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Nutrien Delivers Earnings Growth and Expects Strong Market Fundamentals in 2023

Nutrien revised full-year 2022 earnings guidance to reflect lower near-term potash sales volumes and prices; continue to advance strategic growth initiatives based on a positive multi-year view of the fundamentals.

SASKATOON, Saskatchewan--(BUSINESS WIRE)-- Nutrien Ltd. (TSX and NYSE: NTR) announced today its third quarter 2022 results, with net earnings of $1.6 billion ($2.94 diluted net earnings per share), which includes a non-cash impairment reversal of $330 million relating to our Phosphate operations. Third quarter 2022 adjusted net earnings per share1 were $2.51 and adjusted EBITDA1 was $2.5 billion.

“Nutrien has delivered record earnings in 2022 due to the strength of agriculture fundamentals, higher fertilizer prices and excellent Retail performance. During the third quarter, we saw a temporary reduction in potash purchasing in North America and Brazil, which has impacted our sales volumes and realized prices in the second half of the year. However, the underlying demand drivers remain strong and global fertilizer supply challenges still persist, creating a supportive environment for Nutrien as we look ahead to 2023 and beyond,” commented Ken Seitz, Nutrien’s President and CEO.

“We are focused on efficiently supplying our customers with the products and services they need to help sustainably feed a growing world. We continue to take a multi-year view of the market and remain confident that our additional low-cost potash and nitrogen production capability will be required to meet future demand,” added Mr. Seitz.

Highlights:

  • Nutrien generated record net earnings of $6.6 billion and adjusted EBITDA1 of $10.1 billion in the first nine months of 2022 due to higher realized prices and strong Retail performance, more than offsetting a reduction in fertilizer sales volumes. As a result, cash provided by operating activitiesimproved to $3.4 billion in the first nine months of 2022.
  • Nutrien revised full-year 2022 adjusted EBITDA guidance1 and adjusted net earnings per share guidance1 to $12.2 to $13.2 billion and $13.25 to $14.50 per share, respectively.
  • Nutrien Ag Solutions (“Retail”) delivered record adjusted EBITDA in the first nine months of 2022, due to supportive market conditions in key regions where we operate. Retail cash operating coverage ratio1 as at September 30, 2022 improved to 55 percent compared to 59 percent for the same period in 2021 driven by higher margins.
  • Potash adjusted EBITDA increased in the third quarter and the first nine months of 2022 compared to the prior year due to higher net realized selling prices and record offshore sales volumes, more than offsetting lower North American sales volumes.
  • Nitrogen third quarter and first nine months of 2022 adjusted EBITDA increased compared to the prior year due to higher net realized selling prices that more than offset higher natural gas costs and lower ammonia and urea sales volumes.
  • In the third quarter of 2022, we recognized a non-cash impairment reversal of $330 million associated with our Phosphate operations and $780 million for the first nine months due to a more favorable outlook for phosphate margins.
  • Nutrien repurchased approximately 40 million shares year-to-date as of November 1, 2022, under our share repurchase programs, for a total of approximately $3.5 billion. Nutrien plans to allocate approximately $4 billion to share repurchases in 2022. While some repurchases may now extend into the first quarter of 2023 due to lower forecasted operating cash flow in 2022, we still intend on completing our existing 10 percent share repurchase program prior to its expiry in February 2023.
1 These (and any related guidance, if applicable) are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section for further information.

Management’s Discussion and Analysis

The following management’s discussion and analysis (“MD&A”) is the responsibility of management and is dated as of November 2, 2022. The Board of Directors (“Board”) of Nutrien carries out its responsibility for review of this disclosure principally through its audit committee, comprised exclusively of independent directors. The audit committee reviews and, prior to its publication, approves this disclosure pursuant to the authority delegated to it by the Board. The term “Nutrien” refers to Nutrien Ltd. and the terms “we”, “us”, “our”, “Nutrien” and “the Company” refer to Nutrien and, as applicable, Nutrien and its direct and indirect subsidiaries on a consolidated basis. Additional information relating to Nutrien (which, except as otherwise noted, is not incorporated by reference herein), including our annual report dated February 17, 2022 (“2021 Annual Report”), which includes our annual audited consolidated financial statements and MD&A, and our annual information form dated February 17, 2022 (“2021 Annual Information Form”), each for the year ended December 31, 2021, can be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. No update is provided to the disclosure in our 2021 annual MD&A except for material information since the date of our annual MD&A. The Company is a foreign private issuer under the rules and regulations of the US Securities and Exchange Commission (the “SEC”).

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

Market Outlook and Guidance

Agriculture and Retail

  • Global grain stocks-to-use ratio, excluding China, is projected to decline to the lowest level in more than a quarter century, driven by reduced corn and wheat production expectations in the US and Europe. As a result of historically tight supply and demand balances, spot prices of corn, soybeans and wheat are up 25 to 50 percent compared to the 10-year average and we expect strong futures prices will provide an incentive for growers to boost production in 2023.
  • The re-opening of the Black Sea to Ukrainian grain exports positively impacted exports from the region but there is uncertainty over the continuation of the United Nations brokered agreement with Russia. The US Department of Agriculture (USDA) projects that Ukrainian grain exports will decline by 44 percent year-over-year in 2023, in large part driven by reduced production levels.
  • Weather has been favorable in North America and we anticipate that the rapid pace of harvest will support strong fall ammonia demand and normal application rates of potash, phosphate and crop protection products.
  • South American spring crop planting is proceeding with a mix of planting conditions. Argentina continues to be impacted by La Nina-related drought, while planting conditions in much of Brazil have generally been favorable. We expect that Brazilian soybean acreage will increase by 3 to 4 percent, which is also expected to support a proportional increase in safrinha corn acreage.

Crop Nutrient Markets

  • Potash shipments from Belarus are projected to be down 50 to 60 percent and Russia down 20 to 25 percent in 2022 compared to the prior year, in line with our previous expectations. We have lowered our global potash shipment forecast to between 60 and 62 million tonnes in 2022, largely due to the impact of higher-than-expected inventory and cautious buying in North America and Brazil during the second half of 2022.
  • We expect robust agricultural fundamentals will support increased potash consumption in 2023 and believe pent-up demand will emerge as inventories are drawn down and prices stabilize. We expect potash supply from Eastern Europe will continue to be constrained in 2023, with shipments from Belarus projected to be down 40 to 60 percent and Russia down 15 to 30 percent compared to 2021 levels. Global potash shipments are forecast between 64 to 67 million tonnes in 2023, with projected Nutrien potash sales volumes of approximately 15 million tonnes.
  • Nitrogen prices continue to be supported by historically high European natural gas prices that have led to significant curtailments of ammonia and downstream nitrogen products. Shifts in global nitrogen trade flows have led to higher US exports and lower import volumes, which we expect will result in a tight North American supply and demand balance entering 2023.
  • Chinese urea and phosphate export restrictions have limited exports in 2022 and are expected to persist into 2023. The restrictions have led to low Chinese phosphate operating rates, maintaining relatively tight global phosphate supplies, while contributing to lower global sulfur prices and supporting phosphate production margins.

Financial Guidance

  • Nutrien revised its full-year 2022 adjusted EBITDA guidance and full-year 2022 adjusted net earnings per share guidance primarily due to lower expected Potash earnings as a result of lower potash sales volumes and realized prices, which more than offset stronger expected Retail earnings. Adjusted net earnings per share guidance includes our plan to allocate approximately $4 billion to share repurchases in 2022.
  • Nutrien lowered potash sales volume guidance primarily to reflect the impact of the compressed spring application season in North America that resulted in higher inventory carry-over and cautious purchasing.
  • Nutrien lowered nitrogen sales volume guidance to reflect the impact of Trinidad gas curtailments during the second half of 2022.

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

 

Guidance Ranges 1 as of

 

Nov 2, 2022

Aug 3, 2022

(billions of US dollars, except as otherwise noted)

Low

 

High

 

Low

 

High

Adjusted net earnings per share 2

13.25

 

14.50

 

15.80

 

17.80

Adjusted EBITDA 2

12.2

 

13.2

 

14.0

 

15.5

Retail adjusted EBITDA

2.15

 

2.25

 

2.10

 

2.20

Potash adjusted EBITDA

5.8

 

6.2

 

7.6

 

8.2

Nitrogen adjusted EBITDA

4.1

 

4.4

 

4.0

 

4.7

Phosphate adjusted EBITDA (in millions of US dollars)

700

 

800

 

750

 

850

Potash sales tonnes (millions) 3

12.5

 

12.9

 

14.3

 

14.9

Nitrogen sales tonnes (millions) 3

10.4

 

10.5

 

10.6

 

11.0

Depreciation and amortization

2.0

 

2.1

 

2.0

 

2.1

Effective tax rate on adjusted earnings (%)

25.0

 

26.0

 

25.5

 

26.5

Sustaining capital expenditures 4

1.3

 

1.4

 

1.3

 

1.4

1 See the "Forward-Looking Statements" section.

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

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

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

Consolidated Results

 

Three Months Ended September 30

 

Nine Months Ended September 30

(millions of US dollars, except as otherwise noted)

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

Sales

8,188

 

6,024

 

36

 

30,351

 

20,445

 

48

Freight, transportation and distribution

204

 

220

 

(7)

 

628

 

653

 

(4)

Cost of goods sold

4,722

 

3,639

 

30

 

17,205

 

13,589

 

27

Gross margin

3,262

 

2,165

 

51

 

12,518

 

6,203

 

102

Expenses

1,056

 

1,108

 

(5)

 

3,368

 

3,249

 

4

Net earnings

1,583

 

726

 

118

 

6,569

 

1,972

 

233

Adjusted EBITDA 1

2,467

 

1,642

 

50

 

10,075

 

4,663

 

116

Diluted net earnings per share

2.94

 

1.25

 

135

 

11.96

 

3.41

 

251

Adjusted net earnings per share 1

2.51

 

1.38

 

82

 

11.10

 

3.75

 

196

Cash provided by (used in) operating activities

878

 

(1,565)

 

n/m

 

3,374

 

249

 

n/m

Free cash flow 1

1,543

 

862

 

79

 

6,770

 

2,751

 

146

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

450

 

(1,890)

 

n/m

 

2,496

 

(544)

 

n/m

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

Net earnings and adjusted EBITDA increased in the third quarter and first nine months of 2022 compared to the same periods in 2021. This was due to higher net realized selling prices from global supply uncertainties across our nutrient businesses and strong Retail performance. In the third quarter of 2022, we recorded a non-cash impairment reversal of $330 million related to our Phosphate operations, which impacted net earnings and brings the total impairment reversal to $780 million for the first nine months of 2022. Cash provided by operating activities increased in the third quarter and first nine months of 2022 compared to the same periods in 2021 due primarily to higher net earnings.

Segment Results

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

Nutrien Ag Solutions (“Retail”)

 

Three Months Ended September 30

(millions of US dollars, except

Dollars

 

Gross Margin

 

Gross Margin (%)

as otherwise noted)

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

 

2022

 

2021

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crop nutrients

1,605

 

1,194

 

34

 

214

 

246

 

(13)

 

13

 

21

Crop protection products

1,716

 

1,469

 

17

 

436

 

374

 

17

 

25

 

25

Seed

134

 

140

 

(4)

 

33

 

56

 

(41)

 

25

 

40

Merchandise

241

 

265

 

(9)

 

41

 

44

 

(7)

 

17

 

17

Nutrien Financial

65

 

54

 

20

 

65

 

54

 

20

 

100

 

100

Services and other 1

244

 

252

 

(3)

 

153

 

170

 

(10)

 

63

 

67

Nutrien Financial elimination 1, 2

(25)

 

(27)

 

(7)

 

(25)

 

(27)

 

(7)

 

100

 

100

 

3,980

 

3,347

 

19

 

917

 

917

 

 

23

 

27

Cost of goods sold

3,063

 

2,430

 

26

 

 

 

 

 

 

 

 

 

 

Gross margin

917

 

917

 

 

 

 

 

 

 

 

 

 

 

Expenses 3

890

 

808

 

10

 

 

 

 

 

 

 

 

 

 

Earnings before finance

costs and taxes ("EBIT")

27

 

109

 

(75)

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

206

 

182

 

13

 

 

 

 

 

 

 

 

 

 

EBITDA

233

 

291

 

(20)

 

 

 

 

 

 

 

 

 

 

Adjustments 4

2

 

 

n/m

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

235

 

291

 

(19)

 

 

 

 

 

 

 

 

 

 

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

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

3 Includes selling expenses of $821 million (2021 – $746 million).

4 See Note 2 to the interim financial statements.

 

Nine Months Ended September 30

(millions of US dollars, except

Dollars

 

Gross Margin

 

Gross Margin (%)

as otherwise noted)

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

 

2022

 

2021

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crop nutrients

7,740

 

5,255

 

47

 

1,417

 

1,169

 

21

 

18

 

22

Crop protection products

6,086

 

5,220

 

17

 

1,523

 

1,137

 

34

 

25

 

22

Seed

1,861

 

1,819

 

2

 

382

 

362

 

6

 

21

 

20

Merchandise

755

 

763

 

(1)

 

133

 

127

 

5

 

18

 

17

Nutrien Financial

205

 

138

 

49

 

205

 

138

 

49

 

100

 

100

Services and other 1

729

 

737

 

(1)

 

555

 

570

 

(3)

 

76

 

77

Nutrien Financial elimination 1

(113)

 

(76)

 

49

 

(113)

 

(76)

 

49

 

100

 

100

 

17,263

 

13,856

 

25

 

4,102

 

3,427

 

20

 

24

 

25

Cost of goods sold

13,161

 

10,429

 

26

 

 

 

 

 

 

 

 

 

 

Gross margin

4,102

 

3,427

 

20

 

 

 

 

 

 

 

 

 

 

Expenses 2

2,733

 

2,467

 

11

 

 

 

 

 

 

 

 

 

 

EBIT

1,369

 

960

 

43

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

550

 

528

 

4

 

 

 

 

 

 

 

 

 

 

EBITDA

1,919

 

1,488

 

29

 

 

 

 

 

 

 

 

 

 

Adjustments 3

(17)

 

9

 

n/m

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

1,902

 

1,497

 

27

 

 

 

 

 

 

 

 

 

 

1 Certain immaterial figures have been reclassified for the nine months ended September 30, 2021.

2 Includes selling expenses of $2,556 million (2021 – $2,276 million).

3 See Note 2 to the interim financial statements.

  • Adjusted EBITDA in the first nine months of 2022 increased due to higher sales and gross margins across nearly all product categories and regions where we operate. This was supported by strong agriculture fundamentals, higher selling prices and growth in proprietary products sales. Adjusted EBITDA decreased in the third quarter of 2022 compared to the prior year’s record results as strong crop protection product margins were offset by lower margins in other product categories as well as inflation on certain expense items in 2022. Retail cash operating coverage ratio1 improved as at September 30, 2022 to 55 percent from 59 percent in the same period in 2021 due to significantly higher gross margin.
  • Crop nutrients sales increased in the third quarter and first nine months of 2022 due to higher selling prices. Gross margin and gross margin per tonne increased in the first nine months of 2022 compared to the same period last year due to strategic procurement and the timing of inventory purchasing in the first half of 2022, with a decrease in the third quarter of 2022 due to higher cost inventory. Sales volumes decreased in the first nine months of 2022 due to reduced application resulting from a delayed planting season in North America and earlier engagement in the prior year in a rising price environment.
  • Crop protection products sales and gross margin increased in the third quarter and first nine months of 2022, particularly in North America, due to higher prices along with increased sales and gross margin in proprietary products. Gross margin as a percentage of sales increased in the first nine months of 2022, supported by the reliability of our supply chain and strategic procurement in a rising price environment.
  • Seed sales and gross margin increased in the first nine months of 2022 due to higher pricing and an increase in proprietary seed margins, with a decrease in the third quarter of 2022 as a result of timing and mix of seed sales compared to the same period in 2021.
  • Merchandise gross margin for the first nine months of 2022 increased due to strong margin performance in Australia animal health products from increased flock and herd sizes, with a decrease in the third quarter of 2022 due to an unfavorable foreign exchange rate impact on Australian dollars.
  • Nutrien Financial sales increased in the third quarter and first nine months of 2022 due to higher utilization and adoption of our programs and a higher interest-bearing trade receivable balance, driven by strong commodity pricing.
  • Services and other decreased in the third quarter and first nine months of 2022 mainly due to lower livestock volumes as wet conditions in Australia impeded movement, along with an unfavorable foreign exchange rate impact on Australian dollars.
1 These (and any related guidance, if applicable) are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section for further information.

Potash

 

Three Months Ended September 30

(millions of US dollars, except

Dollars

 

Tonnes (thousands)

 

Average per Tonne

as otherwise noted)

2022

 

2021

% Change

 

2022

 

2021

% Change

 

2022

 

2021

% Change

Manufactured product

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

436

 

483

 

(10)

 

619

 

1,515

 

(59)

 

703

 

319

 

120

Offshore

1,568

 

705

 

122

 

2,548

 

2,276

 

12

 

616

 

310

 

99

 

2,004

 

1,188

 

69

 

3,167

 

3,791

 

(16)

 

633

 

313

 

102

Cost of goods sold

386

 

372

 

4

 

 

 

 

 

 

 

122

 

98

 

24

Gross margin – total

1,618

 

816

 

98

 

 

 

 

 

 

 

511

 

215

 

138

Expenses 1

352

 

146

 

141

 

Depreciation and amortization

 

35

 

35

 

2

EBIT

1,266

 

670

 

89

 

Gross margin excluding depreciation

 

 

 

 

 

Depreciation and amortization

112

 

131

 

(15)

 

and amortization – manufactured 3

546

 

250

 

119

EBITDA

1,378

 

801

 

72

 

Potash controllable cash cost of

 

 

 

 

 

 

Adjustments 2

 

7

 

(100)

 

product manufactured 3

 

70

 

55

 

27

Adjusted EBITDA

1,378

 

808

 

71

 

 

 

 

 

 

 

 

 

 

 

 

1 Includes provincial mining taxes of $348 million (2021 – $128 million).

2 See Note 2 to the interim financial statements.

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

 

Nine Months Ended September 30

(millions of US dollars, except

Dollars

 

Tonnes (thousands)

 

Average per Tonne

as otherwise noted)

2022

 

2021

% Change

 

2022

 

2021

% Change

 

2022

 

2021

% Change

Manufactured product

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

1,949

 

1,141

 

71

 

2,770

 

4,157

 

(33)

 

703

 

275

 

156

Offshore

4,573

 

1,475

 

210

 

7,149

 

6,412

 

11

 

640

 

230

 

178

 

6,522

 

2,616

 

149

 

9,919

 

10,569

 

(6)

 

658

 

248

 

165

Cost of goods sold

1,090

 

980

 

11

 

 

 

 

 

 

 

110

 

93

 

18

Gross margin – total

5,432

 

1,636

 

232

 

 

 

 

 

 

 

548

 

155

 

254

Expenses 1

975

 

333

 

193

 

Depreciation and amortization

 

36

 

35

 

2

EBIT

4,457

 

1,303

 

242

 

Gross margin excluding depreciation

 

 

 

 

 

Depreciation and amortization

354

 

371

 

(5)

 

and amortization – manufactured

584

 

190

 

207

EBITDA

4,811

 

1,674

 

187

 

Potash controllable cash cost of

 

 

 

 

 

 

Adjustments 2

 

9

 

(100)

 

product manufactured

 

56

 

51

 

10

Adjusted EBITDA

4,811

 

1,683

 

186

 

 

 

 

 

 

 

 

 

 

 

 

1 Includes provincial mining taxes of $959 million (2021 – $293 million).

2 See Note 2 to the interim financial statements.

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

  • Sales volumes decreased in the third quarter and first nine months of 2022 due to a compressed North American spring application season that resulted in high inventory carry-over along with cautious purchasing. Offshore sales volumes were the highest of any first nine-month period on record due to strong demand and reduced supply from Eastern Europe.

  • Net realized selling price increased in the third quarter and first nine months of 2022 due to the impact of supply constraints, in particular related to uncertainty on future supply from Russia and Belarus. Net realized prices decreased from the second quarter of 2022 due to a decline in benchmark pricing, particularly in Brazil and North America.

  • Cost of goods sold per tonne in the first nine months of 2022 increased primarily due to higher royalties resulting from increased net realized selling prices. Potash controllable cash cost of product manufactured increased in the third quarter due to lower production volumes and a pull forward of maintenance activities.

Canpotex Sales by Market

(percentage of sales volumes, except as

Three Months Ended September 30

 

Nine Months Ended September 30

otherwise noted)

2022

2021

Change

 

2022

2021

Change

Latin America

35

48

(13)

 

36

38

(2)

Other Asian markets 1

32

28

4

 

34

35

(1)

China

15

7

8

 

14

11

3

Other markets

10

8

2

 

9

10

(1)

India

8

9

(1)

 

7

6

1

 

100

100

 

 

100

100

 

1 All Asian markets except China and India.

 

 

 

 

 

 

 

Nitrogen

 

Three Months Ended September 30

(millions of US dollars, except

Dollars

 

Tonnes (thousands)

 

Average per Tonne

as otherwise noted)

2022

 

2021

% Change

 

2022

 

2021

% Change

 

2022

 

2021

% Change

Manufactured product

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ammonia

649

 

368

 

76

 

701

 

721

 

(3)

 

927

 

509

 

82

Urea

393

 

316

 

24

 

651

 

659

 

(1)

 

603

 

480

 

26

Solutions, nitrates and sulfates

465

 

289

 

61

 

1,274

 

1,141

 

12

 

365

 

253

 

44

 

1,507

 

973

 

55

 

2,626

 

2,521

 

4

 

574

 

386

 

49

Cost of goods sold

872

 

591

 

48

 

 

 

 

 

 

 

333

 

234

 

42

Gross margin – manufactured

635

 

382

 

66

 

 

 

 

 

 

 

241

 

152

 

59

Gross margin – other 1

29

 

24

 

21

 

Depreciation and amortization

 

54

 

50

 

8

Gross margin – total

664

 

406

 

64

 

Gross margin excluding depreciation

 

 

 

 

 

(Income) expenses

(50)

 

(1)

 

n/m

 

and amortization – manufactured 2

295

 

202

 

46

EBIT

714

 

407

 

75

 

Ammonia controllable cash cost of

 

 

 

 

 

 

Depreciation and amortization

141

 

125

 

13

 

product manufactured 2

 

62

 

53

 

17

EBITDA/ Adjusted EBITDA

855

 

532

 

61

 

 

 

 

 

 

 

 

 

 

 

 

1 Includes other nitrogen (including ESN®) and purchased products and comprises net sales of $264 million (2021 – $128 million) less cost of goods sold of $235 million (2021 – $104 million).

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

 

Nine Months Ended September 30

(millions of US dollars, except

Dollars

 

Tonnes (thousands)

 

Average per Tonne

as otherwise noted)

2022

 

2021

% Change

 

2022

 

2021

% Change

 

2022

 

2021

% Change

Manufactured product

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ammonia

1,952

 

874

 

123

 

1,939

 

2,129

 

(9)

 

1,007

 

411

 

145

Urea

1,457

 

911

 

60

 

2,052

 

2,235

 

(8)

 

710

 

407

 

74

Solutions, nitrates and sulfates

1,440

 

743

 

94

 

3,495

 

3,526

 

(1)

 

412

 

211

 

95

 

4,849

 

2,528

 

92

 

7,486

 

7,890

 

(5)

 

648

 

320

 

103

Cost of goods sold

2,351

 

1,628

 

44

 

 

 

 

 

 

 

314

 

206

 

52

Gross margin - manufactured

2,498

 

900

 

178

 

 

 

 

 

 

 

334

 

114

 

193

Gross margin – other 1

84

 

72

 

17

 

Depreciation and amortization

 

54

 

52

 

4

Gross margin – total

2,582

 

972

 

166

 

Gross margin excluding depreciation

 

 

 

 

 

(Income) expenses

(105)

 

(1)

 

n/m

 

and amortization – manufactured

388

 

166

 

134

EBIT

2,687

 

973

 

176

 

Ammonia controllable cash cost of

 

 

 

 

 

 

Depreciation and amortization

403

 

409

 

(1)

 

product manufactured

 

59

 

52

 

13

EBITDA

3,090

 

1,382

 

124

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments 2

 

5

 

(100)

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

3,090

 

1,387

 

123

 

 

 

 

 

 

 

 

 

 

 

 

1 Includes other nitrogen (including ESN®) and purchased products and comprises net sales of $892 million (2021 – $512 million) less cost of goods sold of $808 million (2021 – $440 million).

2 See Note 2 to the interim financial statements.

  • Adjusted EBITDA increased in the third quarter and first nine months of 2022 primarily due to higher net realized selling prices and higher earnings from equity-accounted investees, which more than offset higher natural gas costs and lower ammonia and urea volumes.

  • Sales volumes increased in the third quarter of 2022 due to strong demand and higher offshore urea ammonium nitrate (UAN) sales that more than offset the impact of gas curtailments in Trinidad. Sales volumes in the first nine months of 2022 decreased due to unplanned plant outages and a compressed North American spring application season.

  • Net realized selling price in the third quarter and first nine months of 2022 were higher due to strong benchmark prices resulting from tight global supply and higher energy prices in key nitrogen producing regions. Net realized selling prices decreased from the second quarter of 2022 due to a seasonal reset in benchmark prices that resulted in lower Nitrogen summer fill pricing.

  • Cost of goods sold per tonne in the third quarter and first nine months of 2022 increased primarily due to higher natural gas, raw material and other input costs. Ammoniacontrollable cash cost of product manufactured increased in the third quarter and first nine months due to higher input costs, mainly electricity costs.

Natural Gas Prices in Cost of Production

 

Three Months Ended September 30

 

Nine Months Ended September 30

(US dollars per MMBtu, except as otherwise noted)

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

Overall gas cost excluding realized derivative impact

8.33

 

4.77

 

75

 

7.92

 

3.92

 

102

Realized derivative impact

(0.09)

 

0.01

 

n/m

 

(0.06)

 

0.02

 

n/m

Overall gas cost

8.24

 

4.78

 

72

 

7.86

 

3.94

 

99

 

 

 

 

 

 

 

 

 

 

 

 

Average NYMEX

8.20

 

4.01

 

104

 

6.77

 

3.18

 

113

Average AECO

4.46

 

2.83

 

58

 

4.34

 

2.48

 

75

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

Phosphate

 

Three Months Ended September 30

(millions of US dollars, except

Dollars

 

Tonnes (thousands)

 

Average per Tonne

as otherwise noted)

2022

 

2021

% Change

 

2022

 

2021

% Change

 

2022

 

2021

% Change

Manufactured product

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fertilizer

375

 

269

 

39

 

479

 

428

 

12

 

782

 

628

 

25

Industrial and feed

192

 

132

 

45

 

161

 

192

 

(16)

 

1,198

 

689

 

74

 

567

 

401

 

41

 

640

 

620

 

3

 

886

 

648

 

37

Cost of goods sold

445

 

300

 

48

 

 

 

 

 

 

 

695

 

484

 

44

Gross margin - manufactured

122

 

101

 

21

 

 

 

 

 

 

 

191

 

164

 

16

Gross margin – other 1

(8)

 

7

 

n/m

 

Depreciation and amortization

 

75

 

63

 

19

Gross margin – total

114

 

108

 

6

 

Gross margin excluding depreciation

 

 

 

 

 

(Income) expenses

(311)

 

12

 

n/m

 

and amortization – manufactured 3

266

 

227

 

17

EBIT

425

 

96

 

343

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

48

 

39

 

23

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

473

 

135

 

250

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments 2

(330)

 

 

n/m

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

143

 

135

 

6

 

 

 

 

 

 

 

 

 

 

 

 

1 Includes other phosphate and purchased products and comprises net sales of $84 million (2021 – $47 million) less cost of goods sold of $92 million (2021 – $40 million).

2 See Notes 2 and 3 to the interim financial statements. Includes impairment reversal of assets of $330 million (2021 – nil).

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

 

Nine Months Ended September 30

(millions of US dollars, except

Dollars

 

Tonnes (thousands)

 

Average per Tonne

as otherwise noted)

2022

 

2021

% Change

 

2022

 

2021

% Change

 

2022

 

2021

% Change

Manufactured product

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fertilizer

1,093

 

731

 

50

 

1,305

 

1,331

 

(2)

 

837

 

549

 

52

Industrial and feed

551

 

365

 

51

 

542

 

577

 

(6)

 

1,017

 

633

 

61

 

1,644

 

1,096

 

50

 

1,847

 

1,908

 

(3)

 

890

 

575

 

55

Cost of goods sold

1,157

 

853

 

36

 

 

 

 

 

 

 

626

 

448

 

40

Gross margin – manufactured

487

 

243

 

100

 

 

 

 

 

 

 

264

 

127

 

108

Gross margin – other 1

(10)

 

15

 

n/m

 

Depreciation and amortization

 

70

 

59

 

20

Gross margin – total

477

 

258

 

85

 

Gross margin excluding depreciation

 

 

 

 

 

(Income) expenses

(739)

 

26

 

n/m

 

and amortization – manufactured

334

 

186

 

80

EBIT

1,216

 

232

 

424

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

130

 

112

 

16

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

1,346

 

344

 

291

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments 2

(780)

 

 

n/m

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

566

 

344

 

65

 

 

 

 

 

 

 

 

 

 

 

 

1 Includes other phosphate and purchased products and comprises net sales of $232 million (2021 – $140 million) less cost of goods sold of $242 million (2021 – $125 million).

2 See Notes 2 and 3 to the interim financial statements. Includes impairment reversal of assets of $780 million (2021 – nil).

  • Adjusted EBITDA increased in the third quarter and first nine months of 2022 mainly due to higher net realized selling prices, which more than offset higher raw material costs. Included with expenses in the third quarter of 2022, we recognized a $330 million non-cash impairment of assets reversal, which is deducted from adjusted EBITDA. This brings the total impairment reversal to $780 million for the first nine months of 2022 and is due to a more favorable outlook for phosphate margins.
  • Sales volumes increased in the third quarter of 2022 due to strong offshore fertilizer sales, offsetting lower industrial sales that were impacted by an unplanned plant outage. Sales volumes in the first nine months of 2022 decreased due to a condensed North American spring application season and lower production volumes.
  • Net realized selling price increased in the third quarter and first nine months of 2022 aligned with the increase in global benchmark prices. Industrial and feed net realized selling prices increased to a greater extent than fertilizer prices in the third quarter of 2022, which reflects the typical lag in industrial and feed price realizations relative to spot fertilizer prices.
  • Cost of goods sold per tonne increased in the third quarter and first nine months of 2022 primarily due to significantly higher sulfur and ammonia input costs.

Corporate and Others

(millions of US dollars, except as otherwise

Three Months Ended September 30

 

Nine Months Ended September 30

noted)

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

Selling expenses

(2)

 

(9)

 

(78)

 

(6)

 

(24)

 

(75)

General and administrative expenses

80

 

58

 

38

 

227

 

182

 

25

Share-based compensation expense

39

 

64

 

(39)

 

122

 

125

 

(2)

Other expenses

59

 

30

 

97

 

160

 

141

 

13

EBIT

(176)

 

(143)

 

23

 

(503)

 

(424)

 

19

Depreciation and amortization

19

 

12

 

58

 

55

 

34

 

62

EBITDA

(157)

 

(131)

 

20

 

(448)

 

(390)

 

15

Adjustments 1

63

 

89

 

(29)

 

230

 

232

 

(1)

Adjusted EBITDA

(94)

 

(42)

 

124

 

(218)

 

(158)

 

38

1 See Note 2 to the interim financial statements.

  • General and administrative expenses were higher in the third quarter and first nine months of 2022 compared to the same periods in 2021 mainly due to increased depreciation expense, higher donations and higher information technology-related expenses.
  • Other expenses were higher in the third quarter and first nine months of 2022 compared to the same periods in 2021 mainly due to higher foreign exchange losses related to our US dollar denominated liabilities in our South American operations and higher information technology project-related costs. This was partially offset by the absence of cloud computing related expenses from our change in accounting policy and lower COVID-19 related expenses.

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

(millions of US dollars, except as otherwise

Three Months Ended September 30

 

Nine Months Ended September 30

noted)

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

Finance costs

136

 

122

 

11

 

375

 

367

 

2

Income tax expense

487

 

209

 

133

 

2,206

 

615

 

259

Other comprehensive (loss) income

(230)

 

(79)

 

191

 

(296)

 

6

 

n/m

  • Finance costs were higher in the third quarter and first nine months of 2022 compared to the same periods in 2021 mainly due to higher interest rates and a higher short-term debt balance, mostly offset by a lower long-term debt balance resulting from the early extinguishment of a portion of our long-term debt in the fourth quarter of 2021.
  • Income tax expense was higher as a result of higher earnings in the third quarter and first nine months of 2022 compared to the same periods in 2021.
  • Other comprehensive (loss) income is primarily driven by changes in the currency translation of our foreign operations and our investment in Sinofert Holdings Ltd. (“Sinofert”). In the third quarter and first nine months of 2022, we had fair value losses on our investment in Sinofert due to share price decreases, compared to fair value gains due to share price increases in the same periods of 2021. In the third quarter and first nine months of 2022, we had higher losses on foreign currency translation of our Retail operations, mainly in Australia and Canada compared to the same periods in 2021. These currencies depreciated relative to the US dollar as at September 30, 2022 compared to June 30, 2022 and December 31, 2021 levels, which led to losses in the third quarter and the first nine months of 2022. This was partially offset by a net actuarial gain on our defined benefit pension plans in the third quarter of 2022.

Liquidity and Capital Resources

Sources and Uses of Liquidity

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

Sources and Uses of Cash

(millions of US dollars, except as otherwise

Three Months Ended September 30

 

Nine Months Ended September 30

noted)

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

Cash provided by (used in) operating activities

878

 

(1,565)

 

n/m

 

3,374

 

249

 

n/m

Cash used in investing activities

(705)

 

(523)

 

35

 

(1,679)

 

(1,342)

 

25

Cash (used in) provided by financing activities

(29)

 

757

 

n/m

 

(1,319)

 

117

 

n/m

Effect of exchange rate changes on cash and cash equivalents

(32)

 

(20)

 

60

 

(52)

 

(35)

 

49

Increase (decrease) in cash and cash equivalents

112

 

(1,351)

 

n/m

 

324

 

(1,011)

 

n/m

Cash provided by (used in) operating activities

  • Cash provided by operating activities was higher in the third quarter and first nine months of 2022 compared to the same periods in 2021 due to higher net earnings driven by higher selling prices from global supply uncertainties, offset by working capital requirements.

Cash used in investing activities

  • Cash used in investing activities in the third quarter and first nine months of 2022 was higher compared to the same periods in 2021 mainly due to higher spending to maintain the safety and reliability of our assets and to increase our potash production capabilities.

Cash (used in) provided by financing activities

  • Cash used in financing activities in the third quarter and first nine months of 2022 was higher compared to the same periods in 2021 due to increased share repurchases, partially offset with increased commercial paper and credit facility drawdowns to temporarily finance working capital requirements.

Financial Condition Review

The following balance sheet categories contain variances that are considered material:

 

As at

 

 

 

 

(millions of US dollars, except as otherwise noted)

September 30, 2022

 

December 31, 2021

 

$ Change

 

% Change

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

823

 

499

 

324

 

65

Receivables

8,591

 

5,366

 

3,225

 

60

Inventories

6,545

 

6,328

 

217

 

3

Prepaid expenses and other current assets

737

 

1,653

 

(916)

 

(55)

Property, plant and equipment

21,022

 

20,016

 

1,006

 

5

Liabilities and Equity

 

 

 

 

 

 

 

Short-term debt

4,454

 

1,560

 

2,894

 

186

Current portion of long-term debt

1,016

 

545

 

471

 

86

Payables and accrued charges

8,760

 

10,052

 

(1,292)

 

(13)

Long-term debt

7,020

 

7,521

 

(501)

 

(7)

Deferred income tax liabilities

3,489

 

3,165

 

324

 

10

Asset retirement obligations and accrued environmental costs

1,320

 

1,566

 

(246)

 

(16)

Share capital

14,588

 

15,457

 

(869)

 

(6)

Accumulated other comprehensive loss

(498)

 

(146)

 

(352)

 

241

Retained earnings

11,787

 

8,192

 

3,595

 

44

  • Explanations for changes in Cash and cash equivalents are in the “Sources and Uses of Cash” section.
  • Receivables increased due to higher sales across all of our segments as a result of higher crop nutrient net realized selling prices consistent with higher benchmark pricing, as well as higher Retail vendor rebates receivables.
  • Inventories increased primarily due to higher cost to produce and/or purchase inventory across all our segments. We held higher than average levels of finished products inventory in our Nitrogen and Phosphate segments, resulting from timing of sales, turnarounds at our Nitrogen facilities at year-end and higher input costs. This was partially offset by a decrease in inventory in our Retail segment driven by seasonality. Generally, we carry higher inventory levels at year-end and during the early part of the year in preparation for the upcoming planting and application seasons. Throughout the year, inventory levels decrease as we sell to our customers.
  • Prepaid expenses and other current assets decreased due to the drawdown of prepaid inventory where Retail typically prepays for products at year-end and takes possession of inventory throughout the year.
  • Property, plant and equipment increased due to impairment reversals in the Phosphate segment.
  • Short-term debt increased due to additional commercial paper issuances and borrowings under our credit facilities for our seasonal working capital requirements and for share repurchases.
  • Payables and accrued charges decreased due to the seasonality of our Retail segment. Throughout the year, we settle our vendor obligations and customer prepayments decrease as drawdowns occur. As at September 30, 2022, we had higher payables balances compared to the same period in 2021 due to higher input costs from inflation and tight global supply.
  • Long-term debt decreased due to a reclassification to the current portion of long-term debt of our $500 million notes maturing May 2023.
  • Deferred income tax liabilities increased primarily in the NPK businesses in the US and Canada, partially offset by US Retail recoveries. The reversal of the Phosphate impairment also resulted in an increase in the deferred tax liability of $161 million.
  • Asset retirement obligations and accrued environment costs decreased due to changes in discount rates, reclassification to the current portion of asset retirement obligations and increased spending on remediation to restore our sites.
  • Share capital decreased from shares repurchased under our normal course issuer bids partially offset by exercise of stock options.
  • Accumulated other comprehensive loss increased due to a loss on currency translation of our foreign operations.
  • Retained earnings increased as net earnings in the first nine months of 2022 exceeded dividends declared and share repurchases.

Capital Structure and Management

Principal Debt Instruments

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

 

As at September 30, 2022

 

 

 

Outstanding and Committed

(millions of US dollars)

Rate of Interest (%)

Total Facility Limit

Short-Term Debt

Long-Term Debt

Credit facilities

 

 

 

 

Unsecured revolving term credit facility

n/a

4,500

Unsecured revolving term credit facility

4.1

2,000

1,000

Uncommitted revolving demand facility

4.0

1,000

500

Other credit facilities

 

760

 

 

South American

1.5 - 21.7

 

194

108

Australian

3.6

 

97

Other

3.3 - 4.0

 

8

3

Commercial paper

2.9 - 4.0

 

2,530

Other short-term debt

n/a

 

125

7

Total

 

 

4,454

118

The amount available under the commercial paper program is limited to the availability of backup funds under the $4,500 million unsecured revolving term credit facility and excess cash invested in highly liquid securities. During the third quarter of 2022, we extended the maturity date of the $4,500 million unsecured revolving term credit facility from June 4, 2026 to September 14, 2027. There was no change to the total facility limit or the significant agreement terms from those we disclosed in our 2021 Annual Report.

During the third quarter of 2022, we entered into a new $2,000 million revolving term credit facility, with the same principal covenants and events of default as our existing $4,500 million unsecured revolving term credit facility. The $2,000 million non-revolving term credit facilities we entered into in July 2022 to help temporarily manage normal seasonal working capital swings were closed prior to September 30, 2022.

Our long-term debt consists primarily of notes. See the “Capital Structure and Management” section of our 2021 Annual Report for information on balances, rates and maturities for our notes. Subsequent to the third quarter of 2022, we repaid the $500 million 3.15 percent notes that matured October 1, 2022.

Outstanding Share Data

 

As at November 1, 2022

Common shares

520,183,851

Options to purchase common shares

3,920,176

We repurchased approximately 40 million shares year-to-date as of November 1, 2022, under our share repurchase programs, for a total of approximately $3.5 billion and plan to allocate a total of approximately $4 billion to share repurchases in 2022. While some of the previously expected approximately $5 billion in repurchases may now extend into the first quarter of 2023 due to lower forecasted operating cash flow in 2022, we still intend on completing our existing 10 percent share repurchase program prior to its expiry in February 2023.

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

Quarterly Results

(millions of US dollars, except as otherwise noted)

Q3 2022

 

Q2 2022

 

Q1 2022

 

Q4 2021

 

Q3 2021

 

Q2 2021

 

Q1 2021

 

Q4 2020

Sales

8,188

 

14,506

 

7,657

 

7,267

 

6,024

 

9,763

 

4,658

 

4,052

Net earnings

1,583

 

3,601

 

1,385

 

1,207

 

726

 

1,113

 

133

 

316

Net earnings attributable to equity holders of Nutrien

1,577

 

3,593

 

1,378

 

1,201

 

717

 

1,108

 

127

 

316

Net earnings per share attributable to equity holders of Nutrien

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

2.95

 

6.53

 

2.49

 

2.11

 

1.26

 

1.94

 

0.22

 

0.55

Diluted

2.94

 

6.51

 

2.49

 

2.11

 

1.25

 

1.94

 

0.22

 

0.55

Seasonality in our business results from increased demand for products during the planting season. Crop input sales are generally higher in the spring and fall application seasons. Crop input inventories are normally accumulated leading up to each application season. Our cash collections generally occur after the application season is complete, while customer prepayments made to us are concentrated in December and January and inventory prepayments paid to our suppliers are typically concentrated in the period from November to January. Feed and industrial sales are more evenly distributed throughout the year.

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

In the third and second quarters of 2022, earnings were impacted by $330 million and $450 million non-cash impairment reversals at White Springs and Aurora, respectively, of property, plant and equipment in the Phosphate segment related to higher forecasted global prices and a more favorable outlook for phosphate margins. In the fourth quarter of 2021, earnings were impacted by a $142 million loss resulting from the early extinguishment of long-term debt. In the fourth quarter of 2020, earnings were impacted by a $250 million net gain on disposal of our investment in Misr Fertilizers Production Company S.A.E..

Critical Accounting Estimates

Our significant accounting policies are disclosed in our 2021 Annual Report. We have discussed the development, selection and application of our key accounting policies, and the critical accounting estimates and assumptions they involve, with the audit committee of the Board. Our critical accounting estimates are discussed on page 49 of our 2021 Annual Report. Other than the critical accounting estimates discussed below, there were no material changes in the three or nine months ended September 30, 2022 to our critical accounting estimates.

Impairment of Assets

Long-Lived Asset Impairment and Reversals

In the three months ended September 30, 2022, we continued to revise our near-term pricing forecasts due to continued global export restrictions from major producers and continued our review of our previously impaired Phosphate cash-generating unit (“CGU”), White Springs. In 2017 and 2020, we recorded an impairment of assets at our White Springs CGU relating to property, plant and equipment of $250 million and $215 million respectively, as a result of lower long-term forecasted global phosphate prices. Due to increases in our forecast, the recoverable amount of our White Springs CGU is above its carrying amount. As a result, during the three months ended September 30, 2022, we recorded a full impairment reversal, net of depreciation, of $330 million in the statement of earnings relating to property, plant and equipment. Refer to Note 3 to the interim financial statements.

The recoverable amount estimate is most sensitive to the following key assumptions: our internal sales and input price forecasts, which consider projections from independent third-party data sources, discount rate, and expected mine life. We used key assumptions that were based on historical data and estimates of future results from internal sources, external price benchmarks, and mineral reserve technical reports, as well as industry and market trends.

Goodwill Impairment Indicators

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

During the nine months ended September 30, 2022, North American central banks continued to increase their benchmark borrowing rates. Benchmark borrowing rates are used as the risk-free rate which is a component of determining our discount rate for impairment testing. As a result of these increases, we revised our discount rates and increased our Retail – North America group of CGUs discount rate to 8.5 percent (previous impairment analysis – 8.0 percent at June 30, 2022) and this triggered an impairment test to be performed.

The Retail – North America group of CGUs have $6.9 billion in associated goodwill. Goodwill is more susceptible to impairment risk if there is an increase in the discount rate, or a deterioration in business operating results or economic conditions and actual results do not meet our forecasts. As at September 30, 2022, the Retail – North America group of CGUs carrying amount was equal to its recoverable amount. A 25 basis point increase in the discount rate will result in an impairment of the carrying amount of goodwill of approximately $500 million. A decrease in forecasted EBITDA and cash flows or a reduction in the terminal growth rate will also result in impairment in the future. Refer to Note 3 to the interim financial statements.

Risk Factors

Russia and Ukraine Conflict

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

Controls and Procedures

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

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

Forward-Looking Statements

Certain statements and other information included in this document, including within the "Market Outlook and Guidance" section, constitute “forward-looking information” or “forward-looking statements” (collectively, “forward-looking statements”) under applicable securities laws (such statements are often accompanied by words such as “anticipate”, “forecast”, “expect”, “believe”, “may”, “will”, “should”, “estimate”, “intend” or other similar words). All statements in this document, other than those relating to historical information or current conditions, are forward-looking statements, including, but not limited to: Nutrien's business strategies, plans, prospects and opportunities; Nutrien's 2022 full-year guidance, including expectations regarding our adjusted net earnings per share and adjusted EBITDA (consolidated and by segment); expectations regarding our growth and capital allocation intentions and strategies; our advancement of strategic growth initiatives; capital spending expectations for 2022; our intention to complete our existing share repurchase program in 2022 and 2023, including the funds allocated thereto; expectations regarding performance of our operating segments in 2022 and 2023 including projected potash sales volumes; our operating segment market outlooks and market conditions and fundamentals for 2022 as well as our expectations for market conditions and fundamentals in 2023 and beyond, and the anticipated supply and demand for our products and services, expected market and industry conditions with respect to crop nutrient application rates, planted acres, grower crop investment, crop mix, production expenses, shipments, consumption, prices and the impact of seasonality, import and export volumes and economic sanctions; Nutrien's ability to develop innovative and sustainable solutions; the negotiation of sales contracts; acquisitions and divestitures and the anticipated benefits thereof; and the potential impairment of goodwill associated with our Retail – North America group of CGUs. These forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements. As such, undue reliance should not be placed on these forward-looking statements.

All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions referred to below and elsewhere in this document. Although we believe that these assumptions are reasonable, having regard to our experience and our perception of historical trends, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place undue reliance on these assumptions and such forward-looking statements. Current conditions, economic and otherwise, render assumptions, although reasonable when made, subject to greater uncertainty. The additional key assumptions that have been made include, among other things, assumptions with respect to our ability to successfully complete, integrate and realize the anticipated benefits of our already completed and future acquisitions and divestitures, and that we will be able to implement our standards, controls, procedures and policies in respect of any acquired businesses and to realize the expected synergies; that future business, regulatory and industry conditions will be within the parameters expected by us, including with respect to prices, expenses, margins, demand, supply, product availability, shipments, consumption, supplier agreements, availability and cost of labor and interest, exchange and effective tax rates; assumptions with respect to global economic conditions and the accuracy of our market outlook expectations for 2022 and in the future; assumptions with respect to our intention to complete share repurchases under our share repurchase program, including the funding thereof, existing and future market conditions, including with respect to the price of our common shares, and compliance with respect to applicable limitations under securities laws and regulations and stock exchange policies; our expectations regarding the impacts, direct and indirect, of the COVID-19 pandemic on our business, customers, business partners, employees, supply chain, other stakeholders and the overall global economy; our expectations regarding the impacts, direct and indirect, of the conflict between Ukraine and Russia on, among other things, global supply and demand, energy and commodity prices, global interest rates, supply chains and the global macroeconomic environment, including inflation; the adequacy of our cash generated from operations and our ability to access our credit facilities or capital markets for additional sources of financing; our expectations regarding the impact of certain factors on the carrying amount of goodwill associated with our Retail – North America group of CGUs; our ability to identify suitable candidates for acquisitions and divestitures and negotiate acceptable terms; our ability to maintain investment grade ratings and achieve our performance targets; our ability to successfully negotiate sales contracts; and our ability to successfully implement new initiatives and programs.

Events or circumstances that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: general global economic, market and business conditions; failure to complete announced and future acquisitions or divestitures at all or on the expected terms and within the expected timeline; seasonality; climate change and weather conditions, including impacts from regional flooding and/or drought conditions; crop planted acreage, yield and prices; the supply and demand and price levels for our products; governmental and regulatory requirements and actions by governmental authorities, including changes in government policy (including tariffs, trade restrictions and climate change initiatives), government ownership requirements, changes in environmental, tax and other laws or regulations and the interpretation thereof; political risks, including civil unrest, actions by armed groups or conflict and malicious acts including terrorism; the occurrence of a major environmental or safety incident; innovation and cybersecurity risks related to our systems, including our costs of addressing or mitigating such risks; counterparty and sovereign risk; delays in completion of turnarounds at our major facilities; interruptions of or constraints in availability of key inputs, including natural gas and sulfur; any significant impairment of the carrying amount of certain assets; risks related to reputational loss; certain complications that may arise in our mining processes; the ability to attract, engage and retain skilled employees and strikes or other forms of work stoppages; the COVID-19 pandemic, including variants of the COVID-19 virus and the efficiency and distribution of vaccines, and its resulting effects on economic conditions, restrictions imposed by public health authorities or governments, including government-imposed vaccine mandates, fiscal and monetary responses by governments and financial institutions and disruptions to global supply chains; the conflict between Ukraine and Russia and its potential impact on, among other things, global market conditions and supply and demand, energy and commodity prices; interest rates, supply chains and the global economy generally; our ability to execute on our strategies related to environmental, social and governance matters, and achieve related expectations; the risk that rising interest rates and/or deteriorated business operating results may result in the impairment of goodwill attributed to certain of our cash generating units; and other risk factors detailed from time to time in Nutrien reports filed with the Canadian securities regulators and the SEC in the United States.

The purpose of our adjusted net earnings per share, adjusted EBITDA (consolidated and by segment) and sustaining capital expenditures guidance ranges are to assist readers in understanding our expected and targeted financial results, and this information may not be appropriate for other purposes.

The forward-looking statements in this document are made as of the date hereof and Nutrien disclaims any intention or obligation to update or revise any forward-looking statements in this document as a result of new information or future events, except as may be required under applicable Canadian securities legislation or applicable US federal securities laws.

Terms and Definitions

For the definitions of certain financial and non-financial terms used in this document, as well as a list of abbreviated company names and sources, see the “Terms & Definitions” section of our 2021 Annual Report. All references to per share amounts pertain to diluted net earnings (loss) per share, “n/m” indicates information that is not meaningful, and all financial amounts are stated in millions of US dollars, unless otherwise noted.

About Nutrien

Nutrien is the world's largest provider of crop inputs and services, playing a critical role in helping growers increase food production in a sustainable manner. We produce and distribute approximately 27 million tonnes of potash, nitrogen and phosphate products world-wide. With this capability and our leading agriculture retail network, we are well positioned to supply the needs of our customers. We operate with a long-term view and are committed to working with our stakeholders as we address our economic, environmental and social priorities. The scale and diversity of our integrated portfolio provides a stable earnings base, multiple avenues for growth and the opportunity to return capital to shareholders.

Selected financial data for download can be found in our data tool at www.nutrien.com/investors/interactive-datatool

Such data is not incorporated by reference herein.

Nutrien will host a Conference Call on Thursday, November 3, 2022 at 10:00 a.m. Eastern Time.

Telephone Conference dial-in numbers:

  • From Canada and the US 1-888-886-7786
  • International 1-416-764-8683
  • No access code required. Please dial in 15 minutes prior to ensure you are placed on the call in a timely manner.

Live Audio Webcast: Visit https://www.nutrien.com/investors/events/2022-q3-earnings-conference-call

Appendix A - Selected Additional Financial Data

Selected Retail Measures

Three Months Ended September 30

 

Nine Months Ended September 30

 

2022

 

2021

 

2022

 

2021

Proprietary products margin as a percentage of product line margin (%)

 

 

 

 

 

 

 

Crop nutrients

35

 

26

 

22

 

24

Crop protection products

41

 

41

 

41

 

41

Seed

62

 

48

 

45

 

45

All products

30

 

27

 

27

 

27

Crop nutrients sales volumes (tonnes – thousands)

 

 

 

 

 

 

 

North America

1,066

 

1,112

 

6,286

 

7,729

International

782

 

898

 

2,732

 

2,833

Total

1,848

 

2,010

 

9,018

 

10,562

Crop nutrients selling price per tonne

 

 

 

 

 

 

 

North America

836

 

602

 

908

 

510

International

913

 

585

 

744

 

464

Total

869

 

595

 

858

 

498

Crop nutrients gross margin per tonne

 

 

 

 

 

 

 

North America

155

 

147

 

191

 

127

International

64

 

95

 

80

 

67

Total

117

 

124

 

157

 

111

 

 

 

 

 

 

 

 

Financial performance measures

 

 

 

 

2022

 

2021

Retail adjusted EBITDA margin (%) 1, 2

 

11

 

11

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

 

1,913

 

1,362

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

 

 

 

16

 

12

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

 

1

 

(1)

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

 

 

 

 

6.7

 

6.4

Retail cash operating coverage ratio (%) 1, 4

 

 

 

 

55

 

59

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

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

3 Excluding acquisitions.

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

Nutrien Financial

As at September 30, 2022

As at

Dec 31, 2021

(millions of US dollars)

Current

<31 days

past due

31–90 days

past due

>90 days

past due

Gross Receivables

Allowance 1

Net Receivables

Net Receivables

North America

3,009

49

138

77

3,273

(34)

3,239

1,488

International

572

8

56

25

661

(2)

659

662

Nutrien Financial receivables

3,581

57

194

102

3,934

(36)

3,898

2,150

1 Bad debt expense on the above receivables for the nine months ended September 30, 2022 was $10 million (2021 – $9 million) in the Retail segment.

Selected Nitrogen Measures

Three Months Ended September 30

 

Nine Months Ended September 30

 

2022

 

2021

 

2022

 

2021

Sales volumes (tonnes – thousands)

 

 

 

 

 

 

 

Fertilizer

1,417

 

1,320

 

3,963

 

4,450

Industrial and feed

1,209

 

1,201

 

3,523

 

3,440

Net sales (millions of US dollars)

 

 

 

 

 

 

 

Fertilizer

764

 

533

 

2,658

 

1,503

Industrial and feed

743

 

440

 

2,191

 

1,025

Net selling price per tonne

 

 

 

 

 

 

 

Fertilizer

539

 

404

 

671

 

338

Industrial and feed

614

 

366

 

622

 

298

Production Measures

Three Months Ended September 30

 

Nine Months Ended September 30

 

2022

 

2021

 

2022

 

2021

Potash production (Product tonnes – thousands)

2,742

 

3,199

 

10,066

 

10,149

Potash shutdown weeks 1

10

 

10

 

15

 

14

Ammonia production – total 2

1,483

 

1,414

 

4,359

 

4,355

Ammonia production – adjusted 2, 3

1,009

 

856

 

3,015

 

2,863

Ammonia operating rate (%) 3

91

 

77

 

92

 

87

P2O5 production (P2O5 tonnes – thousands)

335

 

384

 

1,063

 

1,109

P2O5 operating rate (%)

78

 

90

 

84

 

87

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

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

3 Excludes Trinidad and Joffre.

Appendix B - Non-IFRS Financial Measures

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

These non-IFRS financial measures and non-IFRS ratios are not standardized financial measures under IFRS and, therefore, are unlikely to be comparable to similar financial measures presented by other companies. Management believes these non-IFRS financial measures and non-IFRS ratios provide transparent and useful supplemental information to help investors evaluate our financial performance, financial condition and liquidity using the same measures as management. These non-IFRS financial measures and non-IFRS ratios should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS.

The following section outlines our non-IFRS financial measures and non-IFRS ratios, their compositions, and why management uses each measure. It also includes reconciliations to the most directly comparable IFRS measures. Except as otherwise described herein, our non-IFRS financial measures and non-IFRS ratios are calculated on a consistent basis from period to period and are adjusted for specific items in each period, as applicable. As additional non-recurring or unusual items arise in the future, we generally exclude these items in our calculations.

Adjusted EBITDA (Consolidated)

Most directly comparable IFRS financial measure: Net earnings (loss).

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

Why we use the measure and why it is useful to investors: It is not impacted by long-term investment and financing decisions, but rather focuses on the performance of our day-to-day operations. It provides a measure of our ability to service debt and to meet other payment obligations, and as a component of employee remuneration calculations.

 

Three Months Ended September 30

 

Nine Months Ended September 30

(millions of US dollars)

2022

 

2021

 

2022

 

2021

Net earnings

1,583

 

726

 

6,569

 

1,972

Finance costs

136

 

122

 

375

 

367

Income tax expense

487

 

209

 

2,206

 

615

Depreciation and amortization

526

 

489

 

1,492

 

1,454

EBITDA 1

2,732

 

1,546

 

10,642

 

4,408

Share-based compensation expense

39

 

64

 

122

 

125

Foreign exchange loss, net of related derivatives

11

 

1

 

67

 

1

Integration and restructuring related costs

15

 

8

 

35

 

47

(Reversal) impairment of assets

(330)

 

7

 

(780)

 

12

COVID-19 related expenses 2

 

16

 

8

 

34

Gain on disposal of investment

 

 

(19)

 

Cloud computing transition adjustment 3

 

 

 

36

Adjusted EBITDA

2,467

 

1,642

 

10,075

 

4,663

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

2 COVID-19 related expenses primarily consist of increased cleaning and sanitization costs, the purchase of personal protective equipment, discretionary supplemental employee costs, and costs related to construction delays from access limitations and other government restrictions.

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

Adjusted Net Earnings and Adjusted Net Earnings Per Share

Most directly comparable IFRS financial measure: Net earnings (loss) and net earnings (loss) per share.

Definition: Adjusted net earnings and related per share information are calculated as net earnings (loss) before share-based compensation and certain foreign exchange gain/loss (net of related derivatives), net of tax. We also adjust this measure for the following other income and expenses (net of tax) that are excluded when management evaluates the performance of our day-to-day operations: certain integration and restructuring related costs, impairment or reversal of impairment of assets, COVID-19 related expenses (including those recorded under finance costs), gain or loss on disposal of certain businesses and investments, IFRS adoption transition adjustments, gain/loss on early extinguishment of debt or on settlement of derivatives due to discontinuance of hedge accounting. In 2022, we amended our calculation of adjusted net earnings to adjust for a gain on settlement of a derivative due to discontinued hedge accounting. There was no similar gain or loss in the comparative period. We generally apply the annual forecasted effective tax rate to our adjustments during the year and, at year-end, we apply the actual effective tax rate. If the effective tax rate is significantly different from our forecasted effective tax rate due to adjustments or discrete tax impacts, we apply a tax rate that excludes those items. For material adjustments, we apply a tax rate specific to the adjustment.

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

 

Three Months Ended

September 30, 2022

 

Nine Months Ended

September 30, 2022

 

 

 

 

 

Per

 

 

 

 

 

Per

(millions of US dollars, except as otherwise

Increases

 

 

 

Diluted

 

Increases

 

 

 

Diluted

noted)

(Decreases)

 

Post-Tax

 

Share

 

(Decreases)

 

Post-Tax

 

Share

Net earnings attributable to equity holders of Nutrien

 

 

1,577

 

2.94

 

 

 

6,548

 

11.96

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

39

 

30

 

0.06

 

122

 

91

 

0.17

Foreign exchange loss, net of related derivatives

11

 

8

 

0.01

 

67

 

50

 

0.09

Integration and restructuring related costs

15

 

11

 

0.02

 

35

 

26

 

0.05

Impairment reversal of assets

(330)

 

(265)

 

(0.49)

 

(780)

 

(619)

 

(1.13)

COVID-19 related expenses

 

 

 

8

 

6

 

0.01

Gain on disposal of investment

 

 

 

(19)

 

(14)

 

(0.03)

Gain on settlement of discontinued hedge accounting derivative

(18)

 

(14)

 

(0.03)

 

(18)

 

(13)

 

(0.02)

Adjusted net earnings

 

 

1,347

 

2.51

 

 

 

6,075

 

11.10

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

September 30, 2021

 

Nine Months Ended

September 30, 2021

 

 

 

 

 

Per

 

 

 

 

 

Per

(millions of US dollars, except as otherwise

Increases

 

 

 

Diluted

 

Increases

 

 

 

Diluted

noted)

(Decreases)

 

Post-Tax

 

Share

 

(Decreases)

 

Post-Tax

 

Share

Net earnings attributable to equity holders of Nutrien

 

 

717

 

1.25

 

 

 

1,952

 

3.41

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

64

 

48

 

0.09

 

125

 

94

 

0.16

Foreign exchange loss, net of related derivatives

1

 

1

 

 

1

 

1

 

Integration and restructuring related costs

8

 

6

 

0.01

 

47

 

35

 

0.06

Impairment of assets

7

 

5

 

0.01

 

12

 

9

 

0.02

COVID-19 related expenses

16

 

12

 

0.02

 

34

 

26

 

0.05

Cloud computing transition adjustment

 

 

 

36

 

27

 

0.05

Adjusted net earnings

 

 

789

 

1.38

 

 

 

2,144

 

3.75

Adjusted EBITDA (Consolidated) and Adjusted Net Earnings Per Share Guidance

Adjusted EBITDA and adjusted net earnings per share guidance are forward-looking non-IFRS financial measures. We do not provide a reconciliation of such forward-looking measures to the most directly comparable financial measures calculated and presented in accordance with IFRS because a meaningful or accurate calculation of reconciling items and the information is not available without unreasonable effort due to unknown variables, including the timing and amount of certain reconciling items, and the uncertainty related to future results. These unknown variables may include unpredictable transactions of significant value that may be inherently difficult to determine without unreasonable efforts. The probable significance of such unavailable information, which could be material to future results, cannot be addressed. Guidance for adjusted EBITDA and adjusted net earnings per share excludes certain items such as, but not limited to, the impacts of share-based compensation, certain foreign exchange gain/loss (net of related derivatives), integration and restructuring related costs, impairment or reversal of impairment of assets, COVID-19 related expenses (including those recorded under finance costs), gain or loss on disposal of certain businesses and investments, IFRS adoption transition adjustments, and gain/loss on early extinguishment of debt or on settlement of derivatives due to discontinuance of hedge accounting.

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

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

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

Why we use the measure and why it is useful to investors: For evaluation of liquidity and financial strength. These are also useful as indicators of our ability to service debt, meet other payment obligations and make strategic investments. These do not represent residual cash flow available for discretionary expenditures.

 

Three Months Ended September 30

 

Nine Months Ended September 30

(millions of US dollars)

2022

 

2021

 

2022

 

2021

Cash provided by (used in) operating activities

878

 

(1,565)

 

3,374

 

249

Sustaining capital expenditures

(428)

 

(325)

 

(878)

 

(793)

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

450

 

(1,890)

 

2,496

 

(544)

Changes in non-cash operating working capital

(1,093)

 

(2,752)

 

(4,274)

 

(3,295)

Free cash flow

1,543

 

862

 

6,770

 

2,751

Gross Margin Excluding Depreciation and Amortization Per Tonne - Manufactured

Most directly comparable IFRS financial measure: Gross margin.

Definition: Gross margin per tonne less depreciation and amortization per tonne for manufactured products. Reconciliations are provided in the “Segment Results” section.

Why we use the measure and why it is useful to investors: Focuses on the performance of our day-to-day operations, which excludes the effects of items that primarily reflect the impact of long-term investment and financing decisions.

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

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

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

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

 

Three Months Ended September 30

 

Nine Months Ended September 30

(millions of US dollars, except as otherwise noted)

2022

 

2021

 

2022

 

2021

Total COGS – Potash

386

 

372

 

1,090

 

980

Change in inventory

(52)

 

(58)

 

20

 

(42)

Other adjustments 1

(5)

 

(1)

 

(29)

 

(7)

COPM

329

 

313

 

1,081

 

931

Depreciation and amortization in COPM

(84)

 

(101)

 

(317)

 

(315)

Royalties in COPM

(42)

 

(24)

 

(150)

 

(60)

Natural gas costs and carbon taxes in COPM

(9)

 

(11)

 

(45)

 

(34)

Controllable cash COPM

194

 

177

 

569

 

522

Production tonnes (tonnes – thousands)

2,742

 

3,199

 

10,066

 

10,149

Potash controllable cash COPM per tonne

70

 

55

 

56

 

51

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

Ammonia Controllable Cash COPM Per Tonne

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

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

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

 

Three Months Ended September 30

 

Nine Months Ended September 30

(millions of US dollars, except as otherwise noted)

2022

 

2021

 

2022

 

2021

Total Manufactured COGS – Nitrogen

872

 

591

 

2,351

 

1,628

Total Other COGS – Nitrogen

235

 

104

 

808

 

440

Total COGS – Nitrogen

1,107

 

695

 

3,159

 

2,068

Depreciation and amortization in COGS

(117)

 

(105)

 

(334)

 

(347)

Cash COGS for products other than ammonia

(640)

 

(380)

 

(1,912)

 

(1,221)

Ammonia

 

 

 

 

 

 

 

Total cash COGS before other adjustments

350

 

210

 

913

 

500

Other adjustments 1

(31)

 

(36)

 

(145)

 

(66)

Total cash COPM

319

 

174

 

768

 

434

Natural gas and steam costs

(267)

 

(137)

 

(643)

 

(329)

Controllable cash COPM

52

 

37

 

125

 

105

Production tonnes (net tonnes 2 – thousands)

819

 

706

 

2,099

 

2,011

Ammonia controllable cash COPM per tonne

62

 

53

 

59

 

52

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

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

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

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

Why we use the measure and why it is useful to investors: To evaluate operational efficiency. A lower or higher percentage represents increased or decreased efficiency, respectively. The metric excluding Nutrien Financial shows the impact that the working capital of Nutrien Financial has on the ratio.

 

Rolling four quarters ended September 30, 2022

(millions of US dollars, except as otherwise noted)

Q4 2021

 

Q1 2022

 

Q2 2022

 

Q3 2022

 

Average/Total

Current assets

9,924

 

12,392

 

12,487

 

11,262

 

 

Current liabilities

(7,828)

 

(9,223)

 

(9,177)

 

(5,889)

 

 

Working capital

2,096

 

3,169

 

3,310

 

5,373

 

3,487

Working capital from certain recent acquisitions

 

 

 

 

 

Adjusted working capital

2,096

 

3,169

 

3,310

 

5,373

 

3,487

Nutrien Financial working capital

(2,150)

 

(2,274)

 

(4,404)

 

(3,898)

 

 

Adjusted working capital excluding Nutrien Financial

(54)

 

895

 

(1,094)

 

1,475

 

306

 

 

 

 

 

 

 

 

 

 

Sales

3,878

 

3,861

 

9,422

 

3,980

 

 

Sales from certain recent acquisitions

 

 

 

 

 

Adjusted sales

3,878

 

3,861

 

9,422

 

3,980

 

21,141

Nutrien Financial revenue

(51)

 

(49)

 

(91)

 

(65)

 

 

Adjusted sales excluding Nutrien Financial

3,827

 

3,812

 

9,331

 

3,915

 

20,885

 

 

 

 

 

 

 

 

 

 

Adjusted average working capital to sales (%)

 

 

 

 

 

 

 

 

16

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

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

Rolling four quarters ended September 30, 2021

(millions of US dollars, except as otherwise noted)

Q4 2020

 

Q1 2021

 

Q2 2021

 

Q3 2021

 

Average/Total

Current assets

8,013

 

9,160

 

9,300

 

8,945

 

 

Current liabilities

(6,856)

 

(7,530)

 

(7,952)

 

(5,062)

 

 

Working capital

1,157

 

1,630

 

1,348

 

3,883

 

2,005

Working capital from certain recent acquisitions

 

 

 

 

 

Adjusted working capital

1,157

 

1,630

 

1,348

 

3,883

 

2,005

Nutrien Financial working capital

(1,392)

 

(1,221)

 

(3,072)

 

(2,820)

 

 

Adjusted working capital excluding Nutrien Financial

(235)

 

409

 

(1,724)

 

1,063

 

(122)

 

 

 

 

 

 

 

 

 

 

Sales

2,618

 

2,972

 

7,537

 

3,347

 

 

Sales from certain recent acquisitions

 

 

 

 

 

Adjusted sales

2,618

 

2,972

 

7,537

 

3,347

 

16,474

Nutrien Financial revenue

(37)

 

(25)

 

(59)

 

(54)

 

 

Adjusted sales excluding Nutrien Financial

2,581

 

2,947

 

7,478

 

3,293

 

16,299

 

 

 

 

 

 

 

 

 

 

Adjusted average working capital to sales (%)

 

 

 

 

 

 

 

 

12

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

 

 

 

(1)

Nutrien Financial Adjusted Net Interest Margin

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

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

 

Rolling four quarters ended September 30, 2022

(millions of US dollars, except as otherwise noted)

Q4 2021

 

Q1 2022

 

Q2 2022

 

Q3 2022

 

Total/Average

Nutrien Financial revenue

51

 

49

 

91

 

65

 

 

Deemed interest expense 1

(12)

 

(6)

 

(12)

 

(12)

 

 

Net interest

39

 

43

 

79

 

53

 

214

 

 

 

 

 

 

 

 

 

 

Average Nutrien Financial receivables

2,150

 

2,274

 

4,404

 

3,898

 

3,182

Nutrien Financial adjusted net interest margin (%)

 

 

 

 

 

 

 

 

6.7

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

 

 

 

 

 

 

 

 

 

 

 

Rolling four quarters ended September 30, 2021

(millions of US dollars, except as otherwise noted)

Q4 2020

 

Q1 2021

 

Q2 2021

 

Q3 2021

 

Total/Average

Nutrien Financial revenue

37

 

25

 

59

 

54

 

 

Deemed interest expense 1

(14)

 

(6)

 

(8)

 

(10)

 

 

Net interest

23

 

19

 

51

 

44

 

137

 

 

 

 

 

 

 

 

 

 

Average Nutrien Financial receivables

1,392

 

1,221

 

3,072

 

2,820

 

2,126

Nutrien Financial adjusted net interest margin (%)

 

 

 

 

 

 

 

 

6.4

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

Retail Cash Operating Coverage Ratio

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

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

 

Rolling four quarters ended September 30, 2022

(millions of US dollars, except as otherwise noted)

Q4 2021

 

Q1 2022

 

Q2 2022

 

Q3 2022

 

Total

Selling expenses

848

 

722

 

1,013

 

821

 

3,404

General and administrative expenses

43

 

45

 

54

 

50

 

192

Other expenses (income)

20

 

(12)

 

21

 

19

 

48

Operating expenses

911

 

755

 

1,088

 

890

 

3,644

Depreciation and amortization in operating expenses

(173)

 

(167)

 

(171)

 

(204)

 

(715)

Operating expenses excluding depreciation and amortization

738

 

588

 

917

 

686

 

2,929

 

 

 

 

 

 

 

 

 

 

Gross margin

1,173

 

845

 

2,340

 

917

 

5,275

Depreciation and amortization in cost of goods sold

5

 

2

 

4

 

2

 

13

Gross margin excluding depreciation and amortization

1,178

 

847

 

2,344

 

919

 

5,288

Cash operating coverage ratio (%)

 

 

 

 

 

 

 

 

55

 

 

 

 

 

 

 

 

 

 

 

Rolling four quarters ended September 30, 2021

(millions of US dollars, except as otherwise noted)

Q4 2020

 

Q1 2021

 

Q2 2021

 

Q3 2021

 

Total

Selling expenses

727

 

667

 

863

 

746

 

3,003

General and administrative expenses

33

 

39

 

41

 

45

 

158

Other expenses (income)

8

 

15

 

34

 

17

 

74

Operating expenses

768

 

721

 

938

 

808

 

3,235

Depreciation and amortization in operating expenses

(177)

 

(175)

 

(166)

 

(180)

 

(698)

Operating expenses excluding depreciation and amortization

591

 

546

 

772

 

628

 

2,537

 

 

 

 

 

 

 

 

 

 

Gross margin

885

 

652

 

1,858

 

917

 

4,312

Depreciation and amortization in cost of goods sold

3

 

2

 

3

 

2

 

10

Gross margin excluding depreciation and amortization

888

 

654

 

1,861

 

919

 

4,322

Cash operating coverage ratio (%)

 

 

 

 

 

 

 

 

59

Appendix C – Other Financial Measures

Supplementary Financial Measures

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

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

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

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

Retail adjusted EBITDA per US selling location: Calculated as total Retail US adjusted EBITDA for the last four rolling quarters, representing the organic EBITDA component, which excludes acquisitions in those quarters, divided by the number of US locations that have generated sales in the last four rolling quarters, adjusted for acquired locations in those quarters.

Condensed Consolidated Financial Statements

Unaudited - In millions of US dollars except as otherwise noted

C ondensed Consolidated Statements of Earnings

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30

 

September 30

 

Note

2022

 

2021

 

2022

 

2021

SALES

2

8,188

 

6,024

 

30,351

 

20,445

Freight, transportation and distribution

 

204

 

220

 

628

 

653

Cost of goods sold

 

4,722

 

3,639

 

17,205

 

13,589

GROSS MARGIN

 

3,262

 

2,165

 

12,518

 

6,203

Selling expenses

 

826

 

749

 

2,570

 

2,287

General and administrative expenses

 

137

 

110

 

403

 

329

Provincial mining taxes

 

348

 

128

 

959

 

293

Share-based compensation expense

 

39

 

64

 

122

 

125

(Reversal) impairment of assets

3

(330)

 

7

 

(780)

 

12

Other expenses

4

36

 

50

 

94

 

203

EARNINGS BEFORE FINANCE COSTS AND INCOME TAXES

2,206

 

1,057

 

9,150

 

2,954

Finance costs

 

136

 

122

 

375

 

367

EARNINGS BEFORE INCOME TAXES

 

2,070

 

935

 

8,775

 

2,587

Income tax expense

5

487

 

209

 

2,206

 

615

NET EARNINGS

 

1,583

 

726

 

6,569

 

1,972

Attributable to

 

 

 

 

 

 

 

 

Equity holders of Nutrien

 

1,577

 

717

 

6,548

 

1,952

Non-controlling interest

 

6

 

9

 

21

 

20

NET EARNINGS

 

1,583

 

726

 

6,569

 

1,972

 

 

 

 

 

 

 

 

 

NET EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF NUTRIEN ("EPS")

Basic

 

2.95

 

1.26

 

12.00

 

3.42

Diluted

 

2.94

 

1.25

 

11.96

 

3.41

Weighted average shares outstanding for basic EPS

 

534,839,000

 

570,627,000

 

545,776,000

 

570,216,000

Weighted average shares outstanding for diluted EPS

 

536,164,000

 

572,224,000

 

547,449,000

 

571,735,000

Condensed Consolidated Statements of Comprehensive Income

 

Three Months Ended

 

Nine Months Ended

 

September 30

 

September 30

(Net of related income taxes)

2022

 

2021

 

2022

 

2021

NET EARNINGS

1,583

 

726

 

6,569

 

1,972

Other comprehensive (loss) income

 

 

 

 

 

 

 

Items that will not be reclassified to net earnings:

 

 

 

 

 

 

 

Net actuarial gain on defined benefit plans

60

 

 

61

 

Net fair value (loss) gain on investments

(54)

 

46

 

(61)

 

116

Items that have been or may be subsequently reclassified to net earnings:

 

 

 

 

 

 

 

Loss on currency translation of foreign operations

(191)

 

(124)

 

(272)

 

(129)

Other

(45)

 

(1)

 

(24)

 

19

OTHER COMPREHENSIVE (LOSS) INCOME

(230)

 

(79)

 

(296)

 

6

COMPREHENSIVE INCOME

1,353

 

647

 

6,273

 

1,978

Attributable to

 

 

 

 

 

 

 

Equity holders of Nutrien

1,348

 

638

 

6,254

 

1,959

Non-controlling interest

5

 

9

 

19

 

19

COMPREHENSIVE INCOME

1,353

 

647

 

6,273

 

1,978

 

 

 

 

 

 

 

 

(See Notes to the Condensed Consolidated Financial Statements)

Condensed Consolidated Statements of Cash Flows

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30

 

September 30

 

Note

2022

 

2021

 

2022

 

2021

 

 

 

 

Note 1

 

 

 

Note 1

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net earnings

 

1,583

 

726

 

6,569

 

1,972

Adjustments for:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

526

 

489

 

1,492

 

1,454

Share-based compensation expense

 

39

 

64

 

122

 

125

(Reversal) impairment of assets

3

(330)

 

7

 

(780)

 

12

Provision for (recovery of) deferred income tax

 

160

 

(87)

 

152

 

(97)

Gain on disposal of investment

4

 

 

(19)

 

Cloud computing transition adjustment

4

 

 

 

36

Other long-term assets, liabilities and miscellaneous

 

(7)

 

(12)

 

112

 

42

Cash from operations before working capital changes

 

1,971

 

1,187

 

7,648

 

3,544

Changes in non-cash operating working capital:

 

 

 

 

 

 

 

 

Receivables

 

1,240

 

(266)

 

(3,602)

 

(3,101)

Inventories

 

517

 

130

 

(344)

 

193

Prepaid expenses and other current assets

 

(44)

 

(133)

 

1,018

 

865

Payables and accrued charges

 

(2,806)

 

(2,483)

 

(1,346)

 

(1,252)

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

 

878

 

(1,565)

 

3,374

 

249

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Capital expenditures 1

 

(636)

 

(492)

 

(1,464)

 

(1,238)

Business acquisitions, net of cash acquired

 

(10)

 

(30)

 

(78)

 

(70)

Other

 

(90)

 

(19)

 

(60)

 

(57)

Net changes in non-cash working capital

 

31

 

18

 

(77)

 

23

CASH USED IN INVESTING ACTIVITIES

 

(705)

 

(523)

 

(1,679)

 

(1,342)

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Transaction costs related to debt

 

(3)

 

 

(3)

 

(7)

Proceeds from short-term debt, net

 

2,017

 

1,040

 

2,867

 

1,037

Proceeds from long-term debt

 

 

81

 

41

 

89

Repayment of long-term debt

 

(22)

 

 

(50)

 

(5)

Repayment of principal portion of lease liabilities

 

(83)

 

(78)

 

(256)

 

(242)

Dividends paid to Nutrien's shareholders

8

(259)

 

(261)

 

(780)

 

(779)

Repurchase of common shares

8

(1,700)

 

(148)

 

(3,306)

 

(150)

Issuance of common shares

 

4

 

125

 

168

 

188

Other

 

17

 

(2)

 

 

(14)

CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

 

(29)

 

757

 

(1,319)

 

117

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

(32)

 

(20)

 

(52)

 

(35)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

112

 

(1,351)

 

324

 

(1,011)

CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD

 

711

 

1,794

 

499

 

1,454

CASH AND CASH EQUIVALENTS – END OF PERIOD

 

823

 

443

 

823

 

443

Cash and cash equivalents comprised of:

 

 

 

 

 

 

 

 

Cash

 

428

 

315

 

428

 

315

Short-term investments

 

395

 

128

 

395

 

128

 

 

823

 

443

 

823

 

443

SUPPLEMENTAL CASH FLOWS INFORMATION

 

 

 

 

 

 

 

 

Interest paid

 

80

 

81

 

280

 

319

Income taxes paid

 

318

 

212

 

1,503

 

356

Total cash outflow for leases

 

111

 

91

 

339

 

299

1 Includes additions to property, plant and equipment and intangible assets for the three months ended September 30, 2022 of $584 and $52 (2021 – $463 and $29), respectively, and for the nine months ended September 30, 2022 of $1,317 and $147 (2021 – $1,171 and $67), respectively.

 

(See Notes to the Condensed Consolidated Financial Statements)

Condensed Consolidated Statements of Changes in Shareholders’ Equity

 

 

 

 

 

 

 

Accumulated Other Comprehensive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) Income ("AOCI")

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency

 

 

 

 

 

 

 

Equity

 

 

 

 

 

Number of

 

 

 

 

 

Translation

 

 

 

 

 

 

 

Holders

 

Non-

 

 

 

Common

 

Share

 

Contributed

 

of Foreign

 

 

 

Total

 

Retained

 

of