect support from higher agriculture commodity and energy prices, limited new capacity additions and low channel inventories.

In potash, global demand has been very strong, while supply was impacted by mine flooding, new project delays and limited availability of most producers other than Nutrien to meaningful increased production. We estimate inventory levels in most major markets are below average due to record consumption and limited product availability. Additionally, buyers are dealing with the potential impacts of US European trade sanctions on Belarus, which is impacting the vessels chartering in US dollar denominated transactions in other import markets. Prices have moved up in all key spot markets with Brazilian granular potash prices transacting above $750 per ton and recent tenders in Southeast Asia awarded at $600 per ton. We expect contract negotiations with China and India will progress during the fourth quarter and the new contracts will reflect prevailing market conditions. We are equipped and prepared to meet this demand. The nitrogen market has been impacted by the combination of soaring energy prices in Europe and Asia outages and Chinese government ordering fertilizer producers to halt exports until June of 2022. European gas prices have been trading at around $30 MMBtu equating to ammonia production cost of approximately $1100 per ton. This has resulted in at least 40% of European ammonia production being shut down and has increased the need for import. We expect nitrogen markets will remain very tight through the first half of 2022 and there is limited new nitrogen supply expected to come online over that period. We plan to increase our nitrogen production next year by approximately 0.5 million tons through higher operating rates and the benefit of our recently completed expansion projects. We are now fully committed on potash volumes for the remainder of the year and the majority of our nitrogen and phosphate volumes are booked. We expect a normal two to three months lag in our price realizations and anticipate the increase in benchmark prices over the past few months will position us for a very strong start to 2022. We project full-year 2021 adjusted EBITDA in the range of $6.9 billion to $7.1 billion for 2021, which at the midpoint represents of $3.3 billion increase in 2020. The increase in earnings and free cash flow is providing the opportunity to advance our capital allocation priorities. We repurchased 2.4 million shares in the third quarter and returned $900 million to shareholders so far in 2021 through dividends and share buybacks. We plan to significantly strengthen our balance sheet by reducing our long-term debt by approximately $2 billion over the next six months. This will provide flexibility to deliver on future growth opportunities and return of capital to shareholders, while reducing our finance costs by approximately $50 million per year. We remain focused on growing our retail business through tuck-ins and acquisitions building out our network in Brazil. We've announced five transaction in Brazil since the beginning of 2020, and have a good pipeline of accretive opportunities in this market. We are on track to achieve our target of $100 million in run rate EBITDA from Brazil by 2023 and deliver attractive returns on investment. After completing a successful first stage of nitrogen brownfield expansions, we have started a second phase of projects that are expected to add 0.5 million tons of production capacity over the next few years and improve the energy efficiency of our plants. The total investment is estimated at $260 million, providing for some of the lowest cost most efficient expansion tonnes in the industry. We continue to progress on previously announced decarbonization projects that are expected to reduce CO2 equivalent emissions by approximately 1 million tons by the end of 2023. Additional free cash flow beyond these identified opportunities will be allocated on a compete for capital basis, and we will maintain our disciplined approach. Our Board, our leadership team are focused on taking decisive actions to ensure we are positioned to deliver superior long-term value for our stakeholders. We continue to track very well compared to our long-term goals and we'll provide an update on our targets, our strategic plans and capital allocation projects and priorities at our next Investor meeting in June of 2022. And with that the Nutrien team is standing by and looks forward to your questions. Thank you.

Questions and Answers:

Operator

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

Vincent Andrews -- Morgan Stanley -- Analyst

Thank you and good morning everyone. Mayo I was just wondering if you can talk about, you mentioned the $17 million ton run rate in potash in the fourth quarter. And maybe you can just talk about sort of what your expectations are for potash production in 2022, and in particular whether that run rate is sustainable or if that's just something that could be achieved quickly in a short period of time but you can't just keep doing it all the way through next year. So if you want to add more capacity for next year, it's little more of a complex decision, so maybe you could just help us understand how those dynamics take shape.

Mayo Schmidt -- Mayo Schmidt

Sure. And I'll be happy to address that very, very good question. One is, our run rate of 17 million tons has been due to the very quick reaction that we had, and I think you remember when we understood there was a loss of production on that Friday night. Our potash team led by Ken Seitz was able to over a period of the weekend identify another 500,000 tons by labor and mechanical machinery, et cetera, to be able to address that. And then frankly in another 72 hours was able to continue that study and that analysis and undertaking, come up with another 500. And that's really what that is, is that standby production that we've been talking about for a number of years, we could feel it is sustainable, only affected by turnarounds, necessary maintenance and -- that we would do in our mines. But we think about the flexibility in the automation that we have and the six mines that we have and that ability to address the demand. And what I'd like to do is just take a second and ask Ken to talk a little bit about his ability to not only sustain the 17 million tons but also look toward other opportunities. Ken?

Ken Seitz -- Executive Vice President and Chief Executive Officer of Potash

Yeah, thanks. Thanks, Vincent for the question. So just to clarify, the 17 million tonnes annualized run rate is something that we're doing in the fourth quarter and not suggesting that over the course of 2022 we'd be able to sustain a 17 million ton run rate. We don't have labor or mining machine sitting at the face looking for that big an increase in production. But what we have done in 2021 is ramped up with labor and with mining machines for that extra million tons so that it was -- as we head into 2022 we're expecting stable global demand, that's a great thing for the market. And we expect that from a production sales point of view, well, this year will produce around 14 million tons and we'll preserve capacity to do sort of a similar thing in 2022 that we did in 2021. In other words, to ramp up production again perhaps by another million tons over this year's production rate. So we're preserving that capacity, strong global demand next year, but just to clarify that 17 million tonne run rate is for the fourth quarter only.

Operator

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

Christopher Parkinson -- Mizuho -- Analyst

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

Mayo Schmidt -- Mayo Schmidt

Raef, if you want to take that question please.

Raef Sully -- Executive Vice President and CEO of Nitrogen and Phosphate

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

Jason Newton -- Chief Economist & Head of Market Research

Hey, thanks. Raef. Yeah, just to touch on the trade flow question. It is interesting and dynamic market to try to project at this point. The situation in Europe with with respect to the shutdowns that have taken place, that's obviously -- in the short term it's been supportive for ammonia imports flowing into Europe. Longer term, we expect that ammonia production will need to come back on, we'll need to be -- bid into the market by higher prices. But in the meantime, we're losing nitrate production and the result of that will be more positive urea imports into Europe, and that's why we've seen strength in global urea prices led by Egyptian prices. In terms of the Chinese exports, we see 2021 exports between 4.5 million tons and 5.5 million tons. And we know that in the first half of this year they exported about1.7 million tonnes and that will be down in 2022, just given the export restrictions. Historically when export restrictions have been put in place, we've seen a weighting of exports from China more in the third quarter of the year, which we expect to be the case next year. We need to see to balance supply and demand likely somewhere in the 4 million ton to 5 million ton range of exports from China going forward. So without that supply the market will be relatively tight and we know the urea supply demand balance after 2022 tightens globally.

Operator

Your next question comes from the line of Joel Jackson of BMO Capital Markets.

Joel Jackson -- BMO Capital Markets -- Analyst

Hi, good morning everyone. I'll come back to the potash production commentary you gave. So if I understand what you said you produced about 14million tonnes of potash this year and you expect to maybe produce 15 million tonnes next year. That's a million tons more obviously, and your Canpotex partner suggested that demand for potash might grow next year about 1.5%, that's about 1 million ton. So if I understand what you're saying if all this is true, are you implying that you would expect to get all the input into the MAD extra in potash. We know mosaic lot more, other competitors a lot more or do you have a higher demand growth forecast at 1.5% or is it something else I'm off base. Thanks. Yes, it's ten year [Indecipherable]. Thanks for the question. So, yeah, just to clarify, we're preserving that production capability. Again we have a stable global demand we think heading into 2022. We know that inventory is really -- and all of the markets that we serve are quite low at the moment. And of course we have the supply related issues in the market. So it's just to say that we have this network of 6 low cost mines and we want to preserve the capability to do what we did in 2021 and potentially do that in 2022. And so again it's -- we're just formulating our plans now for 2022 as we're watching the China and India situation and inventory is depleting, their contract likely to come our way, if not later this year, early next. And formulating our plans. But again it's just preserving that capability among our network of six low cost mines. Your next question comes from the line of Ben Isaacson of Scotiabank. Thank you very much. Good morning. Perhaps, a question for Ken and Jason and I apologize, it's another potash question. We're hearing farmers moan and groan worldwide about high prices, which is nothing new in potash. While we haven't seen any evidence of demand destruction yet perhaps a bit of weakness in India, but we haven't really seen demand destruction, but we know prices will eventually soften. So with that context, can you actually run through what your expectations are for '22? Can you mention stable demand? Is it possible to see growth in various regions next year? And in terms of pricing do you expect to see the lower prices in one year from today in key potash markets, would you be satisfied to Brazil. The $600 in a year from now? Thanks so much.

Jason Newton -- Chief Economist & Head of Market Research

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

Operator

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

Stephen Byrne -- Bank of America -- Analyst

Yes, thank you. I see your potash pricing net realized price mine gate within the low 300s in the quarter. When was that essentially booked? How many months back? And maybe more importantly as you look forward, your forward sales in fourth quarter and more importantly in the first half of '22, would you say your forward sales are more or less than they would have been historically.

Ken Seitz -- Executive Vice President and Chief Executive Officer of Potash

Hi, Stephen. Yeah, it's. Ken. Thank you for the question. Yeah, with respect to the lag that you're seeing in realized prices versus posted benchmark prices, given the sort of rapid run up in potash prices and really all of the major markets over the course of the last several months and that lag is to be expected. And it could be that volumes are contracted two to three months prior to them being lifted from our mines, which is when we recognize revenue. So that lag is something that we experience all the time and certainly familiar to our realized price versus revenue recognition. But I can tell you as we head into the fourth quarter, here we are fully committed. All of our volumes are committed to our customers. And as we head into Q1, we are now placing volumes into Q1 and I can tell you that we're placing those volumes at sort of posted benchmark prices. And so that lag will catch up to the market and -- to the extent that prices are stable, and you'll see that gap close. So Q1 starting to commit volumes at posted prices.

Operator

Your next question comes from the line of Michael Piken of Cleveland Research.

Michael Piken -- Cleveland Research -- Analyst

Yeah, good morning. My question on retail. If you could talk -- you mentioned that [Indecipherable] from some of the mark-ups in fertilizer and crop protection prices that may not continue for next year, but if you could talk just in terms of your expectations for volume growth in retail organically and then also just do you think that there are going to be any product on the chemistry side, most notably like Glyphosate [Indecipherable] that might be tight that it might impact the number of acres that are planted either in Brazil or the US. Thanks.

Mayo Schmidt -- Mayo Schmidt

We've got David Elser and Jeff Tarsi on the phone. If -- Jeff, if you would comment first and then follow up with David, please.

Jeffrey Tarsi -- Analyst

Yeah. Thanks, Michael. I think Mayo mentioned early on in his comments that we would expect retail margins to especially on the commodity fertilizers NP&K to return to something more of a historical nature going forward. But I'd also like to point out the fact that when you look at our margin on a per ton basis as it relates to fertilizer -- our proprietary nutritional products make up 30% of that. And we've had an outstanding year in '21 with our proprietary nutritionals that we actually expect to see some growth in '22 with those products going forward, which kind of supports the margin side of things. When you look at product specific Michael and how that might relate crops and search, look, we dealt with those challenges throughout '21. We actually weren't alerted to them till about March of this year. And if you look at where we are today, and David can comment after I finish here, but we kind of know what our challenges might be in '22. And the advantage we have is we got about a six-month head start on that. And so as you know, we have a very close relationship between our agronomist and our growers. We've already started, we started to process two months ago, we're sitting down with our growers and when we detail out our solutions that we built for them. We're building those solutions to circumvent what we anticipate some of those issues to be. I actually think it creates an opportunity for us in '22. With that, David, I'll let you speak specifically some of those industries that we're paying close attention to from an inventory standpoint. Yeah, Mike, good question. Jeff nearly nailed all of it, but you know really due to the scale of Nutrien Ag Solutions and the strategic partnerships that we have in the industry and our multi-sourcing strategy from a supply chain perspective, we weathered the storm quite well in '21 and put ourselves in a position to be ready -- to be ready for 2022. As Jeff said, we're much more on the front foot relative to understanding what the situation looks like. Hurricane Ida obviously put a little bit of a challenging position in place on glyphosate, some of the energy crisis is going on in China, continue to put some constraints on certain active ingredients [Indecipherable] as you mentioned Michael is one that was challenging, '21 is going to be a challenge, in '22. We know from our seed sales that the more area will be enabled for the use of blue phosmet and therefore put constraints on supply. As Jeff said, our supply chain organization is directly connected to our sales organization and we have tight communication so we can help agronomists best position our current supply situation as well as bring forward other agronomic solutions to farmers as Jeff said to meet the needs, whether it's in recontrol, disease control, or insect control.

Operator

Your next question comes from the line of Adam Samuelson from Goldman Sachs.

Adam Samuelson -- Goldman Sachs -- Analyst

Yes, thank you. Good morning, everyone. So, maybe a question on capital allocation. I'm just thinking about possibility we're extracting in the second half of this year and where we look to be tracking in the first half of of next year. The EBITDA and the cash flow generation here is very sizable. You're buying back stock, you talked about a $2 billion reduction in long-term debt over the next six months. But can help us think about kind of what the internal kind of capex opportunities would look like, where -- what inorganic or scope or size of inorganic opportunities that might be out there versus an acceleration of cash return to shareholders. I'm just trying to think about how these kinds of prices and cash flow kind of get deployed over the medium term.

Mayo Schmidt -- Mayo Schmidt

Sure. No. Thanks for that question. I think what I would point to and I'll pull in Pedro here in a moment, but when we think about our integrated platform we have a number of avenues several to drive value for shareholders. And I think that quite frankly that's evidenced more pointedly this year than ever before relating to execution. We've been growing the business strategically, you've seen us down in Brazil and then in the past obviously Australia's worked out very, very well meeting our return standards and it's driving value through our entire cycle because when you think about the vertical integration we have between the supply chain in terms of production, all the way through the retail and the agronomist in the field providing the guidance to the producers, to our farmers that can ultimately make them successful in the soil chemistry. It puts us in a really good position to think about strategically how we want to allocate capital in any one of those venues which we as even David and Jeff have just articulated how close we are to every sale of every chemical and every fertilizer. So Pedro, I'd like you to maybe take a take a crack at that.

Pedro Farah -- Executive Vice President and Chief Financial Officer

Yeah, I know. Thank you, Maria, and thank you, Adam for the question. As you put it out, this is a good problem to have right now, especially the strength of our earnings. And we have already distributed quite a bit of the cash flow this year and you would have noticed that we have done some share repurchases so far and -- but they are in addition of a number of different opportunities for investment in the business as Mayo has mentioned. And a bit diversification of retail and we continue to have a very robust pipeline in Brazil. We also have expanded in the past the million tons in nitrogen and the additional free cash flow that we have are going to allow us to not only do what you mentioned is the de-levering of our balance sheet, which creates options for us for both investments and further shareholder returns through the cycle, but also continue with the same investments in retail decarbonization of nitrogen. We have just completed a successful Phase 1 of nitrogen that added about half a million ton of nitrogen and we are now embarking on a second phase for nitrogen with another 0.5 million ton. Those projects are very, very profitable and we are coming at a very good time as well. And for potash, we still have opportunities as well for next-gen initiatives and additional projects for cost reduction as well. And brownfields are coming at this point in time at virtually no capital. So there will be a while until we actually have to even use capital there. So anything over and addition to that will apply on a compete for capital basis. I think we have enough insight programs right now to -- for the foreseeable future. But we will be coming back to everybody with our plans in next June for the sort of the excess capital that we might have at that point in time and how that aligns with our growth initiatives.

Operator

Your next question comes from the line of Steve Hansen with Raymond James.

Steven Hansen -- Raymond James -- Analyst

Yes, good morning [Indecipherable] I'm just curious how proprietary products play into the capital deployment strategy here. I'm thinking back to the 2019 acquisition of Actagro for example. I'm wondering if you might also be targeting similar type deals or perhaps even if there might be specific capabilities or products that you might be looking to target in Brazil.

Mark Thompson -- Executive Vice President, Chief Strategy and Sustainability Officer

Hey, good morning, Steve. It's Mark, thanks for the question. Yeah. So Steve, as you noted the proprietary products business has been a very attractive platform for Nutrien, and Nutrien Ag Solutions in particular. We spent many years over the past decade in North America building out that model, building our Loveland Products business, which is our specialty chemistry and specialty nutrition lines. And then as you noted completed the acquisition of Actagro which is performing very well a few years ago. And we've taken a similar approach to Brazil as well. So you've seen us acquire Agrochem several years ago to provide us with a platform in nutrition and we also completed the acquisition of Tec Agro just recently which provided us with a really attractive soybean seed platform in Brazil and that's a real differentiator for us when you think of how we've added value through core retail distribution in our business, but also bolting on specialty products and services that really provide that full-acre solutions for growers.

With the portfolio that we have, we feel we've got a great organic growth opportunity in expanding the penetration of the existing Loveland products portfolio, the Actagro portfolio, and then the Brazil acquisitions as well as we continue to grow that network out. So a really good organic opportunity that doesn't require further capital investment. But of course as we look to geographic expansion of the retail business over time, it's an area for us that's extremely high margin. It differentiates us at the farm-gate. So we'll continue to look opportunistically in that area as it is a core strategic fit, but we're very happy with what we've got today and obviously it's contributing in a meaningful way to our growth.

Operator

Your next question comes from the line of Jeff Zekauskas, JP Morgan.

Jeffrey Zekauskas -- J.P. Morgan -- Analyst

Thanks very much. There are high natural gas prices in Europe, Eastern Europe and Russia. How much end capacity do you think is offline on a global basis? And in the Phosphate area, what do you think China phosphate exports will be in 2022?

Jason Newton -- Chief Economist & Head of Market Research

Good morning, Jeff. If we look in Europe itself, the capacity of ammonia in Western and Central Europe is about 20 million tons and we think there is about 40% offline. And so that equates to roughly 8 million tons of ammonia capacity currently offline and that would exclude Ukraine and there's additional capacity in Ukraine that's also offline at the current time. As we look toward 2022 in terms of phosphate exports from China, we expect China to be somewhere in 9.5 million tons of exports this year. But the export about 5, a little over 5 million tons in the first half of 2021. And given the constraints right now in terms of export restrictions, we wouldn't expect them to be at that level next year. And so it's a bit early to estimate where those will be in 2022 and still uncertain how those export restrictions will be applied, we certainly need from a supply demand perspective, need volumes of exports keep moving from China, but exports in the range of 8 million tons, 9 million tons sort of similar to where they were in 2020 is likely a realistic level given the increased constraints.

Operator

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

Jacob Bout -- CIBC -- Analyst

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

Mayo Schmidt -- Mayo Schmidt

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

Mark Thompson -- Executive Vice President, Chief Strategy and Sustainability Officer

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

Jeffrey Tarsi -- Analyst

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

Operator

Your next question comes from the line of PJ Juvekar, Citi.

PJ Juvekar -- Citi -- Analyst

Yes, good morning. Just a couple of quick questions. First for Ron, can you talk about sort of the price mix in seeds, what are the price cuts indicating this year and where do you see that going into the growing season? And secondly for Mayo on potash, I know you ramped up your potash production by 1 million tons. And I guess you have at least 3 million tonnes of low cost capacity left. When would you like to activate that capacity if this tightness continues especially in light of the Jansen project that's coming online in, say, five to seven years. Thank you.

Mayo Schmidt -- Mayo Schmidt

Yeah. Thank you, Jeff. I'll let me take the first half, which was I think directed to you and then I'll be happy to start on the second.

Jeffrey Tarsi -- Analyst

Yeah. [Indecipherable] from a seed standpoint, pricing standpoint, we saw modest increases that were released late summer, early fall. And we would expect those increases to obviously carry into the '22 season. We're just getting started really heavily with our fall booking of the seed business. But I think we were probably pleasantly surprised the way the increases came out and some indications were that maybe there'll be a little bit heavier than they were. But there have been increases across all the major lines, proceed and and modest, and I think that speaks well for what we want to do in 2022 as far as increasing our share. David, you might have a few more comments on the seed piece.

David C. Elser -- Vice President, Strategic Supply Chain Operations

Yeah, Jeff and PJ, thanks for the question. When we look at seed price cards, particularly across corn, soybeans as Jeff said, probably a little surprised on the modest increase, we -- on average sort of 3% to 7% across both corn and soybeans. And in terms of our own proprietary brands, we look to lead or look to follow and be at the top end of that range. So, as Jeff said, team is [Indecipherable] in the process of booking seed now, farmers are in the process of finishing up harvest and momentum into 2022.

Mayo Schmidt -- Mayo Schmidt

And then coming back to your good question on 2021 potash production and I'll ask Ken here in a second. But to your good question, we're on pace to deliver 1 million tons of additional sales. And as Ken indicated earlier, that would be reflected in our guidance of 13.6 million metric tons to 13.9 million metric tons. And that really is supported by, as I mentioned in my remarks, the six low cost mines which really gives us a competitive advantage. But I think as you look forward, there is probably additional downtime we took in quarter three and that was we had COVID restrictions, but the mine network is operating very effectively. But no doubt we'll expect to take some additional downtime in 2022 because there's always the need to catch up on additional maintenance projects. And then when you think about the Jansen project and we've commented on that as it is a number of times in the past is if you look at the next nine years and a growth of 2% to 3% in potash demand, that takes us between 20 million tons to 24 million tons of extra demand in the marketplace. So we really do think that when that Jansen project comes online, maybe seven years, maybe nine years with 4.5 million tons that the market will easily absorb if not looking for more production. So Ken, I don't know if you want to add anything to that.

Ken Seitz -- Executive Vice President and Chief Executive Officer of Potash

Yeah, I mean, I think just consistent with what you're saying there Mayo, this year close to 14 million tons of production preserving, an additional 1 million tons for next year. The market is growing 2% to 2.5% average annual growth rates, we expect to maintain market share. And so yeah, we will be increasing production eventually to 18 million tons. But recalling also that we have an additional 5 million tonnes of very low cost brownfield capacity after that about $500 per ton. So we'll be pacing our growth as long as our customers are calling for potash, we'll be there to provide it. And yeah, the comments on Jansen nothing to add there, couldn't agree more.

Operator

Your next question comes from the line of John Roberts with UBS.

John Roberts -- UBS -- Analyst

Thanks and congratulations on a nice quarter. Alberta is promoting carbon sequestration. We've had recent blue syngas plan announcements by Air Products and Dow and then we also had the blue ammonia project in the Gulf Coast. Do you expect Nutrien to be pursuing bigger sequestration related projects than what you currently have underway?

Jeffrey Tarsi -- Analyst

John, appreciate the question. I guess to start, we would think that low carbon ammonia will be an important part of global efforts to decarbonize. And if you think about agriculture or energy alternatives where that's the marine transportation or power generation [Indecipherable] hydrogen carrier low carbon amount certainly fits into that puzzle. There are different technologies available out there from electrolysis through to the carbon sequestration that you talked about. And so we are in an interesting position here. We've got some competitive advantages, particularly if you look at a couple of the sites, we have. So let me start with Geismar Louisiana. We already do CO2 sequestration there. So we have an existing pipeline to the site, we have existing relationships with company that do the sequestration for us. We've got deep water access. So if anybody is able to build low carbon ammonia is part of that global decarbonization. But we certainly have advantaged position. So we're looking hot there, obviously there are some technical discussions to be had around which technology to choose coupled with the sequestration, and then there's the commercial discussions to be had as well. We already have, but a million tonnes of low carbon production out there. So in that regard, we are ahead of our competitors. We also had the Alberta side around Edmonton locations at Redwater and sports [Indecipherable] So we're certainly in a position there if we are able to tie into trunk lines in Nigeria as well. So I think the answer is we should look into this. I think we've got a balanced position and when we're ready to talk about some definitive projects we will be back out in the market.

Operator

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

Andrew Wong -- RBC Capital Markets -- Analyst

Hi, thanks for taking my question. Just wanted to go back a little bit on potash quickly. And I wanted to ask about potash inventories. So there's been a lot of concern from the Potash buyers around Russian sanctions that -- and maybe the potential for limited availability coming out of there, and maybe seen some impact on prices and the recent purchasing activity. So in your view, is there any buildup of inventory from these buyers or how these concerns and who have been active in the market and is there any possible risk that if the sanctions aren't strict that there may be some overhang afterwards. Thanks.

Mayo Schmidt -- Mayo Schmidt

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

Ken Seitz -- Executive Vice President and Chief Executive Officer of Potash

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

Operator

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

Adrien Tamagno -- Berenberg -- Analyst

Hello, good morning. I have a question about nitrogen. When is it fair to expect the incremental 500,000 tons for new Phase II expansion? And all in all, you will have 1 million ton extra product for nitrogen when this will be achieved. So can you give more color around which products that will be directed. [Indecipherable] for example. Thank you.

Jeffrey Tarsi -- Analyst

Yeah. Adrian. Certainly. So the first phase of our brownfield expansions were announced in 2018. That's when we started them. So it's taken us this time to get them in place. So that will help us get production up to about 11. 3 million tonnes next year. As Pedro mentioned, we have started on our Phase 2 projects, that's another 0.5 million tons. You can expect most of those online by the time we get through 2024. So the time we finish the five-year plan, we should be pushing close to 12 million tons. Now in addition -- those expansions are targeted on downstream products from ammonia. So while there is some small ammonia along there at some ammonia increase there, that's to help us produce more urea, more UIN [Indecipherable] from those products where we feel the market is growing, and where we need some other flexibility to improve profitability. So that's the expansion. In addition to those expansions we've been working quite hard on reliability improvements. And so over time, you should see capacity utilizations increase. Pulling against those two are the increased turnarounds that we're having to undertake. We had a couple of the largest ever turnaround done this year at Borger and at Redwater. That's because the plants are over 50 years old. As we get into these turnarounds now we are seeing an increased scope of work as we try and replace these components, the 50 years old and keep the plants in top condition. So working against us we've got the age of the plants, but then we've got the expansion projects. And as I mentioned 0.5 million tons now, 0.5 million tons by the time we get into 2024 and may be further. We're certainly open to looking at additional expansions beyond that. And as I said the downstream products predominantly, so urea, UIN. Hope that answers your question.

Operator

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

Jeff Holzman -- Vice President, Investor Relations

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

Operator

[Operator Closing Remarks]

Duration: 60 minutes

Call participants:

Jeff Holzman -- Vice President, Investor Relations

Mayo Schmidt -- Mayo Schmidt

Ken Seitz -- Executive Vice President and Chief Executive Officer of Potash

Raef Sully -- Executive Vice President and CEO of Nitrogen and Phosphate

Jason Newton -- Chief Economist & Head of Market Research

Jeffrey Tarsi -- Analyst

Pedro Farah -- Executive Vice President and Chief Financial Officer

Mark Thompson -- Executive Vice President, Chief Strategy and Sustainability Officer

David C. Elser -- Vice President, Strategic Supply Chain Operations

Vincent Andrews -- Morgan Stanley -- Analyst

Christopher Parkinson -- Mizuho -- Analyst

Joel Jackson -- BMO Capital Markets -- Analyst

Stephen Byrne -- Bank of America -- Analyst

Michael Piken -- Cleveland Research -- Analyst

Adam Samuelson -- Goldman Sachs -- Analyst

Steven Hansen -- Raymond James -- Analyst

Jeffrey Zekauskas -- J.P. Morgan -- Analyst

Jacob Bout -- CIBC -- Analyst

PJ Juvekar -- Citi -- Analyst

John Roberts -- UBS -- Analyst

Andrew Wong -- RBC Capital Markets -- Analyst

Adrien Tamagno -- Berenberg -- Analyst

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