all amounts are in US dollars except as
otherwise noted
Nutrien Ltd. (TSX and NYSE: NTR) announced today its 2020
second-quarter results, with net earnings of $765 million ($1.34
diluted earnings per share). Second-quarter adjusted net earnings
were $1.45 per share and adjusted EBITDA was $1.72 billion.
Adjusted net earnings per share and adjusted EBITDA, together with
the related guidance, free cash flow including changes in non-cash
operating working capital and cash cost of product manufactured are
non-IFRS financial measures. See the “Non-IFRS Financial Measures”
section for further information.
“Nutrien delivered compelling second-quarter and first-half
results supported by strong growth in our Retail Ag Solutions
earnings and excellent operational performance across our Potash
and Nitrogen business units. Nutrien’s many competitive advantages
were apparent this quarter, including the quality of our assets and
impressive free cash flow generation, even at the bottom of the
commodity cycle. Our digital platform continues to exceed
expectations. We now expect to reach $1 billion in online orders by
the end of the year and are introducing new data-driven offerings
to help farmers make quicker and more informed decisions for their
business,” commented Chuck Magro, Nutrien’s President and CEO.
Highlights:
- Nutrien generated $1.6 billion in free cash flow, including
improvement to our non-cash operating working capital in the second
quarter. The Board of Directors approved the quarterly dividend at
$0.45 per share, maintaining our annualized payout at $1.80 per
share which is well within our targeted range.
- Retail Ag Solutions delivered record EBITDA in the second
quarter and the first half of 2020. First-half EBITDA was up 20
percent year-over-year as a result of double-digit growth in
revenue and gross margin, and EBITDA margins surpassing 10 percent.
We continue to expand in the market, backed by our organic growth
strategy which includes growing our proprietary product sales, as
well as through accretive investments made over the past year.
Total sales through our leading digital retail platform exceeded
$700 million in the first half of 2020, surpassing our annual goal
of $500 million in just the first six months of the year. Second
quarter online sales accounted for 45 percent of North American
sales of products that were available for purchase online.
- Potash EBITDA was down 39 percent in the second quarter and
first half of 2020 compared to the same periods last year as strong
sales volumes and lower cost of goods sold per tonne were more than
offset by lower net realized selling prices. Potash cash cost of
product manufactured was a record low $52 per tonne in the second
quarter of 2020.
- Nitrogen EBITDA was 16 percent lower in the first half and 17
percent lower in the second quarter of 2020 compared to the same
periods last year due to lower net realized selling prices.
However, we achieved higher sales volumes and lower cost of goods
sold per tonne compared to the first half of last year and our
ammonia utilization reached a record high of 97 percent in the
second quarter of 2020.
- Nutrien issued an aggregate of $1.5 billion in senior notes in
the quarter with average coupon rates below 3 percent.
- Nutrien acquired Tec Agro Group, a leading Ag retailer in
Goiás, Brazil. Our Brazil operations now include 30 retail
locations, two large-scale fertilizer blenders, a premier soybean
seed business and specialty nutrition and plant health production
facilities. With the addition of Tec Agro Group, our Brazilian
operations are expected to generate over half a billion dollars in
revenue on a normalized annual run-rate basis.
- Nutrien released its 2020 Environmental, Social and Governance
(ESG) report in April and has since achieved significantly higher
ratings by third party ESG organizations.
- Nutrien's full-year 2020 adjusted net earnings per share and
adjusted EBITDA guidance is $1.50 to $1.90 per share and $3.5
billion to $3.8 billion, respectively. The top end of the guidance
range was lowered due to lower ammonia and UAN prices.
Management’s Discussion and Analysis
The following management’s discussion and analysis (“MD&A”)
is the responsibility of management and is dated as of August 10,
2020. 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 2019 Annual
Report dated February 19, 2020, which includes our annual audited
consolidated financial statements and MD&A and our Annual
Information Form, each for the year ended December 31, 2019, 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
and six months ended June 30, 2020 (“interim financial statements”)
based on International Financial Reporting Standards as issued by
the International Accounting Standards Board (“IFRS”) and prepared
in accordance with International Accounting Standard 34 “Interim
Financial Reporting” unless otherwise stated. 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
- US crop demand fundamentals have stabilized as a result of a
rebound in ethanol demand and strong Chinese purchases due to tight
Chinese inventories and rising prices. However, favorable US
growing conditions, high crop conditions ratings and supportive
weather forecasts have combined to pressure prices in recent
weeks.
- North American spring fertilizer application was robust and
customer engagement in summer fill programs was strong as wholesale
customers replenished inventories. The US corn and soybean crop is
progressing well ahead of 2019 levels, which could be supportive of
strong fall applications.
- In Australia, moisture levels have improved particularly in
eastern states which is expected to result in much higher planting
year-over-year. In Western Canada, we expect that generally good
crop conditions will support summer crop protection demand.
Brazilian soybean and corn prices continue to be historically high.
As a result, Brazilian growers are realizing record margins and
have forward contracts to sell historically high proportions of
their anticipated 2021 harvest. Brazilian soybean acreage is
expected to increase approximately 5 percent in the upcoming
planting season.
Crop Nutrient Markets
- Global potash buying increased meaningfully following the
signing of the China and India potash contracts, particularly in
Brazil. With strong demand in most key regions, many producers have
announced they are now sold out through September 2020 and
Brazilian prices have rebounded by over $30/mt from low values in
the second quarter of this year. We maintain our projection for
2020 global potash shipments between 65 and 67 million tonnes.
- Global urea demand has been supported by strong consumption in
many key regions, particularly in India. Chinese urea exports
continue to be lower year-over-year, but we expect the pace to
increase in the second half of 2020. Ammonia prices have continued
to be held back by weaker-than-normal industrial demand in the
Western Hemisphere, while improved industrial utilization in Asian
markets is supporting both demand and prices in that region.
- Global phosphate prices have been supported by anticipated
strength in second-half demand in India and Brazil.
Financial Outlook and Guidance
Based on market factors detailed above, we are lowering the top
of the range for our 2020 adjusted net earnings guidance to $1.50
to $1.90 per share (from $1.50 to $2.10 per share previously) and
adjusted EBITDA guidance to $3.5 to $3.8 billion (from $3.5 to $3.9
billion previously).
All guidance numbers, including those noted above are outlined
in the tables below. Refer to page 46 of Nutrien’s 2019 Annual
Report for related sensitivities.
2020 Guidance Ranges 1
Low
High
Adjusted net earnings per share 2
$
1.50
$
1.90
Adjusted EBITDA (billions) 2
$
3.5
$
3.8
Retail EBITDA (billions)
$
1.4
$
1.5
Potash EBITDA (billions)
$
1.0
$
1.2
Nitrogen EBITDA (billions)
$
1.1
$
1.2
Phosphate EBITDA (millions)
$
200
$
250
Potash sales tonnes (millions) 3
12.1
12.5
Nitrogen sales tonnes (millions) 3
10.9
11.5
Depreciation and amortization
(billions)
$
1.85
$
1.95
Effective tax rate
19
%
21
%
Sustaining capital expenditures
(billions)
$
0.9
$
1.0
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 June
30
Six Months Ended June
30
(millions of US dollars)
2020
2019
% Change
2020
2019
% Change
Sales
8,416
8,693
(3)
12,602
12,412
2
Freight, transportation and
distribution
237
215
10
449
386
16
Cost of goods sold
6,024
6,166
(2)
9,125
8,739
4
Gross margin
2,155
2,312
(7)
3,028
3,287
(8)
Expenses
1,016
1,017
-
1,807
1,816
-
Net earnings
765
858
(11)
730
899
(19)
EBITDA 1
1,656
1,781
(7)
2,211
2,377
(7)
Adjusted EBITDA 1
1,721
1,870
(8)
2,229
2,574
(13)
Free cash flow ("FCF") 1
1,173
1,308
(10)
1,354
1,690
(20)
FCF including changes in non-cash
operating working capital 1
1,611
929
73
922
246
275
1 See the "Non-IFRS Financial Measures"
section.
Our second-quarter and first-half 2020 net earnings were lower
than the same periods in 2019 primarily due to significantly lower
crop nutrient prices. This was mostly offset by strong Retail
revenue and gross margin growth, higher crop nutrient volume sales,
solid operational results and the benefit of an asset retirement
obligation change in estimate. COVID-19 had limited impact on our
business in the periods.
Segment Results
Our discussion of segment results set out on the following pages
is a comparison of the results for the three and six months ended
June 30, 2020 to the results for the three and six months ended
June 30, 2019, respectively, unless otherwise noted.
Retail
Three Months Ended June
30
(millions of US dollars, except
Dollars
Gross Margin
Gross Margin (%)
as otherwise noted)
2020
2019
% Change
2020
2019
% Change
2020
2019
Sales
Crop nutrients
2,527
2,626
(4)
559
540
4
22
21
Crop protection products
2,436
2,286
7
547
472
16
22
21
Seed
1,141
1,197
(5)
219
209
5
19
17
Merchandise
253
144
76
45
24
88
18
17
Services and other
392
259
51
242
195
24
62
75
6,749
6,512
4
1,612
1,440
12
24
22
Cost of goods sold
5,137
5,072
1
Gross margin
1,612
1,440
12
Expenses 1
811
749
8
Earnings before finance costs and taxes
("EBIT")
801
691
16
Depreciation and amortization
163
145
12
EBITDA
964
836
15
1 Includes selling expenses of $764
million (2019 – $683 million).
Six Months Ended June
30
(millions of US dollars, except
Dollars
Gross Margin
Gross Margin (%)
as otherwise noted)
2020
2019
% Change
2020
2019
% Change
2020
2019
Sales
Crop nutrients
3,312
3,313
-
715
671
7
22
20
Crop protection products
3,446
3,030
14
704
589
20
20
19
Seed
1,535
1,553
(1)
278
259
7
18
17
Merchandise
469
252
86
79
43
84
17
17
Services and other
636
403
58
365
287
27
57
71
9,398
8,551
10
2,141
1,849
16
23
22
Cost of goods sold
7,257
6,702
8
Gross margin
2,141
1,849
16
Expenses 1
1,488
1,320
13
EBIT
653
529
23
Depreciation and amortization
318
281
13
EBITDA
971
810
20
1 Includes selling expenses of $1,399
million (2019 – $1,215 million).
- EBITDA was significantly higher in the second quarter
and first half of 2020, compared to the same periods in 2019, due
to strong growth in revenue and gross margins across most product
lines. The increase was due primarily to organic growth, aided by
more normal weather conditions in the US this year, as well as from
the benefit of acquisitions made over the past year. Total selling
expenses and selling expense as a percent of revenue increased in
the periods due primarily to the Ruralco Holdings Limited
(“Ruralco”) acquisition that closed at the end of the third quarter
of 2019. Selling expenses as a percentage of revenue were also
impacted by lower crop nutrient and seed prices in 2020, resulting
in lower associated revenues. Selling expenses as a percent of
gross margin decreased compared to the same periods in 2019.
- Crop nutrients sales were lower in the second quarter
but similar in the first half of 2020, compared to the same periods
in 2019. Lower selling prices offset a 9 percent and 13 percent
increase in sales volumes in the respective periods. Gross margin
percentage increased in the periods due to higher proprietary
product sales.
- Crop protection products sales in the second quarter and
first half of 2020 were higher due to continued market share
growth, strong applications in North America and Australia
supported by improved weather conditions and earlier planting in
the US relative to 2019. Gross margin percentage increased in the
periods due to strong product sales and gains achieved in key
product categories.
- Seed sales in the first half of 2020 were similar to the
same period last year but were down in the second quarter as North
American planting in 2019 was more heavily weighted to the second
quarter due to delayed seeding. Lower cotton planting and pressure
on soybean seed prices were largely offset by higher total planted
acreage in the US. Gross margin percentage increased due to an
increased proportion of corn and canola seed sales, which have a
higher gross margin, and fewer replanting discounts compared to the
same periods in 2019.
- Merchandise sales increased in the periods primarily due
to the addition of the Ruralco business in Australia. Gross margin
percentage improved in the second quarter and was similar for the
first half of 2020 compared to the same periods last year as we
were able to increase margins in key markets.
- Services and other sales were also higher in the periods
due to contributions from our Australian business and higher custom
applications in the US. Gross margin percentage decreased due to
product mix changes resulting primarily from the acquisition of
Ruralco.
Potash
Three Months Ended June
30
(millions of US dollars, except
Dollars
Tonnes (thousands)
Average per Tonne
as otherwise noted)
2020
2019
% Change
2020
2019
% Change
2020
2019
% Change
Manufactured product
Net sales
North America
232
257
(10)
1,201
975
23
194
264
(27)
Offshore
356
591
(40)
2,414
2,480
(3)
147
238
(38)
588
848
(31)
3,615
3,455
5
163
246
(34)
Cost of goods sold
310
317
(2)
86
92
(7)
Gross margin - manufactured
278
531
(48)
77
154
(50)
Gross margin - other 1
-
-
-
Depreciation and amortization
30
33
(9)
Gross margin - total
278
531
(48)
Gross margin excluding depreciation
Expenses 2
52
92
(43)
and amortization - manufactured 3
107
187
(43)
EBIT
226
439
(49)
Potash cash cost of product
Depreciation and amortization
109
114
(4)
manufactured 3
52
59
(12)
EBITDA
335
553
(39)
1 Includes other potash and purchased
products and is comprised of net sales of $Nil (2019 – $Nil) less
cost of goods sold of $Nil (2019 – $Nil).
2 Includes provincial mining and other
taxes of $46 million (2019 – $91 million).
3 See the "Non-IFRS Financial Measures"
section.
Six Months Ended June
30
(millions of US dollars, except
Dollars
Tonnes (thousands)
Average per Tonne
as otherwise noted)
2020
2019
% Change
2020
2019
% Change
2020
2019
% Change
Manufactured product
Net sales
North America
457
502
(9)
2,348
1,951
20
195
257
(24)
Offshore
648
1,042
(38)
4,144
4,424
(6)
156
235
(34)
1,105
1,544
(28)
6,492
6,375
2
170
242
(30)
Cost of goods sold
575
589
(2)
88
92
(4)
Gross margin - manufactured
530
955
(45)
82
150
(45)
Gross margin - other 1
-
1
(100)
Depreciation and amortization
32
34
(6)
Gross margin - total
530
956
(45)
Gross margin excluding depreciation
Expenses 2
115
156
(26)
and amortization - manufactured
114
184
(38)
EBIT
415
800
(48)
Potash cash cost of product
Depreciation and amortization
205
214
(4)
manufactured
56
59
(5)
EBITDA
620
1,014
(39)
1 Includes other potash and purchased
products and is comprised of net sales of $Nil million (2019 – $1
million) less cost of goods sold of $Nil (2019 – $Nil).
2 Includes provincial mining and other
taxes of $103 million (2019 – $154 million).
- EBITDA decreased in the second quarter and first half of
2020 due to lower global potash prices. This was partially offset
by record high sales volumes and lower cost of goods sold per
tonne.
- Sales volumes were the highest of any second quarter and
first half on record. Strong demand in North America for both the
second quarter and the first half of 2020 resulted from an increase
in US planted acreage and more normal weather this spring following
several challenging application seasons. Offshore sales volumes
declined slightly compared to the same periods last year due to
lower Chinese import demand and some short-term cautious spot
purchasing in certain international markets.
- Net realized selling price decreased in the second
quarter and first half of 2020, reflecting pressure in global
benchmark prices during much of the first half of 2020.
- Cost of goods sold per tonne decreased in both periods
due to lower production costs and lower depreciation and
amortization related to production mix. Potash cash cost of product
manufactured in the second quarter and first half of 2020 was
significantly lower than the same periods in 2019 primarily due to
production efficiency gains and the deferral of maintenance
projects due to COVID-19 precautions.
Canpotex Sales by Market
(percentage of sales volumes, except
as
Three Months Ended June
30
Six Months Ended June
30
otherwise noted)
2020
2019
% Change
2020
2019
% Change
Latin America
36
29
24
31
24
29
Other Asian markets 1
26
27
(4)
28
30
(7)
China
19
25
(24)
22
27
(19)
India
12
9
33
12
10
20
Other markets
7
10
(30)
7
9
(22)
100
100
100
100
1 All Asian markets except China and
India.
Nitrogen
Three Months Ended June
30
(millions of US dollars, except
Dollars
Tonnes (thousands)
Average per Tonne
as otherwise noted)
2020
2019
% Change
2020
2019
% Change
2020
2019
% Change
Manufactured product
Net sales
Ammonia
229
296
(23)
935
1,041
(10)
244
285
(14)
Urea
273
305
(10)
1,000
969
3
273
314
(13)
Solutions, nitrates and sulfates
194
201
(3)
1,255
1,137
10
154
177
(13)
696
802
(13)
3,190
3,147
1
218
255
(15)
Cost of goods sold
508
531
(4)
159
169
(6)
Gross margin - manufactured
188
271
(31)
59
86
(31)
Gross margin - other 1
20
23
(13)
Depreciation and amortization
54
49
10
Gross margin - total
208
294
(29)
Gross margin excluding depreciation
Expenses (income)
(3)
(11)
(73)
and amortization - manufactured
113
135
(16)
EBIT
211
305
(31)
Ammonia controllable cash cost of
Depreciation and amortization
172
154
12
product manufactured 2
40
45
(11)
EBITDA
383
459
(17)
1 Includes other nitrogen (including ESN®
and Rainbow) and purchased products and is comprised of net sales
of $157 million (2019 – $164 million) less cost of goods sold of
$137 million (2019 – $141 million).
2 See the "Non-IFRS Financial Measures"
section.
Six Months Ended June
30
(millions of US dollars, except
Dollars
Tonnes (thousands)
Average per Tonne
as otherwise noted)
2020
2019
% Change
2020
2019
% Change
2020
2019
% Change
Manufactured product
Net sales
Ammonia
359
458
(22)
1,502
1,685
(11)
239
272
(12)
Urea
510
518
(2)
1,856
1,616
15
275
321
(14)
Solutions, nitrates and sulfates
357
372
(4)
2,360
2,085
13
151
178
(15)
1,226
1,348
(9)
5,718
5,386
6
214
250
(14)
Cost of goods sold
952
929
2
166
172
(3)
Gross margin - manufactured
274
419
(35)
48
78
(38)
Gross margin - other 1
31
41
(24)
Depreciation and amortization
56
50
12
Gross margin - total
305
460
(34)
Gross margin excluding depreciation
Expenses (income)
8
(6)
n/m
and amortization - manufactured
104
128
(19)
EBIT
297
466
(36)
Ammonia controllable cash cost of
Depreciation and amortization
322
267
21
product manufactured
43
44
(2)
EBITDA
619
733
(16)
1 Includes other nitrogen (including ESN®
and Rainbow) and purchased products and is comprised of net sales
of $305 million (2019 – $295 million) less cost of goods sold of
$274 million (2019 – $254 million).
- EBITDA decreased in the second quarter and first half of
2020 as lower net realized selling prices more than offset the
benefit of higher sales volumes into North American agricultural
markets and lower cost of goods sold per tonne.
- Sales volumes in the second quarter and first half of
2020 increased compared to the same periods in 2019 due to strong
fertilizer demand. This more than offset lower ammonia sales caused
by reduced industrial demand in the periods.
- Net realized selling price of nitrogen decreased in the
second quarter and first half of 2020 due to lower global and North
American benchmark prices across all products.
- Cost of goods sold per tonne for nitrogen decreased in
the periods as a result of lower natural gas prices and fixed
costs. This was partially offset by higher depreciation and
amortization due to expansion and turnaround work that was
completed in late 2019. Ammonia controllable cash cost of product
manufactured per tonne decreased in the second quarter and first
half of 2020 compared to the same periods last year due to lower
fixed costs and favorable foreign exchange rates related to our
Canadian operations.
Natural Gas Prices
Three Months Ended June
30
Six Months Ended June
30
(US dollars per MMBtu, except as otherwise
noted)
2020
2019
% Change
2020
2019
% Change
Overall gas cost excluding realized
derivative impact
2.09
2.34
(11)
2.16
2.68
(19)
Realized derivative impact
0.06
0.17
(65)
0.06
0.10
(40)
Overall gas cost
2.15
2.51
(14)
2.22
2.78
(20)
Average NYMEX
1.72
2.64
(35)
1.83
2.89
(37)
Average AECO
1.37
0.88
56
1.50
1.18
27
- Gas costs decreased in the second quarter and first half
of 2020 compared to the same periods in 2019 primarily due to lower
US gas costs and a lower realized derivative impact.
Phosphate
Three Months Ended June
30
(millions of US dollars, except
Dollars
Tonnes (thousands)
Average per Tonne
as otherwise noted)
2020
2019
% Change
2020
2019
% Change
2020
2019
% Change
Manufactured product
Net sales
Fertilizer
146
263
(44)
472
681
(31)
309
385
(20)
Industrial and feed
104
104
-
194
182
7
538
569
(5)
250
367
(32)
666
863
(23)
375
424
(12)
Cost of goods sold
224
375
(40)
335
434
(23)
Gross margin - manufactured
26
(8)
n/m
40
(10)
n/m
Gross margin - other 1
2
(2)
n/m
Depreciation and amortization
84
72
17
Gross margin - total
28
(10)
n/m
Gross margin excluding depreciation
Expenses
7
14
(50)
and amortization - manufactured
124
62
100
EBIT
21
(24)
n/m
Depreciation and amortization
56
62
(10)
EBITDA
77
38
103
1 Includes other phosphate and purchased
products and is comprised of net sales of $27 million (2019 - $51
million) less cost of goods sold of $25 million (2019 - $53
million).
Six Months Ended June
30
(millions of US dollars, except
Dollars
Tonnes (thousands)
Average per Tonne
as otherwise noted)
2020
2019
% Change
2020
2019
% Change
2020
2019
% Change
Manufactured product
Net sales
Fertilizer
319
471
(32)
1,040
1,172
(11)
307
401
(23)
Industrial and feed
210
215
(2)
385
386
-
546
556
(2)
529
686
(23)
1,425
1,558
(9)
372
440
(15)
Cost of goods sold
511
679
(25)
359
436
(18)
Gross margin - manufactured
18
7
157
13
4
225
Gross margin - other 1
3
(3)
n/m
Depreciation and amortization
84
78
8
Gross margin - total
21
4
425
Gross margin excluding depreciation
Expenses
17
20
(15)
and amortization - manufactured
97
82
18
EBIT
4
(16)
n/m
Depreciation and amortization
119
122
(2)
EBITDA
123
106
16
1 Includes other phosphate and purchased
products and is comprised of net sales of $61 million (2019 - $81
million) less cost of goods sold of $58 million (2019 - $84
million).
- EBITDA increased in the second quarter and first half of
2020 primarily due to a change in estimate related to an asset
retirement obligation resulting in a gain of $46 million in the
second quarter. Excluding this impact, EBITDA would have been lower
in the periods compared to the previous year, as declines in net
realized selling prices and sales volumes more than offset the
benefit of a reduction in cost of goods sold per tonne.
- Sales volumes decreased in the second quarter and first
half of 2020 primarily due to the conversion of the Redwater
phosphate facility to ammonium sulfate in 2019 and lower phosphoric
acid exports in 2020.
- Net realized selling price of phosphate decreased in the
second quarter and first half of 2020, consistent with declines in
global benchmark prices.
- Cost of goods sold per tonne decreased significantly in
both periods primarily due to the asset retirement obligation
revaluation gain and lower raw material costs.
Corporate and Others
Three Months Ended June
30
Six Months Ended June
30
(millions of US dollars, except as
otherwise noted)
2020
2019
% Change
2020
2019
% Change
Sales 1
20
36
(44)
47
64
(27)
Cost of goods sold
18
36
(50)
43
64
(33)
Gross margin
2
-
n/m
4
-
n/m
Selling expenses
(8)
(3)
167
(13)
(9)
44
General and administrative expenses
65
62
5
125
126
(1)
Provincial mining and other taxes
1
4
(75)
1
5
(80)
Share-based compensation expense
(recovery)
12
59
(80)
(20)
116
n/m
Impairment of assets
-
-
-
-
33
(100)
Other expenses
79
51
55
86
55
56
EBIT
(147)
(173)
(15)
(175)
(326)
(46)
Depreciation and amortization
17
11
55
26
22
18
EBITDA
(130)
(162)
(20)
(149)
(304)
(51)
Finance costs
139
143
(3)
272
266
2
Income tax expense
235
294
(20)
219
306
(28)
Other comprehensive income (loss)
201
(14)
n/m
(157)
18
n/m
1 Primarily relates to our non-core
Canadian business.
- Share-based compensation expense (recovery) - We
had an expense for the three months ended June 30, 2020 as
share-based awards vest over time. This is partially offset by the
impact of a lower share price during this period. We had a recovery
for the six months ended June 30, 2020 as our share price decreased
primarily resulting from market volatility due to the COVID-19
pandemic, compared to an increase in our share price in the
comparative period in 2019.
- Impairment of assets was lower for the first half of
2020 due to a $33 million impairment of our intangible assets as a
result of Fertilizantes Heringer S.A. filing for bankruptcy
protection in 2019.
- Finance costs in the second quarter and first half of
2020 were similar to the same periods last year. Lower interest
rates were more than offset by higher finance costs related to
COVID-19 as we managed, and continue to manage, our liquidity
position during the pandemic.
- Income tax expense decreased due to lower earnings
before income taxes for the second quarter and first half of 2020
compared to the same periods in 2019.
- Other comprehensive income (loss) - For the three months
ended June 30, 2020, we had higher other comprehensive income from
a gain on translation of our Retail operations in Canada and
Australia as the Canadian and Australian dollars significantly
appreciated as global markets partially rebounded following the
COVID-19 outbreak in the early part of 2020. We had an other comprehensive loss in
the first half of 2020 from the translation of our Retail
operations in Canada. We also had higher unrealized fair value
losses in our investment in Sinofert Holdings Ltd. These
greater-than-normal fluctuations in foreign exchange rates and the
mark-to-market value of our investment were primarily attributable
to increased market volatility as a result of the global COVID-19
pandemic.
Financial Condition Review
The following balance sheet categories contained variances that
were considered significant:
As at
(millions of US dollars, except as
otherwise noted)
June 30, 2020
December 31, 2019
$ Change
% Change
Assets
Cash and cash equivalents
1,415
671
744
111
Receivables
5,712
3,542
2,170
61
Inventories
4,199
4,975
(776)
(16)
Prepaid expenses and other current
assets
444
1,477
(1,033)
(70)
Liabilities and Equity
Short-term debt
1,247
976
271
28
Current portion of long-term debt
-
502
(502)
(100)
Payables and accrued charges
7,306
7,437
(131)
(2)
Long-term debt
10,032
8,553
1,479
17
Retained earnings
7,320
7,101
219
3
- Explanations for changes in Cash and cash equivalents
are in the “Sources and Uses of Cash” section.
- Receivables increased due to seasonal Retail sales
resulting in higher receivables from customers and vendor rebates
receivables.
- Inventories decreased due to seasonal Retail sales.
- Prepaid expenses and other current assets decreased due
to Retail taking delivery of prepaid inventory (primarily seed and
crop protection) during the spring application season.
- Short-term debt increased primarily from commercial
paper issuances as part of our seasonal working capital
management.
- Payables and accrued charges decreased primarily due to
lower customer prepayments as Retail customers took delivery of
prepaid sales. The decrease was partially offset by an increase
primarily related to a shift in timing of supplier payments.
- Long-term debt (including current portion) increased due
to the addition of $1.5 billion in notes issued in May 2020
exceeding the repayment of $500 million in notes that matured in
the first quarter of 2020.
- Retained earnings increased as net earnings in the first
half of 2020 exceeded dividends declared.
Liquidity and Capital Resources
Sources and Uses of Liquidity
We believe that internally generated cash flow, supplemented by
available borrowings under our existing financing sources, if
necessary, will be sufficient to meet our anticipated capital
expenditures and other cash requirements for at least the next 12
months. As further developments and impacts of COVID-19 are highly
uncertain and cannot be predicted, we continue to monitor our
liquidity position. Refer to the “Capital Structure and Management”
section for details on our existing long-term debt and credit
facilities.
Key uses in the second quarter and/or six months ended
June 30, 2020 included:
- Repaid $3.5 billion of revolving credit facilities during the
three months ended June 30, 2020.
- Repaid at maturity $500 million of 4.875 percent notes during
the six months ended June 30, 2020. See Note 7 to the interim
financial statements.
- Paid $258 million and $514 million in dividends to shareholders
for the three and six months ended June 30, 2020,
respectively.
- Repurchased approximately 4 million common shares for
cancellation at a cost of $160 million with an average price per
share of $41.96 during the six months ended June 30, 2020. At June
30, 2020, we had approximately 28 million shares available to
repurchase under the normal course issuer bid, which expires on
February 26, 2021. See Note 8 to the interim financial
statements.
Key sources in the second quarter and/or six months ended
June 30, 2020 included:
- Issued $1.5 billion of notes on May 13, 2020. See Note 7 to the
interim financial statements.
In March and April 2020, in response to the market uncertainty
caused by the COVID-19 pandemic, we established new committed
revolving credit facilities totaling approximately $1.5 billion. We
closed these credit facilities after the issuance of the new notes
as described above. We also use commercial paper as a source of
liquidity. For the three and six months ended June 30, 2020,
outstanding commercial paper decreased by $646 million and
increased by $355 million, respectively.
Sources and Uses of Cash
Three Months Ended June
30
Six Months Ended June
30
(millions of US dollars, except as
otherwise noted)
2020
2019
% Change
2020
2019
% Change
Cash provided by operating activities
1,756
1,172
50
1,230
657
87
Cash used in investing activities
(408)
(420)
(3)
(853)
(1,229)
(31)
Cash (used in) provided by financing
activities
(3,139)
(500)
528
380
(1,109)
n/m
Effect of exchange rate changes on cash
and cash equivalents
24
(9)
n/m
(13)
(17)
(24)
(Decrease) increase in cash and cash
equivalents
(1,767)
243
n/m
744
(1,698)
n/m
Cash and cash equivalents decreased by $1,767 million
this quarter compared to an increase of $243 million in the
comparative quarter in 2019, due to:
- An increase of $584 million in cash provided by operating
activities over the same period in 2019, mostly due to improved
working capital management. The most significant change was an
increase in payables and accrued charges related to a shift in
timing of supplier payments. These improvements were partially
offset by a decrease in net earnings due to lower crop nutrient
prices.
- A $114 million increase in cash used for acquisitions compared
to the same period in 2019 primarily from the Tec Agro Group
acquisition in the second quarter of 2020, partially offset by
lower capital expenditures.
- An increase in our short-term debt net repayments of $4.2
billion compared to the same period in 2019, as we repaid $3.5
billion of revolving credit facilities in the second quarter of
2020, and improved working capital management.
- $500 million long-term debt repayment in the second quarter of
2019, compared to minimal repayment in the second quarter of
2020.
- A decrease of $1.1 billion in cash payments to shareholders in
the form of share repurchases compared to the same period in
2019.
Cash and cash equivalents increased by $744 million in the first
half of 2020 compared to a decrease of $1,698 million in the first
half of 2019, due to:
- An increase of $573 million in cash provided by operating
activities over the same period in 2019, mostly due to improved
non-cash operating working capital management. The most significant
change is an increase in payables and accrued charges related to a
shift in timing of supplier payments. These improvements were
partially offset by a decrease in net earnings due to lower crop
nutrient prices.
- A $316 million decrease in cash used for Retail acquisitions
compared to 2019.
- A decrease in our short-term debt net proceeds of $755 million
compared to the same period in 2019, due to improved working
capital management.
- A $493 million decrease in long-term debt repayments compared
to the same period in 2019.
- A decrease of $1.8 billion in cash payments to shareholders in
the form of share repurchases compared to the same period in
2019.
Capital Structure and Management
Principal Debt Instruments
In response to the COVID-19 pandemic, we continue to monitor our
liquidity position. We added new credit facilities of $1.5 billion
in March and April 2020, which we subsequently closed in May 2020
after the issuance of the new notes described below. We use a
combination of cash generated from operations and short-term and
long-term debt to finance our operations. We are in compliance with
our debt covenants and did not have any changes to our credit
ratings in the six months ended June 30, 2020.
Short-term Debt
As at June 30, 2020
(millions of US dollars)
Rate of Interest (%)
Total Facility Limit
Outstanding and
Committed
Remaining Available
Credit facilities
Unsecured revolving term credit
facility
NIL
4,500
-
4,500
Uncommitted revolving demand facility
NIL
500
-
500
Other credit facilities 1
0.9 - 11.8
640
242
398
Commercial paper
0.4 - 2.8
1,005
Total
1,247
1 Other credit facilities are unsecured
and consist of South American facilities with debt of $184
(December 31, 2019 – $149) and interest rates ranging from 2.4
percent to 11.8 percent, Australian facilities with debt of $27
(December 31, 2019 – $157) and an interest rate of 1.3 percent, and
Other facilities with debt of $31 (December 31, 2019 – $20) and
interest rates ranging from 0.9 percent to 4.0 percent.
The amount available under the commercial paper program is
limited to the availability of backup funds under the $4,500
million unsecured revolving term credit facility and excess cash
invested in highly liquid securities.
Long-term Debt
Our long-term debt consists primarily of notes. See the “Capital
Structure and Management” section of our 2019 Annual Report for
information on balances, rates and maturities for our notes. On May
13, 2020, we issued $1.5 billion in notes. See Note 7 to the
interim financial statements. During the first half of 2020, we
repaid the $500 million 4.875 percent notes that matured March 30,
2020.
Outstanding Share Data
As at August 7,
2020
Common shares
569,145,935
Options to purchase common shares
11,177,625
For more information on our capital structure and management,
see Note 26 to our 2019 financial statements.
Quarterly Results
(millions of US dollars, except as
otherwise noted)
Q2 2020
Q1 2020
Q4 2019
Q3 2019
Q2 2019
Q1 2019
Q4 2018
Q3 2018
Sales
8,416
4,186
3,442
4,169
8,693
3,719
3,762
4,034
Net earnings (loss) from continuing
operations
765
(35)
(48)
141
858
41
296
(1,067)
Net earnings from discontinued
operations
-
-
-
-
-
-
2,906
23
Net earnings (loss)
765
(35)
(48)
141
858
41
3,202
(1,044)
EBITDA
1,656
555
499
785
1,781
596
944
(932)
Earnings (loss) per share (“EPS”) from
continuing operations
Basic
1.34
(0.06)
(0.08)
0.25
1.48
0.07
0.48
(1.74)
Diluted
1.34
(0.06)
(0.08)
0.24
1.47
0.07
0.48
(1.74)
EPS
Basic
1.34
(0.06)
(0.08)
0.25
1.48
0.07
5.23
(1.70)
Diluted
1.34
(0.06)
(0.08)
0.24
1.47
0.07
5.22
(1.70)
Seasonality in our business results from increased demand for
products during the planting season. Crop input sales are generally
higher in the spring and fall application seasons. Crop nutrient
inventories are normally accumulated leading up to each application
season. Our cash collections generally occur after the application
season is complete, while customer prepayments made to us are
concentrated in December and January and inventory prepayments paid
to our vendors are typically concentrated in the period from
November to January. Feed and industrial sales are more evenly
distributed throughout the year.
Since the fourth quarter of 2019, Potash earnings were impacted
by lower net realized selling prices caused by a temporary slowdown
in global demand. In the fourth quarter of 2018, earnings were
impacted by $2.9 billion in after-tax gains on the sales of our
investments in Sociedad Quimica y Minera de Chile S.A. and Arab
Potash Company, which were categorized as discontinued operations.
In the third quarter of 2018, earnings were impacted by a $1.8
billion non-cash impairment to property, plant and equipment in the
Potash segment.
Risk Factors
Coronavirus Disease (COVID-19) Pandemic
Epidemics, pandemics or other such crises or public health
concerns in regions of the world where we have operations or source
material or sell products, could impact or disrupt our business.
Specifically, the ongoing COVID-19 outbreak has resulted in travel
restrictions and extended shutdowns of certain businesses around
the world, as well as a deterioration of general economic
conditions. These or any governmental or other regulatory
developments or health concerns in countries in which we operate
could result in operational restrictions or social and economic
instability, or labor shortages. More specifically, there remains
uncertainty relating to the potential impact that COVID-19 could
eventually have on our business. It is still possible that COVID-19
could impact our operations, create supply chain disruptions and/or
limit our ability to timely sell or distribute our products in the
future which would negatively impact our business, financial
condition and operating results. It is also possible the fallout
from COVID-19 could negatively impact our customers, even though
the agriculture sector is classified as an essential service. Any
significant long-term downturn in the global economy or
agricultural markets could impact the Company’s access to capital
or credit ratings, or our customers’ access to liquidity, which
could increase our counterparty credit exposure.
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 have been changes to our internal control over financial
reporting during the quarter ended June 30, 2020. As part of our
digital transformation, we have implemented a new enterprise
resource planning system in the Retail segment resulting in a more
automated control environment for our Canadian and Loveland
Products operations. This change has materially affected our
internal control over financial reporting.
Also, with the acquisition of Ruralco and the integration of the
Australian Retail operations, the internal control over the
Australian Retail operations will come into scope of the Company’s
internal control over financial reporting for the fourth quarter of
2020. The acquisition of Ruralco was previously excluded from
management’s evaluation of the effectiveness of the Company’s
internal control over financial reporting as of December 31, 2019
due to the proximity of the acquisition to year-end. The
integration of the Australian Retail operations is expected to
materially affect our internal control over financial
reporting.
COVID-19 has also affected our business. During the quarter,
corporate office staff and many site administrative staff have
worked from home. This change has required certain processes and
controls that were previously done or documented manually to be
completed and retained in electronic form. This change has not
materially affected our internal control over financial
reporting.
Except as discussed herein, there have been no changes that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
Forward-Looking Statements
Certain statements and other information included and
incorporated by reference in this document 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”, “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 2020 annual
guidance, including expectations regarding our adjusted net
earnings per share, adjusted EBITDA and EBITDA by segment; capital
spending expectations for 2020; expectations regarding our
liquidity; expectations regarding performance of our operating
segments in 2020; our operating segment market outlooks and market
conditions for 2020, including the impact of COVID-19 thereon, and
the anticipated supply and demand for our products and services,
expected market and industry conditions with respect to crop
nutrient application rates, planted acres, crop mix, prices and the
impact of currency fluctuations and import and export volumes; and
acquisitions and divestitures, and the expected synergies
associated with various acquisitions, including timing thereof.
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 an 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 include, among other things, assumptions with
respect to our ability to successfully complete, integrate and
realize the anticipated benefits of our already completed and
future acquisitions, and that we will be able to implement our
standards, controls, procedures and policies at any acquired
businesses to realize the expected synergies; that future business,
regulatory and industry conditions will be within the parameters
expected by us, including with respect to prices, margins, demand,
supply, product availability, supplier agreements, availability and
cost of labor and interest, exchange and effective tax rates; the
completion of our expansion projects on schedule, as planned and on
budget; assumptions with respect to global economic conditions and
the accuracy of our market outlook expectations for 2020 and in the
future; our expectations regarding the impacts, direct and
indirect, of COVID-19 on our business, customers, business
partners, employees, supply chain, other stakeholders and the
overall economy; 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
acceptable terms; our ability to maintain investment grade ratings
and achieve our performance targets; and the receipt, on time, of
all necessary permits, utilities and project approvals with respect
to our expansion projects and that we will have the resources
necessary to meet the projects’ approach.
Events or circumstances that could cause actual results to
differ materially from those in the forward-looking statements
include, but are not limited to: general global economic, market
and business conditions; failure to complete announced and future
acquisitions or divestitures at all or on the expected terms and
within the expected timeline; climate change and weather
conditions, including impacts from regional flooding and/or drought
conditions; crop planted acreage, yield and prices; the supply and
demand and price levels for our products; governmental and
regulatory requirements and actions by governmental authorities,
including changes in government policy (including tariffs, trade
restrictions and climate change initiatives), government ownership
requirements, changes in environmental, tax and other laws or
regulations and the interpretation thereof; political risks,
including civil unrest, actions by armed groups or conflict and
malicious acts including terrorism; the occurrence of a major
environmental or safety incident; innovation and cybersecurity
risks related to our systems, including our costs of addressing or
mitigating such risks; regional natural gas supply restrictions;
counterparty and sovereign risk; delays in completion of
turnarounds at our major facilities; gas supply interruptions; any
significant impairment of the carrying value of certain assets;
risks related to reputational loss; certain complications that may
arise in our mining processes; the ability to attract, engage and
retain skilled employees and strikes or other forms of work
stoppages; the COVID-19 pandemic and its resulting effects on
economic conditions, restrictions imposed by public health
authorities or governments, fiscal and monetary responses by
governments and financial institutions and disruptions to global
supply chains; and other risk factors detailed from time to time in
Nutrien reports filed with the Canadian securities regulators and
the SEC in the United States.
The purpose of our expected adjusted net earnings per share,
adjusted EBITDA and EBITDA by segment guidance ranges are to assist
readers in understanding our expected financial results, and this
information may not be appropriate for other purposes.
Nutrien disclaims any intention or obligation to update or
revise any forward-looking statements in this document as a result
of new information or future events, except as may be required
under applicable Canadian securities legislation or applicable US
federal securities laws.
Terms and Definitions
For the definitions of certain financial and non-financial terms
used in this document, as well as a list of abbreviated company
names and sources, see the “Terms and Definitions” section of our
2019 Annual Report dated February 19, 2020. All references to per
share amounts pertain to diluted net earnings (loss) per share,
“n/m” indicates information that is not meaningful and all
financial data are stated in millions of US dollars, unless
otherwise noted.
About Nutrien
Nutrien is the world's largest provider of crop inputs and
services, playing a critical role in helping growers increase food
production in a sustainable manner. We produce and distribute 25
million tonnes of potash, nitrogen and phosphate products
world-wide. With this capability and our leading agriculture retail
network, we are well positioned to supply the needs of our
customers. We operate with a long-term view and are committed to
working with our stakeholders as we address our economic,
environmental and social priorities. The scale and diversity of our
integrated portfolio provides a stable earnings base, multiple
avenues for growth and the opportunity to return capital to
shareholders.
Selected financial data for download can be found in our data
tool at www.nutrien.com/investors/interactive-datatool
Such data is not incorporated by reference herein.
Nutrien will host a Conference Call on Tuesday, August 11,
2020 at 10:00 am Eastern Time.
- In order to expedite access to our conference call, each
participant will be required to pre-register for the event:
- Online:
http://www.directeventreg.com/registration/event/4497183.
- Via Phone: 1-888-869-1189 Conference ID 4497183.
- Once the registration is complete, a confirmation will be sent
providing the dial in number and both the Direct Event Passcode and
your unique Registrant ID to join this call. For security reasons,
please do not share your information with anyone else.
- Live Audio Webcast: Visit
www.nutrien.com/investors/events/2020-q2-earnings-conference-call
Appendix A - Selected Additional Financial Data
Selected Retail measures
Three Months Ended June
30
Six Months Ended June
30
2020
2019
2020
2019
Proprietary products margin as a
percentage of product line margin (%)
Crop
nutrients
24
23
26
23
Crop
protection products
42
44
42
43
Seed
47
42
44
42
All
products
29
29
28
28
Crop nutrients sales volumes (tonnes -
thousands)
North
America
5,098
4,913
6,524
6,052
International
1,024
704
1,623
1,144
Total
6,122
5,617
8,147
7,196
Crop nutrients selling price per
tonne
North
America
427
472
425
472
International
340
433
332
397
Total
413
467
406
460
Crop nutrients gross margin per
tonne
North
America
101
102
100
101
International
42
56
40
51
Total
91
96
88
93
Financial performance measures
2020 Target
2020 Actuals
Retail
EBITDA to sales (%) 1, 2
10
10
Retail
adjusted average working capital to sales (%) 1, 2
21
18
Retail
cash operating coverage ratio (%) 1, 2
61
61
Retail
normalized comparable store sales (%) 2
6
Retail
EBITDA per US selling location (thousands of US dollars) 1,
2
1,000
1,075
1
Rolling four quarters ended June 30, 2020.
2 See
the “Non-IFRS Financial Measures” section.
Nutrien Financial
As at June 30, 2020
(millions of US dollars)
Current
31-90 days
past due
>90 days
past due
Allowance 2
Total
Nutrien
Financial receivables 1
2,068
32
24
(16)
2,108
1 See
the “Non-IFRS Financial Measures” section.
2
Allowance for expected credit losses of receivables from
customers.
Selected Nitrogen measures
Three Months Ended June
30
Six Months Ended June
30
2020
2019
2020
2019
Sales volumes (tonnes -
thousands)
Fertilizer
2,173
1,882
3,584
2,900
Industrial and feed
1,017
1,265
2,134
2,486
Net sales (millions of US
dollars)
Fertilizer
510
555
828
839
Industrial and feed
186
247
398
509
Net selling price per tonne
Fertilizer
235
295
231
289
Industrial and feed
182
196
186
205
Production measures
Three Months Ended June
30
Six Months Ended June
30
2020
2019
2020
2019
Potash
production (Product tonnes - thousands)
3,346
3,285
6,381
6,784
Potash
shutdown weeks 1
22
15
34
16
Nitrogen
production (Ammonia tonnes - thousands) 2
1,619
1,599
3,066
3,234
Ammonia
operating rate (%) 3
97
91
94
92
Phosphate production (P2O5 tonnes -
thousands) 4
357
357
729
750
Phosphate P2O5 operating rate (%)
4
84
84
86
89
1
Represents weeks of full production shutdown, excluding the impact
of any periods of reduced operating rates and planned routine
annual maintenance shutdowns and announced workforce
reductions.
2 All
figures are provided on a gross production basis.
3
Excludes Trinidad and Joffre.
4
Excludes Redwater.
Appendix B - Non-IFRS Financial Measures
We use both IFRS and certain non-IFRS financial measures to
assess performance. Non-IFRS financial measures are numerical
measures of a company’s performance, that either exclude or include
amounts that are not normally excluded or included in the most
directly comparable measures calculated and presented in accordance
with IFRS. In evaluating these measures, investors should consider
that the methodology applied in calculating such measures may
differ among companies and analysts.
Management believes the non-IFRS financial measures provide
transparent and useful supplemental information to help investors
evaluate our financial performance, financial condition and
liquidity using the same measures as management. These non-IFRS
financial measures should not be considered as a substitute for, or
superior to, measures of financial performance prepared in
accordance with IFRS.
The following section outlines our non-IFRS financial measures,
their definitions and why management uses each measure. It includes
reconciliations to the most directly comparable IFRS measures.
Except as otherwise described herein, our non-IFRS financial
measures are calculated on a consistent basis from period to period
and are adjusted for specific items in each period, as applicable.
As non-recurring or unusual items arise, we generally exclude these
items in our calculation.
EBITDA and Adjusted EBITDA
Most directly comparable IFRS financial measure: Net
earnings (loss).
Definition: EBITDA is calculated as net earnings (loss)
before finance costs, income taxes and depreciation and
amortization. Adjusted EBITDA is calculated as net earnings (loss)
before finance costs, income taxes, depreciation and amortization,
Merger and related costs, certain acquisition and integration
related costs, share-based compensation, impairment of assets,
certain foreign exchange gain/loss (net of related derivatives),
and COVID-19 related expenses. In 2020, we have amended our
calculation of adjusted EBITDA to adjust for the impact of COVID-19
related expenses. There were no similar expenses in the comparative
period.
Why we use the measure and why it is useful to investors:
These are meaningful measures because they are not impacted by
long-term investment and financing decisions, but rather focus on
the performance of our day-to-day operations. These provide a
measure of our ability to service debt and to meet other payment
obligations.
Three Months Ended June
30
Six Months Ended June
30
(millions of US dollars)
2020
2019 1
2020
2019 1
Net earnings
765
858
730
899
Finance costs
139
143
272
266
Income tax expense
235
294
219
306
Depreciation and amortization
517
486
990
906
EBITDA
1,656
1,781
2,211
2,377
Merger and related costs
-
25
-
36
Acquisition and integration related
costs
18
-
28
-
Share-based compensation expense
(recovery)
12
59
(20)
116
Impairment of assets
-
-
-
33
COVID-19 related expenses
17
-
19
-
Foreign exchange loss (gain), net of
related derivatives
18
5
(9)
12
Adjusted EBITDA
1,721
1,870
2,229
2,574
1 In the fourth quarter of 2019, we
amended our calculations of adjusted EBITDA and restated the
comparative periods to exclude the impact of foreign exchange
gain/loss, net of related derivatives, as foreign exchange changes
are not indicative of our operating performance.
Adjusted EBITDA and Adjusted Net Earnings Per Share
Guidance
This guidance is provided on a non-IFRS basis. We do not provide
a reconciliation of such forward-looking measures to the most
directly comparable financial measures calculated and presented in
accordance with IFRS due to unknown variables and the uncertainty
related to future results. These unknown variables may include
unpredictable transactions of significant value that may be
inherently difficult to determine, without unreasonable efforts.
Guidance excludes the impacts of acquisition and integration
related costs, share-based compensation, certain foreign exchange
gain/loss (net of related derivatives), and COVID-19 related
expenses.
Adjusted Net Earnings and Adjusted Net Earnings Per
Share
Most directly comparable IFRS financial measure: Net
earnings (loss) and net earnings (loss) per share.
Definition: Net earnings (loss) before certain
acquisition and integration related costs, share-based
compensation, certain foreign exchange gain/loss (net of related
derivatives), and COVID-19 related expenses (including those
recorded under finance costs), net of tax. In 2020, we have amended
our calculation of adjusted net loss to adjust for the impact of
COVID-19 related expenses.
Why we use the measure and why it is useful to investors:
Focuses on the performance of our day-to-day operations excluding
the effects of non-operating items.
Three Months Ended June 30,
2020
Six Months Ended June 30,
2020
Per
Per
(millions of US dollars, except as
otherwise
Increases
Diluted
Increases
Diluted
noted)
(Decreases)
Post-Tax
Share
(Decreases)
Post-Tax
Share
Net earnings
765
1.34
730
1.28
Adjustments:
Acquisition and integration related
costs
18
14
0.03
28
22
0.04
Share-based compensation expense
(recovery)
12
9
0.02
(20)
(15)
(0.03)
COVID-19 related expenses
29
22
0.04
31
24
0.04
Foreign exchange loss (gain), net of
related derivatives
18
14
0.02
(9)
(7)
(0.01)
Adjusted net earnings
824
1.45
754
1.32
Free Cash Flow and Free Cash Flow Including Changes in
Non-Cash Operating Working Capital
Most directly comparable IFRS financial measure: Cash
from operations before working capital changes.
Definition: Cash from operations before working capital
changes less sustaining capital expenditures. We also calculate a
similar measure which includes changes in non-cash operating
working capital.
Why we use the measure and why it is useful to investors:
For evaluation of liquidity and financial strength, and as a
component of employee remuneration calculations. These are also
useful as an indicator of our ability to service debt, meet other
payment obligations and make strategic investments. These do not
represent residual cash flow available for discretionary
expenditures.
Three Months Ended June
30
Six Months Ended June
30
(millions of US dollars)
2020
2019
2020
2019
Cash from operations before working
capital changes
1,318
1,551
1,662
2,101
Sustaining capital expenditures
(145)
(243)
(308)
(411)
Free cash flow
1,173
1,308
1,354
1,690
Changes in non-cash operating working
capital
438
(379)
(432)
(1,444)
Free cash flow including changes in
non-cash operating working capital
1,611
929
922
246
Potash Cash Cost of Product Manufactured (“COPM”)
Most directly comparable IFRS financial measure: Cost of
goods sold (“COGS”) for the Potash segment.
Definition: Potash COGS for the period excluding
depreciation and amortization expense and inventory and other
adjustments divided by the production tonnes for the period.
Why we use the measure and why it is useful to investors:
To assess operational performance. Potash cash COPM excludes the
effects of production from other periods and long-term investment
decisions, supporting a focus on the performance of our day-to-day
operations.
Three Months Ended June
30
Six Months Ended June
30
(millions of US dollars, except as
otherwise noted)
2020
2019
2020
2019
Total COGS - Potash
310
317
575
589
Change in inventory
(40)
(19)
(32)
25
Other adjustments
(3)
(5)
(5)
(12)
COPM
267
293
538
602
Depreciation and amortization included in
COPM
(92)
(100)
(181)
(205)
Cash COPM
175
193
357
397
Production tonnes (tonnes - thousands)
3,346
3,285
6,381
6,784
Potash cash COPM per tonne
52
59
56
59
Ammonia Controllable Cash COPM
Most directly comparable IFRS financial measure: COGS for
the Nitrogen segment.
Definition: The total of COGS for the Nitrogen segment
excluding depreciation and amortization expense included in COGS,
cash COGS for products other than ammonia, other adjustments, and
natural gas and steam costs, divided by net ammonia production
tonnes.
Why we use the measure and why it is useful to investors:
To assess operational performance. Ammonia controllable cash COPM
excludes the effects of production from other periods, the costs of
natural gas and steam, and long-term investment decisions,
supporting a focus on the performance of our day-to-day
operations.
Three Months Ended June
30
Six Months Ended June
30
(millions of US dollars, except as
otherwise noted)
2020
2019
2020
2019
Total COGS - Nitrogen
645
672
1,226
1,183
Depreciation and amortization in COGS
(152)
(136)
(282)
(231)
Cash COGS for products other than
ammonia
(369)
(383)
(730)
(690)
Ammonia
Total cash COGS before other
adjustments
124
153
214
262
Other adjustments 1
(46)
(50)
(35)
(33)
Total cash COPM
78
103
179
229
Natural gas and steam costs
(53)
(68)
(119)
(159)
Controllable cash COPM
25
35
60
70
Production tonnes (net tonnes 2 -
thousands)
644
784
1,388
1,588
Ammonia controllable cash COPM per
tonne
40
45
43
44
1 Includes changes in inventory balances
and other adjustments.
2 Ammonia tonnes available for sale, as
not upgraded to other Nitrogen products.
Gross Margin Excluding Depreciation and Amortization Per
Tonne - Manufactured
Most directly comparable IFRS financial measure: Gross
margin.
Definition: Gross margin from manufactured products per
tonne less depreciation and amortization per tonne. Reconciliations
are provided in the “Segment Results” section.
Why we use the measure and why it is useful to investors:
Focuses on the performance of our day-to-day operations, which
excludes the effects of items that primarily reflect the impact of
long-term investment and financing decisions.
Retail EBITDA to Sales
Most directly comparable IFRS financial measure: Retail
EBITDA divided by Retail sales.
Definition: Retail EBITDA divided by Retail sales for the
last four rolling quarters.
Why we use the measure and why it is useful to investors:
To evaluate operational efficiency. A higher or lower percentage
represents increased or decreased efficiency, respectively.
Rolling four quarters ended
June 30, 2020
(millions of US dollars, except as
otherwise noted)
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Total
EBITDA
190
231
7
964
1,392
Sales
2,499
2,171
2,649
6,749
14,068
EBITDA to sales (%)
10
Nutrien Financial Receivables
Most directly comparable IFRS financial measure:
Receivables.
Definition: Nutrien Financial receivables are a
subcategory of US Retail receivables managed in the Nutrien
Financial portfolio, segregated predominately according to credit
quality. We manage our credit portfolio based on a combination of
customer credit metrics, past experience with the customer and by
managing exposure to any single customer.
Why we use the measure and why it is useful to investors:
Used by credit rating agencies and other users to evaluate overall
credit risk.
(millions of US dollars)
As at June 30, 2020
Nutrien Financial receivables
2,108
Non-Nutrien Financial receivables
3,604
Receivables
5,712
Retail Adjusted Average Working Capital to Sales
Most directly comparable IFRS financial measure: (Current
assets minus current liabilities for Retail) divided by Retail
sales.
Definition: Retail adjusted average working capital
divided by Retail adjusted sales for the last four rolling
quarters. We exclude in our calculations the working capital and
sales of certain acquisitions (such as Ruralco) during the first
year of acquisition. We have amended our calculation to adjust for
the sales of certain recently acquired businesses.
Why we use the measure and why it is useful to investors:
To evaluate operational efficiency. A lower or higher percentage
represents increased or decreased efficiency, respectively.
Rolling four quarters ended,
June 30, 2020
(millions of US dollars, except as
otherwise noted)
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Average/Total
Working capital
3,699
1,759
2,288
2,030
Working capital from certain recent
acquisitions
(75)
(138)
(108)
63
Adjusted working capital
3,624
1,621
2,180
2,093
2,380
Sales
2,499
2,171
2,649
6,749
Sales from certain recent acquisitions
-
(249)
(348)
(338)
Adjusted sales
2,499
1,922
2,301
6,411
13,133
Adjusted average working capital to
sales (%)
18
Retail Cash Operating Coverage Ratio
Most directly comparable IFRS financial measure: Retail
operating expenses as a percentage of Retail gross margin.
Definition: Retail operating expenses excluding
depreciation and amortization expense, divided by Retail gross
margin excluding depreciation and amortization expense in cost of
goods sold for the last four rolling quarters.
Why we use the measure and why it is useful to investors:
To understand the costs and underlying economics of our Retail
operations and to assess our Retail operating performance and
ability to generate free cash flow.
Rolling four quarters ended
June 30, 2020
(millions of US dollars, except as
otherwise noted)
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Total
Operating expenses 1
617
667
677
811
2,772
Depreciation and amortization in operating
expenses
(150)
(160)
(153)
(161)
(624)
Operating expenses excluding depreciation
and amortization
467
507
524
650
2,148
Gross margin
655
736
529
1,612
3,532
Depreciation and amortization in cost of
goods sold
2
2
2
2
8
Gross margin excluding depreciation and
amortization
657
738
531
1,614
3,540
Cash operating coverage ratio
(%)
61
1 Includes Retail expenses below gross
margin including selling expenses, general and administrative
expenses and other (income) expenses.
Retail EBITDA per US Selling Location
Most directly comparable IFRS financial measure: Retail
US EBITDA.
Definition: Total Retail US EBITDA for the last four
rolling quarters adjusted for acquisitions in those quarters,
divided by the number of US locations that have generated sales in
the last four rolling quarters adjusted for acquired locations.
Why we use the measure and why it is useful to investors:
To assess our US Retail operating performance. Includes locations
we have owned for more than 12 months.
Rolling four quarters ended
June 30, 2020
(millions of US dollars, except as
otherwise noted)
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Total
US EBITDA
142
143
(44)
766
1,007
Adjustments for acquisitions
(23)
US EBITDA adjusted for acquisitions
984
Number of US selling locations adjusted
for acquisitions
915
EBITDA per US selling location
(thousands of US dollars)
1,075
Retail Normalized Comparable Store Sales
Most directly comparable IFRS financial measure: Retail
sales from comparable base as a component of total Retail
sales.
Definition: Prior year comparable store sales adjusted
for published potash, nitrogen and phosphate benchmark prices and
foreign exchange rates used in the current year. We retain sales of
closed locations in the comparable base if the closed location is
in close proximity to an existing location, unless we plan to exit
the market area or are unable to economically or logistically serve
it. We do not adjust for temporary closures, expansions or
renovations of stores.
Why we use the measure and why it is useful to investors:
To evaluate sales growth by adjusting for fluctuations in commodity
prices and foreign exchange rates. Includes locations we have owned
for more than 12 months.
Six Months Ended June
30
(millions of US dollars, except as
otherwise noted)
2020
2019
Sales from comparable base
Current period
8,602
8,307
Prior period
8,551
8,372
Comparable store sales (%)
1
(1)
Prior period normalized for benchmark
prices and foreign exchange rates
8,104
8,587
Normalized comparable store sales
(%)
6
(3)
Condensed Consolidated Financial Statements
Unaudited in millions of US dollars except as otherwise
noted
Condensed Consolidated Statements of Earnings
Three Months Ended
Six Months Ended
June 30
June 30
Note
2020
2019
2020
2019
Note 1
Note 1
SALES
2
8,416
8,693
12,602
12,412
Freight, transportation and
distribution
237
215
449
386
Cost of goods sold
6,024
6,166
9,125
8,739
GROSS MARGIN
2,155
2,312
3,028
3,287
Selling expenses
763
690
1,405
1,228
General and administrative expenses
101
95
205
190
Provincial mining and other taxes
48
96
105
161
Share-based compensation expense
(recovery)
12
59
(20)
116
Impairment of assets
-
-
-
33
Other expenses
3
92
77
112
88
EARNINGS BEFORE FINANCE COSTS AND
INCOME TAXES
1,139
1,295
1,221
1,471
Finance costs
139
143
272
266
EARNINGS BEFORE INCOME TAXES
1,000
1,152
949
1,205
Income tax expense
4
235
294
219
306
NET EARNINGS
765
858
730
899
NET EARNINGS PER SHARE (“EPS”)
Basic
1.34
1.48
1.28
1.52
Diluted
1.34
1.47
1.28
1.52
Weighted average shares outstanding for
basic EPS
569,146,000
581,433,000
570,157,000
591,792,000
Weighted average shares outstanding for
diluted EPS
569,146,000
582,360,000
570,157,000
592,714,000
Condensed Consolidated Statements of Comprehensive
Income
Three Months Ended
Six Months Ended
June 30
June 30
(Net of related income taxes)
2020
2019
2020
2019
NET EARNINGS
765
858
730
899
Other comprehensive income (loss)
Items that will not be reclassified to net
earnings:
Net actuarial gain on defined benefit
plans
-
-
3
-
Net fair value loss on investments
(2)
(24)
(21)
(15)
Items that have been or may be
subsequently reclassified to net earnings:
Gain (loss) on currency translation of
foreign operations
194
16
(121)
35
Other
9
(6)
(18)
(2)
OTHER COMPREHENSIVE INCOME
(LOSS)
201
(14)
(157)
18
COMPREHENSIVE INCOME
966
844
573
917
(See Notes to the Condensed Consolidated
Financial Statements)
Condensed Consolidated Statements of Cash Flows
Three Months Ended
Six Months Ended
June 30
June 30
Note
2020
2019
2020
2019
Note 1
Note 1
OPERATING ACTIVITIES
Net earnings
765
858
730
899
Adjustments for:
Depreciation and amortization
517
486
990
906
Share-based compensation expense
(recovery)
12
59
(20)
116
Impairment of assets
-
-
-
33
Provision for deferred income tax
84
150
62
147
Other long-term liabilities and
miscellaneous
(60)
(2)
(100)
-
Cash from operations before working
capital changes
1,318
1,551
1,662
2,101
Changes in non-cash operating working
capital:
Receivables
(1,824)
(1,905)
(2,147)
(2,051)
Inventories
2,174
2,207
746
698
Prepaid expenses and other current
assets
247
369
1,013
824
Payables and accrued charges
(159)
(1,050)
(44)
(915)
CASH PROVIDED BY OPERATING
ACTIVITIES
1,756
1,172
1,230
657
INVESTING ACTIVITIES
Additions to property, plant and
equipment
(298)
(369)
(661)
(659)
Additions to intangible assets
(36)
(37)
(68)
(75)
Business acquisitions, net of cash
acquired
9
(116)
(2)
(173)
(489)
Proceeds from disposal of discontinued
operations, net of tax
-
45
-
55
Purchase of investments
(29)
(96)
(66)
(122)
Other
71
39
115
61
CASH USED IN INVESTING
ACTIVITIES
(408)
(420)
(853)
(1,229)
FINANCING ACTIVITIES
Transaction costs on long-term debt
(15)
(29)
(15)
(29)
(Repayment of) proceeds from short-term
debt, net
(4,290)
(45)
204
959
Proceeds from long-term debt
7
1,500
1,510
1,506
1,510
Repayment of long-term debt
7
(6)
(500)
(507)
(1,000)
Repayment of principal portion of lease
liabilities
(70)
(63)
(134)
(116)
Dividends paid
8
(258)
(256)
(514)
(520)
Repurchase of common shares
8
-
(1,132)
(160)
(1,930)
Issuance of common shares
-
15
-
17
CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES
(3,139)
(500)
380
(1,109)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND
CASH EQUIVALENTS
24
(9)
(13)
(17)
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS
(1,767)
243
744
(1,698)
CASH AND CASH EQUIVALENTS – BEGINNING
OF PERIOD
3,182
373
671
2,314
CASH AND CASH EQUIVALENTS – END OF
PERIOD
1,415
616
1,415
616
Cash and cash equivalents comprised
of:
Cash
1,106
378
1,106
378
Short-term investments
309
238
309
238
1,415
616
1,415
616
SUPPLEMENTAL CASH FLOWS
INFORMATION
Interest paid
153
128
249
242
Income taxes paid (received)
30
70
65
(45)
Total cash outflow for leases
96
88
188
164
(See Notes to the Condensed Consolidated
Financial Statements)
Condensed Consolidated Statements of Changes in Shareholders’
Equity
Accumulated Other Comprehensive
(Loss) Income (“AOCI”)
Net
Actuarial
Loss on
Net Fair
Gain on
Currency
Number of
Value
Defined
Translation
Common
Share
Contributed
Loss on
Benefit
of Foreign
Total
Retained
Total
Shares
Capital
Surplus
Investments
Plans 1
Operations
Other
AOCI
Earnings
Equity 2
BALANCE – DECEMBER 31, 2018
608,535,477
16,740
231
(7)
-
(251)
(33)
(291)
7,745
24,425
Net earnings
-
-
-
-
-
-
-
-
899
899
Other comprehensive (loss) income
-
-
-
(15)
-
35
(2)
18
-
18
Shares repurchased (Note 8)
(36,066,766)
(992)
-
-
-
-
-
-
(886)
(1,878)
Dividends declared
-
-
-
-
-
-
-
-
(244)
(244)
Effect of share-based compensation
including issuance of common shares
397,889
20
7
-
-
-
-
-
-
27
Transfer of net loss on sale of
investment
-
-
-
3
-
-
-
3
(3)
-
Transfer of net loss on cash flow
hedges
-
-
-
-
-
-
4
4
-
4
BALANCE – JUNE 30, 2019
572,866,600
15,768
238
(19)
-
(216)
(31)
(266)
7,511
23,251
BALANCE - DECEMBER 31, 2019
572,942,809
15,771
248
(29)
-
(204)
(18)
(251)
7,101
22,869
Net earnings
-
-
-
-
-
-
-
-
730
730
Other comprehensive (loss) income
-
-
-
(21)
3
(121)
(18)
(157)
-
(157)
Shares repurchased (Note 8)
(3,832,580)
(105)
(55)
-
-
-
-
-
-
(160)
Dividends declared
-
-
-
-
-
-
-
-
(514)
(514)
Effect of share-based compensation
including issuance of common shares
35,706
1
7
-
-
-
-
-
-
8
Transfer of net loss on cash flow
hedges
-
-
-
-
-
-
11
11
-
11
Transfer of net actuarial gain on defined
benefit plans
-
-
-
-
(3)
-
-
(3)
3
-
BALANCE – JUNE 30, 2020
569,145,935
15,667
200
(50)
-
(325)
(25)
(400)
7,320
22,787
1 Any amounts incurred during a period
were transferred to retained earnings at each period-end.
Therefore, no balance exists at the beginning or end of period.
2 All equity transactions were
attributable to common shareholders.
(See Notes to the Condensed Consolidated
Financial Statements)
Condensed Consolidated Balance Sheets
June 30
December 31
As at
Note
2020
2019
2019
Note 1
ASSETS
Current assets
Cash and cash equivalents
1,415
616
671
Receivables
5,712
5,200
3,542
Inventories
4,199
4,346
4,975
Prepaid expenses and other current
assets
444
383
1,477
11,770
10,545
10,665
Non-current assets
Property, plant and equipment
20,178
19,840
20,335
Goodwill
9
12,096
11,716
11,986
Other intangible assets
2,376
2,291
2,428
Investments
803
796
821
Other assets
578
518
564
TOTAL ASSETS
47,801
45,706
46,799
LIABILITIES
Current liabilities
Short-term debt
6
1,247
1,609
976
Current portion of long-term debt
7
-
503
502
Current portion of lease liabilities
228
208
214
Payables and accrued charges
7,306
5,483
7,437
8,781
7,803
9,129
Non-current liabilities
Long-term debt
7
10,032
8,558
8,553
Lease liabilities
841
770
859
Deferred income tax liabilities
4
3,212
3,082
3,145
Pension and other post-retirement benefit
liabilities
435
420
433
Asset retirement obligations and accrued
environmental costs
1,575
1,657
1,650
Other non-current liabilities
138
165
161
TOTAL LIABILITIES
25,014
22,455
23,930
SHAREHOLDERS’ EQUITY
Share capital
8
15,667
15,768
15,771
Contributed surplus
200
238
248
Accumulated other comprehensive loss
(400)
(266)
(251)
Retained earnings
7,320
7,511
7,101
TOTAL SHAREHOLDERS’ EQUITY
22,787
23,251
22,869
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY
47,801
45,706
46,799
(See Notes to the Condensed Consolidated
Financial Statements)
Notes to the Condensed Consolidated Financial
Statements
As at and for the Three and Six Months Ended June 30,
2020
NOTE 1 BASIS OF
PRESENTATION
Nutrien Ltd. (collectively with its subsidiaries, known as
“Nutrien”, “we”, “us”, “our” or the “Company”) is the world’s
largest provider of crop inputs and services. Nutrien plays a
critical role in helping growers around the globe increase food
production in a sustainable manner.
These unaudited interim condensed consolidated financial
statements (“interim financial statements”) are based on
International Financial Reporting Standards as issued by the
International Accounting Standards Board (“IFRS”) and have been
prepared in accordance with International Accounting Standard 34,
“Interim Financial Reporting”. The accounting policies and methods
of computation used in preparing these interim financial statements
are consistent with those used in the preparation of our 2019
annual consolidated financial statements. These interim financial
statements include the accounts of Nutrien and its subsidiaries;
however, they do not include all disclosures normally provided in
annual consolidated financial statements and should be read in
conjunction with our 2019 annual consolidated financial
statements.
Certain immaterial 2019 figures have been reclassified in the
condensed consolidated statements of earnings, condensed
consolidated statements of cash flows, condensed consolidated
balance sheets and segment information.
In management’s opinion, the interim financial statements
include all adjustments necessary to fairly present such
information in all material respects. Interim results are not
necessarily indicative of the results expected for any other
interim period or the fiscal year. On March 11, 2020, the World
Health Organization declared the novel strain of coronavirus
(“COVID-19”) a global pandemic. We have assessed our accounting
estimates and other matters that require the use of forecasted
financial information for the impact of the COVID-19 pandemic. The
assessment included estimates of the unknown future impacts of the
pandemic using information that is reasonably available at this
time. Accounting estimates and other matters assessed include the
allowance for expected credit losses of receivables from customers,
inventory valuation, goodwill and other long-lived assets,
financial assets, tax assets, pension obligation and assets, and
revenue recognition. Based on the current assessment, there was not
a material impact to these interim financial statements. As
additional information becomes available, the future assessment of
these estimates, including expectations about the severity,
duration and scope of the pandemic, could differ materially in
future reporting periods.
These interim financial statements were authorized by the audit
committee of the Board of Directors for issue on August 10,
2020.
NOTE 2 SEGMENT
INFORMATION
The Company has four reportable operating segments: Retail,
Potash, Nitrogen and Phosphate. The Retail segment distributes crop
nutrients, crop protection products, seed and merchandise, and
provides services directly to growers through a network of farm
centers in North and South America and Australia. The Potash,
Nitrogen and Phosphate segments are differentiated by the chemical
nutrient contained in the products that each produces. Sales
reported under our Corporate and Others segment primarily relates
to our non-core Canadian business.
Three Months Ended June 30,
2020
Corporate
Retail
Potash
Nitrogen
Phosphate
and Others
Eliminations
Consolidated
Sales
– third
party
6,739
617
755
285
20
-
8,416
–
intersegment
10
64
246
49
-
(369)
-
Sales
–
total
6,749
681
1,001
334
20
(369)
8,416
Freight,
transportation and distribution
-
93
148
57
-
(61)
237
Net
sales
6,749
588
853
277
20
(308)
8,179
Cost of
goods sold
5,137
310
645
249
18
(335)
6,024
Gross
margin
1,612
278
208
28
2
27
2,155
Selling
expenses
764
1
5
1
(8)
-
763
General
and administrative expenses
30
1
2
3
65
-
101
Provincial mining and other taxes
-
46
1
-
1
-
48
Share-based compensation expense
-
-
-
-
12
-
12
Other
expenses (income)
17
4
(11)
3
79
-
92
Earnings
(loss) before finance costs and income taxes
801
226
211
21
(147)
27
1,139
Depreciation and amortization
163
109
172
56
17
-
517
EBITDA
1
964
335
383
77
(130)
27
1,656
Assets –
at June 30, 2020
20,529
11,915
10,708
2,111
2,835
(297)
47,801
1 EBITDA
is calculated as net earnings (loss) before finance costs, income
taxes, and depreciation and amortization.
Three Months Ended June 30,
2019
Corporate
Retail
Potash
Nitrogen
Phosphate
and Others
Eliminations
Consolidated
Sales
– third party
6,503
873
857
424
36
-
8,693
– intersegment
9
47
235
60
-
(351)
-
Sales
– total
6,512
920
1,092
484
36
(351)
8,693
Freight, transportation and
distribution
-
72
126
66
-
(49)
215
Net sales
6,512
848
966
418
36
(302)
8,478
Cost of goods sold
5,072
317
672
428
36
(359)
6,166
Gross margin
1,440
531
294
(10)
-
57
2,312
Selling expenses
683
1
7
2
(3)
-
690
General and administrative expenses
27
-
5
1
62
-
95
Provincial mining and other taxes
-
91
-
1
4
-
96
Share-based compensation expense
-
-
-
-
59
-
59
Other expenses (income)
39
-
(23)
10
51
-
77
Earnings (loss) before finance costs and
income taxes
691
439
305
(24)
(173)
57
1,295
Depreciation and amortization
145
114
154
62
11
-
486
EBITDA
836
553
459
38
(162)
57
1,781
Assets – at December 31, 2019
19,990
11,696
10,991
2,198
2,129
(205)
46,799
Six Months Ended June 30,
2020
Corporate
Retail
Potash
Nitrogen
Phosphate
and Others
Eliminations
Consolidated
Sales
– third
party
9,379
1,164
1,401
611
47
-
12,602
–
intersegment
19
128
378
106
-
(631)
-
Sales
–
total
9,398
1,292
1,779
717
47
(631)
12,602
Freight,
transportation and distribution
-
187
248
127
-
(113)
449
Net
sales
9,398
1,105
1,531
590
47
(518)
12,153
Cost of
goods sold
7,257
575
1,226
569
43
(545)
9,125
Gross
margin
2,141
530
305
21
4
27
3,028
Selling
expenses
1,399
4
12
3
(13)
-
1,405
General
and administrative expenses
68
3
4
5
125
-
205
Provincial mining and other taxes
-
103
1
-
1
-
105
Share-based compensation recovery
-
-
-
-
(20)
-
(20)
Other
expenses (income)
21
5
(9)
9
86
-
112
Earnings
(loss) before finance costs and income taxes
653
415
297
4
(175)
27
1,221
Depreciation and amortization
318
205
322
119
26
-
990
EBITDA
971
620
619
123
(149)
27
2,211
Assets –
at June 30, 2020
20,529
11,915
10,708
2,111
2,835
(297)
47,801
Six Months Ended June 30,
2019
Corporate
Retail
Potash
Nitrogen
Phosphate
and Others
Eliminations
Consolidated
Sales
– third party
8,533
1,580
1,469
766
64
-
12,412
– intersegment
18
110
372
117
-
(617)
-
Sales
– total
8,551
1,690
1,841
883
64
(617)
12,412
Freight, transportation and
distribution
-
145
198
116
-
(73)
386
Net sales
8,551
1,545
1,643
767
64
(544)
12,026
Cost of goods sold
6,702
589
1,183
763
64
(562)
8,739
Gross margin
1,849
956
460
4
-
18
3,287
Selling expenses
1,215
5
14
3
(9)
-
1,228
General and administrative expenses
54
-
7
3
126
-
190
Provincial mining and other taxes
-
154
1
1
5
-
161
Share-based compensation expense
-
-
-
-
116
-
116
Impairment of assets
-
-
-
-
33
-
33
Other expenses (income)
51
(3)
(28)
13
55
-
88
Earnings (loss) before finance costs and
income taxes
529
800
466
(16)
(326)
18
1,471
Depreciation and amortization
281
214
267
122
22
-
906
EBITDA
810
1,014
733
106
(304)
18
2,377
Assets – at December 31, 2019
19,990
11,696
10,991
2,198
2,129
(205)
46,799
Presented below is revenue from contracts with customers
disaggregated by product line or geographic location for each
reportable segment to show how the nature, amount, timing and
uncertainty of revenue and cash flows are affected by economic
factors.
Three Months Ended
Six Months Ended
June 30
June 30
2020
2019
2020
2019
Retail sales by product line
Crop nutrients
2,527
2,626
3,312
3,313
Crop protection products
2,436
2,286
3,446
3,030
Seed
1,141
1,197
1,535
1,553
Merchandise
253
144
469
252
Services and other
392
259
636
403
6,749
6,512
9,398
8,551
Potash sales by geography
Manufactured product
North America
325
329
644
647
Offshore 1
356
591
648
1,042
Other potash and purchased products
-
-
-
1
681
920
1,292
1,690
Nitrogen sales by product line
Manufactured product
Ammonia
291
354
447
541
Urea
304
331
566
562
Solutions, nitrates and sulfates
233
229
429
420
Other nitrogen and purchased products
173
178
337
318
1,001
1,092
1,779
1,841
Phosphate sales by product line
Manufactured product
Fertilizer
185
307
406
547
Industrial and feed
117
116
237
240
Other phosphate and purchased products
32
61
74
96
334
484
717
883
1 Relates to Canpotex Limited (“Canpotex”)
(Note 11).
NOTE 3 OTHER EXPENSES
(INCOME)
Three Months Ended
Six Months Ended
June 30
June 30
2020
2019
2020
2019
Merger and related costs
-
25
-
36
Acquisition and integration related
costs
18
-
28
-
Foreign exchange loss (gain), net of
related derivatives
18
5
(13)
12
Earnings of equity-accounted investees
(13)
(30)
(23)
(47)
Bad debts
21
29
27
35
COVID-19 related expenses
17
-
19
-
Other expenses
31
48
74
52
92
77
112
88
NOTE 4 INCOME
TAXES
A separate estimated average annual effective income tax rate
was determined for each taxing jurisdiction and applied
individually to the interim period pre-tax earnings for each
jurisdiction.
Three Months Ended
Six Months Ended
June 30
June 30
2020
2019
2020
2019
Income tax expense
235
294
219
306
Actual effective tax rate on earnings
(%)
25
26
24
25
Actual effective tax rate including
discrete items (%)
24
26
23
25
Discrete tax adjustments that impacted the
tax rate
(13)
(11)
(11)
4
Income tax balances within the condensed consolidated balance
sheets were comprised of the following:
Income Tax Assets and Liabilities
Balance Sheet Location
As at June 30, 2020
As at December 31, 2019
Income tax assets
Current
Receivables
43
104
Non-current
Other assets
71
36
Deferred income tax assets
Other assets
265
249
Total income tax assets
379
389
Income tax liabilities
Current
Payables and accrued charges
89
43
Non-current
Other non-current liabilities
43
44
Deferred income tax liabilities
Deferred income tax liabilities
3,212
3,145
Total income tax liabilities
3,344
3,232
NOTE 5 FINANCIAL
INSTRUMENTS
Fair Value
Estimated fair values for financial instruments are designed to
approximate amounts for which the instruments could be exchanged in
a current arm’s-length transaction between knowledgeable, willing
parties. The valuation policies and procedures for financial
reporting purposes are determined by our finance department. There
have been no changes to our valuation methods presented in Note 12
of the 2019 annual consolidated financial statements and those
valuation methods have been applied in these interim financial
statements.
The following table presents our fair value hierarchy for
financial instruments carried at fair value on a recurring basis or
measured at amortized cost:
June 30, 2020
December 31, 2019
Carrying
Carrying
Financial assets (liabilities) measured
at
Amount
Level 1 1
Level 2 1
Amount
Level 1 1
Level 2 1
Fair value on a recurring basis
Cash and cash equivalents
1,415
-
1,415
671
-
671
Derivative instrument assets
24
-
24
5
-
5
Other current financial assets -
marketable securities 2
152
22
130
193
27
166
Investments at FVTOCI 3
139
139
-
161
161
-
Derivative instrument liabilities
(31)
-
(31)
(33)
-
(33)
Amortized cost
Current portion of long-term debt
Notes and debentures
-
-
-
(494)
-
(503)
Fixed and floating rate debt
-
-
-
(8)
-
(8)
Long-term debt
Notes and debentures
(10,001)
(8,715)
(2,392)
(8,528)
(1,726)
(7,440)
Fixed and floating rate debt
(31)
-
(31)
(25)
-
(25)
1 During the period ended June 30, 2020,
there were no transfers between Level 1 and Level 2 for financial
instruments measured at fair value on a recurring basis.
2 Marketable securities consist of equity
and fixed income securities. We determine the fair value of equity
securities based on the bid price of identical instruments in
active markets. We value fixed income securities using quoted
prices of instruments with similar terms and credit risk.
3 Investments at fair value through other
comprehensive income (“FVTOCI”) are comprised of shares in Sinofert
Holdings Ltd.
NOTE 6 SHORT-TERM
DEBT
Short-term debt was comprised of:
Rate of Interest (%)
Total Facility Limit as at June
30, 2020
As at June 30, 2020
As at December 31, 2019
Credit facilities
Unsecured revolving term credit
facility
NIL
4,500
-
-
Uncommitted revolving demand facility
NIL
500
-
-
Other credit facilities 1
0.9 - 11.8
640
242
326
Commercial paper
0.4 - 2.8
1,005
650
1,247
976
1 Other credit facilities are unsecured
and consist of South American facilities with debt of $184
(December 31, 2019 – $149) and interest rates ranging from 2.4
percent to 11.8 percent, Australian facilities with debt of $27
(December 31, 2019 – $157) and an interest rate of 1.3 percent, and
Other facilities with debt of $31 (December 31, 2019 – $20) and
interest rates ranging from 0.9 percent to 4.0 percent.
The amount available under the commercial paper program is
limited to the availability of backup funds under the $4,500
unsecured revolving term credit facility and excess cash invested
in highly liquid securities.
During the six months ended June 30, 2020, we entered into new
committed revolving credit facilities totaling approximately
$1,500, all with the same principal covenants and events of default
as our existing credit facilities. We closed these credit
facilities after the issuance of the new notes as described in Note
7.
NOTE 7 LONG-TERM
DEBT
The following tables summarize our long-term debt issuances and
repayment activities during the six months ended June 30, 2020:
Rate of interest (%)
Maturity
Amount
Notes
issued 2020
1.900
May 13, 2023
500
Notes
issued 2020
2.950
May 13, 2030
500
Notes
issued 2020
3.950
May 13, 2050
500
1,500
The notes issued in 2020 are unsecured, rank equally with our
existing unsecured notes, and have no sinking fund requirements
prior to maturity. Each series is redeemable and provides for
redemption prior to maturity, at our option, at specified
prices.
Rate of interest (%)
Maturity
Amount
Notes
repaid 2020
4.875
March 30, 2020
500
In March 2020, we filed a base shelf prospectus in Canada and
the US qualifying the issuance of up to $5,000 of common shares,
debt and other securities during a period of 25 months from March
16, 2020. Issuance of securities requires us to file a prospectus
supplement and is subject to availability of funding in capital
markets. During the six months ended June 30, 2020, we filed a
prospectus supplement to issue $1,500 of notes, as described
above.
NOTE 8 SHARE
CAPITAL
Share repurchase programs
Board of Directors
Approval
Expiry
Maximum Shares for
Repurchase
2019
Normal Course Issuer Bid 1
February 20, 2019
February 26, 2020
42,164,420
2020
Normal Course Issuer Bid 2
February 18, 2020
February 26, 2021
28,572,458
1 The
2019 normal course issuer bid permitted the repurchase of up to 7
percent of our outstanding common shares for cancellation. As of
the expiry date, we had repurchased 33,256,668 of the maximum
shares for repurchase.
2 The
2020 normal course issuer bid permits the repurchase of up to 5
percent of our outstanding common shares for cancellation and can
expire earlier than the date above if we acquire the maximum number
of common shares allowable or otherwise decide not to make any
further repurchases.
Purchases under the normal course issuer bids were, or may be,
made through open market purchases at market prices as well as by
other means permitted by applicable securities regulatory
authorities, including private agreements.
The following table summarizes our share repurchase activities
during the period:
Three Months Ended
Six Months Ended
June 30
June 30
2020
2019
2020
2019
Number of common shares repurchased for
cancellation
-
20,590,564
3,832,580
36,066,766
Average price per share (US dollars)
-
52.27
41.96
52.07
Total cost
-
1,076
160
1,878
Dividends declared
We declared dividends per share of $0.45 (2019 – $0.43) during
the three months ended June 30, 2020, payable on July 17, 2020 to
shareholders of record on June 30, 2020 and $0.90 (2019 – $0.43)
during the six months ended June 30, 2020.
Subsequent to June 30, 2020, we declared a quarterly dividend of
$0.45 per share payable on October 16, 2020 to shareholders of
record on September 30, 2020. The total estimated dividend to be
paid is $256.
NOTE 9 BUSINESS
ACQUISITIONS
Ruralco
On September 30, 2019, we acquired Ruralco Holdings Limited
(“Ruralco”) for a purchase price, net of cash and cash equivalents
acquired, of $330. We have engaged independent valuation experts to
assist in determining the fair value of certain assets acquired and
liabilities assumed.
Other Acquisitions
During the six months ended June 30, 2020, we acquired several
businesses, the largest of which was Tec Agro Group, a leading
agriculture retailer in Brazil. The acquired businesses include 29
Retail locations in North and South America and Australia. Expected
benefits of the acquisitions include expansion of geographical
coverage for the sale of crop input products and services, an
increased customer base and workforce and synergies between Nutrien
and the acquired businesses.
The preliminary values allocated to the acquired assets and
assumed liabilities based upon fair values were as follows:
June 30, 2020
Ruralco (Estimate)
Other Acquisitions
Preliminary
Adjustments
Revised Fair Value
Receivables
318
-
318
1
75
Inventories
115
-
115
62
Prepaid expenses and other
current assets
8
-
8
2
Property, plant and equipment
136
-
136
40
Goodwill
189
18
207
147
Other intangible assets
210
-
210
-
Investments
15
-
15
-
Other assets
16
-
16
1
Total assets
1,007
18
1,025
327
Short-term debt
167
-
167
36
Payables and accrued charges
342
21
363
108
Lease liabilities, including
current portion
110
-
110
-
Deferred income tax
liabilities
45
(3)
42
1
Other non-current liabilities
13
-
13
9
Total liabilities
677
18
695
154
Total consideration
330
-
330
173
1 Includes receivables from
customers with gross contractual amounts of $260, of which $5 are
considered to be uncollectible.
The preliminary value relating to Ruralco, included in the above
table, was previously reported in our first quarter financial
statements. The purchase price allocation is not final as we
continue to obtain and verify information required to determine the
fair value of certain assets and liabilities and the amount of
deferred income taxes arising on their recognition. We estimated
the preliminary purchase price allocation as of the date of the
acquisition based on information that was available and continue to
adjust those estimates as new information that existed at the date
of acquisition becomes available. We will finalize the amounts
recognized by September 30, 2020. All measurement period
adjustments were offset against goodwill.
Financial information related to business acquisitions is as
follows:
Pro Forma 1
Other Acquisitions
Sales
260
EBIT
19
1
Estimated annual sales and earnings before finance costs and income
taxes (“EBIT”) if acquisitions occurred at January 1,
2020.
Three Months Ended
Six Months Ended
June 30, 2020
June 30, 2020
From date of acquisition
Other Acquisitions
Other Acquisitions
Sales
30
40
EBIT
-
-
NOTE 10 SEASONALITY
Seasonality in our business results from increased demand for
products during planting season. Crop input sales are generally
higher in spring and fall application seasons. Crop input
inventories are normally accumulated leading up to each application
season. The results of this seasonality have a corresponding effect
on receivables from customers and rebates receivables, inventories,
prepaid expenses and other current assets and trade payables. Our
short-term debt also fluctuates during the year to meet working
capital needs. Our cash collections generally occur after the
application season is complete, while customer prepayments made to
us are typically concentrated in December and January and inventory
prepayments paid to our vendors are typically concentrated in the
period from November to January. Feed and industrial sales are more
evenly distributed throughout the year.
NOTE 11 RELATED PARTY
TRANSACTIONS
We sell potash from our Canadian mines for use outside Canada
and the United States exclusively to Canpotex. Sales are at
prevailing market prices and are settled on normal trade terms.
Sales to Canpotex for the three months ended June 30, 2020 were
$356 (2019 – $591) and the six months ended June 30, 2020 were $648
(2019 – $1,042). At June 30, 2020, $308 (December 31, 2019 – $194)
was owing from Canpotex.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200810005794/en/
Investor Relations: Richard Downey Vice President,
Investor Relations (403) 225-7357 Investors@nutrien.com
Tim Mizuno Director, Investor Relations (306) 933-8548
Media Relations: Will Tigley Manager, Communications -
CEO and Corporate Functions (403) 225-7310
Contact us at: www.nutrien.com
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