Nutrien Delivers Excellent First Quarter Results; Expects Strong Spring Season & Raises Annual Guidance

Rhea-AI Summary

Nutrien Ltd. (NTR) reported its first-quarter 2021 results, achieving $133 million in net earnings or $0.22 per diluted share. Adjusted net earnings stood at $0.29 per share and adjusted EBITDA reached $806 million, reflecting a 60% year-over-year increase. Free cash flow more than doubled to $476 million. The Retail segment generated record adjusted EBITDA of $109 million, supported by strong sales and margins. Full-year guidance for adjusted net earnings per share increased to $2.55 to $3.25.

Positive

• First-quarter adjusted EBITDA rose by 60% year-over-year to $806 million.
• Retail segment achieved record adjusted EBITDA of $109 million.
• Free cash flow increased to $476 million, over double the previous year.
• Full-year adjusted net earnings per share guidance raised to $2.55 to $3.25.
• Potash adjusted EBITDA grew by 33% year-over-year.
• Digital platform sales doubled and accounted for almost 20% of North American sales.

Negative

• Nitrogen sales volumes decreased due to lower opening inventories and reduced production.

Nutrien Ltd. (TSX and NYSE: NTR) announced today its first-quarter 2021 results, with net earnings of $133 million ($0.22 diluted earnings per share). First-quarter adjusted net earnings¹ were $0.29 per share and adjusted EBITDA¹ was $806 million.

“Our earnings and free cash flow¹ 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 Mr. Schmidt.

Highlights:

• 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 percent 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 percent of North American sales.
• Potash adjusted EBITDA increased 33 percent 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 manufactured¹ 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 percent 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 percent² 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 EBITDA¹ 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.  

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1 This financial measure including related guidance, if applicable, is a non-IFRS financial measure. See the “Non-IFRS Financial Measures” section for further information.

2 From 2018 levels.

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 at www.sedar.com and on EDGAR at www.sec.gov. 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.

Market Outlook

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. US 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 US 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.

Financial Outlook and Guidance

Based on market factors detailed above, we are raising full-year 2021 adjusted net earnings guidance to $2.55 to $3.25 per share from $2.05 to $2.75 per share and full-year 2021 adjusted EBITDA guidance to $4.4 to $4.9 billion from $4.0 to $4.5 billion. First-half 2021 guidance is provided at $2.00 to $2.20 adjusted net earnings per share.

All guidance numbers, including those noted above are outlined in the tables below. Refer to page 57 of Nutrien’s 2020 Annual Report for related assumptions and sensitivities.

2021 Guidance Ranges 1		Low				High
Adjusted net earnings per share 2	$	2.55			$	3.25
Adjusted EBITDA (billions) 2	$	4.4			$	4.9
Retail Adjusted EBITDA (billions)	$	1.55			$	1.65
Potash Adjusted EBITDA (billions)	$	1.5			$	1.7
Nitrogen Adjusted EBITDA (billions)	$	1.3			$	1.5
Phosphate Adjusted EBITDA (millions)	$	275			$	375
Potash sales tonnes (millions) 3		12.5				13.0
Nitrogen sales tonnes (millions) 3		10.9				11.4
Depreciation and amortization (billions)	$	1.9			$	2.0
Effective tax rate on adjusted earnings		23	%			25	%
Sustaining capital expenditures (billions) 2	$	1.1			$	1.2

1 See the “Forward-Looking Statements” section.

2 See the "Non-IFRS Financial Measures" section.

3 Manufactured products only. Nitrogen excludes ESN® and Rainbow products.

Consolidated Results

	Three Months Ended March 31
(millions of US dollars)	2021		2020		% Change
Sales 1	4,658		4,198		11
Freight, transportation and distribution	211		212		-
Cost of goods sold	3,291		3,101		6
Gross margin 1	1,156		885		31
Expenses 1	878		803		9
Net earnings (loss)	133		(35)		n/m
Adjusted EBITDA 2	806		508		59
Cash used in operating activities	(152)		(526)		71
Free cash flow ("FCF") 2	476		181		163
FCF including changes in non-cash operating working capital 2	(316)		(689)		54
1 Certain immaterial figures have been reclassified for the three months ended March 31, 2020.
2 See the "Non-IFRS Financial Measures" section.

Net earnings and adjusted EBITDA increased significantly in the first quarter of 2021 compared to the same period in 2020 due to strong Nutrien Ag Solutions (“Retail”) earnings growth, higher crop nutrient net realized selling prices and higher North American potash sales. Cash flow from operating activities increased in the first quarter of 2021 compared to the first quarter of 2020 helping to generate $476 million in free cash flow, more than double compared to the amount generated in the first quarter of 2020. The COVID-19 pandemic had limited impact on our results during the periods.

Segment Results

Our discussion of segment results set out on the following pages is a comparison of the results for the three months ended March 31, 2021 to the results for the three months ended March 31, 2020, unless otherwise noted.

Nutrien Ag Solutions (“Retail”)

	Three Months Ended March 31
(millions of US dollars, except	Dollars						Gross Margin						Gross Margin (%)
as otherwise noted)	2021		2020		% Change		2021		2020		% Change		2021		2020
Sales
Crop nutrients	1,016		785		29		220		156		41		22		20
Crop protection products	1,085		1,010		7		176		157		12		16		16
Seed	463		394		18		69		59		17		15		15
Merchandise	230		216		6		38		34		12		17		16
Nutrien Financial	25		16		56		25		16		56		100		100
Services and other 1	173		255		(32)		144		134		7		83		53
Nutrien Financial elimination 2	(20)		(15)		33		(20)		(15)		33		100		100
	2,972		2,661		12		652		541		21		22		20
Cost of goods sold	2,320		2,120		9
Gross margin	652		541		21
Expenses 1,3	721		689		5
Earnings (loss) before finance
costs and taxes ("EBIT")	(69)		(148)		(53)
Depreciation and amortization	177		155		14
EBITDA	108		7		n/m
Integration and restructuring
related costs	1		-		n/m
Adjusted EBITDA	109		7		n/m
1 Certain immaterial figures have been reclassified for the three months ended March 31, 2020.
2 Represents elimination for the interest and service fees charged by Nutrien Financial to Retail branches.
3 Includes selling expenses of $667 million (2020 – $635 million).

• Adjusted EBITDA increased in the first quarter of 2021 due to higher sales and margins across virtually all product categories and all key regions where we operate. This was supported by strong agricultural market fundamentals, expanded acreage expectations, as well as, supply chain improvements and strategic procurement. Gross margin increased due to strong sales and ongoing efficiency initiatives which also lowered our Retail cash operating coverage ratio¹ to 60 percent from 62 percent.
• Crop nutrients sales increased significantly in the first quarter of 2021 as sales volumes and gross margin per tonne both increased 19 percent. North American sales volumes were up 12 percent, supported by strong spring applications ahead of planting. Gross margin percentage increased in the first quarter of 2021 due to strategic procurement in a rising price environment.
• Crop protection products sales increased in the first quarter of 2021 due to our market growth and favorable application conditions. Gross margin percentage increased by 0.6 percent supported by strong proprietary product results, higher prices, supply chain improvements and the benefit of recent accretive acquisitions in Brazil.
• Seed sales in the first quarter of 2021 increased due to higher grower planting intentions in key regions where we operate, resulting from strong global crop prices and agriculture fundamentals. Gross margin percentage was stable with improved proprietary results offsetting an elevated competitive environment in the US.
• Merchandise sales and gross margin percentage increased in the first quarter of 2021 primarily driven by growth in the US market and strong results in Australia.
• Nutrien Financial sales increased due to higher utilization and adoption of our programs.
• Services and other sales decreased as the divestiture of an Australian livestock export business more than offset much higher North American custom application sales. Despite the change in revenue mix, gross margin increased in Australia and other key markets resulting in a much higher gross margin percentage in the first quarter of 2021.

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1 This financial measure including related guidance, if applicable, is a non-IFRS financial measure. See the “Non-IFRS Financial Measures” section for further infor

FAQ

What were Nutrien's net earnings for the first quarter of 2021?

Nutrien reported net earnings of $133 million for the first quarter of 2021.

What is Nutrien's adjusted EBITDA for Q1 2021?

Nutrien's adjusted EBITDA for the first quarter of 2021 was $806 million.

What is the full-year adjusted net earnings per share guidance for Nutrien?

Nutrien has raised its full-year adjusted net earnings per share guidance to $2.55 to $3.25.

How much free cash flow did Nutrien generate in Q1 2021?

Nutrien generated $476 million in free cash flow in the first quarter of 2021.

What was the performance of Nutrien's Retail segment in Q1 2021?

Nutrien's Retail segment delivered a record adjusted EBITDA of $109 million in the first quarter of 2021.