Nutrien Ltd., Saskatoon, announced 2018 third-quarter results, with net loss from continuing operations of $1.07 billion ($0.74 per diluted share) on sales of $4 billion, up from a year-ago combined loss of $53 million on sales of $3.59 billion. The results reflected the $1.8 billion non-cash impairment on the New Brunswick, N.B., potash facility (see front page), as well as a $151 million gain on an adjustment to pension and retirement benefit plans.
Nutrien shares were up 5.1 percent on the results, closing at $56.98 on Nov. 6 after the prior day $54.20.
“In the third quarter, Nutrien delivered solid operating results,” said Chuck Magro, Nutrien president and CEO. “Retail earnings increased by 10 percent year-over-year, while our nutrient production operations reported higher volumes and margins, and significantly lower costs. We also made significant advances on our strategic priorities, including raising the dividend and our synergy target, completing our share repurchase program, and closing the sale of our stake in Arab Potash Co. (APC).
“We remain on track to receive $5 billion in net proceeds from the sale of our equity investments. Nutrien has also raised its annual guidance due to the strength of market fundamentals and acceleration of merger synergies. We continue to be well positioned to deliver strong long-term shareholder returns,” he added.
The company declared a quarterly dividend of $0.43 per share payable Jan. 17, 2019, to shareholders of record on Dec. 31, 2018. The company said this represents a 7.5 percent increase in the dividend, and is representative of improving fundamentals and its confidence in operational cash flow moving forward.
As for the $5 billion the company expects to collect from the sale of its equity investments, Magro reiterated company investment goals, which include expanding its Retail segment in both North America and Brazil. Beyond those, he said there is opportunity to return more capital to shareholders.
“We firmly believe that Brazil over the long-term will become a very, very significant part of our retail portfolio,” he told analysts. “We actually think it could become the second largest part of our retail portfolio over many years, and we will deliver that hurdle rate that Brazil needs. But the first several acquisitions, I just want to make sure that we’re clear, we most likely will have less of a return because there won’t be synergies.”
Michael Frank, executive vice president, president of Retail, added that the company expects to make some significant moves in Brazil in the next 12-18 months. The company noted that it has essentially converted one of its first acquisitions in Brazil, distributor Agrichem (GM Feb. 2, p. 1), into a full service retailer.
As for questions about Brazil’s new government, Magro said it is seen as both pro-business and pro-agriculture.
Magro added that the Retail segment has added some 50 locations and expected EBITDA of $30 million so far this year, and expects to add more by the year end. He said that he expects another very challenging year for the retail market in general, which gives Nutrien the opportunity to continue to aggressively drive its consolidation strategy, so it would expect an even higher rate of tuck-ins both in terms of numbers and dollars going into next year in the U.S.
And on the nitrogen production side, Magro said the company is looking at several brownfields through its current network, primarily in North America. However, he said it was too early to get into specifics. He said the industry is still a long way from justifying greenfield nitrogen economics in North America.
Raef Sully, executive vice president, president of Nitrogen and Phosphate, gave the timeline for planned changes at Redwater, Alta., saying the company would be ramping up additional MAP production at its White Springs, Fla., plant in first-quarter 2019, closing down Redwater phosphate production the same quarter, and changing over to additional ammonium sulfate production at Redwater by third-quarter 2019.
Nutrien has raised its run-rate synergy target by the end of 2018 from $500 million to $600 million by the end of 2019.
Full-year 2018 adjusted net earnings guidance was raised to $2.60-$2.80 per share from $2.40-$2.70 per share, and adjusted EBITDA guidance to $3.85-$4.05 billion up from $3.7-$4 billion. Fourth-quarter adjusted net earnings guidance is $0.46-$0.66 per share.
Full-year Potash sales volume guidance has been raised to 12.5-13 million from 12.3-12.8 million mt, and Potash adjusted EBITDA to $1.5-$1.6 billion from $1.4-$1.6. The company has raised its 2018 global potash shipment forecast to 66-67 million mt from 65-67 million mt.
Nitrogen EBITDA has been raised to $1.15-$1.25 billion from $1.1-$1.2 billion. Phosphate and Sulfate EBITDA was increased to $0.25-$0.3 billion, respectively, from $0.2-$0.3 billion.
Third-quarter Retail EBITDA was $116 million on sales of $2.17 billion, up from the year-ago $105 million and $2.07 billion, respectively. Total crop nutrient sales volumes were 1.49 million mt, up from the year-ago 1.24 million. While average selling prices were up at $436/mt from $425/mt, margins were down at $95/mt from $96/mt.
In the Wholesale segment, third-quarter Potash EBITDA was a negative $1.3 billion (due to the impairment) on sales of $817 million, compared to the year-ago $303 million and $590 million, respectively. Adjusted EBITDA was a positive $498 million. Total potash sales volumes were 3.86 million mt, up from the year-ago 3.31 million mt, with the average selling price going to $213/mt from $192/mt. Gross margin per mt was $119/mt versus $81/mt.
Third-quarter Nitrogen EBITDA was $257 million on sales of $612 million, up from $113 million and $496 million, respectively. Total sales volumes were 2.46 million mt, up from the year-ago 2.28 million mt, with the average selling price going to $222/mt from $185/mt. The gross margin per mt was $57/mt, up from $20/mt.
Third-quarter Phosphate/Sulfate EBITDA was $88 million on sales of $437 million, up from the year-ago $11 million and $356 million, respectively. Total sales volumes were 982,000 mt, up from the year-ago 977,000 mt, with the average selling price going to $412/mt from $351/mt. Gross margins per mt were $36/mt, up from a year-ago loss of $40/mt.
Nutrien nine-month net earnings were $371 million on sales of $15.9 billion.