Nutrien(NTR) - 2023 Q1 - Quarterly Report

First Quarter 2023 Results Overview Nutrien achieved its second-highest Q1 net earnings, returning $1.1 billion to shareholders despite a significant decline from 2022's record, with full-year guidance revised downwards Highlights and Executive Summary Nutrien reported its second-highest Q1 net earnings, returning $1.1 billion to shareholders despite a significant decline from 2022's record, with full-year guidance revised downwards Q1 2023 Key Financial Metrics | Metric | Value | | :--- | :--- | | Net Earnings | $0.6 billion | | Diluted Net Earnings per Share | $1.14 | | Adjusted Net Earnings per Share | $1.11 | | Adjusted EBITDA | $1.4 billion | - Returned $1.1 billion to shareholders in Q1 2023, consisting of approximately $900 million in share repurchases (11.8 million shares) and dividends[2][4][7] - Full-year 2023 guidance was revised to an adjusted EBITDA of $6.5-$8.0 billion and adjusted EPS of $5.50-$7.50, reflecting the stabilization of fertilizer markets[7] - Crop input demand has strengthened for the spring planting season, and the company anticipates increased demand in the second half of 2023 due to strong agricultural fundamentals and lower inventory levels[5] Management's Discussion and Analysis (MD&A) This section provides an in-depth analysis of Nutrien's financial performance, market outlook, and operational results for the quarter Market Outlook and Financial Guidance Market outlook remains positive due to strong agricultural fundamentals, yet full-year 2023 guidance was revised downwards due to lower forecasted fertilizer prices - The global grain stocks-to-use ratio is projected to end the current growing season at its lowest level in over 25 years, providing incentive for growers to invest in crops[12] - Global potash shipment forecast for 2023 is maintained at 63 to 67 million tonnes, with increased demand expected in H2 2023 due to lower inventories and improved grower affordability[12] Revised Full-Year 2023 Guidance (as of May 10, 2023) | Metric | Previous Guidance (Feb 15, 2023) | Revised Guidance (May 10, 2023) | | :--- | :--- | :--- | | Adjusted Net Earnings per Share | $8.45 - $10.65 | $5.50 - $7.50 | | Adjusted EBITDA | $8.4 - $10.0 billion | $6.5 - $8.0 billion | | Retail Adjusted EBITDA | $1.85 - $2.05 billion | $1.60 - $1.75 billion | | Potash Adjusted EBITDA | $3.7 - $4.5 billion | $2.65 - $3.35 billion | | Nitrogen Adjusted EBITDA | $2.5 - $3.2 billion | $1.95 - $2.55 billion | - Guidance was lowered primarily due to the expectation of below-normal crop nutrient gross margins (Retail), and lower forecasted benchmark fertilizer prices (Potash and Nitrogen)[17] Consolidated Results Nutrien's Q1 2023 consolidated results showed significant year-over-year declines in sales and net earnings, driven by lower selling prices across all segments Consolidated Financial Highlights (Three Months Ended March 31) | Metric | 2023 (US$ million) | 2022 (US$ million) | % Change | | :--- | :--- | :--- | :--- | | Sales | $6,107 million | $7,657 million | (20)% | | Gross Margin | $1,913 million | $3,257 million | (41)% | | Net Earnings | $576 million | $1,385 million | (58)% | | Adjusted EBITDA | $1,421 million | $2,615 million | (46)% | | Diluted Net Earnings per Share | $1.14 | $2.49 | (54)% | - The primary reason for the decline in earnings was lower net realized selling prices in all segments and lower sales volumes in Retail, Potash, and Phosphate[20] - Cash used in operating activities increased significantly, primarily due to lower earnings across all segments[20] Segment Results All operating segments reported a year-over-year adjusted EBITDA decline in Q1 2023, with Retail incurring a loss and other segments affected by lower selling prices Nutrien Ag Solutions ("Retail") The Retail segment reported an adjusted EBITDA loss of $34 million in Q1 2023, driven by lower sales and gross margins for crop nutrients and protection products Retail Segment Performance (Three Months Ended March 31) | Metric | 2023 (US$ million) | 2022 (US$ million) | % Change | | :--- | :--- | :--- | :--- | | Sales | $3,422 million | $3,861 million | (11)% | | Gross Margin | $615 million | $845 million | (27)% | | Adjusted EBITDA | $(34) million | $240 million | n/m | - Crop nutrient gross margin per tonne decreased in all regions due to lower selling prices and higher cost inventory[25] - Crop protection product sales and gross margin decreased, particularly in North America, compared to a historically strong Q1 2022[25] Potash Potash adjusted EBITDA fell 52% to $676 million in Q1 2023, driven by lower net realized selling prices and decreased sales volumes Potash Segment Performance (Three Months Ended March 31) | Metric | 2023 (US$ million) | 2022 (US$ million) | % Change | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $676 million | $1,406 million | (52)% | | Sales Volumes (k tonnes) | 2,636 | 3,043 | (13)% | | Avg. Net Realized Price/Tonne ($) | $380 | $608 | (38)% | | COGS per Tonne ($) | $115 | $100 | 15% | - Sales volumes in North America decreased due to just-in-time buying, while record Q1 Canpotex sales to Brazil partially offset lower demand from Asia[28] - Cost of goods sold per tonne increased primarily due to lower production volumes and a pull forward of maintenance activities[28] Nitrogen Nitrogen adjusted EBITDA decreased 32% to $676 million due to lower selling prices, partially offset by reduced natural gas costs and improved operational reliability Nitrogen Segment Performance (Three Months Ended March 31) | Metric | 2023 (US$ million) | 2022 (US$ million) | % Change | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $676 million | $995 million | (32)% | | Sales Volumes (k tonnes) | 2,357 | 2,325 | 1% | | Avg. Net Realized Price/Tonne ($) | $500 | $651 | (23)% | | COGS per Tonne ($) | $275 | $290 | (5)% | - The decline was driven by weaker benchmark prices for all major nitrogen products, while cost of goods sold per tonne decreased due to lower natural gas costs[33] - Ammonia utilization rate increased to 95% from 89% in Q1 2022, due to a focus on reliability initiatives[33][75] Phosphate Phosphate adjusted EBITDA declined 43% to $137 million due to decreased sales volumes and lower net realized prices for fertilizer products Phosphate Segment Performance (Three Months Ended March 31) | Metric | 2023 (US$ million) | 2022 (US$ million) | % Change | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $137 million | $239 million | (43)% | | Sales Volumes (k tonnes) | 548 | 651 | (16)% | | Avg. Net Realized Price/Tonne ($) | $814 | $865 | (6)% | - The decrease in adjusted EBITDA was due to lower sales volumes and lower net realized prices for fertilizer products[37] Corporate and Others Corporate and Others' adjusted EBITDA loss improved to $(13) million, driven by reduced share-based compensation and a gain on post-retirement benefit plans - Share-based compensation expense decreased to $15 million from $135 million in Q1 2022 due to a decrease in the fair value of share-based awards[36][38] - Other income of $81 million was mainly due to an $80 million gain on amendments to other post-retirement benefit plans[38] Liquidity and Capital Resources Nutrien's liquidity was impacted by lower earnings, leading to increased debt and borrowings, with capital deployed for assets, growth, and shareholder returns Sources and Uses of Cash (Three Months Ended March 31) | Activity | 2023 (US$ million) | 2022 (US$ million) | | :--- | :--- | :--- | | Cash used in operating activities | $(858) million | $(62) million | | Cash used in investing activities | $(694) million | $(457) million | | Cash provided by financing activities | $2,129 million | $588 million | - Financing activities were higher due to the issuance of $1.5 billion of notes in Q1 2023[44] - Short-term debt increased by $1.87 billion from year-end 2022 to finance seasonal working capital and share repurchases[45][46] - The company repurchased 11.8 million shares for approximately $900 million year-to-date as of March 31, 2023, reducing total shares outstanding by 10% compared to the same period in 2022[7] Supplementary Information This section provides additional financial data and reconciliations of non-IFRS measures to support the understanding of the company's performance Quarterly Results This section summarizes key financial metrics for the past eight quarters, highlighting earnings volatility influenced by fertilizer prices and business seasonality - The company's earnings are significantly affected by volatile fertilizer benchmark prices and seasonality, with crop input sales higher in spring and fall[52][53] - The provided eight-quarter data shows sales peaking at $14.5 billion and net earnings at $3.6 billion in Q2 2022, demonstrating the recent cyclical peak[52] Non-IFRS Financial Measures This section defines and reconciles non-IFRS financial measures like Adjusted EBITDA and Adjusted Net Earnings, used by management to assess operational performance - Management uses non-IFRS measures to evaluate the performance of day-to-day operations, as they are not impacted by long-term investment and financing decisions[79][83] Reconciliation of Net Earnings to Adjusted EBITDA (Q1) | (millions of US dollars) | 2023 | 2022 | | :--- | :--- | :--- | | Net earnings | 576 | 1,385 | | Finance costs | 170 | 109 | | Income tax expense | 193 | 505 | | Depreciation and amortization | 496 | 461 | | EBITDA | 1,435 | 2,460 | | Adjustments (Share-based comp, FX, etc.) | (14) | 155 | | Adjusted EBITDA | 1,421 | 2,615 | Reconciliation of Net Earnings to Adjusted Net Earnings (Q1) | (millions of US dollars) | 2023 | 2022 | | :--- | :--- | :--- | | Net earnings attributable to equity holders | 571 | 1,378 | | Post-tax adjustments | (10) | 117 | | Adjusted net earnings | 561 | 1,495 | Condensed Consolidated Financial Statements This section presents the unaudited interim condensed consolidated financial statements for Q1 2023, including the Statements of Earnings, Cash Flows, and Balance Sheet Financial Statements This section presents the unaudited interim condensed consolidated financial statements for Q1 2023, including the Statements of Earnings, Cash Flows, and Balance Sheet - The Statement of Earnings shows Net Earnings of $576 million for Q1 2023, down from $1,385 million in Q1 2022[114] - The Balance Sheet as of March 31, 2023 shows Total Assets of $56.6 billion, Total Liabilities of $31.3 billion, and Total Shareholders' Equity of $25.3 billion[118] - The Statement of Cash Flows indicates cash used in operating activities was $858 million, cash used in investing activities was $694 million, and cash provided by financing activities was $2,129 million[116] Notes to the Financial Statements The notes provide detailed disclosures supporting the financial statements, including segment performance, new long-term debt issuance, and share repurchase details - Note 2 (Segment Information) provides a detailed reconciliation of segment sales, gross margin, and EBITDA to the consolidated company totals[123][124] - Note 8 (Long-Term Debt) details the issuance of $1.5 billion in new notes on March 27, 2023, comprising $750 million at 4.900% due 2028 and $750 million at 5.800% due 2053[139] - Note 9 (Share Capital) confirms the repurchase and cancellation of 11,751,290 common shares for a total cost of $899 million during the three months ended March 31, 2023[142]