Nutrien Ltd., Saskatoon, announced on Jan. 4 that Mayo Schmidt had left his position as President and CEO and resigned from the Board of Directors. Schmidt had only been in the position since April 2021 (GM April 23, 2021), replacing Chuck Magro, who stepped down to pursue other opportunities.
Ken Seitz, Executive Vice President and CEO of Potash, was named the company’s interim CEO, with the company noting that he has over 25 years of extensive global leadership experience in the agriculture and mining sectors and was the former President and CEO of potash supplier Canpotex Ltd.
“Nutrien has delivered exceptional results in 2021 and is well positioned to continue this strong momentum into 2022,” said Russ Girling, Nutrien Board Chairman. “Nutrien has a talented and deep executive team, and we are confident that Ken Seitz and this team will continue to build on the organization’s record financial and operating performance.”
Girling said the Board will work with an executive search firm to begin a global search to select a long-term leader that will take the company into its next phase, and that it will consider both internal and external candidates.
A Nutrien spokesperson told Bloomberg it could not comment on details of Schmidt’s departure because of legal constraints. However, the company reiterated the change will not affect Nutrien’s strategic direction.
The Nutrien job gave Schmidt his third opportunity to run a public company in Canada. The executive, who briefly played for the Miami Dolphins in the 1980s, rebuilt agricultural company Saskatchewan Wheat Pool in the early 2000s after a restructuring under a new name, Viterra Inc., before it was bought by Glencore in 2012. He later became CEO of HydroOne Ltd., an electrical utility in Ontario.
The surprise departure raises questions about Nutrien just as it enjoys the biggest rally in fertilizer for years, which has fueled higher earnings and a 55 percent rally in its shares in 2021. The company is projecting full-year adjusted EBITDA between $6.9-$7.1 billion.
Scotia Capital Inc. analysts led by Ben Isaacson called the exit “abrupt” and “bizarre.”
“Investors are likely to penalize NTR due to perceived dysfunction at the Board and senior leadership levels,” he wrote in a note, referring to Nutrien’s stock ticker. “Accordingly, we expect the stock to come under pressure near term.”
Nutrien shares were off 5.71 percent Jan. 4 to close at $71.77. Shares closed at $69.25 on Jan. 6, down 9 percent since the announcement.
And despite the run up in Nutrien stock in 2021, sources noted that its performance lagged North American peers CF Industries Holdings Inc. and The Mosaic Co.
Later in a Jan. 6 note, Isaacson suggested that a “lack of execution” ultimately prompted Schmidt’s sudden departure. “During his eight months as captain of the ship, global fertilizer markets soared to highs not seen since 2007/08.” He said this created “a unique opportunity” for Nutrien’s Board and senior leadership team to use “a tidal wave of free cash flow” in 2021/22 to meaningfully increase mid-cycle EBITDA.
“We surmise this lack of execution (timing and scale) is ultimately what led to Mr. Schmidt’s departure,” he said. However, he said the ordeal will make the company stronger, with Schmidt’s departure viewed as “net positive” for the organization over time.
RBC Capital Markets said Nutrien has a solid foundation thanks to its well-run assets and strong financials, though the sudden CEO change raised questions about its management.
RBC said it is more constructive to focus on Nutrien’s asset base across the agriculture and fertilizer sector, and its day-to-day operations should not be impacted by the CEO change.
“We received many inbounds from investors seeking answers to a second sudden CEO departure in a short eight-month period,” RBC said. “However, as is often the case with these situations, we will likely never really know the full story.
“While we do not expect more official commentary on the departures, we think the Board and interim CEO Ken Seitz could help alleviate some concerns around the changes with more details on the company’s near-term focus and search plans for a permanent CEO,” continued RBC.
RBC believes there may be a silver lining to the unexpected management changes, as the new leadership may address issues related to its long-term strategic growth strategy.