All amounts are in US dollars except as otherwise noted
Nutrien Ltd. (TSX and NYSE: NTR) announced today its 2020 third
quarter results, with a net loss of $587 million ($1.03 diluted
loss per share), which includes a non-cash impairment of $823
million, primarily related to our Phosphate operations.
Third-quarter adjusted net earnings were $0.23 per share (adjusted
EBITDA was $670 million), excluding the impairment. Adjusted net
earnings includes a net tax benefit of $48 million ($0.08 per
diluted share) related primarily to recoveries of prior year taxes
due to US legislative changes. Adjusted net earnings per share and
adjusted EBITDA (consolidated), together with the related guidance
and potash cash cost of product manufactured are non-IFRS financial
measures. See the “Non-IFRS Financial Measures” section for further
information.
“Nutrien delivered another quarter of solid operating results
with strong fertilizer sales volumes and exceptional growth of
orders through our digital agriculture platform, surpassing $1
billion of sales. Market conditions are improving around the world
with higher crop and fertilizer prices, lower expected inventories
and strong demand for crop inputs as we finish the year and enter
2021,” commented Chuck Magro, Nutrien’s President and CEO.
Highlights:
- In the third quarter of 2020, we recognized a non-cash
impairment of $823 million associated primarily with our Phosphate
assets related to a less favorable long-term outlook for phosphate
prices and expected global supply imbalance.
- Retail delivered 13 percent higher adjusted EBITDA in the first
nine months of 2020, over the same period in 2019 as a result of
double-digit growth in sales and gross margin. Adjusted EBITDA in
the third quarter of 2020 was 15 percent lower due to elevated
applications in the same period last year caused by the timing of
the growing season, and was further impacted by lower insecticide
and fungicide applications this quarter as a result of lower than
expected US acreage and dry conditions. Total sales through our
leading digital retail platform exceeded $1.0 billion in the first
nine months of 2020, more than double our annual goal of $500
million. Digital sales in the first nine months of 2020 accounted
for 43 percent of North American sales of products that were
available for purchase online.
- Potash sales volumes in the third quarter and first nine months
of 2020 were higher compared to the same periods in 2019, and
Nutrien is fully committed on offshore potash sales volumes and
well subscribed domestically for the remainder of the year. Potash
adjusted EBITDA was down 19 percent and 33 percent in the third
quarter and first nine months of 2020 respectively, 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 $53
per tonne in the third quarter, the second lowest on record and $9
per tonne lower than in the third quarter of 2019.
- Nitrogen adjusted EBITDA was 21 percent lower in the third
quarter and 17 percent lower in the first nine months of 2020
compared to the same periods last year due to lower net realized
selling prices and lower industrial sales volumes. We delivered
higher sales volumes, lower cost of goods sold and higher ammonia
utilization rates (93 percent versus 90 percent) in the first nine
months of 2020 compared to the same period last year. In the third
quarter, we also made the decision to indefinitely close the
smallest of our four ammonia plants in Trinidad. The closure is
expected to enhance the competitiveness at that site, and we are
now running three plants at normal production levels.
- Nutrien’s full-year 2020 adjusted net earnings per share and
adjusted EBITDA guidance range is narrowed to $1.60 to $1.85 per
share and $3.5 billion to $3.7 billion, respectively due to
increased visibility in each of our business units to the end of
the year.
Management’s Discussion and Analysis
The following management’s discussion and analysis (“MD&A”)
is the responsibility of management and is dated as of November 2,
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 nine months ended September 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 noted. This
MD&A contains certain non-IFRS financial measures and
forward-looking statements which are described in the “Non-IFRS
Financial Measures” and the “Forward-Looking Statements” sections,
respectively.
Market Outlook
Agriculture and Retail
- Key crop prices have increased, driven by significant
improvements in supply and demand fundamentals. Higher crop prices
have boosted North American grower sentiment.
- The North American harvest progressed at a pace well ahead of
the past two years when timing was impacted by late maturing crops
and weather delays. This is expected to provide a wider window for
growers to plan and apply fall fertilizer compared to the past few
fall seasons.
- Strong Brazilian crop prices and margins provided an incentive
to boost summer soybean and Safrinha corn planting. We expect the
planted area of these crops to increase by approximately 4 percent
and 6 percent respectively. Planting has started slower than normal
as a result of dry weather, but we expect a long planting window
and high crop prices will motivate farmers to plant.
Crop Nutrient Markets
- Global potash demand has been strong in 2020 and we continue to
expect global potash shipments and consumption to increase by
approximately 2 million tonnes from 2019 levels. As a result, we
maintain our 2020 shipment forecast between 65 and 67 million
tonnes.
- The prospect of a robust fall application season in North
America has supported strong retail-level demand. We expect that
potash delivered in North America in the fall of 2020 will largely
be applied to ground and that channel inventories will be lower at
the end of 2020 compared to recent years. We also expect that
strong fall applications in China, driven by historically high crop
prices in combination with seasonal increases in compound NPK
production, will support strong potash consumption in the remainder
of 2020. Meanwhile, demand in India will continue to be supported
by the favorable growing conditions and increased minimum support
prices for crops.
- Global urea prices have been relatively stable as Indian import
tenders have pulled significant volumes out of the trade market.
The pace of Chinese urea exports has recently increased, along with
Indian demand, but remains down around 10 percent in the first nine
months of the year. North American urea prices are currently
discounted relative to the rest of the world, which is seasonally
normal, but offshore imports are down more than 25 percent from
July to September and prices need to increase significantly to
reach import parity. Global ammonia prices have increased driven by
improved industrial demand, higher global gas prices and production
curtailments in East Asia and Trinidad.
- Global phosphate prices have trended higher due to strong
demand in India and Brazil and trade flow changes related to
countervailing duty investigations in the US. We continue to
believe the phosphate market is fundamentally oversupplied which
could limit a long-term price recovery.
Financial Outlook and Guidance
Based on market factors detailed above, we are narrowing our
2020 adjusted net earnings guidance to $1.60 to $1.85 per share
(from $1.50 to $1.90 per share previously) and adjusted EBITDA
guidance to $3.5 to $3.7 billion (from $3.5 to $3.8 billion
previously). In the third quarter of 2020, we revised the measure
with which we evaluate our segments from EBITDA to adjusted EBITDA.
This has not had an impact on our segment guidance numbers
below.
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
$
1.60
$
1.85
Adjusted EBITDA (billions) 2
$
3.5
$
3.7
Adjusted Retail EBITDA (billions)
$
1.37
$
1.42
Adjusted Potash EBITDA (billions)
$
1.1
$
1.2
Adjusted Nitrogen EBITDA (billions)
$
1.05
$
1.10
Adjusted Phosphate EBITDA (millions)
$
200
$
250
Potash sales tonnes (millions) 3
12.2
12.5
Nitrogen sales tonnes (millions) 3
10.9
11.1
Depreciation and amortization
(billions)
$
1.85
$
1.95
Effective tax rate
11
%
13
%
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 September
30
Nine Months Ended September
30
(millions of US dollars)
2020
2019
% Change
2020
2019
% Change
Sales
4,205
4,169
1
16,807
16,581
1
Freight, transportation and
distribution
204
210
(3)
653
596
10
Cost of goods sold
3,004
2,819
7
12,129
11,558
5
Gross margin
997
1,140
(13)
4,025
4,427
(9)
Expenses
1,719
812
112
3,526
2,628
34
Net (loss) earnings
(587)
141
n/m
143
1,040
(86)
Adjusted EBITDA 1
670
787
(15)
2,899
3,361
(14)
Free cash flow ("FCF") 1
280
329
(15)
1,634
2,019
(19)
FCF including changes in non-cash
operating working capital 1
(888)
333
n/m
34
579
(94)
1 See the "Non-IFRS Financial Measures"
section.
Our third-quarter and first-nine months net (loss) earnings for
2020 were negatively impacted primarily by a non-cash impairment of
assets related primarily to our Phosphate operations. Adjusted
EBITDA decreased in the same periods due to significantly lower
crop nutrient prices that more than offset strong Retail earnings
growth and greater operational efficiencies. The COVID-19 pandemic
had limited impact on our business during the periods.
Segment Results
Our discussion of segment results set out on the following pages
is a comparison of the results for the three and nine months ended
September 30, 2020 to the results for the three and nine months
ended September 30, 2019, respectively, unless otherwise noted. In
the third quarter of 2020, we revised the measure with which we
evaluate our segments from EBITDA to Adjusted EBITDA. Adjusted
EBITDA provides a better indication of the segments performance as
it excludes the impact of impairments and other costs that are
centrally managed by our corporate function. We have presented
adjusted EBITDA for the comparative periods.
Retail
Three Months Ended September
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
780
769
1
179
175
2
23
23
Crop protection products
1,328
1,318
1
256
303
(16)
19
23
Seed
103
60
72
27
17
59
26
28
Merchandise
234
135
73
37
22
68
16
16
Services and other
275
217
27
162
138
17
59
64
2,720
2,499
9
661
655
1
24
26
Cost of goods sold
2,059
1,844
12
Gross margin
661
655
1
Expenses 1
669
617
8
Earnings (loss) before finance costs and
taxes ("EBIT")
(8)
38
n/m
Depreciation and amortization
170
152
12
EBITDA / Adjusted EBITDA
162
190
(15)
1 Includes selling expenses of $669
million (2019 – $601 million).
Nine Months Ended September
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
4,092
4,082
-
894
846
6
22
21
Crop protection products
4,774
4,348
10
960
892
8
20
21
Seed
1,638
1,613
2
305
276
11
19
17
Merchandise
703
387
82
116
65
78
17
17
Services and other
911
620
47
527
425
24
58
69
12,118
11,050
10
2,802
2,504
12
23
23
Cost of goods sold
9,316
8,546
9
Gross margin
2,802
2,504
12
Expenses 1
2,157
1,937
11
EBIT
645
567
14
Depreciation and amortization
488
433
13
EBITDA / Adjusted EBITDA
1,133
1,000
13
1 Includes selling expenses of $2,068
million (2019 – $1,816 million).
- Adjusted EBITDA was lower in the third quarter of 2020
due primarily to the sales mix and use of crop protection products
compared to the delayed season last year which pushed sales into
the third quarter in North America. US applications this year were
also negatively impacted by lower than expected planted acreage and
weather-related events. Adjusted EBITDA in the first nine months of
2020 increased significantly from the same period in 2019 due to
strong growth in revenue and gross margins across most product
lines. The increase was primarily due to organic growth, aided by
more normal weather conditions in the US, as well as from the
benefit of acquisitions made over the past year. Total selling
expenses increased in the periods due primarily to acquisitions,
including the acquisition of Ruralco Holdings Limited (“Ruralco”).
Selling expenses as a percentage of sales were also impacted by
lower crop nutrient and seed prices in 2020, which resulted in
lower associated sales. Total US selling expenses, excluding
depreciation and amortization, were down this quarter relative to
the third quarter of last year.
- Crop nutrients sales were higher in the third quarter
and the first nine months of 2020, compared to the same periods in
2019 as higher sales volumes more than offset the impact of lower
selling prices. Third quarter sales volumes were 10 percent higher
than last year, due to strong applications in Australia which
offset lower sales volumes in the US. For the first nine months of
2020, total sales volumes were up 12 percent, with increases across
all geographies. Gross margin percentage was stable in the third
quarter but higher in the nine-month period due to a larger
proportion of higher-margin proprietary product sales.
- Crop protection products sales in the third quarter and
first nine months of 2020 were higher compared to the same periods
in 2019, due to acquisitions and continued market share growth.
Gross margin percentage decreased in the periods due to the impact
of recent acquisitions, including that of Ruralco, which impacted
the mix of product sold. There was also a slight reduction in use
of higher margin discretionary products such as fungicides and
insecticides in the US market due to a combination of weather and
market factors.
- Seed sales in the third quarter and first nine months of
2020 increased from the same period last year due to strong growth
in all key markets, including contributions from the Tec Agro Group
acquisition in Brazil and Ruralco in Australia. Gross margin
percentage decreased in the third quarter of 2020 primarily due to
the Ruralco acquisition, while US seed margins in the third quarter
strengthened year over year. Gross margin percentage increased in
the first nine months of 2020 due to higher margins achieved on
soybean and corn sales and fewer replanting discounts compared to
the same periods in 2019.
- Merchandise sales increased in third quarter and first
nine months of 2020 due to benefits from the acquisition of the
Ruralco business in Australia. Gross margin percentage was stable
in the periods.
- Services and other sales were higher in the third
quarter and first nine months of 2020 due to increased
contributions from our Australian business. Sales and gross profit
in the US declined in the third quarter but margins were slightly
stronger. Gross margin percentage decreased in the periods due to
product mix changes resulting primarily from the acquisition of
Ruralco.
Potash
Three Months Ended September
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
252
330
(24)
1,426
1,438
(1)
176
229
(23)
Offshore
339
379
(11)
2,252
1,823
24
151
208
(27)
591
709
(17)
3,678
3,261
13
161
218
(26)
Cost of goods sold
303
303
-
83
94
(12)
Gross margin - manufactured
288
406
(29)
78
124
(37)
Gross margin - other 1
-
-
-
Depreciation and amortization
34
34
-
Gross margin - total
288
406
(29)
Gross margin excluding depreciation
Expenses 2
84
86
(2)
and amortization - manufactured 3
112
158
(29)
EBIT
204
320
(36)
Potash cash cost of product
Depreciation and amortization
124
110
13
manufactured 3
53
62
(15)
EBITDA
328
430
(24)
Impairment of assets
22
-
n/m
Adjusted EBITDA
350
430
(19)
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 $58 million (2019 – $83 million).
3 See the "Non-IFRS Financial Measures"
section.
Nine Months Ended September
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
709
832
(15)
3,774
3,389
11
188
245
(23)
Offshore
987
1,421
(31)
6,396
6,247
2
154
228
(32)
1,696
2,253
(25)
10,170
9,636
6
167
234
(29)
Cost of goods sold
878
892
(2)
87
93
(6)
Gross margin - manufactured
818
1,361
(40)
80
141
(43)
Gross margin - other 1
-
1
(100)
Depreciation and amortization
32
34
(6)
Gross margin - total
818
1,362
(40)
Gross margin excluding depreciation
Expenses 2
199
242
(18)
and amortization - manufactured
112
175
(36)
EBIT
619
1,120
(45)
Potash cash cost of product
Depreciation and amortization
329
324
2
manufactured
55
60
(8)
EBITDA
948
1,444
(34)
Impairment of assets
22
-
n/m
Adjusted EBITDA
970
1,444
(33)
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 $161 million (2019 – $237 million).
- Adjusted EBITDA decreased in the third quarter and first
nine months of 2020 due to lower global potash prices. This was
partially offset by higher sales volumes and lower cost of goods
sold per tonne.
- Sales volumes in the third quarter of 2020 were the
second highest of any quarter on record while sales volumes in the
first nine months of 2020 were the highest on record. Higher sales
volumes relative to the same periods last year were supported by
strong offshore demand, higher US planted acreage and improved crop
fundamentals.
- Net realized selling price decreased in the third
quarter and first nine months of 2020, due to pressure in global
benchmark prices.
- Cost of goods sold per tonne decreased in both periods
due to production efficiency gains and the deferral of maintenance
projects related to COVID-19 precautions. These factors also
lowered the potash cash cost of product manufactured in the third
quarter and the first nine months of 2020.
Canpotex Sales by Market
(percentage of sales volumes, except
as
Three Months Ended September
30
Nine Months Ended September
30
otherwise noted)
2020
2019
% Change
2020
2019
% Change
Latin America
36
44
(18)
33
31
6
Other Asian markets 1
20
21
(5)
25
27
(7)
China
23
16
44
22
23
(4)
India
14
12
17
13
11
18
Other markets
7
7
-
7
8
(13)
100
100
100
100
1 All Asian markets except China and
India.
Nitrogen
Three Months Ended September
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
105
144
(27)
546
715
(24)
193
203
(5)
Urea
193
221
(13)
766
726
6
251
304
(17)
Solutions, nitrates and sulfates
143
168
(15)
1,091
1,081
1
131
155
(15)
441
533
(17)
2,403
2,522
(5)
184
211
(13)
Cost of goods sold
392
416
(6)
164
165
(1)
Gross margin - manufactured
49
117
(58)
20
46
(57)
Gross margin - other 1
9
16
(44)
Depreciation and amortization
55
50
10
Gross margin - total
58
133
(56)
Gross margin excluding depreciation
Expenses
21
13
62
and amortization - manufactured
75
96
(22)
EBIT
37
120
(69)
Ammonia controllable cash cost of
Depreciation and amortization
131
127
3
product manufactured 2
47
45
4
EBITDA
168
247
(32)
Impairment of assets
27
-
n/m
Adjusted EBITDA
195
247
(21)
1 Includes other nitrogen (including ESN®
and Rainbow) and purchased products and is comprised of net sales
of $99 million (2019 – $69 million) less cost of goods sold of $90
million (2019 – $53 million).
2 See the "Non-IFRS Financial Measures"
section.
Nine Months Ended September
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
464
602
(23)
2,048
2,400
(15)
227
251
(10)
Urea
703
739
(5)
2,622
2,342
12
268
315
(15)
Solutions, nitrates and sulfates
500
540
(7)
3,451
3,166
9
145
170
(15)
1,667
1,881
(11)
8,121
7,908
3
205
238
(14)
Cost of goods sold
1,344
1,345
-
165
170
(3)
Gross margin - manufactured
323
536
(40)
40
68
(41)
Gross margin - other 1
40
57
(30)
Depreciation and amortization
56
50
12
Gross margin - total
363
593
(39)
Gross margin excluding depreciation
Expenses
29
7
314
and amortization - manufactured
96
118
(19)
EBIT
334
586
(43)
Ammonia controllable cash cost of
Depreciation and amortization
453
394
15
product manufactured
44
44
-
EBITDA
787
980
(20)
Impairment of assets
27
-
n/m
Adjusted EBITDA
814
980
(17)
1 Includes other nitrogen (including ESN®
and Rainbow) and purchased products and is comprised of net sales
of $404 million (2019 – $364 million) less cost of goods sold of
$364 million (2019 – $307 million).
- Adjusted EBITDA decreased in the third quarter and first
nine months 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 decreased in the third quarter of 2020
compared to the same period in 2019 due to lower industrial
nitrogen demand, particularly for ammonia, and associated
operational changes in Trinidad. This was partially offset by
higher agriculture-related nitrogen sales. Sales volumes in the
first nine months of 2020 were higher compared to the same period
in 2019 due to recent expansion projects and strong operating rates
at our North American facilities.
- Net realized selling price of nitrogen was lower in the
third quarter and first nine months of 2020 than the same periods
last year due to lower global and North American benchmark prices.
Third quarter sales commitments in 2020 were weighted towards the
beginning of the quarter prior to benchmark price increases.
- Cost of goods sold per tonne decreased in the third
quarter and first nine months of 2020 compared to the same periods
in 2019 due to lower natural gas prices and fixed costs. This more
than offset higher depreciation and amortization per tonne related
to expansion and turnaround work completed in late 2019. Ammonia
controllable cash cost of product manufactured per tonne increased
in the third quarter due to lower production associated with
curtailments in Trinidad. Ammonia controllable cash costs for the
first nine months of 2020 were consistent with the same period last
year due to lower fixed costs that offset lower production.
Natural Gas Prices in Cost of Production
Three Months Ended September
30
Nine Months Ended September
30
(US dollars per MMBtu, except as otherwise
noted)
2020
2019
% Change
2020
2019
% Change
Overall gas cost excluding realized
derivative impact
2.18
2.06
6
2.17
2.47
(12)
Realized derivative impact
0.06
0.22
(73)
0.06
0.14
(57)
Overall gas cost
2.24
2.28
(2)
2.23
2.61
(15)
Average NYMEX
1.98
2.23
(11)
1.88
2.67
(30)
Average AECO
1.62
0.78
108
1.54
1.05
47
- Gas prices in our cost of production decreased in
the third quarter and first nine months of 2020 as lower US gas
prices and a lower realized derivative impact more than offset
higher Canadian gas prices compared to the same period last
year.
Phosphate
Three Months Ended September
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
172
164
5
542
492
10
317
335
(5)
Industrial and feed
94
106
(11)
166
192
(14)
563
549
3
266
270
(1)
708
684
4
375
396
(5)
Cost of goods sold
268
284
(6)
379
416
(9)
Gross margin - manufactured
(2)
(14)
86
(4)
(20)
80
Gross margin - other 1
1
(1)
n/m
Depreciation and amortization
85
85
-
Gross margin - total
(1)
(15)
93
Gross margin excluding depreciation
Expenses
782
9
n/m
and amortization - manufactured
81
65
25
EBIT
(783)
(24)
n/m
Depreciation and amortization
60
58
3
EBITDA
(723)
34
n/m
Impairment of assets
769
-
n/m
Adjusted EBITDA
46
34
35
1 Includes other phosphate and purchased
products and is comprised of net sales of $26 million (2019 - $44
million) less cost of goods sold of $25 million (2019 - $45
million).
Nine Months Ended September
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
491
635
(23)
1,582
1,664
(5)
310
382
(19)
Industrial and feed
304
321
(5)
551
578
(5)
552
555
(1)
795
956
(17)
2,133
2,242
(5)
373
426
(12)
Cost of goods sold
779
963
(19)
366
429
(15)
Gross margin - manufactured
16
(7)
n/m
7
(3)
n/m
Gross margin - other 1
4
(4)
n/m
Depreciation and amortization
84
80
5
Gross margin - total
20
(11)
n/m
Gross margin excluding depreciation
Expenses
799
29
n/m
and amortization - manufactured
91
77
18
EBIT
(779)
(40)
n/m
Depreciation and amortization
179
180
(1)
EBITDA
(600)
140
n/m
Impairment of assets
769
-
n/m
Adjusted EBITDA
169
140
21
1 Includes other phosphate and purchased
products and is comprised of net sales of $87 million (2019 - $125
million) less cost of goods sold of $83 million (2019 - $129
million).
- Adjusted EBITDA increased in the third quarter and first
nine months of 2020 primarily due to lower cost of goods sold per
tonne. As part of our expenses, we recognized a $769 million
non-cash impairment of assets which is added back to adjusted
EBITDA. This impairment relates to a less favorable long-term
outlook of phosphate selling prices and an expected global supply
imbalance.
- Sales volumes increased in the third quarter of 2020
compared to the third quarter last year due to higher fertilizer
sales that more than offset lower industrial and feed sales. Sales
volumes in the first nine months of 2020 decreased compared to the
same period last year 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 fertilizer sales
was lower than in the third quarter of last year due to the lag
effect in realized prices, which was partially offset by higher
industrial and feed prices. Net realized selling prices in the
first nine months of 2020 were lower than the same period last year
consistent with declines in global benchmark prices.
- Cost of goods sold per tonne decreased in the third
quarter of 2020 due to lower raw material costs and a favorable
non-cash inventory adjustment. Cost of goods sold per tonne
decreased significantly in the first nine months of 2020 compared
to the same period last year primarily due to both lower raw
material costs and a change in estimate related to an asset
retirement obligation recorded in the second quarter of 2020.
Corporate and Others
(millions of US dollars, except as otherwise
Three Months Ended September
30
Nine Months Ended September
30
noted)
2020
2019
% Change
2020
2019
% Change
Sales 1
23
35
(34)
70
99
(29)
Cost of goods sold
20
35
(43)
63
99
(36)
Gross margin
3
-
n/m
7
-
n/m
Selling expenses
(4)
(5)
(20)
(17)
(14)
21
General and administrative expenses
66
65
2
191
191
-
Provincial mining and other taxes
-
8
(100)
1
13
(92)
Share-based compensation expense
(recovery)
29
(21)
n/m
9
95
(91)
Impairment of assets
5
-
n/m
5
33
(85)
Other expenses
67
40
68
153
95
61
EBIT
(160)
(87)
84
(335)
(413)
(19)
Depreciation and amortization
15
10
50
41
32
28
EBITDA
(145)
(77)
88
(294)
(381)
(23)
Merger and related costs
-
21
(100)
-
57
(100)
Acquisition and integration related
costs
10
-
n/m
38
-
n/m
Share-based compensation expense
(recovery)
29
(21)
n/m
9
95
(91)
Impairment of assets
5
-
n/m
5
33
(85)
COVID-19 related expenses
11
-
n/m
30
-
n/m
Foreign exchange loss, net of related
derivatives
13
2
550
4
14
(71)
Loss on disposal of business
6
-
n/m
6
-
n/m
Adjusted EBITDA
(71)
(75)
(5)
(202)
(182)
11
Finance costs
129
147
(12)
401
413
(3)
Income tax (recovery) expense
(264)
40
n/m
(45)
346
n/m
Other comprehensive income (loss)
71
(75)
n/m
(86)
(57)
51
1 Primarily relates to our non-core
Canadian business which was sold in the third quarter of 2020.
- Share-based compensation expense (recovery) - We
had an expense for the third quarter of 2020 due to an increase in
share price and a recovery for the comparative period in 2019 due
to a decrease in share price. We had a lower expense for the first
nine months of 2020 as our share price was negatively impacted from
market volatility due to the COVID-19 pandemic in the first nine
months of 2020.
- Impairment of assets was lower for the first nine months
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.
- Other expenses in the third quarter and first nine
months of 2020 were higher due to project costs related to our
Retail enterprise resource planning system as part of our digital
transformation and COVID-19 related expenses. COVID-19 expenses
primarily consist of increased cleaning and sanitization costs, the
purchase of personal protective equipment, discretionary
supplemental employee costs and costs related to construction
delays from access limitations and other government
restrictions.
- Finance costs in the third quarter and first nine months
of 2020 were slightly lower than the same periods last year. Lower
interest rates more than offset higher finance costs incurred as we
managed our immediate liquidity position during the initial months
of the COVID-19 pandemic.
- Income tax (recovery) expense – Income tax recoveries
were recorded for the third quarter and first nine months of 2020
due to an impairment of assets, discrete tax recoveries primarily
related to US legislative changes and a change in jurisdictional
earnings composition. The discrete tax recoveries were $48 million
and $59 million for the third quarter and first nine months of
2020, respectively.
- Other comprehensive income (loss) – For the third
quarter of 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 appreciated
relative to the US dollar as global markets rebounded following the
COVID-19 pandemic in the early part of 2020. For the first nine
months of 2020, we had a higher other comprehensive loss due
primarily to a loss on translation of our Retail operations in
Brazil as the Brazilian Real declined relative to the US dollar.
There were also offsetting impacts from translation of our Canadian
and Australian Retail operations.
Financial Condition Review
The following balance sheet categories contained variances that
were considered significant:
As at
(millions of US dollars, except as
otherwise noted)
September 30, 2020
December 31, 2019
$ Change
% Change
Assets
Cash and cash equivalents
465
671
(206)
(31)
Receivables
5,056
3,542
1,514
43
Inventories
3,829
4,975
(1,146)
(23)
Prepaid expenses and other current
assets
531
1,477
(946)
(64)
Property, plant and equipment
19,308
20,335
(1,027)
(5)
Liabilities and Equity
Short-term debt
1,644
976
668
68
Current portion of long-term debt
-
502
(502)
(100)
Payables and accrued charges
5,239
7,437
(2,198)
(30)
Long-term debt
10,041
8,553
1,488
17
Retained earnings
6,477
7,101
(624)
(9)
- 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
activity.
- Prepaid expenses and other current assets decreased due
to the drawdown of prepaid inventory where Retail typically prepays
for products at year-end and takes possession of inventory
throughout the year.
- Property, plant and equipment decreased primarily due to
a non-cash impairment of our Phosphate production facilities as
described in Note 3 to the interim financial statements.
- Short-term debt increased from commercial paper
issuances as part of our seasonal working capital management.
- Payables and accrued charges decreased due to lower
customer prepayments as Retail customers took delivery of prepaid
products. This was partially offset by an increase related to a
shift in timing of vendor 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 decreased due to dividends declared
exceeding net earnings.
Liquidity and Capital Resources
Sources and Uses of Liquidity
We managed our capital in
accordance with our capital allocation strategy. We believe that
our 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 and sources of cash and cash equivalents in the
third quarter and/or nine months ended September 30, 2020
included:
- Investments in capital assets to sustain and grow our safe,
reliable and cost-efficient operations. Sustaining capital
expenditures were $203 million in the third quarter of 2020 and
were $511 million in the first nine months of 2020. Investing
capital expenditures were $96 million in the third quarter of 2020
and were $360 million for the first nine months of 2020.
- Returns to our shareholders through dividends and share
repurchases (See Note 9 to the interim financial statements).
Dividends paid were $257 million in the third quarter of 2020 and
were $771 million for the first nine months of 2020. Share
repurchases were $nil in the third quarter of 2020 and were $160
million in the first nine months of 2020.
- Other financing activities including the following:
- Issued $1.5 billion of notes on May 13, 2020. See Note 8 to the
interim financial statements.
- Drew down $446 million and $801 million from our commercial
paper during the three and nine months ended September 30, 2020,
respectively.
- Repaid at maturity $500 million of 4.875 percent notes during
the nine months ended September 30, 2020. See Note 8 to the interim
financial statements.
- Established new committed revolving credit facilities totaling
approximately $1.5 billion in March and April 2020, in response to
the market uncertainty caused by the COVID-19 pandemic. We closed
these credit facilities after the issuance of the new notes, as
described above. During the first nine months of 2020, we drew down
from and later repaid $3.5 billion of our revolving credit
facilities to provide additional liquidity in the volatile market
caused by the COVID-19 pandemic.
Sources and Uses of Cash
(millions of US dollars, except as
otherwise
Three Months Ended September
30
Nine Months Ended September
30
noted)
2020
2019
% Change
2020
2019
% Change
Cash (used in) provided by operating
activities
(685)
589
n/m
545
1,246
(56)
Cash used in investing activities
(356)
(904)
(61)
(1,209)
(2,133)
(43)
Cash provided by (used in) financing
activities
85
272
(69)
465
(837)
n/m
Effect of exchange rate changes on cash
and cash equivalents
6
(5)
n/m
(7)
(22)
(68)
Decrease in cash and cash equivalents
(950)
(48)
n/m
(206)
(1,746)
(88)
Cash and cash equivalents decreased by $950 million in
the third quarter of 2020 compared to a decrease of $48 million in
2019 as a result of lower cash from our operating activities mainly
due to lower crop nutrient prices and comparatively strong results
in the third quarter of 2019. We also settled more trade payables
due to the shift in timing of vendor payments from the second to
third quarter of 2020.
As cash from operations decreased, we lowered our spend in
investing activities through:
- A $305 million decrease in cash used for acquisitions compared
to the same period in 2019. We acquired Ruralco in the third
quarter of 2019 with no similar acquisition in the third quarter of
2020.
- A $276 million decrease in capital expenditures compared to the
same period in 2019 as we deferred or reduced capital projects
mainly due to lower crop nutrient prices, as well as COVID-19
precautions.
Cash and cash equivalents decreased by $206 million in the nine
months ended September 30, 2020 compared to a decrease of $1.7
billion in the nine months ended September 30, 2019.
Cash from our operating activities decreased as a result of
lower crop nutrient prices. Despite this decrease, we had a $933
million decrease in short-term debt net proceeds compared to the
same period in 2019, due to improved working capital
management.
The decrease in our cash from operating activities was partially
offset by:
- An approximately $900 million decrease in cash used for Retail
acquisitions and capital expenditures 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.
- A $503 million decrease in long-term debt repayments 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 nine months ended September 30, 2020.
Short-term Debt
As at September 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
0.8 - 9.5
600
193
407
Commercial paper
0.2 - 0.6
1,451
Total
1,644
1 Other credit facilities are unsecured
and consist of South American facilities with debt of $143
(December 31, 2019 – $149) and interest rates ranging from 2.0
percent to 9.5 percent, Australian facilities with debt of $24
(December 31, 2019 – $157) and an interest rate of 1.3 percent, and
other facilities with debt of $26 (December 31, 2019 – $20) and
interest rates ranging from 0.8 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 8 to the
interim financial statements. During the first quarter of 2020, we
repaid the $500 million 4.875 percent notes that matured March 30,
2020.
Outstanding Share Data
As at October 30, 2020
Common shares
569,145,935
Options to purchase common shares
11,123,020
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)
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
Q2 2019
Q1 2019
Q4 2018
Sales
4,205
8,416
4,186
3,442
4,169
8,693
3,719
3,762
Net earnings (loss) from continuing
operations
(587)
765
(35)
(48)
141
858
41
296
Net earnings from discontinued
operations
-
-
-
-
-
-
-
2,906
Net earnings (loss)
(587)
765
(35)
(48)
141
858
41
3,202
Adjusted EBITDA
670
1,721
508
664
787
1,870
704
924
Earnings (loss) per share ("EPS") from
continuing operations
Basic
(1.03)
1.34
(0.06)
(0.08)
0.25
1.48
0.07
0.48
Diluted
(1.03)
1.34
(0.06)
(0.08)
0.24
1.47
0.07
0.48
EPS
Basic
(1.03)
1.34
(0.06)
(0.08)
0.25
1.48
0.07
5.23
Diluted
(1.03)
1.34
(0.06)
(0.08)
0.24
1.47
0.07
5.22
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 have been
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 2020, earnings were impacted by non-cash
impairments of property, plant and equipment primarily in the
Phosphate segment as a result of lower forecasted global phosphate
prices.
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 responses
or 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
ultimately 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 that 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.
Critical Accounting Estimates
Our critical accounting policies are disclosed in our 2019
Annual Report. We have discussed the development, selection and
application of our key accounting policies, and the critical
accounting estimates and assumptions they involve, with the audit
committee of the Board. Our critical accounting estimates are
discussed on page 54 of our 2019 Annual Report. Other than the
critical accounting estimates discussed below, there were no
significant changes in the first nine months of 2020.
Long-lived Asset Impairment
During the three and nine months ended September 30, 2020, we
identified an impairment indicator in our Phosphate cash generating
units (“CGUs”) due to lower long-term forecasted global phosphate
prices and recorded impairments of assets in the statement of
(loss) earnings relating to our property plant and equipment at
Aurora and White Springs of $545 million and $215 million,
respectively. See Note 3 to the interim financial statements.
The recoverable values of Aurora and White Springs are most
sensitive to the following key assumptions: our internal sales
price forecasts which consider projections from an independent
third-party data source, discount rates, long-term growth rates,
and expected mine life. We used key assumptions that were based on
historical data and estimates of future results from internal
sources, external price benchmarks, mineral reserve technical
reports, as well as industry and market trends.
The following table highlights sensitivities to the recoverable
value which could result in additional impairment losses or
reversals of previously recorded losses. The sensitivities have
been calculated independently of changes in other key
variables.
Aurora
Increase (Decrease)
Key Assumptions
Change in Assumption
to Recoverable Value ($
millions)
Net selling price
±
10 per tonne
±
150
Discount rate
±
1.0 percentage point
±
120
For our White Springs CGU, there were no reasonably possible
changes in the key assumptions that would result in a substantial
change in the recoverable value.
At September 30, 2020, we performed impairment testing on the
Trinidad CGU, part of our Nitrogen segment, due to the indefinite
closure of an ammonia plant in response to market conditions and
lower long-term forecasted global ammonia prices. No impairment
resulted from comparing the carrying value of the Trinidad CGU to
its recoverable value determined on a fair value less costs of
disposal (“FVLCD”) methodology. FVLCD was based on after-tax
discounted cash flows (using a five-year projection and a 2.0%
terminal growth rate) discounted at a post-tax rate of 12.6%.
The following table indicates the percentages by which key
assumptions would need to change individually for the estimated
Trinidad CGU recoverable value to be equal to the carrying
value:
Change Required for
Carrying
Key Assumptions
Value to Equal Recoverable
Value
Net selling price (5-year
average)
4 percent decrease
Production volumes (5-year
average)
5 percent decrease
Discount rate (post-tax)
0.9 percentage point increase
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 continues to materially affect our
internal control over financial reporting.
As a result of 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 during
the quarter ended September 30, 2020, 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 (consolidated and by segment);
capital spending expectations for 2020; expectations regarding our
liquidity; expectations regarding performance of our operating
segments in 2020, including the impact of our ammonia plant closure
on our Nitrogen segment; 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 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 divestitures, 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 and
adjusted EBITDA (consolidated and by segment) guidance ranges are
to assist readers in understanding our expected financial results,
and this information may not be appropriate for other purposes.
The forward-looking statements in this document are made as of
the date hereof and 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 amounts 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, November 3,
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/9668938.
- Via Phone: 1-888-869-1189 Conference ID 9668938.
- 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
http://www.nutrien.com/investors/events/2020-q3-earnings-conference-call
Appendix A - Selected Additional Financial Data
Selected Retail measures
Three Months Ended September
30
Nine Months Ended September
30
2020
2019
2020
2019
Proprietary products margin as a
percentage of product line margin (%)
Crop
nutrients
33
31
27
24
Crop
protection products
43
39
40
42
Seed
n/m
20
43
44
All
products
25
27
27
28
Crop nutrients sales volumes (tonnes -
thousands)
North
America
1,159
1,202
7,683
7,254
International
741
533
2,364
1,677
Total
1,900
1,735
10,047
8,931
Crop nutrients selling price per
tonne
North
America
413
467
423
471
International
407
389
356
395
Total
411
443
407
457
Crop nutrients gross margin per
tonne
North
America
116
114
102
103
International
61
70
47
57
Total
94
101
89
95
Financial performance measures
2020 Target
2020 Actuals
Retail
Adjusted EBITDA to sales (%) 1, 2
10
10
Retail
adjusted average working capital to sales (%) 1, 2
21
17
Retail
cash operating coverage ratio (%) 1, 2
61
62
Retail
Adjusted EBITDA per US selling location (thousands of US dollars)
1, 2
1,000
1,031
1
Rolling four quarters ended September 30, 2020.
2 See
the "Non-IFRS Financial Measures" section.
Nutrien Financial
As at September 30,
2020
(millions of US dollars)
Current
31-90 days past due
>90 days past due
Allowance 2
Total
Nutrien
Financial receivables 1
1,661
37
35
(22)
1,711
1 See
the "Non-IFRS Financial Measures" section.
2
Allowance for expected credit losses of receivables from
customers.
Selected Nitrogen measures
Three Months Ended September
30
Nine Months Ended September
30
2020
2019
2020
2019
Sales volumes (tonnes -
thousands)
Fertilizer
1,426
1,304
5,010
4,204
Industrial and feed
977
1,218
3,111
3,704
Net sales (millions of US
dollars)
Fertilizer
280
316
1,108
1,155
Industrial and feed
161
217
559
726
Net selling price per tonne
Fertilizer
196
243
221
275
Industrial and feed
166
178
180
196
Production measures
Three Months Ended September
30
Nine Months Ended September
30
2020
2019
2020
2019
Potash
production (Product tonnes - thousands)
3,430
2,977
9,811
9,761
Potash
shutdown weeks 1
4
11
38
27
Nitrogen
production (Ammonia tonnes - thousands) 2
1,413
1,529
4,479
4,763
Ammonia
operating rate (%) 3
91
85
93
90
Phosphate production (P2O5 tonnes -
thousands) 4
354
374
1,083
1,124
Phosphate P2O5 operating rate (%)
4
83
87
85
88
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, unusual or other non-operational items arise, we
generally exclude these items in our calculation.
Adjusted EBITDA (Consolidated)
Most directly comparable IFRS financial measure: Net
earnings (loss).
Definition: 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), COVID-19 related expenses and loss on disposal of
business. In the first and third quarter of 2020, respectively, we
have amended our calculation of adjusted EBITDA to adjust for the
impact of COVID-19 related expenses and loss on disposal of
business. There were no similar expenses in the comparative period.
To align with the change in our segment performance measure
effective in the third quarter of 2020, we will primarily use
Adjusted EBITDA going forward as our consolidated performance
measure.
Why we use the measure and why it is useful to investors:
It is not impacted by long-term investment and financing decisions,
but rather focuses on the performance of our day-to-day operations.
It provides a measure of our ability to service debt and to meet
other payment obligations.
Three Months Ended September
30
Nine Months Ended September
30
(millions of US dollars)
2020
2019 1
2020
2019 1
Net (loss) earnings
(587)
141
143
1,040
Finance costs
129
147
401
413
Income tax (recovery) expense
(264)
40
(45)
346
Depreciation and amortization
500
457
1,490
1,363
EBITDA
(222)
785
1,989
3,162
Merger and related costs
-
21
-
57
Acquisition and integration related
costs
10
-
38
-
Share-based compensation expense
(recovery)
29
(21)
9
95
Impairment of assets
823
-
823
33
COVID-19 related expenses
11
-
30
-
Foreign exchange loss, net of related
derivatives
13
2
4
14
Loss on disposal of business
6
-
6
-
Adjusted EBITDA
670
787
2,899
3,361
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 (Consolidated) and Adjusted Net Earnings Per
Share Guidance
Adjusted EBITDA and adjusted net earnings per share guidance are
forward-looking non-IFRS financial measures. 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), COVID-19 related expenses (including those recorded
under finance costs), loss on disposal of business and impairment
of assets, net of tax. In 2020, we have amended our calculation of
adjusted net loss to adjust for the impact of COVID-19 related
expenses and loss on disposal of business.
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 September
30, 2020
Nine Months Ended September
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 (loss) earnings
(587)
(1.03)
143
0.25
Adjustments:
Acquisition and integration related
costs
10
8
0.01
38
31
0.06
Share-based compensation expense
29
23
0.04
9
7
0.01
Impairment of assets
823
661
1.16
823
661
1.16
COVID-19 related expenses
14
11
0.02
45
36
0.06
Foreign exchange loss, net of related
derivatives
13
10
0.02
4
3
0.01
Loss on disposal of business
6
5
0.01
6
5
0.01
Adjusted net earnings
131
0.23
886
1.56
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 indicators 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 September
30
Nine Months Ended September
30
(millions of US dollars)
2020
2019
2020
2019
Cash from operations before working
capital changes
483
585
2,145
2,686
Sustaining capital expenditures
(203)
(256)
(511)
(667)
Free cash flow
280
329
1,634
2,019
Changes in non-cash operating working
capital
(1,168)
4
(1,600)
(1,440)
Free cash flow including changes in
non-cash operating working capital
(888)
333
34
579
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 September
30
Nine Months Ended September
30
(millions of US dollars, except as
otherwise noted)
2020
2019
2020
2019
Total COGS - Potash
303
303
878
892
Change in inventory
4
(26)
(28)
(1)
Other adjustments
-
(4)
(5)
(16)
COPM
307
273
845
875
Depreciation and amortization included in
COPM
(124)
(87)
(305)
(292)
Cash COPM
183
186
540
583
Production tonnes (tonnes - thousands)
3,430
2,977
9,811
9,761
Potash cash COPM per tonne
53
62
55
60
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 September
30
Nine Months Ended September
30
(millions of US dollars, except as
otherwise noted)
2020
2019
2020
2019
Total COGS - Nitrogen
482
469
1,708
1,652
Depreciation and amortization in COGS
(113)
(109)
(395)
(340)
Cash COGS for products other than
ammonia
(287)
(262)
(1,017)
(952)
Ammonia
Total cash COGS before other
adjustments
82
98
296
360
Other adjustments 1
(11)
(2)
(46)
(35)
Total cash COPM
71
96
250
325
Natural gas and steam costs
(45)
(62)
(164)
(221)
Controllable cash COPM
26
34
86
104
Production tonnes (net tonnes 2 -
thousands)
557
755
1,945
2,343
Ammonia controllable cash COPM per
tonne
47
45
44
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 Adjusted EBITDA to Sales
Most directly comparable IFRS financial measure: Retail
adjusted EBITDA divided by Retail sales.
Definition: Retail adjusted 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. In the
third quarter of 2020, we revised this measure from EBITDA to
Adjusted EBITDA to align with how we evaluate Retail results. There
were no changes to this measure as a result of the change.
Rolling four quarters ended
September 30, 2020
(millions of US dollars, except as
otherwise noted)
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Total
Adjusted EBITDA
231
7
964
162
1,364
Sales
2,171
2,649
6,749
2,720
14,289
Adjusted 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, 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 September 30,
2020
Nutrien Financial receivables
1,711
Non-Nutrien Financial receivables
3,345
Receivables
5,056
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 following the 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
September 30, 2020
(millions of US dollars, except as
otherwise noted)
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Average/Total
Working capital
1,759
2,288
2,030
3,216
Working capital from certain recent
acquisitions
(138)
(108)
63
-
Adjusted working capital
1,621
2,180
2,093
3,216
2,278
Sales
2,171
2,649
6,749
2,720
Sales from certain recent acquisitions
(249)
(348)
(338)
-
Adjusted sales
1,922
2,301
6,411
2,720
13,354
Adjusted average working capital to
sales (%)
17
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
September 30, 2020
(millions of US dollars, except as
otherwise noted)
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Total
Operating expenses 1
667
677
811
669
2,824
Depreciation and amortization in operating
expenses
(160)
(153)
(161)
(167)
(641)
Operating expenses excluding depreciation
and amortization
507
524
650
502
2,183
Gross margin
736
529
1,612
661
3,538
Depreciation and amortization in cost of
goods sold
2
2
2
3
9
Gross margin excluding depreciation and
amortization
738
531
1,614
664
3,547
Cash operating coverage ratio
(%)
62
1 Includes Retail expenses below gross
margin including selling expenses, general and administrative
expenses and other (income) expenses.
Retail Adjusted EBITDA per US Selling Location
Most directly comparable IFRS financial measure: Retail
US adjusted EBITDA.
Definition: Total Retail US adjusted 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. This measure
includes locations we have owned for more than 12 months. In the
third quarter of 2020, we revised this measure from US EBITDA to US
adjusted EBITDA to align with how we evaluate Retail results. There
were no changes to this measure as a result of the change.
Rolling four quarters ended
September 30, 2020
(millions of US dollars, except as
otherwise noted)
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Total
Adjusted US EBITDA
143
(44)
766
86
951
Adjustments for acquisitions
(11)
Adjusted US EBITDA adjusted for
acquisitions
940
Number of US selling locations adjusted
for acquisitions
912
Adjusted EBITDA per US selling location
(thousands of US dollars)
1,031
Condensed Consolidated Financial Statements
Unaudited in millions of US dollars except as otherwise
noted
Condensed Consolidated Statements of (Loss) Earnings
Three Months Ended
Nine Months Ended
September 30
September 30
Note
2020
2019
2020
2019
Note 1
Note 1
SALES
2
4,205
4,169
16,807
16,581
Freight, transportation and
distribution
204
210
653
596
Cost of goods sold
3,004
2,819
12,129
11,558
GROSS MARGIN
997
1,140
4,025
4,427
Selling expenses
676
607
2,081
1,835
General and administrative expenses
107
97
312
287
Provincial mining and other taxes
58
92
163
253
Share-based compensation expense
(recovery)
29
(21)
9
95
Impairment of assets
3
823
-
823
33
Other expenses
4
26
37
138
125
(LOSS) EARNINGS BEFORE FINANCE COSTS
AND INCOME TAXES
(722)
328
499
1,799
Finance costs
129
147
401
413
(LOSS) EARNINGS BEFORE INCOME
TAXES
(851)
181
98
1,386
Income tax (recovery) expense
5
(264)
40
(45)
346
NET (LOSS) EARNINGS
(587)
141
143
1,040
NET (LOSS) EARNINGS PER SHARE
("EPS")
Basic
(1.03)
0.25
0.25
1.78
Diluted
(1.03)
0.24
0.25
1.77
Weighted average shares outstanding for
basic EPS
569,146,000
572,887,000
569,818,000
585,421,000
Weighted average shares outstanding for
diluted EPS
569,146,000
573,702,000
569,818,000
586,335,000
Condensed Consolidated Statements of Comprehensive (Loss)
Income
Three Months Ended
Nine Months Ended
September 30
September 30
(Net of related income taxes)
2020
2019
2020
2019
NET (LOSS) EARNINGS
(587)
141
143
1,040
Other comprehensive income (loss)
Items that will not be reclassified to net
(loss) earnings:
Net actuarial gain on defined benefit
plans
-
-
3
-
Net fair value loss on investments
(4)
(11)
(25)
(26)
Items that have been or may be
subsequently reclassified to net (loss) earnings:
Gain (loss) on currency translation of
foreign operations
69
(71)
(52)
(36)
Other
6
7
(12)
5
OTHER COMPREHENSIVE INCOME
(LOSS)
71
(75)
(86)
(57)
COMPREHENSIVE (LOSS) INCOME
(516)
66
57
983
(See Notes to the Condensed Consolidated
Financial Statements)
Condensed Consolidated Statements of Cash Flows
Three Months Ended
Nine Months Ended
September 30
September 30
Note
2020
2019
2020
2019
Note 1
Note 1
OPERATING ACTIVITIES
Net (loss) earnings
(587)
141
143
1,040
Adjustments for:
Depreciation and amortization
500
457
1,490
1,363
Share-based compensation expense
(recovery)
29
(21)
9
95
Impairment of assets
3
823
-
823
33
(Recovery of) provision for deferred
income tax
(161)
31
(99)
178
Other long-term liabilities and
miscellaneous
(121)
(23)
(221)
(23)
Cash from operations before working
capital changes
483
585
2,145
2,686
Changes in non-cash operating working
capital:
Receivables
692
624
(1,455)
(1,427)
Inventories
407
541
1,153
1,239
Prepaid expenses and other current
assets
(77)
(23)
936
801
Payables and accrued charges
(2,190)
(1,138)
(2,234)
(2,053)
CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES
(685)
589
545
1,246
INVESTING ACTIVITIES
Additions to property, plant and
equipment
(266)
(518)
(927)
(1,177)
Additions to intangible assets
(19)
(43)
(87)
(118)
Business acquisitions, net of cash
acquired
10
(43)
(348)
(216)
(837)
Proceeds from disposal of discontinued
operations, net of tax
-
-
-
55
Purchase of investments
(13)
(42)
(79)
(164)
Other
(15)
47
100
108
CASH USED IN INVESTING
ACTIVITIES
(356)
(904)
(1,209)
(2,133)
FINANCING ACTIVITIES
Transaction costs on long-term debt
-
-
(15)
(29)
Proceeds from short-term debt, net
397
575
601
1,534
Proceeds from long-term debt
8
14
-
1,520
1,510
Repayment of long-term debt
8
-
(11)
(507)
(1,010)
Repayment of principal portion of lease
liabilities
(69)
(49)
(203)
(166)
Dividends paid
9
(257)
(244)
(771)
(764)
Repurchase of common shares
9
-
-
(160)
(1,930)
Issuance of common shares
-
1
-
18
CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES
85
272
465
(837)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS
6
(5)
(7)
(22)
DECREASE IN CASH AND CASH
EQUIVALENTS
(950)
(48)
(206)
(1,746)
CASH AND CASH EQUIVALENTS – BEGINNING
OF PERIOD
1,415
616
671
2,314
CASH AND CASH EQUIVALENTS – END OF
PERIOD
465
568
465
568
Cash and cash equivalents comprised
of:
Cash
328
326
328
326
Short-term investments
137
242
137
242
465
568
465
568
SUPPLEMENTAL CASH FLOWS
INFORMATION
Interest paid
85
111
334
353
Income taxes paid
27
46
92
1
Total cash outflow for leases
78
89
266
253
(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
-
-
-
-
-
-
-
-
1,040
1,040
Other comprehensive (loss) income
-
-
-
(26)
-
(36)
5
(57)
-
(57)
Shares repurchased (Note 9)
(36,066,766)
(992)
-
-
-
-
-
-
(886)
(1,878)
Dividends declared
-
-
-
-
-
-
-
-
(496)
(496)
Effect of share-based compensation
including issuance of common shares
431,485
21
13
-
-
-
-
-
-
34
Transfer of net loss on sale of
investment
-
-
-
4
-
-
-
4
(4)
-
Transfer of net loss on cash flow
hedges
-
-
-
-
-
-
8
8
-
8
BALANCE – SEPTEMBER 30, 2019
572,900,196
15,769
244
(29)
-
(287)
(20)
(336)
7,399
23,076
BALANCE – DECEMBER 31, 2019
572,942,809
15,771
248
(29)
-
(204)
(18)
(251)
7,101
22,869
Net earnings
-
-
-
-
-
-
-
-
143
143
Other comprehensive (loss) income
-
-
-
(25)
3
(52)
(12)
(86)
-
(86)
Shares repurchased (Note 9)
(3,832,580)
(105)
(55)
-
-
-
-
-
-
(160)
Dividends declared
-
-
-
-
-
-
-
-
(770)
(770)
Effect of share-based compensation
including issuance of common shares
35,706
1
10
-
-
-
-
-
-
11
Transfer of net loss on cash flow
hedges
-
-
-
-
-
-
13
13
-
13
Transfer of net actuarial gain on defined
benefit plans
-
-
-
-
(3)
-
-
(3)
3
-
BALANCE – SEPTEMBER 30, 2020
569,145,935
15,667
203
(54)
-
(256)
(17)
(327)
6,477
22,020
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
September 30
December 31
As at
Note
2020
2019
2019
ASSETS
Current assets
Cash and cash equivalents
465
568
671
Receivables
5,056
4,843
3,542
Inventories
3,829
3,873
4,975
Prepaid expenses and other current
assets
531
440
1,477
9,881
9,724
10,665
Non-current assets
Property, plant and equipment
3
19,308
20,045
20,335
Goodwill
10
12,179
11,983
11,986
Other intangible assets
2,352
2,330
2,428
Investments
809
809
821
Other assets
742
538
564
TOTAL ASSETS
45,271
45,429
46,799
LIABILITIES
Current liabilities
Short-term debt
7
1,644
2,287
976
Current portion of long-term debt
8
-
501
502
Current portion of lease liabilities
230
219
214
Payables and accrued charges
5,239
4,615
7,437
7,113
7,622
9,129
Non-current liabilities
Long-term debt
8
10,041
8,555
8,553
Lease liabilities
847
793
859
Deferred income tax liabilities
5
3,053
3,137
3,145
Pension and other post-retirement benefit
liabilities
446
425
433
Asset retirement obligations and accrued
environmental costs
1,575
1,662
1,650
Other non-current liabilities
176
159
161
TOTAL LIABILITIES
23,251
22,353
23,930
SHAREHOLDERS’ EQUITY
Share capital
9
15,667
15,769
15,771
Contributed surplus
203
244
248
Accumulated other comprehensive loss
(327)
(336)
(251)
Retained earnings
6,477
7,399
7,101
TOTAL SHAREHOLDERS’ EQUITY
22,020
23,076
22,869
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY
45,271
45,429
46,799
(See Notes to the Condensed Consolidated
Financial Statements)
Notes to the Condensed Consolidated Financial Statements
As at and for the Three and Nine Months Ended September 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 (loss) earnings, condensed
consolidated statements of cash flows 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 our 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 November 2,
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 America, 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 which was sold in the third
quarter of 2020.
In the third quarter of 2020, our Chief Operating Decision Maker
changed the measure used to evaluate the performance of our
operating segments from net earnings (loss) before finance costs,
income taxes, and depreciation and amortization (“EBITDA”) to
adjusted EBITDA. Adjusted EBITDA provides a better indication of
the segments performance as it excludes the impact of impairments
and other costs that are centrally managed by our corporate
function. Due to the change in the measurement of the segments, we
have presented adjusted EBITDA for the comparative periods.
Three Months Ended September
30, 2020
Corporate
Retail
Potash
Nitrogen
Phosphate
and Others
Eliminations
Consolidated
Sales
– third
party
2,712
634
524
312
23
-
4,205
–
intersegment
8
63
103
40
-
(214)
-
Sales
–
total
2,720
697
627
352
23
(214)
4,205
Freight,
transportation and distribution
-
106
87
60
-
(49)
204
Net
sales
2,720
591
540
292
23
(165)
4,001
Cost of
goods sold
2,059
303
482
293
20
(153)
3,004
Gross
margin
661
288
58
(1)
3
(12)
997
Selling
expenses
669
3
7
1
(4)
-
676
General
and administrative expenses
34
2
3
2
66
-
107
Provincial mining and other taxes
-
58
-
-
-
-
58
Share-based compensation expense
-
-
-
-
29
-
29
Impairment of assets
-
22
27
769
5
-
823
Other
(income) expenses
(34)
(1)
(16)
10
67
-
26
(Loss)
earnings before finance costs and income taxes
(8)
204
37
(783)
(160)
(12)
(722)
Depreciation and amortization
170
124
131
60
15
-
500
EBITDA
162
328
168
(723)
(145)
(12)
(222)
Acquisition and integration related
costs
-
-
-
-
10
-
10
Share-based compensation expense
-
-
-
-
29
-
29
Impairment of assets
-
22
27
769
5
-
823
COVID-19
related expenses
-
-
-
-
11
-
11
Foreign
exchange loss, net of related derivatives
-
-
-
-
13
-
13
Loss on
disposal of business
-
-
-
-
6
-
6
Adjusted
EBITDA
162
350
195
46
(71)
(12)
670
Assets –
at September 30, 2020
19,722
12,005
10,805
1,362
1,760
(383)
45,271
Three Months Ended September 30,
2019
Corporate
Retail
Potash
Nitrogen
Phosphate
and Others
Eliminations
Consolidated
Sales
– third party
2,489
748
564
333
35
-
4,169
– intersegment
10
68
115
43
-
(236)
-
Sales
– total
2,499
816
679
376
35
(236)
4,169
Freight, transportation and
distribution
-
107
77
62
-
(36)
210
Net sales
2,499
709
602
314
35
(200)
3,959
Cost of goods sold
1,844
303
469
329
35
(161)
2,819
Gross margin
655
406
133
(15)
-
(39)
1,140
Selling expenses
601
2
7
2
(5)
-
607
General and administrative expenses
28
-
4
-
65
-
97
Provincial mining and other taxes
-
83
1
-
8
-
92
Share-based compensation recovery
-
-
-
-
(21)
-
(21)
Other (income) expenses
(12)
1
1
7
40
-
37
Earnings (loss) before finance costs and
income taxes
38
320
120
(24)
(87)
(39)
328
Depreciation and amortization
152
110
127
58
10
-
457
EBITDA
190
430
247
34
(77)
(39)
785
Merger and related costs
-
-
-
-
21
-
21
Share-based compensation recovery
-
-
-
-
(21)
-
(21)
Foreign exchange loss, net of
related derivatives
-
-
-
-
2
-
2
Adjusted EBITDA
190
430
247
34
(75)
(39)
787
Assets – at December 31, 2019
19,990
11,696
10,991
2,198
2,129
(205)
46,799
Nine Months Ended September
30, 2020
Corporate
Retail
Potash
Nitrogen
Phosphate
and Others
Eliminations
Consolidated
Sales
– third
party
12,091
1,798
1,925
923
70
-
16,807
–
intersegment
27
191
481
146
-
(845)
-
Sales
–
total
12,118
1,989
2,406
1,069
70
(845)
16,807
Freight,
transportation and distribution
-
293
335
187
-
(162)
653
Net
sales
12,118
1,696
2,071
882
70
(683)
16,154
Cost of
goods sold
9,316
878
1,708
862
63
(698)
12,129
Gross
margin
2,802
818
363
20
7
15
4,025
Selling
expenses
2,068
7
19
4
(17)
-
2,081
General
and administrative expenses
102
5
7
7
191
-
312
Provincial mining and other taxes
-
161
1
-
1
-
163
Share-based compensation expense
-
-
-
-
9
-
9
Impairment of assets
-
22
27
769
5
-
823
Other
(income) expenses
(13)
4
(25)
19
153
-
138
Earnings
(loss) before finance costs and income taxes
645
619
334
(779)
(335)
15
499
Depreciation and amortization
488
329
453
179
41
-
1,490
EBITDA
1,133
948
787
(600)
(294)
15
1,989
Acquisition and integration related
costs
-
-
-
-
38
-
38
Share-based compensation expense
-
-
-
-
9
-
9
Impairment of assets
-
22
27
769
5
-
823
COVID-19
related expenses
-
-
-
-
30
-
30
Foreign
exchange loss, net of related derivatives
-
-
-
-
4
-
4
Loss on
disposal of business
-
-
-
-
6
-
6
Adjusted
EBITDA
1,133
970
814
169
(202)
15
2,899
Assets –
at September 30, 2020
19,722
12,005
10,805
1,362
1,760
(383)
45,271
Nine Months Ended September 30,
2019
Corporate
Retail
Potash
Nitrogen
Phosphate
and Others
Eliminations
Consolidated
Sales
– third party
11,022
2,328
2,033
1,099
99
-
16,581
– intersegment
28
178
487
160
-
(853)
-
Sales
– total
11,050
2,506
2,520
1,259
99
(853)
16,581
Freight, transportation and
distribution
-
252
275
178
-
(109)
596
Net sales
11,050
2,254
2,245
1,081
99
(744)
15,985
Cost of goods sold
8,546
892
1,652
1,092
99
(723)
11,558
Gross margin
2,504
1,362
593
(11)
-
(21)
4,427
Selling expenses
1,816
7
21
5
(14)
-
1,835
General and administrative expenses
82
-
11
3
191
-
287
Provincial mining and other taxes
-
237
2
1
13
-
253
Share-based compensation expense
-
-
-
-
95
-
95
Impairment of assets
-
-
-
-
33
-
33
Other expenses (income)
39
(2)
(27)
20
95
-
125
Earnings (loss) before finance costs and
income taxes
567
1,120
586
(40)
(413)
(21)
1,799
Depreciation and amortization
433
324
394
180
32
-
1,363
EBITDA
1,000
1,444
980
140
(381)
(21)
3,162
Merger and related costs
-
-
-
-
57
-
57
Share-based compensation expense
-
-
-
-
95
-
95
Impairment of assets
-
-
-
-
33
-
33
Foreign exchange loss, net of related
derivatives
-
-
-
-
14
-
14
Adjusted EBITDA
1,000
1,444
980
140
(182)
(21)
3,361
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
Nine Months Ended
September 30
September 30
2020
2019
2020
2019
Retail sales by product line
Crop nutrients
780
769
4,092
4,082
Crop protection products
1,328
1,318
4,774
4,348
Seed
103
60
1,638
1,613
Merchandise
234
135
703
387
Services and other
275
217
911
620
2,720
2,499
12,118
11,050
Potash sales by geography
Manufactured product
North America
358
437
1,002
1,084
Offshore 1
339
379
987
1,421
Other potash and purchased products
-
-
-
1
697
816
1,989
2,506
Nitrogen sales by product line
Manufactured product
Ammonia
129
172
576
713
Urea
214
239
780
801
Solutions, nitrates and sulfates
177
193
606
613
Other nitrogen and purchased products
107
75
444
393
627
679
2,406
2,520
Phosphate sales by product line
Manufactured product
Fertilizer
216
205
622
752
Industrial and feed
105
119
342
359
Other phosphate and purchased products
31
52
105
148
352
376
1,069
1,259
1 Relates to Canpotex Limited ("Canpotex")
(Note 12).
NOTE 3 IMPAIRMENT OF ASSETS
During the three and nine months ended September 30, 2020, we
recorded the following impairments of assets in the statement of
(loss) earnings relating to our property plant and equipment:
Cash-generating units ("CGUs")
Aurora
White Springs
Segment
Phosphate
Impairment indicator
Lower long-term forecasted global
phosphate prices
Pre-tax
impairment loss ($)
545
215
Recoverable value ($)
995 (post-tax)
160 (pre-tax)
Valuation technique
Fair value less costs of disposal
(“FVLCD”) a Level 3
measurement
Value in use
Key
assumptions
End of
mine life (proven and probable reserves) (year)
2050
2029
Long-term growth rate (%)
2.0
n/a
Post-tax
discount rate (%)
10.5
12.0 (pre-tax - 16.0)
For our Aurora CGU, the recoverable value was based on after-tax
discounted cash flows (using a five-year projection and a terminal
year thereafter to the expected mine life), which incorporated
assumptions an independent market participant would apply. For our
White Springs CGU, the recoverable value was based on pre-tax
discounted cash flows until the end of the mine life.
The recoverable value is most sensitive to the following key
assumptions: our internal sales price forecasts which consider
projections from an independent third-party data source, discount
rates, long-term growth rates, and expected mine life. We used key
assumptions that were based on historical data and estimates of
future results from internal sources, external price benchmarks,
mineral reserve technical reports, as well as industry and market
trends.
The following table highlights sensitivities to the recoverable
value which could result in additional impairment losses or
reversals of previously recorded losses. The sensitivities have
been calculated independently of changes in other key
variables.
Aurora
Increase (Decrease)
Key Assumptions
Change in Assumption
to Recoverable Value
($)
Net selling price
±
10 per tonne
±
150
Discount rate
±
1.0 percentage point
±
120
For our White Springs CGU, there were no reasonably possible
changes in the key assumptions that would result in a substantial
change in the recoverable value.
At September 30, 2020, we performed impairment testing on the
Trinidad CGU, part of our Nitrogen segment, due to the indefinite
closure of an ammonia plant in response to market conditions and
lower long-term forecasted global ammonia prices. No impairment
resulted from comparing the carrying value of the Trinidad CGU to
its recoverable value determined on a FVLCD methodology. FVLCD was
based on after-tax discounted cash flows (using a five-year
projection and a 2.0% terminal growth rate) discounted at a
post-tax rate of 12.6%.
The following table indicates the percentages by which key
assumptions would need to change individually for the estimated
Trinidad CGU recoverable value to be equal to the carrying
value:
Change Required for
Carrying
Key Assumptions
Value to Equal Recoverable
Value
Net selling price (5-year
average)
4 percent decrease
Production volumes (5-year
average)
5 percent decrease
Discount rate (post-tax)
0.9 percentage point increase
During the nine months ended September 30, 2020, we also
recorded $63 of impairment losses relating to other non-current
assets.
NOTE 4 OTHER EXPENSES
(INCOME)
Three Months Ended
Nine Months Ended
September 30
September 30
2020
2019
2020
2019
Merger and related costs
-
21
-
57
Acquisition and integration related
costs
10
-
38
-
Foreign exchange loss, net of related
derivatives
14
2
1
14
Earnings of equity-accounted investees
(23)
(6)
(46)
(53)
Bad debt (recovery) expense
(18)
3
9
38
COVID-19 related expenses
11
-
30
-
Loss on disposal of business
6
-
6
-
Other expenses
26
17
100
69
26
37
138
125
NOTE 5 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
Nine Months Ended
September 30
September 30
2020
2019
2020
2019
Income tax (recovery) expense
(264)
40
(45)
346
Actual effective tax rate on loss/earnings
(%)
26
22
14
25
Actual effective tax rate including
discrete items (%)
31
22
(47)
25
Discrete tax adjustments that impacted the
tax rate
(48)
1
(59)
5
Income tax balances within the condensed consolidated balance
sheets were comprised of the following:
Income Tax Assets and Liabilities
Balance Sheet Location
As at September 30,
2020
As at December 31, 2019
Income tax assets
Current
Receivables
50
104
Non-current
Other assets
213
36
Deferred income tax assets
Other assets
258
249
Total income tax assets
521
389
Income tax liabilities
Current
Payables and accrued charges
105
43
Non-current
Other non-current liabilities
40
44
Deferred income tax liabilities
Deferred income tax liabilities
3,053
3,145
Total income tax liabilities
3,198
3,232
NOTE 6 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:
September 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
465
-
465
671
-
671
Derivative instrument assets
31
-
31
5
-
5
Other current financial assets -
marketable securities 2
155
23
132
193
27
166
Investments at FVTOCI 3
135
135
-
161
161
-
Derivative instrument liabilities
(35)
-
(35)
(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
(10,003)
(7,911)
(3,494)
(8,528)
(1,726)
(7,440)
Fixed and floating rate debt
(38)
-
(38)
(25)
-
(25)
1 During the period ended September 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 7 SHORT-TERM
DEBT
Short-term debt was comprised of:
Rate of Interest (%)
Total Facility Limit as at
September 30, 2020
As at September 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
0.8 - 9.5
600
193
326
Commercial paper
0.2 - 0.6
1,451
650
1,644
976
1 Other credit facilities are unsecured
and consist of South American facilities with debt of $143
(December 31, 2019 – $149) and interest rates ranging from 2.0
percent to 9.5 percent, Australian facilities with debt of $24
(December 31, 2019 – $157) and an interest rate of 1.3 percent, and
other facilities with debt of $26 (December 31, 2019 – $20) and
interest rates ranging from 0.8 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 nine months ended September 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
8.
NOTE 8 LONG-TERM
DEBT
The following tables summarize our long-term debt issuances and
repayment activities during the nine months ended September 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 nine months ended September 30, 2020, we filed
a prospectus supplement to issue $1,500 of notes, as described
above.
NOTE 9 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
Nine Months Ended
September 30
September 30
2020
2019
2020
2019
Number of common shares repurchased for
cancellation
-
-
3,832,580
36,066,766
Average price per share (US dollars)
-
-
41.96
52.07
Total cost
-
-
160
1,878
Dividends declared
We declared dividends per share of $0.45 (2019 – $0.45) during
the three months ended September 30, 2020, payable on October 16,
2020 to shareholders of record on September 30, 2020 and $1.35
(2019 – $0.88) during the nine months ended September 30, 2020.
NOTE 10 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 completed our assessment of identifying
and measuring all the assets acquired and liabilities assumed. This
assessment included a thorough review of all internal and external
sources of information available on circumstances that existed at
the acquisition date. We engaged independent valuation experts to
assist in determining the fair value of certain assets acquired and
liabilities assumed. The significant fair value considerations used
in determining the allocation of purchase price are consistent with
those disclosed in Note 4 of the 2019 annual consolidated financial
statements.
Other Acquisitions
During the nine months ended September 30, 2020, we acquired
several businesses, the largest of which was Tec Agro Group, a
leading agriculture retailer in Brazil. The acquired businesses
include 37 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 fair values allocated to the acquired assets and assumed
liabilities were as follows:
September 30, 2020
Ruralco
Other Acquisitions
Preliminary 1
Adjustments
Final Fair Value
Preliminary
Receivables
318
(2)
316
2
69
Inventories
115
(3)
112
63
Prepaid expenses and other
current assets
8
(1)
7
4
Property, plant and equipment
136
4
140
53
Goodwill
207
29
236
184
Other intangible assets
210
(2)
208
-
Investments
15
-
15
-
Other assets
16
(14)
2
-
Total assets
1,025
11
1,036
373
Short-term debt
167
-
167
36
Payables and accrued charges
363
(39)
324
111
Lease liabilities, including
current portion
110
-
110
-
Deferred income tax
liabilities
42
(11)
31
1
Other non-current liabilities
13
61
74
9
Total liabilities
695
11
706
157
Total consideration
330
-
330
216
1 As previously reported in our
second quarter financial statements. We recorded additional
adjustments to the preliminary fair value primarily related to
changes in the preliminary valuation assumptions, including
refinement of our liabilities. All measurement period adjustments
were offset against goodwill.
2 Includes receivables from
customers with gross contractual amounts of $260, of which $7 are
considered to be uncollectible.
Financial information related to business acquisitions is as
follows:
Pro Forma 1
Other Acquisitions
Sales
320
EBIT
24
1
Estimated annual sales and earnings before finance costs and income
taxes ("EBIT") if acquisitions occurred at January 1,
2020.
Three Months Ended
Nine Months Ended
September 30, 2020
September 30, 2020
From date of acquisition
Other Acquisitions
Other Acquisitions
Sales
60
100
EBIT
6
6
NOTE 11 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 12 RELATED PARTY
TRANSACTIONS
We sell potash from our Canadian mines for use outside Canada
and the United States exclusively to Canpotex. Canpotex sells
potash to buyers in export markets pursuant to term and spot
contracts at agreed upon prices. Our revenue is recognized at the
amount received from Canpotex representing proceeds from their sale
of potash, less net costs of Canpotex. Sales to Canpotex are shown
in Note 2.
As at
September 30, 2020
December 31 ,2019
Receivables from Canpotex
201
194
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201102006035/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: Megan Fielding Vice President, Brand
& Culture Communications (403) 797-3015
Contact us at: www.nutrien.com
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