Nutrien Reports Strong 2Q, Lowers Guidance, Expects Strong Rebound in 2020

Nutrien Ltd., Saskatoon, reported second-quarter results that either matched or exceeded analyst expectations in light of the dismal spring planting season. Net earnings from continuing operations were up, at $858 million ($1.47 per diluted share) on sales of $8.6 billion from the year-ago $741 million ($1.17 per share) and $8.1 billion, respectively. While net earnings were down at $858 million, the year-ago $1.42 billion reflected asset sales that were required for the merger to create the company. Adjusted EBITDA was $1.86 billion, up from $1.6 billion.

“Nutrien delivered earnings growth in the first half of 2019 despite unprecedented wet conditions in the U.S., demonstrating the strength of our business model and asset mix,” said Nutrien President and CEO Chuck Magro. “Nutrien remains focused on factors under its control and creating long-term value for stakeholders. We expect to achieve over $650 million in annual run rate synergies by the end of 2019, have made strategic investments to grow our Retail business, and returned $5.2 billion to shareholders through share repurchases and dividends over the past 18 months.

“U.S. weather in the first half was so severe it nearly eliminated global demand growth for crop inputs,” he added. “However, demand for grains and oilseeds is still growing, and with lower crop inventories and higher prices, we expect a strong rebound in 2020.”

Nutrien sees 2019 corn acres at 85-87 million acres, compared to the USDA’s June 28 forecast of 91.7 million. Nutrien puts soybean acres as 80 million. In all, it said some 10 million acres of major crops were not planted this year. Nutrien Retail CEO Michael Franks told analysts it is easy to see 95-plus million acres of corn being set up for 2020.

Nutrien lowered its full-year adjusted net earnings per share guidance to $2.70-$3.00 from the previous $2.80-$3.20 per share, and its adjusted EBITDA guidance to $4.35-$4.7 billion from $4.4-$4.9 billion. It lowered Retail EBITDA guidance to $1.2-$1.3 billion from $1.3-$1.4 billion.

Citing weather and policy-related issues impacting the second-half, Nutrien lowered its projections for global potash deliveries to 65-67 million mt, down from 67-69 million. Its annual potash sales volume guidance is down, at 12.6-13 million mt from 13-13.4 million mt.

The company said North American potash movement was impacted by the wet weather, and only a portion of that is expected to be made up in the fall. It estimated that North America lost some 800,000 mt of potash applications in the first half. It said Chinese demand could be deferred due to import policies, while potash demand in India is being negatively impacted by a below-normal monsoon.

On the positive side, the company said its potash fill program was quickly snapped up, and that new production has been slow to ramp up.

The company said dry phosphate prices continue to be pressured by the combination of increased supply from Saudi Arabia and Morocco, strong Chinese exports, and weakness in raw material prices.

The company believes ammonia inventories will tighten as demand continues to grow and few new plants are to come online.

Wall Street was not deterred by the downward guidance. Nutrien shares rose 7.26 percent to close at $54.21 on July 30.

Nutrien announced a 5 percent increase in the expected quarterly dividend payout to $0.45 per share, commencing with the quarterly dividend having a record date at the end of third-quarter 2019.

Six-month net earnings from continuing operations were $899 million ($1.52 per share) on sales of $12.3 billion, up from the year-ago $740 million ($1.16 per share) and $11.8 billion, respectively. Net earnings were $899 million versus the year-ago $1.41 billion. Adjusted EBITDA was $2.56 billion, up from $2.17 billion.

*CN = crop nutrient