Nutrien Ltd. on Aug. 2 reported second-quarter net earnings of $448 million ($2.53 adjusted earnings per share) on sales of $11.65 billion, down from last year’s $3.6 billion ($5.85 adjusted earnings per share) and $14.5 billion, respectively. Adjusted EBITDA came in at $2.48 billion versus $4.99 billion.
Earnings per share, net income, and EBITDA fell below the average analyst estimates (Bloomberg Consensus), while second-quarter sales were above the average analyst estimate of $10.95 billion.
“Nutrien’s results have been impacted by unprecedented volatility in global crop input markets over the last 18 months,” said Ken Seitz, Nutrien’s President and CEO. “We continue to see demand strengthen in our key markets, in particular North America, however the process of recovery has been more uneven in offshore markets.”
Nitrogen adjusted EBITDA declined to $569 million in the second quarter, down from last year’s $1.24 billion and below the average analyst estimate of $596.6 million, due to lower net realized selling prices for all major nitrogen products, which more than offset higher sales volumes and lower gas costs.
Nutrien said global urea and nitrate prices have strengthened in the third quarter of 2023, driven by increased demand and supply constraints, including plant turnarounds and reduced Egyptian gas supplies. The company said it expects ammonia markets to strengthen during the balance of the year due to low global inventories, continued supply constraints, and higher values for other nitrogen products.
Potash adjusted EBITDA for the quarter fell to $654 million, down sharply from last year’s $2.02 billion and below the average analyst estimate of $817.4 million. Nutrien said weaker net realized selling prices and lower offshore sales volumes more than offset higher North American sales volumes, with offshore volumes impacted by the strike at the port of Vancouver and the outage at Canpotex’s Portland, Ore., terminal.
Nutrien said potash channel inventories in North America ended the first half at multi-year lows and are seeing strong demand in the third quarter. The settlement of the Chinese potash contract in June also sparked stronger engagement in offshore markets, particularly in Brazil, the company said.
Phosphate adjusted EBITDA fell to $113 million for the quarter, down from last year’s $184 million and below the average analyst estimate of $151.6 million, driven by declines in dry phosphate prices. Nutrien said the spring season ended with low channel inventories, however, and demand has strengthened in the second half.
Nutrien recognized a $233 million non-cash impairment of its White Springs, Fla., property, plant, and equipment during the quarter due to the volatility of phosphate margins forecasts, but planned turnarounds have been completed and Nutrien expects operating rates to increase through the remainder of 2023.
Retail adjusted EBITDA declined to $1.07 billion in the quarter, down from last year’s $1.43 billion but up slightly from the average analyst estimate of $1.06 billion, primarily due to lower gross margins for crop nutrients and crop protection products.
Nutrien’s North American crop nutrient sales volumes were up 16% in the quarter compared to last year, and per-ton margins in the US returned to more normalized levels, the company reported. Crop protection margins were pressured by lower prices for certain commodity products and the impact of selling through higher-cost inventory.
Nutrien said crop prices have been volatile but remain historically high, with new crop corn, wheat, and soybean prices 15-20% above the ten-year average. “Fertilizer affordability has improved significantly compared to the previous year due to the continued strength in crop prices and reduction in fertilizer prices,” the company said, adding that dry conditions in North America have impacted in-season nitrogen and crop protection applications.
Nutrien announced several strategic actions in response to market conditions, including indefinitely pausing the planned ramp-up of potash production capacity to 18 million mt (GM June 10, 2022) by 2025, and suspending work on its proposed 1.2 million mt clean ammonia project in Geismar, La.
Nutrien said some “in-flight projects” related to the potash expansion would be completed in the second half of 2023. The decision to table the Geismar clean ammonia project was due to an increase in expected capital costs compared to the company’s initial estimates, continued uncertainty on the timing of emerging uses for clean ammonia, and the prioritization of other capital allocation alternatives.
“These actions, along with other operational efficiency initiatives, demonstrate our commitment to disciplined capital allocation and focus on long-term value creation,” Seitz said.
Nutrien said it also plans to reduce capital expenditures across smaller investment projects in its Retail business, and to defer the timing of expenditures on certain Nitrogen brownfield projects as the company prioritizes capital and provides flexibility on future allocation alternatives.
Nutrien said it expects to lower capital expenditures by approximately $200 million in 2023 and is targeting a $100 million reduction in expenses compared to its previous estimates. The company said it now expects total capital expenditures of $2.8 billion in 2023, with further reductions anticipated in 2024.
For the first six months, Nutrien posted net earnings of $1.0 billion ($2.03 diluted net earnings per share) and adjusted EBITDAof $3.9 billion ($3.63 adjusted net earnings per share), down significantly from the record levels achieved in the first half of 2022, due primarily to lower net realized fertilizer prices, offshore potash sales volumes, and Nutrien Ag Solutions earnings.
Full-year 2023 adjusted EBITDA and adjusted net earnings per share guidance were revised downward to $5.5-$6.7 billion and $3.85-$5.60 per share, respectively, down from Nutrien’s May 10 guidance of $6.5-$8.0 billion and $5.50-$7.50 per share, respectively.
Adjusted EBITDA guidance by segment fell to $2.0-$2.5 billion for Potash, down from May’s $2.65-$3.35 billion; $1.8-$2.3 billion for Nitrogen, down from $1.95-$2.55 billion; $500-$600 million for Phosphate, down from $550-$700 million; and $1.45-$1.60 billion for Retail, down from $1.60-$1.75 billion in May.
Nutrien’s US ticker dropped 3.7% premarket after the earnings miss and the cut to full-year guidance. Nutrien announced on Aug. 2 that its Board of Directors has declared a quarterly dividend of $0.53 per share payable on Oct. 13, 2023, to shareholders of record on Sept. 29, 2023.
| Retail (millions) | 2Q-23 | 2Q-22 |
| Adjusted EBITDA | 1,067 | 1,427 |
| Gross Margin | 1,931 | 2,340 |
| Total Sales | 9,128 | 9,422 |
| Crop Nutrient Sales | 3,986 | 4,548 |
| Potash (millions) | 2Q-23 | 2Q-22 |
| Adjusted EBITDA | 654 | 2,027 |
| Gross Margin | 656 | 2,269 |
| Total Sales | 1,009 | 2,668 |
| Nitrogen (millions) | 2Q-23 | 2Q-22 |
| Adjusted EBITDA | 569 | 1,240 |
| Gross Margin | 399 | 1,058 |
| Total Sales | 1,115 | 1,957 |
| Phosphate (millions) | 2Q-23 | 2Q-22 |
| Adjusted EBITDA | 113 | 184 |
| Gross Margin | 49 | 156 |
| Total Sales | 430 | 514 |