Nutrien announces 1Q20 results

“Nutrien continues to produce and deliver crop inputs in a safe and efficient manner to farmers across North America and around the world during this period of increased global uncertainty. We are part of an industry that is essential to supplying the food that the world continues to need,” commented Chuck Magro, Nutrien’s President and CEO.

“The first quarter is typically a weaker earnings period for us, but we are seeing strong spring demand for all crop inputs and services, as North American farmers catch up after the extreme wet weather that impacted agricultural activities last year. COVID-19 has had limited direct impact on our operations or crop input demand, and Nutrien remains in an excellent financial position with a strong balance sheet and free cash flow, a stable dividend and ample liquidity,” added Magro.

Highlights

• Retail EBITDA increased in 1Q20 compared to the same period in 2019 due to strong business performance in the US and Australia including organic and acquisition related growth, as well as, solid contributions from proprietary products lines.
• Potash EBITDA in 1Q20 was 38% lower than the same period in 2019 due to lower net realised selling prices and lower offshore sales volumes. Lower offshore sales volumes were associated with short-term cautious spot purchasing in some key international markets.
• Nitrogen EBITDA was 14% lower in the 1Q20 compared to the same period last year due to lower net realised selling prices which more than offset higher sales volumes and lower per tonne costs.
• Nutrien has declared its second quarterly dividend in 2020 maintaining a payout rate of US$0.45 per share (US$1.80 annualised).
• Nutrien full-year 2020 adjusted net earnings per share and adjusted EBITDA guidance was lowered to US$1.50 to US$2.10 per share and US$3.5 billion to US$3.9 billion, respectively. First-half 2020 guidance is provided at US$1.20 to US$1.40 adjusted net earnings per share.

Market outlook

Agriculture and retail

• The global economic downturn has created increased market volatility and uncertainty, however, crop prices have been less impacted than other commodities that are more fundamentally tied to economic growth. Historically, there has been minimal direct correlation between global food consumption and economic growth. Nonetheless, Nutrien expects some negative impacts resulting from lower non-food consumption, in particular reduced corn use for ethanol production.
• The company continues to expect strong crop input demand in its core markets, all of which have declared agriculture an essential service. The US Department of Agriculture’s (USDA) March 2020 Prospective Plantings report projected a 15 million acre increase in major crop acreage, which Nutrien expects to support a 1 to 3% increase in total crop input expenditures in the US.
• Brazilian soybean and corn prices are at near historical highs, which the company expects will support higher soybean acreage in its 2020 planting season. Despite the recent devaluation of the Brazilian real versus the US dollar, grower economics are naturally hedged as they sell their crops and buy inputs in US dollars.
• In Australia, soil moisture levels have improved significantly after several years of drought conditions which is supporting the outlook for crop input demand in 2020. Nutrien expects a delayed start to the spring application season in Western Canada as some 2019 crop is being harvested this spring, but prices of certain crops have firmed and the company expects strong crop input demand in 2020.

Crop nutrient markets

• Global potash prices continue to be under pressure which led to cautious spot purchasing in offshore markets. The company expects offshore shipments to increase with improved market clarity in the coming months.
• The company has seen strong farm-level demand and wholesale shipments in North America and expects lower channel inventories entering 3Q20 assuming the continuation of normal weather conditions. However, the company has reduced its projected 2020 global potash shipment range by approximately 1 million t to between 65 and 67 million t to reflect lower expectations in Southeast Asia and lower-than-expected shipments so far in 2020.
• Nitrogen prices have been relatively stable so far in 2020, particularly in the North American market where Nutrien expects nitrogen demand to remain strong through the planting season. However, the company expects weakness in the global economy resulting from COVID-19 to impact global industrial nitrogen demand in 2020.
• North American phosphate prices have been firm in the spring season supported by strong demand, but they remain well below previous year levels. Chinese DAP/MAP exports were down 10% y/y in 1Q20.

Financial outlook and guidance

Based on market factors detailed above, the company is lowering 2020 adjusted net earnings guidance to US$1.50 to US$2.10 per share (from US$1.90 to US$2.60 per share previously) and adjusted EBITDA guidance to US$3.5 to US$3.9 billion (from US$3.8 to US$4.3 billion previously). 1H20 adjusted net earnings guidance is provided at US$1.20 to US$1.40 per share.

Read the article online at: https://www.worldfertilizer.com/potash/07052020/nutrien-announces-1q20-results/