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Nutrien (NTR)

Filed: 3 Aug 22, 9:57pm

Exhibit 99.1

LOGO

  News Release

 

NYSE, TSX: NTR

 

August 3, 2022 – all amounts are in US dollars except as otherwise noted

Nutrien Delivers Record First Half Earnings

and Expects Strong Second Half

Nutrien is accelerating growth initiatives and announces intention to complete its existing 10 percent share repurchase program in 2022

SASKATOON, Saskatchewan - Nutrien Ltd. (TSX and NYSE: NTR) announced today its second quarter 2022 results, with net earnings of $3.6 billion ($6.51 diluted net earnings per share), which includes a non-cash impairment reversal of $450 million relating to our Phosphate operations. Second quarter 2022 adjusted net earnings per share1 were $5.85 and adjusted EBITDA1 was $5.0 billion.

“Nutrien delivered record earnings in the first half of 2022 due to the strength of market fundamentals, strong operating performance, the advantaged position of our global production assets and the excellent results of Retail. We generated strong results across our integrated business and demonstrated our unmatched capability to efficiently supply our customers with the products they need to help sustainably feed a growing world,” commented Ken Seitz, Nutrien’s Interim President and CEO.

“We expect supply challenges across global energy, agriculture and fertilizer markets to persist well beyond 2022. The strength of our projected cash flow provides an opportunity to accelerate high-return strategic growth initiatives and return significant capital to shareholders. We intend on completing our 10 percent share repurchase program in 2022, increasing the total amount of capital returned to shareholders to approximately $6 billion during the year,” added Mr. Seitz.

Highlights:

 

 

Nutrien generated net earnings of $5.0 billion and adjusted EBITDA1 of $7.6 billion in the first half of 2022 due to higher realized prices and strong Retail performance, more than offsetting a reduction in fertilizer sales volumes. As a result, cash provided by operating activities increased to $2.5 billion in the first half of 2022.

 

 

Nutrien revised full-year 2022 adjusted EBITDA guidance1 and adjusted net earnings per share guidance1 to $14.0 to $15.5 billion and $15.80 to $17.80 per share, respectively. Adjusted net earnings per share guidance includes our plans to allocate approximately $5 billion to share repurchases in 2022.

 

 

Nutrien Ag Solutions (“Retail”) delivered record adjusted EBITDA in the second quarter and the first half of 2022. First-half adjusted EBITDA was up 38 percent year-over-year as a result of strong sales and gross margin growth, due to supportive market conditions in key regions where we operate. Retail cash operating coverage ratio1 improved to 54 percent compared to 60 percent for the same period in 2021 driven by higher margins.

 

 

Potash adjusted EBITDA in the second quarter and the first half of 2022 increased compared to the prior year due to higher net realized selling prices and strong offshore sales volumes. North American sales volumes were lower than the same period last year due to a compressed application season.

 

 

Nitrogen second quarter and first half adjusted EBITDA increased compared to the prior year due to higher net realized selling prices that more than offset higher natural gas costs and lower sales volumes.

 

 

In the second quarter of 2022, we recognized a non-cash impairment reversal of $450 million associated with our Phosphate operations due to a more favorable outlook for phosphate margins.

 

 

Nutrien repurchased approximately 22 million shares year-to-date as of August 2, 2022, under our share repurchase programs, for a total of approximately $1.8 billion.

 

 

On May 18, 2022, Nutrien announced it is evaluating its existing site at Geismar, Louisiana to build the world’s largest clean ammonia facility. The project would leverage low-cost natural gas, tidewater access to world markets, and high-quality carbon capture and sequestration infrastructure to serve growing demand in agricultural, industrial and emerging energy markets.

 

 

On June 9, 2022, Nutrien announced its intention to increase potash production capability to 18 million tonnes by 2025 in response to the uncertainty of potash supply from Eastern Europe being able to meet global demand.

 

 

Nutrien announced agreements to acquire Brazilian ag retail companies Casa do Adubo S.A. and Marca Agro Mercantil. These acquisitions support Nutrien’s Retail growth strategy in Brazil and upon completion of the acquisitions, we expect to surpass our stated target of $100 million annual adjusted EBITDA in Brazil by 2023.

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

 

1


Management’s Discussion and Analysis

The following management’s discussion and analysis (“MD&A”) is the responsibility of management and is dated as of August 3, 2022. 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 annual report dated February 17, 2022 (“2021 Annual Report”), which includes our annual audited consolidated financial statements and MD&A, and our annual information form dated February 17, 2022 (“2021 Annual Information Form”), each for the year ended December 31, 2021, 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 2021 annual MD&A except for material information since the date of our annual MD&A. The Company is a foreign private issuer under the rules and regulations of the US Securities and Exchange Commission (the “SEC”).

This MD&A is based on and should be read in conjunction with the Company’s unaudited interim condensed consolidated financial statements as at and for the three and six months ended June 30, 2022 (“interim financial statements”) based on International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting”, unless otherwise noted. This MD&A contains certain non-IFRS financial measures and ratios and forward-looking statements, which are described in the “Non-IFRS Financial Measures” and the “Forward-Looking Statements” sections, respectively.

Market Outlook and Guidance

Agriculture and Retail

 

 

Global grain and oilseed stocks-to-use ratios remain well below historical average levels, which we believe will continue to be supportive for crop prices. Prices for key crops such as corn, soybeans and wheat are up 25 to 35 percent compared to the 10-year average, providing strong incentive for growers to increase production.

 

 

The US Department of Agriculture (USDA) projects that Ukrainian wheat and corn production will be down by more than 40 percent and combined Ukrainian exports of corn, wheat and barley will be down by approximately 60 percent year-over-year in 2022/23. While diplomatic efforts to restore exports from Ukrainian ports has progressed, the overall reduction in Ukrainian production in 2022 is expected to continue to constrain supplies for the forthcoming year.

 

 

US crop conditions started the 2022 growing season favorably, however, recent hot and dry weather has accelerated crop development and could limit yield potential. In Western Canada, growing conditions have improved from the severe 2021 drought. We expect the combination of robust grower economics and favorable growing conditions to support demand for crop nutritional products, fungicides and insecticides in the third quarter of 2022.

 

 

Prospective Brazilian grower margins remain historically high and analysts expect a 2 to 4 percent increase in soybean planted area in the 2022 planting season. While we expect this to support overall crop input demand, fertilizer inventories have been slow to move from port to inland positions and we expect import demand will resurface as these inventories move inland for Brazil’s spring planting season in the second half of 2022.

 

2


Crop Nutrient Markets

 

 

Restricted supplies of potash from Russia and Belarus kept potash prices at historically high levels through the first half of 2022. Potash shipments from Russia and Belarus were estimated to be down approximately 25 and 50 percent respectively in the first half of 2022, with the majority of Belarus exports occurring in the first quarter. We have narrowed our global potash shipment forecast to between 61 and 64 million tonnes in 2022 and continue to expect demand to be constrained by restrictions on exports from Russia and Belarus.

 

 

A dramatic increase in European natural gas prices has once again led to reduced nitrogen operating rates in the region. Tightening European ammonia supplies and significantly reduced Russian ammonia exports from the Black Sea are pressuring global ammonia availability. We expect strong seasonal nitrogen demand in the second half of 2022 following a period of delayed purchases due to benchmark price volatility.

 

 

The Chinese government continues to impose export restrictions on urea and phosphate fertilizers that are expected to limit its export volumes in the second half of 2022.

Financial Guidance

 

 

Nutrien revised full-year 2022 adjusted EBITDA guidance1 and full-year 2022 adjusted net earnings per share guidance1 primarily due to lower expected Nitrogen earnings as a result of lower nitrogen benchmark pricing and higher natural gas costs. Retail adjusted EBITDA guidance was increased to reflect strong performance in the second quarter. Adjusted net earnings per share guidance includes our plans to allocate approximately $5 billion to share repurchases in 2022.

 

 

Nutrien lowered potash and nitrogen sales volume guidance to reflect the impact of lower application in North America this spring.

All guidance numbers, including those noted above are outlined in the table below. Refer to page 53 of Nutrien’s 2021 Annual Report for related assumptions and sensitivities.

 

                                                                        
  Guidance Ranges1 as of 
  Aug. 3, 2022  May 2, 2022 
  (billions of US dollars, except as otherwise noted) Low     High     Low     High    

  Adjusted net earnings per share 2

  15.80   17.80   16.20   18.70 

  Adjusted EBITDA 2

  14.0   15.5   14.5   16.5 

  Retail adjusted EBITDA

  2.1   2.2   1.8   1.9 

  Potash adjusted EBITDA

  7.6   8.2   7.5   8.3 

  Nitrogen adjusted EBITDA

  4.0   4.7   5.0   5.8 

  Phosphate adjusted EBITDA (in US millions)

  750   850   800   900 

  Potash sales tonnes (millions) 3

  14.3   14.9   14.5   15.1 

  Nitrogen sales tonnes (millions) 3

  10.6   11.0   10.7   11.1 

  Depreciation and amortization

  2.0   2.1   2.0   2.1 

  Effective tax rate on adjusted earnings (%)

  25.5   26.5   25.5   26.5 

  Sustaining capital expenditures 4

  1.3   1.4   1.2   1.3 

  1  See the “Forward-Looking Statements” section.

  2  These are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section.

  3  Manufactured product only. Nitrogen sales tonnes excludes ESN® products.

  4  This is a supplementary financial measure. See the “Other Financial Measures” section.

 

3


Consolidated Results

 

      Three Months Ended June 30          Six Months Ended June 30     

(millions of US dollars, except as otherwise noted)

                2022              2021      % Change              2022               2021      % Change 

Sales

  14,506   9,763   49   22,163   14,421   54 

Freight, transportation and distribution

  221   222   -   424   433   (2

Cost of goods sold

  8,286   6,659   24   12,483   9,950   25 

Gross margin

  5,999   2,882   108   9,256   4,038   129 

Expenses

  1,054   1,263   (17  2,312   2,141   8 

Net earnings

  3,601   1,113   224   4,986   1,246   300 

Adjusted EBITDA 1

  4,993   2,215   125   7,608   3,021   152 

Diluted net earnings per share

  6.51   1.94   236   8.99   2.16   316 

Adjusted net earnings per share 1

  5.85   2.08   181   8.53   2.37   260 

Cash provided by operating activities                            

  2,558   1,966   30   2,496   1,814   38 

Free cash flow 1

  3,413   1,413   142   5,227   1,889   177 

Free cash flow including changes in non-cash operating working capital 1

  2,302   1,662   39   2,046   1,346   52 

 1  These are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section.

Net earnings and adjusted EBITDA more than doubled in the second quarter and first half of 2022 compared to the same period in 2021. This was due to higher net realized selling prices from global supply uncertainties across our nutrient businesses and strong Retail performance. In the second quarter of 2022, we recorded a non-cash impairment reversal of $450 million related to our Phosphate operations which impacted net earnings. Cash provided by operating activities increased in the second quarter and first half of 2022 compared to the same period in 2021 due primarily to higher net earnings.

Segment Results

Our discussion of segment results set out on the following pages is a comparison of the results for the three and six months ended June 30, 2022 to the results for the three and six months ended June 30, 2021, unless otherwise noted.

 

4


 Nutrien Ag Solutions (“Retail”)

 

  Three Months Ended June 30 
 (millions of US dollars, except Dollars     Gross Margin     Gross Margin (%) 
     as otherwise noted)         2022  2021  % Change             2022  2021  % Change     2022  2021 

 Sales

          

Crop nutrients

  4,548   3,045   49    911   703   30    20   23 

Crop protection products

  2,983   2,666   12    805   587   37    27   22 

Seed

  1,269   1,216   4    283   237   19    22   19 

Merchandise

  280   268   4    51   45   13    18   17 

Nutrien Financial

  91   59   54    91   59   54    100   100 

Services and other 1

  310   320   (3   258   264   (2   83   83 

Nutrien Financial elimination 1, 2

  (59  (37  59    (59  (37  59    100   100 
  9,422   7,537   25    2,340   1,858   26    25   25 

 Cost of goods sold

  7,082   5,679   25        

 Gross margin

  2,340   1,858   26        

 Expenses 3

  1,088   938   16        

 Earnings before finance costs and taxes (“EBIT”)

  1,252   920   36        

 Depreciation and amortization

  175   169   4        

 EBITDA

  1,427   1,089   31        

 Adjustments 4

  -   8   (100       

 Adjusted EBITDA

  1,427   1,097   30                             

 1  Certain immaterial figures have been reclassified for the three months ended June 30, 2021.

   

 2  Represents elimination for the interest and service fees charged by Nutrien Financial to Retail branches.

   

 3  Includes selling expenses of $1,013 million (2021 – $863 million).

   

 4  See Note 2 to the interim financial statements.

   

  Six Months Ended June 30 
 (millions of US dollars, except Dollars     Gross Margin     Gross Margin (%) 
     as otherwise noted) 2022  2021  % Change     2022  2021  % Change     2022  2021 

 Sales

          

Crop nutrients

  6,135   4,061   51    1,203   923   30    20   23 

Crop protection products

  4,370   3,751   17    1,087   763   42    25   20 

Seed

  1,727   1,679   3    349   306   14    20   18 

Merchandise

  514   498   3    92   83   11    18   17 

Nutrien Financial

  140   84   67    140   84   67    100   100 

Services and other 1

  485   485   -    402   400   1    83   82 

Nutrien Financial elimination 1

  (88  (49  80    (88  (49  80    100   100 
  13,283   10,509   26    3,185   2,510   27    24   24 

 Cost of goods sold

  10,098   7,999   26        

 Gross margin

  3,185   2,510   27        

 Expenses 2

  1,843   1,659   11        

 EBIT

  1,342   851   58        

 Depreciation and amortization

  344   346   (1       

 EBITDA

  1,686   1,197   41        

 Adjustments 3

  (19  9   n/m        

 Adjusted EBITDA

  1,667   1,206   38                             

 1  Certain immaterial figures have been reclassified for the six months ended June 30, 2021.

   

 2  Includes selling expenses of $1,735 million (2021 – $1,530 million).

   

 3  See Note 2 to the interim financial statements.

   

 

 

Adjusted EBITDA increased in the second quarter and first half of 2022 due to higher sales and gross margins across nearly all product categories and regions where we operate. This was supported by strong agriculture fundamentals, higher selling prices and growth in proprietary products sales. Retail cash operating coverage ratio1 improved as at June 30, 2022 to 54 percent from 60 percent in the same period in 2021 due to significantly higher gross margin.

 

 

Crop nutrients sales and gross margin increased significantly in the second quarter and first half of 2022 due to higher selling prices. Gross margin per tonne increased in the second quarter and first half of 2022 compared to the same periods in the prior year due to strategic procurement and the timing of inventory purchases. Sales volumes decreased due to a pull forward of sales into the fourth quarter of 2021 and reduced application resulting from a delayed planting season in North America.

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

 

5


 

Crop protection products sales and gross margin increased in the second quarter and first half of 2022 in all regions we operate due to higher prices, along with increased sales and gross margin in proprietary products. Gross margin percent increased by 5 percentage points in the second quarter and first half of 2022, supported by the reliability of our supply chain and strategic procurement in a rising price environment.

 

 

Seed sales and gross margin increased in the second quarter and first half of 2022 due to higher pricing, an increase in proprietary seed margins and strong demand in Australia.

 

 

Merchandise sales increased in the second quarter and first half of 2022 primarily driven by favorable market conditions for Australia animal health products, with increased flock and herd sizes along with higher fencing sales.

 

 

Nutrien Financial sales increased in the second quarter and first half of 2022 due to higher utilization and adoption of our programs and a higher interest-bearing trade receivable balance, driven by strong commodity pricing.

 

 

Services and other sales decreased in the second quarter due to lower fertilizer application services, and held flat through the first half of 2022, due to favorable weather conditions in Australia in the first quarter.

 

 Potash

 

  Three Months Ended June 30 
  (millions of US dollars, except     Dollars     Tonnes (thousands)     Average per Tonne 
     as otherwise noted)       2022        2021   % Change           2022       2021   % Change           2022        2021   % Change 

Manufactured product

              

Net sales

              

North America

  680   326    109   933  1,172    (20   729   278    162 

Offshore

  1,988   491    305   2,776  2,449    13    716   200    258 
  2,668   817    227   3,709  3,621    2    719   226    218 

Cost of goods sold

  399   317    26         107   88    22 

Gross margin - total

  2,269   500    354      612   138    343 

Expenses 1

  372   123    202   

Depreciation and amortization

 

      35   32    9 

EBIT

  1,897   377    403   Gross margin excluding depreciation

 

     

Depreciation and amortization

  130   116    12   

and amortization - manufactured  3

 

      647   170    281 

EBITDA

  2,027   493    311   Potash controllable cash cost of

 

     

Adjustments 2

  -   2    (100  

product manufactured 3

 

      52   50    4 

Adjusted EBITDA

  2,027   495    309                         

 1  Includes provincial mining taxes of $362 million (2021 – $107 million).

 2  See Note 2 to the interim financial statements.

 3  These are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section.

 

  Six Months Ended June 30 
  (millions of US dollars, except     Dollars     Tonnes (thousands)     Average per Tonne 
     as otherwise noted)       2022        2021   % Change           2022       2021   % Change           2022        2021   % Change 

Manufactured product

              

Net sales

              

North America

  1,513   658    130   2,151  2,642    (19   703   249    182 

Offshore

  3,005   770    290   4,601  4,136    11    653   186    251 
  4,518   1,428    216   6,752  6,778    -    669   211    217 

Cost of goods sold

  704   608    16         104   90    16 

Gross margin - total

  3,814   820    365      565   121    367 

Expenses 1

  623   187    233   

Depreciation and amortization

 

      36   35    1 

EBIT

  3,191   633    404   Gross margin excluding depreciation

 

     

Depreciation and amortization

  242   240    1   

and amortization - manufactured

 

      601   156    284 

EBITDA

  3,433   873    293   Potash controllable cash cost of

 

     

Adjustments 2

  -   2    (100  

product manufactured

 

      51   50    2 

Adjusted EBITDA

  3,433   875    292                         

 1  Includes provincial mining taxes of $611 million (2021 – $165 million).

 2  See Note 2 to the interim financial statements.

 

 

Adjusted EBITDA increased in the second quarter and first half of 2022 due to higher net realized selling prices and strong offshore sales volumes, which more than offset lower North American sales volumes, higher royalties and provincial mining taxes.

 

 

Sales volumes were the highest of any second quarter on record due to strong demand in offshore markets. North American sales volumes were impacted by delayed planting and a compressed application window.

 

6


 

Net realized selling price increased in the second quarter and first half of 2022 due to the impact of supply constraints, in particular related to uncertainty on future supply from Russia and Belarus.

 

 

Cost of goods sold per tonne increased in the second quarter and first half of 2022 primarily due to higher royalties resulting from increased net realized selling prices. Potash controllable cash cost of product manufactured increased slightly in the second quarter and first half of 2022 due to higher input costs driven by inflation.

Canpotex Sales by Market

 

      Three Months Ended June 30      Six Months Ended June 30 

(percentage of sales volumes, except as otherwise noted)

            2022             2021         Change             2022         2021         Change 

Latin America

  40   35   5   36   33   3 

Other Asian markets 1

  28   41   (13  35   39   (4

China

  12   11   1   12   12   - 

Other markets

  11   10   1   11   11   - 

India

  9   3   6   6   5   1 
   100   100       100   100     

 1  All Asian markets except China and India.

 

 Nitrogen

 

  Three Months Ended June 30 
  (millions of US dollars, except Dollars     Tonnes (thousands)     Average per Tonne  
     as otherwise noted)       2022        2021   % Change           2022       2021   % Change           2022        2021   % Change 

Manufactured product

              

Net sales

              

Ammonia

  743   346    115   643  836    (23   1,157   416    178 

Urea

  601   346    74   810  819    (1   742   421    76 

Solutions, nitrates and sulfates

  536   290    85   1,142  1,311    (13   469   221    112 
  1,880   982    91   2,595  2,966    (13   724   331    119 

Cost of goods sold

  839   597    41         323   201    61 

Gross margin - manufactured

  1,041   385    170      401   130    208 

Gross margin - other 1

  17   31    (45  Depreciation and amortization

 

      54   52    2 

Gross margin - total

  1,058   416    154   Gross margin excluding depreciation

     

(Income) expenses

  (43  17    n/m   

and amortization - manufactured 3

 

      455   182    149 

EBIT

  1,101   399    176   Ammonia controllable cash cost of

 

     

Depreciation and amortization

  139   155    (10  

product manufactured 3

 

      58   51    14 

EBITDA

  1,240   554    124        

Adjustments 2

  -   1    (100       

Adjusted EBITDA

  1,240   555    123                         

 1  Includes other nitrogen (including ESN®) and purchased products and comprises net sales of $349 million (2021 – $197 million) less cost of goods sold of $332 million (2021 – $166 million).

 2  See Note 2 to the interim financial statements.

 3  These are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section.

 

7


  Six Months Ended June 30 
  (millions of US dollars, except Dollars     Tonnes (thousands)     Average per Tonne  
     as otherwise noted)       2022        2021   % Change           2022       2021   % Change           2022        2021   % Change 

Manufactured product

              

Net sales

              

Ammonia

  1,303   506    158   1,238  1,408    (12   1,052   360    192 

Urea

  1,064   595    79   1,401  1,576    (11   760   377    102 

Solutions, nitrates and sulfates

  975   454    115   2,221  2,385    (7   439   190    131 
  3,342   1,555    115   4,860  5,369    (9   688   290    137 

Cost of goods sold

  1,479   1,037    43         305   194    57 

Gross margin - manufactured

  1,863   518    260      383   96    299 

Gross margin - other 1

  55   48    15   Depreciation and amortization

 

      54   53    2 

Gross margin - total

  1,918   566    239   Gross margin excluding depreciation

 

     

Income

  (55  -    -   

and amortization - manufactured

 

      437   149    193 

EBIT

  1,973   566    249   Ammonia controllable cash cost of

 

     

Depreciation and amortization

  262   284    (8  

product manufactured

 

      57   51    12 

EBITDA

  2,235   850    163        

Adjustments 2

  -   5    (100       

Adjusted EBITDA

  2,235   855    161                         

 1  Includes other nitrogen (including ESN®) and purchased products and comprises net sales of $628 million (2021 – $384 million) less cost of goods sold of $573 million (2021 – $336 million).

 2  See Note 2 to the interim financial statements.

 

 

Adjusted EBITDA increased in the second quarter and first half of 2022 primarily due to higher net realized selling prices and higher earnings from equity-accounted investees, which more than offset higher natural gas costs and lower sales volumes.

 

 

Sales volumes decreased in the second quarter and first half of 2022 due to unplanned plant outages that impacted ammonia and urea production, along with a cool and wet spring in North America that condensed the application window for direct application of ammonia and delayed application of other nitrogen products.

 

 

Net realized selling price in the second quarter and first half of 2022 were higher due to strong benchmark prices resulting from the strength in global demand and tight supply, along with higher energy prices in key nitrogen exporting regions.

 

 

Cost of goods sold per tonne in the second quarter and first half of 2022 increased primarily due to higher natural gas costs and higher raw material costs.

Natural Gas Prices in Cost of Production

 

  Three Months Ended June 30  Six Months Ended June 30 

(US dollars per MMBtu, except as otherwise noted)

            2022             2021         % Change             2022             2021             % Change 

Overall gas cost excluding realized derivative impact

  8.54   3.86   121   7.72   3.51   120 

Realized derivative impact

  (0.06  0.03   n/m   (0.04  0.03   n/m 

Overall gas cost

  8.48   3.89   118   7.68   3.54   117 

Average NYMEX

  7.17   2.83   153   6.06   2.76   120 

Average AECO

  4.95   2.32   113   4.28   2.31   85 

 

 

Natural gas prices in our cost of production increased in the second quarter and first half of 2022 as a result of higher North American gas index prices and increased gas costs in Trinidad, where our gas prices are linked to ammonia benchmark prices.

 

8


 Phosphate

 

  Three Months Ended June 30 
  (millions of US dollars, except Dollars     Tonnes (thousands)     Average per Tonne  
     as otherwise noted)       2022        2021   % Change           2022       2021   % Change           2022        2021   % Change 

Manufactured product

              

Net sales

              

Fertilizer

  325   232    40   366  394    (7   888   588    51 

Industrial and feed

  189   119    59   190  192    (1   996   621    60 
  514   351    46   556  586    (5   925   598    55 

Cost of goods sold

      352       271    30         634   463    37 

Gross margin - manufactured

  162   80    103      291   135    116 

Gross margin - other 1

  (6  4    n/m   Depreciation and amortization

 

      74   60    23 

Gross margin - total

  156   84    86   Gross margin excluding depreciation

 

     

(Income) expenses

  (437  7    n/m   

  and amortization -manufactured  3

 

      365   195    87 

EBIT

  593   77    670        

Depreciation and amortization

  41   35    17        

EBITDA

  634   112    466        

Adjustments 2

  (450  -    n/m        

Adjusted EBITDA

  184   112    64                         

 1  Includes other phosphate and purchased products and comprises net sales of $76 million (2021 – $52 million) less cost of goods sold of $82 million (2021 – $48 million).

 2  See Notes 2 and 3 to the interim financial statements. Includes impairment reversal of assets of $450 million (2021 – nil).

 3  This is a non-IFRS financial measure. See the “Non-IFRS Financial Measures” section.

 

  Six Months Ended June 30 
  (millions of US dollars, except Dollars     Tonnes (thousands)     Average per Tonne  
     as otherwise noted)       2022        2021   % Change           2022       2021   % Change           2022        2021   % Change 

Manufactured product

              

Net sales

              

Fertilizer

  718   462    55   826  903    (9   869   511    70 

Industrial and feed

  359   233    54   381  385    (1   943   605    56 
      1,077       695    55   1,207  1,288    (6   892   539    65 

Cost of goods sold

  712   553    29         589   429    37 

Gross margin - manufactured

  365   142    157      303   110    175 

Gross margin - other 1

  (2  8    n/m   Depreciation and amortization

 

      68   57    20 

Gross margin - total

  363   150    142   Gross margin excluding depreciation

 

     

(Income) expenses

  (428  14    n/m   

  and amortization - manufactured

 

      371   167    123 

EBIT

  791   136    482        

Depreciation and amortization

  82   73    12        

EBITDA

  873   209    318        

Adjustments 2

  (450  -    n/m        

Adjusted EBITDA

  423   209    102                         

 1  Includes other phosphate and purchased products and comprises net sales of $148 million (2021 – $93 million) less cost of goods sold of $150 million (2021 – $85 million).

 2  See Notes 2 and 3 to the interim financial statements. Includes impairment reversal of assets of $450 million (2021 – nil).

 

 

Adjusted EBITDA increased in the second quarter and first half of 2022 due to higher net realized selling prices, which more than offset higher raw material costs and lower sales volumes. As part of expenses, we recognized a $450 million non-cash impairment of assets reversal, which is deducted from adjusted EBITDA. This impairment reversal is due to a more favorable outlook for phosphate margins.

 

 

Sales volumes decreased particularly in fertilizer, as a cool and wet spring in North America condensed the application window.

 

 

Net realized selling price increased in the second quarter and first half of 2022 in connection with the increase in global benchmark prices. Industrial and feed net realized selling prices increased to a greater extent than fertilizer prices in the second quarter of 2022, which reflects the typical lag in industrial and feed price realizations relative to spot fertilizer prices.

 

 

Cost of goods sold per tonne increased primarily due to significantly higher sulfur and ammonia input costs.

 

9


 Corporate and Others

 

      Three Months Ended June 30      Six Months Ended June 30 

(millions of US dollars, except as otherwise noted)

            2022             2021     % Change             2022             2021     % Change 

Selling expenses

  (2  (9  (78  (4  (15  (73

General and administrative expenses

  77   66   17   147   124   19 

Share-based compensation (recovery) expense

  (52  38   n/m   83   61   36 

Other expenses

  48   83   (42  101   111   (9

EBIT

  (71  (178  (60  (327  (281  16 

Depreciation and amortization

  20   10   100   36   22   64 

EBITDA

  (51  (168  (70  (291  (259  12 

Adjustments 1

  (7  100   n/m   167   143   17 

Adjusted EBITDA

  (58  (68  (15  (124  (116  7 

1  See Note 2 to the interim financial statements.

 

  

Share-based compensation (recovery) expense – the recovery in the second quarter of 2022 reflects a decrease in the fair value of share-based compensation due to a decrease in our share price, whereas an expense was recorded in the second quarter of 2021 as our share price increased during the period.

 

  

Other expenses were lower in the second quarter and first half of 2022 compared to the same periods in 2021 due to the absence of cloud computing related expenses from our change in accounting policy, partially offset by higher foreign exchange losses related to our international operations.

 

 Eliminations

Eliminations of gross margin between operating segments was a recovery of $176 million in the second quarter of 2022 compared to a recovery of $24 million in the same period of 2021. We had a significant recovery in the second quarter of 2022 due to the release of higher-margin inventories held by our Retail segment at the end of the previous quarter. Eliminations are not part of the Corporate and Others segment.

Finance Costs, Income Taxes and Other Comprehensive (Loss) Income

 

  Three Months Ended June 30  Six Months Ended June 30 

millions of US dollars, except as otherwise noted)

              2022               2021       % Change               2022               2021       % Change 

Finance costs

  130   125   4   239   245   (2

Income tax expense

  1,214   381   219   1,719   406   323 

Other comprehensive (loss) income

  (242  61   n/m   (66  85   n/m 

 

  

Income tax expense was higher as a result of significantly higher earnings in the second quarter and first half of 2022 compared to the same periods in 2021.

 

  

Other comprehensive (loss) income is primarily driven by changes in the currency translation of our foreign operations and our investment in Sinofert Holdings Ltd. (“Sinofert”). In the second quarter and first half of 2022, we had fair value losses on our investment in Sinofert due to share price decreases compared to fair value gains due to share price increases in the same periods of 2021. In the second quarter of 2022, we also had a significant loss on foreign currency translation of our Retail operations in Australia, Brazil and Canada as these currencies depreciated relative to the US dollar as at June 30, 2022 compared to March 31, 2022 levels. These losses offset the gains on translation for all three currencies in the first quarter of 2022. Whereas, we had a foreign currency translation gain in the second quarter of 2021 and net loss in the second half of 2021.

 

10


Liquidity and Capital Resources

Sources and Uses of Liquidity

We continued to manage our capital in accordance with our capital allocation strategy. We believe that our internally generated cash flow, supplemented by available borrowings under our new or existing financing sources, if necessary, will be sufficient to meet our anticipated capital expenditures, planned growth and development activities, and other cash requirements for the foreseeable future. Refer to the “Capital Structure and Management” section for details on our existing long-term debt and credit facilities.

Sources and Uses of Cash

 

(millions of US dollars, except as otherwise noted)  Three Months Ended June 30 Six Months Ended June 30 
               2022               2021       % Change               2022               2021       % Change 

Cash provided by operating activities

   2,558   1,966   30   2,496   1,814   38 

Cash used in investing activities

   (517  (431  20   (974  (819  19 

Cash used in financing activities

   (1,878  (449  318   (1,290  (640  102 

Effect of exchange rate changes on cash and cash equivalents

   (29  (4  625   (20  (15  33 

Increase in cash and cash equivalents

   134   1,082   (88  212   340   (38

 

  
Cash provided by
operating activities
  

 Higher cash provided by operating activities in the second quarter and first half of 2022 compared to the same periods in 2021 due to higher earnings driven by higher crop input prices from tight global supply, offset with seasonal working capital requirements.

  
Cash used in
investing activities
  

 Cash used in investing activities in the second quarter and first half of 2022 was higher compared to the same periods in 2021 due to higher spending in Potash to increase our production capabilities and in Nitrogen to advance our brownfield expansions, and the timing of supplier payments.

  
Cash used in
financing activities
  

 Cash used in financing activities in the second quarter of 2022 was higher compared to the same period in 2021 due to increased share repurchases and higher repayments of commercial paper.

 

 Cash used in financing activities in the first half of 2022 was higher compared to the same period in 2021 due to increased share repurchases, partially offset with increased commercial paper drawdowns to temporarily finance working capital requirements.

Financial Condition Review

The following balance sheet categories contained variances that were considered material:

 

  As at       

(millions of US dollars, except as otherwise noted)

  June 30, 2022   December 31, 2021   $ Change   % Change 

Assets

    

Cash and cash equivalents

  711   499   212   42 

Receivables

  10,171   5,366   4,805   90 

Inventories

  7,160   6,328   832   13 

Prepaid expenses and other current assets

  615   1,653   (1,038  (63

Property, plant and equipment

  20,492   20,016   476   2 

Liabilities and Equity

    

Short-term debt

  2,403   1,560   843   54 

Current portion of long-term debt

  1,028   545   483   89 

Payables and accrued charges

  11,682   10,052   1,630   16 

Long-term debt

  7,056   7,521   (465  (6

Share capital

  15,115   15,457   (342  (2

Retained earnings

  11,563   8,192   3,371   41 

 

  

Explanations for changes in Cash and cash equivalents are in the “Sources and Uses of Cash” section.

 

  

Receivables increased due to higher sales across all of our segments as a result of higher crop nutrient net realized selling prices consistent with higher benchmark pricing, as well as higher Retail vendor rebates receivables.

 

11


  

Inventories increased due to seasonal Retail inventory build-up in North America and higher costs to produce or purchase inventory due to inflation and tight global supply. The increase was partly offset by a decrease in Retail seed inventory driven by seasonality.

 

  

Prepaid expenses and other current assets decreased due to the drawdown of prepaid inventory (primarily seed and crop protection products) during the North American planting and application spring season.

 

  

Property, plant and equipment increased due to an impairment reversal related to our Aurora cash generating unit in the Phosphate segment.

 

  

Short-term debt increased due to additional commercial paper issuances as part of our seasonal working capital management.

 

  

Payables and accrued charges increased due to a shift in timing of supplier payments, higher input costs from inflation and tight global supply and higher inventory purchases, which were partly offset by lower customer prepayments in North America as Retail customers took delivery of prepaid sales.

 

  

Long-term debt decreased due to a reclassification to the current portion of long-term debt of our $500 million notes maturing May 2023.

 

  

Share capital decreased from shares repurchased under our normal course issuer bids partially offset by exercise of stock options.

 

  

Retained earnings increased as net earnings in the first half of 2022 exceeded dividends declared and share repurchases.

Capital Structure and Management

Principal Debt Instruments

As part of the normal course of business, we closely monitor our liquidity position. We use a combination of cash generated from operations and short-term and long-term debt to finance our operations. We were in compliance with our debt covenants and did not have any changes to our credit ratings in the six months ended June 30, 2022.

 

 

 

 

 As at June 30, 2022 
        Outstanding and Committed 
(millions of US dollars) Rate of Interest (%)  Total Facility Limit  Short-Term Debt  Long-Term Debt 

Credit facilities

    

Unsecured revolving term credit facility

  n/a   4,500   -   - 

Uncommitted revolving demand facility

  n/a   1,000   -   - 

Other credit facilities

   770   

South American

  1.4 - 16.3    140   160 

Other

  1.6 - 4.0    17   3 

Commercial paper

  1.4 - 2.5    2,105   - 

Other short-term debt

  n/a    141   - 
     

Total

  

 

 

 

 

 

  

 

 

 

 

 

  2,403   163 

We also have a commercial paper program, which 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.

Subsequent to June 30, 2022, and in addition to the $500 million 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.

Our long-term debt consists primarily of notes. See the “Capital Structure and Management” section of our 2021 Annual Report for information on balances, rates and maturities for our notes.

 

12


Outstanding Share Data

 

 

 

 

 

  As at August 2, 2022 

Common shares

   538,926,006 

Options to purchase common shares

   3,933,487 

For more information on our capital structure and management, see Note 24 to our 2021 annual financial statements.

On June 7, 2022, the Financial and Consumer Affairs Authority of Saskatchewan and the Ontario Securities Commission granted Nutrien exemptive relief to allow the purchase of up to 10 percent of its “public float” of common shares through the facilities of the New York Stock Exchange and other US-based trading systems as part of Nutrien’s current normal course issuer bid. Absent this exemptive relief, Nutrien’s purchases under the normal course issuer bid on markets other than the TSX would be limited to not more than 5 percent of its outstanding common shares over any twelve-month period. The exemptive relief is effective until June 7, 2023 and is conditional upon purchases being made in compliance with applicable US rules and National Instrument 23-101- Trading Rules in Canada, and at a price not higher than the market price at the time of purchase. The aggregate number of common shares purchased by Nutrien over any exchange or market may not exceed 10 percent of the public float as specified in Nutrien’s normal course issuer bid application approved by the TSX and announced on February 25, 2022.

Quarterly Results

 

  (millions of US dollars, except as otherwise noted)  Q2 2022   Q1 2022   Q4 2021   Q3 2021   Q2 2021   Q1 2021   Q4 2020   Q3 2020 

Sales 1

   14,506    7,657    7,267    6,024    9,763    4,658    4,052    4,227 

Net earnings (loss)

   3,601    1,385    1,207    726    1,113    133    316    (587

Net earnings (loss) attributable to equity holders of Nutrien

   3,593    1,378    1,201    717    1,108    127    316    (587

Net earnings (loss) per share attributable to equity holders of Nutrien

                

Basic

   6.53    2.49    2.11    1.26    1.94    0.22    0.55    (1.03

Diluted

   6.51    2.49    2.11    1.25    1.94    0.22    0.55    (1.03

1  Certain immaterial figures have been reclassified in the third quarter of 2020.

 

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 input 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 suppliers are typically concentrated in the period from November to January. Feed and industrial sales are more evenly distributed throughout the year.

Our earnings are significantly affected by fertilizer benchmark prices, which have been volatile over the last two years and are affected by demand-supply conditions, grower affordability and weather.

In the second quarter of 2022, earnings were impacted by a $450 million non-cash impairment reversal of property, plant and equipment in the Phosphate segment related to higher forecasted global prices and a more favorable outlook for phosphate margins. In the fourth quarter of 2021, earnings were impacted by a $142 million loss resulting from the early extinguishment of long-term debt. In the fourth quarter of 2020, earnings were impacted by a $250 million net gain on disposal of our investment in Misr Fertilizers Production Company S.A.E.. In the third quarter of 2020, earnings were impacted by an $823 million non-cash impairment of assets primarily in the Phosphate segment as a result of lower long-term forecasted global phosphate prices.

Critical Accounting Estimates

Our significant accounting policies are disclosed in our 2021 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 49 of our 2021 Annual Report. Other than the critical accounting estimates discussed below, there were no material changes in the three or six months ended June 30, 2022 to our critical accounting estimates.

 

13


Impairment of Assets

Long-Lived Asset Impairment and Reversals

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 our property, plant and equipment of $545 million at our Aurora CGU, as a result of lower long-term forecasted global phosphate prices. Due to increases in our forecast during the three months ended June 30, 2022, the recoverable amount of our Aurora CGU is above its carrying amount. As a result, we recorded an impairment reversal of $450 million in the statement of earnings relating to property, plant and equipment. Refer to Note 3 to the interim financial statements.

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 million and $215 million 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. 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 million (full reversal, net of depreciation).

Goodwill Impairment

Operating segments have assets allocated to them that must be assessed for impairment when events or circumstances indicate there could be an impairment, or at least annually. Based on our assumptions at the time of our impairment testing, the recoverable amount of each of our CGUs or groups of CGUs was in excess of their carrying amounts. Key assumptions in our testing models may change, and changes that could reasonably be expected to occur may cause impairment or impairment reversals. Such change in assumptions could be driven by global supply and demand and other market factors and changes in regulations and other future events outside our control.

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.

The Retail – North America group of CGUs have $6.9 billion in associated goodwill. Goodwill is more susceptible to impairment risk if business operating results or economic conditions deteriorate and we do not meet our forecasts. A reduction in the terminal growth rate, an increase in the discount rate or a decrease in forecasted EBITDA could cause impairment in the future. As at June 30, 2022 the Retail – North America group of CGUs recoverable amount exceeds its carrying amount by $0.8 billion, which is 7 percent of the carrying amount. Refer to Note 3 to the interim financial statements.

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 

 

14


Risk Factors

Russia and Ukraine Conflict

The current conflict between Ukraine and Russia and the international response has, and may continue to have, potential wide-ranging consequences for global market volatility and economic conditions, including energy and commodity prices. Certain countries including Canada, the United States, Australia and certain European countries have imposed strict financial and trade sanctions against Russia, with Russia and Belarus imposing retaliatory sanctions of their own, which have had, and may continue to have, far-reaching effects on the global economy, energy and commodity prices, food security and crop nutrient supply and prices. The short-, medium- and long-term implications of the conflict in Ukraine are difficult to predict with any degree of certainty at this time. While Nutrien does not have operations in Ukraine or Russia, there remains uncertainty relating to the potential impact of the conflict and its effect on global food security, growers and the market outlook for crop nutrient market supply and demand fundamentals and nutrient prices, and it could have a material and adverse effect on our business, financial condition and results of operations. Depending on the extent, duration, and severity of the conflict, it may have the effect of heightening many of the other risks Nutrien is subject to and which are described in our 2021 Annual Report and 2021 Annual Information Form, including, without limitation, risks relating to market fundamentals and conditions (such as sanctions and trade flows and the impact thereof on crop nutrient supply and demand); cybersecurity threats; energy and commodity prices; inflationary pressures, interest rates and costs of capital; and supply chains and cost-effective and timely transportation.

Controls and Procedures

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, and National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with IFRS. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

There has been no change in our internal control over financial reporting during the three months ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Forward-Looking Statements

Certain statements and other information included in this document, including within the “Financial Outlook and Guidance” section, constitute “forward-looking information” or “forward-looking statements” (collectively, “forward-looking statements”) under applicable securities laws (such statements are often accompanied by words such as “anticipate”, “forecast”, “expect”, “believe”, “may”, “will”, “should”, “estimate”, “intend” or other similar words). All statements in this document, other than those relating to historical information or current conditions, are forward-looking statements, including, but not limited to: Nutrien’s business strategies, plans, prospects and opportunities; Nutrien’s 2022 full-year guidance, including expectations regarding our adjusted net earnings per share and adjusted EBITDA (consolidated and by segment); expectations regarding our growth and capital allocation intentions and strategies, including our evaluation of the Geismar, Louisiana clean ammonia facility and the anticipated benefits thereof; capital spending expectations for 2022; our intention to complete our existing share repurchase program in 2022; expectations regarding performance of our operating segments in 2022, including our operating segment market outlooks and market conditions for 2022, 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, grower crop investment, crop mix, prices and the impact of import and export volumes and economic sanctions; Nutrien’s ability to develop innovative and sustainable solutions; the negotiation of sales contracts; and acquisitions and divestitures and the anticipated benefits 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.

 

15


All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions referred to below and elsewhere in this document. Although we believe that these assumptions are reasonable, having regard to our experience and our perception of historical trends, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place undue reliance on these assumptions and such forward-looking statements. Current conditions, economic and otherwise, render assumptions, although reasonable when made, subject to greater uncertainty. The additional key assumptions that have been made 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 in respect of any acquired businesses and 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; assumptions with respect to global economic conditions and the accuracy of our market outlook expectations for 2022 and in the future; assumptions with respect to our ability to repurchase shares under our share repurchase program, including existing and future market conditions and compliance with respect to applicable securities laws and regulations and stock exchange policies; our expectations regarding the impacts, direct and indirect, of the COVID-19 pandemic on our business, customers, business partners, employees, supply chain, other stakeholders and the overall global economy; our expectations regarding the impacts, direct and indirect, of the conflict between Ukraine and Russia on, among other things, global supply and demand, energy and commodity prices; interest rates, supply chains and the global 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; our ability to successfully negotiate sales contracts; and our ability to successfully implement new initiatives and programs.

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; counterparty and sovereign risk; delays in completion of turnarounds at our major facilities; interruptions of or constraints in availability of key inputs, including natural gas and sulfur; any significant impairment of the carrying amount 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, including variants of the COVID-19 virus and the efficiency and distribution of vaccines, and its resulting effects on economic conditions, restrictions imposed by public health authorities or governments, including government-imposed vaccine mandates, fiscal and monetary responses by governments and financial institutions and disruptions to global supply chains; the conflict between Ukraine and Russia and its potential impact on, among other things, global market conditions and supply and demand, energy and commodity prices; interest rates, supply chains and the global economy generally; our ability to execute on our strategies related to environmental, social, and governance matters, and achieve related expectations; the risk that rising interest rates and/or deteriorated business operating results may result in the impairment of goodwill attributed to certain of our cash generating units; 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 adjusted net earnings per share, adjusted EBITDA (consolidated and by segment) and sustaining capital expenditures guidance ranges are to assist readers in understanding our expected and targeted 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.

 

16


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 & Definitions” section of our 2021 Annual Report. 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 approximately 27 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.

For Further Information:

Investor Relations:

Jeff Holzman

Vice President, Investor Relations

(306) 933-8545

Investors@nutrien.com

Media Relations:

Megan Fielding

Vice President, Brand & Culture Communications

(403) 797-3015

Contact us at: www.nutrien.com

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 Thursday, August 4, 2022 at 10:00 a.m. Eastern Time.

Telephone Conference dial-in numbers:

 

 

From Canada and the US 1-888-886-7786

 

International 1-416-764-8683

 

No access code required. Please dial in 15 minutes prior to ensure you are placed on the call in a timely manner.

Live Audio Webcast: Visit https://www.nutrien.com/investors/events/2022-q2-earnings-conference-call

 

17


Appendix A - Selected Additional Financial Data

 

Selected Retail Measures 

Three Months Ended June 30

 

Six Months Ended June 30

 

 2022 2021 2022  2021

  Proprietary products margin as a percentage of

    product line margin (%)

    

        Crop nutrients

 22 24 20  23

        Crop protection products

 39 43 39  42

        Seed

 46 46 44  43

        All products

 28 29 26  27

  Crop nutrients sales volumes (tonnes – thousands)

  

    North America

 3,978 5,020 5,220  6,617

    International

 1,017 1,132 1,950  1,935

    Total

 4,995 6,152 7,170  8,552

  Crop nutrients selling price per tonne

    

    North America

 940 506 923  494

    International

 795 445 676  408

    Total

 911 495 856  475

  Crop nutrients gross margin per tonne

    

    North America

 202 127 198  123

    International

 105 57 86  54

    Total

 182 114 168  108

  Financial performance measures

     2022  2021

    Retail adjusted EBITDA margin (%) 1, 2

   12  10

    Retail adjusted EBITDA per US selling location (thousands of US dollars) 1, 2, 3

 1,897  1,267

    Retail adjusted average working capital to sales (%) 1, 4

   15  12

    Retail adjusted average working capital to sales excluding Nutrien Financial (%) 1, 4

  -

    Nutrien Financial adjusted net interest margin (%) 1, 4

   7.0  6.2

    Retail cash operating coverage ratio (%) 1, 4

   54  60

    Retail normalized comparable store sales (%) 4

     (3) 1

  1   Rolling four quarters ended June 30, 2022 and 2021.

    

  2   These are supplementary financial measures. See the “Other Financial Measures” section.

  

  3   Excluding acquisitions.

    

  4   These are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section.

  

 

  Nutrien Financial  As at June 30, 2022   

As at

Dec 31, 2021

 
  (millions of US dollars)  Current   

<31 days

past due

   

31–90
days

past due

   

>90 days

past due

   Gross
Receivables
   Allowance 1  Net
Receivables
   Net
Receivables
 

  North America

   3,342    201    70    67    3,680    (35  3,645    1,488 

  International

   642    53    13    53    761    (2  759    662 

  Nutrien Financial receivables

   3,984    254    83    120    4,441    (37  4,404    2,150 

  1   Bad debt expense on the above receivables for the six months ended June 30, 2022 was $8 million (2021 – $5 million) in the Retail segment.

 

 

18


Selected Nitrogen Measures 

Three Months Ended June 30

 

Six Months Ended June 30

  2022 2021 2022 2021

Sales volumes (tonnes – thousands)

    

    Fertilizer

 1,453 1,825 2,546 3,130

    Industrial and feed

 1,142 1,141 2,314 2,239

Net sales (millions of US dollars)

    

    Fertilizer

 1,120 638 1,894 970

    Industrial and feed

 760 344 1,448 585

Net selling price per tonne

    

    Fertilizer

 771 350 744 310

    Industrial and feed

 666 302 626 261
Production Measures 

Three Months Ended June 30

 

Six Months Ended June 30

  2022 2021 2022 2021

Potash production (Product tonnes – thousands)

 

3,621

 

3,414

 

7,324

 

6,950

Potash shutdown weeks 1

 

5

 

4

 

5

 

4

Ammonia production – total 2

 

1,473

 

1,492

 

2,876

 

2,941

Ammonia production – adjusted 2, 3

 

1,048

 

954

 

2,006

 

2,007

Ammonia operating rate (%) 3

 

96

 

87

 

92

 

92

P2O5production (P2O5 tonnes – thousands)

P2O5  operating rate (%)

 

350

 

347

 

728

 

725

 82 82 86 86

1   Represents weeks of full production shutdown, including inventory adjustments and unplanned events, excluding the impact of any periods of reduced operating rates, planned routine annual maintenance shutdowns and announced workforce reductions.

2   All figures are provided on a gross production basis in thousands of product tonnes.

3   Excludes Trinidad and Joffre.

 

19


Appendix B - Non-IFRS Financial Measures

We use both IFRS measures and certain non-IFRS financial measures to assess performance. Non-IFRS financial measures are financial measures disclosed by a company that (a) depict historical or expected future financial performance, financial position or cash flow of a company, (b) with respect to their composition, exclude amounts that are included in, or include amounts that are excluded from, the composition of the most directly comparable financial measure disclosed in the primary financial statements of the company, (c) are not disclosed in the financial statements of the company and (d) are not a ratio, fraction, percentage or similar representation. Non-IFRS ratios are financial measures disclosed by a company that are in the form of a ratio, fraction, percentage or similar representation that has a non-IFRS financial measure as one or more of its components, and that are not disclosed in the financial statements of the company.

These non-IFRS financial measures and non-IFRS ratios are not standardized financial measures under IFRS and, therefore, are unlikely to be comparable to similar financial measures presented by other companies. Management believes these non-IFRS financial measures and non-IFRS ratios 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 and non-IFRS ratios 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 and non-IFRS ratios, their compositions, and why management uses each measure. It also includes reconciliations to the most directly comparable IFRS measures. Except as otherwise described herein, our non-IFRS financial measures and non-IFRS ratios are calculated on a consistent basis from period to period and are adjusted for specific items in each period, as applicable. As additional non-recurring or unusual items arise in the future, we generally exclude these items in our calculations.

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, share-based compensation and certain foreign exchange gain/loss (net of related derivatives). We also adjust this measure for the following other income and expenses that are excluded when management evaluates the performance of our day-to-day operations: integration and restructuring related costs, impairment or reversal of impairment of assets, COVID-19 related expenses, gain or loss on disposal of certain businesses and investments, and IFRS adoption transition adjustments.

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, and as a component of employee remuneration calculations.

 

   Three Months Ended June 30   Six Months Ended June 30

 (millions of US dollars)

                   2022                    2021                    2022                    2021 

 Net earnings

   3,601    1,113    4,986    1,246 

 Finance costs

   130    125    239    245 

 Income tax expense

   1,214    381    1,719    406 

 Depreciation and amortization

   505    485    966    965 

 EBITDA 1

   5,450    2,104    7,910    2,862 

 Share-based compensation (recovery) expense

   (52   38    83    61 

 Foreign exchange loss (gain), net of related derivatives

   31    (2   56    - 

 Integration and restructuring related costs

   11    29    20    39 

 (Reversal) impairment of assets

   (450   1    (450   5 

 COVID-19 related expenses 2

   3    9    8    18 

 Gain on disposal of investment

   -    -    (19   - 

 Cloud computing transition adjustment 3

   -    36    -    36 

 Adjusted EBITDA

   4,993    2,215    7,608    3,021 

1   EBITDA is calculated as net earnings (loss) before finance costs, income taxes, and depreciation and amortization.

2   COVID-19 related 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.

3   Cloud computing transition adjustment relates to cloud computing costs in prior years that no longer qualify for capitalization based on an agenda decision issued by the IFRS Interpretations Committee in April 2021.

 

20


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: Adjusted net earnings and related per share information are calculated as net earnings (loss) before share-based compensation and certain foreign exchange gain/loss (net of related derivatives), net of tax. We also adjust this measure for the following other income and expenses (net of tax) that are excluded when management evaluates the performance of our day-to-day operations: certain integration and restructuring related costs, impairment or reversal of impairment of assets, COVID-19 related expenses (including those recorded under finance costs), gain or loss on disposal of certain businesses and investments, IFRS adoption transition adjustments and gain/loss on early extinguishment of debt. We generally apply the annual forecasted effective tax rate to our adjustments during the year and, at year-end, we apply the actual effective tax rate. If the effective tax rate is significantly different from our forecasted effective tax rate due to adjustments or discrete tax impacts, we apply a tax rate that excludes those items. For material adjustments, we apply a tax rate specific to the adjustment.

Why we use the measure and why it is useful to investors: Focuses on the performance of our day-to-day operations and is used as a component of employee remuneration calculations.

 

   

Three Months Ended

June 30, 2022

   

Six Months Ended

June 30, 2022

 

(millions of US dollars, except as otherwise noted)

   
Increases
(Decreases)
 
 
  Post-Tax   

Per
      Diluted
Share
 
 
 
   
Increases
(Decreases)
 
 
  Post-Tax   

Per
      Diluted
Share
 
 
 

Net earnings attributable to equity holders of Nutrien

    3,593   6.51     4,971   8.99 

Adjustments:

        

Share-based compensation (recovery) expense

   (52  (39  (0.07   83   62   0.11 

Foreign exchange loss, net of related derivatives

   31   23   0.04    56   42   0.07 

Integration and restructuring related costs

   11   8   0.01    20   15   0.02 

Impairment reversal of assets

   (450  (354  (0.64   (450  (354  (0.64

COVID-19 related expenses

   3   2   -    8   6   0.01 

Gain on disposal of investment

   -   -   -    (19  (14  (0.03
       

Adjusted net earnings

       3,233   5.85        4,728   8.53 
   

Three Months Ended

June 30, 2021

   

Six Months Ended

June 30, 2021

 

(millions of US dollars, except as otherwise noted)

   
Increases
(Decreases)
 
 
  Post-Tax   

Per
Diluted
Share
 
 
 
   
Increases
(Decreases)
 
 
  Post-Tax   

Per
Diluted
Share
 
 
 

Net earnings attributable to equity holders of Nutrien

    1,108   1.94     1,235   2.16 

Adjustments:

        

Share-based compensation expense

   38   29   0.05    61   46   0.08 

Foreign exchange gain, net of related derivatives

   (2  (2  -    -   -   - 

Integration and restructuring related costs

   29   22   0.03    39   30   0.05 

Impairment of assets

   1   1   -    5   4   0.01 

COVID-19 related expenses

   9   7   0.01    18   14   0.02 

Cloud computing transition adjustment

   36   27   0.05    36   27   0.05 
       

Adjusted net earnings

       1,192   2.08        1,356   2.37 

 

21


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 because a meaningful or accurate calculation of reconciling items and the information is not available without unreasonable effort due to unknown variables, including the timing and amount of certain reconciling items, 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. The probable significance of such unavailable information, which could be material to future results, cannot be addressed. Guidance for adjusted EBITDA and adjusted net earnings per share excludes certain items such as, but not limited to, the impacts of share-based compensation, certain foreign exchange gain/loss (net of related derivatives), integration and restructuring related costs, impairment or reversal of impairment of assets, COVID-19 related expenses (including those recorded under finance costs), gain or loss on disposal of certain businesses and investments, IFRS adoption transition adjustments, and gain/loss on early extinguishment of debt.

Free Cash Flow and Free Cash Flow Including Changes in Non-Cash Operating Working Capital

Most directly comparable IFRS financial measure: Cash provided by (used in) operating activities.

Definition: Free cash flow is calculated as cash provided by (used in) operating activities less sustaining capital expenditures and before changes in non-cash operating working capital. Free cash flow including non-cash operating working capital is calculated as cash provided by operating activities less sustaining capital expenditures.

Why we use the measure and why it is useful to investors: For evaluation of liquidity and financial strength. 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 June 30  Six Months Ended June 30

 (millions of US dollars)

                   2022                    2021                   2022                   2021 

 Cash provided by operating activities

   2,558    1,966   2,496   1,814 

 Sustaining capital expenditures

   (256   (304  (450  (468

 Free cash flow including changes in non-cash operating working capital

   2,302    1,662   2,046   1,346 

 Changes in non-cash operating working capital

   (1,111   249   (3,181  (543

 Free cash flow

   3,413    1,413   5,227   1,889 

Gross Margin Excluding Depreciation and Amortization Per Tonne - Manufactured

Most directly comparable IFRS financial measure: Gross margin.

Definition: Gross margin per tonne less depreciation and amortization per tonne for manufactured products. 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.

 

22


Potash Controllable Cash Cost of Product Manufactured (“COPM”) Per Tonne

Most directly comparable IFRS financial measure: Cost of goods sold (“COGS”) for the Potash segment.

Definition: Total Potash COGS excluding depreciation and amortization expense included in COPM, royalties, natural gas costs and carbon taxes, change in inventory, and other adjustments, divided by potash production tonnes.

Why we use the measure and why it is useful to investors: To assess operational performance. In 2022, we replaced Potash cash COPM with this new financial measure. Potash controllable cash COPM excludes the effects of production from other periods and the impacts of our long-term investment decisions. Potash controllable cash COPM also excludes royalties and natural gas costs and carbon taxes, which management does not consider controllable, as they are primarily driven by regulatory and market conditions.

 

   Three Months Ended June 30  Six Months Ended June 30 
 (millions of US dollars, except as otherwise noted)                   2022                    2021                   2022                   2021 

 Total COGS – Potash

   399    317   704   608 

 Change in inventory

   (5   (11  72   16 

 Other adjustments 1

   (9   (2  (24  (6

 COPM

   385    304   752   618 

 Depreciation and amortization in COPM

   (114   (103  (233  (214

 Royalties in COPM

   (63   (19  (108  (36

 Natural gas costs and carbon taxes in COPM

   (19   (11  (36  (23

 Controllable cash COPM

   189    171   375   345 

 Production tonnes (tonnes – thousands)

   3,621    3,414   7,324   6,950 

 Potash controllable cash COPM per tonne

   52    50   51   50 

1  Other adjustments include unallocated production overhead that is recognized as part of cost of goods sold but is not included in the measurement of inventory and changes in inventory balances.

 

Ammonia Controllable Cash COPM Per Tonne

Most directly comparable IFRS financial measure: Total manufactured COGS for the Nitrogen segment.

Definition: Total Nitrogen COGS excluding depreciation and amortization expense included in COGS, cash COGS for products other than ammonia, other adjustments, and natural gas and steam costs, divided by net ammonia production tonnes.

Why we use the measure and why it is useful to investors: To assess operational performance. Ammonia controllable cash COPM excludes the effects of production from other periods, the costs of natural gas and steam, and long-term investment decisions, supporting a focus on the performance of our day-to-day operations.

 

   Three Months Ended June 30  Six Months Ended June 30 

 (millions of US dollars, except as otherwise noted)

                   2022                    2021                   2022                   2021 

 Total Manufactured COGS – Nitrogen

   839    597   1,479   1,037 

 Total Other COGS – Nitrogen

   332    166   573   336 

 Total COGS – Nitrogen

   1,171    763   2,052   1,373 

 Depreciation and amortization in COGS

   (115   (134  (217  (242

 Cash COGS for products other than ammonia

   (748   (448  (1,272  (841

 Ammonia

      

Total cash COGS before other adjustments

   308    181   563   290 

Other adjustments 1

   (78   (27  (114  (30

Total cash COPM

   230    154   449   260 

Natural gas and steam costs

   (195   (118  (376  (192

Controllable cash COPM

   35    36   73   68 

 Production tonnes (net tonnes 2 – thousands)

   606    703   1,280   1,305 

 Ammonia controllable cash COPM per tonne

   58    51   57   51 

1  Other adjustments include unallocated production overhead that is recognized as part of cost of goods sold but is not included in the measurement of inventory and changes in inventory balances.

2  Ammonia tonnes available for sale, as not upgraded to other Nitrogen products.

 

23


Retail Adjusted Average Working Capital to Sales and Retail Adjusted Average Working Capital to Sales Excluding Nutrien Financial

Definition: Retail adjusted average working capital divided by Retail adjusted sales for the last four rolling quarters. We exclude in our calculations the sales and working capital of certain acquisitions during the first year following the acquisition. We also look at this metric excluding Nutrien Financial revenue and working capital.

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. The metric excluding Nutrien Financial shows the impact that the working capital of Nutrien Financial has on the ratio.

 

  Rolling four quarters ended June 30, 2022 
(millions of US dollars, except as otherwise noted) Q3 2021  Q4 2021  Q1 2022  Q2 2022              Average/Total   

Current assets

  8,945   9,924   12,392   12,487  

Current liabilities

  (5,062  (7,828  (9,223  (9,177    

Working capital

  3,883   2,096   3,169   3,310   3,115   

Working capital from certain recent acquisitions

  -   -   -   -      

Adjusted working capital

  3,883   2,096   3,169   3,310   3,115   

Nutrien Financial working capital

  (2,820  (2,150  (2,274  (4,404    

Adjusted working capital excluding Nutrien Financial

  1,063   (54  895   (1,094  203   

Sales

  3,347   3,878   3,861   9,422  

Sales from certain recent acquisitions

  -   -   -   -     

Adjusted sales

  3,347   3,878   3,861   9,422   20,508   

Nutrien Financial revenue

  (54  (51  (49  (91    

Adjusted sales excluding Nutrien Financial

  3,293   3,827   3,812   9,331   20,263   

Adjusted average working capital to sales (%)

      15   

Adjusted average working capital to sales excluding Nutrien Financial (%)

 

   1   
  Rolling four quarters ended June 30, 2021 
(millions of US dollars, except as otherwise noted) Q3 2020  Q4 2020  Q1 2021  Q2 2021  Average/Total   

Current assets

  7,324   8,013   9,160   9,300  

Current liabilities

  (4,108  (6,856  (7,530  (7,952    

Working capital

  3,216   1,157   1,630   1,348   1,838   

Working capital from certain recent acquisitions

  -   -   -   -     

Adjusted working capital

  3,216   1,157   1,630   1,348   1,838   

Nutrien Financial working capital

  (1,711  (1,392  (1,221  (3,072    

Adjusted working capital excluding Nutrien Financial

  1,505   (235  409   (1,724  (11) 

Sales

  2,742   2,618   2,972   7,537  

Sales from certain recent acquisitions

  -   -   -   -     

Adjusted sales

  2,742   2,618   2,972   7,537   15,869   

Nutrien Financial revenue

  (36  (37  (25  (59    

Adjusted sales excluding Nutrien Financial

  2,706   2,581   2,947   7,478   15,712   

Adjusted average working capital to sales (%)

      12   

Adjusted average working capital to sales excluding Nutrien Financial (%)

 

   -   

 

24


Nutrien Financial Adjusted Net Interest Margin

Definition: Nutrien Financial revenue less deemed interest expense divided by average Nutrien Financial receivables outstanding for the last four rolling quarters.

Why we use the measure and why it is useful to investors: Used by credit rating agencies and other users to evaluate financial performance of Nutrien Financial.

 

  Rolling four quarters ended June 30, 2022 
(millions of US dollars, except as otherwise noted) Q3 2021  Q4 2021  Q1 2022  Q2 2022              Total/Average   

Nutrien Financial revenue

  54   51   49   91  

Deemed interest expense 1

  (10  (12  (6  (12    

Net interest

  44   39   43   79   205   

Average Nutrien Financial receivables

  2,820   2,150   2,274   4,404   2,912   

Nutrien Financial adjusted net interest margin (%)

                  7.0   

 1   Average borrowing rate applied to the notional debt required to fund the portfolio of receivables from customers monitored and serviced by Nutrien Financial.

 

 

  Rolling four quarters ended June 30, 2021 
(millions of US dollars, except as otherwise noted) Q3 2020  Q4 2020  Q1 2021  Q2 2021  Total/Average   

Nutrien Financial revenue

  36   37   25   59  

Deemed interest expense 1

  (15  (14  (6  (8    

Net interest

  21   23   19   51   114   

Average Nutrien Financial receivables

  1,711   1,392   1,221   3,072   1,849   

Nutrien Financial adjusted net interest margin (%)

                  6.2   
 1   Average borrowing rate applied to the notional debt required to fund the portfolio of receivables from customers monitored and serviced by Nutrien Financial.

 

 

25


Retail Cash Operating Coverage Ratio

Definition: Retail selling, general and administrative, and other expenses, excluding depreciation and amortization expense, divided by Retail gross margin excluding depreciation and amortization expense in cost of goods sold, for the last four rolling quarters.

Why we use the measure and why it is useful to investors: To understand the costs and underlying economics of our Retail operations and to assess our Retail operating performance and ability to generate free cash flow.

 

  Rolling four quarters ended June 30, 2022 
(millions of US dollars, except as otherwise noted) Q3 2021  Q4 2021  Q1 2022  Q2 2022  Total   

Selling expenses

  746   848   722   1,013   3,329   

General and administrative expenses

  45   43   45   54   187   

Other expenses (income)

  17   20   (12  21   46   

Operating expenses

  808   911   755   1,088   3,562   

Depreciation and amortization in operating expenses

  (180  (173  (167  (171  (691) 

Operating expenses excluding depreciation and amortization

  628   738   588   917   2,871   

Gross margin

  917   1,173   845   2,340   5,275   

Depreciation and amortization in cost of goods sold

  2   5   2   4   13   

Gross margin excluding depreciation and amortization

  919   1,178   847   2,344   5,288   

Cash operating coverage ratio (%)

                  54   
  

 

Rolling four quarters ended June 30, 2021

 
(millions of US dollars, except as otherwise noted) Q3 2020  Q4 2020  Q1 2021  Q2 2021  Total   

Selling expenses

  669   727   667   863   2,926   

General and administrative expenses

  34   33   39   41   147   

Other expenses (income)

  (12  8   15   34   45   

Operating expenses

  691   768   721   938   3,118   

Depreciation and amortization in operating expenses

  (167  (177  (175  (166  (685) 

Operating expenses excluding depreciation and amortization

  524   591   546   772   2,433   

Gross margin

  683   885   652   1,858   4,078   

Depreciation and amortization in cost of goods sold

  3   3   2   3   11   

Gross margin excluding depreciation and amortization

  686   888   654   1,861   4,089   

Cash operating coverage ratio (%)

                  60   

Retail Normalized Comparable Store Sales

Most directly comparable IFRS financial measure: Retail sales from comparable base as a component of total Retail sales.

Definition: Prior year comparable store sales adjusted for published potash, nitrogen and phosphate benchmark prices and foreign exchange rates used in the current year. We retain sales of closed locations in the comparable base if the closed location is in close proximity to an existing location, unless we plan to exit the market area or are unable to economically or logistically serve it. We do not adjust for temporary closures, expansions or renovations of stores.

Why we use the measure and why it is useful to investors: To evaluate sales growth by adjusting for fluctuations in commodity prices and foreign exchange rates. Includes locations we have owned for more than 12 months.

 

           Six Months Ended June 30         

 (millions of US dollars, except as otherwise noted)

                   2022                    2021  

 Sales from comparable base

    

Prior period

   10,509    9,425  

Adjustments 1

   (57    

Revised prior period

   10,452    9,425  

Current period

   13,230    10,405  

 Comparable store sales (%)

   27    10  

 Prior period normalized for benchmark prices and foreign exchange rates

   13,706    10,351  

 Normalized comparable store sales (%)

   (3    
 1   Adjustments relate to prior period sales related to closed locations or businesses that no longer exist in the current period in order to provide a comparable base in our calculation.

 

 

26


Appendix C – Other Financial Measures

Supplementary Financial Measures

Supplementary financial measures are financial measures disclosed by a company that (a) are, or are intended to be, disclosed on a periodic basis to depict the historical or expected future financial performance, financial position or cash flow of a company, (b) are not disclosed in the financial statements of the company, (c) are not non-IFRS financial measures, and (d) are not non-IFRS ratios.

The following section provides an explanation of the composition of those supplementary financial measures if not previously provided.

Retail adjusted EBITDA margin: Retail adjusted EBITDA divided by Retail sales for the last four rolling quarters.

Sustaining capital expenditures: Represents capital expenditures that are required to sustain operations at existing levels and include major repairs and maintenance, and plant turnarounds.

Retail adjusted EBITDA per US selling location: Calculated as total Retail US adjusted EBITDA for the last four rolling quarters, representing the organic EBITDA component, which excludes 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 in those quarters.

Shareholder returns (cash used for dividends and share repurchases): Calculated as dividends paid to Nutrien shareholders plus repurchase of common shares. This measure is useful as it represents return of capital to shareholders.

 

27


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”)

 

 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

 

      

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
related derivatives

   -    -    -   -   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.

 

   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
related derivatives

   -    -    -   -   (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
related derivatives

   -   -    -   -   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 

 

34


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%

 

 

35


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

 

36


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

 

37


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.

 

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