Nutrien reports Q3 2023 results: Delivered record potash sales volumes and benefited from strong crop nutrient demand in North America

Nutrien Ltd. (TSX and NYSE: NTR) announced its third quarter 2023 results, with net earnings of $82 million ($0.15 diluted net earnings per share). Third quarter 2023 adjusted net earnings per share¹ was $0.35 and adjusted EBITDA¹ was $1.1 billion.

″Nutrien’s third-quarter results reflect the strength of agriculture and crop nutrient market fundamentals in North America. We delivered record potash sales volumes and are encouraged by the increased level of demand and market stability in the second half of 2023. We are optimistic on the outlook for our business and will continue to position the company to efficiently serve the needs of our customers,″ commented Ken Seitz, Nutrien’s President and CEO.

″Our focus is on initiatives that strengthen the advantages of our integrated business, drive operational efficiencies and increase free cash flow. We expect to deliver growth from highly targeted investment projects and maintain a balanced and disciplined approach to capital allocation, including the return of meaningful capital to our shareholders,″ added Mr. Seitz.

Highlights²:

• Generated net earnings of $1.1 billion ($2.18 diluted net earnings per share) and adjusted EBITDA¹ of $5.0 billion ($4.01 adjusted net earnings per share¹) in the first nine months of 2023, down from the record levels achieved over the comparable period in 2022. Adjusted EBITDA declined primarily due to lower net realized fertilizer prices across all segments and lower Nutrien Ag Solutions (″Retail″) earnings.

• Retail adjusted EBITDA declined to $197 million in the third quarter primarily due to lower gross margin for crop protection products, partially offset by higher gross margin for crop nutrients and seed. Crop nutrients gross margin increased in the quarter due to improved grower demand and higher per-tonne margins for the commodity fertilizer and proprietary nutritional and biostimulant product lines.

• Potash adjusted EBITDA declined to $611 million in the third quarter due to lower net realized selling prices. Nutrien delivered record potash sales volumes in the quarter supported by strong demand in North America and increased Canpotex sales to Brazil, which more than offset the impact of logistical challenges at Canpotex’s West Coast port facilities and lower demand from customers in India and Southeast Asia.

• Nitrogen adjusted EBITDA declined to $294 million in the third quarter due to lower net realized selling prices and lower sales volumes due to production outages, which more than offset lower natural gas costs.

• Returned $1.8 billion to shareholders in the first nine months of 2023 through dividends and share repurchases.

• Full year 2023 adjusted EBITDA guidance¹ was narrowed to $5.8 to $6.4 billion and adjusted net earnings per share guidance was revised to $4.15 to $5.00 per share.

1. These (and any related guidance, if applicable) are non-IFRS financial measures. See the ″Non-IFRS Financial Measures″ section for further information.

2. The discussion of highlights set out on this page is a comparison of the results for the three and nine months ended September 30, 2023 to the results for the three and nine months ended September 30, 2022, unless otherwise noted.

Market Outlook and Guidance

Agriculture and Retail

• Weather and geopolitical issues continue to impact global grain and oilseed production and trade flows, resulting in tight inventories. New crop corn and soybean prices have recently incurred some seasonal pressure but remain 10 to 15 percent above the 10-year average.

• Harvest in the US has progressed at an above average pace and fall fertilizer application rates have been strong in regions where harvest has been completed. Nutrien projects fertilizer demand will be up 5 to 10 percent in the fourth quarter of 2023 compared to the same period in the prior year.

• Brazilian soybean acreage is expected to expand 3 to 4 percent in 2023 and fertilizer demand has increased in the fourth quarter. Growers in Brazil continue to purchase crop inputs on a just-in-time basis, in particular crop protection products.

• Australian growing conditions have been variable and shifting climate patterns could increase the risk of drier weather impacting crop production and crop input demand.

Crop Nutrient Markets

• Global potash prices were relatively stable in the third quarter of 2023 and demand was strong in North America, Brazil and China. Nutrien has increased the projected global shipment range to 65 to 67 million tonnes due to the strength of demand in the second half of 2023. We now anticipate exports from Belarus to be down approximately 4 million tonnes and exports from Russia to be down approximately 2 million tonnes, compared to 2021 levels.

• Nutrien expects robust agricultural fundamentals and the need to replenish soil nutrient levels will support increased potash consumption next year. We forecast global potash shipments in the range of 67 to 71 million tonnes in 2024, supported by stronger expected demand in Southeast Asia, Latin America, Europe and India.

• Ammonia outages in Europe and production challenges in other key regions have contributed to higher benchmark prices in the second half of 2023. Urea markets are relatively balanced as Chinese export restrictions and strong import demand in India offset weaker seasonal demand in other regions.

• Tight phosphate fertilizer supply has supported global benchmark prices, while recent increases in ammonia and sulfur input costs could pressure phosphate margins.

Financial Guidance

• Based on market factors detailed above, Nutrien is narrowing full-year 2023 adjusted EBITDA guidance² to $5.8 to $6.4 billion. Full-year 2023 adjusted net earnings guidance² is revised to $4.15 to $5.00 per share primarily due to a higher projected effective tax rate. Full-year 2023 cash provided by operations is now projected at $4.0 to $4.5 billion and capital expenditures at approximately $2.7 billion.

• Retail adjusted EBITDA guidance was revised to reflect pressure on crop protection product margins in South America and lower projected earnings in Australia, primarily related to weaker livestock markets.

• Potash adjusted EBITDA guidance and potash sales volume guidance were revised due to the strength of North American market fundamentals.

• Nitrogen adjusted EBITDA guidance was narrowed as higher benchmark prices offset lower projected sales volumes. Nutrien lowered Nitrogen sales volume guidance due to unplanned plant outages in the third quarter and the pull-forward of a planned maintenance outage at Nutrien's Borger site into the fourth quarter of 2023.

• Phosphate adjusted EBITDA guidance was lowered due to the impacts of hurricane related outages in the third quarter and lower projected feed and industrial sales volumes.

• Effective tax rate on adjusted earnings guidance was increased primarily due to an unfavorable change to the geographic mix of earnings. Nutrien expects the effective tax rate on adjusted earnings will return to more historical levels in 2024.

All guidance numbers, including those noted above are outlined in the table below. Refer to page 56 of Nutrien’s 2022 Annual Report for related assumptions and sensitivities, except as set forth below.

Consolidated Results

Net earnings and adjusted EBITDA decreased in the third quarter and first nine months 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, and higher sales volumes for Retail crop nutrients. In the first nine months of 2023, we recorded non-cash impairment of assets of $698 million primarily related to South American Retail goodwill and Phosphate property, plant and equipment, resulting in lower net earnings. In the third quarter and first nine months of 2022, Nutrien recorded a non-cash impairment reversal of $330 million and $780 million, respectively, related to Nutrien's Phosphate assets. The decrease in cash provided by operating activities in the third quarter and first nine months of 2023 compared to the same periods in 2022 was primarily due to lower earnings across all segments.

Segment Results

The discussion of segment results set out on the following pages is a comparison of the results for the three and nine months ended September 30, 2023 to the results for the three and nine months ended September 30, 2022, unless otherwise noted.

Nutrien Ag Solutions (″Retail″)

• Retail adjusted EBITDA decreased in the third quarter of 2023 primarily due to lower gross margin for crop protection products, partially offset by higher gross margin for crop nutrients and seed. For the first nine months of the year, adjusted EBITDA decreased mainly due to lower gross margin for both crop nutrients and crop protection products. Included with expenses for the first nine months of 2023, Nutrien recognized a $465 million non-cash impairment primarily to goodwill relating to Nutrien's South American Retail assets, mainly due to the impact of crop input price volatility, more moderate long-term growth assumptions and higher interest rates.

• Crop nutrients sales decreased in the third quarter and first nine months of 2023 due to lower selling prices across all regions compared to the strong comparable periods in 2022. Third quarter gross margin increased due to improved grower demand and higher per-tonne margins for both commodity fertilizer and Nutrien's proprietary nutritional and biostimulant product lines. Sales volumes increased for both the third quarter and first nine months of the year as growers returned to more normalized application rates to replenish nutrients in the soil.

• Crop protection products sales were lower in the third quarter and first nine months of 2023 primarily due to decreased prices for certain commodity products compared to the historically strong comparable periods in 2022. Gross margin was also impacted by the selling through of higher cost inventory. Dry conditions in the US Midwest impacted demand for certain crop protection products during the third quarter and first nine months of the year.

• Seed sales and gross margin were higher in the third quarter due to increased cotton sales in the Southern US and the benefits of acquisitions in Brazil. Sales and gross margin for the first nine months of 2023 improved primarily due to increased corn sales in the US.

• Nutrien Financial sales increased in the third quarter and first nine months of 2023 due to higher utilization of Nutrien's financing offerings in the US as well as the recent launch of NPay, Nutrien's digitally-enabled financing program in Australia.

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