Nutrien Reports Record Earnings and an Excellent Outlook
Nutrien Ltd. (TSX and NYSE: NTR) announced today its second quarter 2021 results, with net earnings of $1.1 billion ($1.94 diluted earnings per share). Second-quarter adjusted net earnings1 were $2.08 per share and adjusted EBITDA1 was $2.2 billion.
“We delivered record earnings across our global business for the second quarter and first half of 2021 and expect the remainder of the year to contribute to a full year record. We showcased Nutrien’s unique competitive advantages, strong operating performance and the significant leverage to higher fertilizer prices as we focus on our purpose to help growers meet the ever-growing demand for increased food production in a sustainable manner,” commented Mayo Schmidt, Nutrien’s President and CEO.
“The outlook for global crop and fertilizer markets continues to be very strong and we are positioned to benefit from our structural advantages and as a global leader in agriculture. We increased our full year 2021 adjusted EBITDA guidance1 by over $1.5 billion, supported in part by our quick actions to produce an additional one million tonnes of potash, illustrating the power of the Potash team’s unparalleled flexible, reliable, and low-cost six-mine network,” added Mr. Schmidt.
Highlights:
Nutrien generated record adjusted EBITDA of $3.0 billion and free cash flow1 of $1.9 billion in the first half of 2021. This represents an increase of 36 percent and 40 percent, respectively, compared to the first half of 2020 and 17 percent and 12 percent, respectively higher than the previous record for the company in the first half of 2019. Nutrien raised full-year 2021 adjusted EBITDA and adjusted net earnings per share1 guidance to $6.0 to $6.4 billion and $4.60 to $5.10 per share, respectively. This reflects higher expected results across our business, as well as, the benefits of increasing our 2021 potash sales guidance by one million tonnes to address global demand in support of our grower customers around the world. By the fourth quarter of 2021, we expect to surge potash production to an annualized run-rate of approximately 17 million tonnes, due to our flexible mine network and the responsiveness of our dedicated employees. Nutrien Ag Solutions (“Retail”) delivered record adjusted EBITDA in the second quarter and first half of 2021. First-half adjusted EBITDA increased 24 percent compared to the same period in 2020 as a result of double-digit growth in revenue and gross margin, higher gross margin percentage and adjusted EBITDA margins surpassing 11 percent. The increase was primarily due to organic growth supported by strong demand for grains and oilseeds, continued growth in our proprietary product sales, optimization and efficiency initiatives, as well as, the ongoing commitment of our approximately 3,600 crop advisors to serve our grower customers. Sales through our digitally-enabled retail platform were approximately $1.6 billion in the first half of 2021, nearly double the sales compared to the same period in 2020 and exceeding the full year 2020 results of $1.2 billion in just six months. In the first half of 2021, we processed nearly half-a-million individual grower payments through the digital platform. Potash adjusted EBITDA was 48 percent higher in the second quarter and 41 percent higher in the first half of 2021 compared to the same periods in 2020 due to higher net realized selling prices and sales volumes. We achieved record production and sales volumes of nearly 7 million tonnes in the first six months of 2021. Nitrogen adjusted EBITDA was 45 percent higher in the second quarter and 38 percent higher in the first half of 2021 compared to the same periods in 2020 due to higher net realized selling prices. Phosphate adjusted EBITDA increased 45 percent in the second quarter and 70 percent in the first half of 2021 compared to the same periods in 2020 due to higher net realized selling prices. Subsequent to the second quarter of 2021, Nutrien announced an agreement to purchase Terra Nova, a retail businesses in Brazil with EBITDA margins and acquisition multiples in line with similar transaction metrics for ag retail businesses acquired by Nutrien in the US. We also entered a collaboration agreement with EXMAR NV to jointly develop and build a low-carbon, ammonia-fueled vessel to further reduce maritime transportation emissions.
___________________
1 This financial measure including related guidance, if applicable, is a non-IFRS financial measure. 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 August 9, 2021. 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 2020 Annual Report dated February 18, 2021, which includes our annual audited consolidated financial statements and MD&A, and our Annual Information Form, each for the year ended December 31, 2020, can be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. No update is provided to the disclosure in our annual MD&A except for material information since the date of our annual MD&A. The Company is a foreign private issuer under the rules and regulations of the US Securities and Exchange Commission (“SEC”).
This MD&A is based on the Company’s unaudited interim condensed consolidated financial statements as at and for the three and six months ended June 30, 2021 (“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 forward-looking statements which are described in the “Non-IFRS Financial Measures” and the “Forward-Looking Statements” sections, respectively.
Market Outlook
Agriculture and Retail
Crop prices continue to be supported by strong global demand and less than expected supply, resulting in historically low global inventory and strong grower margins. We expect these market fundamentals to continue beyond this season and be supportive of crop prices and grower margins into 2022. Growing conditions across North America vary with favorable crop conditions in the US South and East regions, and drought conditions in the Western US, US Northern Plains and Canadian Prairies. We expect this variability could impact regional crop protection and plant health product demand in the second half of 2021 as growers experiencing favorable conditions look to boost and protect yields, particularly given additional pest pressure in parts of the US this summer, while growers impacted by drought may reduce some applications. However, with the strong outlook for crop prices and assuming a normal window for fall application, we expect US fertilizer demand and post-harvest crop protection applications to be strong. Brazil’s safrinha corn crop production estimates are significantly below initial market expectations due to both drought and frost. However, Brazilian crop prices remain at near-record highs and growers are expected to increase soybean and safrinha corn area when the next growing seasons begin. In Australia, precipitation has supported favorable soil moisture levels, leading to the largest seeded area for winter crops in the country’s history.Crop Nutrient Markets
Global potash shipments are projected to reach a record 69 to 71 million tonnes in 2021 while inventory in key regions are expected to be historically low going into 2022. This is supported by strong potash consumption backed by favorable agricultural fundamentals, with further upside limited by global supply issues and most producers operating at peak rates. We believe Latin America could reach new records for both potash consumption and imports in 2021, as applications for the last crop were strong and growers are proactively securing volumes for the upcoming season. In North America, increased crop area and normal application rates have supported historically high demand which we expect will continue in the fall. Global nitrogen demand growth is expected to be approximately 3 percent in 2021 driven by strong agricultural fundamentals and a rebound in industrial demand. In addition, global supply is tight because of production outages and project delays, which together with higher global energy costs, have supported nitrogen prices. Strong global urea prices and robust global import demand led Chinese urea exports to increase by over 40 percent during the first half of 2021 compared to depressed 2020 levels. However, as a result of high Chinese domestic prices and very strong demand, the Chinese government urged producers to prioritize the domestic market, which may limit China’s exports through the second half of 2021. Meanwhile, strong Indian urea demand, lower domestic production and tight inventories have resulted in regular tenders. Global phosphate demand remains robust in most key markets, which in combination with higher raw material costs and limited growth in export supply has continued to support phosphate prices. While inventories in India are tight, poor import economics create uncertainty for import demand in the second half of 2021.Financial Outlook and Guidance
Based on market factors detailed above, we are raising full-year 2021 adjusted EBITDA guidance to $6.0 to $6.4 billion from $4.4 to $4.9 billion and full-year 2021 adjusted net earnings guidance to $4.60 to $5.10 per share from $2.55 to $3.25 per share.
All guidance numbers, including those noted above are outlined in the tables below. Refer to page 57 of Nutrien’s 2020 Annual Report for related assumptions and sensitivities.
2021 Guidance Ranges 1
Low
High
Adjusted net earnings per share 2
$
4.60
$
5.10
Adjusted EBITDA (billions) 2
$
6.0
$
6.4
Retail Adjusted EBITDA (billions)
$
1.6
$
1.7
Potash Adjusted EBITDA (billions)
$
2.4
$
2.6
Nitrogen Adjusted EBITDA (billions)
$
1.85
$
2.05
Phosphate Adjusted EBITDA (millions)
$
400
$
500
Potash sales tonnes (millions) 3
13.5
13.9
Nitrogen sales tonnes (millions) 3
10.8
11.2
Depreciation and amortization (billions)
$
1.9
$
2.0
Effective tax rate on adjusted earnings
24
%
26
%
Sustaining capital expenditures (billions) 2
$
1.15
$
1.25
1 See the “Forward-Looking Statements” section.
2 See the "Non-IFRS Financial Measures" section.
3 Manufactured products only. Nitrogen excludes ESN® and Rainbow products.
Consolidated Results
Three Months Ended June 30
Six Months Ended June 30
(millions of US dollars)
2021
2020
% Change
2021
2020
% Change
Sales 1
9,763
8,431
16
14,421
12,629
14
Freight, transportation and distribution
222
237
(6)
433
449
(4)
Cost of goods sold
6,659
6,024
11
9,950
9,125
9
Gross margin 1
2,882
2,170
33
4,038
3,055
32
Expenses 1
1,263
1,031
23
2,141
1,834
17
Net earnings
1,113
765
45
1,246
730
71
Adjusted EBITDA 2
2,215
1,721
29
3,021
2,229
36
Cash provided by operating activities
1,966
1,756
12
1,814
1,230
47
Free cash flow ("FCF") 2
1,413
1,173
20
1,889
1,354
40
FCF including changes in non-cash operating working capital 2
1,662
1,611
3
1,346
922
46
1 Certain immaterial figures have been reclassified for the three and six months ended June 30, 2020.
2 See the "Non-IFRS Financial Measures" section.
Net earnings and adjusted EBITDA increased significantly in the second quarter and first half of 2021 compared to the same periods in 2020 due to higher net realized selling prices, higher potash sales volumes and earnings growth in Nutrien Ag Solutions (“Retail”). Cash flow from operating activities increased in the second quarter and first half of 2021 compared to the same periods last year, which helped generate $1.9 billion in free cash flow in the first half of 2021, an increase of more than $0.5 billion compared to the amount generated in the same period in 2020. The COVID-19 pandemic had a limited impact on our results during the second quarter and first half of 2021.
Segment Results
Our discussion of segment results set out on the following pages is a comparison of the results for the three and six months ended June 30, 2021 to the results for the three and six months ended June 30, 2020, unless otherwise noted.
Nutrien Ag Solutions (“Retail”)
Three Months Ended June 30
(millions of US dollars, except
Dollars
Gross Margin
Gross Margin (%)
as otherwise noted)
2021
2020
% Change
2021
2020
% Change
2021
2020
Sales
Crop nutrients
3,045
2,527
20
703
559
26
23
22
Crop protection products
2,666
2,436
9
587
547
7
22
22
Seed
1,216
1,141
7
237
219
8
19
19
Merchandise
268
253
6
45
45
-
17
18
Nutrien Financial 1
59
40
48
59
40
48
100
100
Services and other 1
335
400
(16)
279
250
12
83
63
Nutrien Financial elimination 2
(52)
(33)
58
(52)
(33)
58
100
100
7,537
6,764
11
1,858
1,627
14
25
24
Cost of goods sold
5,679
5,137
11
Gross margin
1,858
1,627
14
Expenses 1,3
938
826
14
Earnings before finance costs and taxes ("EBIT")
920
801
15
Depreciation and amortization
169
163
4
EBITDA
1,089
964
13
Adjustments 4
8
-
n/m
Adjusted EBITDA
1,097
964
14
1 Certain immaterial figures have been reclassified for the three months ended June 30, 2020.
2 Represents elimination for the interest and service fees charged by Nutrien Financial to Retail branches.
3 Includes selling expenses of $863 million (2020 – $764 million).
4 See Note 2 to the interim financial statements.
Six Months Ended June 30
(millions of US dollars, except
Dollars
Gross Margin
Gross Margin (%)
as otherwise noted)
2021
2020
% Change
2021
2020
% Change
2021
2020
Sales
Crop nutrients
4,061
3,312
23
923
715
29
23
22
Crop protection products
3,751
3,446
9
763
704
8
20
20
Seed
1,679
1,535
9
306
278
10
18
18
Merchandise
498
469
6
83
79
5
17
17
Nutrien Financial 1
84
56
50
84
56
50
100
100
Services and other 1
508
655
(22)
423
384
10
83
59
Nutrien Financial elimination
(72)
(48)
50
(72)
(48)
50
100
100
10,509
9,425
12
2,510
2,168
16
24
23
Cost of goods sold
7,999
7,257
10
Gross margin
2,510
2,168
16
Expenses 1,2
1,659
1,515
10
EBIT
851
653
30
Depreciation and amortization
346
318
9
EBITDA
1,197
971
23
Adjustments 3
9
-
n/m
Adjusted EBITDA
1,206
971
24
1 Certain immaterial figures have been reclassified for the six months ended June 30, 2020.
2 Includes selling expenses of $1,530 million (2020 – $1,399 million).
3 See Note 2 to the interim financial statements.
Adjusted EBITDA increased in the second quarter and first half of 2021 due to higher sales, gross margin and gross margin percentages. This was supported by expanded planted acreage and strong agricultural market fundamentals in all regions in which we operate, as well as, supply chain improvements and strategic procurement. Our Retail cash operating coverage ratio1 for the first half of 2021 declined to 60 percent. Crop nutrients sales increased significantly in the second quarter and first half of 2021 supported by higher prices and record North American and International first half sales volumes. Gross margin benefited from stronger margin per tonne due in part to strategic procurement in a rising price environment. Crop protection products sales increased in the second quarter and first half of 2021 due to market growth and favorable application conditions throughout most of the US. Gross margin percentages were stable as strategic procurement and strong proprietary product results more than offset higher costs for certain products caused by global supply chain issues. Seed sales increased in the second quarter and first half of 2021, supported by higher seeded acreage in key regions where we operate and strong agriculture fundamentals. Gross margin percentage was stable in the second quarter and first half of 2021. Merchandise sales increased in the second quarter and first half of 2021 primarily driven by growth in the Australian market due to higher animal health and management sales related to strong livestock prices. Gross margin was similar in both periods despite the shift in product mix. Nutrien Financial sales increased in the second quarter and first half of 2021 due to higher utilization and adoption of our programs. Services and other sales decreased due to the divestiture of an Australian livestock export business in the fourth quarter of 2020, which more than offset higher US custom application sales. Despite the change in revenue mix, the impact to gross margin percentage was favorable for both the second quarter and first half of 2021.
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1 This financial measure is a non-IFRS financial measure. See the “Non-IFRS Financial Measures” section for further information.
Potash
Three Months Ended June 30
(millions of US dollars, except
Dollars
Tonnes (thousands)
Average per Tonne
as otherwise noted)
2021
2020
% Change
2021
2020
% Change
2021
2020
% Change
Manufactured product
Net sales
North America
326
232
41
1,172
1,201
(2)
278
194
43
Offshore
491
356
38
2,449
2,414
1
200
147
36
817
588
39
3,621
3,615
-
226
163
39
Cost of goods sold
317
310
2
88
86
2
Gross margin - total
500
278
80
138
77
79
Expenses 1
123
52
137
Depreciation and amortization
32
30
7
EBIT
377
226
67
Gross margin excluding depreciation
Depreciation and amortization
116
109
6
and amortization - manufactured 2
170
107
59
EBITDA
493
335
47
Potash cash cost of product
Adjustments 3
2
-
n/m
manufactured 2
59
52
13
Adjusted EBITDA
495
335
48
1 Includes provincial mining taxes of $107 million (2020 – $46 million).
2 See the "Non-IFRS Financial Measures" section.
3 See Note 2 to the interim financial statements.
Six Months Ended June 30
(millions of US dollars, except
Dollars
Tonnes (thousands)
Average per Tonne
as otherwise noted)
2021
2020
% Change
2021
2020
% Change
2021
2020
% Change
Manufactured product
Net sales
North America
658
457
44
2,642
2,348
13
249
195
28
Offshore
770
648
19
4,136
4,144
-
186
156
19
1,428
1,105
29
6,778
6,492
4
211
170
24
Cost of goods sold
608
575
6
90
88
2
Gross margin - total
820
530
55
121
82
48
Expenses 1
187
115
63
Depreciation and amortization
35
32
9
EBIT
633
415
53
Gross margin excluding depreciation
Depreciation and amortization
240
205
17
and amortization - manufactured
156
114
37
EBITDA
873
620
41
Potash cash cost of product
Adjustments 2
2
-
n/m
manufactured
58
56
4
Adjusted EBITDA
875
620
41
1 Includes provincial mining taxes of $165 million (2020 – $103 million).
2 See Note 2 to the interim financial statements.
Adjusted EBITDA increased in the second quarter and first half of 2021 due to higher net realized selling prices and record sales volumes. Sales volumes were the highest of any second quarter or first half on record. Demand was strong in both North America and Offshore markets, supported by high crop prices and good affordability, allowing us to leverage our structurally advantaged, flexible, low-cost network of six mines and integrated transportation and logistics system. Net realized selling price increased in the second quarter and first half of 2021 due to strong global demand and very tight supply. Cost of goods sold per tonne in the second quarter and first half of 2021 was slightly higher compared to the same periods in 2020, primarily due to the stronger Canadian dollar and mine production mix. These factors also led to a higher potash cash cost of product manufactured per tonne in the second quarter and first half of 2021.Canpotex Sales by Market
(percentage of sales volumes, except as
Three Months Ended June 30
Six Months Ended June 30
otherwise noted)
2021
2020
Change
2021
2020
Change
Other Asian markets 1
41
26
15
39
28
11
Latin America
35
36
(1)
33
31
2
China
11
19
(8)
12
22
(10)
Other markets
10
7
3
11
7
4
India
3
12
(9)
5
12
(7)
100
100
100
100
1 All Asian markets except China and India.
Nitrogen
Three Months Ended June 30
(millions of US dollars, except
Dollars
Tonnes (thousands)
Average per Tonne
as otherwise noted)
2021
2020
% Change
2021
2020
% Change
2021
2020
% Change
Manufactured product
Net sales
Ammonia
346
229
51
836
935
(11)
416
244
70
Urea
346
273
27
819
1,000
(18)
421
273
54
Solutions, nitrates and sulfates
290
194
49
1,311
1,255
4
221
154
44
982
696
41
2,966
3,190
(7)
331
218
52
Cost of goods sold
597
508
18
201
159
26
Gross margin - manufactured
385
188
105
130
59
120
Gross margin - other 1
31
20
55
Depreciation and amortization
52
54
(4)
Gross margin - total
416
208
100
Gross margin excluding depreciation
Expenses (income)
17
(3)
n/m
and amortization - manufactured
182
113
61
EBIT
399
211
89
Ammonia controllable cash cost of
Depreciation and amortization
155
172
(10)
product manufactured 2
51
40
28
EBITDA
554
383
45
Adjustments 3
1
-
n/m
Adjusted EBITDA
555
383
45
1 Includes other nitrogen (including ESN® and Rainbow) and purchased products and is comprised of net sales of $197 million (2020 – $157 million) less cost of goods sold of $166 million (2020 – $137 million).
2 See the "Non-IFRS Financial Measures" section.
3 See Note 2 to the interim financial statements.
Six Months Ended June 30
(millions of US dollars, except
Dollars
Tonnes (thousands)
Average per Tonne
as otherwise noted)
2021
2020
% Change
2021
2020
% Change
2021
2020
% Change
Manufactured product
Net sales
Ammonia
506
359
41
1,408
1,502
(6)
360
239
51
Urea
595
510
17
1,576
1,856
(15)
377
275
37
Solutions, nitrates and sulfates
454
357
27
2,385
2,360
1
190
151
26
1,555
1,226
27
5,369
5,718
(6)
290
214
36
Cost of goods sold
1,037
952
9
194
166
17
Gross margin - manufactured
518
274
89
96
48
100
Gross margin - other 1
48
31
55
Depreciation and amortization
53
56
(5)
Gross margin - total
566
305
86
Gross margin excluding depreciation
Expenses
-
8
(100)
and amortization - manufactured
149
104
43
EBIT
566
297
91
Ammonia controllable cash cost of
Depreciation and amortization
284
322
(12)
product manufactured
51
43
19
EBITDA
850
619
37
Adjustments 2
5
-
n/m
Adjusted EBITDA
855
619
38
1 Includes other nitrogen (including ESN® and Rainbow) and purchased products and is comprised of net sales of $384 million (2020 – $305 million) less cost of goods sold of $336 million (2020 – $274 million).
2 See Note 2 to the interim financial statements.
Adjusted EBITDA increased in the second quarter and first half of 2021 due to higher net realized selling prices which more than offset higher natural gas costs, lower equity earnings and lower sales volumes. Sales volumes were lower in the second quarter and first half of 2021 due to higher turnaround activities, temporary production outages and lower inventories at the beginning of 2021. Our ammonia operating rate was 87 percent and 92 percent respectively in the second quarter and first half of 2021. Net realized selling price of nitrogen in the second quarter and first half of 2021 was higher due to higher benchmark prices resulting from the strength in global agriculture markets and a recovery in industrial nitrogen demand. Cost of goods sold per tonne increased during the second quarter and first half of 2021 due to higher natural gas costs, a stronger Canadian dollar and lower nitrogen production. The stronger Canadian dollar combined with lower production volumes led to a higher ammonia controllable cash cost of product manufactured per tonne in the second quarter and first half of 2021.Natural Gas Prices in Cost of Production
Three Months Ended June 30
Six Months Ended June 30
(US dollars per MMBtu, except as otherwise noted)
2021
2020
% Change
2021
2020
% Change
Overall gas cost excluding realized derivative impact
3.86
2.09
85
3.51
2.16
63
Realized derivative impact
0.03
0.06
(50)
0.03
0.06
(50)
Overall gas cost
3.89
2.15
81
3.54
2.22
59
Average NYMEX
2.83
1.72
65
2.76
1.83
51
Average AECO
2.32
1.37
69
2.31
1.50
54
Natural gas prices in our cost of production increased in the second quarter and first half of 2021 as a result of higher North American gas index prices and increased gas costs in Trinidad, which are linked to ammonia benchmark prices.Phosphate
Three Months Ended June 30
(millions of US dollars, except
Dollars
Tonnes (thousands)
Average per Tonne
as otherwise noted)
2021
2020
% Change
2021
2020
% Change
2021
2020
% Change
Manufactured product
Net sales
Fertilizer
232
146
59
394
472
(17)
588
309
90
Industrial and feed
119
104
14
192
194
(1)
621
538
15
351
250
40
586
666
(12)
598
375
59
Cost of goods sold
271
224
21
463
335
38
Gross margin - manufactured
80
26
208
135
40
238
Gross margin - other 1
4
2
100
Depreciation and amortization
60
84
(29)
Gross margin - total
84
28
200
Gross margin excluding depreciation
Expenses
7
7
-
and amortization - manufactured
195
124
57
EBIT
77
21
267
Depreciation and amortization
35
56
(38)
EBITDA / Adjusted EBITDA
112
77
45
1 Includes other phosphate and purchased products and is comprised of net sales of $52 million (2020 - $27 million) less cost of goods sold of $48 million (2020 - $25 million).
Six Months Ended June 30
(millions of US dollars, except
Dollars
Tonnes (thousands)
Average per Tonne
as otherwise noted)
2021
2020
% Change
2021
2020
% Change
2021
2020
% Change
Manufactured product
Net sales
Fertilizer
462
319
45
903
1,040
(13)
511
307
66
Industrial and feed
233
210
11
385
385
-
605
546
11
695
529
31
1,288
1,425
(10)
539
372
45
Cost of goods sold
553
511
8
429
359
19
Gross margin - manufactured
142
18
689
110
13
746
Gross margin - other 1
8
3
167
Depreciation and amortization
57
84
(32)
Gross margin - total
150
21
614
Gross margin excluding depreciation
Expenses
14
17
(18)
and amortization - manufactured
167
97
72
EBIT
136
4
n/m
Depreciation and amortization
73
119
(39)
EBITDA / Adjusted EBITDA
209
123
70
1 Includes other phosphate and purchased products and is comprised of net sales of $93 million (2020 - $61 million) less cost of goods sold of $85 million (2020 - $58 million).
Adjusted EBITDA increased in the second quarter and first half of 2021 due to higher net realized selling prices which more than offset higher raw material costs and lower sales volumes. Sales volumes were lower in the second quarter and first half of 2021 due to the timing of turnaround activity this year and higher inventory tonnes in 2020 which supported higher sales in the second quarter and first half of 2020. Net realized selling price of phosphate fertilizer increased in the second quarter and first half of 2021 as a result of the increase in benchmark fertilizer prices resulting from the strength in global agriculture markets and higher global raw material costs. Industrial and feed prices also increased, but to a lesser extent than fertilizer, due to a lag in price realizations relative to spot prices. Cost of goods sold per tonne increased due to significantly higher raw material input costs and a $46 million favorable change in estimate related to an asset retirement obligation recorded in the second quarter of 2020. This was partially offset by lower depreciation and amortization following the non-cash impairment of assets in the third quarter of 2020.Corporate and Others
(millions of US dollars, except as otherwise
Three Months Ended June 30
Six Months Ended June 30
noted)
2021
2020
% Change
2021
2020
% Change
Sales 1
-
20
(100)
-
47
(100)
Cost of goods sold
-
18
(100)
-
43
(100)
Gross margin
-
2
(100)
-
4
(100)
Selling expenses
(9)
(8)
13
(15)
(13)
15
General and administrative expenses
66
65
2
124
125
(1)
Share-based compensation expense (recovery)
38
12
217
61
(20)
n/m
Other expenses
83
80
4
111
87
28
EBIT
(178)
(147)
21
(281)
(175)
61
Depreciation and amortization
10
17
(41)
22
26
(15)
EBITDA
(168)
(130)
29
(259)
(149)
74
Adjustments 2
100
65
54
143
18
694
Adjusted EBITDA
(68)
(65)
5
(116)
(131)
(11)
1 Primarily relates to our non-core Canadian business that was sold in 2020.
2 See Note 2 to the interim financial statements.
Share-based compensation expense (recovery) – In the second quarter of 2021, the expense was higher as a result of the increase in our share price. We also had a higher number of share-based awards that vested in 2021.We had an expense in the first half of 2021 due to an increase in our share price, while a recovery was recorded in the first half of 2020 as our share price decreased as a result of market volatility caused by the COVID-19 pandemic. Other expenses were higher in the second quarter and first half of 2021 compared to the same periods in 2020 as we recognized additional cloud computing related expenses from our change in accounting policy (refer to Note 3). This was partially offset by lower foreign exchange losses as Canadian and Australian dollars improved relative to the US dollar in the second quarter of 2021.
Finance Costs, Income Tax Expense and
Other Comprehensive Income (Loss)
(millions of US dollars, except as otherwise
Three Months Ended June 30
Six Months Ended June 30
noted)
2021
2020
% Change
2021
2020
% Change
Finance costs
125
139
(10)
245
272
(10)
Income tax expense
381
235
62
406
219
85
Other comprehensive income (loss)
61
201
(70)
85
(157)
n/m
Finance costs in the second quarter and first half of 2021 were lower due to lower interest rates and a lower short-term debt balance, more than offsetting a higher long-term debt balance resulting from the $1.5 billion in notes issued in the second quarter of 2020. Income tax expense in the second quarter and first half of 2021 was higher as a result of higher earnings before income taxes compared to the same periods in 2020. Other comprehensive income (loss) is primarily driven by changes in the currency translation of our foreign operations and our investment in Sinofert Holdings Ltd. (“Sinofert”). In 2020, the COVID-19 pandemic resulted in increased market volatility that affected share prices and foreign exchange rates. This resulted in fair value losses on our investment in Sinofert as well as a significant translation gain in the second quarter of 2020 and a significant translation loss in the first quarter of 2020. In the first half of 2021, Sinofert share price increased while the Canadian and Australian dollars relative to the US dollar were less volatile.Liquidity and Capital Resources
Sources and Uses of Liquidity
We continued to manage our capital in accordance with our capital allocation strategy. We believe that our internally generated cash flow, supplemented by available borrowings under our existing financing sources, if necessary, will be sufficient to meet our anticipated capital expenditures 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 June 30
Six Months Ended June 30
noted)
2021
2020
% Change
2021
2020
% Change
Cash provided by operating activities
1,966
1,756
12
1,814
1,230
47
Cash used in investing activities
(431)
(408)
6
(819)
(853)
(4)
Cash (used in) provided by financing activities
(449)
(3,139)
(86)
(640)
380
n/m
Effect of exchange rate changes on cash and cash equivalents
(4)
24
n/m
(15)
(13)
15
Increase (decrease) in cash and cash equivalents
1,082
(1,767)
n/m
340
744
(54)
Cash provided by
operating activities
Cash used in
investing activities
Cash (used in)
provided by
financing activities
Financial Condition Review
The following balance sheet categories contained variances that were considered significant:
As at
(millions of US dollars, except as otherwise noted)
June 30, 2021
December 31, 2020
$ Change
% Change
Assets
Cash and cash equivalents
1,794
1,454
340
23
Receivables
6,683
3,626
3,057
84
Prepaid expenses and other current assets
524
1,460
(936)
(64)
Other assets
664
914
(250)
(27)
Liabilities and Equity
Payables and accrued charges
9,367
8,058
1,309
16
Retained earnings
7,315
6,606
709
11
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. This was a result of increased crop nutrient net realized selling prices and demand for crop inputs, as well as higher Retail vendor rebates receivables. Certain income tax receivables previously classified as non-current are currently realizable within one year. Prepaid expenses and other current assets decreased due to Retail taking delivery of prepaid inventory (primarily seed and crop protection) during the spring planting and application seasons. Other assets decreased due to a reclassification of certain income tax receivables as current receivables, which will be realized within one year. Payables and accrued charges increased due to a shift in timing of supplier payments and higher inventory purchases to meet strong seasonal demand, which were partially offset by lower customer prepayments in North America as Retail customers took delivery of prepaid sales. Retained earnings increased as net earnings in the first half of 2021 exceeded dividends declared.Capital Structure and Management
Principal Debt Instruments
As part of the normal course of business, we closely monitor our liquidity position. We use a combination of cash generated from operations and short-term and long-term debt to finance our operations. We were in compliance with our debt covenants and did not have any changes to our credit ratings in the six months ended June 30, 2021.
As at June 30, 2021
Outstanding and Committed
(millions of US dollars)
Rate of Interest (%)
Total Facility Limit
Short-term debt
Long-term debt
Credit facilities
Unsecured revolving term credit facility
n/a
4,500
-
-
Uncommitted revolving demand facility
n/a
500
-
-
Other credit facilities 1
0.9 - 7.5
630
115
73
Other
n/a
95
-
Total
210
73
1 Other credit facilities are unsecured and consist of South American facilities with debt of $167 million and interest rates ranging from 1.5 percent to 7.5 percent and other facilities with debt of $21 million and interest rates ranging from 0.9 percent to 4.1 percent.
We also have a commercial paper program, which is limited to the availability of backup funds under the $4,500 million unsecured revolving term credit facility and excess cash invested in highly liquid securities. There is no outstanding balance as of June 30, 2021.
We extended the maturity date of the unsecured revolving term credit facility from 2023 to 2026 in the three months ended June 30, 2021. There was no change to the total facility limit or the significant agreement terms from those we disclosed in our 2020 Annual Report.
Our long-term debt consists primarily of notes. See the “Capital Structure and Management” section of our 2020 Annual Report for information on balances, rates and maturities for our notes.
Outstanding Share Data
As at August 6, 2021
Common shares
570,688,867
Options to purchase common shares
9,877,776
For more information on our capital structure and management, see Note 24 to our 2020 financial statements.
Quarterly Results
(millions of US dollars, except as otherwise noted)
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
Sales 1
9,763
4,658
4,052
4,227
8,431
4,198
3,462
4,185
Net earnings (loss) attributable to equity holders of Nutrien
1,108
127
316
(587)
765
(35)
(48)
141
Adjusted EBITDA
2,215
806
768
670
1,721
508
664
787
Net earnings (loss) per share attributable to equity holders of Nutrien
Basic
1.94
0.22
0.55
(1.03)
1.34
(0.06)
(0.08)
0.25
Diluted
1.94
0.22
0.55
(1.03)
1.34
(0.06)
(0.08)
0.24
1 Certain immaterial figures have been reclassified in the first three quarters of 2020.
Seasonality in our business results from increased demand for products during the planting season. Crop input sales are generally higher in the spring and fall application seasons. Crop nutrient inventories are normally accumulated leading up to each application season. Our cash collections generally occur after the application season is complete, while customer prepayments made to us are concentrated in December and January and inventory prepayments paid to our suppliers are typically concentrated in the period from November to January. Feed and industrial sales are more evenly distributed throughout the year.
In the third quarter of 2020, earnings were impacted by an $824 million non-cash impairment of assets primarily in the Phosphate segment as a result of lower forecasted global phosphate prices. 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. (“MOPCO”).
Critical Accounting Estimates
Our significant accounting policies are disclosed in our 2020 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 53 of our 2020 Annual Report. There were no significant changes in the six months ended June 30, 2021 to our critical accounting estimates.
Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, and National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with IFRS. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
There has been no change in our internal control over financial reporting during the three months ended June 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Forward-Looking Statements
Certain statements and other information included in this document, including within the "Financial Outlook and Guidance" section, constitute “forward-looking information” or “forward-looking statements” (collectively, “forward-looking statements”) under applicable securities laws (such statements are often accompanied by words such as “anticipate”, “forecast”, “expect”, “believe”, “may”, “will”, “should”, “estimate”, “intend” or other similar words). All statements in this document, other than those relating to historical information or current conditions, are forward-looking statements, including, but not limited to: Nutrien's business strategies, plans, prospects and opportunities; Nutrien's 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; capital spending expectations for 2021; expectations regarding performance of our operating segments in 2021, including our operating segment market outlooks and market conditions for 2021, and the anticipated supply and demand for our products and services, expected market and industry conditions with respect to crop nutrient application rates, planted acres, crop mix, prices and the impact of import and export volumes; Nutrien's ability to develop innovative and sustainable solutions; the negotiation of sales contracts; and acquisitions and divestitures. These forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements. As such, undue reliance should not be placed on these forward-looking statements.
All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions referred to below and elsewhere in this document. Although we believe that these assumptions are reasonable, having regard to our experience and our perception of historical trends, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place an undue reliance on these assumptions and such forward-looking statements. Current conditions, economic and otherwise, render assumptions, although reasonable when made, subject to greater uncertainty. The additional key assumptions that have been made include, among other things, assumptions with respect to our ability to successfully complete, integrate and realize the anticipated benefits of our already completed and future acquisitions and divestitures, and that we will be able to implement our standards, controls, procedures and policies in respect of any acquired businesses and to realize the expected synergies; that future business, regulatory and industry conditions will be within the parameters expected by us, including with respect to prices, margins, demand, supply, product availability, supplier agreements, availability and cost of labor and interest, exchange and effective tax rates; assumptions with respect to global economic conditions and the accuracy of our market outlook expectations for 2021 and in the future; 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 economy; the adequacy of our cash generated from operations and our ability to access our credit facilities or capital markets for additional sources of financing; our ability to identify suitable candidates for acquisitions and divestitures and negotiate acceptable terms; our ability to maintain investment grade ratings and achieve our performance targets; our ability to successfully negotiate sales contracts; and our ability to successfully implement new initiatives and programs.
Events or circumstances that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: general global economic, market and business conditions; failure to complete announced and future acquisitions or divestitures at all or on the expected terms and within the expected timeline; climate change and weather conditions, including impacts from regional flooding and/or drought conditions; crop planted acreage, yield and prices; the supply and demand and price levels for our products; governmental and regulatory requirements and actions by governmental authorities, including changes in government policy (including tariffs, trade restrictions and climate change initiatives), government ownership requirements, changes in environmental, tax and other laws or regulations and the interpretation thereof; political risks, including civil unrest, actions by armed groups or conflict and malicious acts including terrorism; the occurrence of a major environmental or safety incident; innovation and cybersecurity risks related to our systems, including our costs of addressing or mitigating such risks; counterparty and sovereign risk; delays in completion of turnarounds at our major facilities; interruptions of or constraints in availability of key inputs, including natural gas and sulfur; any significant impairment of the carrying amount of certain assets; risks related to reputational loss; certain complications that may arise in our mining processes; the ability to attract, engage and retain skilled employees and strikes or other forms of work stoppages; the COVID-19 pandemic, including variants of the COVID-19 virus and the efficiency and distribution of vaccines, and its resulting effects on economic conditions, restrictions imposed by public health authorities or governments, fiscal and monetary responses by governments and financial institutions and disruptions to global supply chains; and other risk factors detailed from time to time in Nutrien reports filed with the Canadian securities regulators and the SEC in the United States.
The purpose of our expected adjusted net earnings per share, adjusted EBITDA (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 and Definitions” section of our 2020 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 Tuesday, August 10, 2021 at 10:00 am Eastern Time.
In order to expedite access to our conference call, each participant will be required to pre-register for the event: Online: http://www.directeventreg.com/registration/event/3792844. Via Phone: 1-888-869-1189 Conference ID 3792844. Once the registration is complete, a confirmation will be sent providing the dial in number and both the Direct Event Passcode and your unique Registrant ID to join this call. For security reasons, please do not share your information with anyone else. Live Audio Webcast: Visit http://www.nutrien.com/investors/events/2021-q2-earnings-conference-callAppendix A - Selected Additional Financial Data
Selected Retail measures
Three Months Ended June 30
Six Months Ended June 30
2021
2020
2021
2020
Proprietary products margin as a percentage of product line margin (%)
Crop nutrients
24
24
23
26
Crop protection products
43
42
42
42
Seed
46
47
43
44
All products
29
29
27
28
Crop nutrients sales volumes (tonnes - thousands)
North America
5,020
5,098
6,617
6,524
International
1,132
1,024
1,935
1,623
Total
6,152
6,122
8,552
8,147
Crop nutrients selling price per tonne
North America
506
427
494
425
International
445
340
408
332
Total
495
413
475
406
Crop nutrients gross margin per tonne
North America
127
101
123
100
International
57
42
54
40
Total
114
91
108
88
Financial performance measures
2021
Retail adjusted EBITDA to sales (“Retail adjusted EBITDA margin”) (%) 1
10
Retail adjusted average working capital to sales (%) 1, 2
12
Retail adjusted average working capital to sales excluding Nutrien Financial (%) 1, 2
-
Retail cash operating coverage ratio (%) 1, 2
60
Retail normalized comparable store sales (%) 2
1
Retail adjusted EBITDA per US selling location (thousands of US dollars) 1, 2
1,267
Nutrien Financial net interest margin (%) 1, 2
6.2
1 Rolling four quarters ended June 30, 2021.
2 See the "Non-IFRS Financial Measures" section.
Nutrien Financial
As at June 30, 2021
(millions of US dollars)
Current
<31 days
past due
31-90 days
past due
>90 days
past due
Gross
Receivables
Allowance 1
Total
North America
2,530
152
56
48
2,786
(31)
2,755
International
230
12
14
63
319
(2)
317
Nutrien Financial receivables
2,760
164
70
111
3,105
(33)
3,072
1 Bad debt expense on the above receivables for the three months ended June 30, 2021 was $11 million (2020 - $12 million) in the Retail segment.
Selected Nitrogen measures
Three Months Ended June 30
Six Months Ended June 30
2021
2020
2021
2020
Sales volumes (tonnes - thousands)
Fertilizer
1,825
2,173
3,130
3,584
Industrial and feed
1,141
1,017
2,239
2,134
Net sales (millions of US dollars)
Fertilizer
638
510
970
828
Industrial and feed
344
186
585
398
Net selling price per tonne
Fertilizer
350
235
310
231
Industrial and feed
302
182
261
186
Production measures
Three Months Ended June 30
Six Months Ended June 30
2021
2020
2021
2020
Potash production (Product tonnes - thousands)
3,414
3,346
6,950
6,381
Potash shutdown weeks 1
4
22
4
34
Ammonia production - total 2
1,492
1,619
2,941
3,066
Ammonia production - adjusted 2, 3
954
1,067
2,007
2,058
Ammonia operating rate (%) 3
87
97
92
94
P2O5 production (P2O5 tonnes - thousands)
347
357
725
729
P2O5 operating rate (%)
82
84
86
86
1 Represents weeks of full production shutdown, excluding the impact of any periods of reduced operating rates and planned routine annual maintenance shutdowns and announced workforce reductions.
2 All figures are provided on a gross production basis in thousands of product tonnes.
3 Excludes Trinidad and Joffre.
Appendix B - Non-IFRS Financial Measures
We use both IFRS and certain non-IFRS financial measures to assess performance. Non-IFRS financial measures are numerical measures of a company’s historical or future financial performance, financial position or cash flow that are not specified, defined or determined under IFRS, and are not presented in our interim financial statements. Non-IFRS measures either exclude amounts that are included in, or include amounts that are excluded from, the most directly comparable measure specified, defined or determined under IFRS. In evaluating these measures, investors should consider that the methodology applied in calculating such measures may differ among companies and analysts.
Management believes the non-IFRS financial measures provide transparent and useful supplemental information to help investors evaluate our financial performance, financial condition and liquidity using the same measures as management. These non-IFRS financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS.
The following section outlines our non-IFRS financial measures, their definitions, and why management uses each measure. It includes reconciliations to the most directly comparable IFRS measures. Except as otherwise described herein, our non-IFRS financial measures are calculated on a consistent basis from period to period and are adjusted for specific items in each period, as applicable. As non-recurring or unusual items arise, we generally exclude these items in our calculation of the applicable non-IFRS financial measure.
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, certain integration and restructuring related costs, share-based compensation, impairment of assets, certain foreign exchange gain/loss (net of related derivatives), COVID-19 related expenses, cloud computing transition adjustment, loss on disposal of business, and net gain on disposal of investment in MOPCO. 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. 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. In 2021, we amended our calculation of adjusted EBITDA to adjust for the impact of restructuring and related costs and cloud computing transition adjustment. There were no similar expenses in the comparative period.
Why we use the measure and why it is useful to investors: It is not impacted by long-term investment and financing decisions, but rather focuses on the performance of our day-to-day operations. It provides a measure of our ability to service debt and to meet other payment obligations.
Three Months Ended June 30
Six Months Ended June 30
(millions of US dollars)
2021
2020
2021
2020
Net earnings
1,113
765
1,246
730
Finance costs
125
139
245
272
Income tax expense
381
235
406
219
Depreciation and amortization
485
517
965
990
EBITDA
2,104
1,656
2,862
2,211
Integration and restructuring related costs
29
18
39
28
Share-based compensation expense (recovery)
38
12
61
(20)
Impairment of assets
1
-
5
-
COVID-19 related expenses
9
17
18
19
Foreign exchange (gain) loss, net of related derivatives
(2)
18
-
(9)
Cloud computing transition adjustment
36
-
36
-
Adjusted EBITDA
2,215
1,721
3,021
2,229
Adjusted EBITDA (Consolidated), Adjusted Net Earnings Per Share and Sustaining Capital Expenditures Guidance
Adjusted EBITDA, adjusted net earnings per share and sustaining capital expenditures guidance are forward-looking non-IFRS financial measures. We do not provide a reconciliation of such forward-looking measures to the most directly comparable financial measures calculated and presented in accordance with IFRS due to unknown variables and the uncertainty related to future results. These unknown variables may include unpredictable transactions of significant value that may be inherently difficult to determine, without unreasonable efforts. Guidance for adjusted EBITDA and adjusted net earnings per share excludes the impacts of integration and restructuring related costs, share-based compensation, certain foreign exchange gain/loss (net of related derivatives), COVID-19 related expenses, and cloud computing transition adjustment. Guidance for sustaining capital expenditures includes expected expenditures required to sustain operations at existing levels and includes major repairs and maintenance and plant turnarounds.
Adjusted Net Earnings and Adjusted Net Earnings Per Share
Most directly comparable IFRS financial measure: Net earnings (loss) and net earnings (loss) per share.
Definition: Net earnings (loss) before certain integration and restructuring related costs, share-based compensation, certain foreign exchange gain/loss (net of related derivatives), COVID-19 related expenses (including those recorded under finance costs for managing our liquidity position in response to the COVID-19 pandemic in 2020), cloud computing transition adjustment, loss on disposal of business, net gain on disposal of investment in MOPCO and impairment of assets, net of tax. 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. In 2021, we amended our calculation of adjusted net earnings to adjust for the impact of restructuring and related costs and cloud computing transition adjustment. There were no similar expenses in the comparative period.
Why we use the measure and why it is useful to investors: Focuses on the performance of our day-to-day operations excluding the effects of non-operating items.
Three Months Ended
June 30, 2021
Six Months Ended
June 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
1,108
1.94
1,235
2.16
Adjustments:
Integration and restructuring related costs
29
22
0.03
39
30
0.05
Share-based compensation expense
38
29
0.05
61
46
0.08
Impairment of assets
1
1
-
5
4
0.01
COVID-19 related expenses
9
7
0.01
18
14
0.02
Foreign exchange gain, net of related derivatives
(2)
(2)
-
-
-
-
Cloud computing transition adjustment
36
27
0.05
36
27
0.05
Adjusted net earnings
1,192
2.08
1,356
2.37
Free Cash Flow and Free Cash Flow Including Changes in Non-Cash Operating Working Capital
Most directly comparable IFRS financial measure: Cash from operations before working capital changes.
Definition: Cash from operations before working capital changes less sustaining capital expenditures. We also calculate a similar measure that includes changes in non-cash operating working capital.
Why we use the measure and why it is useful to investors: For evaluation of liquidity and financial strength. These are also useful as indicators of our ability to service debt, meet other payment obligations and make strategic investments. These do not represent residual cash flow available for discretionary expenditures.
Three Months Ended June 30
Six Months Ended June 30
(millions of US dollars)
2021
2020
2021
2020
Cash from operations before working capital changes
1,717
1,318
2,357
1,662
Sustaining capital expenditures
(304)
(145)
(468)
(308)
Free cash flow
1,413
1,173
1,889
1,354
Changes in non-cash operating working capital
249
438
(543)
(432)
Free cash flow including changes in non-cash operating working capital
1,662
1,611
1,346
922
Potash Cash Cost of Product Manufactured (“COPM”)
Most directly comparable IFRS financial measure: Cost of goods sold (“COGS”) for the Potash segment.
Definition: Potash COGS for the period excluding depreciation and amortization expense and inventory and other adjustments divided by the production tonnes for the period.
Why we use the measure and why it is useful to investors: To assess operational performance. Potash cash COPM excludes the effects of production from other periods and long-term investment decisions, supporting a focus on the performance of our day-to-day operations.
Three Months Ended June 30
Six Months Ended June 30
(millions of US dollars, except as otherwise noted)
2021
2020
2021
2020
Total COGS - Potash
317
310
608
575
Change in inventory
(11)
(40)
16
(32)
Other adjustments
(2)
(3)
(6)
(5)
COPM
304
267
618
538
Depreciation and amortization included in COPM
(103)
(92)
(214)
(181)
Cash COPM
201
175
404
357
Production tonnes (tonnes - thousands)
3,414
3,346
6,950
6,381
Potash cash COPM per tonne
59
52
58
56
Ammonia Controllable Cash COPM
Most directly comparable IFRS financial measure: COGS for the Nitrogen segment.
Definition: The total of COGS for the Nitrogen segment excluding depreciation and amortization expense included in COGS, cash COGS for products other than ammonia, other adjustments, and natural gas and steam costs, divided by net ammonia production tonnes.
Why we use the measure and why it is useful to investors: To assess operational performance. Ammonia controllable cash COPM excludes the effects of production from other periods, the costs of natural gas and steam, and long-term investment decisions, supporting a focus on the performance of our day-to-day operations.
Three Months Ended June 30
Six Months Ended June 30
(millions of US dollars, except as otherwise noted)
2021
2020
2021
2020
Total COGS - Nitrogen
763
645
1,373
1,226
Depreciation and amortization in COGS
(134)
(152)
(242)
(282)
Cash COGS for products other than ammonia
(448)
(369)
(841)
(730)
Ammonia
Total cash COGS before other adjustments
181
124
290
214
Other adjustments 1
(27)
(46)
(30)
(35)
Total cash COPM
154
78
260
179
Natural gas and steam costs
(118)
(53)
(192)
(119)
Controllable cash COPM
36
25
68
60
Production tonnes (net tonnes 2 - thousands)
703
644
1,305
1,388
Ammonia controllable cash COPM per tonne
51
40
51
43
1 Includes changes in inventory balances and other adjustments.
2 Ammonia tonnes available for sale, as not upgraded to other Nitrogen products.
Gross Margin Excluding Depreciation and Amortization Per Tonne - Manufactured
Most directly comparable IFRS financial measure: Gross margin.
Definition: Gross margin from manufactured products per tonne less depreciation and amortization per tonne. Reconciliations are provided in the “Segment Results” section.
Why we use the measure and why it is useful to investors: Focuses on the performance of our day-to-day operations, which excludes the effects of items that primarily reflect the impact of long-term investment and financing decisions.
Retail Adjusted Average Working Capital to Sales and Retail Adjusted Average Working Capital to Sales Excluding Nutrien Financial
Most directly comparable IFRS financial measure: (Current assets minus current liabilities for Retail) divided by Retail sales.
Definition: Retail adjusted average working capital divided by Retail adjusted sales for the last four rolling quarters. We exclude in our calculations the working capital and sales of certain acquisitions (such as Ruralco) during the first year following the acquisition. We amended our calculation to adjust for the sales of certain recently acquired businesses. We also look at this metric excluding the sales and working capital of Nutrien Financial.
Why we use the measure and why it is useful to investors: To evaluate operational efficiency. A lower or higher percentage represents increased or decreased efficiency, respectively. The metric excluding Nutrien Financial shows the impact that the working capital of Nutrien Financial has on the ratio.
Rolling four quarters ended June 30, 2021
(millions of US dollars, except as otherwise noted)
Q3 2020
Q4 2020
Q1 2021
Q2 2021
Average/Total
Working capital
3,216
1,157
1,630
1,348
Working capital from certain recent acquisitions
-
-
-
-
Adjusted working capital
3,216
1,157
1,630
1,348
1,838
Nutrien Financial working capital
(1,711)
(1,392)
(1,221)
(3,072)
Adjusted working capital excluding Nutrien Financial
1,505
(235)
409
(1,724)
(11)
Sales 1
2,742
2,618
2,972
7,537
Sales from certain recent acquisitions
-
-
-
-
Adjusted sales
2,742
2,618
2,972
7,537
15,869
Nutrien Financial revenue 1
(36)
(37)
(25)
(59)
Adjusted sales excluding Nutrien Financial
2,706
2,581
2,947
7,478
15,712
1 Certain immaterial figures have been reclassified for the third quarter of 2020.
Adjusted average working capital to sales (%)
12
Adjusted average working capital to sales excluding Nutrien Financial (%)
-
Nutrien Financial Net Interest Margin
Most directly comparable IFRS financial measure: Nutrien Financial gross margin divided by average Nutrien Financial receivables.
Definition: Nutrien Financial revenue less deemed interest expense divided by average Nutrien Financial receivables outstanding for the last four rolling quarters.
Why we use the measure and why it is useful to investors: Used by credit rating agencies and other users to evaluate financial performance of Nutrien Financial.
Rolling four quarters ended June 30, 2021
(millions of US dollars, except as otherwise noted)
Q3 2020
Q4 2020
Q1 2021
Q2 2021
Total/Average
Nutrien Financial revenue
36
37
25
59
Deemed interest expense 1
(15)
(14)
(6)
(8)
Net interest
21
23
19
51
114
Average Nutrien Financial receivables
1,711
1,392
1,221
3,072
1,849
Nutrien Financial net interest margin (%)
6.2
1 Average borrowing rate applied to the notional debt required to fund the portfolio of receivables from customers monitored and serviced by Nutrien Financial.
Retail Cash Operating Coverage Ratio
Most directly comparable IFRS financial measure: Retail operating expenses as a percentage of Retail gross margin.
Definition: Retail operating expenses, excluding depreciation and amortization expense, divided by Retail gross margin excluding depreciation and amortization expense in cost of goods sold, for the last four rolling quarters.
Why we use the measure and why it is useful to investors: To understand the costs and underlying economics of our Retail operations and to assess our Retail operating performance and ability to generate free cash flow.
Rolling four quarters ended June 30, 2021
(millions of US dollars, except as otherwise noted)
Q3 2020
Q4 2020
Q1 2021
Q2 2021
Total
Operating expenses 1, 2
691
768
721
938
3,118
Depreciation and amortization in operating expenses
(167)
(177)
(175)
(166)
(685)
Operating expenses excluding depreciation and amortization
524
591
546
772
2,433
Gross margin 2
683
885
652
1,858
4,078
Depreciation and amortization in cost of goods sold
3
3
2
3
11
Gross margin excluding depreciation and amortization
686
888
654
1,861
4,089
Cash operating coverage ratio (%)
60
1 Includes Retail expenses below gross margin including selling expenses, general and administrative expenses and other (income) expenses.
2 Certain immaterial figures have been reclassified for the third quarter of 2020.
Retail Adjusted EBITDA per US Selling Location
Most directly comparable IFRS financial measure: Retail US adjusted EBITDA.
Definition: Total Retail US adjusted EBITDA for the last four rolling quarters, adjusted for acquisitions in those quarters, divided by the number of US locations that have generated sales in the last four rolling quarters, adjusted for acquired locations.
Why we use the measure and why it is useful to investors: To assess our US Retail operating performance. This measure includes locations we have owned for more than 12 months.
Rolling four quarters ended June 30, 2021
(millions of US dollars, except as otherwise noted)
Q3 2020
Q4 2020
Q1 2021
Q2 2021
Total
Adjusted US EBITDA
86
177
29
847
1,139
Adjustments for acquisitions
(5)
Adjusted US EBITDA adjusted for acquisitions
1,134
Number of US selling locations adjusted for acquisitions
895
Adjusted EBITDA per US selling location (thousands of US dollars)
1,267
Retail Normalized Comparable Store Sales
Most directly comparable IFRS financial measure: Retail sales from comparable base as a component of total Retail sales.
Definition: Prior year comparable store sales adjusted for published potash, nitrogen and phosphate benchmark prices and foreign exchange rates used in the current year. We retain sales of closed locations in the comparable base if the closed location is in close proximity to an existing location, unless we plan to exit the market area or are unable to economically or logistically serve it. We do not adjust for temporary closures, expansions or renovations of stores.
Why we use the measure and why it is useful to investors: To evaluate sales growth by adjusting for fluctuations in commodity prices and foreign exchange rates. Includes locations we have owned for more than 12 months.
Six Months Ended June 30
(millions of US dollars, except as otherwise noted)
2021
2020
Sales from comparable base
Current period
10,405
8,602
Prior period 1
9,425
8,551
Comparable store sales (%)
10
1
Prior period normalized for benchmark prices and foreign exchange rates 1
10,351
8,104
Normalized comparable store sales (%)
1
6
1 Certain immaterial figures have been reclassified in 2020.
Condensed Consolidated Financial Statements
Unaudited in millions of US dollars except as otherwise noted
Condensed Consolidated Statements of Earnings
Three Months Ended
Six Months Ended
June 30
June 30
Note
2021
2020
2021
2020
Note 1
Note 1
SALES
2
9,763
8,431
14,421
12,629
Freight, transportation and distribution
222
237
433
449
Cost of goods sold
6,659
6,024
9,950
9,125
GROSS MARGIN
2,882
2,170
4,038
3,055
Selling expenses
865
763
1,538
1,405
General and administrative expenses
116
101
219
205
Provincial mining taxes
107
48
165
105
Share-based compensation expense (recovery)
38
12
61
(20)
Other expenses
3
137
107
158
139
EARNINGS BEFORE FINANCE COSTS AND INCOME TAXES
1,619
1,139
1,897
1,221
Finance costs
125
139
245
272
EARNINGS BEFORE INCOME TAXES
1,494
1,000
1,652
949
Income tax expense
4
381
235
406
219
NET EARNINGS
1,113
765
1,246
730
Attributable to
Equity holders of Nutrien
1,108
765
1,235
730
Non-controlling interest
5
-
11
-
NET EARNINGS
1,113
765
1,246
730
NET EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF NUTRIEN ("EPS")
Basic
1.94
1.34
2.17
1.28
Diluted
1.94
1.34
2.16
1.28
Weighted average shares outstanding for basic EPS
570,352,000
569,146,000
570,007,000
570,157,000
Weighted average shares outstanding for diluted EPS
571,972,000
569,146,000
571,453,000
570,157,000
Condensed Consolidated Statements of Comprehensive Income
Three Months Ended
Six Months Ended
June 30
June 30
(Net of related income taxes)
2021
2020
2021
2020
NET EARNINGS
1,113
765
1,246
730
Other comprehensive income (loss)
Items that will not be reclassified to net earnings:
Net actuarial gain on defined benefit plans
-
-
-
3
Net fair value gain (loss) on investments
22
(2)
70
(21)
Items that have been or may be subsequently reclassified to
net earnings:
Gain (loss) on currency translation of foreign operations
25
194
(5)
(121)
Other
14
9
20
(18)
OTHER COMPREHENSIVE INCOME (LOSS)
61
201
85
(157)
COMPREHENSIVE INCOME
1,174
966
1,331
573
Attributable to
Equity holders of Nutrien
1,170
966
1,321
573
Non-controlling interest
4
-
10
-
COMPREHENSIVE INCOME
1,174
966
1,331
573
(See Notes to the Condensed Consolidated Financial Statements)
Condensed Consolidated Statements of Cash Flows
Three Months Ended
Six Months Ended
June 30
June 30
Note
2021
2020
2021
2020
OPERATING ACTIVITIES
Net earnings
1,113
765
1,246
730
Adjustments for:
Depreciation and amortization
485
517
965
990
Share-based compensation expense (recovery)
38
12
61
(20)
Impairment of assets
1
-
5
-
(Recovery of) provision for deferred income tax
(20)
84
(10)
62
Cloud computing transition adjustment
3
36
-
36
-
Other long-term assets, liabilities and miscellaneous
64
(60)
54
(100)
Cash from operations before working capital changes
1,717
1,318
2,357
1,662
Changes in non-cash operating working capital:
Receivables
(2,443)
(1,824)
(2,835)
(2,147)
Inventories
1,848
2,174
63
746
Prepaid expenses and other current assets
310
247
998
1,013
Payables and accrued charges
534
(159)
1,231
(44)
CASH PROVIDED BY OPERATING ACTIVITIES
1,966
1,756
1,814
1,230
INVESTING ACTIVITIES
Additions to property, plant and equipment
(378)
(298)
(703)
(661)
Additions to intangible assets
(5)
(36)
(38)
(68)
Business acquisitions, net of cash acquired
(19)
(116)
(40)
(173)
Other
(29)
42
(38)
49
CASH USED IN INVESTING ACTIVITIES
(431)
(408)
(819)
(853)
FINANCING ACTIVITIES
Transaction costs related to debt
(7)
(15)
(7)
(15)
(Repayment of) proceeds from short-term debt, net
(104)
(4,290)
(3)
204
Proceeds from long-term debt
8
1,500
8
1,506
Repayment of long-term debt
(5)
(6)
(5)
(507)
Repayment of principal portion of lease liabilities
(86)
(70)
(164)
(134)
Dividends paid to Nutrien's shareholders
6
(263)
(258)
(518)
(514)
Repurchase of common shares
6
(1)
-
(2)
(160)
Issuance of common shares
21
-
63
-
Other
(12)
-
(12)
-
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
(449)
(3,139)
(640)
380
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
(4)
24
(15)
(13)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
1,082
(1,767)
340
744
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD
712
3,182
1,454
671
CASH AND CASH EQUIVALENTS – END OF PERIOD
1,794
1,415
1,794
1,415
Cash and cash equivalents comprised of:
Cash
1,580
1,106
1,580
1,106
Short-term investments
214
309
214
309
1,794
1,415
1,794
1,415
SUPPLEMENTAL CASH FLOWS INFORMATION
Interest paid
86
153
162
249
Income taxes paid
105
30
144
65
Total cash outflow for leases
111
96
208
188
(See Notes to the Condensed Consolidated Financial Statements)
Condensed Consolidated Statements of Changes in Shareholders’ Equity
Accumulated Other Comprehensive (Loss) Income ("AOCI")
Net
Actuarial
Loss on
Equity
Net Fair Value
Gain on
Currency
Holders
Non-
Number of
(Loss) Gain
Defined
Translation
of
Controlling
Common
Share
Contributed
on
Benefit
of Foreign
Total
Retained
Nutrien
Interest
Total
Shares
Capital
Surplus
Investments
Plans 1
Operations
Other
AOCI
Earnings
(Note 1)
(Note 1)
Equity
BALANCE – DECEMBER 31, 2019
572,942,809
15,771
248
(29)
-
(204)
(18)
(251)
7,101
22,869
38
22,907
Net earnings
-
-
-
-
-
-
-
-
730
730
-
730
Other comprehensive (loss) income
-
-
-
(21)
3
(121)
(18)
(157)
-
(157)
-
(157)
Shares repurchased (Note 6)
(3,832,580)
(105)
(55)
-
-
-
-
-
-
(160)
-
(160)
Dividends declared
-
-
-
-
-
-
-
-
(514)
(514)
-
(514)
Effect of share-based
compensation including
issuance of common shares
35,706
1
7
-
-
-
-
-
-
8
-
8
Transfer of net loss on
cash flow hedges
-
-
-
-
-
-
11
11
-
11
-
11
Transfer of net actuarial gain
on defined benefit plans
-
-
-
-
(3)
-
-
(3)
3
-
-
-
BALANCE – JUNE 30, 2020
569,145,935
15,667
200
(50)
-
(325)
(25)
(400)
7,320
22,787
38
22,825
BALANCE – DECEMBER 31, 2020
569,260,406
15,673
205
(36)
-
(62)
(21)
(119)
6,606
22,365
38
22,403
Net earnings
-
-
-
-
-
-
-
-
1,235
1,235
11
1,246
Other comprehensive income (loss)
-
-
-
70
-
(4)
20
86
-
86
(1)
85
Shares repurchased (Note 6)
(32,728)
(1)
(1)
-
-
-
-
-
-
(2)
-
(2)
Dividends declared
-
-
-
-
-
-
-
-
(526)
(526)
-
(526)
Non-controlling interest transactions
-
-
-
-
-
-
-
-
-
-
(12)
(12)
Effect of share-based
compensation including
issuance of common shares
-
74
(3)
-
-
-
-
-
-
71
-
71
Transfer of net gain on cash flow hedges
-
-
-
-
-
-
(11)
(11)
-
(11)
-
(11)
BALANCE – JUNE 30, 2021
569,227,678
15,746
201
34
-
(66)
(12)
(44)
7,315
23,218
36
23,254
1 Any amounts incurred during a period were transferred to retained earnings at each period-end. Therefore, no balance exists at the beginning or end of period.
(See Notes to the Condensed Consolidated Financial Statements)
Condensed Consolidated Balance Sheets
June 30
December 31
As at
Note
2021
2020
2020
Note 1
Note 1
ASSETS
Current assets
Cash and cash equivalents
1,794
1,415
1,454
Receivables
6,683
5,736
3,626
Inventories
4,876
4,199
4,930
Prepaid expenses and other current assets
524
420
1,460
13,877
11,770
11,470
Non-current assets
Property, plant and equipment
19,592
20,178
19,660
Goodwill
12,211
12,096
12,198
Other intangible assets
2,393
2,376
2,388
Investments
619
803
562
Other assets
664
578
914
TOTAL ASSETS
49,356
47,801
47,192
LIABILITIES
Current liabilities
Short-term debt
210
1,247
159
Current portion of long-term debt
32
-
14
Current portion of lease liabilities
276
228
249
Payables and accrued charges
9,367
7,306
8,058
9,885
8,781
8,480
Non-current liabilities
Long-term debt
10,029
10,032
10,047
Lease liabilities
900
841
891
Deferred income tax liabilities
4
3,118
3,212
3,149
Pension and other post-retirement benefit liabilities
458
435
454
Asset retirement obligations and accrued environmental costs
1,559
1,575
1,597
Other non-current liabilities
153
100
171
TOTAL LIABILITIES
26,102
24,976
24,789
SHAREHOLDERS’ EQUITY
Share capital
6
15,746
15,667
15,673
Contributed surplus
201
200
205
Accumulated other comprehensive loss
(44)
(400)
(119)
Retained earnings
7,315
7,320
6,606
Equity holders of Nutrien
23,218
22,787
22,365
Non-controlling interest
36
38
38
TOTAL SHAREHOLDERS’ EQUITY
23,254
22,825
22,403
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
49,356
47,801
47,192
(See Notes to the Condensed Consolidated Financial Statements)
Notes to the Condensed Consolidated Financial Statements
As at and for the Three and Six Months Ended June 30, 2021
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 consistent with those used in the preparation of our 2020 annual consolidated financial statements except as disclosed in Note 3. 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 2020 annual consolidated financial statements.
Certain immaterial 2020 figures have been reclassified in the condensed consolidated statements of earnings, condensed consolidated statements of changes in shareholders’ equity, condensed consolidated balance sheets and segment information.
In management’s opinion, the interim financial statements include all adjustments necessary to fairly present such information in all material respects. Interim results are not necessarily indicative of the results expected for any other interim period or the fiscal year.
We prepare our interim financial statements in accordance with IFRS, which requires us to make judgments, assumptions and estimates in applying accounting policies. We have assessed our accounting estimates and other matters that require the use of forecasted financial information for the impacts arising from the novel coronavirus (“COVID-19”) pandemic. The future assessment of these estimates, including expectations about the severity, duration and scope of the pandemic, could differ materially in future reporting periods. As a result of the COVID-19 pandemic, we incurred directly attributable and incremental COVID-19 related expenses in other expenses (Note 3).
These interim financial statements were authorized by the audit committee of the Board of Directors for issue on August 9, 2021.
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 June 30, 2021
Corporate
Retail
Potash
Nitrogen
Phosphate
and Others
Eliminations
Consolidated
Sales
– third party
7,522
844
1,008
389
-
-
9,763
– intersegment
15
61
307
60
-
(443)
-
Sales
– total
7,537
905
1,315
449
-
(443)
9,763
Freight, transportation and distribution
-
88
136
46
-
(48)
222
Net sales
7,537
817
1,179
403
-
(395)
9,541
Cost of goods sold
5,679
317
763
319
-
(419)
6,659
Gross margin
1,858
500
416
84
-
24
2,882
Selling expenses
863
2
8
1
(9)
-
865
General and administrative expenses
41
3
3
3
66
-
116
Provincial mining taxes
-
107
-
-
-
-
107
Share-based compensation expense
-
-
-
-
38
-
38
Other expenses
34
11
6
3
83
-
137
Earnings (loss) before finance costs and
income taxes
920
377
399
77
(178)
24
1,619
Depreciation and amortization
169
116
155
35
10
-
485
EBITDA
1,089
493
554
112
(168)
24
2,104
Integration and restructuring related costs
7
-
-
-
22
-
29
Share-based compensation expense
-
-
-
-
38
-
38
Impairment of assets
-
-
1
-
-
-
1
COVID-19 related expenses
-
-
-
-
9
-
9
Foreign exchange gain, net of
related derivatives
-
-
-
-
(2)
-
(2)
Cloud computing transition adjustment
1
2
-
-
33
-
36
Adjusted EBITDA
1,097
495
555
112
(68)
24
2,215
Assets – at June 30, 2021
21,784
12,107
10,266
1,454
4,414
(669)
49,356
Three Months Ended June 30, 2020
Corporate
Retail
Potash
Nitrogen
Phosphate
and Others
Eliminations
Consolidated
Sales
– third party
6,754
617
755
285
20
-
8,431
– intersegment
10
64
246
49
-
(369)
-
Sales
– total
6,764
681
1,001
334
20
(369)
8,431
Freight, transportation and distribution
-
93
148
57
-
(61)
237
Net sales
6,764
588
853
277
20
(308)
8,194
Cost of goods sold
5,137
310
645
249
18
(335)
6,024
Gross margin
1,627
278
208
28
2
27
2,170
Selling expenses
764
1
5
1
(8)
-
763
General and administrative expenses
30
1
2
3
65
-
101
Provincial mining taxes
-
46
1
-
1
-
48
Share-based compensation expense
-
-
-
-
12
-
12
Other expenses (income)
32
4
(11)
3
79
-
107
Earnings (loss) before finance costs and
income taxes
801
226
211
21
(147)
27
1,139
Depreciation and amortization
163
109
172
56
17
-
517
EBITDA
964
335
383
77
(130)
27
1,656
Integration and restructuring related costs
-
-
-
-
18
-
18
Share-based compensation expense
-
-
-
-
12
-
12
COVID-19 related expenses
-
-
-
-
17
-
17
Foreign exchange loss, net of
related derivatives
-
-
-
-
18
-
18
Adjusted EBITDA
964
335
383
77
(65)
27
1,721
Assets – at December 31, 2020 ¹
20,526
11,707
10,077
1,388
3,917
(423)
47,192
1 In 2021, certain assets related to transportation, distribution and logistics were reclassified under Corporate and Others as these are centrally managed. Comparative figures have been restated to reflect this change. Depreciation expense related to these assets are allocated to the rest of the segments based on usage.
Six Months Ended June 30, 2021
Corporate
Retail
Potash
Nitrogen
Phosphate
and Others
Eliminations
Consolidated
Sales
– third party
10,482
1,475
1,703
761
-
-
14,421
– intersegment
27
151
467
132
-
(777)
-
Sales
– total
10,509
1,626
2,170
893
-
(777)
14,421
Freight, transportation and distribution
-
198
231
105
-
(101)
433
Net sales
10,509
1,428
1,939
788
-
(676)
13,988
Cost of goods sold
7,999
608
1,373
638
-
(668)
9,950
Gross margin
2,510
820
566
150
-
(8)
4,038
Selling expenses
1,530
5
15
3
(15)
-
1,538
General and administrative expenses
80
5
5
5
124
-
219
Provincial mining taxes
-
165
-
-
-
-
165
Share-based compensation expense
-
-
-
-
61
-
61
Other expenses (income)
49
12
(20)
6
111
-
158
Earnings (loss) before finance costs and
income taxes
851
633
566
136
(281)
(8)
1,897
Depreciation and amortization
346
240
284
73
22
-
965
EBITDA
1,197
873
850
209
(259)
(8)
2,862
Integration and restructuring related costs
8
-
-
-
31
-
39
Share-based compensation expense
-
-
-
-
61
-
61
Impairment of assets
-
-
5
-
-
-
5
COVID-19 related expenses
-
-
-
-
18
-
18
Cloud computing transition adjustment
1
2
-
-
33
-
36
Adjusted EBITDA
1,206
875
855
209
(116)
(8)
3,021
Assets – at June 30, 2021
21,784
12,107
10,266
1,454
4,414
(669)
49,356
Six Months Ended June 30, 2020
Corporate
Retail
Potash
Nitrogen
Phosphate
and Others
Eliminations
Consolidated
Sales
– third party
9,406
1,164
1,401
611
47
-
12,629
– intersegment
19
128
378
106
-
(631)
-
Sales
– total
9,425
1,292
1,779
717
47
(631)
12,629
Freight, transportation and distribution
-
187
248
127
-
(113)
449
Net sales
9,425
1,105
1,531
590
47
(518)
12,180
Cost of goods sold
7,257
575
1,226
569
43
(545)
9,125
Gross margin
2,168
530
305
21
4
27
3,055
Selling expenses
1,399
4
12
3
(13)
-
1,405
General and administrative expenses
68
3
4
5
125
-
205
Provincial mining taxes
-
103
1
-
1
-
105
Share-based compensation recovery
-
-
-
-
(20)
-
(20)
Other expenses (income)
48
5
(9)
9
86
-
139
Earnings (loss) before finance costs and
income taxes
653
415
297
4
(175)
27
1,221
Depreciation and amortization
318
205
322
119
26
-
990
EBITDA
971
620
619
123
(149)
27
2,211
Integration and restructuring related costs
-
-
-
-
28
-
28
Share-based compensation recovery
-
-
-
-
(20)
-
(20)
COVID-19 related expenses
-
-
-
-
19
-
19
Foreign exchange gain, net of
related derivatives
-
-
-
-
(9)
-
(9)
Adjusted EBITDA
971
620
619
123
(131)
27
2,229
Assets – at December 31, 2020
20,526
11,707
10,077
1,388
3,917
(423)
47,192
Presented below is revenue from contracts with customers disaggregated by product line or geographic location for each reportable segment.
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Retail sales by product line
Crop nutrients
3,045
2,527
4,061
3,312
Crop protection products
2,666
2,436
3,751
3,446
Seed
1,216
1,141
1,679
1,535
Merchandise
268
253
498
469
Nutrien Financial
59
40
84
56
Services and other
335
400
508
655
Nutrien Financial elimination 1
(52)
(33)
(72)
(48)
7,537
6,764
10,509
9,425
Potash sales by geography
Manufactured product
North America
414
325
856
644
Offshore 2
491
356
770
648
905
681
1,626
1,292
Nitrogen sales by product line
Manufactured product
Ammonia
405
291
593
447
Urea
372
304
646
566
Solutions, nitrates and sulfates
329
233
526
429
Other nitrogen and purchased products
209
173
405
337
1,315
1,001
2,170
1,779
Phosphate sales by product line
Manufactured product
Fertilizer
258
185
530
406
Industrial and feed
133
117
259
237
Other phosphate and purchased products
58
32
104
74
449
334
893
717
1 Represents elimination for the interest and service fees charged by Nutrien Financial to Retail branches.
2 Relates to Canpotex Limited ("Canpotex") (Note 8).
NOTE 3 OTHER (INCOME) EXPENSES
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Integration and restructuring related costs
29
18
39
28
Foreign exchange loss (gain), net of related derivatives
1
18
3
(13)
Earnings of equity-accounted investees
(2)
(13)
(22)
(23)
Bad debt expense
13
21
15
27
COVID-19 related expenses
9
17
18
19
Impairment of assets
1
-
5
-
Cloud computing transition adjustment
36
-
36
-
Other expenses
50
46
64
101
137
107
158
139
In April 2021, the IFRS Interpretations Committee published a final agenda decision clarifying how to recognize certain configuration and customization expenditures related to cloud computing with retrospective application. Costs that do not meet the capitalization criteria should be expensed as incurred. We changed our accounting policy to align with the interpretation and previously capitalized costs that no longer qualify for capitalization were expensed in the current period since they were not material.
NOTE 4 INCOME TAXES
A separate estimated average annual effective income tax rate was determined for each taxing jurisdiction and applied individually to the interim period pre-tax earnings for each jurisdiction.
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Income tax expense
381
235
406
219
Actual effective tax rate on earnings (%)
26
25
25
24
Actual effective tax rate including discrete items (%)
26
24
25
23
Discrete tax adjustments that impacted the tax rate
(3)
(13)
(3)
(11)
Income tax balances within the condensed consolidated balance sheets were comprised of the following:
Income Tax Assets and Liabilities
Balance Sheet Location
As at June 30, 2021
As at December 31, 2020
Income tax assets
Current
Receivables
346
83
Non-current
Other assets
89
305
Deferred income tax assets
Other assets
221
242
Total income tax assets
656
630
Income tax liabilities
Current
Payables and accrued charges
335
48
Non-current
Other non-current liabilities
49
40
Deferred income tax liabilities
Deferred income tax liabilities
3,118
3,149
Total income tax liabilities
3,502
3,237
NOTE 5 FINANCIAL INSTRUMENTS
Fair Value
Estimated fair values for financial instruments are designed to approximate amounts for which the instruments could be exchanged in a current arm’s-length transaction between knowledgeable, willing parties. The valuation policies and procedures for financial reporting purposes are determined by our finance department. There have been no changes to our valuation methods presented in Note 10 of the 2020 annual consolidated financial statements and those valuation methods have been applied in these interim financial statements.
The following table presents our fair value hierarchy for financial instruments carried at fair value on a recurring basis or measured at amortized cost:
June 30, 2021
December 31, 2020
Carrying
Carrying
Financial assets (liabilities) measured at
Amount
Level 1 1
Level 2 1
Level 3
Amount
Level 1 1
Level 2 1
Fair value on a recurring basis
Cash and cash equivalents
1,794
-
1,794
-
1,454
-
1,454
Derivative instrument assets
27
-
27
-
45
-
45
Other current financial assets
- marketable securities 2
224
31
193
-
161
24
137
Investments at FVTOCI 3
233
223
-
10
153
153
-
Derivative instrument liabilities
(20)
-
(20)
-
(48)
-
(48)
Amortized cost
Current portion of long-term debt
Fixed and floating rate debt
(32)
-
(32)
-
(14)
-
(14)
Long-term debt
Notes and debentures
(9,988)
(7,763)
(3,721)
-
(9,994)
(3,801)
(7,955)
Fixed and floating rate debt
(41)
-
(41)
-
(53)
-
(53)
1 During the periods ended June 30, 2021 and December 31, 2020, there were no transfers between Level 1 and Level 2 for financial instruments measured at fair value on a recurring basis.
2 Marketable securities consist of equity and fixed income securities. We determine the fair value of equity securities based on the bid price of identical instruments in active markets. We value fixed income securities using quoted prices of instruments with similar terms and credit risk.
3 Investments at fair value through other comprehensive income ("FVTOCI") is primarily comprised of shares in Sinofert Holdings Ltd.
NOTE 6 SHARE CAPITAL
Share repurchase programs
Maximum
Maximum
Number of
Commencement
Shares for
Shares for
Shares
Date
Expiry
Repurchase
Repurchase (%)
Repurchased
2019 Normal Course Issuer Bid
February 27, 2019
February 26, 2020
42,164,420
7
33,256,668
2020 Normal Course Issuer Bid
February 27, 2020
February 26, 2021
28,572,458
5
710,100
2021 Normal Course Issuer Bid 1
March 1, 2021
February 28, 2022
28,468,448
5
32,728
1 The 2021 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 regulatory authorities, including private agreements.
The following table summarizes our share repurchase activities during the period:
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Number of common shares repurchased for cancellation
17,750
-
32,728
3,832,580
Average price per share (US dollars)
52.88
-
52.90
41.96
Total cost
1
-
2
160
Dividends declared
We declared a dividend per share of $0.46 (2020 – $0.45) during the three months ended June 30, 2021, payable on July 16, 2021 to shareholders of record on June 30, 2021 and total dividends of $0.92 (2020 – $0.90) during the six months ended June 30, 2021.
NOTE 7 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 8 RELATED PARTY TRANSACTIONS
We sell potash outside Canada and the United States exclusively through Canpotex. Canpotex sells potash to buyers in export markets pursuant to term and spot contracts at agreed upon prices. Our revenue is recognized at the amount received from Canpotex representing proceeds from their sale of potash, less net costs of Canpotex. Sales to Canpotex are shown in Note 2.
As at
June 30, 2021
December 31, 2020
Receivables from Canpotex
356
122
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