While Nutrien Ltd. missed major analyst projections (Bloomberg Consensus) for fourth-quarter adjusted EBITDA, net income, and revenues (GM Feb. 10, p. 1), company shares advanced 6.5% on Feb. 16 for its biggest intraday gain since May after the company gave guidance that it would slow down its plans to increase potash capacity to 18 million mt/y.
Nutrien announced that it is adjusting the ramp-up timing of its existing low-cost potash capacity to optimize capital expenditures in line with the expected pace of demand recovery in 2023 and beyond. It now expects to reach 18 million mt/y in 2026. Last June, the company announced plans to ratchet up production to that amount by 2025 (GM June 10, 2022). At the time, Nutrien said it was accelerating the ramp-up in response to the uncertainty of supply from Eastern Europe.
Nutrien anticipates 2023 potash sales volumes to be 13.8-14.6 million mt, but said it has maintained the capability to increase sales volumes to its previous expectation of 15 million mt if the company sees stronger demand in the market.
“We like the implied supply discipline in this new production/sales outlook,” Raymond James analyst Steve Hansen wrote in a note, as reported by Bloomberg. Analysts had been quizzing Nutrien for some time as to whether it would rethink the expansion plans.
Nutrien’s Board of Directors also approved a 10% increase in the quarterly dividend to $0.53 per share and approved the purchase of up to 5% of the company’s outstanding common shares over a twelve-month period through a normal course issuer bid (NCIB). The company purchased 53 million shares in 2022, and an additional 8 million so far in 2023.
“Geopolitical events caused an unprecedented level of supply disruption and market volatility across agriculture, energy, and fertilizer markets in 2022,” said President and CEO Ken Seitz. “Nutrien delivered record net earnings and cash flow in this environment due to the advantages of our world-class production, distribution, and retail network. We returned $5.6 billion to shareholders, invested in our global Retail network, and advanced a number of long-term strategic initiatives that position our company for future growth and sustainability.
“The outlook for our business is strong, as we expect global supply issues to persist and demand for crop inputs to increase in 2023. We remain disciplined in our capital allocation approach as we position the company to best serve the needs of our customers, while delivering meaningful returns for our shareholders,” added Seitz.
The company said fourth-quarter nitrogen volumes were impacted by production losses related to Trinidad gas curtailments and extreme cold weather events that caused outages at North American plants. The company forecasts Trinidad gas curtailments of approximately 20%, similar to the impact in second-half 2022. In addition to lower production, the company cited cautious buying from both the agriculture and industrial markets.
The company said its potash winter fill program had a good response, with about 70% of the program filled, which would be modestly below historical levels. It said this reflects the overall caution in the market. It added that about 40% of soil test samples seen by the company’s laboratory subsidiary, Waypoint Analytical, have shown a need for potash, in addition to a significant need for phosphate.
The company said agricultural fundamentals remain strong with the lowest global grain stocks-to-use ratio in over 25 years, and grain supplies will continue to be constrained due to the war in Ukraine. In the US, it foresees a 4% increase in major crop acreage, with corn acreage at 91-93 million acres. It said Brazilian grower economics for soybeans and corn are strong, and it expects this to support another year of above-trend acreage growth.
Overall, Nutrien said it is seeing a 15-20% decline of inventories in the fertilizer supply channel at the end of 2022 versus 2021.
Nutrien believes US and Brazil potash volumes have been drawn down following a historic decline in the pace of potash shipments in second-half 2022. It expects improved demand in early 2023, though buyers have taken a cautious approach to managing inventories.
The company expects global potash shipments to remain constrained in 2023, to 63-67 million mt, below historical trend demand estimated at around 70 million mt. Belarus shipments are projected to be down 40-60% and Russian down 15-30% compared to 2021.
As for 2023 pricing guidance, the company told analysts that it expects prices in Brazil to remain flat at about $500-$520/mt, where it is today. The company also believes India, which has low potash inventories, will ink a contract before China.
Despite lower European natural gas prices, it expects them to remain volatile throughout 2023 and said around 30% of the region’s nitrogen capacity is currently offline. It said North American gas should remain highly competitive with Henry Hub prices between $2.50-$4.50/mmBtu.
Nutrien expects tight US supply and demand balance ahead of the 2023 spring planting season due to higher corn acreage and increased US nitrogen exports in second-half 2022. It expects supply constraints to remain in Russia, Europe, and China. The company believes nitrogen prices will firm from current levels.
Chinese phosphate export restrictions should remain in place at least until April 2023, according to Nutrien, which anticipates improved demand in North America and Brazil and continued strong demand in India. Margins are expected to improve because of lower sulfur prices due to reduced operating rates and demand in China.
Fourth-quarter net income was $1.12 billion on sales of $7.53 billion, down from the year-ago $1.21 billion and $7.27 billion, respectively. Adjusted EBITDA was off at $2.1 billion from $2.46 billion.
Full-year net income was $7.69 billion on sales of $37.9 billion, more than double 2021’s $3.18 billion and $27.7 billion, respectively, with adjusted EBITDA up at $12.2 billion from $7.13 billion.
Nutrien guidance for full-year 2023:
| Nutrien Guidance | Analyst Estimate | |
| Net Earnings Per Share | $8.45-$10.65 | $11.36 |
| Adjusted EBITDA | $8.4-$10.0 B | $10.23 B |
| Retail Adj. EBITDA | $1.85-$2.05 B | $1.88 B |
| Potash Adj. EBITDA | $3.7-$4.5 B | $4.88 B |
| Nitrogen Adj. EBITDA | $2.5-$3.2 B | $3.43 B |
| Phosphate Adj. EBITDA | $550-$750 M | $599 M |
| Potash Sales (millions) | 13.8-14.6 mt | — |
| Nitrogen Sales (millions) | 10.8-11.4 mt | — |
| Retail (millions) | 4Q-22 | 4Q-21 | 2022 | 2021 |
| Adjusted EBITDA | 391 | 442 | 2,293 | 1,939 |
| Gross Margin | 1,077 | 1,173 | 5,179 | 4,600 |
| Total Sales | 4,087 | 3,878 | 21,350 | 17,734 |
| CN Sales | 2,320 | 2,035 | 10,060 | 7,290 |
| CN Margins | 349 | 428 | 1,766 | 1,597 |
| CN Volume (000 mt) | 2,494 | 2,821 | 11,513 | 13,383 |
| Avg ($/mt) | 930 | 721 | 874 | 545 |
| CN gross margin per mt | 15 | 21 | 18 | 22 |
| Potash (millions) | 4Q-22 | 4Q-21 | 2022 | 2021 |
| Adjusted EBITDA | 958 | 1,053 | 5,769 | 2,736 |
| Gross Margin | 1,067 | 1,115 | 6,499 | 2,751 |
| Total Sales | 1,377 | 1,420 | 7,899 | 4,036 |
| Sales Volume (000 mt) | 2,618 | 3,056 | 12,537 | 13,625 |
| Avg ($/mt) | 526 | 465 | 630 | 296 |
| Nitrogen (millions) | 4Q-22 | 4Q-21 | 2022 | 2021 |
| Adjusted EBITDA | 841 | 921 | 3,931 | 2,308 |
| Gross Margin | 699 | 754 | 3,281 | 1,726 |
| Total Sales | 1,541 | 1,456 | 6,390 | 3,984 |
| Sales Volume (000 mt) | 2,537 | 2,835 | 10,023 | 10,725 |
| Avg ($/mt) | 607 | 514 | 638 | 371 |
| Gas Costs ($/mmBtu) | 7.44 | 6.40 | 7.77 | 4.61 |
| Phosphate (millions) | 4Q-22 | 4Q-21 | 2022 | 2021 |
| Adjusted EBITDA | 28 | 196 | 594 | 540 |
| Gross Margin | 16 | 163 | 493 | 421 |
| Total Sales | 429 | 532 | 2,073 | 1,628 |
| Sales Volume (000 mt) | 531 | 711 | 2,378 | 2,619 |
| Avg ($/mt) | 807 | 749 | 872 | 622 |