Nutrien Delivers Earnings Growth and Expects Strong Market Fundamentals in 2023
Nutrien Ltd. (TSX and NYSE: NTR) announced today its third quarter 2022 results, with net earnings of $1.6 billion ($2.94 diluted net earnings per share), which includes a non-cash impairment reversal of $330 million relating to our Phosphate operations. Third quarter 2022 adjusted net earnings per share1 were $2.51 and adjusted EBITDA1 was $2.5 billion.
“Nutrien has delivered record earnings in 2022 due to the strength of agriculture fundamentals, higher fertilizer prices and excellent Retail performance. During the third quarter, we saw a temporary reduction in potash purchasing in North America and Brazil, which has impacted our sales volumes and realized prices in the second half of the year. However, the underlying demand drivers remain strong and global fertilizer supply challenges still persist, creating a supportive environment for Nutrien as we look ahead to 2023 and beyond,” commented Ken Seitz, Nutrien’s President and CEO.
“We are focused on efficiently supplying our customers with the products and services they need to help sustainably feed a growing world. We continue to take a multi-year view of the market and remain confident that our additional low-cost potash and nitrogen production capability will be required to meet future demand,” added Mr. Seitz.
Highlights:
Nutrien generated record net earnings of $6.6 billion and adjusted EBITDA1 of $10.1 billion in the first nine months 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 improved to $3.4 billion in the first nine months of 2022. Nutrien revised full-year 2022 adjusted EBITDA guidance1 and adjusted net earnings per share guidance1 to $12.2 to $13.2 billion and $13.25 to $14.50 per share, respectively. Nutrien Ag Solutions (“Retail”) delivered record adjusted EBITDA in the first nine months of 2022, due to supportive market conditions in key regions where we operate. Retail cash operating coverage ratio1 as at September 30, 2022 improved to 55 percent compared to 59 percent for the same period in 2021 driven by higher margins. Potash adjusted EBITDA increased in the third quarter and the first nine months of 2022 compared to the prior year due to higher net realized selling prices and record offshore sales volumes, more than offsetting lower North American sales volumes. Nitrogen third quarter and first nine months of 2022 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 ammonia and urea sales volumes. In the third quarter of 2022, we recognized a non-cash impairment reversal of $330 million associated with our Phosphate operations and $780 million for the first nine months due to a more favorable outlook for phosphate margins. Nutrien repurchased approximately 40 million shares year-to-date as of November 1, 2022, under our share repurchase programs, for a total of approximately $3.5 billion. Nutrien plans to allocate approximately $4 billion to share repurchases in 2022. While some repurchases may now extend into the first quarter of 2023 due to lower forecasted operating cash flow in 2022, we still intend on completing our existing 10 percent share repurchase program prior to its expiry in February 2023. 1 These (and any related guidance, if applicable) are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section for further information.Management’s Discussion and Analysis
The following management’s discussion and analysis (“MD&A”) is the responsibility of management and is dated as of November 2, 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 nine months ended September 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 stocks-to-use ratio, excluding China, is projected to decline to the lowest level in more than a quarter century, driven by reduced corn and wheat production expectations in the US and Europe. As a result of historically tight supply and demand balances, spot prices of corn, soybeans and wheat are up 25 to 50 percent compared to the 10-year average and we expect strong futures prices will provide an incentive for growers to boost production in 2023. The re-opening of the Black Sea to Ukrainian grain exports positively impacted exports from the region but there is uncertainty over the continuation of the United Nations brokered agreement with Russia. The US Department of Agriculture (USDA) projects that Ukrainian grain exports will decline by 44 percent year-over-year in 2023, in large part driven by reduced production levels. Weather has been favorable in North America and we anticipate that the rapid pace of harvest will support strong fall ammonia demand and normal application rates of potash, phosphate and crop protection products. South American spring crop planting is proceeding with a mix of planting conditions. Argentina continues to be impacted by La Nina-related drought, while planting conditions in much of Brazil have generally been favorable. We expect that Brazilian soybean acreage will increase by 3 to 4 percent, which is also expected to support a proportional increase in safrinha corn acreage.Crop Nutrient Markets
Potash shipments from Belarus are projected to be down 50 to 60 percent and Russia down 20 to 25 percent in 2022 compared to the prior year, in line with our previous expectations. We have lowered our global potash shipment forecast to between 60 and 62 million tonnes in 2022, largely due to the impact of higher-than-expected inventory and cautious buying in North America and Brazil during the second half of 2022. We expect robust agricultural fundamentals will support increased potash consumption in 2023 and believe pent-up demand will emerge as inventories are drawn down and prices stabilize. We expect potash supply from Eastern Europe will continue to be constrained in 2023, with shipments from Belarus projected to be down 40 to 60 percent and Russia down 15 to 30 percent compared to 2021 levels. Global potash shipments are forecast between 64 to 67 million tonnes in 2023, with projected Nutrien potash sales volumes of approximately 15 million tonnes. Nitrogen prices continue to be supported by historically high European natural gas prices that have led to significant curtailments of ammonia and downstream nitrogen products. Shifts in global nitrogen trade flows have led to higher US exports and lower import volumes, which we expect will result in a tight North American supply and demand balance entering 2023. Chinese urea and phosphate export restrictions have limited exports in 2022 and are expected to persist into 2023. The restrictions have led to low Chinese phosphate operating rates, maintaining relatively tight global phosphate supplies, while contributing to lower global sulfur prices and supporting phosphate production margins.Financial Guidance
Nutrien revised its full-year 2022 adjusted EBITDA guidance and full-year 2022 adjusted net earnings per share guidance primarily due to lower expected Potash earnings as a result of lower potash sales volumes and realized prices, which more than offset stronger expected Retail earnings. Adjusted net earnings per share guidance includes our plan to allocate approximately $4 billion to share repurchases in 2022. Nutrien lowered potash sales volume guidance primarily to reflect the impact of the compressed spring application season in North America that resulted in higher inventory carry-over and cautious purchasing. Nutrien lowered nitrogen sales volume guidance to reflect the impact of Trinidad gas curtailments during the second half of 2022.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 Ranges 1 as of
Nov 2, 2022
Aug 3, 2022
(billions of US dollars, except as otherwise noted)
Low
High
Low
High
Adjusted net earnings per share 2
13.25
14.50
15.80
17.80
Adjusted EBITDA 2
12.2
13.2
14.0
15.5
Retail adjusted EBITDA
2.15
2.25
2.10
2.20
Potash adjusted EBITDA
5.8
6.2
7.6
8.2
Nitrogen adjusted EBITDA
4.1
4.4
4.0
4.7
Phosphate adjusted EBITDA (in millions of US dollars)
700
800
750
850
Potash sales tonnes (millions) 3
12.5
12.9
14.3
14.9
Nitrogen sales tonnes (millions) 3
10.4
10.5
10.6
11.0
Depreciation and amortization
2.0
2.1
2.0
2.1
Effective tax rate on adjusted earnings (%)
25.0
26.0
25.5
26.5
Sustaining capital expenditures 4
1.3
1.4
1.3
1.4
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.
Consolidated Results
Three Months Ended September 30
Nine Months Ended September 30
(millions of US dollars, except as otherwise noted)
2022
2021
% Change
2022
2021
% Change
Sales
8,188
6,024
36
30,351
20,445
48
Freight, transportation and distribution
204
220
(7)
628
653
(4)
Cost of goods sold
4,722
3,639
30
17,205
13,589
27
Gross margin
3,262
2,165
51
12,518
6,203
102
Expenses
1,056
1,108
(5)
3,368
3,249
4
Net earnings
1,583
726
118
6,569
1,972
233
Adjusted EBITDA 1
2,467
1,642
50
10,075
4,663
116
Diluted net earnings per share
2.94
1.25
135
11.96
3.41
251
Adjusted net earnings per share 1
2.51
1.38
82
11.10
3.75
196
Cash provided by (used in) operating activities
878
(1,565)
n/m
3,374
249
n/m
Free cash flow 1
1,543
862
79
6,770
2,751
146
Free cash flow including changes in non-cash operating working capital 1
450
(1,890)
n/m
2,496
(544)
n/m
1 These are non-IFRS financial measures. See the "Non-IFRS Financial Measures" section.
Net earnings and adjusted EBITDA increased in the third quarter and first nine months of 2022 compared to the same periods 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 third quarter of 2022, we recorded a non-cash impairment reversal of $330 million related to our Phosphate operations, which impacted net earnings and brings the total impairment reversal to $780 million for the first nine months of 2022. Cash provided by operating activities increased in the third quarter and first nine months of 2022 compared to the same periods 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 nine months ended September 30, 2022 to the results for the three and nine months ended September 30, 2021, unless otherwise noted.
Nutrien Ag Solutions (“Retail”)
Three Months Ended September 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
1,605
1,194
34
214
246
(13)
13
21
Crop protection products
1,716
1,469
17
436
374
17
25
25
Seed
134
140
(4)
33
56
(41)
25
40
Merchandise
241
265
(9)
41
44
(7)
17
17
Nutrien Financial
65
54
20
65
54
20
100
100
Services and other 1
244
252
(3)
153
170
(10)
63
67
Nutrien Financial elimination 1, 2
(25)
(27)
(7)
(25)
(27)
(7)
100
100
3,980
3,347
19
917
917
‐
23
27
Cost of goods sold
3,063
2,430
26
Gross margin
917
917
‐
Expenses 3
890
808
10
Earnings before finance
costs and taxes ("EBIT")
27
109
(75)
Depreciation and amortization
206
182
13
EBITDA
233
291
(20)
Adjustments 4
2
‐
n/m
Adjusted EBITDA
235
291
(19)
1 Certain immaterial figures have been reclassified for the three months ended September 30, 2021.
2 Represents elimination for the interest and service fees charged by Nutrien Financial to Retail branches.
3 Includes selling expenses of $821 million (2021 – $746 million).
4 See Note 2 to the interim financial statements.
Nine Months Ended September 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
7,740
5,255
47
1,417
1,169
21
18
22
Crop protection products
6,086
5,220
17
1,523
1,137
34
25
22
Seed
1,861
1,819
2
382
362
6
21
20
Merchandise
755
763
(1)
133
127
5
18
17
Nutrien Financial
205
138
49
205
138
49
100
100
Services and other 1
729
737
(1)
555
570
(3)
76
77
Nutrien Financial elimination 1
(113)
(76)
49
(113)
(76)
49
100
100
17,263
13,856
25
4,102
3,427
20
24
25
Cost of goods sold
13,161
10,429
26
Gross margin
4,102
3,427
20
Expenses 2
2,733
2,467
11
EBIT
1,369
960
43
Depreciation and amortization
550
528
4
EBITDA
1,919
1,488
29
Adjustments 3
(17)
9
n/m
Adjusted EBITDA
1,902
1,497
27
1 Certain immaterial figures have been reclassified for the nine months ended September 30, 2021.
2 Includes selling expenses of $2,556 million (2021 – $2,276 million).
3 See Note 2 to the interim financial statements.
Adjusted EBITDA in the first nine months of 2022 increased 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. Adjusted EBITDA decreased in the third quarter of 2022 compared to the prior year’s record results as strong crop protection product margins were offset by lower margins in other product categories as well as inflation on certain expense items in 2022. Retail cash operating coverage ratio1 improved as at September 30, 2022 to 55 percent from 59 percent in the same period in 2021 due to significantly higher gross margin. Crop nutrients sales increased in the third quarter and first nine months of 2022 due to higher selling prices. Gross margin and gross margin per tonne increased in the first nine months of 2022 compared to the same period last year due to strategic procurement and the timing of inventory purchasing in the first half of 2022, with a decrease in the third quarter of 2022 due to higher cost inventory. Sales volumes decreased in the first nine months of 2022 due to reduced application resulting from a delayed planting season in North America and earlier engagement in the prior year in a rising price environment. Crop protection products sales and gross margin increased in the third quarter and first nine months of 2022, particularly in North America, due to higher prices along with increased sales and gross margin in proprietary products. Gross margin as a percentage of sales increased in the first nine months 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 first nine months of 2022 due to higher pricing and an increase in proprietary seed margins, with a decrease in the third quarter of 2022 as a result of timing and mix of seed sales compared to the same period in 2021. Merchandise gross margin for the first nine months of 2022 increased due to strong margin performance in Australia animal health products from increased flock and herd sizes, with a decrease in the third quarter of 2022 due to an unfavorable foreign exchange rate impact on Australian dollars. Nutrien Financial sales increased in the third quarter and first nine months 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 decreased in the third quarter and first nine months of 2022 mainly due to lower livestock volumes as wet conditions in Australia impeded movement, along with an unfavorable foreign exchange rate impact on Australian dollars. 1 These (and any related guidance, if applicable) are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section for further information.Potash
Three Months Ended September 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
436
483
(10)
619
1,515
(59)
703
319
120
Offshore
1,568
705
122
2,548
2,276
12
616
310
99
2,004
1,188
69
3,167
3,791
(16)
633
313
102
Cost of goods sold
386
372
4
122
98
24
Gross margin – total
1,618
816
98
511
215
138
Expenses 1
352
146
141
Depreciation and amortization
35
35
2
EBIT
1,266
670
89
Gross margin excluding depreciation
Depreciation and amortization
112
131
(15)
and amortization – manufactured 3
546
250
119
EBITDA
1,378
801
72
Potash controllable cash cost of
Adjustments 2
‐
7
(100)
product manufactured 3
70
55
27
Adjusted EBITDA
1,378
808
71
1 Includes provincial mining taxes of $348 million (2021 – $128 million).
2 See Note 2 to the interim financial statements.
3 These are non-IFRS financial measures. See the "Non-IFRS Financial Measures" section.
Nine Months Ended September 30
(millions of US dollars, except
Dollars
Tonnes (thousands)
Average per Tonne
as otherwise noted)
2022
2021
% Change
2022
2021
% Change
2022
2021
% Change
Manufactured product
Net sales
North America
1,949
1,141
71
2,770
4,157
(33)
703
275
156
Offshore
4,573
1,475
210
7,149
6,412
11
640
230
178
6,522
2,616
149
9,919
10,569
(6)
658
248
165
Cost of goods sold
1,090
980
11
110
93
18
Gross margin – total
5,432
1,636
232
548
155
254
Expenses 1
975
333
193
Depreciation and amortization
36
35
2
EBIT
4,457
1,303
242
Gross margin excluding depreciation
Depreciation and amortization
354
371
(5)
and amortization – manufactured
584
190
207
EBITDA
4,811
1,674
187
Potash controllable cash cost of
Adjustments 2
‐
9
(100)
product manufactured
56
51
10
Adjusted EBITDA
4,811
1,683
186
1 Includes provincial mining taxes of $959 million (2021 – $293 million).
2 See Note 2 to the interim financial statements.
Adjusted EBITDA increased in the third quarter and first nine months 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 decreased in the third quarter and first nine months of 2022 due to a compressed North American spring application season that resulted in high inventory carry-over along with cautious purchasing. Offshore sales volumes were the highest of any first nine-month period on record due to strong demand and reduced supply from Eastern Europe.
Net realized selling price increased in the third quarter and first nine months of 2022 due to the impact of supply constraints, in particular related to uncertainty on future supply from Russia and Belarus. Net realized prices decreased from the second quarter of 2022 due to a decline in benchmark pricing, particularly in Brazil and North America.
Cost of goods sold per tonne in the first nine months of 2022 increased primarily due to higher royalties resulting from increased net realized selling prices. Potash controllable cash cost of product manufactured increased in the third quarter due to lower production volumes and a pull forward of maintenance activities.
Canpotex Sales by Market
(percentage of sales volumes, except as
Three Months Ended September 30
Nine Months Ended September 30
otherwise noted)
2022
2021
Change
2022
2021
Change
Latin America
35
48
(13)
36
38
(2)
Other Asian markets 1
32
28
4
34
35
(1)
China
15
7
8
14
11
3
Other markets
10
8
2
9
10
(1)
India
8
9
(1)
7
6
1
100
100
100
100
1 All Asian markets except China and India.
Nitrogen
Three Months Ended September 30
(millions of US dollars, except
Dollars
Tonnes (thousands)
Average per Tonne
as otherwise noted)
2022
2021
% Change
2022
2021
% Change
2022
2021
% Change
Manufactured product
Net sales
Ammonia
649
368
76
701
721
(3)
927
509
82
Urea
393
316
24
651
659
(1)
603
480
26
Solutions, nitrates and sulfates
465
289
61
1,274
1,141
12
365
253
44
1,507
973
55
2,626
2,521
4
574
386
49
Cost of goods sold
872
591
48
333
234
42
Gross margin – manufactured
635
382
66
241
152
59
Gross margin – other 1
29
24
21
Depreciation and amortization
54
50
8
Gross margin – total
664
406
64
Gross margin excluding depreciation
(Income) expenses
(50)
(1)
n/m
and amortization – manufactured 2
295
202
46
EBIT
714
407
75
Ammonia controllable cash cost of
Depreciation and amortization
141
125
13
product manufactured 2
62
53
17
EBITDA/ Adjusted EBITDA
855
532
61
1 Includes other nitrogen (including ESN®) and purchased products and comprises net sales of $264 million (2021 – $128 million) less cost of goods sold of $235 million (2021 – $104 million).
2 These are non-IFRS financial measures. See the "Non-IFRS Financial Measures" section.
Nine Months Ended September 30
(millions of US dollars, except
Dollars
Tonnes (thousands)
Average per Tonne
as otherwise noted)
2022
2021
% Change
2022
2021
% Change
2022
2021
% Change
Manufactured product
Net sales
Ammonia
1,952
874
123
1,939
2,129
(9)
1,007
411
145
Urea
1,457
911
60
2,052
2,235
(8)
710
407
74
Solutions, nitrates and sulfates
1,440
743
94
3,495
3,526
(1)
412
211
95
4,849
2,528
92
7,486
7,890
(5)
648
320
103
Cost of goods sold
2,351
1,628
44
314
206
52
Gross margin - manufactured
2,498
900
178
334
114
193
Gross margin – other 1
84
72
17
Depreciation and amortization
54
52
4
Gross margin – total
2,582
972
166
Gross margin excluding depreciation
(Income) expenses
(105)
(1)
n/m
and amortization – manufactured
388
166
134
EBIT
2,687
973
176
Ammonia controllable cash cost of
Depreciation and amortization
403
409
(1)
product manufactured
59
52
13
EBITDA
3,090
1,382
124
Adjustments 2
‐
5
(100)
Adjusted EBITDA
3,090
1,387
123
1 Includes other nitrogen (including ESN®) and purchased products and comprises net sales of $892 million (2021 – $512 million) less cost of goods sold of $808 million (2021 – $440 million).
2 See Note 2 to the interim financial statements.
Adjusted EBITDA increased in the third quarter and first nine months 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 ammonia and urea volumes.Sales volumes increased in the third quarter of 2022 due to strong demand and higher offshore urea ammonium nitrate (UAN) sales that more than offset the impact of gas curtailments in Trinidad. Sales volumes in the first nine months of 2022 decreased due to unplanned plant outages and a compressed North American spring application season.
Net realized selling price in the third quarter and first nine months of 2022 were higher due to strong benchmark prices resulting from tight global supply and higher energy prices in key nitrogen producing regions. Net realized selling prices decreased from the second quarter of 2022 due to a seasonal reset in benchmark prices that resulted in lower Nitrogen summer fill pricing.
Cost of goods sold per tonne in the third quarter and first nine months of 2022 increased primarily due to higher natural gas, raw material and other input costs. Ammonia controllable cash cost of product manufactured increased in the third quarter and first nine months due to higher input costs, mainly electricity costs.
Natural Gas Prices in Cost of Production
Three Months Ended September 30
Nine Months Ended September 30
(US dollars per MMBtu, except as otherwise noted)
2022
2021
% Change
2022
2021
% Change
Overall gas cost excluding realized derivative impact
8.33
4.77
75
7.92
3.92
102
Realized derivative impact
(0.09)
0.01
n/m
(0.06)
0.02
n/m
Overall gas cost
8.24
4.78
72
7.86
3.94
99
Average NYMEX
8.20
4.01
104
6.77
3.18
113
Average AECO
4.46
2.83
58
4.34
2.48
75
Natural gas prices in our cost of production increased in the third quarter and first nine months 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.Phosphate
Three Months Ended September 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
375
269
39
479
428
12
782
628
25
Industrial and feed
192
132
45
161
192
(16)
1,198
689
74
567
401
41
640
620
3
886
648
37
Cost of goods sold
445
300
48
695
484
44
Gross margin - manufactured
122
101
21
191
164
16
Gross margin – other 1
(8)
7
n/m
Depreciation and amortization
75
63
19
Gross margin – total
114
108
6
Gross margin excluding depreciation
(Income) expenses
(311)
12
n/m
and amortization – manufactured 3
266
227
17
EBIT
425
96
343
Depreciation and amortization
48
39
23
EBITDA
473
135
250
Adjustments 2
(330)
‐
n/m
Adjusted EBITDA
143
135
6
1 Includes other phosphate and purchased products and comprises net sales of $84 million (2021 – $47 million) less cost of goods sold of $92 million (2021 – $40 million).
2 See Notes 2 and 3 to the interim financial statements. Includes impairment reversal of assets of $330 million (2021 – nil).
3 This is a non-IFRS financial measure. See the "Non-IFRS Financial Measures" section.
Nine Months Ended September 30
(millions of US dollars, except
Dollars
Tonnes (thousands)
Average per Tonne
as otherwise noted)
2022
2021
% Change
2022
2021
% Change
2022
2021
% Change
Manufactured product
Net sales
Fertilizer
1,093
731
50
1,305
1,331
(2)
837
549
52
Industrial and feed
551
365
51
542
577
(6)
1,017
633
61
1,644
1,096
50
1,847
1,908
(3)
890
575
55
Cost of goods sold
1,157
853
36
626
448
40
Gross margin – manufactured
487
243
100
264
127
108
Gross margin – other 1
(10)
15
n/m
Depreciation and amortization
70
59
20
Gross margin – total
477
258
85
Gross margin excluding depreciation
(Income) expenses
(739)
26
n/m
and amortization – manufactured
334
186
80
EBIT
1,216
232
424
Depreciation and amortization
130
112
16
EBITDA
1,346
344
291
Adjustments 2
(780)
‐
n/m
Adjusted EBITDA
566
344
65
1 Includes other phosphate and purchased products and comprises net sales of $232 million (2021 – $140 million) less cost of goods sold of $242 million (2021 – $125 million).
2 See Notes 2 and 3 to the interim financial statements. Includes impairment reversal of assets of $780 million (2021 – nil).
Adjusted EBITDA increased in the third quarter and first nine months of 2022 mainly due to higher net realized selling prices, which more than offset higher raw material costs. Included with expenses in the third quarter of 2022, we recognized a $330 million non-cash impairment of assets reversal, which is deducted from adjusted EBITDA. This brings the total impairment reversal to $780 million for the first nine months of 2022 and is due to a more favorable outlook for phosphate margins. Sales volumes increased in the third quarter of 2022 due to strong offshore fertilizer sales, offsetting lower industrial sales that were impacted by an unplanned plant outage. Sales volumes in the first nine months of 2022 decreased due to a condensed North American spring application season and lower production volumes. Net realized selling price increased in the third quarter and first nine months of 2022 aligned with the increase in global benchmark prices. Industrial and feed net realized selling prices increased to a greater extent than fertilizer prices in the third 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 in the third quarter and first nine months of 2022 primarily due to significantly higher sulfur and ammonia input costs.Corporate and Others
(millions of US dollars, except as otherwise
Three Months Ended September 30
Nine Months Ended September 30
noted)
2022
2021
% Change
2022
2021
% Change
Selling expenses
(2)
(9)
(78)
(6)
(24)
(75)
General and administrative expenses
80
58
38
227
182
25
Share-based compensation expense
39
64
(39)
122
125
(2)
Other expenses
59
30
97
160
141
13
EBIT
(176)
(143)
23
(503)
(424)
19
Depreciation and amortization
19
12
58
55
34
62
EBITDA
(157)
(131)
20
(448)
(390)
15
Adjustments 1
63
89
(29)
230
232
(1)
Adjusted EBITDA
(94)
(42)
124
(218)
(158)
38
1 See Note 2 to the interim financial statements.
General and administrative expenses were higher in the third quarter and first nine months of 2022 compared to the same periods in 2021 mainly due to increased depreciation expense, higher donations and higher information technology-related expenses. Other expenses were higher in the third quarter and first nine months of 2022 compared to the same periods in 2021 mainly due to higher foreign exchange losses related to our US dollar denominated liabilities in our South American operations and higher information technology project-related costs. This was partially offset by the absence of cloud computing related expenses from our change in accounting policy and lower COVID-19 related expenses.Finance Costs, Income Taxes and Other Comprehensive (Loss) Income
(millions of US dollars, except as otherwise
Three Months Ended September 30
Nine Months Ended September 30
noted)
2022
2021
% Change
2022
2021
% Change
Finance costs
136
122
11
375
367
2
Income tax expense
487
209
133
2,206
615
259
Other comprehensive (loss) income
(230)
(79)
191
(296)
6
n/m
Finance costs were higher in the third quarter and first nine months of 2022 compared to the same periods in 2021 mainly due to higher interest rates and a higher short-term debt balance, mostly offset by a lower long-term debt balance resulting from the early extinguishment of a portion of our long-term debt in the fourth quarter of 2021. Income tax expense was higher as a result of higher earnings in the third quarter and first nine months 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 third quarter and first nine months 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 third quarter and first nine months of 2022, we had higher losses on foreign currency translation of our Retail operations, mainly in Australia and Canada compared to the same periods in 2021. These currencies depreciated relative to the US dollar as at September 30, 2022 compared to June 30, 2022 and December 31, 2021 levels, which led to losses in the third quarter and the first nine months of 2022. This was partially offset by a net actuarial gain on our defined benefit pension plans in the third quarter of 2022.Liquidity and Capital Resources
Sources and Uses of Liquidity
We continued to manage our capital in accordance with our capital allocation strategy. We believe that our internally generated cash flow, supplemented by available borrowings under new or existing financing sources, if necessary, will be sufficient to meet our anticipated capital expenditures, planned growth and development activities, and other cash requirements for the foreseeable future. Refer to the “Capital Structure and Management” section for details on our existing long-term debt and credit facilities.
Sources and Uses of Cash
(millions of US dollars, except as otherwise
Three Months Ended September 30
Nine Months Ended September 30
noted)
2022
2021
% Change
2022
2021
% Change
Cash provided by (used in) operating activities
878
(1,565)
n/m
3,374
249
n/m
Cash used in investing activities
(705)
(523)
35
(1,679)
(1,342)
25
Cash (used in) provided by financing activities
(29)
757
n/m
(1,319)
117
n/m
Effect of exchange rate changes on cash and cash equivalents
(32)
(20)
60
(52)
(35)
49
Increase (decrease) in cash and cash equivalents
112
(1,351)
n/m
324
(1,011)
n/m
Cash provided by (used in) operating activities
Cash provided by operating activities was higher in the third quarter and first nine months of 2022 compared to the same periods in 2021 due to higher net earnings driven by higher selling prices from global supply uncertainties, offset by working capital requirements.Cash used in investing activities
Cash used in investing activities in the third quarter and first nine months of 2022 was higher compared to the same periods in 2021 mainly due to higher spending to maintain the safety and reliability of our assets and to increase our potash production capabilities.Cash (used in) provided by financing activities
Cash used in financing activities in the third quarter and first nine months of 2022 was higher compared to the same periods in 2021 due to increased share repurchases, partially offset with increased commercial paper and credit facility drawdowns to temporarily finance working capital requirements.Financial Condition Review
The following balance sheet categories contain variances that are considered material:
As at
(millions of US dollars, except as otherwise noted)
September 30, 2022
December 31, 2021
$ Change
% Change
Assets
Cash and cash equivalents
823
499
324
65
Receivables
8,591
5,366
3,225
60
Inventories
6,545
6,328
217
3
Prepaid expenses and other current assets
737
1,653
(916)
(55)
Property, plant and equipment
21,022
20,016
1,006
5
Liabilities and Equity
Short-term debt
4,454
1,560
2,894
186
Current portion of long-term debt
1,016
545
471
86
Payables and accrued charges
8,760
10,052
(1,292)
(13)
Long-term debt
7,020
7,521
(501)
(7)
Deferred income tax liabilities
3,489
3,165
324
10
Asset retirement obligations and accrued environmental costs
1,320
1,566
(246)
(16)
Share capital
14,588
15,457
(869)
(6)
Accumulated other comprehensive loss
(498)
(146)
(352)
241
Retained earnings
11,787
8,192
3,595
44
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. Inventories increased primarily due to higher cost to produce and/or purchase inventory across all our segments. We held higher than average levels of finished products inventory in our Nitrogen and Phosphate segments, resulting from timing of sales, turnarounds at our Nitrogen facilities at year-end and higher input costs. This was partially offset by a decrease in inventory in our Retail segment driven by seasonality. Generally, we carry higher inventory levels at year-end and during the early part of the year in preparation for the upcoming planting and application seasons. Throughout the year, inventory levels decrease as we sell to our customers. Prepaid expenses and other current assets decreased due to the drawdown of prepaid inventory where Retail typically prepays for products at year-end and takes possession of inventory throughout the year. Property, plant and equipment increased due to impairment reversals in the Phosphate segment. Short-term debt increased due to additional commercial paper issuances and borrowings under our credit facilities for our seasonal working capital requirements and for share repurchases. Payables and accrued charges decreased due to the seasonality of our Retail segment. Throughout the year, we settle our vendor obligations and customer prepayments decrease as drawdowns occur. As at September 30, 2022, we had higher payables balances compared to the same period in 2021 due to higher input costs from inflation and tight global supply. Long-term debt decreased due to a reclassification to the current portion of long-term debt of our $500 million notes maturing May 2023. Deferred income tax liabilities increased primarily in the NPK businesses in the US and Canada, partially offset by US Retail recoveries. The reversal of the Phosphate impairment also resulted in an increase in the deferred tax liability of $161 million. Asset retirement obligations and accrued environment costs decreased due to changes in discount rates, reclassification to the current portion of asset retirement obligations and increased spending on remediation to restore our sites. Share capital decreased from shares repurchased under our normal course issuer bids partially offset by exercise of stock options. Accumulated other comprehensive loss increased due to a loss on currency translation of our foreign operations. Retained earnings increased as net earnings in the first nine months 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 nine months ended September 30, 2022.
As at September 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
‐
‐
Unsecured revolving term credit facility
4.1
2,000
1,000
‐
Uncommitted revolving demand facility
4.0
1,000
500
‐
Other credit facilities
760
South American
1.5 - 21.7
194
108
Australian
3.6
97
‐
Other
3.3 - 4.0
8
3
Commercial paper
2.9 - 4.0
2,530
‐
Other short-term debt
n/a
125
7
Total
4,454
118
The amount available under the commercial paper program is limited to the availability of backup funds under the $4,500 million unsecured revolving term credit facility and excess cash invested in highly liquid securities. During the third quarter of 2022, we extended the maturity date of the $4,500 million unsecured revolving term credit facility from June 4, 2026 to September 14, 2027. There was no change to the total facility limit or the significant agreement terms from those we disclosed in our 2021 Annual Report.
During the third quarter of 2022, we entered into a new $2,000 million revolving term credit facility, with the same principal covenants and events of default as our existing $4,500 million unsecured revolving term credit facility. The $2,000 million non-revolving term credit facilities we entered into in July 2022 to help temporarily manage normal seasonal working capital swings were closed prior to September 30, 2022.
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. Subsequent to the third quarter of 2022, we repaid the $500 million 3.15 percent notes that matured October 1, 2022.
Outstanding Share Data
As at November 1, 2022
Common shares
520,183,851
Options to purchase common shares
3,920,176
We repurchased approximately 40 million shares year-to-date as of November 1, 2022, under our share repurchase programs, for a total of approximately $3.5 billion and plan to allocate a total of approximately $4 billion to share repurchases in 2022. While some of the previously expected approximately $5 billion in repurchases may now extend into the first quarter of 2023 due to lower forecasted operating cash flow in 2022, we still intend on completing our existing 10 percent share repurchase program prior to its expiry in February 2023.
For more information on our capital structure and management, see Note 24 to our 2021 annual financial statements.
Quarterly Results
(millions of US dollars, except as otherwise noted)
Q3 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Sales
8,188
14,506
7,657
7,267
6,024
9,763
4,658
4,052
Net earnings
1,583
3,601
1,385
1,207
726
1,113
133
316
Net earnings attributable to equity holders of Nutrien
1,577
3,593
1,378
1,201
717
1,108
127
316
Net earnings per share attributable to equity holders of Nutrien
Basic
2.95
6.53
2.49
2.11
1.26
1.94
0.22
0.55
Diluted
2.94
6.51
2.49
2.11
1.25
1.94
0.22
0.55
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 third and second quarters of 2022, earnings were impacted by $330 million and $450 million non-cash impairment reversals at White Springs and Aurora, respectively, 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..
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 nine months ended September 30, 2022 to our critical accounting estimates.
Impairment of Assets
Long-Lived Asset Impairment and Reversals
In the three months ended September 30, 2022, we continued to revise our near-term pricing forecasts due to continued global export restrictions from major producers and continued our review of our previously impaired Phosphate cash-generating unit (“CGU”), White Springs. 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, as a result of lower long-term forecasted global phosphate prices. Due to increases in our forecast, the recoverable amount of our White Springs CGU is above its carrying amount. As a result, during the three months ended September 30, 2022, we recorded a full impairment reversal, net of depreciation, of $330 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.
Goodwill Impairment Indicators
CGUs or groups of CGUs that have goodwill allocated to them 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 greater than or approximately equal to their carrying amounts. Key assumptions in our testing models may change, and changes that could reasonably be expected to occur may cause impairment. Such change in assumptions could be driven by global supply and demand, other market factors, changes in regulations, and other future events outside our control.
During the nine months ended September 30, 2022, North American central banks continued to increase their benchmark borrowing rates. 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 rates and increased our Retail – North America group of CGUs discount rate to 8.5 percent (previous impairment analysis – 8.0 percent at June 30, 2022) and this triggered an impairment test to be performed.
The Retail – North America group of CGUs have $6.9 billion in associated goodwill. Goodwill is more susceptible to impairment risk if there is an increase in the discount rate, or a deterioration in business operating results or economic conditions and actual results do not meet our forecasts. As at September 30, 2022, the Retail – North America group of CGUs carrying amount was equal to its recoverable amount. A 25 basis point increase in the discount rate will result in an impairment of the carrying amount of goodwill of approximately $500 million. A decrease in forecasted EBITDA and cash flows or a reduction in the terminal growth rate will also result in impairment in the future. Refer to Note 3 to the interim financial statements.
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 September 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 "Market Outlook and Guidance" section, constitute “forward-looking information” or “forward-looking statements” (collectively, “forward-looking statements”) under applicable securities laws (such statements are often accompanied by words such as “anticipate”, “forecast”, “expect”, “believe”, “may”, “will”, “should”, “estimate”, “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; our advancement of strategic growth initiatives; capital spending expectations for 2022; our intention to complete our existing share repurchase program in 2022 and 2023, including the funds allocated thereto; expectations regarding performance of our operating segments in 2022 and 2023 including projected potash sales volumes; our operating segment market outlooks and market conditions and fundamentals for 2022 as well as our expectations for market conditions and fundamentals in 2023 and beyond, 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, production expenses, shipments, consumption, prices and the impact of seasonality, import and export volumes and economic sanctions; Nutrien's ability to develop innovative and sustainable solutions; the negotiation of sales contracts; acquisitions and divestitures and the anticipated benefits thereof; and the potential impairment of goodwill associated with our Retail – North America group of CGUs. These forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements. As such, undue reliance should not be placed on these forward-looking statements.
All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions referred to below and elsewhere in this document. Although we believe that these assumptions are reasonable, having regard to our experience and our perception of historical trends, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place undue reliance on these assumptions and such forward-looking statements. Current conditions, economic and otherwise, render assumptions, although reasonable when made, subject to greater uncertainty. The additional key assumptions that have been made 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, expenses, margins, demand, supply, product availability, shipments, consumption, 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 intention to complete share repurchases under our share repurchase program, including the funding thereof, existing and future market conditions, including with respect to the price of our common shares, and compliance with respect to applicable limitations under securities laws and regulations and stock exchange policies; 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, global interest rates, supply chains and the global macroeconomic environment, including inflation; 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 expectations regarding the impact of certain factors on the carrying amount of goodwill associated with our Retail – North America group of CGUs; 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; seasonality; 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.
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.
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, November 3, 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-q3-earnings-conference-call
Appendix A - Selected Additional Financial Data
Selected Retail Measures
Three Months Ended September 30
Nine Months Ended September 30
2022
2021
2022
2021
Proprietary products margin as a percentage of product line margin (%)
Crop nutrients
35
26
22
24
Crop protection products
41
41
41
41
Seed
62
48
45
45
All products
30
27
27
27
Crop nutrients sales volumes (tonnes – thousands)
North America
1,066
1,112
6,286
7,729
International
782
898
2,732
2,833
Total
1,848
2,010
9,018
10,562
Crop nutrients selling price per tonne
North America
836
602
908
510
International
913
585
744
464
Total
869
595
858
498
Crop nutrients gross margin per tonne
North America
155
147
191
127
International
64
95
80
67
Total
117
124
157
111
Financial performance measures
2022
2021
Retail adjusted EBITDA margin (%) 1, 2
11
11
Retail adjusted EBITDA per US selling location (thousands of US dollars) 1, 2, 3
1,913
1,362
Retail adjusted average working capital to sales (%) 1, 4
16
12
Retail adjusted average working capital to sales excluding Nutrien Financial (%) 1, 4
1
(1)
Nutrien Financial adjusted net interest margin (%) 1, 4
6.7
6.4
Retail cash operating coverage ratio (%) 1, 4
55
59
1 Rolling four quarters ended September 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 September 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
3,009
49
138
77
3,273
(34)
3,239
1,488
International
572
8
56
25
661
(2)
659
662
Nutrien Financial receivables
3,581
57
194
102
3,934
(36)
3,898
2,150
1 Bad debt expense on the above receivables for the nine months ended September 30, 2022 was $10 million (2021 – $9 million) in the Retail segment.
Selected Nitrogen Measures
Three Months Ended September 30
Nine Months Ended September 30
2022
2021
2022
2021
Sales volumes (tonnes – thousands)
Fertilizer
1,417
1,320
3,963
4,450
Industrial and feed
1,209
1,201
3,523
3,440
Net sales (millions of US dollars)
Fertilizer
764
533
2,658
1,503
Industrial and feed
743
440
2,191
1,025
Net selling price per tonne
Fertilizer
539
404
671
338
Industrial and feed
614
366
622
298
Production Measures
Three Months Ended September 30
Nine Months Ended September 30
2022
2021
2022
2021
Potash production (Product tonnes – thousands)
2,742
3,199
10,066
10,149
Potash shutdown weeks 1
10
10
15
14
Ammonia production – total 2
1,483
1,414
4,359
4,355
Ammonia production – adjusted 2, 3
1,009
856
3,015
2,863
Ammonia operating rate (%) 3
91
77
92
87
P2O5 production (P2O5 tonnes – thousands)
335
384
1,063
1,109
P2O5 operating rate (%)
78
90
84
87
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.
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 September 30
Nine Months Ended September 30
(millions of US dollars)
2022
2021
2022
2021
Net earnings
1,583
726
6,569
1,972
Finance costs
136
122
375
367
Income tax expense
487
209
2,206
615
Depreciation and amortization
526
489
1,492
1,454
EBITDA 1
2,732
1,546
10,642
4,408
Share-based compensation expense
39
64
122
125
Foreign exchange loss, net of related derivatives
11
1
67
1
Integration and restructuring related costs
15
8
35
47
(Reversal) impairment of assets
(330)
7
(780)
12
COVID-19 related expenses 2
‐
16
8
34
Gain on disposal of investment
‐
‐
(19)
‐
Cloud computing transition adjustment 3
‐
‐
‐
36
Adjusted EBITDA
2,467
1,642
10,075
4,663
1 EBITDA is calculated as net earnings 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.
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, gain/loss on early extinguishment of debt or on settlement of derivatives due to discontinuance of hedge accounting. In 2022, we amended our calculation of adjusted net earnings to adjust for a gain on settlement of a derivative due to discontinued hedge accounting. There was no similar gain or loss in the comparative period. 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
September 30, 2022
Nine Months Ended
September 30, 2022
Per
Per
(millions of US dollars, except as otherwise
Increases
Diluted
Increases
Diluted
noted)
(Decreases)
Post-Tax
Share
(Decreases)
Post-Tax
Share
Net earnings attributable to equity holders of Nutrien
1,577
2.94
6,548
11.96
Adjustments:
Share-based compensation expense
39
30
0.06
122
91
0.17
Foreign exchange loss, net of related derivatives
11
8
0.01
67
50
0.09
Integration and restructuring related costs
15
11
0.02
35
26
0.05
Impairment reversal of assets
(330)
(265)
(0.49)
(780)
(619)
(1.13)
COVID-19 related expenses
‐
‐
‐
8
6
0.01
Gain on disposal of investment
‐
‐
‐
(19)
(14)
(0.03)
Gain on settlement of discontinued hedge accounting derivative
(18)
(14)
(0.03)
(18)
(13)
(0.02)
Adjusted net earnings
1,347
2.51
6,075
11.10
Three Months Ended
September 30, 2021
Nine Months Ended
September 30, 2021
Per
Per
(millions of US dollars, except as otherwise
Increases
Diluted
Increases
Diluted
noted)
(Decreases)
Post-Tax
Share
(Decreases)
Post-Tax
Share
Net earnings attributable to equity holders of Nutrien
717
1.25
1,952
3.41
Adjustments:
Share-based compensation expense
64
48
0.09
125
94
0.16
Foreign exchange loss, net of related derivatives
1
1
‐
1
1
‐
Integration and restructuring related costs
8
6
0.01
47
35
0.06
Impairment of assets
7
5
0.01
12
9
0.02
COVID-19 related expenses
16
12
0.02
34
26
0.05
Cloud computing transition adjustment
‐
‐
‐
36
27
0.05
Adjusted net earnings
789
1.38
2,144
3.75
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 or on settlement of derivatives due to discontinuance of hedge accounting.
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 September 30
Nine Months Ended September 30
(millions of US dollars)
2022
2021
2022
2021
Cash provided by (used in) operating activities
878
(1,565)
3,374
249
Sustaining capital expenditures
(428)
(325)
(878)
(793)
Free cash flow including changes in non-cash operating working capital
450
(1,890)
2,496
(544)
Changes in non-cash operating working capital
(1,093)
(2,752)
(4,274)
(3,295)
Free cash flow
1,543
862
6,770
2,751
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.
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 September 30
Nine Months Ended September 30
(millions of US dollars, except as otherwise noted)
2022
2021
2022
2021
Total COGS – Potash
386
372
1,090
980
Change in inventory
(52)
(58)
20
(42)
Other adjustments 1
(5)
(1)
(29)
(7)
COPM
329
313
1,081
931
Depreciation and amortization in COPM
(84)
(101)
(317)
(315)
Royalties in COPM
(42)
(24)
(150)
(60)
Natural gas costs and carbon taxes in COPM
(9)
(11)
(45)
(34)
Controllable cash COPM
194
177
569
522
Production tonnes (tonnes – thousands)
2,742
3,199
10,066
10,149
Potash controllable cash COPM per tonne
70
55
56
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.
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 September 30
Nine Months Ended September 30
(millions of US dollars, except as otherwise noted)
2022
2021
2022
2021
Total Manufactured COGS – Nitrogen
872
591
2,351
1,628
Total Other COGS – Nitrogen
235
104
808
440
Total COGS – Nitrogen
1,107
695
3,159
2,068
Depreciation and amortization in COGS
(117)
(105)
(334)
(347)
Cash COGS for products other than ammonia
(640)
(380)
(1,912)
(1,221)
Ammonia
Total cash COGS before other adjustments
350
210
913
500
Other adjustments 1
(31)
(36)
(145)
(66)
Total cash COPM
319
174
768
434
Natural gas and steam costs
(267)
(137)
(643)
(329)
Controllable cash COPM
52
37
125
105
Production tonnes (net tonnes 2 – thousands)
819
706
2,099
2,011
Ammonia controllable cash COPM per tonne
62
53
59
52
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.
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 September 30, 2022
(millions of US dollars, except as otherwise noted)
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Average/Total
Current assets
9,924
12,392
12,487
11,262
Current liabilities
(7,828)
(9,223)
(9,177)
(5,889)
Working capital
2,096
3,169
3,310
5,373
3,487
Working capital from certain recent acquisitions
‐
‐
‐
‐
Adjusted working capital
2,096
3,169
3,310
5,373
3,487
Nutrien Financial working capital
(2,150)
(2,274)
(4,404)
(3,898)
Adjusted working capital excluding Nutrien Financial
(54)
895
(1,094)
1,475
306
Sales
3,878
3,861
9,422
3,980
Sales from certain recent acquisitions
‐
‐
‐
‐
Adjusted sales
3,878
3,861
9,422
3,980
21,141
Nutrien Financial revenue
(51)
(49)
(91)
(65)
Adjusted sales excluding Nutrien Financial
3,827
3,812
9,331
3,915
20,885
Adjusted average working capital to sales (%)
16
Adjusted average working capital to sales excluding Nutrien Financial (%)
1
Rolling four quarters ended September 30, 2021
(millions of US dollars, except as otherwise noted)
Q4 2020
Q1 2021
Q2 2021
Q3 2021
Average/Total
Current assets
8,013
9,160
9,300
8,945
Current liabilities
(6,856)
(7,530)
(7,952)
(5,062)
Working capital
1,157
1,630
1,348
3,883
2,005
Working capital from certain recent acquisitions
‐
‐
‐
‐
Adjusted working capital
1,157
1,630
1,348
3,883
2,005
Nutrien Financial working capital
(1,392)
(1,221)
(3,072)
(2,820)
Adjusted working capital excluding Nutrien Financial
(235)
409
(1,724)
1,063
(122)
Sales
2,618
2,972
7,537
3,347
Sales from certain recent acquisitions
‐
‐
‐
‐
Adjusted sales
2,618
2,972
7,537
3,347
16,474
Nutrien Financial revenue
(37)
(25)
(59)
(54)
Adjusted sales excluding Nutrien Financial
2,581
2,947
7,478
3,293
16,299
Adjusted average working capital to sales (%)
12
Adjusted average working capital to sales excluding Nutrien Financial (%)
(1)
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 September 30, 2022
(millions of US dollars, except as otherwise noted)
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Total/Average
Nutrien Financial revenue
51
49
91
65
Deemed interest expense 1
(12)
(6)
(12)
(12)
Net interest
39
43
79
53
214
Average Nutrien Financial receivables
2,150
2,274
4,404
3,898
3,182
Nutrien Financial adjusted net interest margin (%)
6.7
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 September 30, 2021
(millions of US dollars, except as otherwise noted)
Q4 2020
Q1 2021
Q2 2021
Q3 2021
Total/Average
Nutrien Financial revenue
37
25
59
54
Deemed interest expense 1
(14)
(6)
(8)
(10)
Net interest
23
19
51
44
137
Average Nutrien Financial receivables
1,392
1,221
3,072
2,820
2,126
Nutrien Financial adjusted net interest margin (%)
6.4
1 Average borrowing rate applied to the notional debt required to fund the portfolio of receivables from customers monitored and serviced by Nutrien Financial.
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 September 30, 2022
(millions of US dollars, except as otherwise noted)
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Total
Selling expenses
848
722
1,013
821
3,404
General and administrative expenses
43
45
54
50
192
Other expenses (income)
20
(12)
21
19
48
Operating expenses
911
755
1,088
890
3,644
Depreciation and amortization in operating expenses
(173)
(167)
(171)
(204)
(715)
Operating expenses excluding depreciation and amortization
738
588
917
686
2,929
Gross margin
1,173
845
2,340
917
5,275
Depreciation and amortization in cost of goods sold
5
2
4
2
13
Gross margin excluding depreciation and amortization
1,178
847
2,344
919
5,288
Cash operating coverage ratio (%)
55
Rolling four quarters ended September 30, 2021
(millions of US dollars, except as otherwise noted)
Q4 2020
Q1 2021
Q2 2021
Q3 2021
Total
Selling expenses
727
667
863
746
3,003
General and administrative expenses
33
39
41
45
158
Other expenses (income)
8
15
34
17
74
Operating expenses
768
721
938
808
3,235
Depreciation and amortization in operating expenses
(177)
(175)
(166)
(180)
(698)
Operating expenses excluding depreciation and amortization
591
546
772
628
2,537
Gross margin
885
652
1,858
917
4,312
Depreciation and amortization in cost of goods sold
3
2
3
2
10
Gross margin excluding depreciation and amortization
888
654
1,861
919
4,322
Cash operating coverage ratio (%)
59
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.
Condensed Consolidated Financial Statements
Unaudited - In millions of US dollars except as otherwise noted
Condensed Consolidated Statements of Earnings
Three Months Ended
Nine Months Ended
September 30
September 30
Note
2022
2021
2022
2021
SALES
2
8,188
6,024
30,351
20,445
Freight, transportation and distribution
204
220
628
653
Cost of goods sold
4,722
3,639
17,205
13,589
GROSS MARGIN
3,262
2,165
12,518
6,203
Selling expenses
826
749
2,570
2,287
General and administrative expenses
137
110
403
329
Provincial mining taxes
348
128
959
293
Share-based compensation expense
39
64
122
125
(Reversal) impairment of assets
3
(330)
7
(780)
12
Other expenses
4
36
50
94
203
EARNINGS BEFORE FINANCE COSTS AND INCOME TAXES
2,206
1,057
9,150
2,954
Finance costs
136
122
375
367
EARNINGS BEFORE INCOME TAXES
2,070
935
8,775
2,587
Income tax expense
5
487
209
2,206
615
NET EARNINGS
1,583
726
6,569
1,972
Attributable to
Equity holders of Nutrien
1,577
717
6,548
1,952
Non-controlling interest
6
9
21
20
NET EARNINGS
1,583
726
6,569
1,972
NET EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF NUTRIEN ("EPS")
Basic
2.95
1.26
12.00
3.42
Diluted
2.94
1.25
11.96
3.41
Weighted average shares outstanding for basic EPS
534,839,000
570,627,000
545,776,000
570,216,000
Weighted average shares outstanding for diluted EPS
536,164,000
572,224,000
547,449,000
571,735,000
Condensed Consolidated Statements of Comprehensive Income
Three Months Ended
Nine Months Ended
September 30
September 30
(Net of related income taxes)
2022
2021
2022
2021
NET EARNINGS
1,583
726
6,569
1,972
Other comprehensive (loss) income
Items that will not be reclassified to net earnings:
Net actuarial gain on defined benefit plans
60
‐
61
‐
Net fair value (loss) gain on investments
(54)
46
(61)
116
Items that have been or may be subsequently reclassified to net earnings:
Loss on currency translation of foreign operations
(191)
(124)
(272)
(129)
Other
(45)
(1)
(24)
19
OTHER COMPREHENSIVE (LOSS) INCOME
(230)
(79)
(296)
6
COMPREHENSIVE INCOME
1,353
647
6,273
1,978
Attributable to
Equity holders of Nutrien
1,348
638
6,254
1,959
Non-controlling interest
5
9
19
19
COMPREHENSIVE INCOME
1,353
647
6,273
1,978
(See Notes to the Condensed Consolidated Financial Statements)
Condensed Consolidated Statements of Cash Flows
Three Months Ended
Nine Months Ended
September 30
September 30
Note
2022
2021
2022
2021
Note 1
Note 1
OPERATING ACTIVITIES
Net earnings
1,583
726
6,569
1,972
Adjustments for:
Depreciation and amortization
526
489
1,492
1,454
Share-based compensation expense
39
64
122
125
(Reversal) impairment of assets
3
(330)
7
(780)
12
Provision for (recovery of) deferred income tax
160
(87)
152
(97)
Gain on disposal of investment
4
‐
‐
(19)
‐
Cloud computing transition adjustment
4
‐
‐
‐
36
Other long-term assets, liabilities and miscellaneous
(7)
(12)
112
42
Cash from operations before working capital changes
1,971
1,187
7,648
3,544
Changes in non-cash operating working capital:
Receivables
1,240
(266)
(3,602)
(3,101)
Inventories
517
130
(344)
193
Prepaid expenses and other current assets
(44)
(133)
1,018
865
Payables and accrued charges
(2,806)
(2,483)
(1,346)
(1,252)
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
878
(1,565)
3,374
249
INVESTING ACTIVITIES
Capital expenditures 1
(636)
(492)
(1,464)
(1,238)
Business acquisitions, net of cash acquired
(10)
(30)
(78)
(70)
Other
(90)
(19)
(60)
(57)
Net changes in non-cash working capital
31
18
(77)
23
CASH USED IN INVESTING ACTIVITIES
(705)
(523)
(1,679)
(1,342)
FINANCING ACTIVITIES
Transaction costs related to debt
(3)
‐
(3)
(7)
Proceeds from short-term debt, net
2,017
1,040
2,867
1,037
Proceeds from long-term debt
‐
81
41
89
Repayment of long-term debt
(22)
‐
(50)
(5)
Repayment of principal portion of lease liabilities
(83)
(78)
(256)
(242)
Dividends paid to Nutrien's shareholders
8
(259)
(261)
(780)
(779)
Repurchase of common shares
8
(1,700)
(148)
(3,306)
(150)
Issuance of common shares
4
125
168
188
Other
17
(2)
‐
(14)
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
(29)
757
(1,319)
117
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
(32)
(20)
(52)
(35)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
112
(1,351)
324
(1,011)
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD
711
1,794
499
1,454
CASH AND CASH EQUIVALENTS – END OF PERIOD
823
443
823
443
Cash and cash equivalents comprised of:
Cash
428
315
428
315
Short-term investments
395
128
395
128
823
443
823
443
SUPPLEMENTAL CASH FLOWS INFORMATION
Interest paid
80
81
280
319
Income taxes paid
318
212
1,503
356
Total cash outflow for leases
111
91
339
299
1 Includes additions to property, plant and equipment and intangible assets for the three months ended September 30, 2022 of $584 and $52 (2021 – $463 and $29), respectively, and for the nine months ended September 30, 2022 of $1,317 and $147 (2021 – $1,171 and $67), respectively.
(See Notes to the Condensed Consolidated Financial Statements)
Condensed Consolidated Statements of Changes in Shareholders’ Equity
Accumulated Other Comprehensive
(Loss) Income ("AOCI")
Loss on
Currency
Equity
Number of
Translation
Holders
Non-
Common
Share
Contributed
of Foreign
Total
Retained
of
Controlling
Total
Shares
Capital
Surplus
Operations
Other
AOCI
Earnings
Nutrien
Interest
Equity
BALANCE – DECEMBER 31, 2020
569,260,406
15,673
205
(62)
(57)
(119)
6,606
22,365
38
22,403
Net earnings
‐
‐
‐
‐
‐
‐
1,952
1,952
20
1,972
Other comprehensive (loss) income
‐
‐
‐
(128)
135
7
‐
7
(1)
6
Shares repurchased (Note 8)
(2,460,097)
(68)
(46)
‐
‐
‐
(36)
(150)
‐
(150)
Dividends declared
‐
‐
‐
‐
‐
‐
(786)
(786)
‐
(786)
Non-controlling interest transactions
‐
‐
‐
‐
‐
‐
(1)
(1)
(14)
(15)
Effect of share-based compensation
including issuance of common shares
4,166,620
213
(12)
‐
‐
‐
‐
201
‐
201
Transfer of net gain on cash flow hedges
‐
‐
‐
‐
(10)
(10)
‐
(10)
‐
(10)
Share cancellation
(210,173)
‐
‐
‐
‐
‐
‐
‐
‐
‐
BALANCE – SEPTEMBER 30, 2021
570,756,756
15,818
147
(190)
68
(122)
7,735
23,578
43
23,621
BALANCE – DECEMBER 31, 2021
557,492,516
15,457
149
(176)
30
(146)
8,192
23,652
47
23,699
Net earnings
‐
‐
‐
‐
‐
‐
6,548
6,548
21
6,569
Other comprehensive loss
‐
‐
‐
(270)
(24)
(294)
‐
(294)
(2)
(296)
Shares repurchased (Note 8)
(38,387,969)
(1,070)
(23)
‐
‐
‐
(2,241)
(3,334)
‐
(3,334)
Dividends declared
‐
‐
‐
‐
‐
‐
(773)
(773)
‐
(773)
Non-controlling interest transactions
‐
‐
‐
‐
‐
‐
‐
‐
(18)
(18)
Effect of share-based compensation
including issuance of common shares
3,058,561
201
(19)
‐
‐
‐
‐
182
‐
182
Transfer of net loss on cash flow hedges
‐
‐
‐
‐
3
3
‐
3
‐
3
Transfer of net actuarial gain on defined benefit plans
‐
‐
‐
‐
(61)
(61)
61
‐
‐
‐
BALANCE – SEPTEMBER 30, 2022
522,163,108
14,588
107
(446)
(52)
(498)
11,787
25,984
48
26,032
(See Notes to the Condensed Consolidated Financial Statements)
Condensed Consolidated Balance Sheets
September 30
December 31
As at
Note
2022
2021
2021
ASSETS
Current assets
Cash and cash equivalents
823
443
499
Receivables
8,591
6,911
5,366
Inventories
6,545
4,674
6,328
Prepaid expenses and other current assets
737
654
1,653
16,696
12,682
13,846
Non-current assets
Property, plant and equipment
3
21,022
19,704
20,016
Goodwill
12,180
12,220
12,220
Other intangible assets
2,217
2,349
2,340
Investments
772
682
703
Other assets
937
679
829
TOTAL ASSETS
53,824
48,316
49,954
LIABILITIES
Current liabilities
Short-term debt
7
4,454
1,255
1,560
Current portion of long-term debt
1,016
46
545
Current portion of lease liabilities
303
281
286
Payables and accrued charges
8,760
6,930
10,052
14,533
8,512
12,443
Non-current liabilities
Long-term debt
7,020
10,094
7,521
Lease liabilities
884
896
934
Deferred income tax liabilities
5
3,489
3,043
3,165
Pension and other post-retirement benefit liabilities
337
451
419
Asset retirement obligations and accrued environmental costs
1,320
1,523
1,566
Other non-current liabilities
209
176
207
TOTAL LIABILITIES
27,792
24,695
26,255
SHAREHOLDERS’ EQUITY
Share capital
8
14,588
15,818
15,457
Contributed surplus
107
147
149
Accumulated other comprehensive loss
(498)
(122)
(146)
Retained earnings
11,787
7,735
8,192
Equity holders of Nutrien
25,984
23,578
23,652
Non-controlling interest
48
43
47
TOTAL SHAREHOLDERS’ EQUITY
26,032
23,621
23,699
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
53,824
48,316
49,954
(See Notes to the Condensed Consolidated Financial Statements)
Notes to the Condensed Consolidated Financial Statements
As at and for the Three and Nine Months Ended September 30, 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 November 2, 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.
Three Months Ended September 30, 2022
Corporate
Retail
Potash
Nitrogen
Phosphate
and Others
Eliminations
Consolidated
Sales
– third party
3,967
1,968
1,666
587
‐
‐
8,188
– intersegment
13
84
236
126
‐
(459)
‐
Sales
– total
3,980
2,052
1,902
713
‐
(459)
8,188
Freight, transportation and distribution
‐
48
131
62
‐
(37)
204
Net sales
3,980
2,004
1,771
651
‐
(422)
7,984
Cost of goods sold
3,063
386
1,107
537
‐
(371)
4,722
Gross margin
917
1,618
664
114
‐
(51)
3,262
Selling expenses
821
3
7
1
(2)
(4)
826
General and administrative expenses
50
2
2
3
80
‐
137
Provincial mining taxes
‐
348
‐
‐
‐
‐
348
Share-based compensation expense
‐
‐
‐
‐
39
‐
39
Impairment reversal of assets
‐
‐
‐
(330)
‐
‐
(330)
Other expenses (income)
19
(1)
(59)
15
59
3
36
Earnings (loss) before finance costs and income taxes
27
1,266
714
425
(176)
(50)
2,206
Depreciation and amortization
206
112
141
48
19
‐
526
EBITDA 1
233
1,378
855
473
(157)
(50)
2,732
Integration and restructuring related costs
2
‐
‐
‐
13
‐
15
Share-based compensation expense
‐
‐
‐
‐
39
‐
39
Impairment reversal of assets
‐
‐
‐
(330)
‐
‐
(330)
Foreign exchange loss, net of related derivatives
‐
‐
‐
‐
11
‐
11
Adjusted EBITDA
235
1,378
855
143
(94)
(50)
2,467
Assets – at September 30, 2022
23,507
14,078
11,802
2,742
2,500
(805)
53,824
1 EBITDA is calculated as net earnings (loss) before finance costs, income taxes, and depreciation and amortization.
Three Months Ended September 30, 2021
Corporate
Retail
Potash
Nitrogen
Phosphate
and Others
Eliminations
Consolidated
Sales
– third party
3,336
1,188
1,037
463
‐
‐
6,024
– intersegment
11
107
162
39
‐
(319)
‐
Sales
– total
3,347
1,295
1,199
502
‐
(319)
6,024
Freight, transportation and distribution
‐
107
98
54
‐
(39)
220
Net sales
3,347
1,188
1,101
448
‐
(280)
5,804
Cost of goods sold
2,430
372
695
340
‐
(198)
3,639
Gross margin
917
816
406
108
‐
(82)
2,165
Selling expenses
746
3
7
2
(9)
‐
749
General and administrative expenses
45
1
3
3
58
‐
110
Provincial mining taxes
‐
128
‐
‐
‐
‐
128
Share-based compensation expense
‐
‐
‐
‐
64
‐
64
Impairment of assets
‐
7
‐
‐
‐
‐
7
Other expenses (income)
17
7
(11)
7
30
‐
50
Earnings (loss) before finance costs and income taxes
109
670
407
96
(143)
(82)
1,057
Depreciation and amortization
182
131
125
39
12
‐
489
EBITDA
291
801
532
135
(131)
(82)
1,546
Integration and restructuring related costs
‐
‐
‐
‐
8
‐
8
Share-based compensation expense
‐
‐
‐
‐
64
‐
64
Impairment of assets
‐
7
‐
‐
‐
‐
7
COVID-19 related expenses
‐
‐
‐
‐
16
‐
16
Foreign exchange loss, net of related derivatives
‐
‐
‐
‐
1
‐
1
Adjusted EBITDA
291
808
532
135
(42)
(82)
1,642
Assets – at December 31, 2021
22,387
13,148
11,093
1,699
2,266
(639)
49,954
Nine Months Ended September 30, 2022
Corporate
Retail
Potash
Nitrogen
Phosphate
and Others
Eliminations
Consolidated
Sales
– third party
17,177
6,345
5,078
1,751
‐
‐
30,351
– intersegment
86
396
1,021
303
‐
(1,806)
‐
Sales
– total
17,263
6,741
6,099
2,054
‐
(1,806)
30,351
Freight, transportation and distribution
‐
219
358
178
‐
(127)
628
Net sales
17,263
6,522
5,741
1,876
‐
(1,679)
29,723
Cost of goods sold
13,161
1,090
3,159
1,399
‐
(1,604)
17,205
Gross margin
4,102
5,432
2,582
477
‐
(75)
12,518
Selling expenses
2,556
9
22
5
(6)
(16)
2,570
General and administrative expenses
149
6
12
9
227
‐
403
Provincial mining taxes
‐
959
‐
‐
‐
‐
959
Share-based compensation expense
‐
‐
‐
‐
122
‐
122
Impairment reversal of assets
‐
‐
‐
(780)
‐
‐
(780)
Other expenses (income)
28
1
(139)
27
160
17
94
Earnings (loss) before finance costs and income taxes
1,369
4,457
2,687
1,216
(503)
(76)
9,150
Depreciation and amortization
550
354
403
130
55
‐
1,492
EBITDA
1,919
4,811
3,090
1,346
(448)
(76)
10,642
Integration and restructuring related costs
2
‐
‐
‐
33
‐
35
Share-based compensation expense
‐
‐
‐
‐
122
‐
122
Impairment reversal of assets
‐
‐
‐
(780)
‐
‐
(780)
COVID-19 related expenses
‐
‐
‐
‐
8
‐
8
Foreign exchange loss, net of related derivatives
‐
‐
‐
‐
67
‐
67
Gain on disposal of investment
(19)
‐
‐
‐
‐
‐
(19)
Adjusted EBITDA
1,902
4,811
3,090
566
(218)
(76)
10,075
Assets – at September 30, 2022
23,507
14,078
11,802
2,742
2,500
(805)
53,824
Nine Months Ended September 30, 2021
Corporate
Retail
Potash
Nitrogen
Phosphate
and Others
Eliminations
Consolidated
Sales
– third party
13,818
2,663
2,740
1,224
‐
‐
20,445
– intersegment
38
258
629
171
‐
(1,096)
‐
Sales
– total
13,856
2,921
3,369
1,395
‐
(1,096)
20,445
Freight, transportation and distribution
‐
305
329
159
‐
(140)
653
Net sales
13,856
2,616
3,040
1,236
‐
(956)
19,792
Cost of goods sold
10,429
980
2,068
978
‐
(866)
13,589
Gross margin
3,427
1,636
972
258
‐
(90)
6,203
Selling expenses
2,276
8
22
5
(24)
‐
2,287
General and administrative expenses
125
6
8
8
182
‐
329
Provincial mining taxes
‐
293
‐
‐
‐
‐
293
Share-based compensation expense
‐
‐
‐
‐
125
‐
125
Impairment of assets
‐
7
5
‐
‐
‐
12
Other expenses (income)
66
19
(36)
13
141
‐
203
Earnings (loss) before finance costs and income taxes
960
1,303
973
232
(424)
(90)
2,954
Depreciation and amortization
528
371
409
112
34
‐
1,454
EBITDA
1,488
1,674
1,382
344
(390)
(90)
4,408
Integration and restructuring related costs
8
‐
‐
‐
39
‐
47
Share-based compensation expense
‐
‐
‐
‐
125
‐
125
Impairment of assets
‐
7
5
‐
‐
‐
12
COVID-19 related expenses
‐
‐
‐
‐
34
‐
34
Foreign exchange loss, net of related derivatives
‐
‐
‐
‐
1
‐
1
Cloud computing transition adjustment
1
2
‐
‐
33
‐
36
Adjusted EBITDA
1,497
1,683
1,387
344
(158)
(90)
4,663
Assets – at December 31, 2021
22,387
13,148
11,093
1,699
2,266
(639)
49,954
Presented below is revenue from contracts with customers disaggregated by product line or geographic location for each reportable segment.
Three Months Ended
Nine Months Ended
September 30
September 30
2022
2021
2022
2021
Retail sales by product line
Crop nutrients
1,605
1,194
7,740
5,255
Crop protection products
1,716
1,469
6,086
5,220
Seed
134
140
1,861
1,819
Merchandise
241
265
755
763
Nutrien Financial
65
54
205
138
Services and other 1
244
252
729
737
Nutrien Financial elimination 1,2
(25)
(27)
(113)
(76)
3,980
3,347
17,263
13,856
Potash sales by geography
Manufactured product
North America
484
590
2,168
1,446
Offshore 3
1,568
705
4,573
1,475
2,052
1,295
6,741
2,921
Nitrogen sales by product line
Manufactured product
Ammonia
695
401
2,072
994
Urea
422
339
1,543
985
Solutions, nitrates and sulfates
512
326
1,564
852
Other nitrogen and purchased products
273
133
920
538
1,902
1,199
6,099
3,369
Phosphate sales by product line
Manufactured product
Fertilizer
414
306
1,204
836
Industrial and feed
206
146
594
405
Other phosphate and purchased products
93
50
256
154
713
502
2,054
1,395
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 10) and includes provisional pricing adjustments for the three months ended September 30, 2022 of $(187) (2021 – $109) and the nine months ended September 30, 2022 of $66 (2021 – $160).
NOTE 3 IMPAIRMENT OF ASSETS
Phosphate Impairment Reversal
In the three months ended September 30, 2022, we continued to revise our near-term pricing forecasts due to continued global export restrictions from major producers and continued our review of our previously impaired Phosphate cash-generating unit (“CGU”), White Springs.
In 2017 and 2020, we recorded a total impairment of assets at our White Springs CGU relating to property, plant and equipment of $250 and $215, respectively. Due to increases in our forecast, the recoverable amount of our White Springs CGU is $770 which is above its carrying amount of $425. As a result, during the three months ended September 30, 2022, we recorded a full impairment reversal, net of depreciation, of $330 in the statement of earnings relating to property, plant and equipment.
During the nine months ended September 30, 2022, we recorded the following impairment reversals:
CGU
Aurora
White Springs
Segment
Phosphate
Impairment reversal indicator
Higher forecasted global prices
Date of impairment reversal
June 30, 2022
September 30, 2022
Pre-tax impairment reversal amount ($)
450
330
Valuation methodology
Fair value less costs of disposal ("FVLCD") a level 3 measurement
Value in use ("VIU")
Valuation technique
Five-year DCF1 plus terminal year to end of mine life
DCF1 to end of mine life
Key assumptions
End of mine life 2 (year)
2050
2030
Long-term growth rate (%)
2.0
n/a
Post-tax discount rate (%)
10.4
12.0 (pre-tax - 15.2) 3
Forecasted EBITDA 4 ($)
3,090
980
1 Discounted Cash Flow.
2 Includes proven and probable reserves.
3 Discount rate used in the previous measurement was 12.0% (pre-tax - 16.0%).
4 First five years of the forecast period.
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.
Goodwill Impairment Indicators
During the nine months ended September 30, 2022, North American central banks continued to increase their benchmark borrowing rates. 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 rates and increased our Retail – North America group of CGUs discount rate to 8.5 percent (previous impairment analysis – 8.0 percent at June 30, 2022) and this triggered an impairment test to be performed. 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.
As at
As at
Retail - North America group of CGUs
June 30, 2022
September 30, 2022
Carrying amount of goodwill (billions)
6.9
6.9
Excess carrying amount over recoverable amount (billions)
0.8
nil
Excess carrying amount over recoverable amount (%)
7
nil
Goodwill is more susceptible to impairment risk if there is an increase in the discount rate, or a deterioration in business operating results or economic conditions and actual results do not meet our forecasts. As at September 30, 2022, the Retail – North America group of CGUs carrying amount was equal to its recoverable amount. A 25 basis point increase in the discount rate will result in an impairment of the carrying amount of goodwill of approximately $500. A decrease in forecasted EBITDA and cash flows or a reduction in the terminal growth rate will also result in impairment in the future.
Value Used in Impairment
Key Assumptions
Model
Terminal growth rate (%)
2.5
Forecasted EBITDA over forecast period (billions)
7.6
Discount rate (%)
8.5
NOTE 4 OTHER EXPENSES (INCOME)
Three Months Ended
Nine Months Ended
September 30
September 30
2022
2021
2022
2021
Integration and restructuring related costs
15
8
35
47
Foreign exchange loss, net of related derivatives
11
1
67
4
Earnings of equity-accounted investees
(82)
(21)
(200)
(43)
Bad debt expense
4
7
18
22
COVID-19 related expenses
‐
16
8
34
Gain on disposal of investment
‐
‐
(19)
‐
Cloud computing transition adjustment
‐
‐
‐
36
Other expenses
88
39
185
103
36
50
94
203
NOTE 5 INCOME TAXES
A separate estimated average annual effective income tax rate was determined for each taxing jurisdiction and applied individually to the interim period pre-tax earnings for each jurisdiction.
Three Months Ended
Nine Months Ended
September 30
September 30
2022
2021
2022
2021
Income tax expense
487
209
2,206
615
Actual effective tax rate on earnings (%)
24
23
25
24
Actual effective tax rate including discrete items (%)
24
22
25
24
Discrete tax adjustments that impacted the tax rate
(12)
(10)
8
(13)
Income tax balances within the condensed consolidated balance sheets were comprised of the following:
Income Tax Assets and Liabilities
Balance Sheet Location
As at September 30, 2022
As at December 31, 2021
Income tax assets
Current
Receivables
49
223
Non-current
Other assets
132
166
Deferred income tax assets
Other assets
427
262
Total income tax assets
608
651
Income tax liabilities
Current
Payables and accrued charges
943
606
Non-current
Other non-current liabilities
51
44
Deferred income tax liabilities
Deferred income tax liabilities
3,489
3,165
Total income tax liabilities
4,483
3,815
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:
September 30, 2022
December 31, 2021
Carrying
Carrying
Financial assets (liabilities) measured at
Amount
Level 1
Level 2
Level 3
Amount
Level 1
Level 2
Level 3
Fair value on a recurring basis 1
Cash and cash equivalents
823
‐
823
‐
499
‐
499
‐
Derivative instrument assets
11
‐
11
‐
19
‐
19
‐
Other current financial assets - marketable securities 2
189
24
165
‐
134
19
115
‐
Investments at FVTOCI 3
183
173
‐
10
244
234
‐
10
Derivative instrument liabilities
(51)
‐
(51)
‐
(20)
‐
(20)
‐
Amortized cost
Current portion of long-term debt
Notes and debentures
(999)
(491)
(500)
‐
(500)
(506)
‐
‐
Fixed and floating rate debt
(17)
‐
(17)
‐
(45)
‐
(45)
‐
Long-term debt
Notes and debentures
(6,902)
(1,362)
(4,740)
‐
(7,424)
(4,021)
(4,709)
‐
Fixed and floating rate debt
(118)
‐
(118)
‐
(97)
‐
(97)
‐
1 During the periods ended September 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 SHORT-TERM DEBT
Short-term debt was comprised of:
Rate of
Interest (%)
Total Facility Limit as at September 30, 2022
As at
September 30, 2022
As at
December 31, 2021
Credit facilities
Unsecured revolving term credit facility
n/a
4,500
‐
‐
Unsecured revolving term credit facility
4.1
2,000
1,000
‐
Uncommitted revolving demand facility
4.0
1,000
500
‐
Other credit facilities 1
760
South American
1.5 - 21.7
194
74
Australian
3.6
97
211
Other
3.3
8
28
Commercial paper
2.9 - 4.0
2,530
1,170
Other short-term debt
n/a
125
77
4,454
1,560
1 Total facility limit amounts include some facilities with maturities in excess of one year.
The amount available under the commercial paper program is limited to the availability of backup funds under the $4,500 unsecured revolving term credit facility and excess cash invested in highly liquid securities. During the three months ended September 30, 2022, we extended the maturity date of the $4,500 unsecured revolving term credit facility from June 4, 2026 to September 14, 2027. There was no change to the total facility limit or the significant agreement terms from those we disclosed in our 2021 Annual Report.
During the three months ended September 30, 2022, we entered into a new $2,000 revolving term credit facility, with the same principal covenants and events of default as our existing $4,500 unsecured revolving term credit facility. The $2,000 non-revolving term credit facilities we entered into in July 2022 to help temporarily manage normal seasonal working capital swings were closed prior to September 30, 2022.
NOTE 8 SHARE CAPITAL
Share Repurchase Programs
Maximum
Maximum
Number of
Commencement
Shares for
Shares for
Shares
Date
Expiry
Repurchase
Repurchase (%)
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
32,183,728
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.
The following table summarizes our share repurchase activities during the period:
Three Months Ended
Nine Months Ended
September 30
September 30
2022
2021
2022
2021
Number of common shares repurchased for cancellation
19,027,561
2,427,369
38,387,969
2,460,097
Average price per share (US dollars)
89.25
61.18
86.85
61.07
Total cost
1,698
148
3,334
150
As of November 1, 2022, an additional 1,981,462 common shares were repurchased for cancellation at a cost of $165 and an average price per share of $83.25.
Dividends Declared
We declared a dividend per share of $0.48 (2021 – $0.46) during the three months ended September 30, 2022, payable on October 14, 2022 to shareholders of record on September 30, 2022.
NOTE 9 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 10 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
September 30, 2022
December 31, 2021
Receivables from Canpotex
1,454
828
NOTE 11 BUSINESS COMBINATIONS
Subsequent to September 30, 2022, we completed the previously announced acquisition of Casa do Adubo S.A. (“Casa do Adubo”) on October 1, 2022 for a preliminary purchase price, net of cash and cash equivalents acquired, of $279. We acquired 100% of the issued and outstanding Casa do Adubo stock. Casa do Adubo is an agriculture retailer in Brazil with 39 retail locations and 10 distribution centers. The expected benefits of the acquisition resulting in goodwill include: synergies from expected reduction in operating costs, wider distribution channel for selling products, a large assembled workforce and a potential increase in our customer base.
We have engaged independent valuation experts to assist in determining the fair value of certain assets acquired and liabilities assumed and related deferred income tax impacts. Given the transaction closed on October 1, 2022, as at the date of our interim financial statements we do not have sufficient information to determine fair values and complete the purchase price allocation or the proforma financial information disclosures. As part of our due diligence process, we are continuing to obtain and verify information required to determine the fair value of certain assets acquired and liabilities assumed and the amount of deferred income taxes arising on their recognition. We expect to finalize the amounts recognized as we obtain the information necessary to complete the analysis within one year from the date of the acquisition.
The Casa do Adubo acquisition was completed at the close of business on October 1, 2022, therefore, our consolidated statements of earnings did not include any impacts from Casa do Adubo for the three and nine months ended September 30, 2022. Financial information related to Casa do Adubo is as follows:
2022 Pro Forma 1
Sales
440
EBITDA
40
1 Estimated annual sales and EBITDA if acquisition occurred at January 1, 2022. Net earnings before income taxes is not available.
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