Nutrien earns $1.4B US, hikes guidance as Ukraine war drives fertilizer demand

Nutrien Ltd. has significantly hiked its earnings forecast for the year after announcing a record first quarter profit driven by surging commodity prices and concerns about global food security due to Russia's invasion of Ukraine.

The Saskatoon-based company, which is the world's largest producer of fertilizer and reports in U.S. dollars, earned a record $1.4 billion US in the quarter ended March 31. That works out to $2.49 per share, more than 10 times the 22 cents per share it earned in the same period of 2021.

Nutrien also hiked its earnings guidance for the full year 2022 by 50 per cent. It said Tuesday it now expects to earn between $16.20 and $18.70 per share this year, up from a previous target of $10.20 to $11.80.

Nutrien which was created in 2018 as a result of the merger between PotashCorp of Saskatchewan and Calgary-based Agrium Inc. has seen its share price increase by more than 20 per cent since the first of March due to the impact of geopolitical events on fertilizer markets and prices.

According to the company, Russia and Belarus account for approximately 40 per cent of global production and exports of potash, a key plant nutrient used in agriculture.

Financial sanctions imposed on Russia and Belarus due to the war in Ukraine mean that potash exports from the region were approximately 20 per cent lower in the first quarter of 2022 compared to the same period in 2021.

"There's no simple or fast solution to overcome this level of supply disruption," said Nutrien interim CEO Ken Seitz on a conference call. (The company has not yet named a permanent replacement for former CEO Mayo Schmidt, who stepped down in January after just nine months on the job.)

"We believe these issues could extend well beyond this year."

Nutrien has over 20 million tonnes of capacity at six potash mines in Saskatchewan. It also has two large phosphate mines in the U.S., and is the world's third-largest producer of nitrogen. Potash, phosphate and nitrogen are the three main plant nutrients used in commercial fertilizer.

For 2022, Nutrien said it expects to produce between 14.5 to 15.1 million tonnes of potash. This reflects the company's March announcement that it will increase potash production capacity by nearly one million tonnes to help meet global demand.

Production might expand

However, Seitz said Tuesday that the company is currently exploring the feasibility of expanding production even more. He said more details will be forthcoming at the company's investor day on June 9.

"We will closely monitor global market developments as we assess opportunities to increase our potash production capability beyond 15 million tonnes," Seitz said.

"Increasing production on a sustained basis requires opening up new ground, installing additional equipment and infrastructure, hiring more people and securing outbound logistics. These are decisions that require careful planning as they have long-term impacts on our operations and our people."

In an email, Edward Jones analyst Matt Arnold said Nutrien has been careful not to harm fertilizer pricing by adding too much capacity in the past, and said he expects the company to remain disciplined with future decisions as well.

"We would only expect significant capacity additions if the company is confident the Russia/Ukraine conflict will impair Russia and Belarus exports on a more sustained basis, and not just this year," Arnold said.

Nutrien's sales in the quarter totalled $7.6 billion, up from $4.7 billion in the previous quarter.

The company's share price was trading at $137.05 in the early afternoon on the Toronto Stock Exchange, up $9.22 or 7.2 per cent.