Nutrien Delivers Earnings Growth and Expects Strong Market Fundamentals in 2023

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/