Nutrien Tower in Saskatoon, Sask., Friday, June 25, 2021. THE CANADIAN PRESS/Liam Richards
SASKATOON – Nutrien Ltd. is indefinitely pausing its potash production ramp-up and suspending work on its Geismar clean ammonia project after a period of “unprecedented volatility” in fertilizer markets, said chief executive Ken Seitz on Thursday.
Persistent uncertainty in global crop input markets over the past 18 months have been a challenge, and helped lead to significantly lower net earnings for the company in the second quarter of 2023, but there are still positive signs ahead, he said on an analyst call.
“We are encouraged by the continued improvement in demand as the year has progressed. This is most evident in North America, where we had a strong spring season, relative fertilizer price stability and a significant reduction in channel inventories,” said Seitz.
However, he noted demand has been slower in certain offshore fertilizer markets.
The strategic action to pull back on infrastructure investments reflect the company’s commitment to disciplined capital allocation and enhancing free cash flow, Seitz said.
Nutrien reported second-quarter net earnings of US$448 million, down from US$3.6 billion a year earlier, and revised its full-year guidance lower amid economic pressures including lower potash prices.
Sales were US$11.7 billion, down from US$14.5 billion during the same quarter last year, the company said in a press release Wednesday. Diluted net earnings per share were 89 cents US, down from US$6.51.
The lower earnings are mainly due to lower selling prices, weaker offshore potash sales volumes, and lower retail gross margin for crop nutrients and crop protection products, Nutrien said. It added that net earnings were also hit by non-cash impairments of US$465 million and US$233 million.
Nutrien is undertaking other cost-cutting measures in addition to pausing its potash ramp-up and suspending work on the ammonia project. These include reducing expenditures in both operations and in smaller retail investment projects.
The company has also taken targeted actions this year to reduce headcount amid wage inflation, said Jeff Tarsi, executive vice-president and president of global retail, on the conference call.
“We’ve been very deliberate about controlling our controllables. And we’re taking out discretionary costs across our network,” Tarsi said.
Canadian potash exports will likely be constrained in the third quarter by logistical challenges related to the B.C. ports strike, said Seitz, as well as an outage at Canpotex’s Portland terminal.
“It could take several more weeks until the backlog is cleared and the supply chain returns to normal,” he said, adding this resulted in a lower estimate for global potash shipments in 2023, to a range of 63 to 65 million tonnes.
Nutrien lowered its full-year guidance due to weaker potash prices, lower projected potash exports, and other factors.
It now expects full-year adjusted earnings before interest, taxes, depreciation and amortization to be between US$5.5 and US$6.7 billion. Guidance last quarter was between US$6.5 and US$8.0 billion.
Shares in the company were down more than four per cent in mid-afternoon trading Thursday after the Saskatoon-based company reported its earnings after the bell on Wednesday.
This report by The Canadian Press was first published August 3, 2023.
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