Category: Uncategorized

Fertilizer giant Nutrien sticking to plan to boost production; potash sales slump

Amanda Stephenson, The Canadian Press – Canadian Press – Thu Nov 3, 1:21PM CDT

CALGARY — Nutrien Ltd. is sticking to its plan to increase potash production, even as the Saskatoon-based fertilizer giant cut its full-year guidance for 2022 due to slumping potash sales volumes in the second half of this year.

The company — which is the largest fertilizer producer in the world — saw its share price tumble Thursday after releasing its third-quarter financial results after the close of markets on Wednesday.

By mid-day Thursday, Nutrien’s shares were down more than 13 per cent to $98.65 on the Toronto Stock Exchange. Investors appeared to be spooked by the company’s announcement that it is lowering its full-year adjusted earnings forecast from the previously stated range of US$14 billion to US$15.5 billion, to a new range of US$12.2 billion to US$13.2 billion.

Nutrien also lowered its full-year guidance for 2022 potash sales to 12.5 to 12.9 billion tonnes, down from a previously announced range of 14.3 to 14.9 billion.

The poorer forecast came in spite of Nutrien’s reported third-quarter adjusted earnings per share of US$2.5 billion, or US$2.51 per share, an 82 per cent increase from the the prior year’s quarter.

Nutrien also saw its revenue increase by 36 per cent, thanks to higher selling prices for fertilizer and strong results from its farm retail network.

But the company saw its potash sales volumes decline in North America and Brazil during the third quarter, in part because farmers appear to be postponing fertilizer purchases in the face of high prices. A cool wet spring in North America also compressed the planting season and led to less fertilizer going into the ground, said Nutrien interim CEO Ken Seitz on a conference call Thursday.

Seitz said these challenges, while enough to result in a lowered guidance for the year, are “near-term” issues and don’t change the company’s previously announced plan to increase its annual potash production capability to 18 million tonnes by 2025.

The plan, which was announced earlier this year as the Russia-Ukraine war shook up global agricultural markets and reduced supplies of fertilizer from Eastern Europe, represents an increase of more than five million tonnes, or 40 percent, compared to 2020 production levels.

Nutrien has said it will achieve this by investing in expansions at its existing Saskatchewan mines, including the hiring of approximately 350 more people.

“The longer-term fundamentals for our business remain very strong and the challenge of feeding a growing world has not abated,” Seitz said.

“We had a lull in demand here in the third quarter, but again, the backdrop of ag fundamentals remain strong. The supply side continues to be challenged — we see that continuing into 2023.”

Nutrien is forecasting potash supply from Eastern Europe to continue to be constrained in 2023, with shipments from Belarus projected to be down 40 to 60 percent and Russia down 15 to 30 percent compared to 2021 levels. The company is forecasting global potash shipments to be between 64 to 67 million tonnes in 2023, with projected Nutrien potash sales volumes of approximately 15 million tonnes.

In a research note, Raymond James analyst Matt Arnold said while he was slightly disappointed with Nutrien’s weaker-than-expected third quarter and its revised guidance for the year, he still believes the company is well-positioned to benefit from long-term trends in agriculture.

“We think the overall backdrop for Nutrien remains favourable given high grain and fertilizer prices,” Arnold said. “Also, continued supply disruptions from the Russia/Ukraine conflict are likely, which create market-share opportunities for the company. As a result, we think 2023 should be another strong year for the company.”

This report by The Canadian Press was first published Nov. 3, 2022.

Nutrien Delivers Earnings Growth and Expects Strong Market Fundamentals in 2023

Nutrien Ltd. (TSX and NYSE: NTR) announced today its third quarter 2022 results, with net earnings of $1.6 billion ($2.94 diluted net earnings per share), which includes a non-cash impairment reversal of $330 million relating to our Phosphate operations. Third quarter 2022 adjusted net earnings per share¹ were $2.51 and adjusted EBITDA¹ was $2.5 billion.

“Nutrien has delivered record earnings in 2022 due to the strength of agriculture fundamentals, higher fertilizer prices and excellent Retail performance. During the third quarter, we saw a temporary reduction in potash purchasing in North America and Brazil, which has impacted our sales volumes and realized prices in the second half of the year. However, the underlying demand drivers remain strong and global fertilizer supply challenges still persist, creating a supportive environment for Nutrien as we look ahead to 2023 and beyond,” commented Ken Seitz, Nutrien’s President and CEO.

“We are focused on efficiently supplying our customers with the products and services they need to help sustainably feed a growing world. We continue to take a multi-year view of the market and remain confident that our additional low-cost potash and nitrogen production capability will be required to meet future demand,” added Mr. Seitz.

Highlights:

• Nutrien generated record net earnings of $6.6 billion and adjusted EBITDA¹ of $10.1 billion in the first nine months 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 activitiesimproved to $3.4 billion in the first nine months of 2022.
• Nutrien revised full-year 2022 adjusted EBITDA guidance¹ and adjusted net earnings per share guidance¹ to $12.2 to $13.2 billion and $13.25 to $14.50 per share, respectively.
• Nutrien Ag Solutions (“Retail”) delivered record adjusted EBITDA in the first nine months of 2022, due to supportive market conditions in key regions where we operate. Retail cash operating coverage ratio¹ as at September 30, 2022 improved to 55 percent compared to 59 percent for the same period in 2021 driven by higher margins.
• Potash adjusted EBITDA increased in the third quarter and the first nine months of 2022 compared to the prior year due to higher net realized selling prices and record offshore sales volumes, more than offsetting lower North American sales volumes.
• Nitrogen third quarter and first nine months of 2022 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 ammonia and urea sales volumes.
• In the third quarter of 2022, we recognized a non-cash impairment reversal of $330 million associated with our Phosphate operations and $780 million for the first nine months due to a more favorable outlook for phosphate margins.
• Nutrien repurchased approximately 40 million shares year-to-date as of November 1, 2022, under our share repurchase programs, for a total of approximately $3.5 billion. Nutrien plans to allocate approximately $4 billion to share repurchases in 2022. While some repurchases may now extend into the first quarter of 2023 due to lower forecasted operating cash flow in 2022, we still intend on completing our existing 10 percent share repurchase program prior to its expiry in February 2023.

Agriculture and Retail

• Global grain stocks-to-use ratio, excluding China, is projected to decline to the lowest level in more than a quarter century, driven by reduced corn and wheat production expectations in the US and Europe. As a result of historically tight supply and demand balances, spot prices of corn, soybeans and wheat are up 25 to 50 percent compared to the 10-year average and we expect strong futures prices will provide an incentive for growers to boost production in 2023.
• The re-opening of the Black Sea to Ukrainian grain exports positively impacted exports from the region but there is uncertainty over the continuation of the United Nations brokered agreement with Russia. The US Department of Agriculture (USDA) projects that Ukrainian grain exports will decline by 44 percent year-over-year in 2023, in large part driven by reduced production levels.
• Weather has been favorable in North America and we anticipate that the rapid pace of harvest will support strong fall ammonia demand and normal application rates of potash, phosphate and crop protection products.
• South American spring crop planting is proceeding with a mix of planting conditions. Argentina continues to be impacted by La Nina-related drought, while planting conditions in much of Brazil have generally been favorable. We expect that Brazilian soybean acreage will increase by 3 to 4 percent, which is also expected to support a proportional increase in safrinha corn acreage.

Crop Nutrient Markets

• Potash shipments from Belarus are projected to be down 50 to 60 percent and Russia down 20 to 25 percent in 2022 compared to the prior year, in line with our previous expectations. We have lowered our global potash shipment forecast to between 60 and 62 million tonnes in 2022, largely due to the impact of higher-than-expected inventory and cautious buying in North America and Brazil during the second half of 2022.
• We expect robust agricultural fundamentals will support increased potash consumption in 2023 and believe pent-up demand will emerge as inventories are drawn down and prices stabilize. We expect potash supply from Eastern Europe will continue to be constrained in 2023, with shipments from Belarus projected to be down 40 to 60 percent and Russia down 15 to 30 percent compared to 2021 levels. Global potash shipments are forecast between 64 to 67 million tonnes in 2023, with projected Nutrien potash sales volumes of approximately 15 million tonnes.
• Nitrogen prices continue to be supported by historically high European natural gas prices that have led to significant curtailments of ammonia and downstream nitrogen products. Shifts in global nitrogen trade flows have led to higher US exports and lower import volumes, which we expect will result in a tight North American supply and demand balance entering 2023.
• Chinese urea and phosphate export restrictions have limited exports in 2022 and are expected to persist into 2023. The restrictions have led to low Chinese phosphate operating rates, maintaining relatively tight global phosphate supplies, while contributing to lower global sulfur prices and supporting phosphate production margins.

Financial Guidance

• Nutrien revised its full-year 2022 adjusted EBITDA guidance and full-year 2022 adjusted net earnings per share guidance primarily due to lower expected Potash earnings as a result of lower potash sales volumes and realized prices, which more than offset stronger expected Retail earnings. Adjusted net earnings per share guidance includes our plan to allocate approximately $4 billion to share repurchases in 2022.
• Nutrien lowered potash sales volume guidance primarily to reflect the impact of the compressed spring application season in North America that resulted in higher inventory carry-over and cautious purchasing.
• Nutrien lowered nitrogen sales volume guidance to reflect the impact of Trinidad gas curtailments during the second half of 2022.

https://www.theglobeandmail.com/investing/markets/stocks/NTR-T/pressreleases/11289547/nutrien-delivers-earnings-growth-and-expects-strong-market-fundamentals-in-2023/

Dow closes 500 points lower, Nasdaq sheds 3% as Fed Chair Powell signals intent to continue hiking rates

Stocks tumbled Wednesday after Federal Reserve Chair Jerome Powell said inflation was still too high and indicated that the central bank has more rate hiking ahead.

The Dow Jones Industrial Average slid 505.44 points, or 1.55%, to settle at 32,147.76. The S&P 500 dropped 2.5% to close at 3,759.69, while the Nasdaq Composite dove 3.36% to finish at 10,524.80.

The Fed implemented another 0.75 percentage point rate increase Wednesday afternoon, and Powell said in a press conference that its inflation fight was far from done.

“We still have some ways to go and incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected,” he said.

Powell added that it was “premature” to talk about pausing hikes.

“We have a ways to go,” said the central bank chair.

Stocks initially rallied following the rate hike when the Fed’s accompanying statement hinted at a possible policy change in the future. “In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” the statement read.

https://www.cnbc.com/2022/11/01/stock-market-futures-open-to-close-news.html

Fed approves 0.75-point hike to take rates to highest since 2008 and hints at change in policy ahead

• The Federal Reserve, in a well-telegraphed move, raised its short-term borrowing rate by 0.75 percentage point to a target range of 3.75%-4%, the highest level since January 2008.
• The central bank’s new statement hinted at a potential change in how it will approach monetary policy to bring down inflation.
• However, stocks fell as Fed Chair Jerome Powell dismissed the idea that the Fed may be pausing soon though he said he expects a discussion at the next meeting or two about slowing the pace of tightening.
• Still, Powell reiterated that there may come a time to slow the pace of rate increases.

https://www.cnbc.com/2022/11/02/fed-hikes-by-another-three-quarters-of-a-point-taking-rates-to-the-highest-level-since-january-2008.html

Fox News crushes CNN, MSNBC viewership combined to finish October as No. 1 cable network

‘The Five’ has been the most-watched cable news program for seven-straight months

Fox News Channel finished October as the most-watched cable network among total day viewers for the 20th straight month, crushing CNN and MSNBC viewership combined among key categories. 

Fox News averaged 1.5 million total day viewers, while no other networks cracked the one-million viewer benchmark. ESPN finished second with 885,000 average total viewers, followed by 751,000 for MSNBC and a gloomy 533,000 for CNN. 

During the primetime hours of 8-11 p.m. ET, Fox News averaged 2.3 million viewers compared to 1.2 million for MSNBC and only 624,000 for CNN. It was CNN’s smallest monthly primetime audience of the year. 

https://www.foxnews.com/media/fox-news-crushes-cnn-msnbc-viewership-combined-finish-october-1-cable-network

The Fed is expected to raise interest rates by three-quarters of a point and then signal it could slow the pace

• The Federal Reserve is expected to raise interest rates by 75 basis points Wednesday but also signal it could begin to slow down the size of its rate hikes in December.
• Markets are also braced for the Fed to end rate hikes in March at a level of 5%, and market pros say a more hawkish Fed could trigger a violent reaction.
• Fed Chair Jerome Powell is expected to sound somewhat hawkish in his briefing Wednesday and emphasize that the Fed’s goal is to crush inflation.

The Federal Reserve is expected to raise interest rates by three-quarters of a percentage point Wednesday and then signal that it could reduce the size of its rate hikes starting as soon as December.

Markets are primed for the fourth 75-basis point hike in a row, and investors are anticipating the Fed will slow down its pace before winding down the rate-hiking cycle in March. A basis point is equal to 0.01 of a percentage point.

“We think they hike just to get to the end point. We do think they hike by 75. We think they do open the door to a step down in rate hikes beginning in December,” said Michael Gapen, chief U.S. economist at Bank of America.

Gapen said he expects Fed Chair Jerome Powell to indicate during his press briefing that the Fed discussed slowing the pace of rate hikes but did not commit to it. He expects the Fed would then raise interest rates by a half percentage point in December.

https://www.cnbc.com/2022/11/01/fed-seen-raising-rates-by-three-quarters-of-a-point-may-slow-pace-ahead.html

Oil climbs on demand hopes after big drawdown in U.S. crude stocks

• Oil prices rose in early trade on Wednesday after industry data showed a surprise drop in U.S. crude stockpiles, suggesting demand is holding up despite steep interest rate hikes dampening global growth.
• Brent crude futures picked up 17 cents, or 0.1%, to $94.82 a barrel at 0014 GMT, while U.S. West Texas Intermediate (WTI) crude futures rose 26 cents, or 0.3%, to $88.63 a barrel.

Oil prices rose in early trade on Wednesday after industry data showed a surprise drop in U.S. crude stockpiles, suggesting demand is holding up despite steep interest rate hikes dampening global growth.

Brent crude futures picked up 17 cents, or 0.1%, to $94.82 a barrel at 0014 GMT, while U.S. West Texas Intermediate (WTI) crude futures rose 26 cents, or 0.3%, to $88.63 a barrel.

Both benchmark contracts rose about 2% in the previous session on a weaker U.S. dollar and after an unverified note trending on social media said the Chinese government was going to consider ways to relax Covid rules from March 2023.

In a further positive sign for demand, data on Tuesday from the American Petroleum Institute showed crude stocks fell by about 6.5 million barrels for the week ended Oct. 28, according to market sources.

Eight analysts polled by Reuters had on average expected crude inventories to rise by 400,000 barrels.

At the same time, gasoline inventories fell more than expected, with stockpiles down by 2.6 million barrels compared with analysts’ forecasts for a drawdown of 1.4 million barrels.

China’s zero-Covid policy has been a key factor in keeping a lid on oil prices as repeated lockdowns have slowed growth and pared oil demand in the world’s second largest economy.

“Potential changes to China’s Covid-19 policy could have significant implications for oil demand,” ANZ Research analysts said in a note.

Bidding for HSBC Canada narrows as two major banks drop out

The field of contenders to acquire HSBC Bank Canada is narrowing, with at least two major Canadian banks now out of the running.

National Bank of Canada NA-T +0.05%increase is no longer in the auction for the Canadian arm of Britain-based HSBC Holdings Inc., according to two sources familiar with the process. Canadian Imperial Bank of Commerce CM-T -0.13%decrease is also out of the process, said a third source with direct knowledge of the bank’s position.

Bank of Montreal BMO-T -0.14%decrease is among the banks that are still pursuing HSBC Canada – a prized asset that could fetch more than $10-billion in a sale – according to a fourth source with knowledge of BMO’s participation in the auction.

The Globe and Mail is not identifying the sources because they are not authorized to discuss the confidential bidding process.

Spokespeople for HSBC, BMO, National Bank and CIBC declined to comment.

HSBC confirmed in early October that it was considering selling its Canadian unit, a profitable business with strong roots in commercial banking and a large presence in British Columbia and Ontario. All six of Canada’s largest banks held preliminary meetings to kick the tires on HSBC Canada, and the auction process has moved quickly. The Globe has reported that first-round bids were due late last week.

HSBC Canada would offer a buyer a meaningful increase in scale in the Canadian banking market. But a potential deal is fraught with challenges, some of them having to do with the sheer size of the transaction.There are also potential political problems related to competition in an already concentrated banking market.

In the auction’s early stages, CIBC and National Bank were considered by some analysts to have some of the most compelling strategic reasons to buy HSBC Canada, though each would have had to raise billions of dollars to meet the purchase price. As the fifth- and sixth-largest banks in the country respectively, the two institutions might have viewed acquiring HSBC Canada as a singular opportunity to narrow the gaps between themselves andlarger rivals. And both banks would presumably have presented lesser competition concerns than their more-dominant competitors.

For National Bank, which is considered a “super-regional” bank with a stronghold in Quebec, a deal would have meaningfully extended its reach in Western Canada. And last week, Scotia Capital Inc. analyst Meny Grauman wrote in a note to clients that CIBC had “a compelling strategic case for doing this deal, especially when it comes to boosting its commercial market share.”

But when CIBC’s chief executive, Victor Dodig, was asked about the HSBC sale at a meeting of hundreds of his bank’s senior staff on Thursday, he hinted that preserving capital is important in the current climate of market uncertainty, and that the bank’s priority is still organic growth, according to a fifth source with direct knowledge of the meeting.

Analysts have pegged Royal Bank of Canada RY-T +0.08%increase, the country’s largest bank, as an obvious front-runner, because it is the only Canadian lender that might have enough excess capital to buy HSBC Canada in cash, without raising additional funds. Toronto-Dominion Bank TD-T +0.55%increase and Bank of Nova Scotia BNS-T +0.06%increase could also be contenders, though both companies face hurdles in the path to a deal.

TD is still working to close two large acquisitions in the United States. It is paying US$13.4-billion to buy First Horizon Corp., and purchasing New York-based investment bank Cowen Inc. for US$1.3-billion. But TD could sell some of its US$16-billion stake in Charles Schwab Corp. SCHW-N +0.14%increase to raise funds.

Scotiabank is in the midst of a CEO succession that stunned Bay Street by elevating a candidate from outside the banking industry. The change in leadershipwon’t officially take place until early next year. But the bank’s executives have expressed a desire to strengthen its presence in B.C., where HSBCalready does a great deal of business.

The fact that the largest of the large Canadian banks are likely still in contention for HSBC Canada, as the smallest of the Big Six drop out, will only sharpen questions about how the government might respond to a merger.

If RBC or TD acquired HSBC Canada, the deal would increase their share of bank deposits in Canada to 24 per cent or 21 per cent respectively. That would be higher than the market share created by a theoretical merger between National Bank and any of Scotiabank, BMO or CIBC – the type of deal that is widely considered to be a political non-starter because the federal banking regulator deems the Big Six banks systemically important to Canada.

Exxon Mobil’s record-smashing third-quarter profit nearly matches Apple’s (owns IMO)

Exxon Mobil Corp XOM-N +0.32%increase on Friday smashed expectations as soaring energy prices fuelled a record-breaking quarterly profit, nearly matching that of tech giant Apple XOM-N +0.32%increase.

Its $19.66-billion third-quarter net profit far exceeded recently raised Wall Street forecasts as skyrocketing natural gas and high oil prices put its earnings within reach of Apple’s $20.7-billion net for the same period.

As recently as 2013, Exxon ranked as the largest publicly traded U.S. company by market value – a position now held by Apple. Exxon shares jumped 2 per cent in premarket trading to $109.80, a new record high.

Oil company profits have soared this year as rising demand and an undersupplied energy market collided with Western sanctions against Russia over its invasion of Ukraine. U.S. exports of gas and oil to Europe have jumped and promise to set all-time profit records for the industry.

The top U.S. oil producer reported a per-share profit of $4.68, exceeding Wall Street’s $3.89 consensus view, on a huge jump in natural gas earnings, continued high oil prices and strong fuel sales.

“Where others pulled back in the face of uncertainty and a historic slowdown, retreating and retrenching, this company moved forward, continuing to invest,” Chief Executive Darren Woods told investors. Its quarterly profits “reflect that deep commitment” as well as higher prices, he added.

Exxon led record gains among oil majors in the second quarter and has leapfrogged Shell Plc and TotalEnergies SE with earnings almost twice as big from continued bets on fossil fuels as competitors shifted investment to renewables.

Exxon banked $43-billion in the first nine months of this year, 19 per cent more than in the same period of 2008, when oil prices traded at a record level of $140 per barrel.

Earnings from pumping oil and gas tripled last quarter while profit from selling motor fuels jumped tenfold compared with year-ago levels. Natural gas sales to Europe and soaring demand for diesel fuel led the company’s better-than-expected results.

“The refining businesses – both in the U.S. and international – was the star performer,” said Peter McNally, an analyst at Third Bridge.

Those rising fuel profits have renewed calls by U.S. President Joe Biden for companies to invest the windfall from this year’s energy price run-up in production rather than buy back their own shares.

Exxon will maintain its $30-billion share buyback through 2023 while increasing dividends, Chief Financial Officer Kathryn Mikells told Reuters. On Friday, it declared a fourth-quarter per-share dividend of 91 cents, up 3 cents, and will pay $15-billion to shareholders this year.

Exxon said its U.S. oil and gas production from the Permian Basin was near 560,000 barrels of oil and gas per day (boed), a record. Production for the year will increase about 20 per cent over 2021, said CEO Woods.

“We’re optimizing and adjusting our development plans,” he told analysts, with the full-year production gain below the 25 per cent increase Exxon had forecast in February.

Results also were helped by an almost 100,000-boed increase over the previous quarter in Guyana, where Exxon leads a consortium responsible for all output in the South American nation.

But its withdrawal from Russia reduced its overall production forecast for the year by about 100,000 barrels per day. Exxon said its Russian assets were expropriated.

“We are going to end up at about 3.7 million barrels a day for the full year,” Mikells said, down from a 3.8 million goal set in February.