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Nutrien Reports First Quarter 2024 Results
"We continued to see strong crop input demand, a normalization of product margins for our North American Retail business and increased global potash shipments in the first quarter. Our results highlighted the capabilities of our flexible, low-cost production assets and downstream distribution network to efficiently supply our customers' needs," commented Ken Seitz, Nutrien's President and CEO.
"We expect growth in Retail earnings and fertilizer sales volumes compared to the prior year and have maintained our 2024 guidance ranges. Our focus remains on strengthening our capability to serve growers and enhancing our core businesses to improve the quality of our earnings and free cash flow," added Mr. Seitz.
Highlights(2):
Generated net earnings of $165 million and adjusted EBITDA of $1.1 billion in the first quarter of 2024, down from the same period in 2023 primarily due to lower net fertilizer selling prices. This was partially offset by increased Retail earnings, higher fertilizer sales volumes and lower natural gas costs. Nutrien Ag Solutions ("Retail") adjusted EBITDA increased to $77 million in the first quarter of 2024 primarily due to higher gross margin for crop nutrients and crop protection products supported by strong grower demand and a normalization of product margins in North America. Potash adjusted EBITDA declined to $530 million in the first quarter of 2024 due to lower net selling prices, which more than offset higher sales volumes. We increased potash production, supported by continued advancement of mine automation initiatives, and reduced our controllable cash cost of product manufactured per tonne. Nitrogen adjusted EBITDA declined to $464 million in the first quarter of 2024 due to lower net selling prices for all major nitrogen products, which more than offset higher sales volumes and lower natural gas costs. Ammonia production increased in the first quarter, driven by higher utilization rates in Trinidad. Initiated a process to divest our Retail assets in Argentina, Chile, and Uruguay to provide greater focus on our core Retail businesses and enhance the quality of earnings and free cash flow. This is a non-GAAP financial measure. See the "Non-GAAP Financial Measures" section. Our discussion of highlights set out on this page is a comparison of the results for the three months ended March 31, 2024 to the results for the three months ended March 31, 2023, unless otherwise noted.
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 8, 2024. The Board of Directors ("Board") of Nutrien carries out its responsibility for review of this disclosure principally through its Audit Committee, composed entirely 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 annual report dated February 22, 2024 ("2023 Annual Report"), which includes our annual audited consolidated financial statements and MD&A, and our annual information form dated February 22, 2024, each for the year ended December 31, 2023, can be found on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov. No update is provided to the disclosure in our 2023 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 (the "SEC").
This MD&A is based on and should be read in conjunction with the Company's unaudited interim condensed consolidated financial statements as at and for the three months ended March 31, 2024 ("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 ("IAS") 34 "Interim Financial Reporting", unless otherwise noted. This MD&A contains certain non-GAAP financial measures and ratios and forward-looking statements, which are described in the "Non-GAAP Financial Measures" and the "Forward-Looking Statements" sections, respectively.
Market Outlook and Guidance
Agriculture and Retail Markets
We expect US corn plantings of approximately 90 million acres in 2024 and soybean plantings of approximately 87 million acres. US planting progress is in line with historical average levels and fertilizer application rates have been strong. Wet weather has recently delayed planting progress and fertilizer application in the Corn Belt. Brazilian growers are finalizing their soybean harvest, and favorable weather conditions resulted in safrinha corn planted area exceeding initial expectations. Soybean margins are expected to improve from the compressed levels in 2023 and support growth in planted acreage and crop input demand in the second half of 2024. Australian soil moisture conditions vary regionally but remain supportive for this upcoming growing season and the Indian monsoon is projected to produce average to above-average precipitation, supporting yield potential and grower demand for crop inputs.
Crop Nutrient Markets
Global potash supply and demand has been relatively balanced as increased shipments have been required to meet historically strong demand in the first quarter. We have maintained our 2024 full-year potash shipment forecast of 68 to 71 million tonnes. We are seeing strong potash demand in North America for the spring application season as channel inventories were tight to start 2024. Potash demand in Southeast Asia has been supported by lower inventory levels compared to the prior year and favorable economics for key crops such as oil palm and rice. China's potash imports remained strong in the first quarter of 2024 supported by a step-change in domestic consumption but are expected to decline on a full-year basis compared to the record levels in 2023. Global nitrogen markets have fluctuated in 2024 driven by seasonal buying patterns, production outages and uncertainty over Chinese urea export restrictions and India's urea import requirements. The US nitrogen supply and demand balance remains relatively tight, in particular for ammonia and UAN, with net nitrogen imports down 21 percent on a fertilizer year basis compared to the historical average. Phosphate fertilizer prices remained firm through the first quarter of 2024 due to strong demand in the Northern Hemisphere, supportive Indian DAP purchases, Chinese export restrictions and production outages. Prices have softened in the second quarter driven primarily by lower seasonal demand.
Financial and Operational Guidance
We are maintaining our Retail adjusted EBITDA and fertilizer sales volume guidance ranges as market fundamentals and operational performance have been in line with our previous expectations. Retail adjusted EBITDA guidance of $1.65 to $1.85 billion reflects expectations for increased crop nutrient sales volumes and margins for our North American business in the first half of 2024 and improved crop input margins in Brazil during the second half of the year. Guidance assumes a full year of earnings from our Retail assets in Argentina, Chile and Uruguay. Potash sales volumes guidance of 13.0 to 13.8 million tonnes assumes a more even split between first and second half volumes compared to the prior year. Nitrogen sales volumes guidance of 10.6 to 11.2 million tonnes assumes higher operating rates at our North American and Trinidad plants and growth in sales of upgraded products such as urea and nitrogen solutions. Effective tax rate on adjusted earnings guidance was lowered primarily due to a change to our expected geographic mix of earnings.
All guidance numbers, including those noted above are outlined in the table below. Refer to page 65 of Nutrien's 2023 Annual Report for related assumptions and sensitivities.
2024 Guidance Ranges (1) as of
------------------------------------------------------------------------------------------------------------
May 8, 2024 February 21, 2024
-------------------------------------------- -------------------- --------------------------------------------
(billions of US dollars, except as otherwise noted) Low High Low High
--------------------------------------------------- ------------ -------------------- ------------ -------------------- ------------ -------------------- ------------
Retail adjusted EBITDA 1.65 1.85 1.65 1.85
Potash sales volumes (million tonnes) (2) 13.0 13.8 13.0 13.8
Nitrogen sales volumes (million tonnes) (2) 10.6 11.2 10.6 11.2
Phosphate sales volumes (million tonnes) (2) 2.6 2.8 2.6 2.8
Depreciation and amortization 2.2 2.3 2.2 2.3
Finance costs 0.75 0.85 0.75 0.85
Effective tax rate on adjusted earnings (%) 23.0 25.0 24.0 26.0
Capital expenditures (3) 2.2 2.3 2.2 2.3
--------------------------------------------------- ------------ -------------------- ------------ -------------------- ------------ -------------------- ------------
1 See the "Forward-Looking Statements" section.
2 Manufactured product only.
Consolidated Results
Three Months Ended March 31
----------------------------------------------------------
(millions of US dollars, except as otherwise noted) 2024 2023 % Change
--------------------------------------------------- ----- -------------------- ----- -------------------- --------
Sales 5,389 6,107 (12)
Gross margin 1,537 1,913 (20)
Expenses 1,118 974 15
Net earnings 165 576 (71)
Adjusted EBITDA (1) 1,055 1,421 (26)
Diluted net earnings per share 0.32 1.14 (72)
Adjusted net earnings per share (1) 0.46 1.11 (59)
--------------------------------------------------- ----- -------------------- ----- -------------------- --------
Net earnings and adjusted EBITDA decreased in the first quarter of 2024 compared to the same period in 2023, primarily due to lower net fertilizer selling prices. This was partially offset by increased Retail earnings, higher fertilizer sales volumes and lower natural gas costs. Expenses increased mainly due to higher foreign exchange losses primarily from our Retail - South America region in the first quarter of 2024 and an $80 million gain recognized in the first quarter of 2023 due to post-retirement benefit plan amendments.
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, 2024 to the results for the three months ended March 31, 2023, unless otherwise noted.
Nutrien Ag Solutions ("Retail")
Three Months Ended March 31
----------------------------------------------------------
(millions of US dollars, except as otherwise noted) 2024 2023 % Change
--------------------------------------------------- ----- -------------------- ----- -------------------- --------
Sales 3,308 3,422 (3)
Cost of goods sold 2,561 2,807 (9)
Gross margin 747 615 21
Adjusted EBITDA (1) 77 (34) n/m
--------------------------------------------------- ----- -------------------- ----- -------------------- --------
Retail adjusted EBITDA increased in the first quarter of 2024 primarily due to higher gross margin for crop nutrients and crop protection products supported by strong grower demand and a normalization of product margins in North America. Gross margin of our proprietary products increased in the first quarter driven primarily by our crop nutritional and biostimulant product lines, as we continued to expand our differentiated product offering and manufacturing capacity.
Three Months Ended March 31
------------------------------------------------------------------------------
Sales Gross Margin
------------------------------ ----------------------------
(millions of US dollars) 2024 2023 2024 2023
----------------------------- ----- -------------------- ----- ---- -------------------- ----
Crop nutrients 1,309 1,335 254 141
Crop protection products 1,114 1,154 234 208
Seed 485 507 59 72
Services and other 156 148 125 118
Merchandise 200 246 31 44
Nutrien Financial 66 57 66 57
Nutrien Financial elimination (22) (25) (22) (25)
----------------------------- ----- -------------------- ----- ---- -------------------- ----
Crop nutrients sales decreased in the first quarter of 2024 due to lower selling prices, partially offset by higher sales volumes across all regions. Gross margin increased in the first quarter due to higher per-tonne margins and higher sales volumes resulting from a more typical start to spring applications in the US compared to 2023. Crop protection products sales were lower in the first quarter of 2024 primarily due to lower selling prices. Gross margin increased compared to the first quarter of 2023, which was impacted by the sell through of higher cost inventory. Seed sales and gross margin decreased in the first quarter of 2024 primarily due to lower sales volumes and competitive market prices in the US, as growers delayed crop selection decisions in some regions. Nutrien Financial sales and gross margin increased in the first quarter of 2024 due to higher financing offering rates and expanded program participation from growers in the US and Australia.
Supplemental Data Three Months Ended March 31
--------------------------------------------------------------------------------------------------------------------------------------------
Gross Margin % of Product Line (1)
------------------------------------------------------------ ------------------------------------------------------------
(millions of US dollars, except as otherwise noted) 2024 2023 2024 2023
--------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Proprietary products
70 54 28 38
Crop nutrients
83 74 36 36
Crop protection products
17 30 29 42
Seed
3 3 9 6
Merchandise
--------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Total 173 161 23 26
--------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Sales Volumes Gross Margin / Tonne
(tonnes - thousands) (US dollars)
------------------------------------------------------------ ------------------------------------------------------------
2024 2023 2024 2023
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Crop nutrients
1,464 1,195 139 94
North America
918 845 55 35
International
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
(percentages) March 31, 2024 December 31, 2023 December 31, 2023 December 31, 2023
------------------------------------------------------------------------- -------------------- -------------------- -------------------- --------------------
Financial performance measures (1, 2)
66 68 68 68
Cash operating coverage ratio
19 19 19 19
Adjusted average working capital to sales
nil 1 1 1
Adjusted average working capital to sales excluding Nutrien Financial
5.2 5.2 5.2 5.2
Nutrien Financial adjusted net interest margin
------------------------------------------------------------------------- -------------------- -------------------- -------------------- --------------------
1 Rolling four quarters.
Potash
Three Months Ended March 31
----------------------------------------------
(millions of US dollars, except as otherwise noted) 2024 2023 % Change % Change
--------------------------------------------------- ----- -------------------- ----- -------- --------
Net sales 813 1,002 (19) (19)
Cost of goods sold 358 305 17 17
Gross margin 455 697 (35) (35)
Adjusted EBITDA (1) 530 676 (22) (22)
--------------------------------------------------- ----- -------------------- ----- -------- --------
Potash adjusted EBITDA declined in the first quarter of 2024 due to lower net selling prices, which more than offset higher sales volumes. We increased potash production in the first quarter, supported by continued advancement of mine automation initiatives, which helped to meet customer demand and reduced our controllable cash cost of product manufactured(1) to $56 per tonne.
Manufactured product Three Months Ended
March 31
------------------------------------------------------------
($ / tonne, except as otherwise noted) 2024 2023
-------------------------------------------------------- -------------------- -------------------- --------------------
Sales volumes (tonnes - thousands)
1,307 854
North America
2,106 1,782
Offshore
-------------------------------------------------------- -------------------- -------------------- --------------------
3,413 2,636
Total sales volumes
-------------------------------------------------------- -------------------- -------------------- --------------------
Net selling price
310 401
North America
193 370
Offshore
-------------------------------------------------------- -------------------- -------------------- --------------------
238 380
Average selling price
Cost of goods sold 105 115
-------------------------------------------------------- -------------------- -------------------- --------------------
Gross margin 133 265
Depreciation and amortization 43 37
-------------------------------------------------------- -------------------- -------------------- --------------------
Gross margin excluding depreciation and amortization (1) 176 302
-------------------------------------------------------- -------------------- -------------------- --------------------
Sales volumes increased in North America in the first quarter of 2024 due to low channel inventory and more normal buying behaviors compared to the same period in 2023. Offshore sales volumes were higher compared to the same period in the prior year driven by increased demand in major offshore markets. Net selling price per tonne decreased in the first quarter of 2024 due to a decline in benchmark prices compared to the strong prices in the first quarter of 2023. Cost of goods sold per tonne decreased in the first quarter of 2024 mainly due to higher production volumes and lower royalties.
Supplemental Data Three Months Ended
March 31
------------------------------------------------------------------------------------------------------
2024 2023
------------------------------------------------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Production volumes (tonnes - thousands) 3,565 3,088
Potash controllable cash cost of product manufactured per tonne (1) 56 62
------------------------------------------------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Canpotex sales by market (percentage of sales volumes)
32 35
Latin America
33 38
Other Asian markets (2)
20 12
China
3 2
India
12 13
Other markets
------------------------------------------------------------------- ---------------------------------- ---------------------------------- ----------------------------------
100 100
Total
------------------------------------------------------------------- ---------------------------------- ---------------------------------- ----------------------------------
1 This is a non-GAAP financial measure. See the "Non-GAAP Financial Measures" section.
Nitrogen
Three Months Ended March 31
----------------------------------------------
(millions of US dollars, except as otherwise noted) 2024 2023 % Change % Change
--------------------------------------------------- ----- -------------------- ----- -------- --------
Net sales 911 1,312 (31) (31)
Cost of goods sold 604 771 (22) (22)
Gross margin 307 541 (43) (43)
Adjusted EBITDA (1) 464 676 (31) (31)
--------------------------------------------------- ----- -------------------- ----- -------- --------
Nitrogen adjusted EBITDA declined in the first quarter of 2024 due to lower net selling prices for all major nitrogen products, which more than offset higher sales volumes and lower natural gas costs. Ammonia production increased in the first quarter supporting product mix optimization and increased downstream urea and UAN production.
Manufactured product Three Months Ended
March 31
------------------------------------------------------------
($ / tonne, except as otherwise noted) 2024 2023
-------------------------------------------------------- -------------------- -------------------- --------------------
Sales volumes (tonnes - thousands)
517 534
Ammonia
775 747
Urea and ESN(R)
1,215 1,076
Solutions, nitrates and sulfates
-------------------------------------------------------- -------------------- -------------------- --------------------
2,507 2,357
Total sales volumes
-------------------------------------------------------- -------------------- -------------------- --------------------
Net selling price
403 721
Ammonia
432 617
Urea and ESN(R)
226 310
Solutions, nitrates and sulfates
-------------------------------------------------------- -------------------- -------------------- --------------------
326 500
Average net selling price
Cost of goods sold 207 275
-------------------------------------------------------- -------------------- -------------------- --------------------
Gross margin 119 225
Depreciation and amortization 54 57
-------------------------------------------------------- -------------------- -------------------- --------------------
Gross margin excluding depreciation and amortization (1) 173 282
-------------------------------------------------------- -------------------- -------------------- --------------------
Sales volumes were higher in the first quarter of 2024 primarily due to higher urea and UAN production and strong fertilizer demand, partially offset by lower ammonia sales due to product mix optimization. Net selling price per tonne was lower in the first quarter of 2024 for all major nitrogen products primarily due to weaker benchmark prices resulting from lower energy prices in key nitrogen producing regions. Cost of goods sold per tonne decreased in the first quarter of 2024 mainly due to lower natural gas costs.
Supplemental Data Three Months Ended
March 31
---------------------------------------------------------------
2024 2023
-------------------------------------------------------------------- --------------------- --------------------- ---------------------
Sales volumes (tonnes - thousands)
1,423 1,248
Fertilizer
1,084 1,109
Industrial and feed
Production volumes (tonnes - thousands)
1,452 1,431
Ammonia production - total (1)
1,018 1,037
Ammonia production - adjusted (1, 2)
Ammonia operating rate (%) (2) 92 95
Natural gas costs (US dollars per MMBtu)
3.16 4.85
Overall natural gas cost excluding realized derivative impact
0.04 -
Realized derivative impact (3)
-------------------------------------------------------------------- --------------------- --------------------- ---------------------
3.20 4.85
Overall natural gas cost
-------------------------------------------------------------------- --------------------- --------------------- ---------------------
1 All figures are provided on a gross production basis in thousands of product tonnes.
2 Excludes Trinidad and Joffre.
Phosphate
Three Months Ended March 31
----------------------------------------------
(millions of US dollars, except as otherwise noted) 2024 2023 % Change % Change
--------------------------------------------------- ----- -------------------- ----- -------- --------
Net sales 437 514 (15) (15)
Cost of goods sold 372 427 (13) (13)
Gross margin 65 87 (25) (25)
Adjusted EBITDA (1) 121 137 (12) (12)
--------------------------------------------------- ----- -------------------- ----- -------- --------
Phosphate adjusted EBITDA decreased in the first quarter of 2024 primarily due to lower net selling prices, partially offset by higher sales volumes and lower ammonia and sulfur input costs. Production increased in the first quarter due to improved reliability at our Aurora plant.
Manufactured product Three Months Ended
March 31
------------------------------------------------------------
($ / tonne, except as otherwise noted) 2024 2023
-------------------------------------------------------- -------------------- -------------------- --------------------
Sales volumes (tonnes - thousands)
447 388
Fertilizer
173 160
Industrial and feed
-------------------------------------------------------- -------------------- -------------------- --------------------
620 548
Total sales volumes
-------------------------------------------------------- -------------------- -------------------- --------------------
Net selling price
627 682
Fertilizer
848 1,136
Industrial and feed
-------------------------------------------------------- -------------------- -------------------- --------------------
689 814
Average net selling price
Cost of goods sold 580 651
-------------------------------------------------------- -------------------- -------------------- --------------------
Gross margin 109 163
Depreciation and amortization 113 122
-------------------------------------------------------- -------------------- -------------------- --------------------
Gross margin excluding depreciation and amortization (1) 222 285
-------------------------------------------------------- -------------------- -------------------- --------------------
Sales volumes increased in the first quarter of 2024 due to higher production and strong demand across fertilizer, industrial and feed products. Net selling price per tonne decreased in the first quarter of 2024 due to lower fertilizer benchmark prices and lower industrial and feed net selling prices which reflect the typical lag in price realizations relative to benchmark prices. Cost of goods sold per tonne decreased in the first quarter of 2024 mainly due to lower ammonia and sulfur input costs.
Supplemental Data Three Months Ended
March 31
--------------------------------
2024 2023
--------------------------------------------------------- ------ -------------------- ------
Production volumes (P2O5 tonnes - thousands) 352 341
Corporate and Others and Eliminations
Three Months Ended March 31
----------------------------------------------------------------------------------------------------
(millions of US dollars, except as otherwise noted) 2024 2023 % Change
--------------------------------------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Corporate and Others
(2) (2) -
Selling expenses (recovery)
89 84 6
General and administrative expenses
6 15 (60)
Share-based compensation expense
97 (81) n/m
Other expenses (income)
(101) (13) 677
Adjusted EBITDA(1)
--------------------------------------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Eliminations
(37) (27) 37
Gross margin
(36) (21) 71
Adjusted EBITDA (1)
--------------------------------------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Other expenses (income) was an expense in the first quarter of 2024 compared to income in the same period in 2023 due to higher foreign exchange losses primarily from our Retail - South America region in the first quarter of 2024 and an $80 million gain recognized in the first quarter of 2023 due to post-retirement benefit plan amendments.
Finance Costs, Income Taxes and Other Comprehensive (Loss) Income
Three Months Ended March 31
----------------------------------------------------------
(millions of US dollars, except as otherwise noted) 2024 2023 % Change
------------------------------------------------------ ----- -------------------- ----- -------------------- --------
Finance costs 179 170 5
Income tax expense 75 193 (61)
Actual effective tax rate including discrete items (%) 31 25 24
Income tax expense was lower in the first quarter of 2024 primarily as a result of lower earnings compared to the same period in 2023. We did not record the tax benefit on South America losses in the first quarter of 2024 as the recognition criteria to record deferred tax assets was not met. This resulted in a higher effective tax rate for the first quarter of 2024. Other comprehensive (loss) income was a loss in the first quarter of 2024 primarily driven by changes in the currency translation of our Retail foreign operations primarily due to depreciation of Australian and Canadian currencies relative to the US dollar.
Liquidity and Capital Resources
Sources and Uses of Liquidity
We continued to manage our capital in accordance with our capital allocation strategy. We believe that our internally generated cash flow, supplemented by available borrowings under new or existing financing sources, if necessary, will be sufficient to meet our anticipated capital expenditures, planned growth and development activities, and other cash requirements for the foreseeable future. Refer to the "Capital Structure and Management" section for details on our existing long-term debt and credit facilities.
Sources and Uses of Cash
Three Months Ended March 31
------------------------------------------------------------
(millions of US dollars, except as otherwise noted) 2024 2023 % Change
--------------------------------------------------- ----- -------------------- ------- -------------------- --------
Cash used in operating activities (487) (858) (43)
Cash used in investing activities (494) (694) (29)
Cash provided by financing activities 548 2,129 (74)
Cash used for dividends and share repurchases (1) (261) (1,143) (77)
--------------------------------------------------- ----- -------------------- ------- -------------------- --------
Cash used in Reduced cash outflow in the first quarter of 2024 compared to the same period in 2023 due to a decrease in income taxes paid and other working capital movements. Typically, in the first quarter of the year, we have lower cash payments to our suppliers and have lower cash receipts from our grower customers as our receivables build during the planting and application season. In the first quarter of 2023, we experienced global supply chain challenges and higher benchmark prices compared to the first quarter of 2024, resulting in higher than usual payments to our suppliers offsetting the higher receivables we collected from our customers. operating activities -------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Cash used in Lower in the first quarter of 2024 compared to the same period in 2023 due to lower capital expenditures and fewer business acquisitions. investing activities -------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Cash provided by Lower in the first quarter of 2024 compared to the same period in 2023 due to the issuance of $1,500 million of senior notes in the first quarter of 2023. financing activities The proceeds from our short-term debt decreased by $947 million compared to the first quarter of 2023; however, we also did not repurchase any shares in the first quarter of 2024. -------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Financial Condition Review
The following is a comparison of balance sheet categories that are considered material:
As at
------------------------------------------------------------
(millions of US dollars, except as otherwise noted) March 31, 2024 December 31, 2023 $ Change % Change
--------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Assets
Cash and cash equivalents 496 941 (445) (47)
Receivables 5,561 5,398 163 3
Inventories 8,188 6,336 1,852 29
Prepaid expenses and other current assets 905 1,495 (590) (39)
Property, plant and equipment 22,410 22,461 (51) -
--------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Liabilities and Equity
Short-term debt 2,835 1,815 1,020 56
Payables and accrued charges 9,431 9,467 (36) -
Explanations for changes in Cash and cash equivalents are in the "Sources and Uses of Cash" section. Receivables remained consistent as the increase in receivables due to the seasonality of our Retail sales was offset by faster collection of our Potash receivables. Inventories increased due to the seasonality of our Retail segment and the larger portion of its operations in North America. Our inventory levels build up in the last quarter of the year and peaks in the first quarter of the year, while we draw inventories in the succeeding quarters. Prepaid expenses and other current assets decreased due to Retail taking delivery of prepaid inventories in preparation for the spring planting and application seasons in North America. Property, plant and equipment decreased due to depreciation more than offsetting capital expenditures in the first quarter of 2024. Short-term debt increased due to higher drawdowns on our credit facilities based on our working capital requirements driven by the seasonality of our business. Payables and accrued charges remained consistent, as we have higher customer prepayment balances which were partially offset by lower costs to purchase and produce our inventories and lower capital expenditures accruals. Retained earnings decreased as dividends declared exceeded net earnings.
Capital Structure and Management
Principal Debt Instruments
As part of the normal course of business, we closely monitor our liquidity position. We use a combination of cash generated from operations and short-term and long-term debt to finance our operations. We continually evaluate various financing arrangements and may seek to engage in transactions from time to time when market and other conditions are favorable. We were in compliance with our debt covenants and did not have any changes to our credit ratings for the three months ended March 31, 2024.
Capital Structure (Debt and Equity)
(millions of US dollars) March 31, 2024 December 31, 2023 ------------------------------------ -------------- -------------------- ----------------- Short-term debt 2,835 1,815 Current portion of long-term debt 513 512 Current portion of lease liabilities 346 327 Long-term debt 8,910 8,913 Lease liabilities 1,034 999
Commercial Paper, Credit Facilities and Other Debt
We have several credit facilities available in the jurisdictions where we operate. We also have a commercial paper program, which is limited to the undrawn amount under our $4,500 million unsecured revolving term credit facility and excess cash invested in highly liquid securities. As at March 31, 2024, we had $1,963 million of commercial paper outstanding.
As at March 31, 2024, $240 million in letters of credit were outstanding and committed, with $118 million of remaining credit available under our dedicated letter of credit facilities.
On March 7, 2024, we entered into an uncommitted $500 million accounts receivable repurchase facility, under which we drew borrowings of $100 million as at March 31, 2024. See Note 6 to the interim financial statements for a further description of this facility.
In March 2024, we filed a base shelf prospectus in Canada and the US qualifying the issuance, subject to approval of the Board of Directors, of common shares, debt securities and other securities during a period of 25 months from March 22, 2024.
Outstanding Share Data
As at May 7, 2024 -------------------- ------------------------------- Common shares 494,628,434
For more information on our capital structure and management, see Note 24 to the consolidated financial statements in our 2023 Annual Report.
Quarterly Results
(millions of US dollars, except as otherwise noted) Q1 2024 Q4 2023 Q4 2023 Q3 2023 Q3 2023 Q2 2023 Q2 2023 Q1 2023 Q1 2023 Q4 2022 Q4 2022 Q3 2022 Q3 2022 Q2 2022 Q2 2022
---------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Sales 5,389 5,664 5,664 5,631 5,631 11,654 11,654 6,107 6,107 7,533 7,533 8,188 8,188 14,506 14,506
Net earnings 165 176 176 82 82 448 448 576 576 1,118 1,118 1,583 1,583 3,601 3,601
Net earnings attributable to equity holders of Nutrien 158 172 172 75 75 440 440 571 571 1,112 1,112 1,577 1,577 3,593 3,593
Net earnings per share attributable to equity holders of Nutrien
0.32 0.35 0.35 0.15 0.15 0.89 0.89 1.14 1.14 2.15 2.15 2.95 2.95 6.53 6.53
Basic
Our quarterly earnings are significantly affected by the seasonality of our business, fertilizer benchmark prices, which have been volatile over the last two years and are affected by demand-supply conditions, grower affordability and weather. See Note 8 to the interim financial statements.
The following table describes certain items that impacted our quarterly earnings:
Quarter
Transaction or Event
------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Q2 2023
$698 million non-cash impairment of assets comprised of a $233 million non-cash impairment of our Phosphate White Springs property, plant and equipment due to a decrease in our forecasted phosphate margins and a $465 million non-cash impairment of our Retail - South America assets primarily related to goodwill mainly due to the impact of crop input price volatility, more moderate long-term growth assumptions and higher interest rates which lowered our forecasted earnings.
------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Q3 2022
$330 million reversal of non-cash impairment of our Phosphate White Springs property, plant and equipment related to higher forecasted global prices and a more favorable outlook for phosphate margins.
------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Critical Accounting Estimates
Our significant accounting policies are disclosed in our 2023 Annual Report. We have discussed the development, selection and application of our key accounting policies, and the critical accounting estimates and assumptions they involve, with the Audit Committee of the Board. Our critical accounting estimates are discussed on pages 72 to 74 of our 2023 Annual Report. There were no material changes to our critical accounting estimates for the three months ended March 31, 2024.
Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, and National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with IFRS. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
There has been no change in our internal control over financial reporting during the three months ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Forward-Looking Statements
Certain statements and other information included in this document, including within the "Market Outlook and Guidance" section, constitute "forward-looking information" or "forward-looking statements" (collectively, "forward-looking statements") under applicable securities laws (such statements are often accompanied by words such as "anticipate", "forecast", "expect", "believe", "may", "will", "should", "estimate", "project", "intend" or other similar words). All statements in this document, other than those relating to historical information or current conditions, are forward-looking statements, including, but not limited to:
Nutrien's business strategies, plans, prospects and opportunities; Nutrien's 2024 full-year guidance, including expectations regarding Retail adjusted EBITDA, Potash sales volumes, Nitrogen sales volumes, Phosphate sales volumes, depreciation and amortization, finance costs, effective tax rate and capital expenditures; our projections to generate strong cash from operations; expectations regarding our capital allocation intentions and strategies; our ability to advance strategic initiatives and high value growth investments, including expectations regarding our ability to serve growers, maintain a low-cost position of fertilizer production assets and increase free cash flow; capital spending expectations for 2024 and beyond; expectations regarding our ability to generate and enhance free cash flow; expectations regarding performance of our operating segments in 2024, including increased fertilizer sales volumes and growth in Retail earnings; our operating segment market outlooks and our expectations for market conditions and fundamentals in 2024 and beyond, and the anticipated supply and demand for our products and services, expected market, industry and growing conditions with respect to crop nutrient application rates, planted acres, grower crop investment, crop mix, including the need to replenish soil nutrient levels, production volumes and expenses, shipments, natural gas costs and availability, consumption, prices, operating rates and the impact of seasonality, import and export volumes, economic sanctions and restrictions, operating rates, inventories, crop development and natural gas curtailments; the negotiation of sales contracts; acquisitions and divestitures and the anticipated benefits thereof; and expectations in connection with our ability to deliver long-term returns to shareholders.
These forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements. As such, undue reliance should not be placed on these forward-looking statements.
All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions referred to below and elsewhere in this document. Although we believe that these assumptions are reasonable, having regard to our experience and our perception of historical trends, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place undue reliance on these assumptions and such forward-looking statements. Current conditions, economic and otherwise, render assumptions, although reasonable when made, subject to greater uncertainty.
The additional key assumptions that have been made in relation to the operation of our business as currently planned and our ability to achieve our business objectives include, among other things, assumptions with respect to: our ability to successfully implement our business strategies, growth and capital allocation investments and initiatives that we will conduct our operations and achieve results of operations as anticipated; our ability to successfully complete, integrate and realize the anticipated benefits of our already completed and future acquisitions and divestitures, and that we will be able to implement our standards, controls, procedures and policies in respect of any acquired businesses and to realize the expected synergies on the anticipated timeline or at all; that future business, regulatory and industry conditions will be within the parameters expected by us, including with respect to prices, expenses, margins, demand, supply, product availability, shipments, consumption, weather conditions, including the current El Nino weather pattern, supplier agreements, product distribution agreements, inventory levels, exports, crop development and cost of labor and interest, exchange and effective tax rates; potash demand growth in offshore markets and normalization of Canpotex port operations; global economic conditions and the accuracy of our market outlook expectations for 2024 and in the future; assumptions related to our assessment of recoverable amount estimates of our assets, including in relation to our Retail - South America group of CGUs goodwill and intangible asset impairments; assumptions related to the calculation of recoverable amount of our Aurora and White Springs CGUs, including internal sales and input price forecasts, discount rate, long-term growth rate and end of expected mine life; our intention to complete share repurchases under our normal course issuer bid programs, including Toronto Stock Exchange approval, the funding of such share repurchases, existing and future market conditions, including with respect to the price of our common shares, and compliance with respect to applicable limitations under securities laws and regulations and stock exchange policies and assumptions related to our ability to fund our dividends at the current level; our expectations regarding the impacts, direct and indirect, of certain geopolitical conflicts, including the war in Eastern Europe and the conflict in the Middle East on, among other things, global supply and demand, including for crop nutrients, energy and commodity prices, global interest rates, supply chains and the global macroeconomic environment, including inflation; assumptions regarding future markets for clean ammonia; the adequacy of our cash generated from operations and our ability to access our credit facilities or capital markets for additional sources of financing; our ability to identify suitable candidates for acquisitions and divestitures and negotiate accepta