Nutrien Reports Fourth Quarter and Full-Year 2023 Results

Fourth quarter results reflect strong fertilizer market fundamentals in North America. Expect increased fertilizer sales volumes and growth in Retail earnings in 2024.

All amounts are in US dollars except as otherwise noted

SASKATOON, Saskatchewan–(BUSINESS WIRE)–Nutrien Ltd. (TSX and NYSE: NTR) announced today its fourth quarter 2023 results, with net earnings of $176 million ($0.35 diluted net earnings per share). Fourth quarter 2023 adjusted net earnings per share¹ was $0.37 and adjusted EBITDA¹ was $1.1 billion.

“We saw a continuation of strong fertilizer market fundamentals in North America during the fourth quarter driven by improved affordability, an extended fall application season and low channel inventories. Utilizing the strengths of our integrated business, we achieved record fourth-quarter potash deliveries, increased crop nutrient sales volumes across our global Retail network and generated strong cash flow from operations,” commented Ken Seitz, Nutrien’s President and CEO.

“As we look ahead to 2024, we expect to deliver higher fertilizer sales volumes and Retail earnings, supported by increased crop input market stability and demand. We continue to prioritize strategic initiatives that enhance our capability to serve growers in our core markets, maintain the low-cost position and reliability of our assets, and position the Company for growth,” added Mr. Seitz.

Highlights²:

• Generated net earnings of $1.3 billion ($2.53 diluted net earnings per share) and adjusted EBITDA¹ of $6.1 billion ($4.44 adjusted net earnings per share¹) in 2023, down from the record levels achieved in 2022. Adjusted EBITDA declined primarily due to lower net realized selling prices across all segments and lower Nutrien Ag Solutions (“Retail”) earnings. Cash provided by operating activities totaled $5.1 billion in 2023, representing 84 percent of adjusted EBITDA.
• Retail adjusted EBITDA of $1.5 billion in 2023 decreased primarily due to lower gross margin for both crop nutrients and crop protection products, as we sold through high-cost inventory. Crop nutrient sales volumes increased as growers returned to more normalized application rates to replenish nutrients in the soil. We continued to grow our proprietary nutritional and biostimulant sales and margins through differentiated product offerings and expanded manufacturing capacity.
• Potash full year 2023 adjusted EBITDA declined to $2.4 billion due to lower net realized selling prices. We delivered record fourth quarter potash sales volumes driven by strong demand in North America and increased offshore sales.
• Nitrogen full year 2023 adjusted EBITDA decreased to $1.9 billion due to lower net realized selling prices for all major nitrogen products, which more than offset lower natural gas costs and higher sales volumes.
• In the fourth quarter of 2023, we recognized a $76 million non-cash impairment in our Nitrogen segment relating to our Trinidad property, plant and equipment due to a new natural gas contract and the resulting outlook for higher expected natural gas costs and constrained near-term availability. We expect improved natural gas availability in Trinidad as the development of additional gas fields is anticipated to add new supply starting in 2026.
• Returned $2.1 billion to shareholders in 2023 through dividends and share repurchases. Nutrien’s Board of Directors approved an increase in the quarterly dividend to $0.54 per share. Nutrien continues to target a stable and growing dividend with our dividend per share increasing by 35 percent since the beginning of 2018. Nutrien’s Board of Directors also approved the purchase of up to 5 percent of Nutrien’s outstanding common shares over a twelve-month period through a normal course issuer bid (“NCIB”). The NCIB is subject to acceptance by the Toronto Stock Exchange.

Market Outlook and Guidance

Agriculture and Retail

• Global grain stocks-to-use ratios remain historically low going into the 2024 growing season as tightening supplies of wheat and rice have offset increased corn supplies in the US and Brazil. We expect weather and geopolitical issues will continue to impact grain and oilseed production, exports and inventory levels.
• Crop prices have declined from historically high levels in 2022, but lower crop input prices have resulted in improved demand, evidenced by the strong North American fall application season in 2023. We expect US corn plantings to range from 91 to 92 million acres in 2024 and soybean plantings to range from 87 to 88 million acres.
• In Brazil, dry weather during the summer crop growing season and lower corn prices could result in lower corn area in 2024. Brazilian growers are expected to continue to expand soybean acreage, which we anticipate will support the need for strong fertilizer imports in the second and third quarters of 2024.
• In Australia, growers have benefited from multiple years of above-average yields and fundamentals remain supportive entering 2024. Timely precipitation led to higher-than-expected winter crop production, however if the El Niño weather pattern continues, it could pose a risk for the 2024 growing season.

Crop Nutrient Markets

• Global potash demand was strong through the second half of 2023, and we estimate full-year shipments were between 67 to 68 million tonnes. The increase was supported by strong consumption and increased imports in key markets such as North America, China and Brazil.
• We expect global potash demand will continue to recover towards trend levels in 2024 with full-year shipments projected between 68 to 71 million tonnes. We anticipate a relatively balanced global market with incremental supply from producers in Canada, Russia, Belarus and Laos.
• We are seeing strong potash demand ahead of the North American spring application season as channel inventories were tight to start the year. Potash demand in Southeast Asia is expected to increase significantly in 2024 due to much lower inventory levels compared to the prior year and favorable economics for key crops such as oil palm and rice. We expect lower potash imports from China compared to the record levels in 2023 but for demand to remain at historically high levels driven by increased consumption.
• We expect nitrogen supply constraints to persist in 2024, including limited Russian ammonia exports, reduced European operating rates and Chinese urea export restrictions. North American natural gas prices remain highly competitive compared to Europe and Asia, and we expect Henry Hub natural gas prices to average approximately $2.50 per MMBtu for the year.
• The US nitrogen supply and demand balance is projected to be tight ahead of the spring application season, as nitrogen fertilizer net imports in the first half of the 2023/2024 fertilizer year were down an estimated 55 percent compared to the three-year average. Global industrial nitrogen demand remains a risk in 2024 as industrial production, most notably in Europe and Asia, has yet to rebound to historical levels.
• Phosphate fertilizer markets have remained relatively strong in the first quarter of 2024, particularly in North America where channel inventories were low entering the year. We expect Chinese phosphate exports to be similar to 2023 levels and tight stocks in India to support demand ahead of their key planting season.

Financial Guidance

We have revised our guidance practice in 2024 to provide forward looking estimates on those metrics that we believe are of value to our shareholders and are less impacted by fertilizer commodity prices. We continue to provide guidance for Retail adjusted EBITDA, fertilizer sales volumes and other key financial modeling metrics as well as fertilizer pricing sensitivities.

• Retail adjusted EBITDA guidance of $1.65 to $1.85 billion assumes increased gross margins in all major product lines compared to 2023. We anticipate that crop nutrient gross margin will be supported by higher sales volumes and per-tonne margins, in particular compared to the compressed levels in the first half of the prior year. We expect a recovery in Brazilian crop protection margins in the second half of 2024.
• Potash sales volume guidance of 13.0 to 13.8 million tonnes assumes demand growth in offshore markets and a return to more normal Canpotex port operations in 2024. In North America, we expect increased first quarter sales volumes compared to the prior year due to strong customer engagement to refill depleted inventories.
• Nitrogen sales volume guidance of 10.6 to 11.2 million tonnes assumes higher operating rates at our US and Trinidad plants compared to 2023. Phosphate sales volume guidance of 2.6 to 2.8 million tonnes assumes improved operating rates compared to the prior year.
• Total capital expenditures of $2.2 to $2.3 billion are expected to be below the prior year. This total includes approximately $500 million in investing capital expenditures focused on proprietary products, network optimization and digital capabilities in Retail, mine automation projects in Potash, and low-cost brownfield expansions in Nitrogen.

All guidance numbers, including those noted above are outlined in the table below. In addition, set forth below are anticipated fertilizer pricing and natural gas price sensitivities relating to adjusted EBITDA (consolidated) and adjusted net earnings per share.

Consolidated Results

Net earnings and adjusted EBITDA decreased in the fourth quarter and full year of 2023 compared to the same periods in 2022, mainly due to lower net realized selling prices across all segments and lower Retail earnings. This was partially offset by decreased cost of goods sold from lower natural gas and royalty costs, lower provincial mining taxes, higher sales volumes for Retail crop nutrients and increased Potash and Nitrogen sales volumes. For the full year of 2023, we recorded non-cash impairment of assets of $774 million in aggregate primarily related to Retail – South America goodwill and Nitrogen and Phosphate property, plant and equipment, resulting in lower net earnings. For the full year of 2022, we recorded a non-cash impairment reversal of an aggregate of $780 million related to our Phosphate assets. The decrease in cash provided by operating activities in the fourth quarter and full-year 2023 compared to the same periods in 2022 was primarily due to lower earnings across all segments.

Segment Results

Our discussion of segment results set out on the following pages is a comparison of the results for the three and twelve months ended December 31, 2023 to the results for the three and twelve months ended December 31, 2022, unless otherwise noted.

Nutrien Ag Solutions (“Retail”)

• Retail adjusted EBITDA decreased in the fourth quarter of 2023 primarily due to lower gross margin for crop protection products and higher expenses. For the full year, adjusted EBITDA was lower mostly due to lower gross margin for both crop nutrients and crop protection products. Included within expenses for the full year of 2023, we recognized a $465 million non-cash impairment primarily related to goodwill of our South American Retail assets. The impairment was mainly due to the impact of crop input price volatility, more moderate long-term growth assumptions and higher interest rates.
• Crop nutrients sales and gross margin decreased in the fourth quarter and full year of 2023 due to lower selling prices across all regions compared to the strong comparable periods in 2022. Sales volumes increased for both the fourth quarter and full year as growers returned to more normalized application rates to replenish nutrients in the soil. Full year sales and gross margin of our proprietary nutritional and biostimulant product lines increased compared to 2022 levels as we continued to expand our differentiated product offering and manufacturing capacity.
• Crop protection products sales and gross margin were lower in the fourth quarter and full year of 2023 primarily due to decreased selling prices compared to the historically strong comparable periods in 2022. This was partially offset by higher fourth quarter sales in North America as growers returned to more normalized buying behaviors. Gross margin in 2023 was also impacted by the selling through of high-cost inventory, which in the fourth quarter was primarily related to South America.
• Seed sales and gross margin decreased in the fourth quarter of 2023 due to lower soybean sales volumes and competitive market prices in South America. Full-year sales increased primarily due to increased corn sales in the US, while gross margin saw little change compared to the prior year.
• Nutrien Financial sales increased in the fourth quarter and full year of 2023 due to higher utilization of our financing offerings in the US and Australia compared to the same periods in 2022.

Potash

• Potash adjusted EBITDA declined in the fourth quarter and full year of 2023 due to lower net realized selling prices, which more than offset higher North American sales volumes and lower provincial mining taxes and royalties. We increased granular potash production in the fourth quarter to meet customer demand and reduced our controllable cash cost of product manufactured to $56 per tonne.
• Sales volumes in North America were higher in the fourth quarter and full year of 2023 due to lower channel inventory and increased grower demand supported by an extended fall application window and improved affordability. Offshore sales volumes were higher in the fourth quarter compared to the same period in the prior year driven by stronger demand in Brazil and China. Full-year offshore sales volumes were lower compared to the record levels in 2022 primarily due to logistical challenges at Canpotex’s West Coast port facilities and reduced shipments to customers in India and Southeast Asia.
• Net realized selling price decreased in the fourth quarter and full year of 2023 compared to the historically strong periods in 2022, due to a decline in benchmark prices and higher costs related to logistical challenges at Canpotex’s West Coast port facilities.
• Cost of goods sold per tonne decreased in the fourth quarter and full year of 2023 mainly due to lower royalties. Fourth quarter costs were also lower due to the timing of turnaround activity.

Canpotex Sales by Market

Nitrogen

Contacts

Investor Relations:
Jeff Holzman

Vice President, Investor Relations

(306) 933-8545

[email protected]

Media Relations:
Megan Fielding

Vice President, Brand & Culture Communications

(403) 797-3015

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