Exhibit 99.3
NUTRIEN LTD.
INTERIM FINANCIAL STATEMENTS AND NOTES
AS AT AND FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2022
Unaudited | In millions of US dollars except as otherwise noted |
Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Earnings
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||||
Note | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
SALES | 2 | 14,506 | 9,763 | 22,163 | 14,421 | |||||||||||||
Freight, transportation and distribution | 221 | 222 | 424 | 433 | ||||||||||||||
Cost of goods sold | 8,286 | 6,659 | 12,483 | 9,950 | ||||||||||||||
GROSS MARGIN | 5,999 | 2,882 | 9,256 | 4,038 | ||||||||||||||
Selling expenses | 1,017 | 865 | 1,744 | 1,538 | ||||||||||||||
General and administrative expenses | 140 | 116 | 266 | 219 | ||||||||||||||
Provincial mining taxes | 362 | 107 | 611 | 165 | ||||||||||||||
Share-based compensation (recovery) expense | (52 | ) | 38 | 83 | 61 | |||||||||||||
(Reversal) impairment of assets | 3 | (450 | ) | 1 | (450 | ) | 5 | |||||||||||
Other expenses | 4 | 37 | 136 | 58 | �� | 153 | ||||||||||||
EARNINGS BEFORE FINANCE COSTS AND INCOME TAXES | 4,945 | 1,619 | 6,944 | 1,897 | ||||||||||||||
Finance costs | 130 | 125 | 239 | 245 | ||||||||||||||
EARNINGS BEFORE INCOME TAXES | 4,815 | 1,494 | 6,705 | 1,652 | ||||||||||||||
Income tax expense | 5 | 1,214 | 381 | 1,719 | 406 | |||||||||||||
NET EARNINGS | 3,601 | 1,113 | 4,986 | 1,246 | ||||||||||||||
Attributable to | ||||||||||||||||||
Equity holders of Nutrien | 3,593 | 1,108 | 4,971 | 1,235 | ||||||||||||||
Non-controlling interest | 8 | 5 | 15 | 11 | ||||||||||||||
NET EARNINGS | 3,601 | 1,113 | 4,986 | 1,246 | ||||||||||||||
NET EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF NUTRIEN (“EPS”) |
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Basic | 6.53 | 1.94 | 9.02 | 2.17 | ||||||||||||||
Diluted | 6.51 | 1.94 | 8.99 | 2.16 | ||||||||||||||
Weighted average shares outstanding for basic EPS | 550,048,000 | 570,352,000 | 551,335,000 | 570,007,000 | ||||||||||||||
Weighted average shares outstanding for diluted EPS | 551,659,000 | 571,972,000 | 553,198,000 | 571,453,000 | ||||||||||||||
Condensed Consolidated Statements of Comprehensive Income |
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Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||||
(Net of related income taxes) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
NET EARNINGS | 3,601 | 1,113 | 4,986 | 1,246 | ||||||||||||||
Other comprehensive (loss) income | ||||||||||||||||||
Items that will not be reclassified to net earnings: | ||||||||||||||||||
Net actuarial gain on defined benefit plans | - | - | 1 | - | ||||||||||||||
Net fair value (loss) gain on investments | (38 | ) | 22 | (7 | ) | 70 | ||||||||||||
Items that have been or may be subsequently reclassified to net earnings: | ||||||||||||||||||
(Loss) gain on currency translation of foreign operations | (209 | ) | 25 | (81 | ) | (5 | ) | |||||||||||
Other | 5 | 14 | 21 | 20 | ||||||||||||||
OTHER COMPREHENSIVE (LOSS) INCOME | (242 | ) | 61 | (66 | ) | 85 | ||||||||||||
COMPREHENSIVE INCOME | 3,359 | 1,174 | 4,920 | 1,331 | ||||||||||||||
Attributable to | ||||||||||||||||||
Equity holders of Nutrien | 3,352 | 1,170 | 4,906 | 1,321 | ||||||||||||||
Non-controlling interest | 7 | 4 | 14 | 10 | ||||||||||||||
COMPREHENSIVE INCOME | 3,359 | 1,174 | 4,920 | 1,331 |
(See Notes to the Condensed Consolidated Financial Statements)
28
Unaudited | In millions of US dollars except as otherwise noted |
Condensed Consolidated Statements of Cash Flows
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||||
Note | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
Note 1 | Note 1 | |||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||||
Net earnings | 3,601 | 1,113 | 4,986 | 1,246 | ||||||||||||||
Adjustments for: | ||||||||||||||||||
Depreciation and amortization | 505 | 485 | 966 | 965 | ||||||||||||||
Share-based compensation (recovery) expense | (52 | ) | 38 | 83 | 61 | |||||||||||||
(Reversal) impairment of assets | 3 | (450 | ) | 1 | (450 | ) | 5 | |||||||||||
Recovery of deferred income tax | (53 | ) | (20 | ) | (8 | ) | (10 | ) | ||||||||||
Gain on disposal of investment | - | - | (19 | ) | - | |||||||||||||
Cloud computing transition adjustment | 4 | - | 36 | - | 36 | |||||||||||||
Other long-term assets, liabilities and miscellaneous | 118 | 64 | 119 | 54 | ||||||||||||||
Cash from operations before working capital changes | 3,669 | 1,717 | 5,677 | 2,357 | ||||||||||||||
Changes in non-cash operating working capital: | ||||||||||||||||||
Receivables | (3,933 | ) | (2,443 | ) | (4,842 | ) | (2,835 | ) | ||||||||||
Inventories | 1,748 | 1,848 | (861 | ) | 63 | |||||||||||||
Prepaid expenses and other current assets | 340 | 310 | 1,062 | 998 | ||||||||||||||
Payables and accrued charges | 734 | 534 | 1,460 | 1,231 | ||||||||||||||
CASH PROVIDED BY OPERATING ACTIVITIES | 2,558 | 1,966 | 2,496 | 1,814 | ||||||||||||||
INVESTING ACTIVITIES | ||||||||||||||||||
Capital expenditures 1 | (477 | ) | (448 | ) | (828 | ) | (746 | ) | ||||||||||
Business acquisitions, net of cash acquired | (27 | ) | (19 | ) | (68 | ) | (40 | ) | ||||||||||
Other | (4 | ) | (29 | ) | 30 | (38 | ) | |||||||||||
Net changes in non-cash working capital | (9 | ) | 65 | (108 | ) | 5 | ||||||||||||
CASH USED IN INVESTING ACTIVITIES | (517 | ) | (431 | ) | (974 | ) | (819 | ) | ||||||||||
FINANCING ACTIVITIES | ||||||||||||||||||
Transaction costs related to debt | - | (7 | ) | - | (7 | ) | ||||||||||||
(Repayment of) proceeds from short-term debt, net | (604 | ) | (104 | ) | 850 | (3 | ) | |||||||||||
Proceeds from long-term debt | 41 | 8 | 41 | 8 | ||||||||||||||
Repayment of long-term debt | (26 | ) | (5 | ) | (28 | ) | (5 | ) | ||||||||||
Repayment of principal portion of lease liabilities | (94 | ) | (86 | ) | (173 | ) | (164 | ) | ||||||||||
Dividends paid to Nutrien’s shareholders | 7 | (264 | ) | (263 | ) | (521 | ) | (518 | ) | |||||||||
Repurchase of common shares | 7 | (964 | ) | (1 | ) | (1,606 | ) | (2 | ) | |||||||||
Issuance of common shares | 38 | 21 | 164 | 63 | ||||||||||||||
Other | (5 | ) | (12 | ) | (17 | ) | (12 | ) | ||||||||||
CASH USED IN FINANCING ACTIVITIES | (1,878 | ) | (449 | ) | (1,290 | ) | (640 | ) | ||||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (29 | ) | (4 | ) | (20 | ) | (15 | ) | ||||||||||
INCREASE IN CASH AND CASH EQUIVALENTS | 134 | 1,082 | 212 | 340 | ||||||||||||||
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD | 577 | 712 | 499 | 1,454 | ||||||||||||||
CASH AND CASH EQUIVALENTS – END OF PERIOD | 711 | 1,794 | 711 | 1,794 | ||||||||||||||
Cash and cash equivalents comprised of: | ||||||||||||||||||
Cash | 628 | 1,580 | 628 | 1,580 | ||||||||||||||
Short-term investments | 83 | 214 | 83 | 214 | ||||||||||||||
711 | 1,794 | 711 | 1,794 | |||||||||||||||
SUPPLEMENTAL CASH FLOWS INFORMATION | ||||||||||||||||||
Interest paid | 150 | 162 | 200 | 238 | ||||||||||||||
Income taxes paid | 396 | 105 | 1,185 | 144 | ||||||||||||||
Total cash outflow for leases | 121 | 111 | 228 | 208 |
1 Includes additions to property, plant and equipment and intangible assets for the three months ended June 30, 2022 of $427 and $50 (2021 – $443 and $5), respectively, and for the six months ended June 30, 2022 of $733 and $95 (2021 – $708 and $38), respectively.
(See Notes to the Condensed Consolidated Financial Statements)
29
Unaudited | In millions of US dollars except as otherwise noted |
Condensed Consolidated Statements of Changes in Shareholders’ Equity
Accumulated Other Comprehensive (Loss) Income (“AOCI”) | ||||||||||||||||||||||||||||||||||||||||
Number of Common Shares | Share Capital | Contributed Surplus | Loss on Currency Translation of Foreign Operations | Other | Total AOCI | Retained Earnings | Equity Holders of Nutrien | Non- Controlling Interest | Total Equity | |||||||||||||||||||||||||||||||
BALANCE – DECEMBER 31, 2020 | 569,260,406 | 15,673 | 205 | (62 | ) | (57 | ) | (119 | ) | 6,606 | 22,365 | 38 | 22,403 | |||||||||||||||||||||||||||
Net earnings | - | - | - | - | - | - | 1,235 | 1,235 | 11 | 1,246 | ||||||||||||||||||||||||||||||
Other comprehensive (loss) income | - | - | - | (4 | ) | 90 | 86 | - | 86 | (1 | ) | 85 | ||||||||||||||||||||||||||||
Shares repurchased (Note 7) | (32,728 | ) | (1 | ) | (1 | ) | - | - | - | - | (2 | ) | - | (2 | ) | |||||||||||||||||||||||||
Dividends declared | - | - | - | - | - | - | (526 | ) | (526 | ) | - | (526 | ) | |||||||||||||||||||||||||||
Non-controlling interest transactions | - | - | - | - | - | - | - | - | (12 | ) | (12 | ) | ||||||||||||||||||||||||||||
Effect of share-based compensation including issuance of common shares | 1,427,381 | 74 | (3 | ) | - | - | - | - | 71 | - | 71 | |||||||||||||||||||||||||||||
Transfer of net gain on cash flow hedges | - | - | - | - | (11 | ) | (11 | ) | - | (11 | ) | - | (11 | ) | ||||||||||||||||||||||||||
BALANCE – JUNE 30, 2021 | 570,655,059 | 15,746 | 201 | (66 | ) | 22 | (44 | ) | 7,315 | 23,218 | 36 | 23,254 | ||||||||||||||||||||||||||||
BALANCE – DECEMBER 31, 2021 | 557,492,516 | 15,457 | 149 | (176 | ) | 30 | (146 | ) | 8,192 | 23,652 | 47 | 23,699 | ||||||||||||||||||||||||||||
Net earnings | - | - | - | - | - | - | 4,971 | 4,971 | 15 | 4,986 | ||||||||||||||||||||||||||||||
Other comprehensive (loss) income | - | - | - | (80 | ) | 15 | (65 | ) | - | (65 | ) | (1 | ) | (66 | ) | |||||||||||||||||||||||||
Shares repurchased (Note 7) | (19,360,408 | ) | (539 | ) | (22 | ) | - | - | - | (1,075 | ) | (1,636 | ) | - | (1,636 | ) | ||||||||||||||||||||||||
Dividends declared | - | - | - | - | - | - | (526 | ) | (526 | ) | - | (526 | ) | |||||||||||||||||||||||||||
Non-controlling interest transactions | - | - | - | - | - | - | - | - | (17 | ) | (17 | ) | ||||||||||||||||||||||||||||
Effect of share-based compensation including issuance of common shares | 2,994,221 | 197 | (22 | ) | - | - | - | - | 175 | - | 175 | |||||||||||||||||||||||||||||
Transfer of net gain on cash flow hedges | - | - | - | - | (2 | ) | (2 | ) | - | (2 | ) | - | (2 | ) | ||||||||||||||||||||||||||
Transfer of net actuarial gain on defined benefit plans | - | - | - | - | (1 | ) | (1 | ) | 1 | - | - | - | ||||||||||||||||||||||||||||
BALANCE – JUNE 30, 2022 | 541,126,329 | 15,115 | 105 | (256 | ) | 42 | (214 | ) | 11,563 | 26,569 | 44 | 26,613 | ||||||||||||||||||||||||||||
(See Notes to the Condensed Consolidated Financial Statements) |
|
30
Unaudited | In millions of US dollars except as otherwise noted |
Condensed Consolidated Balance Sheets
June 30 | December 31 | |||||||||||||||
As at | Note | 2022 | 2021 | 2021 | ||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | 711 | 1,794 | 499 | |||||||||||||
Receivables | 10,171 | 6,683 | 5,366 | |||||||||||||
Inventories | 7,160 | 4,876 | 6,328 | |||||||||||||
Prepaid expenses and other current assets | 615 | 524 | 1,653 | |||||||||||||
18,657 | 13,877 | 13,846 | ||||||||||||||
Non-current assets | ||||||||||||||||
Property, plant and equipment | 20,492 | 19,592 | 20,016 | |||||||||||||
Goodwill | 12,213 | 12,211 | 12,220 | |||||||||||||
Other intangible assets | 2,283 | 2,393 | 2,340 | |||||||||||||
Investments | 731 | 619 | 703 | |||||||||||||
Other assets | 859 | 664 | 829 | |||||||||||||
TOTAL ASSETS | 55,235 | 49,356 | 49,954 | |||||||||||||
LIABILITIES | ||||||||||||||||
Current liabilities | ||||||||||||||||
Short-term debt | 2,403 | 210 | 1,560 | |||||||||||||
Current portion of long-term debt | 1,028 | 32 | 545 | |||||||||||||
Current portion of lease liabilities | 303 | 276 | 286 | |||||||||||||
Payables and accrued charges | 11,682 | 9,367 | 10,052 | |||||||||||||
15,416 | 9,885 | 12,443 | ||||||||||||||
Non-current liabilities | ||||||||||||||||
Long-term debt | 7,056 | 10,029 | 7,521 | |||||||||||||
Lease liabilities | 913 | 900 | 934 | |||||||||||||
Deferred income tax liabilities | 5 | 3,253 | 3,118 | 3,165 | ||||||||||||
Pension and other post-retirement benefit liabilities | 422 | 458 | 419 | |||||||||||||
Asset retirement obligations and accrued environmental costs | 1,376 | 1,559 | 1,566 | |||||||||||||
Other non-current liabilities | 186 | 153 | 207 | |||||||||||||
TOTAL LIABILITIES | 28,622 | 26,102 | 26,255 | |||||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||||||
Share capital | 7 | 15,115 | 15,746 | 15,457 | ||||||||||||
Contributed surplus | 105 | 201 | 149 | |||||||||||||
Accumulated other comprehensive loss | (214 | ) | (44 | ) | (146 | ) | ||||||||||
Retained earnings | 11,563 | 7,315 | 8,192 | |||||||||||||
Equity holders of Nutrien | 26,569 | 23,218 | 23,652 | |||||||||||||
Non-controlling interest | 44 | 36 | 47 | |||||||||||||
TOTAL SHAREHOLDERS’ EQUITY | 26,613 | 23,254 | 23,699 | |||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 55,235 | 49,356 | 49,954 |
(See Notes to the Condensed Consolidated Financial Statements)
31
Unaudited | In millions of US dollars except as otherwise noted |
Notes to the Condensed Consolidated Financial Statements
As at and for the Three and Six Months Ended June 30, 2022
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 (“IFRS”) as issued by the International Accounting Standards Board 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 materially consistent with those used in the preparation of our 2021 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 2021 annual audited consolidated financial statements.
Certain immaterial 2021 figures have been reclassified in the condensed consolidated statements of cash flows and segment note.
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.
These interim financial statements were authorized by the audit committee of the Board of Directors for issue on August 3, 2022.
NOTE 2 SEGMENT INFORMATION
The Company has four reportable operating segments: Nutrien Ag Solutions (“Retail”), Potash, Nitrogen and Phosphate. The Retail segment distributes crop nutrients, crop protection products, seed and merchandise, and it 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 produce.
32
Unaudited | In millions of US dollars except as otherwise noted |
Three Months Ended June 30, 2022 | ||||||||||||||||||||||||||||
Retail | Potash | Nitrogen | Phosphate | Corporate and Others | Eliminations | Consolidated | ||||||||||||||||||||||
Sales – third party | 9,377 | 2,667 | 1,915 | 547 | - | - | 14,506 | |||||||||||||||||||||
– intersegment | 45 | 78 | 446 | 98 | - | (667 | ) | - | ||||||||||||||||||||
Sales – total | 9,422 | 2,745 | 2,361 | 645 | - | (667 | ) | 14,506 | ||||||||||||||||||||
Freight, transportation and distribution | - | 77 | 132 | 55 | - | (43 | ) | 221 | ||||||||||||||||||||
Net sales | 9,422 | 2,668 | 2,229 | 590 | - | (624 | ) | 14,285 | ||||||||||||||||||||
Cost of goods sold | 7,082 | 399 | 1,171 | 434 | - | (800 | ) | 8,286 | ||||||||||||||||||||
Gross margin | 2,340 | 2,269 | 1,058 | 156 | - | 176 | 5,999 | |||||||||||||||||||||
Selling expenses | 1,013 | 3 | 7 | 2 | (2 | ) | (6 | ) | 1,017 | |||||||||||||||||||
General and administrative expenses | 54 | 2 | 4 | 3 | 77 | - | 140 | |||||||||||||||||||||
Provincial mining taxes | - | 362 | - | - | - | - | 362 | |||||||||||||||||||||
Share-based compensation recovery | - | - | - | - | (52 | ) | - | (52 | ) | |||||||||||||||||||
Impairment reversal of assets | - | - | - | (450 | ) | - | - | (450 | ) | |||||||||||||||||||
Other expenses (income) | 21 | 5 | (54 | ) | 8 | 48 | 9 | 37 | ||||||||||||||||||||
Earnings (loss) before finance costs and income taxes | 1,252 | 1,897 | 1,101 | 593 | (71 | ) | 173 | 4,945 | ||||||||||||||||||||
Depreciation and amortization | 175 | 130 | 139 | 41 | 20 | - | 505 | |||||||||||||||||||||
EBITDA 1 | 1,427 | 2,027 | 1,240 | 634 | (51 | ) | 173 | 5,450 | ||||||||||||||||||||
Integration and restructuring related costs | - | - | - | - | 11 | - | 11 | |||||||||||||||||||||
Share-based compensation recovery | - | - | - | - | (52 | ) | - | (52 | ) | |||||||||||||||||||
Impairment reversal of assets | - | - | - | (450 | ) | - | - | (450 | ) | |||||||||||||||||||
COVID-19 related expenses | - | - | - | - | 3 | - | 3 | |||||||||||||||||||||
Foreign exchange loss, net of | - | - | - | - | 31 | - | 31 | |||||||||||||||||||||
Adjusted EBITDA | 1,427 | 2,027 | 1,240 | 184 | (58 | ) | 173 | 4,993 | ||||||||||||||||||||
Assets – at June 30, 2022 | 24,825 | 14,777 | 11,726 | 2,396 | 2,562 | (1,051 | ) | 55,235 | ||||||||||||||||||||
1 EBITDA is calculated as net earnings (loss) before finance costs, income taxes, and depreciation and amortization. |
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Three Months Ended June 30, 2021 | ||||||||||||||||||||||||||||
Retail | Potash | Nitrogen | Phosphate | Corporate and Others | Eliminations | Consolidated | ||||||||||||||||||||||
Sales – third party | 7,522 | 844 | 1,008 | 389 | - | - | 9,763 | |||||||||||||||||||||
– intersegment | 15 | 61 | 307 | 60 | - | (443 | ) | - | ||||||||||||||||||||
Sales – total | 7,537 | 905 | 1,315 | 449 | - | (443 | ) | 9,763 | ||||||||||||||||||||
Freight, transportation and distribution | - | 88 | 136 | 46 | - | (48 | ) | 222 | ||||||||||||||||||||
Net sales | 7,537 | 817 | 1,179 | 403 | - | (395 | ) | 9,541 | ||||||||||||||||||||
Cost of goods sold | 5,679 | 317 | 763 | 319 | - | (419 | ) | 6,659 | ||||||||||||||||||||
Gross margin | 1,858 | 500 | 416 | 84 | - | 24 | 2,882 | |||||||||||||||||||||
Selling expenses | 863 | 2 | 8 | 1 | (9 | ) | - | 865 | ||||||||||||||||||||
General and administrative expenses | 41 | 3 | 3 | 3 | 66 | - | 116 | |||||||||||||||||||||
Provincial mining taxes | - | 107 | - | - | - | - | 107 | |||||||||||||||||||||
Share-based compensation expense | - | - | - | - | 38 | - | 38 | |||||||||||||||||||||
Impairment of assets | - | - | 1 | - | - | - | 1 | |||||||||||||||||||||
Other expenses | 34 | 11 | 5 | 3 | 83 | - | 136 | |||||||||||||||||||||
Earnings (loss) before finance costs and income taxes | 920 | 377 | 399 | 77 | (178 | ) | 24 | 1,619 | ||||||||||||||||||||
Depreciation and amortization | 169 | 116 | 155 | 35 | 10 | - | 485 | |||||||||||||||||||||
EBITDA | 1,089 | 493 | 554 | 112 | (168 | ) | 24 | 2,104 | ||||||||||||||||||||
Integration and restructuring related costs | 7 | - | - | - | 22 | - | 29 | |||||||||||||||||||||
Share-based compensation expense | - | - | - | - | 38 | - | 38 | |||||||||||||||||||||
Impairment of assets | - | - | 1 | - | - | - | 1 | |||||||||||||||||||||
COVID-19 related expenses | - | - | - | - | 9 | - | 9 | |||||||||||||||||||||
Foreign exchange gain, net of | - | - | - | - | (2 | ) | - | (2 | ) | |||||||||||||||||||
Cloud computing transition adjustment | 1 | 2 | - | - | 33 | - | 36 | |||||||||||||||||||||
Adjusted EBITDA | 1,097 | 495 | 555 | 112 | (68 | ) | 24 | 2,215 | ||||||||||||||||||||
Assets – at December 31, 2021 | 22,387 | 13,148 | 11,093 | 1,699 | 2,266 | (639 | ) | 49,954 |
33
Unaudited | In millions of US dollars except as otherwise noted |
Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||||
Retail | Potash | Nitrogen | Phosphate | Corporate and Others | Eliminations | Consolidated | ||||||||||||||||||||||
Sales – third party | 13,210 | 4,377 | 3,412 | 1,164 | - | - | 22,163 | |||||||||||||||||||||
– intersegment | 73 | 312 | 785 | 177 | - | (1,347 | ) | - | ||||||||||||||||||||
Sales – total | 13,283 | 4,689 | 4,197 | 1,341 | - | (1,347 | ) | 22,163 | ||||||||||||||||||||
Freight, transportation and distribution | - | 171 | 227 | 116 | - | (90 | ) | 424 | ||||||||||||||||||||
Net sales | 13,283 | 4,518 | 3,970 | 1,225 | - | (1,257 | ) | 21,739 | ||||||||||||||||||||
Cost of goods sold | 10,098 | 704 | 2,052 | 862 | - | (1,233 | ) | 12,483 | ||||||||||||||||||||
Gross margin | 3,185 | 3,814 | 1,918 | 363 | - | (24 | ) | 9,256 | ||||||||||||||||||||
Selling expenses | 1,735 | 6 | 15 | 4 | (4 | ) | (12 | ) | 1,744 | |||||||||||||||||||
General and administrative expenses | 99 | 4 | 10 | 6 | 147 | - | 266 | |||||||||||||||||||||
Provincial mining taxes | - | 611 | - | - | - | - | 611 | |||||||||||||||||||||
Share-based compensation expense | - | - | - | - | 83 | - | 83 | |||||||||||||||||||||
Impairment reversal of assets | - | - | - | (450 | ) | - | - | (450 | ) | |||||||||||||||||||
Other expenses (income) | 9 | 2 | (80 | ) | 12 | 101 | 14 | 58 | ||||||||||||||||||||
Earnings (loss) before finance costs and income taxes | 1,342 | 3,191 | 1,973 | 791 | (327 | ) | (26 | ) | 6,944 | |||||||||||||||||||
Depreciation and amortization | 344 | 242 | 262 | 82 | 36 | - | 966 | |||||||||||||||||||||
EBITDA | 1,686 | 3,433 | 2,235 | 873 | (291 | ) | (26 | ) | 7,910 | |||||||||||||||||||
Integration and restructuring related costs | - | - | - | - | 20 | - | 20 | |||||||||||||||||||||
Share-based compensation expense | - | - | - | - | 83 | - | 83 | |||||||||||||||||||||
Impairment reversal of assets | - | - | - | (450 | ) | - | - | (450 | ) | |||||||||||||||||||
COVID-19 related expenses | - | - | - | - | 8 | - | 8 | |||||||||||||||||||||
Foreign exchange loss, net of | - | - | - | - | 56 | - | 56 | |||||||||||||||||||||
Gain on disposal of investment | (19 | ) | - | - | - | - | - | (19 | ) | |||||||||||||||||||
Adjusted EBITDA | 1,667 | 3,433 | 2,235 | 423 | (124 | ) | (26 | ) | 7,608 | |||||||||||||||||||
Assets – at June 30, 2022 | 24,825 | 14,777 | 11,726 | 2,396 | 2,562 | (1,051 | ) | 55,235 | ||||||||||||||||||||
Six Months Ended June 30, 2021 | ||||||||||||||||||||||||||||
Retail | Potash | Nitrogen | Phosphate | Corporate and Others | Eliminations | Consolidated | ||||||||||||||||||||||
Sales – third party | 10,482 | 1,475 | 1,703 | 761 | - | - | 14,421 | |||||||||||||||||||||
– intersegment | 27 | 151 | 467 | 132 | - | (777 | ) | - | ||||||||||||||||||||
Sales – total | 10,509 | 1,626 | 2,170 | 893 | - | (777 | ) | 14,421 | ||||||||||||||||||||
Freight, transportation and distribution | - | 198 | 231 | 105 | - | (101 | ) | 433 | ||||||||||||||||||||
Net sales | 10,509 | 1,428 | 1,939 | 788 | - | (676 | ) | 13,988 | ||||||||||||||||||||
Cost of goods sold | 7,999 | 608 | 1,373 | 638 | - | (668 | ) | 9,950 | ||||||||||||||||||||
Gross margin | 2,510 | 820 | 566 | 150 | - | (8 | ) | 4,038 | ||||||||||||||||||||
Selling expenses | 1,530 | 5 | 15 | 3 | (15 | ) | - | 1,538 | ||||||||||||||||||||
General and administrative expenses | 80 | 5 | 5 | 5 | 124 | - | 219 | |||||||||||||||||||||
Provincial mining taxes | - | 165 | - | - | - | - | 165 | |||||||||||||||||||||
Share-based compensation expense | - | - | - | - | 61 | - | 61 | |||||||||||||||||||||
Impairment of assets | - | - | 5 | - | - | - | 5 | |||||||||||||||||||||
Other expenses (income) | 49 | 12 | (25 | ) | 6 | 111 | - | 153 | ||||||||||||||||||||
Earnings (loss) before finance costs and income taxes | 851 | 633 | 566 | 136 | (281 | ) | (8 | ) | 1,897 | |||||||||||||||||||
Depreciation and amortization | 346 | 240 | 284 | 73 | 22 | - | 965 | |||||||||||||||||||||
EBITDA | 1,197 | 873 | 850 | 209 | (259 | ) | (8 | ) | 2,862 | |||||||||||||||||||
Integration and restructuring related costs | 8 | - | - | - | 31 | - | 39 | |||||||||||||||||||||
Share-based compensation expense | - | - | - | - | 61 | - | 61 | |||||||||||||||||||||
Impairment of assets | - | - | 5 | - | - | - | 5 | |||||||||||||||||||||
COVID-19 related expenses | - | - | - | - | 18 | - | 18 | |||||||||||||||||||||
Cloud computing transition adjustment | 1 | 2 | - | - | 33 | - | 36 | |||||||||||||||||||||
Adjusted EBITDA | 1,206 | 875 | 855 | 209 | (116 | ) | (8 | ) | 3,021 | |||||||||||||||||||
Assets – at December 31, 2021 | 22,387 | 13,148 | 11,093 | 1,699 | 2,266 | (639 | ) | 49,954 |
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Unaudited | In millions of US dollars except as otherwise noted |
Presented below is revenue from contracts with customers disaggregated by product line or geographic location for each reportable segment.
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Retail sales by product line | ||||||||||||||||
Crop nutrients | 4,548 | 3,045 | 6,135 | 4,061 | ||||||||||||
Crop protection products | 2,983 | 2,666 | 4,370 | 3,751 | ||||||||||||
Seed | 1,269 | 1,216 | 1,727 | 1,679 | ||||||||||||
Merchandise | 280 | 268 | 514 | 498 | ||||||||||||
Nutrien Financial | 91 | 59 | 140 | 84 | ||||||||||||
Services and other 1 | 310 | 320 | 485 | 485 | ||||||||||||
Nutrien Financial elimination 1,2 | (59 | ) | (37 | ) | (88 | ) | (49 | ) | ||||||||
9,422 | 7,537 | 13,283 | 10,509 | |||||||||||||
Potash sales by geography | ||||||||||||||||
Manufactured product | ||||||||||||||||
North America | 757 | 414 | 1,684 | 856 | ||||||||||||
Offshore 3 | 1,988 | 491 | 3,005 | 770 | ||||||||||||
2,745 | 905 | 4,689 | 1,626 | |||||||||||||
Nitrogen sales by product line | ||||||||||||||||
Manufactured product | ||||||||||||||||
Ammonia | 786 | 405 | 1,377 | 593 | ||||||||||||
Urea | 637 | 372 | 1,121 | 646 | ||||||||||||
Solutions, nitrates and sulfates | 578 | 329 | 1,052 | 526 | ||||||||||||
Other nitrogen and purchased products | 360 | 209 | 647 | 405 | ||||||||||||
2,361 | 1,315 | 4,197 | 2,170 | |||||||||||||
Phosphate sales by product line | ||||||||||||||||
Manufactured product | ||||||||||||||||
Fertilizer | 358 | 258 | 790 | 530 | ||||||||||||
Industrial and feed | 204 | 133 | 388 | 259 | ||||||||||||
Other phosphate and purchased products | 83 | 58 | 163 | 104 | ||||||||||||
645 | 449 | 1,341 | 893 | |||||||||||||
1 Certain immaterial 2021 figures have been reclassified. 2 Represents elimination for the interest and service fees charged by Nutrien Financial to Retail branches. 3 Relates to Canpotex Limited (“Canpotex”) (Note 9) and includes provisional pricing adjustments for the three months ended June 30, 2022 of $191 (2021 – $45) and the six months ended June 30, 2022 of $253 (2021 – $51). |
NOTE 3 IMPAIRMENT OF ASSETS
Phosphate Impairment Reversal
In the three months ended June 30, 2022, we revised our pricing forecasts to reflect the current macroeconomic environment. This resulted in a review of our previously impaired Phosphate cash-generating units (“CGUs”).
In 2020, we recorded an impairment of assets relating to property, plant and equipment of $545 at our Aurora CGU as a result of lower long-term forecasted global phosphate prices. Due to increases in our forecast, the recoverable amount of our Aurora CGU is above its carrying amount. As a result, during the three and six months ended June 30, 2022, we recorded an impairment reversal of $450 (full reversal, net of depreciation) in the statement of earnings relating to property, plant and equipment.
Aurora CGU | ||
Segment | Phosphate | |
Impairment reversal indicator | Higher forecasted global prices | |
Valuation methodology | Fair value less costs of disposal (“FVLCD”) | |
Fair value hierarchy | Level 3 | |
Valuation technique | Five-year DCF1 plus terminal year to end of mine life | |
Key assumptions | ||
End of mine life (proven and probable reserves) (year) | 2050 | |
Long-term growth rate (%) | 2.0 | |
Post-tax discount rate (%) 2 | 10.4 | |
1 Discounted Cash Flow 2 Post-tax discount rate used in the previous measurement was 10.5% |
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Unaudited | In millions of US dollars except as otherwise noted |
Aurora CGU | As at June 30, 2022 | |
Recoverable amount | 2,900 | |
Carrying amount | 1,200 |
The recoverable amount estimate is most sensitive to the following key assumptions: our internal sales and input price forecasts, which consider projections from independent third-party data sources, discount rate, 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, and mineral reserve technical reports, as well as industry and market trends. For our Aurora CGU, there were no reasonably possible changes in key assumptions that would result in a substantial change in the reversal amount.
In 2017 and 2020, we recorded an impairment of assets at our White Springs CGU relating to property, plant and equipment of $250 and $215 respectively. The White Springs CGU has a shorter expected mine life and is therefore more sensitive to changes in short and medium-term pricing forecasts. The impairment test performed on our White Springs CGU at June 30, 2022 did not result in recognition of an impairment reversal as the recoverable amount was not substantially different than the carrying amount of the CGU. We are continuously monitoring our key assumptions for changes that could have an impact on the recoverable amount including our internal sales and input price forecasts. Changes in these key assumptions could result in impairment reversals in future periods. The maximum impairment reversal that could result at our White Springs CGU is $340 (full reversal, net of depreciation).
Goodwill Impairment Indicators
During the six months ended June 30, 2022, North American central banks continued to increase their benchmark borrowing rates and have forecasted additional near-term increases. Benchmark borrowing rates are used as the risk-free rate which, is a component of determining our discount rate for impairment testing. As a result of these increases, we revised our discount rate to 8.0 percent (previous annual impairment analysis – 7.4 percent) and this triggered an impairment test to be performed for our Retail – North America group of CGUs. We used the FVLCD methodology based on after-tax discounted cash flows (five-year projections and a terminal year thereafter) and incorporated assumptions an independent market participant would apply. FVLCD is a Level 3 measurement.
Retail - North America group of CGUs | 2021 Impairment Analysis | As at June 30, 2022 | ||||
Carrying amount of goodwill (billions) | 6.9 | 6.9 | ||||
Excess carrying amount over recoverable amount (billions) | 1.5 | 0.8 | ||||
Excess carrying amount over recoverable amount (percent) | 12 | 7 | ||||
Goodwill is more susceptible to impairment risk if business operating results or economic conditions deteriorate and actual results do not meet our forecasts. A reduction in the terminal growth rate, an increase in the discount rate or a decrease in forecasted EBITDA and cash flows could cause impairment in the future.
The following table indicates the percentages by which key assumptions would need to change individually for the estimated recoverable amount to be equal to the carrying amount:
| ||||||
Key Assumptions | Value Used in Impairment Model | Change Required for Carrying Amount to Equal Recoverable Amount | ||||
Terminal growth rate (%) | 2.5 | percentage point decrease | 0.6 | |||
Forecasted EBITDA over forecast period (in billions of US dollars) | 7.5 | percent decrease | 5.0 | |||
Discount rate (%) | 8.0 | percentage point increase | 0.4 |
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Unaudited | In millions of US dollars except as otherwise noted |
NOTE 4 OTHER EXPENSES (INCOME)
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Integration and restructuring related costs | 11 | 29 | 20 | 39 | ||||||||||||
Foreign exchange loss, net of related derivatives | 31 | 1 | 56 | 3 | ||||||||||||
Earnings of equity-accounted investees | (77 | ) | (2 | ) | (118 | ) | (22 | ) | ||||||||
Bad debt expense | 14 | 13 | 14 | 15 | ||||||||||||
COVID-19 related expenses | 3 | 9 | 8 | 18 | ||||||||||||
Gain on disposal of investment | - | - | (19 | ) | - | |||||||||||
Cloud computing transition adjustment | - | 36 | - | 36 | ||||||||||||
Other expenses | 55 | 50 | 97 | 64 | ||||||||||||
37 | 136 | 58 | 153 |
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 June 30 | Six Months Ended June 30 | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Income tax expense | 1,214 | 381 | 1,719 | 406 | ||||||||||||
Actual effective tax rate on earnings (%) | 25 | 26 | 26 | 25 | ||||||||||||
Actual effective tax rate including discrete items (%) | 25 | 26 | 25 | 25 | ||||||||||||
Discrete tax adjustments that impacted the tax rate | 12 | (3 | ) | 20 | (3 | ) |
Income tax balances within the condensed consolidated balance sheets were comprised of the following:
Income Tax Assets and Liabilities | Balance Sheet Location | As at June 30, 2022 | As at December 31, 2021 | |||
Income tax assets | ||||||
Current | Receivables | 252 | 223 | |||
Non-current | Other assets | 132 | 166 | |||
Deferred income tax assets | Other assets | 355 | 262 | |||
Total income tax assets | 739 | 651 | ||||
Income tax liabilities | ||||||
Current | Payables and accrued charges | 1,132 | 606 | |||
Non-current | Other non-current liabilities | 52 | 44 | |||
Deferred income tax liabilities | Deferred income tax liabilities | 3,253 | 3,165 | |||
Total income tax liabilities | 4,437 | 3,815 |
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Unaudited | In millions of US dollars except as otherwise noted |
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 10 of the 2021 annual consolidated financial statements and those valuation methods have been applied in these interim financial statements.
The following table presents our fair value hierarchy for financial instruments carried at fair value on a recurring basis or measured at amortized cost:
June 30, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||
Financial assets (liabilities) measured at | Carrying Amount | Level 1 | Level 2 | Level 3 | Carrying Amount | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
Fair value on a recurring basis 1 | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | 711 | - | 711 | - | 499 | - | 499 | - | ||||||||||||||||||||||||
Derivative instrument assets | 34 | - | 34 | - | 19 | - | 19 | - | ||||||||||||||||||||||||
Other current financial assets - marketable securities 2 | 133 | 18 | 115 | - | 134 | 19 | 115 | - | ||||||||||||||||||||||||
Investments at FVTOCI 3 | 237 | 227 | - | 10 | 244 | 234 | - | 10 | ||||||||||||||||||||||||
Derivative instrument liabilities | (24 | ) | - | (24 | ) | - | (20 | ) | - | (20 | ) | - | ||||||||||||||||||||
Amortized cost | ||||||||||||||||||||||||||||||||
Current portion of long-term debt | ||||||||||||||||||||||||||||||||
Notes and debentures | (999 | ) | - | (995 | ) | - | (500 | ) | (506 | ) | - | - | ||||||||||||||||||||
Fixed and floating rate debt | (29 | ) | - | (29 | ) | - | (45 | ) | - | (45 | ) | - | ||||||||||||||||||||
Long-term debt | ||||||||||||||||||||||||||||||||
Notes and debentures | (6,921 | ) | (931 | ) | (5,683 | ) | - | (7,424 | ) | (4,021 | ) | (4,709 | ) | - | ||||||||||||||||||
Fixed and floating rate debt | (135 | ) | - | (135 | ) | - | (97 | ) | - | (97 | ) | - | ||||||||||||||||||||
1 During the periods ended June 30, 2022 and December 31, 2021, there were no transfers between levelling 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. |
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3 Investments at fair value through other comprehensive income (“FVTOCI”) is primarily comprised of shares in Sinofert Holdings Ltd. |
|
NOTE 7 SHARE CAPITAL
Share Repurchase Programs
Commencement Date | Expiry | Maximum Shares for Repurchase | Maximum Shares for Repurchase (%) | Number of Shares Repurchased | ||||||
| ||||||||||
2020 Normal Course Issuer Bid | February 27, 2020 | February 26, 2021 | 28,572,458 | 5 | 710,100 | |||||
2021 Normal Course Issuer Bid | March 1, 2021 | February 28, 2022 | 28,468,448 | 5 | 22,186,395 | |||||
2022 Normal Course Issuer Bid 1 | March 1, 2022 | February 28, 2023 | 55,111,110 | 10 | 13,156,167 | |||||
| ||||||||||
1 The 2022 normal course issuer bid will 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 laws, including private agreements.
38
Unaudited | In millions of US dollars except as otherwise noted |
The following table summarizes our share repurchase activities during the period:
Three Months Ended June 30 | Six Months Ended June 30 | |||||||
| 2022 | 2021 | 2022 | 2021 | ||||
Number of common shares repurchased for cancellation | 11,712,173 | 17,750 | 19,360,408 | 32,728 | ||||
Average price per share (US dollars) | 89.51 | 52.88 | 84.48 | 52.90 | ||||
Total cost
| 1,049
| 1
| 1,636
| 2
|
As of August 2, 2022, an additional 2,205,645 common shares were repurchased for cancellation at a cost of $172 and an average price per share of $78.21.
Dividends Declared
We declared a dividend per share of $0.48 (2021 – $0.46) during the three months ended June 30, 2022, payable on July 15, 2022 to shareholders of record on June 30, 2022.
NOTE 8 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 suppliers are typically concentrated in the period from November to January. Feed and industrial sales are more evenly distributed throughout the year.
NOTE 9 RELATED PARTY TRANSACTIONS
We sell potash outside Canada and the United States exclusively through 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 | June 30, 2022 | December 31, 2021 | ||
Receivables from Canpotex | 1,805 | 828 |
NOTE 10 SUBSEQUENT EVENTS
On July 20, 2022, Nutrien announced the planned acquisition of Casa do Adubo S.A. The acquisition includes 39 retail locations and 10 distribution centers in Brazil. Closing of the transaction is subject to approval from the Administrative Council for Economic Defense (CADE) in Brazil and is expected to be completed in the second half of 2022.
Subsequent to June 30, 2022, and in addition to the $500 increase in our uncommitted revolving demand facility during the second quarter of 2022, we entered into $2 billion in new non-revolving term credit facilities, all with the same principal covenants and events of default as our existing revolving term credit facilities. These new facilities are temporary to help manage normal seasonal working capital swings and are intended to be closed before year-end. As of August 2, 2022, we had approximately $3.0 billion drawn on our credit facilities and a commercial paper balance of approximately $2.1 billion.
39