Feb 7, 2019
Operator
[Abrupt start] As a reminder, today's conference is being recorded. I would now like to turn the conference over to Richard Downey, VP of Investor and Corporate Relations.
Richard Downey
Thank you, operator. Good morning, everyone.
And welcome to Nutrien’s conference call to discuss our fourth quarter results and outlook. On the phone with us today is Mr.
Chuck Magro, President and CEO of Nutrien; the heads of three business units and Mr. Pedro Farah, our new Chief Financial Officer.
As we conduct this conference call, various statements that we make about future expectations, plans and prospects contain forward-looking information. Certain material assumptions were applied in making these conclusions and forecasts.
Therefore, actual results could differ materially from those contained in our forward-looking information. Additional information about these factors and assumptions are contained in our current quarterly report to our shareholders, as well as our most recent annual report, MD&A and Annual Information Form filed with Canadian and U.S.
Securities Commissions to which we direct you. I will now turn the call over to Mr.
Chuck Magro.
Charles Magro
Thanks, Richard. Good morning everyone and welcome to Nutrien's fourth quarter 2018 earnings call.
This quarter marked the first full year for Nutrien. It was the year in which we delivered on all of our strategic priorities and generated significantly higher earnings.
Before I touch on fourth quarter and full-year financial results, I would like to review the performance of our key priorities. First is the progress we made on synergies and the value we generated from the merger.
At the end of 2018, we achieved run rate synergies of $521 million, exceeding our initial two-year target in just 12 months. We also increased our run rate synergy target by 20% to $600 million.
The realization of synergies has made a meaningful impact on our cost and we expect to capture further improvements across our business units going forward. The second priority in 2018 was to complete the required sale of our equity investments.
I would like to acknowledge the exceptional work of the team on the progress as we generated net proceeds of $5.3 billion from the sale of our stakes in SQM, ICL and APC, which exceeded our initial estimates of $4.5 billion to $5 billion. The equity proceeds along with strong operating cash flows, provide a significant opportunity to return cash to shareholders and grow our business.
In 2018 we returned $2.8 billion to shareholders through share buybacks and dividends. We paid nearly $1 billion in dividends representing a 17% increase from our legacy companies combined payout and we announced a further 7.5% increase in our dividend for 2019.
We also increased our existing share buyback program in December from 5% of shares outstanding to 8%. We've been very active with this extended buyback program and have now repurchased 42 million shares at an average price of $50.80 per share.
We accomplished a lot in 2018 and are well positioned to generate significant value for shareholders as we move forward. I will now turn to our financial results for the quarter and the full year.
Retail results were impacted by one of the wettest fourth quarters in the US in over 100 years. The business was also impacted by grower caution related to the ongoing trade uncertainty.
Q4 retail EBITDA was down 11% from the same period last year, primarily due to lower crop nutrient and crop protection applications. On a full-year basis, retail EBITDA was up by 5% supported by earnings from recent acquisitions and optimization of our extensive platform.
Most of our operating metrics were relatively flat year-over-year and we maintained EBITDA margins of nearly 10%, despite challenging weather conditions and pressure on grower margins. Retail also had a very successful year in terms of delivering on its strategic initiatives.
We acquired over 50 locations in the US and Australia, representing approximately $400 million in annual sales. Also in July, we launched our integrated digital platform.
By the end of 2018, we had over 50% of our North American revenue base signed up. The platform is leading-edge and complements our existing supply chain, agronomist network and our product offerings, creating value for our customers.
We will provide more details on our retail strategy, including a demonstration of our digital platform at our Investor Day in Toronto on May 28. Moving to our crop nutrient business where we generated significantly higher earnings in the fourth quarter compared to the previous year, potash EBITDA increased by almost 60% as we benefited from higher prices, record Q4 sales volumes and lower cash cost per ton.
The strength of Q4 potash volumes illustrates our ability to respond to market opportunity by flexing our operational and supply-chain capabilities. We benefited from higher prices in all major markets and continue to lower our cost through merger synergies and increased production from our lowest cost mines.
Potash adjusted EBITDA for the year was up 48% compared to 2017. We increased potash sales by 1.3 million tons and lowered our cash cost of product manufactured by 9% to $60 per ton.
This places us as the largest and one of the lowest-cost producers in the world. Turning to nitrogen, our EBITDA increased by nearly 65% in the fourth quarter as we benefited from higher market prices and increased volumes.
We were able to offset a weaker fall application season in the US with healthy nitrogen sales in Western Canada and our stable industrial customer base. Our ammonia utilization rate increased by six percentage points in 2018, which helped drive our cost per ton and increased sales volumes.
Combined with stronger year-over-year nitrogen prices, we increased nitrogen EBITDA by over 40% in 2018. We also generated higher earnings from our phosphate business, both for the quarter and on a full-year basis.
Higher realized prices in particular for fertilizer products more than offset the impact of increased ammonia and sulfur input cost. We closed our small Geismar phosphate facility at the end of 2018 and completed the final purchase of Phosphate Rock moving towards a simpler and more cost-effective phosphate platform.
Nutrien's adjusted EBITDA totaled $932 million in the quarter up 50% and we generated an impressive $2 billion in cash from operations. Our annual adjusted EBITDA was $3.9 billion up 32% compared to 2017, reflecting the strength of our integrated business model, merger synergies and improving market fundamentals.
We ended the year with a very strong balance sheet and a net debt to adjusted EBITDA ratio at approximately 1.6 times. The strength of our balance sheet puts us in an excellent position to execute on our strategic priorities.
As we look forward, we see a supportive environment in the first half of 2019. Global trade uncertainties have impacted the Ag sector, but the underlying fundamentals for most crops are improving.
The USDA is currently projecting the lowest US corn inventories since 2013. US soybean and corn prices are up 15% to 20% from harvest time lows.
In December corn futures are back around $4 per bushel. We expect US growers to increase corn area by 2 million acres to 4 million acres in place of soybean and we also expect higher cotton acreage.
The shift in acreage is supportive of crop input demand as per acre expenditure on corn and cotton is roughly double the average spend for soybean. US grower prepay, which we consider to be a barometer of farmer sentiment is above last year's level and we anticipate a very busy spring season.
In Potash, we forecast record demand of 67 million tons to 69 million tons, supported by steady consumption growth and low inventory levels in key markets such as China and Brazil. We expect potash markets will remain tight through at least the first half of the year.
Canpotex has a strong order book in place and is fully committed until April. We recently announced the $10 price increase in the domestic market, reflecting our expectation for a strong spring season, assuming normal weather conditions.
Nutrien potash sales volumes are expected to range between 13 million tons and 13.4 million tons in 2019 up modestly from last year. We maintain strong production flexibility in 2019 should market opportunities arise and have approximately 5 million tons of incremental operational capacity in Saskatchewan that we can bring on with limited capital as global demand grows.
Nitrogen markets have weakened over the past few months, resulting in more cautious fuel and pricing through the early part of 2019. However, we believe the market is over correcting and still anticipate a seasonal recovery in prices, driven by strong demand in the spring and limited new capacity additions.
As such we see the opportunity for higher global utilization rates and a continued improvement in nitrogen prices over time. North American gas prices are expected to remain low, particularly compared to other key nitrogen producing regions such as Europe.
This provides a significant competitive advantage for our North American nitrogen assets. In phosphate, we expect a balanced market and relatively stable pricing across our diverse product lines.
We anticipate a small reduction in our phosphate sales volume as we complete our synergy plan, including the conversion of our Redwater plant to ammonium sulfate in the third quarter. In 2019, we were report ammonium sulfate results in the nitrogen segment, resulting in an approximately $50 million shift in EBITDA from phosphate to nitrogen.
Based on phase on improving market conditions and increased synergy realization, we expect higher earnings across our retail and crop nutrient businesses in 2019. Our annual adjusted earnings guidance of $2.80 to $3.20 per share and our adjusted EBITDA at $4.4 billion $4.9 billion, both up significantly year-over-year.
Sustaining capital expenditures are projected to be similar to last year and we expect free cash flow in 2019 to exceed the $2 billion generated in 2018. Our guidance includes the impact of the new IFRS lease accounting standard, which will result in an increase to EBITDA of approximately $225 million and finance cost of $30 million.
It also includes incremental depreciation from the merger-related purchase price allocation adjustment of about $350 million, which we no longer exclude from our adjusted earnings guidance. Our focus in 2019 remains on the execution of our strategic priorities and prudent allocation of capital.
We continue to work towards the achievement of our synergy targets and drive operational efficiencies across the organization. We will provide more detailed operational targets for each of our business units at our Investor Day in May.
We are very well positioned to enhance shareholder value with a healthy balance sheet and a strong cash generation of the company. Retail will be the primary focus of growth capital and we continue to have a strong pipeline of highly accretive acquisition opportunities in North America and Australia.
We had a strong start to the year with two US retail acquisitions completed in January, representing a total of $170 million in revenue. This week we also announced a definitive agreement to purchase Actagro a leading developer and producer of proven environmentally sustainable soil and plant health products and technologies.
The acquisition is aligned with our strategy to invest in proprietary products that increase our margins and deliver strong value to growers. The acquisition is expected to be accretive to earnings in the first year and to generate approximately $55 million in run rate EBITDA two years after close.
In terms of returning cash to shareholders, we are focused on providing a stable and growing dividend that is underpinned by growth in our retail business and will review the renewal of the share buyback program when it concludes later this month. This is an exciting time for Nutrien.
We accomplish a lot in the first 12 months and we look forward to delivering on the significant opportunities that lie ahead. Finally I'd like to welcome our new CFO, Pedro Farah, who joined us at the beginning of the month.
Pedro brings extensive global experience in both financial and retail services and is well-positioned to lead our finance organization. With that operator, we'll now be happy to take questions.
Operator
[Operator Instructions] Your first question comes from the line of Ben Isaacson with Scotia Bank. Your line is open.
Ben Isaacson
Thank you good morning. Chuck, there was an article in the Wall Street Journal yesterday that talked about rising bankruptcies in the US farm belt, near record debt levels, negative median farming, I guess this is partially being blamed on lower crop prices, increased competition and the trade war.
Can you provide your thoughts on what's happening on the ground? What data points should we be watching for, for Red Flags and then as it relates to Nutrien specifically, can you frame the risk to retail in terms of volume and your 9.5% EBITDA margin that you've realized in each of the past two years thanks?
Charles Magro
Good morning, Ben. Yeah so we have been the article in the Wall Street Journal and look, maybe I'll start with just the overall comments.
The farmer bankruptcy is especially when it family farm bankruptcy. We never want to see that and I said it many times before that we make money when our farmer customers are profitable and healthy financially.
But you have to put that data in the context, when we look at the overall bankruptcy situation for farmers in the US as a whole, actually 2018 the number of bankruptcies in 2018 was actually lower than the 10-year average and the 2018 number has actually improved. It is lower than the 2017 numbers.
Now when you look at the data that farmers are carrying, the increase is really driven by real estate, but by their acquisition of land and land values have actually held up for fairly well over the last few years. So their balance sheets from our balance sheet perspective on the farm are relatively stable and what we have to worry about to be concerned with is really the liquidity and the cash flow from the farms and what we're seeing is as that comes down farmer margins and last year in 2018 it wasn't a great year for farmers.
We had crop prices starting to recover early in the year. The fundamental have improved for most crops, cotton, corn around the world and that is good news, but then the trade uncertainty hit that provided a significant amount of pressure on crop prices and that has hurt our farmer customers and we've said that I before, but when we look at the fundamentals of crop around the world especially stocks to use ratios, they are getting better.
So when I look at it from a 2019 perspective, here's what we expect. We do expect farmer economics to improve in 2019.
Crop prices are actually up. I said that in my prepared remarks from the lows we saw in 2018.
We do expect the mix change for more corn planted acres to really help farmer economics and if you look at our pre-pay so this is directly involving now Nutrien and our customers that we deal with, the pre-pay is up year-over-year approaching $1.6 billion, which is a really good sentiment I think that our customers are certainly expected to spend more on crop inputs this year. We do need a trace element then.
I think it is important to suggest that if we had trade settlement, we do expect crop prices to rise. But, overall, we still expect 2019 to be a better year than 2008.
Operator
Your next question comes in the line of Jacob Bout with CIBC. Your line is open.
Jacob Bout
Good morning. On your retail EBITDA guidance, how much is organic versus acquisition growth and how aggressive do you expect to be on US retail acquisitions in 2019 and in retail overall?
Charles Magro
Mike Frank, our Head of Retail is the question for you Jacob and then I'll provides some color as well.
Michael Frank
Yes, good morning, Jacob. Look, based on our guidance, we would expect that our EBITDA growth from acquisitions will be a bit stronger this year than it has been historically.
We would estimate that probably $30 million to $50 million of the growth in our EBITDA will come from acquisitions. And obviously we are also expecting a good bounced back especially in the first half following a Q4 that was very tough for customers.
And we didn't get on the herbicide or the fertilizer that growers want to get on. So we expect a strong performance base business.
We do expect some growth from as acquisitions as well. And I would just say in terms of the opportunities that lie ahead from M&A standpoint are strong.
As Chuck mentioned in the opening comments, we've already made a couple of acquisitions this year that are really good acquisitions on the footprint side, we acquired a company called Security Seeds which is based in Kentucky that has 14 branches. And that a high quality business and so we expect to have some additional midsize acquisitions on footprint like that through to this year.
We are also very pleased with the acquisition of [Indiscernible] 0:02:04.2 ,p7 obviously that has to go through our regulatory approval and so are we expected to close sometime in the first half of the year, but this is an acquisition and it would fit really well with our proprietary product strategy where we can take really good product, help our customers perform --the improve the performance on the field. And in these products also have strong margins and so it is exactly the type of acquisitions that we are looking for.
Charles Magro
Yes. Jacob, just a couple more comments on this one.
So the guidance range for retail 1.3 to 1.4 it really does as Mike suggest include really a normal or historical M&A activity as part of that number. It certainly does not include a significant step up in capital spending for acquisition.
And the reason is just look at the [Indiscernible] 0:02:53.7,p7 acquisition and that phenomenal acquisition, we are very pleased to have the employees and the product of the company join Nutrien. But that have to go to an antitrust review process and most likely we won't have that integrated in and contribute to retail earnings by the spring season, which of course is the largest season from an earnings perspective.
So these things are -- and they take time to integrate into close, but certainly when you look forward to 2020 and 2021 the capital that we plan to allocate into retail will be very accretive. And I think you'll see that in the years to come.
Operator
Next question comes from the line of Don Carson with Susquehanna Financial. Your line is open.
Don Carson
Hey, Chuck, just want to get your thoughts on the upcoming nitrogen season. You mentioned that obviously last fall was the worse fall season in US over 100 years.
So how much demand you think will got pulled Q4 into the first half of this year in terms of either volumes or on the percentage of ammonia that wasn't applied versus what was normally applied? And I guess logistically how do you see the prospects of squeezing season and a half in the one season?
Could we see logistical tie ups and an enhanced technician supply demand that could lead to apply from crisis?
Charles Magro
Yes. I'll give you my comments then Raef Sully, our Head of Nitrogen provide his.
Don. So look you frame it very well.
When I travel through the US and I was in that Michigan Ag Conference just a few weeks ago what is being reported that in the key nitrogen areas in the fourth quarter, it really did not have a season and especially when it comes to ammonia and that has been very, very well-documented I think you pointed out and that has led to the volatility and the uncertainty we are seeing in terms of pricing right now. And as I said in my remarks, we think the nitrogen prices have over corrected.
Now if we get normal weather patterns in the spring season, we expect to get all of it back. So if the window is there for growers especially with the mix moving to more corn acreage, farmers will not gamble in terms of the nitrogen application.
So the answer to your second question I think it depending on whether it would be nice to get an early spring but even in normal spring, we are anticipating and planning to get all of the deficit back assuming that the weather cooperates. Now with the distribution system that Nutrien has in place in the US, a season like this is going to take to our benefit.
We've invested heavily in our distribution system. We have our retail business plus our wholesale distribution network, one of the best I think in North America.
And that will play to our strengths. Raef Sully do you have more comments?
Raef Sully
No, just reinforce the point that the distribution system is there, but we've had seasons in the past where they have been very tight. We got the volumes out.
Chuck mentioned areas where there was Norman [Indiscernible] 0:01:00.9 ,p8 applied series with 25% went down, as long as we get a couple good windows through the spring season we will see that go out and get to ground.
Operator
Your next question comes from the line of Andrew Wong with RBC Capital Markets. Your line is open.
Andrew Wong
Good morning. So maybe question both for Chuck and Pedro.
Could you talk about your views on an optimal capital structure and leverage ratio? And obviously Nutrien has a lot of financial flexibility now much lower net debt to EBITDA ratio.
So I mean what scenarios would you be looking to increase leverage? Thanks.
Charles Magro
Yes, Andrew, I'll give you my comments and then [Indiscernible] 0:01:45.1will make a comment or two, recognize this is his first week on the job, but he has a vast experience from the different business is been within, it would be good to get a perspective. So our view really hasn't changed when it comes to leverage an capital structure for the company.
We want to maintain our investment grade rating. We think it's very, very important to do that.
And it's good and our leverage ratio will depend on where we are within our cycle. So at the top of the cycle having to or below is it something that we are not uncomfortable with.
And it's at the bottom of our cycle getting up to 3x debt to EBITDA again it is not something that we would be comfortable with. So the movement between 2x to 3x debt to EBITDA is sort of what where we think.
Obviously at the end of this year, we were at 1.6. So we have I think capacity and opportunity but that will be depending on where we can allocate capital to grow shareholder value.
Certainly, we are not going to rush out and to do anything that we don't think we will create long-term value. We've been very active with our share buyback program.
If you look at what we've been able to do so far purchasing 41 million shares at just less than $51 a share. We think that is a great use of our capital and we would be prepared to allocate even more capital to the buyback program.
And may be now I'll turn it over to Pedro for a few comments.
Pedro Farah
Yes. As Chuck said, this is day four for me, so there is a lot to learn about business.
I think the company is in a very privileged position from a cash standpoint. The balance sheet is so strong and I think it will provide in the short term room for all that we want to do in terms of share repurchase, dividends and the acquisitions that we have in the [Indiscernible] 0:03:36.0, p8 at this point of time.
So you as we go forward, I think it will be more room and we can consider something of different sizes, but right now I think we're sitting well positioned to take advantage of everything we have in the pipeline.
Operator
Your next question comes from the line of Chris Parkinson with Credit Suisse. Your line is open.
Graham Wells
Good morning, everyone, this is Graham Wells on for Chris. I had a quick question on the nitrogen segment.
Curious to hear your views on how you're thinking about global cost curves given the volatility we've seen in energy prices outside of the US? Also you mention the fact that you see the Chinese exports being roughly stable year-on-year but I'm curious to get your views as well on what you think Chinese production costs will look like in 2019 relative to 2018.
And the impact that could have on pricing for the year going forward.
Charles Magro
Graham, I will give you the overall urchin comments and then I'll Jason Newton, our Head Economist to talk about China and the production -- specific production cost for you. So the way we are looking at the nitrogen supply demand is a continuation of what we saw last year.
There's not a lot of excess capacity coming into the market. Demand has been growing at a steady rate, and so we see a continued improvement in the overall supply demand for nitrogen.
We don't think that we see a much more exports from China then we saw in 2018, simply because of the cost structure which Jason will address and probably as equal important is that there environmental reform that they're trying to put through in China. So we would like the overall fundamentals of the nitrogen business.
We think they are supportive; they are tightening and if you look at it from a cost to serve perspective when you have a third of our nitrogen business based on gas up here in Western Canada and then another third in the in Nymex. Based on Nymex and then a third in Trinidad, we are really well positioned globally in terms of our cost curve.
I think we can compete very well, and we think that will improve even more as we go through 2020 -2021 where the supply demand situation I think will get even tighter. Jason you just want to address the cost of production in China?
Jason Newton
Yes, good morning. Just looking at cost production in China is relatively flat where it was through much of the second half of last year, particularly the after site base urea production, which really drives the marginal cost.
And so we still believe those costs are in the range of the $250 to $253 per ton fob per ton in China. The bituminous prices have come down and are now more than they were a year ago.
But if we look at where Chinese production rates are, they really very flat to year-over-year levels and inventory at ports also remain relatively flat year-over-year levels which were relatively tight. And so while the export pace picked up at the end of 2018 and early 2019, we really don't see the export volumes from China being significantly different in 2019 than they were in 2018.
European gas costs are also important driver particularly for ammonia and UAN we had seen the hub based gas prices in Europe come down but really right pretty closing lines where we were year ago so they are doubt in high but in line to year ago level. And it really I think if we go through the year directional those prices will drive right that the core prices move midway through the year.
That the formula based prices driven by crude oil had also declined, but that there actually up about $1 from MBTU compared to where prices were a year ago. So overall I think that the cost is-- the cost structure remains pretty much stable to average 2018 level was down from the highs that we saw in the second half of the year.
Operator
Your next question comes from the line of Steve Byrne with Bank of America. Your line is open.
Steve Byrne
Yes, thank you. How do you expect to envision your digital ag program to drive value for your retail business and perhaps more specifically, what fraction of your members digital data do you think you'll be able to access?
Yield data by genetics that you could then build a productive tool to help your members buy the best genetics for their soil type.
Charles Magro
Good morning. Steve.
I'll have the Mike Frank answer your questions and then I'll provide some color as well.
Michael Frank
Good morning, Stevel. As Chuck mentioned in his comments, since we've launched our digital platform to our customers last July, we been very pleased with the uptake in the engagement that we've seen from our customers with over half of our customers now signed up on to the customer portal and engaging managing their accounts and now buying products.
The way we think about our digital platform that customer facing, it really has three big buckets. One is around what we call the omni channel piece of it, and this is the area that gross can come in, they can manage their account, they can look at what they've done in the past; they can pay their invoices online and now they can also order products online and so that a very important convenient tool that we've put in the hands of our customers online.
The second big area of focus for around crop planning. And this is a tool that allows our [Indiscernible] 0:04:45.1to sit down with our growers at the end of the season, look back to what happened on their farm and field by field then plan the next year based on the opportunity, the weather, the crop prices and the technologies that we have that we can help our customers be successful.
And so that the second big bucket that we are well advanced in and then last area and probably here you asking about was more around digital agronomy, and this is an area that we will build buying partnering. We have some great tools today around variable rate fertilizer and variable rate planting, our prescriptions where we can go into the field and the prescribed specific planting rate or fertilizer variable rate script.
We also have other tools, we announced a partnership with Lindsay [ph] recently on water and irrigation management. And so this is an area that will continue to build out over time.
I would say it is the third late to this tool and we won't develop all the tools ourselves. There's a lot of partnership opportunities, so for example on the seed side, with the acquisition we made last year there, we have a great tool called Find my seed and so we've got that seed selection tool.
So now up and running on our digital platform where customers can go in and on a field by field basis select the right genetics for their field and so we feel like we are on the leading edge of this. And again based on the feedback and the engagement we are getting from our customers, it's showing up away from them as well.
Charles Magro
Yes. Steve, Just a few more comments, so Mike covered the details really well, the high-level strategy we plan to lead the industry and we are going to be very smart but what that means, but we want to be able to work with our customers, when they want, how they want and where they want.
And this integrated platform is connected to our 3,500 grommet. Our extensive supply chain capability and our proprietary products and we put it all together, I think we are going to have so much leverage we will be able to create tremendous value for not only our customers, but our shareholders.
Operator
Your next question comes from the line of P.J. Juvekar with Citi.
Your line is open.
P.J. Juvekar
Yes, hi, good morning. Just couple questions on products, you talk about low production wind origin process in Brazil and China but you also mentioned high retail inventories in North America.
So what are the magnitudes of these low and high inventories in different regions and could they potentially offset each other? And secondly related to products, you talked about 5 million ton of flex capacity in products, is that sort your new strategy to flex your capacity with demand and the old strategy of price over volume.
Thank you.
Charles Magro
Yes. I'll answer the second question then I'll have Susan talk about inventory.
So PJ, we don't subscribe to any one specific strategy. I want to make that clear as I can, we never have.
We adjust our strategy based on market demand and where we are on the cycle and what our competitors are doing, like every other company would. Now when we look at 2019, we are very constructive on what --how its unfolding.
If you look at last year, we had 2% increase in demand again up to 66.5 million ton. This year --our guidance and our view is that the market will continue to grow not somewhere between 67 and 69 million ton.
So if you just take the midpoint of that we think that the demand around the world will grow at an incremental 1.5 million tons. And if you look at what's been announced by our peers in the industry, and what we believe will come into the market is something less than 1.5 million tons and because we have, I think one of the few companies that have incremental capacity.
We will service our customers like we always have them look at the supply demand and make sure that we can supply our customers and that's what we've done and our guidance--our production guidance and sales volume number that we gave is reflective of that. So the strategy really have not changed.
I think we were very constructive last year. We grew our sales volume by over 1 million tons, but as well we saw good momentum when it comes to pricing, but we met our customers’ needs and that's what we're trying to do.
And that's what we'll do in 2019. Susan, do you just talk about how you are seeing inventories globally?
Susan Jones
Yes, good morning, PJ. In terms of - you are absolutely right, what we talked about is the low inventories in both China and Brazil in particular, indicated before we went out of 2018, they were sold through the first quarter.
We are seeing the same thing in North America. And potash, no different than the rest of the Nutrien was impacted by the wet season in the fall.
However, having said that from a domestic standpoint, this is no different than the nitrogen story we talked about earlier which is the fact that if we see a normal season we expect those inventories to clear out. We expect to have good demand throughout the spring season and we are perfectly positioned with both our upstream warehouse and distribution capacity and our downstream retail capacity to pull that potash into the market.
So I don't think this is a situation where the domestic growth will offset the low inventory. Globally we do expect to see good demand and just on the flat capacity, the one piece that I just want to add to Charles' comments are that the way we look at this is stable prices are what we want for the grower.
We do not want to see volatility in prices. You'll have seen last year we met the demand as it was needed and we are well positioned to do so if we see further demand going into the second half.
Operator
Your next question comes from the line of Mark Connelly with Stephens Inc. Your line is open.
Mark Connelly
Thank you. So more than one domestic seed producers has talked about seeds pull forward into the fourth quarter, but we're not seeing that very clearly in your number, so I am wondering how you're thinking about the timing of seed sales this spring and on a related note outside of the central corn belt, many the farmers were talking to our -- looking pretty aggressively for alternative crops rather than just shifting to corn or cotton.
I would assume you get a pretty good sense of that until the questions is, is that a significant trend and would it help you or hurt you if it becomes significant?
Charles Magro
Hi Mark. I'll have Mike Frank answer your questions for you.
Michael Frank
Yeah. Good morning, Mark.
I think on the seed side, when you hear from other suppliers again you need to parse through what is building channel inventory and what is actually being sold through to the grower obviously our number show what's being sold to growers. What we saw in Q4 is that our corn seed sales were strong and it lines up with our expectation that corn acres are going to be up a little bit next year and selling of soy seed was soft as growers are really I think taking your time to figure out what they are going to do this spring.
And again as Chuck mentioned the fact that we've got prepaid that's up over last year, it was a strong indication that growers are going to invest in their crop, but they are delaying some of their purchases and some of their planning decisions I think to see how the trade dispute plays out. Now your question outside the corn belt, we're not seeing a big shift that's material there.
The wheat acres are pretty much baked based on what was planted last year and that was pretty, pretty flat. As Chuck mentioned we do expect cotton to be up a little bit and if you look at West Texas, which had a significant draught last year, they will definitely plan more cotton and so that's constructive to our business and so we're not seeing a shift to other crops that are going to -- that would be material in any way to our business.
Operator
Your next question comes from the line of Joel Jackson with BMO Capital Markets. Your line is open.
Joel Jackson
Hi. Good morning.
If I go back to retail, it seems like if you sort of parse the numbers, you're projecting kind of organic growth in retail to be flat right. So $150 million more retail EBITDA this year, maybe $75 million more from the IFRS change $40 million more from acquisitions and deferred demands from the fall of the spring.
So looks like there is not much organic growth going on in retail. Can you just speak to that point and then maybe in that commentary, talk about different regions and different product groups the different puts and takes?
Charles Magro
Good morning, Joel. Mike go ahead.
Michael Frank
Yeah. So Joel we are expecting a strong year in retail as per our guidance after a very challenging 2018 we were very pleased to Q3 last year where we were running ahead about 10% on the EBITDA line.
Obviously we gave some of that back in Q4 because of the tough conditions, but ending up 5% year-over-year we know we outperformed the market. In fact on a look back basis, we know that we grew our share in the U.S.
in the crop protection shelf at least to 0.5 point. We were up slightly on seed and we also grew share probably over 1% in fertilizer.
So we feel very good about that and most of that is just organic growth based on how we performed in the marketplace. So as we said in the previous comments, we are expecting a bounce back in the market, which will look like organic growth because of the week Q4, but we're also very pleased with the progress we're making.
We're transforming our supply chain to get more efficient in terms of how we operate and with our vast network of operations in a busy spring, we know that will benefit our business and so we feel good about the range, the guidance range for next year and I think when we're there, we'll look back and it will be a strong year of performance.
Operator
Your next question comes from the line of Steve Hansen with Raymond James. Your line open.
Steve Hansen
Just a quick one in terms of the retail growth outlay for this year, your recent announcements through January grow etcetera in the comments I think Mike made earlier, suggests you're off to a pretty good start, but most of the announcements do tilt very heavily towards the domestic opportunity. I am just trying to get a sense for the full-year outlook, how do you expect the outlays to sort of tilt on a relative basis between domestic and international particularly around Brazil and a lot of work you've been doing down there.
Should we really think it's going to be domestically heavier this year or how should we think about it thanks.
Charles Magro
Good morning, Steve. Mike go ahead.
Michael Frank
Yeah. So Steve, look I think we would expect that the majority of our M&A activities in going to continue to be domestic just a significant runway of opportunities that we see unfolding in the U.S.
as the independent side of the retail business continues to look for opportunities to exit in this very tough market and the changing dynamics around digital and everything else that's going on in the retail space. As Chuck mentioned we also see opportunities in Australia and we made some very nice acquisition in Australia.
So we see some opportunities continuing to unfold there and in Brazil, the way we're thinking about Brazil is over the next three to four years, we'll likely invest about $1 billion and so this will likely unfold on a slower basis than a big bang basis. We are now down there prospecting the market.
We made a very nice acquisition last year of Agrichem. We would expect to make some acquisitions this year of retail footprint where we'll actually start expanding our retail presence and we'll also continue to look for opportunities to add content in the Brazil market from a proprietary standpoint that will also build out our business there.
So I think there will be some movement in Brazil in 2019, but we'll go there slow and steady and we'll build it over time.
Operator
Your next question comes from the line of Duffy Fischer with Barclays. Your line is open.
Duffy Fischer
Yeah maybe if I can sneak in two quick, one just on your slide where you talk about the IFRS 16 impact on EBITDA of $225 million, can you do a bridge of that $225 million from EBITDA to free cash flow or the cash flow how that affects that? And then Chuck if you would just talk about what do you think the delta would be in North American purchasing whether we have a deal or no deal by the time we're planting in April?
Charles Magro
Good morning, Duffy. I'll have Fred Thun, our Head of Finance talk about the IFRS conversion and then I'll try to address your question on trade.
Fred Thun
Hi Duffy, Again just talking about the IFRS conversion the beauty of this is that it's simply an accounting change and it's a realignment of certain lines on our financial statements. So I wouldn’t anticipate any change to cash flow whatsoever as a result.
Charles Magro
And then Duffy, your question on whether we have a deal, what would happen for grower sentiment and purchasing, that's pretty tough to call. Our conversations with our growers I think Mike framed it really well.
Right now farmers are in the mindset of kind of wait and see and they're going to wait as long as they can before they have to make planting and crop decisions because they simply don't know. So I think what would happen is if we had a deal two things most likely would happen.
First is I think you would clarity in terms of their purchasing decisions and maybe the timing accelerated a bit which would be good news for all of us but I want to caveat that Nutrien has the supply-chain capability and the infrastructure to go with the farmer when they choose to go. It doesn’t have to be in early spring.
We can still get a lot of business done with them. The second I think though which is probably more important is that once the trade deal is done and assuming that there is success there, there will be this cloud of uncertainty that will be lifted over the crop pricing and the crop prices will be allowed to trade more on the fundamentals and we believe that when that happens, you'll see higher price, which are going to be good for everybody, but farmers first in terms of their profitability.
So that's why we're really concerned and watching the trade progress is because we think that it will be constructive for the overall ad complex starting with crop pricing.
Operator
Your next question comes from the line of John Roberts with UBS. Your line is open.
John Roberts
I realize this is not big but I hope it will be insightful to me. When you buy something like Actagro, kind of it go to market, would Actagro product be available in an Agrichem store and also available at a competitor store down the road?
And I don't know if they are currently held by FBN but would you pull them from FBN if they were there?
Charles Magro
I’ll have Mike Frank answer your questions for you.
Michael Frank
So we know Actagro very well, in fact we are by further largest customer. We've been working with them for over 10 years and we really like the products and technologies.
We like how they perform in the field and their value adding to us as a retailer and once we closed the deal, we’ll get the full margin opportunity. The Actagro also does sell to other third parties and we intend to continue to service that business as well.
So that is an opportunity for us. When we look at the synergy opportunity, there will be some cost synergies but the sale synergy will be significant.
We’ll start driving this harder across our whole retail footprint both domestically and internationally and so see a number of opportunities. Regarding FBN, they do not distribute through FBN today.
As you probably know FBNs product portfolio is very thin and it's a very small part of the business and so we wouldn't expect any change there.
Charles Magro
John just to fill that out for you, so we do have a wholesale proprietary product business that we sell the other retailers. Now we are selective on what those products are but that is part of our business.
So there will no change with the Actagro go-to-market strategy.
Operator
Your next question comes from the line of Jeff Zekauskas with JPMorgan. Your line is open.
Jeff Zekauskas
Your EBITDA in 2018 was about $4 billion and your cash flow from operations was $2 billion and there was a large working capital used maybe by about $1 billion. Can you speak through what your normal level of cash flow from operations is?
Is it 3.2 or 2.79 or 3, what's a more normal number. And secondarily, how many people work at Actagro.
Charles Magro
So we'll have Fred Thun answer your question on the conversion in terms of free cash flow and then just to answer your second question quickly here Actagro has about 100 employees. Fred go ahead.
Fred Thun
In terms of our cash flow both operating and free cash flow, number one Jeff is we're focusing on the strength of balance sheet and focusing on maintaining a strong balance sheet there. You will see ups and downs particularly in the non-cash working capital line primarily seasonally but then also with the commodity cycle.
It’s difficult given that to predict what the annual cash flow provided by operations should be. Instead we prefer to focus on free cash flow.
We delivered $3.16 per share of free cash flow in 2018, about $2 billion and our free cash flow is going to rise proportionately with the growth in our business in 2019. But overall ultimately we’ll focus primarily in the strong balance sheet and maintaining that investment grade credit rating.
Charles Magro
Jeff just to give you a perspective on how I think about the company as a whole, okay, so we usually convert somewhere between 70 and sometime you’ll get a sizeable 73% of EBITDA to free cash flow. And so that's a good kind of walking around proxy.
Now what happened in 2018 was we had a working capital build and the reason we had a working capital build is as we've articulated it one of the wettest fourth quarters in our history and really did not have the fall application season. So, that will work its way through the system but generally we see a conversion from EBITDA to free cash flow in that 70% to 73% ratio.
Operator
Your next question comes from the line of Michael Piken with Cleveland Research. Your line is open.
Michael Piken, your line is open.
Michael Piken
Hi, can you hear me?
Charles Magro
Yes Michael, I can hear you now.
Michael Piken
Hi sorry about that. Yeah I just wanted to get a feel for how you're thinking about the two competing platforms?
How big you think the launch of the new soybean platform will be this year and what is your expectation for selling both products in the future?
Charles Magro
Okay. We'll have Mike Frank answer those questions.
Michael Frank
Yeah. Good morning, Michael.
We were really pleased to see the Chinese government finally approve a number of new biotech trades that will be important tools for US growers in corn and soy and in canola. I think you're referencing specifically the [indiscernible] list trade that just got approved and how it's going to stack up to extend.
I think our research would say growers are very interested in both technologies. They had unique features and benefits and like a lot of trades that really depends on the quality of the underlying germ plasm.
So for 2019 we don't expect to see much of a market for analysts. I think it'll be a very slow introduction to the technology but we'll get our hands on it and we'll test it with some of our growers and in 2020 and beyond it will be more commercially available throughout the marketplace.
And so we're working with both [indiscernible] and again we like both technologies. We think this is going to be a fit for both and we think [indiscernible] is going to push hard on the list and [indiscernible] is going to push hard on extend and that will be good for our customers and probably an opportunity for us as well on the retail space.
Operator
Your next question comes from the line of Vincent Andrews with Morgan Stanley. Your line is open.
Vincent Andrews
Thank you and good morning, everyone. Maybe to build a little bit on that, you talked about the seed order book is kind of coming in ahead of schedule a little bit on pre-pays, are you seeing any unusual promotional activity in seeds and then I guess maybe in chemistry as well that might be encouraging that larger prepay and I guess some more comments on soybeans would be helpful because I just recall last year one of the consolidated competitors apparently got quite promotional with soy so are we seeing that again particularly as maybe we're about to enter a more competitive dynamic with trade competition as well, thanks.
Charles Magro
Good morning, Vincent. Go ahead Mike.
Michael Frank
Yeah Vincent as you know the last several years the seed market has been very competitive and there's been lots of programs that have been offered from the suppliers and so we're not seeing anything unique. That continues.
It's a very competitive marketplace. From a seat availability standpoint, we've got very strong availability.
So farmers don't feel rust right now to make those decisions. Now we're not seeing any unusual, which I think is at the core of your question, on either crop protection or seed and so we as you know our margins last year on both seed and crop protection were roughly flat.
We that we're going to continue to drive hard our proprietary products business this year, which will be constructive to margins and the seed business will likely be similar to last year from an overall margin perspective.
Operator
Your next question comes from the line of Adam Samuelson with Goldman Sachs. Your line is open.
Adam Samuelson
Yes thanks. Good morning, everyone.
Maybe a question, a follow-up on potash, just want to make sure on the guidance it would seem that the guidance implies kind of unit margins and pricing reasonably flat to up slightly year-over-year in the EBITDA range that you've given. Is that accurate?
And then along those lines just from a demand perspective it sounds like from a global growth perspective it's almost all China is how you're thinking is going to drive a global basis and just the confidence level and the first half, second half dynamics embedded in that assumption?
Charles Magro
Good morning, Adam. I'll have Susan Jones to answer your questions for you.
Susan Jones
Good morning, Adam. The way we're looking at from a directional pricing perspective is we're seeing firm pricing assuming a normal spring season through the first half and as I mentioned earlier on the call, Computex [ph] has a very firm book of business.
When we get into the second half pricing, we expect to be flat to a little bit down, but a lot is going to depend on how quickly some of these ramp up happen. We do expect to see demand growth consistent with what we've seen last year and some of the year 2.5% to 3% demand growth continue and that is not only out of China, but we see that other Asian markets, we see that in Brazil and we see that maybe a little bit of flat in India, but I think that from an overall volume perspective of where we're directionally positioning, it would be keeping our market share pretty well flat year-over-year meeting around 19.5% market share.
Charles Magro
Yeah and just one other comment, so we are seeing good growth in Africa and we don't talk a lot about Africa but the work that some of our peers have done on phosphate in Africa is having certainly a good strong effect when it comes to potash demand in that area as well. So China is by far the largest in terms of leading the growth in 2019, but we're really pleased with how demand for fertilizer is improving and increasing in Africa, which could be helpful in the future.
Richard Downey
We have time for just one more question.
Operator
Your final question comes from the line of Jonas Oxgaard with Bernstein. You line is open.
Jonas Oxgaard
Well thank you for sneaking me in there. Thinking little broadly about your retail strategy, it seems that you have three main directions, footprint, proprietary, content and digital ag, Can you talk a little bit about the how you rank order those priorities and if I may, if you have three choices, the returns is about the same in all three, which one would you pack?
Charles Magro
Yeah Jonas, I'll try and answer your question. So left out -- the way we think about is we have -- we have a channel and we have direct relationship to the grower and we're investing heavily to continue to build out that channel, that's the traditional retail footprint the facility that we buy, but then we also want to either own or rent or lease content and we've been investing heavily in that as well, that the [indiscernible] Agrible came down in Brazil and the Loveland products portfolio and then we have this notion of our digital platform, which is another tool to enable the relationship with the grower and I don't think we actually internally we don't prioritize them, we don't say one is more important than the other, it's the strategy of execution on all three of those because we think that that's the way to maximize value creation for the farmer and for our shareholders, but that is in essence the strategy, continue to build the channel and the content while looking at what services solutions and opportunity can we bring for our growers.
Operator
I'll now turn the call over to Mr. Richard Downey for closing remarks.
Thank you, operator and thanks everyone for joining us. IR is available for a calls you may have and we'll talk to you shortly.
Thank you.
Operator
This concludes today's conference call. You may now disconnect.