Nutrien Ltd. has announced its first-quarter 2021 results, with net earnings of $133 million ($0.22 diluted earnings per share). First-quarter adjusted net earnings were $0.29 per share and adjusted EBITDA was $806 million.
“Our earnings and free cash flow results highlight the strength of our integrated business model, execution of strategic initiatives and the recovery in global agricultural markets. Nutrien delivered a record first quarter for Retail and strong fertilizer volumes and margins,” commented Mayo Schmidt, Nutrien’s President and CEO.
“Crop prices and cash margins are at multi-year highs and growers are responding accordingly with increased seeded acreage and a focus on maximizing yields and our team at Nutrien is supporting them at every level. We are delivering the end-to-end services and products they need including our full suite of crop inputs, digital tools and innovative and sustainable solutions that help achieve higher yields. This is a very exciting time for Nutrien, and the team is focused on executing Nutrien’s strategy and achieving operational excellence across our business,” added Schmidt.
- Nutrien generated $476 million in free cash flow in the first quarter of 2021, more than double that of the first quarter in 2020, while adjusted EBITDA increased by nearly 60 percent compared to the first quarter of 2020.
- Nutrien Ag Solutions (“Retail”) delivered a record $109 million in adjusted EBITDA in the first quarter of 2021, reflecting strong business performance and supportive market conditions across virtually all product categories and key regions where we operate. Retail sales increased 12 percent and gross margin percentage was 22 percent in the first quarter of 2021 compared to 20 percent in the first quarter of 2020 due to strong sales performance, higher gross margin on proprietary products and the benefits of supply chain. improvements and strategic procurement. Rolling four quarter Retail adjusted EBITDA to sales exceeded 10 percent and was more than 11% in the US. Retail also improved its cash operating coverage ratio1 and lowered its adjusted average working capital1 by nearly $800 million compared to the first quarter of 2020. Retail adjusted EBITDA per US selling location1 surpassed $1.1 million and digital platform sales doubled compared to the first quarter of 2020, and accounted for nearly 20% of North American sales.
- Potash adjusted EBITDA increased 33% in the first quarter of 2021 compared to the same period in 2020, due to higher net realized selling prices and sales volumes. Our Potash sales volumes were near record levels for a first quarter due to continued strong demand in North American and offshore markets. Potash cash cost of product manufactured was $57 per tonne in the first quarter of 2021, down $3 per tonne from the same period in 2020, despite headwinds from a stronger Canadian dollar.
- Nitrogen adjusted EBITDA increased 27% in the first quarter of 2021 compared to the same quarter in 2020 primarily due to higher net realized selling prices. Sales volumes decreased due to lower opening inventories this year after a strong fall application season and reduced production in Trinidad.
- In April 2021, Nutrien released its “Feeding the Future Plan” and Environmental, Social and Governance (“ESG”) Report which includes aggressive long-term targets and commitments including an at least 30% reduction in greenhouse gas emissions (scope 1 and 2) intensity by 2030 and scaling our end-to-end and on-farm Carbon Program. Uptake of our Carbon Program pilot exceeded expectations and we will provide an update on the program and our broader ESG strategy and targets in June 2021.
- Nutrien raised full-year 2021 adjusted net earnings per share1 and adjusted EBITDA guidance to $2.55 to $3.25 per share and $4.4 billion to $4.9 billion, respectively. First-half 2021 guidance is provided at $2.00 to $2.20 adjusted net earnings per share.
Management’s Discussion and Analysis
The following management’s discussion and analysis (“MD&A”) is the responsibility of management and is dated as of May 3, 2021. The Board of Directors (“Board”) of Nutrien carries out its responsibility for review of this disclosure principally through its audit committee, comprised exclusively of independent directors. The audit committee reviews and, prior to its publication approves this disclosure pursuant to the authority delegated to it by the Board. The term “Nutrien” refers to Nutrien Ltd. and the terms “we”, “us”, “our”, “Nutrien” and “the Company” refer to Nutrien and, as applicable, Nutrien and its direct and indirect subsidiaries on a consolidated basis. Additional information relating to Nutrien (which, except as otherwise noted, is not incorporated by reference herein), including our 2020 Annual Report dated February 18, 2021, which includes our annual audited consolidated financial statements and MD&A and our Annual Information Form, each for the year ended December 31, 2020, can be found on SEDAR and on EDGAR. No update is provided to the disclosure in our annual MD&A except for material information since the date of our annual MD&A. The Company is a foreign private issuer under the rules and regulations of the US Securities and Exchange Commission (“SEC”).
This MD&A is based on the Company’s unaudited interim condensed consolidated financial statements as at and for the three months ended March 31, 2021 (“interim financial statements”) based on International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” unless otherwise noted. This MD&A contains certain non-IFRS financial measures and forward-looking statements which are described in the “Non-IFRS Financial Measures” and the “Forward-Looking Statements” sections, respectively.
Agriculture and Retail
- Crop prices are at multi-year highs supported by strong global demand and less than expected supply from major production regions. The rally in crop prices highlights the tightness in global supply and demand balances and the sensitivity to any potential supply risk in 2021. Planting is in full swing across much of North America and we expect US corn and soybean acreage combined could be approximately four million acres above the United States Department of Agriculture’s Prospective Plantings report.
- We anticipate crop input expenditures will increase more than three percent in key markets where we operate, supported by higher planted acreage and crop prices, as well as, higher crop protection and crop nutrient prices.
- We expect record Brazilian crop margins will drive further increases in acreage in the second half of 2021. Safrinha corn planting is complete, but yield potential may be constrained by planting delays and weather which could further tighten the supply and demand balance for corn.
- Soil moisture is favorable for Australian winter crop planting and production and growers are expected to increase their spend on all crop inputs due to increased income realized in 2020 and a strong outlook for 2021 crop prices.
Crop Nutrient Markets
- Robust agricultural fundamentals and favorable potash affordability continue to support potash use and prices, particularly for granular product. Given strong demand, we continue to expect record global potash shipments in 2021 of 68 to 70 million tonnes. Strong global demand led to recent potash contracts in India settling at $280 per tonne, which is $33 per tonne higher than the previous contract settled at the end of January.
- Global nitrogen prices were supported by strong agriculture fundamentals and a resurgence of industrial demand. Tampa ammonia contract prices have more than doubled since December 2020, as an already tight market was squeezed further by global production outages. U.S. urea and UAN prices have also increased driven by the strong demand for the spring application season, coupled with production outages and slower than normal imports in the first half of the fertilizer year.
- We project Chinese urea exports in 2021 will be between 4.0 and 5.5 million tonnes, higher than previously anticipated but lower compared to 5.5 million tonnes in 2020. This is a result of higher expected operating rates, as increased urea prices more than offset elevated feedstock costs.
- High crop prices, tight availability and the final rulings on U.S. countervailing duties supported phosphate prices but we anticipate some pressure on historically high production margins going forward due to the significant increase in raw material costs.