Business Wire

Nutrien Delivers Record First Half Earnings and Expects Strong Second Half

Nutrien is accelerating growth initiatives and announces intention to complete its existing 10 percent share repurchase program in 2022

All amounts are in US dollars except as otherwise noted


SASKATOON, Saskatchewan--(BUSINESS WIRE)--Nutrien Ltd. (TSX and NYSE: NTR) announced today its second quarter 2022 results, with net earnings of $3.6 billion ($6.51 diluted net earnings per share), which includes a non-cash impairment reversal of $450 million relating to our Phosphate operations. Second quarter 2022 adjusted net earnings per share1 were $5.85 and adjusted EBITDA1 was $5.0 billion.

Nutrien delivered record earnings in the first half of 2022 due to the strength of market fundamentals, strong operating performance, the advantaged position of our global production assets and the excellent results of Retail. We generated strong results across our integrated business and demonstrated our unmatched capability to efficiently supply our customers with the products they need to help sustainably feed a growing world,” commented Ken Seitz, Nutrien’s Interim President and CEO.

We expect supply challenges across global energy, agriculture and fertilizer markets to persist well beyond 2022. The strength of our projected cash flow provides an opportunity to accelerate high-return strategic growth initiatives and return significant capital to shareholders. We intend on completing our 10 percent share repurchase program in 2022, increasing the total amount of capital returned to shareholders to approximately $6 billion during the year,” added Mr. Seitz.

Highlights:

  • Nutrien generated net earnings of $5.0 billion and adjusted EBITDA1 of $7.6 billion in the first half of 2022 due to higher realized prices and strong Retail performance, more than offsetting a reduction in fertilizer sales volumes. As a result, cash provided by operating activities increased to $2.5 billion in the first half of 2022.
  • Nutrien revised full-year 2022 adjusted EBITDA guidance1 and adjusted net earnings per share guidance1 to $14.0 to $15.5 billion and $15.80 to $17.80 per share, respectively. Adjusted net earnings per share guidance includes our plans to allocate approximately $5 billion to share repurchases in 2022.
  • Nutrien Ag Solutions (“Retail”) delivered record adjusted EBITDA in the second quarter and the first half of 2022. First-half adjusted EBITDA was up 38 percent year-over-year as a result of strong sales and gross margin growth, due to supportive market conditions in key regions where we operate. Retail cash operating coverage ratio1 improved to 54 percent compared to 60 percent for the same period in 2021 driven by higher margins.
  • Potash adjusted EBITDA in the second quarter and the first half of 2022 increased compared to the prior year due to higher net realized selling prices and strong offshore sales volumes. North American sales volumes were lower than the same period last year due to a compressed application season.
  • Nitrogen second quarter and first half adjusted EBITDA increased compared to the prior year due to higher net realized selling prices that more than offset higher natural gas costs and lower sales volumes.
  • In the second quarter of 2022, we recognized a non-cash impairment reversal of $450 million associated with our Phosphate operations due to a more favorable outlook for phosphate margins.
  • Nutrien repurchased approximately 22 million shares year-to-date as of August 2, 2022, under our share repurchase programs, for a total of approximately $1.8 billion.
  • On May 18, 2022, Nutrien announced it is evaluating its existing site at Geismar, Louisiana to build the world’s largest clean ammonia facility. The project would leverage low-cost natural gas, tidewater access to world markets, and high-quality carbon capture and sequestration infrastructure to serve growing demand in agricultural, industrial and emerging energy markets.
  • On June 9, 2022, Nutrien announced its intention to increase potash production capability to 18 million tonnes by 2025 in response to the uncertainty of potash supply from Eastern Europe being able to meet global demand.
  • Nutrien announced agreements to acquire Brazilian ag retail companies Casa do Adubo S.A. and Marca Agro Mercantil. These acquisitions support Nutrien’s Retail growth strategy in Brazil and upon completion of the acquisitions, we expect to surpass our stated target of $100 million annual adjusted EBITDA in Brazil by 2023.
1 These (and any related guidance, if applicable) are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section for further information.

Management’s Discussion and Analysis

The following management’s discussion and analysis (“MD&A”) is the responsibility of management and is dated as of August 3, 2022. The Board of Directors (“Board”) of Nutrien carries out its responsibility for review of this disclosure principally through its audit committee, comprised exclusively of independent directors. The audit committee reviews and, prior to its publication, approves this disclosure pursuant to the authority delegated to it by the Board. The term “Nutrien” refers to Nutrien Ltd. and the terms “we”, “us”, “our”, “Nutrien” and “the Company” refer to Nutrien and, as applicable, Nutrien and its direct and indirect subsidiaries on a consolidated basis. Additional information relating to Nutrien (which, except as otherwise noted, is not incorporated by reference herein), including our annual report dated February 17, 2022 (“2021 Annual Report”), which includes our annual audited consolidated financial statements and MD&A, and our annual information form dated February 17, 2022 (“2021 Annual Information Form”), each for the year ended December 31, 2021, can be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. No update is provided to the disclosure in our 2021 annual MD&A except for material information since the date of our annual MD&A. The Company is a foreign private issuer under the rules and regulations of the US Securities and Exchange Commission (the “SEC”).

This MD&A is based on and should be read in conjunction with the Company’s unaudited interim condensed consolidated financial statements as at and for the three and six months ended June 30, 2022 (“interim financial statements”) based on International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting”, unless otherwise noted. This MD&A contains certain non-IFRS financial measures and ratios and forward-looking statements, which are described in the “Non-IFRS Financial Measures” and the “Forward-Looking Statements” sections, respectively.

Market Outlook and Guidance

Agriculture and Retail

  • Global grain and oilseed stocks-to-use ratios remain well below historical average levels, which we believe will continue to be supportive for crop prices. Prices for key crops such as corn, soybeans and wheat are up 25 to 35 percent compared to the 10-year average, providing strong incentive for growers to increase production.
  • The US Department of Agriculture (USDA) projects that Ukrainian wheat and corn production will be down by more than 40 percent and combined Ukrainian exports of corn, wheat and barley will be down by approximately 60 percent year-over-year in 2022/23. While diplomatic efforts to restore exports from Ukrainian ports has progressed, the overall reduction in Ukrainian production in 2022 is expected to continue to constrain supplies for the forthcoming year.
  • US crop conditions started the 2022 growing season favorably, however, recent hot and dry weather has accelerated crop development and could limit yield potential. In Western Canada, growing conditions have improved from the severe 2021 drought. We expect the combination of robust grower economics and favorable growing conditions to support demand for crop nutritional products, fungicides and insecticides in the third quarter of 2022.
  • Prospective Brazilian grower margins remain historically high and analysts expect a 2 to 4 percent increase in soybean planted area in the 2022 planting season. While we expect this to support overall crop input demand, fertilizer inventories have been slow to move from port to inland positions and we expect import demand will resurface as these inventories move inland for Brazil’s spring planting season in the second half of 2022.

Crop Nutrient Markets

  • Restricted supplies of potash from Russia and Belarus kept potash prices at historically high levels through the first half of 2022. Potash shipments from Russia and Belarus were estimated to be down approximately 25 and 50 percent respectively in the first half of 2022, with the majority of Belarus exports occurring in the first quarter. We have narrowed our global potash shipment forecast to between 61 and 64 million tonnes in 2022 and continue to expect demand to be constrained by restrictions on exports from Russia and Belarus.
  • A dramatic increase in European natural gas prices has once again led to reduced nitrogen operating rates in the region. Tightening European ammonia supplies and significantly reduced Russian ammonia exports from the Black Sea are pressuring global ammonia availability. We expect strong seasonal nitrogen demand in the second half of 2022 following a period of delayed purchases due to benchmark price volatility.
  • The Chinese government continues to impose export restrictions on urea and phosphate fertilizers that are expected to limit its export volumes in the second half of 2022.

Financial Guidance

  • Nutrien revised full-year 2022 adjusted EBITDA guidance1 and full-year 2022 adjusted net earnings per share guidance1 primarily due to lower expected Nitrogen earnings as a result of lower nitrogen benchmark pricing and higher natural gas costs. Retail adjusted EBITDA guidance was increased to reflect strong performance in the second quarter. Adjusted net earnings per share guidance includes our plans to allocate approximately $5 billion to share repurchases in 2022.
  • Nutrien lowered potash and nitrogen sales volume guidance to reflect the impact of lower application in North America this spring.

All guidance numbers, including those noted above are outlined in the table below. Refer to page 53 of Nutrien’s 2021 Annual Report for related assumptions and sensitivities.

 

Guidance Ranges1 as of

 

Aug 3, 2022

May 2, 2022

(billions of US dollars, except as otherwise noted)

Low

 

High

 

Low

 

High

Adjusted net earnings per share 2

15.80

 

17.80

 

16.20

 

18.70

Adjusted EBITDA 2

14.0

 

15.5

 

14.5

 

16.5

Retail adjusted EBITDA

2.1

 

2.2

 

1.8

 

1.9

Potash adjusted EBITDA

7.6

 

8.2

 

7.5

 

8.3

Nitrogen adjusted EBITDA

4.0

 

4.7

 

5.0

 

5.8

Phosphate adjusted EBITDA (in US millions)

750

 

850

 

800

 

900

Potash sales tonnes (millions) 3

14.3

 

14.9

 

14.5

 

15.1

Nitrogen sales tonnes (millions) 3

10.6

 

11.0

 

10.7

 

11.1

Depreciation and amortization

2.0

 

2.1

 

2.0

 

2.1

Effective tax rate on adjusted earnings (%)

25.5

 

26.5

 

25.5

 

26.5

Sustaining capital expenditures 4

1.3

 

1.4

 

1.2

 

1.3

1 See the "Forward-Looking Statements" section.

2 These are non-IFRS financial measures. See the "Non-IFRS Financial Measures" section.

3 Manufactured product only. Nitrogen sales tonnes excludes ESN® products.

4 This is a supplementary financial measure. See the "Other Financial Measures" section.

Consolidated Results

 

Three Months Ended June 30

 

Six Months Ended June 30

(millions of US dollars, except as otherwise noted)

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

Sales

14,506

 

9,763

 

49

 

22,163

 

14,421

 

54

Freight, transportation and distribution

221

 

222

 

 

424

 

433

 

(2)

Cost of goods sold

8,286

 

6,659

 

24

 

12,483

 

9,950

 

25

Gross margin

5,999

 

2,882

 

108

 

9,256

 

4,038

 

129

Expenses

1,054

 

1,263

 

(17)

 

2,312

 

2,141

 

8

Net earnings

3,601

 

1,113

 

224

 

4,986

 

1,246

 

300

Adjusted EBITDA 1

4,993

 

2,215

 

125

 

7,608

 

3,021

 

152

Diluted net earnings per share

6.51

 

1.94

 

236

 

8.99

 

2.16

 

316

Adjusted net earnings per share 1

5.85

 

2.08

 

181

 

8.53

 

2.37

 

260

Cash provided by operating activities

2,558

 

1,966

 

30

 

2,496

 

1,814

 

38

Free cash flow 1

3,413

 

1,413

 

142

 

5,227

 

1,889

 

177

Free cash flow including changes in non-cash operating working capital 1

2,302

 

1,662

 

39

 

2,046

 

1,346

 

52

1 These are non-IFRS financial measures. See the "Non-IFRS Financial Measures" section.

Net earnings and adjusted EBITDA more than doubled in the second quarter and first half of 2022 compared to the same period in 2021. This was due to higher net realized selling prices from global supply uncertainties across our nutrient businesses and strong Retail performance. In the second quarter of 2022, we recorded a non-cash impairment reversal of $450 million related to our Phosphate operations which impacted net earnings. Cash provided by operating activities increased in the second quarter and first half of 2022 compared to the same period in 2021 due primarily to higher net earnings.

Segment Results

Our discussion of segment results set out on the following pages is a comparison of the results for the three and six months ended June 30, 2022 to the results for the three and six months ended June 30, 2021, unless otherwise noted.

Nutrien Ag Solutions (“Retail”)

Three Months Ended June 30

(millions of US dollars, except

Dollars

 

Gross Margin

 

Gross Margin (%)

as otherwise noted)

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

 

2022

 

2021

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crop nutrients

4,548

 

3,045

 

49

 

911

 

703

 

30

 

20

 

23

Crop protection products

2,983

 

2,666

 

12

 

805

 

587

 

37

 

27

 

22

Seed

1,269

 

1,216

 

4

 

283

 

237

 

19

 

22

 

19

Merchandise

280

 

268

 

4

 

51

 

45

 

13

 

18

 

17

Nutrien Financial

91

 

59

 

54

 

91

 

59

 

54

 

100

 

100

Services and other 1

310

 

320

 

(3)

 

258

 

264

 

(2)

 

83

 

83

Nutrien Financial elimination 1, 2

(59)

 

(37)

 

59

 

(59)

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