Nutrien CEO Chuck Magro: Economic Impact, Jobs, Opportunity

Well, thank you so much Tribal Chief Mark for those kind words. Still a little choked up actually. We've got to know each other over the last year and I want to thank you personally for the friendship and the openness that you've showed us. I also want to recognize that we are on Treaty Six territory, the traditional home of the Metis. The Saskatoon Tribal Council and other First Nations have been fantastic partners over the years. And we are seeing more and more opportunities to create social and economic value every day. We know that our Playbook in this area is one that other companies follow so I just want to start by offering for any of our partners or businesses here if you want to see what we do and how we do it, we would gladly share all of that information with you. I do think it is a Canadian best practice and we certainly plan to take that around the world into places like Australia.

This is my first time speaking with the Chamber in Saskatoon and it is a really special day, not because we've got a beautiful day outside and a full house here. I have had the opportunity in my job to speak to crowds all over the world, but this is really special because we do consider this to be home. And I can tell we're home because we see, when I look out into this room, a lot of our partners and our business associates I also see a lot of my employees here, and a lot of the leadership team. So before I get started, I just wanted to take a minute to thank the incredible employees of Nutrien that are in this room, that have made our company such a huge success in such a short period of time, so thank you all for your contributions.

It's hard to believe that Nutrien just turned one year old last month. And we've had a really busy year as you can imagine. We put together a new, much larger and much more diverse company. A company that has a different mission, it has a different strategy, and it certainly has a different purpose. Nutrien, by design, is different than any of our predecessor companies, and I'll explain that to you today. We also created something special, which I think is great for Canada, Western Canada and certainly for Saskatchewan. And it will be great for all of our stakeholders, including our employees, our shareholders, our customers and our supply partners. And in my belief, Canada does not have enough Canadian champions who can compete on the global stage. And that's exactly what Nutrien was built and designed to do. Is to operate locally in Western Canada, but also around the world, but compete globally.

On a personal note, my first summer job was working on a dairy farm as a hired hand in Southwestern Ontario when I was 14 years old. I gave up my paper route, that was a big thing for me back then. And when I went on the farm, I fell in love with agriculture. I fell in love with the farming community. Everyone I met worked hard, had respect for the land and took pride in their families and in their communities. And to me, the world needs more agriculture. Not just for the food we produce, but for the culture and the values that we live every day. And I'm proud to be in the Ag business, and I'm very proud to lead this wonderful company called Nutrien.

So I'm going to talk for about 20 to 30 minutes today. I'll talk a little bit about Nutrien, what we created with the merger, why it is so important and our plans to really reshape how agriculture is done around the world. I'll then talk about our unique relationship with Saskatchewan, why we're so proud of our heritage here. And then I'll wrap up with my perspective on what Nutrien, but basically every other Canadian company that operates in Canada, needs to be successful. And then we'll open it up to a Q&A session and hopefully Darla won't be so mean to me. But we'll see. So let's get started.

So Nutrien is an agriculture company, it's not just a fertilizer company although we're the world's largest fertilizer company. It's not just a retail distribution business even though we operate one of the world's largest Ag retail businesses on the planet. We see ourselves as an agricultural solutions provider. We provide farmers with everything they need to grow a crop, maximize their profit and, most importantly, be sustainable and transparent while they do it. And the merger was a big part of this because the merger brought three pieces together that no other publicly-traded Ag company in the world has under one roof. First, we have a direct relationship with the farmer - 500,000 farmers in 7 countries. And as I mentioned, we bring them full agricultural solutions, products and services, agrinomic knowledge, financing and now digital and precision tools. And we are very very proud to work with our farmer customers around the world, shoulder to shoulder, every day, on their farm. That's how we built our business. The second is a world-class supply chain. We have the capability to get products and services, but more importantly, people to the farm in a matter of hours. Some of the numbers: 15,000 rail cars, 400 distribution centres, 1,700 retail facilities, and I'd say, and counting. But, most importantly, 22,000 employees strong. And we have invested billions of dollars to build this capability, and I believe it is unprecedented in our industry. The third thing we brought together: world-scale, world-class products and services. High-quality production that we manufacture at a globally competitive cost. Nutrients, crop protection and seed. Potash is the perfect example of this. Potash is important to farmers because it improves plant, root and stem strength, water-utilization and disease resistance. Our potash mine is here, right? Six mines and we're proudly mining potash on behalf of the people of Saskatchewan. And it is some of the lowest cost, highest quality potash on the planet. And our shareholders have invested about 10 billion dollars in the last few years to ensure we stay low cost and remain competitive. This integrated business allows us to start with the farmer first and work backwards. Everyone else in our industry is doing it the other way around. And in my humble view, this approach will transform the industry in just a few years. A company who can get this right will generate significant value for shareholders and for all of our stakeholders, including the communities where we live and work. And I'll explain that in just a minute. So, without a doubt, the merged company is a lot bigger, it's more diverse, it's more competitive and we believe more sustainable than either company ever was before.

Moving past the merger, what I'd say here is that, the merger was the beginning of a journey, it certainly wasn't an end. Our strategy is to continue building this integrated platform throughout North America, but also South America, Australia and eventually other parts of the world. And we expect to invest significant capital to grow our businesses, but also to invest in new products, new technology and new services. In fact, we are planning to invest about 3 to 4 billion dollars in our retail business over the next coming years. Our retail consolidation strategy has been highly effective and we believe that this is the key to our long term success. We are also launching a former farmer financing business, which should be operational by the end of this year. The ability to obtain affordable financing is so important, part of the equation for farmers, especially in today's world. And Nutrien is preparing to support our farmers with this new capability. Beyond this, we are also spending about 100 million dollars per year responding to farmer needs by developing a leading and new digital platform. We have seen significant uptake since launching this new platform in July, and I believe one day this could really change how we do business with our farmers. In potash, we are still investing and expanding our capacity, and improving our efficiency. We're investing significantly to drive improvements in safety and reliability, lower our costs and increase product flexibility. We are also investing in our digital capabilities in mining. We will leverage data, advanced analytics, automation to ensure we remain competitive and improve the safety of mining all at the same time.

Now some of you may be asking 'Why?' Why shift in the focus? After all, Potash Corp was successful. Agrium was successful. What's driving the change? And to me, I see two reasons why the merger was so very important. The first, of course, as a publicly-traded company, we need to create shareholder value. The integrated business model allows Nutrien to have higher asset utilization rates, lower costs and more stable earnings and cash flows. In other words, it's a bigger and stronger company. And our shareholders like that. Just look at last year. Our potash production last year was up 600,000 tonnes year over year. We produced an incremental 600,000 tonnes last year. Yes, we had slightly higher market demand from core markets like China, but the other reason, which is equally and probably more important, is we were able to sell our potash through our own retail distribution business direct to our own customers. This can be very very important when the market gets into an over-supplied situation like we saw just a few years ago. The second reason for driving the change and the merger was technology disruption. We are in the midst of another revolution in the agricultural industry. Agriculture is changing more rapidly than we have ever seen it. Our customers are changing, their customers are changing, almost everything in agriculture is changing.

So let me wrap up this section by giving you a glimpse of what agriculture and our business could look like 10 years from now if not sooner. Agricultural technology has advanced rapidly in the past decade. With agriculture now attracting billions and billions of investment. We're seeing it being poured into Ag tech like we have never seen it before. Amazon recently created an Ag tech department. Google Ventures is extremely active in the Ag tech world, investing in many start-ups. The agricultural equipment market has experienced what I would call revolutionary change. Let me give you a few examples. Drones. Drones have been around for a really long time - that's really not the game-changing event. What's really changing drone technology now is the new multi-spectral imaging technology. The camera technology in today's drones are incredible. To the point where farmers can see from drones on their mobile devices how healthy and unhealthy their crops are. Soil and crop sensors. We are seeing wireless sensors being developed to gather data on everything. Soil moisture, compaction, fertility, leaf temperature, plant water status, insect, disease, weed and festations. Senors are being actively developed in all those areas. Self-driving tractors. GPS technology has been around for 20 years, but now the tractors are actually driving themselves, and if you haven't seen it, it's pretty scary at first. With the advancements and application of data science, agronomy tools, visual imaging technology and robotics, I believe that the agricultural industry is at a point where it's just about to shift. It's going to shift from becoming an inputs business to an outputs business. Inputs are the fertilizer, the chemistry and the seed that's applied to grow the crop. Outputs are the number of bushels or the profit per acre. So we're already seeing the conversation with farmers, they're changing, it's shifting from 'How much fertilizer do I need to grow my crop?' to 'How do I make 250 dollars with this soil per acre?' That's what's happening. And company's like Nutrien will take much more responsibility for growing that crop because we will have the data and the analytics to predict the outcomes. Basically what we're preparing to do is underwrite the risk for our farmer customers. Which is something that has never been done in our company or in the agricultural industry to date. This shift has already started to happen. We are seeing several companies experimenting with this transformation, and Nutrien wants to be a part of that transformation.

So how do we get our company ready? How do we get Saskatchewan ready? And how do we get Canada ready? If agriculture is going to shift to that way. Before I can answer those questions let me stop and just look a little bit at what business we have in Saskatchewan. And what I love about Saskatchewan is it is a mini Nutrien. It has all the elements of our integrated business model right here in this wonderful province. 20 million tonnes of potash capacity, which gets a lot of attention, but we also have 120 retail facilities, 4,000 employees and 15,000 farmer customers in the province of Saskatchewan. I do want to call out specifically our seed breeding facility here in the province, it probably doesn't get as much attention. This is a canola gene-editing breeding business. Now, for most of you, you know that the world canola means Canadian oil. It was developed here in Saskatchewan and Manitoba in the 1960s and 70s. Nutrien's canola seed business, it's branded under the name Proven. I believe it's some of the best canola seed in the world. And our international breeding office is right here in Saskatoon. And it's focused on delivering high yielding and herbicide-tolerant varieties, which obviously allows our farmer customers to spray herbicides on the crop to efficiently control weeds and drive productivity for them. Over the many years our Proven seed has been planted on millions of acres across Western Canada. But because of our integrated business model now, we've also taken Proven seed to the United States and to Australia through our integrated distribution model right to our own customers. So it's a great success story for Nutrien and I think something that Saskatchewan should be very proud of.

Now looking at this chart, you can see that Saskatchewan is very important to Nutrien. It's a core location for our people, our products and our technology. And it will always be that way. And to me, fundamentally, I believe that what we have to ask ourselves is 'Is Saskatchewan better off with the merger and the creation of Nutrien?' And I won't leave you in suspense. The answer is yes, far better off. Saskatchewan has been a clear winner as a result of the merger. And when you step back and you look at what we did in 2018, and just add up the numbers, it was very very impressive. Nutrien contributed an additional 750 million dollars to the local economy. This is on top of what the combined two legacy companies did the prior year. In just 12 months, 750 million dollars. So how did we do this? The money is one thing, but what impact did we have? Well, we expanded our workforce. We now employ 4,000 employees in this province. We significantly increased the number of people working in our Saskatoon office by about 30 percent. And they're not just potash jobs. They're representatives of every one of our corporate functions they are here. We made a decision to anchor the Nutrien tower at River Landing. This is a 15 year, 50 million dollar commitment, and it will be one of the tallest buildings in the province, but more importantly, it will be modern and innovated and house our employees in a really awesome work environment that they can be proud of. It will redefine the river front and feature a new park, pathways, a farmer market, restaurants and other amenities to enrich our community for years and years. We also relocated our Canadian retail business to Regina. and Roger Bortis is here, Roger wave. He runs our Canadian retail business and this business is a 2 billion dollar revenue business with approximately 270 retail facilities in Western Canada. If this business was a stand alone business, it would be one of the largest companies in Saskatchewan. And we move that business from Alberta to Regina. We also donated to more than 200 community organizations including the new 13 million dollar, 10 year financial commitment to STARS and STARS has been an incredible partner, and we're so proud to have a relationship with them. We are also focused on supporting local business. Many of you in this room are our partners and I want to personally thank you for the business that you do with Nutrien. You make us better everyday. Last year we sourced products and services from approximately 2,000 Saskatchewan-based companies, spending about 700 million dollars locally. And we're proud of that, and we're committed to continue to support local business and our Aboriginal suppliers and communities. And we expect this commitment will grow as our company grows. So like I said, Saskatchewan has been a clear winner because of the merger.

Now, as for our executive presence in the province. We place our executives where it makes the most business sense. Like every other company that is publicly traded and competes globally this can be and will be no exception. Our global potash business proudly calls Saskatoon home. The people managing production, marketing, logistics, procurement, all those fine women and men, are here in this community. And that makes good business sense. But beyond potash, we have about a third, one third of our vice presidents, living and working in Saskatchewan. Leaders of HR, Finance, IT, Legal, Procurement - they are all here. Senior people with global responsibilities here in the community. Why? Because that makes business sense. We want those corporate functions to be close to the businesses. It's the same way that we've built our company in Colorado and in Calgary. Now, as for my direct reports, we call these folks Executive Vice Presidents. So today we have Susan Jones. She is Executive Vice President of Nutrien and she is also the head of our potash business. Many of you have met Susan, and I want to thank you all for welcoming her to the community. The plan was always to have more than Susan living and working in Saskatoon. In fact, we ultimately planned to have three of my direct reports living here. And my expectation is that we will be at that level by the end of the year. As our organization settles after a very very complex merger. Now, it has not all been positive. Mergers involve a lot of change, and some of it is painful. Some employees are no longer with the company or they have seen significant changes in responsibilities or duties. Some people want to turn the clock back, return to the way things were. And we understand that. But there is much greater risk to the company, all the jobs and prosperity it supports, of looking at the past and not moving forward. I'm sure for all of you business owners out here, you are looking forward. You are investing in new technologies and people, and you're making those tough decisions needed to be a successful company long term. And Nutrien is doing nothing but exactly the same thing.

Now, looking forward, I believe we are just getting started. As I mentioned, we are only one year old, and put as plainly as I can, Nutrien wins when Saskatchewan wins. Saskatchewan wins when Nutrien wins. We are tied at the hip of our mutual success. And as we continue to grow our company around the world, it will have a very significant impact to Saskatchewan. If Nutrien is successful in the execution of its business strategy, we believe we can add an additional 1.5 billion dollars more to the local economy in just a few coming years. That is above the 750 million dollars I already referenced. So how are we going to do that? Our long-term plan calls for much more potash production as we grow our global distribution business. Let me give you an example. We recently purchased a small company called Waypoint. Waypoint is the largest soil sampling and data analysis company in the U.S. We added 250 people to our family and 17 facilities across the United States. Why would Nutrien buy a soil sampling company? We wanted the soil data. Obviously to serve our customers, which is first and foremost. It will help them make better decisions on how much fertilizer to put on the soil, but also it will drive our sustainability agenda. We don't want anymore fertilizer going onto the soil than it needs to. And it will benefit our potash business here in Saskatchewan. Imagine having labs that are analyzing soil in our other core markets: China, India, Brazil. Imagine the kind of advantage that Nutrien would have and that would bring to our mining operations here in Saskatchewan. Being not only able to understand and identify soil deficiencies, but being able to act on it because we have real data. The point of this example is we are investing in new technologies to ensure long-term success tomorrow. Unlocking our manufacturing and mining capabilities with data science, predictive analytics. In other words, we are marrying the old world with the new. And this is something that I believe Saskatchewan, but more broadly Canada, needs to do to be more globally competitive.

Now this certainly isn't a slam dunk, which leads me to my last few comments. There is significant geopolitical unrest in the world today. The trade issues as an example between the U.S. and China are putting tremendous financial pressure on our farmer customers. And impacting the prices of almost all agricultural crops around the world. In potash, competition has never been as fierce, certainly in the days that I've been around, as it is today. Russian, Belarusian, but also German and Israeli producers they're low cost, they're high quality and they are targeting our historical potash markets in India and China and Brazil. And there is enormous pressure to ensure that agriculture is more sustainable and less impactful for the environment. This is something that we believe, we are in full agreement with. We believe it's something that needs to happen, and many of our customers feel the same way. I was in Davos earlier this year at the World Economic Forum, and this issue is top of mind for the world's most influential leaders. I certainly expect these trends to continue for the foreseeable future, but I also believe that there may be opportunities for smart, nimble companies and countries.

Nutrien and many of its businesses represented by the people in this room have been successful for many reasons. One is that Saskatchewan is blessed with enormous, high-quality natural resources. Another is that Saskatchewan has incredible people. And the third is that Saskatchewan and Canada have been a good place to do business for a long time. Great resources and great people will always be constant. And it's very important that the last feature, being a good place to do business, continues. To build a successful business, one that can compete globally, we have to first service our customers with delight. Second, we have to be able to move quickly, adapt and be nimble. And third, we have to allocate resources, both capital and people resources, with a long-term view. We don't need special treatment. We just need a level playing field with sensible regulation and policy. And that's not just me talking. This is a topic that has come up at the Business Council of Canada, which has just launched a task force on Canada's economic future. With a focus on business competitiveness and ensuring a high quality of life for all Canadians now and for future generations. For those of you that are not familiar with the Business Council, it brings together the CEOs and leaders of Canada's top 150 companies. Who in total employee about 2 million people, and impact the lives of millions more. Who are responsible for most of our country's exports, our corporate philanthropy and business investments and research and development. But above all else, this group is led by women and men who are passionate about Canada. People who are committed to their employees, building strong communities where they live and work and making Canada a better place. But when you step back and you look at what's happening around the world, that theme of change is really powerful. And we should ask ourselves, 'Is there more we should be doing to ensure Canada and Saskatchewan are the preferred places to do business?' Because investment brings jobs. Investment is what pays for the important social services that Canadians are rightly proud of. Investment brings a high quality of life for everyone involved in our country and in our province. And I see no reason why Canada shouldn't be the best place in the world to invest. So, as my work with the Business Council goes forward, I will be talking to many groups and individuals, including the Saskatchewan government, about ways we can work together to make Canada more attractive for investment, grow our economy, add jobs and drive prosperity for all.

To wrap up, Nutrien was put together by a management and board with a long-term vision. Who focus and are focusing on creating long-term stakeholder value. We are well-positioned to grow and compete on a global stage, that means ensuring our communities are strong and prosperous. Saskatchewan has been a clear winner as a result of the merger, and most importantly, the best is still to come. Because like I've already said, we're just getting started. Thank you very much.