Nutrien Ltd 6-K, filed Feb 18, 2020
Nutrien Ltd. (NTR)
About this 6-K
Nutrien Ltd filed this 6-K on February 18, 2020.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Issuer
Pursuant to Section 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
For the month of: February, 2020
Commission File Number: 001-38336
NUTRIEN LTD.
(Name of registrant)
Suite 500, 122 – 1st Avenue South
Saskatoon, Saskatchewan
S7K 7G3 Canada
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ☐ Form 40-F ☒
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NUTRIEN LTD. | ||||||
| Date: February 18, 2020 | By: | /s/ Robert A. Kirkpatrick | ||||
| Name: | Robert A. Kirkpatrick | |||||
| Title: | SVP & Corporate Secretary | |||||
EXHIBIT INDEX
| Exhibit |
Description of Exhibit | |
| 99.1 | News Release dated February 18, 2020 | |
Exhibit 99.1
|
News Release | |
|
NYSE, TSX: NTR
|
February 18, 2020 – all amounts are in US dollars except as otherwise noted
Nutrien Delivers Stable Earnings in a Challenging Year
Nutrien Ltd. (Nutrien) announced today its 2019 fourth-quarter and full year 2019 results, with a net loss from continuing operations of $48 million ($0.08 diluted loss per share) in the fourth quarter of 2019. Fourth-quarter adjusted net earnings was $0.09 per share and adjusted EBITDA was $664 million. Adjusted net earnings (total and per share amounts) and adjusted EBITDA, together with the related annual guidance, Potash adjusted EBITDA, free cash flow and free cash flow including changes in non-cash working capital are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section for further information.
“Nutrien’s earnings held up well in 2019 and we generated strong free cash flow in a very tough agriculture market. We executed on our strategic plan, growing our Retail business with several strategic acquisitions and made great strides with the roll-out and adoption of our leading Retail digital platform and financial tools. Agriculture fundamentals are strengthening and grower sentiment is positive. We expect higher planting and favorable farm economics to support strong North American crop input demand in 2020,” commented Chuck Magro, Nutrien’s President and CEO.
“Our business is designed to provide stability in times of market weakness, with significant leverage through a recovery in fertilizer markets. We remain focused on optimizing our network, allocating capital to grow our Retail business and leading our industry in returning capital to shareholders,” added Mr. Magro.
Highlights:
| • | Nutrien generated $2.2 billion in free cash flow in 2019, up 9 percent over last year, and $2.6 billion in free cash flow including changes in non-cash working capital in 2019, which is over three times higher than in 2018. |
| • | Nutrien recorded a number of charges totaling $128 million this quarter related to mergers, acquisitions and impairments, the largest associated with the rebranding of the Australian retail business after the Ruralco acquisition. |
| • | Retail performed well as EBITDA increased 8 percent in the fourth quarter and 2 percent in the full year 2019, compared to the same periods in 2018. Nutrien’s sales, service and supply chain strength helped to grow market share and we expect strong EBITDA growth in 2020 due to contributions from acquisitions, improved market conditions and organic growth. |
| • | Potash EBITDA was down 62 percent in the fourth quarter of 2019 compared to the same period in 2018 due to lower sales volumes and lower net realized selling prices caused by a temporary reduction in global demand, the impact of production downtime and the Canadian National Railway labor strike. 2019 potash adjusted EBITDA was similar to 2018 as higher average net realized selling prices were mostly offset by lower sales volumes. |
| • | Nitrogen EBITDA in the fourth quarter of 2019 was 19 percent lower than the same period last year due primarily to lower ammonia sales volumes and a lower nitrogen net realized selling price. Nitrogen EBITDA in 2019 increased 2 percent compared to 2018 as lower natural gas costs in North America more than offset higher natural gas costs in Trinidad, and higher earnings from equity-accounted investees and the impact of IFRS 16 more than offset lower ammonia sales volumes and lower nitrogen net realized selling prices. |
| • | In the fourth quarter of 2019, Nutrien increased the maximum number of common shares that may be acquired under its current normal course issuer bid (NCIB) to approximately 7 percent of the outstanding common shares. Nutrien repurchased an aggregate of 36 million common shares in 2019 and 72 million common shares over the past 24 months. |
| • | Nutrien full-year 2020 adjusted net earnings per share and adjusted EBITDA guidance is $1.90 to $2.60 per share and $3.8 to $4.3 billion, respectively. |
1
Market Outlook
Agriculture and Retail
| • | Recent US/China trade progress has underpinned positive sentiment among US growers as agricultural exports to China are expected to improve significantly both in the short and medium term. |
| • | The US Department of Agriculture (USDA) projects 2019/2020 global grain inventories outside of China to be at six-year lows. US crop input demand in 2020 is expected to be supported by an additional 14 million acres, or about a 6 percent increase, in planted acreage. |
| • | We expect demand for potash in Southeast Asia will be supported by the significant improvement in palm oil prices since mid-2019. |
| • | Despite improved agricultural fundamentals in most key markets, we continue to monitor the possible impacts of the Coronavirus, drought conditions in Australia and the African Swine Fever. |
Crop Nutrient Markets
| • | Global potash prices declined in 2019 as customers in key offshore markets drew from inventories built by strong first-half 2019 shipments, while demand declined in North America due to adverse weather and in Southeast Asia due to weak palm oil prices. Global potash producers announced the equivalent of over 3 million tonnes of estimated production curtailments to rebalance supply. We estimate global potash deliveries were approximately 64.5 million tonnes in 2019, down significantly from the 66.7 million tonnes in 2018. |
We believe potash production curtailments lowered inventory at the producer level, while continued grower consumption lowered distributor inventory in key markets outside of China. We expect global potash demand to rebound in 2020, driven by increased planting acreage in North America, a rebound in applications in Indonesia and Malaysia, lower beginning inventories and strong affordability. We estimate global potash deliveries in 2020 will be between 66 to 68 million tonnes in 2020, similar to the record global delivery levels of 2018.
| • | Global nitrogen prices declined in 2019, due to reduced demand in North America driven by challenging weather conditions and lower feedstock prices in some key producing regions. We expect nitrogen fundamentals to improve in 2020, supported by higher North American planting, stable demand in other key regions and limited new global capacity. |
| • | Dry phosphate fertilizer prices have recently improved after reaching historically low levels in 2019, but they continue to be impacted by increased supply from Morocco and Saudi Arabia. Some global phosphate producers have announced curtailments to rebalance supply and the Coronavirus could reduce Chinese export availability in the first quarter of 2020, however, we expect low raw material costs will be a headwind to a significant market recovery. |
Financial Outlook and Guidance
Based on market factors detailed above, we are issuing 2020 adjusted net earnings guidance of $1.90 to $2.60 per share and adjusted EBITDA guidance of $3.8 to $4.3 billion.
All guidance numbers, including those noted above and related sensitivities are outlined in the tables below.
| 2020 Guidance Ranges 1 | Low | High | ||||||
| Adjusted net earnings per share 2 |
$ | 1.90 | $ | 2.60 | ||||
| Adjusted EBITDA (billions) 2 |
$ | 3.8 | $ | 4.3 | ||||
| Retail EBITDA (billions) |
$ | 1.4 | $ | 1.5 | ||||
| Potash EBITDA (billions) |
$ | 1.3 | $ | 1.5 | ||||
| Nitrogen EBITDA (billions) |
$ | 1.2 | $ | 1.4 | ||||
| Phosphate EBITDA (millions) |
$ | 180 | $ | 250 | ||||
| Potash sales tonnes (millions) 3 |
12.3 | 12.7 | ||||||
| Nitrogen sales tonnes (millions) 3 |
11.0 | 11.6 | ||||||
| Depreciation and amortization (billions) |
$ | 1.8 | $ | 1.9 | ||||
| Effective tax rate on continuing operations |
23 | % | 25 | % | ||||
| Sustaining capital expenditures (billions) |
$ | 1.0 | $ | 1.1 | ||||
2
| Impact to | ||||||||
| 2020 Annual Assumptions & Sensitivities 1 | Adjusted EBITDA |
Adjusted EPS 4 |
||||||
| $1/MMBtu change in NYMEX 5 |
$ | 165 | $ | 0.21 | ||||
| $20/tonne change in realized Potash selling prices |
$ | 205 | $ | 0.25 | ||||
| $20/tonne change in realized Ammonia selling prices |
$ | 40 | $ | 0.05 | ||||
| $20/tonne change in realized Urea selling prices |
$ | 65 | $ | 0.09 | ||||
| 2020 FX Rate CAD to USD |
1.30 | |||||||
| 2020 NYMEX natural gas ($US/MMBtu) |
$2.25 | |||||||
1 See the “Forward-Looking Statements” section.
2 See the “Non-IFRS Financial Measures” section.
3 Manufactured products only. Nitrogen excludes ESN® and Rainbow products.
4 Assumes 574 million shares outstanding.
5 Nitrogen related impact.
Consolidated Results
| Three Months Ended December 31 | Twelve Months Ended December 31 | |||||||||||||||||||||||
| (millions of US dollars) | 2019 | 2018 | % Change | 2019 | 2018 | % Change | ||||||||||||||||||
| Sales |
3,442 | 3,762 | (9 | ) | 20,023 | 19,636 | 2 | |||||||||||||||||
| Freight, transportation and distribution |
172 | 189 | (9 | ) | 768 | 864 | (11 | ) | ||||||||||||||||
| Cost of goods sold |
2,256 | 2,314 | (3 | ) | 13,814 | 13,380 | 3 | |||||||||||||||||
| Gross margin |
1,014 | 1,259 | (19 | ) | 5,441 | 5,392 | 1 | |||||||||||||||||
| Expenses |
951 | 713 | 33 | 3,579 | 4,978 | (28 | ) | |||||||||||||||||
| Net (loss) earnings from continuing operations |
(48 | ) | 296 | n/m | 992 | (31 | ) | n/m | ||||||||||||||||
| Net earnings from discontinued operations |
- | 2,906 | (100 | ) | - | 3,604 | (100 | ) | ||||||||||||||||
| Net (loss) earnings |
(48 | ) | 3,202 | n/m | 992 | 3,573 | (72 | ) | ||||||||||||||||
| EBITDA 1 |
499 | 944 | (47 | ) | 3,661 | 2,006 | 83 | |||||||||||||||||
| Adjusted EBITDA 1 |
664 | 924 | (28 | ) | 4,025 | 3,934 | 2 | |||||||||||||||||
| Free cash flow (“FCF”) 1 |
138 | 403 | (66 | ) | 2,157 | 1,975 | 9 | |||||||||||||||||
| FCF including changes in non-cash working capital 1 |
2,068 | 1,647 | 26 | 2,647 | 837 | 216 | ||||||||||||||||||
| 1 See the “Non-IFRS Financial Measures” section. |
| |||||||||||||||||||||||
Our fourth-quarter net loss from continuing operations was caused by the impact of a temporary slow down in global fertilizer demand that more than offset a strong performance by Retail. 2019 net earnings from continuing operations increased compared to 2018 due to solid operational results, the continued benefit of Merger related synergies and operational improvements and a non-cash impairment of our New Brunswick potash facility in 2018.
Our net earnings from discontinued operations in 2018 was related to the required divestiture of certain equity investments in connection with the Merger.
Segment Results
In the first quarter of 2019, our Executive Leadership Team reassessed our product groupings and decided to evaluate the performance of ammonium sulfate as part of the Nitrogen segment, rather than the Phosphate and Sulfate segment as previously reported in 2018. Effective January 1, 2019, we have four reportable operating segments: Retail, Potash, Nitrogen and Phosphate. Comparative amounts presented on a segmented basis have been restated accordingly. We also renamed our “Others” segment to “Corporate and Others”.
Detailed descriptions of our operating segments can be found in our 2018 Annual Report dated February 20, 2019 in the “Operating Segment Performance & Outlook” section.
Our discussion of segment results set out on the following pages is a comparison of the results for the three and twelve months ended December 31, 2019 to the results for the three and twelve months ended December 31, 2018, respectively and unless otherwise noted. See Appendix A for a summary of our results for the twelve months ended December 31, 2019 by operating segment.
3
Retail
| (millions of US dollars, except as otherwise noted) |
Three Months Ended December 31 | |||||||||||||||||||||||||||||||||||||
| Dollars | Gross Margin | Gross Margin (%) | ||||||||||||||||||||||||||||||||||||
| 2019 | 2018 | % Change | 2019 | 2018 | % Change | 2019 | 2018 | |||||||||||||||||||||||||||||||
| Sales |
||||||||||||||||||||||||||||||||||||||
| Crop nutrients 1 |
907 | 917 | (1 | ) | 186 | 184 | 1 | 21 | 20 | |||||||||||||||||||||||||||||
| Crop protection products |
635 | 644 | (1 | ) | 281 | 270 | 4 | 44 | 42 | |||||||||||||||||||||||||||||
| Seed |
99 | 103 | (4 | ) | 60 | 56 | 7 | 61 | 54 | |||||||||||||||||||||||||||||
| Merchandise 2 |
211 | 142 | 49 | 44 | 27 | 63 | 21 | 19 | ||||||||||||||||||||||||||||||
| Services and other |
319 | 211 | 51 | 165 | 125 | 32 | 52 | 59 | ||||||||||||||||||||||||||||||
| 2,171 | 2,017 | 8 | 736 | 662 | 11 | 34 | 33 | |||||||||||||||||||||||||||||||
| Cost of goods sold 2 |
1,435 | 1,355 | 6 | |||||||||||||||||||||||||||||||||||
| Gross margin |
736 | 662 | 11 | |||||||||||||||||||||||||||||||||||
| Expenses 3 |
667 | 580 | 15 | |||||||||||||||||||||||||||||||||||
| Earnings before finance costs and taxes (“EBIT”) |
69 | 82 | (16 | ) | ||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
162 | 132 | 23 | |||||||||||||||||||||||||||||||||||
| EBITDA |
231 | 214 | 8 | |||||||||||||||||||||||||||||||||||
1 Includes intersegment sales. See Note 2 to the unaudited condensed consolidated financial statements as at and for the three and twelve months ended December 31, 2019 (“condensed consolidated financial statements”).
2 Certain immaterial figures have been reclassified or grouped together for the three months ended December 31, 2018.
3 Includes selling expenses of $668 million (2018 – $571 million).
| • | EBITDA was higher in the fourth quarter and full year of 2019 as sales, service and supply chain strength helped to grow our market share and margins. EBITDA in both periods also benefited from strong US and Australia results and the impact from adoption of IFRS 16, which more than offset weather-related challenges in Canada. Gross margin and gross margin percentage increased in the fourth quarter and full year 2019 as a result of optimization initiatives and strategic purchasing. Selling expenses as a proportion of sales in the full year 2019 were similar to the same period in 2018. |
| • | Crop nutrients sales decreased in the fourth quarter of 2019 as higher sales volumes were offset by lower selling prices. Crop nutrients sales in 2019 increased due to higher sales volumes and higher selling prices. Gross margin percentage increased in the periods due to strategic purchasing and an increased mix of higher margin specialty and proprietary products sales. |
| • | Crop protection products sales in the fourth quarter decreased compared to the fourth quarter of 2018 due primarily to lower Canadian fall applications caused by early winter conditions. Crop protection products sales in 2019 increased as US farmers made more in-season applications due to the excessive moisture experienced in the fall of 2018. Gross margin percentage increased in the fourth quarter and was flat in 2019 due to favorable product mix changes and strategic purchasing that offset the impact of higher competition from a condensed season and higher costs for product sourced from China. |
| • | Seed sales in the fourth quarter were down slightly compared to the same period in 2018 caused mostly by drought conditions in Australia. Sales in 2019 increased compared to 2018 due to the mix of higher value corn and cotton seed sales, which more than offset the impact of lower planted acreage in the US. Gross margin percentage increased in the fourth quarter due to a favorable sales mix, while gross margin percentage in 2019 was comparable with 2018. |
| • | Merchandise sales and gross margin increased in the fourth quarter and full year of 2019 due to our recent acquisition of Ruralco. |
| • | Services and other sales were higher in the fourth quarter and full year of 2019 due to sales from recent acquisitions, including Ruralco, and increased US applications and services resulting from a condensed growing season. Gross margin percentage decreased in the quarter and full year of 2019 due to product mix changes resulting primarily from the acquisition of Ruralco. |
4
Potash
| (millions of US dollars, except as otherwise noted) |
Three Months Ended December 31 | |||||||||||||||||||||||||||||||||||||||||
| Dollars | Tonnes (thousands) | Average per Tonne | ||||||||||||||||||||||||||||||||||||||||
| 2019 | 2018 | % Change | 2019 | 2018 | % Change | 2019 | 2018 | % Change | ||||||||||||||||||||||||||||||||||
| Manufactured product 1 |
||||||||||||||||||||||||||||||||||||||||||
| Net sales |
||||||||||||||||||||||||||||||||||||||||||
| North America |
146 | 177 | (18 | ) | 651 | 731 | (11 | ) | 226 | 242 | (7 | ) | ||||||||||||||||||||||||||||||
| Offshore |
204 | 459 | (56 | ) | 1,234 | 2,126 | (42 | ) | 164 | 216 | (24 | ) | ||||||||||||||||||||||||||||||
| 350 | 636 | (45 | ) | 1,885 | 2,857 | (34 | ) | 186 | 223 | (17 | ) | |||||||||||||||||||||||||||||||
| Cost of goods sold |
211 | 271 | (22 | ) | 112 | 95 | 18 | |||||||||||||||||||||||||||||||||||
| Gross margin - manufactured |
139 | 365 | (62 | ) | 74 | 128 | (42 | ) | ||||||||||||||||||||||||||||||||||
| Gross margin - other 2 |
- | 1 | (100 | ) | Depreciation and amortization |
|
35 | 32 | 9 | |||||||||||||||||||||||||||||||||
| Gross margin - total |
139 | 366 | (62 | ) | Gross margin excluding depreciation |
|
||||||||||||||||||||||||||||||||||||
| Expenses 3 |
56 | 64 | (13 | ) | and amortization - manufactured 4 |
|
109 | 160 | (32 | ) | ||||||||||||||||||||||||||||||||
| EBIT |
83 | 302 | (73 | ) | Potash cash cost of product |
|
||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
66 | 92 | (28 | ) | manufactured 4 |
|
82 | 67 | 22 | |||||||||||||||||||||||||||||||||
| EBITDA |
149 | 394 | (62 | ) | ||||||||||||||||||||||||||||||||||||||
| 1 Includes intersegment sales. See Note 2 to the condensed consolidated financial statements. 2 Includes other potash and purchased products and is comprised of net sales of $Nil (2018 – $1 million) less cost of goods sold of $Nil (2018 – $Nil). 3 Includes provincial mining and other taxes of $50 million (2018 – $56 million). 4 See the “Non-IFRS Financial Measures” section. |
| |||||||||||||||||||||||||||||||||||||||||
| • | EBITDA decreased in the fourth quarter due to lower sales volumes, lower net realized selling prices and the temporary impacts associated with production downtime and the Canadian National Railway labor strike. EBITDA in 2019 was higher as a result of a non-cash impairment of our New Brunswick potash facility in 2018. Adjusted EBITDA in 2019 was similar to 2018 as lower sales volumes and higher provincial mining taxes and other taxes were mostly offset by higher net realized selling prices. |
| • | Sales volumes in North America were down in the fourth quarter and in the full year of 2019 due to challenging US weather conditions that negatively impacted both spring and fall applications. Offshore sales volumes in 2019 were the second highest on record, down only from 2018, due to strong demand in the first half of the year. Offshore sales volumes in the fourth quarter of 2019 decreased from the same period last year as customers in key markets delayed purchases and/or drew upon existing inventory. |
| • | Net realized selling price decreased in the fourth quarter of 2019 reflecting lower benchmark prices caused by a temporary slowdown in global demand. Higher freight rates further decreased North America net realized selling prices while adjustments to Nutrien’s provisional selling price to Canpotex lowered Offshore net realized selling prices in the quarter. Net realized selling prices were higher in 2019 compared to 2018 due to stronger prices through the first nine months of the year. |
| • | Cost of goods sold per tonne increased in the fourth quarter and full year of 2019 compared to the same periods in 2018 due to the impact of lower production volumes related to temporary production downtime. Potash cash cost of product manufactured per tonne increased in the fourth quarter and full year of 2019 due primarily to the impact of lower production volumes compared to the same periods in 2018. |
Canpotex Sales by Market
| (percentage of sales volumes, except as otherwise noted) |
Three Months Ended December 31 | Twelve Months Ended December 31 | ||||||||||||||||||||||
| 2019 | 2018 | % Change | 2019 | 2018 | % Change | |||||||||||||||||||
| Latin America |
31 | 33 | (6 | ) | 31 | 33 | (6 | ) | ||||||||||||||||
| Other Asian markets 1 |
27 | 28 | (4 | ) | 27 | 31 | (13 | ) | ||||||||||||||||
| China |
17 | 17 | - | 22 | 18 | 22 | ||||||||||||||||||
| India |
7 | 14 | (50 | ) | 10 | 10 | - | |||||||||||||||||
| Other markets |
18 | 8 | 125 | 10 | 8 | 25 | ||||||||||||||||||
| 100 | 100 | 100 | 100 | |||||||||||||||||||||
| 1 All Asian markets except China and India. | ||||||||||||||||||||||||
5
Nitrogen
| Three Months Ended December 31 | ||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) |
Dollars | Tonnes (thousands) | Average per Tonne | |||||||||||||||||||||||||||||||||||||
| 2019 | 2018 1 | % Change | 2019 | 2018 1 | % Change | 2019 | 2018 1 | % Change | ||||||||||||||||||||||||||||||||
| Manufactured product 2 |
||||||||||||||||||||||||||||||||||||||||
| Net sales |
||||||||||||||||||||||||||||||||||||||||
| Ammonia |
141 | 235 | (40 | ) | 571 | 808 | (29 | ) | 245 | 290 | (16 | ) | ||||||||||||||||||||||||||||
| Urea |
193 | 231 | (16 | ) | 695 | 687 | 1 | 278 | 337 | (18 | ) | |||||||||||||||||||||||||||||
| Solutions, nitrates and sulfates |
166 | 180 | (8 | ) | 1,096 | 1,016 | 8 | 152 | 177 | (14 | ) | |||||||||||||||||||||||||||||
| 500 | 646 | (23 | ) | 2,362 | 2,511 | (6 | ) | 212 | 257 | (18 | ) | |||||||||||||||||||||||||||||
| Cost of goods sold |
404 | 439 | (8 | ) | 171 | 175 | (2 | ) | ||||||||||||||||||||||||||||||||
| Gross margin - manufactured |
96 | 207 | (54 | ) | 41 | 82 | (50 | ) | ||||||||||||||||||||||||||||||||
| Gross margin - other 3 |
11 | 17 | (35 | ) | Depreciation and amortization |
|
60 | 43 | 40 | |||||||||||||||||||||||||||||||
| Gross margin - total |
107 | 224 | (52 | ) | Gross margin excluding depreciation |
|
||||||||||||||||||||||||||||||||||
| (Income) Expenses |
(11 | ) | 11 | n/m | and amortization - manufactured 4 |
|
101 | 125 | (19 | ) | ||||||||||||||||||||||||||||||
| EBIT |
118 | 213 | (45 | ) | Ammonia controllable cash cost of |
|
||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
141 | 108 | 31 | product manufactured 4 |
|
48 | 44 | 9 | ||||||||||||||||||||||||||||||||
| EBITDA |
259 | 321 | (19 | ) | ||||||||||||||||||||||||||||||||||||
1 Restated for the reclassification of sulfate from the Phosphate segment. See Note 2 to the condensed consolidated financial statements.
2 Includes intersegment sales. See Note 2 to the condensed consolidated financial statements.
3 Includes other nitrogen (including ESN® and Rainbow) and purchased products and is comprised of net sales of $103 million (2018 – $99 million) less cost of goods sold of $92 million (2018 – $82 million).
4 See the “Non-IFRS Financial Measures” section.
| • | EBITDA decreased in the fourth quarter of 2019 as lower ammonia sales volumes and lower nitrogen net realized selling prices more than offset the impact of lower natural gas costs. EBITDA for 2019 increased compared to 2018 as lower natural gas costs, higher earnings from equity-accounted investees and the impact of adopting IFRS 16 more than offset lower sales volumes and net realized selling prices. |
| • | Sales volumes in the fourth quarter and full year of 2019 were down compared to the same period in 2018 as lower ammonia sales volumes in some of our highest netback regions were only partially offset by higher urea and solutions, nitrates and sulfates sales volumes. Ammonia sales volumes were impacted by compressed spring and fall application seasons in North America and turnaround activity at our Trinidad facility. |
| • | Net realized selling price of nitrogen was lower in the fourth quarter and full year of 2019 as benefits from our distribution network and product positioning were more than offset by lower global benchmark prices. |
| • | Cost of goods sold per tonne of nitrogen decreased in the fourth quarter of 2019 due primarily to lower natural gas costs. Cost of goods sold in 2019 was slightly higher compared to 2018 as lower natural gas costs in North America were offset by higher natural gas costs in Trinidad and a lower proportion of sales from lower cost facilities. Ammonia controllable cash cost of product manufactured per tonne increased in the fourth quarter and full year 2019 due to lower production volumes available for sale resulting from turnaround activity at our Trinidad facility. |
Natural Gas Prices
| Three Months Ended December 31 | Twelve Months Ended December 31 | |||||||||||||||||||||||
| (US dollars per MMBtu, except as otherwise noted) | 2019 | 2018 | % Change | 2019 | 2018 | % Change | ||||||||||||||||||
| Overall gas cost excluding realized derivative impact |
2.46 | 2.87 | (14 | ) | 2.47 | 2.54 | (3 | ) | ||||||||||||||||
| Realized derivative impact |
0.06 | 0.14 | (57 | ) | 0.11 | 0.29 | (62 | ) | ||||||||||||||||
| Overall gas cost |
2.52 | 3.01 | (16 | ) | 2.58 | 2.83 | (9 | ) | ||||||||||||||||
| Average NYMEX |
2.50 | 3.64 | (31 | ) | 2.63 | 3.09 | (15 | ) | ||||||||||||||||
| Average AECO |
1.76 | 1.45 | 21 | 1.22 | 1.19 | 3 | ||||||||||||||||||
| • | Gas costs decreased in the fourth quarter and full year 2019 compared to the same periods last year due primarily to lower gas costs in the US and a lower realized derivative impact. |
6
Phosphate
| (millions of US dollars, except as otherwise noted) |
Three Months Ended December 31 | |||||||||||||||||||||||||||||||||||||||||||
| Dollars | Tonnes (thousands) | Average per Tonne | ||||||||||||||||||||||||||||||||||||||||||
| 2019 | 2018 1 | % Change | 2019 | 2018 1 | % Change | 2019 | 2018 1 | % Change | ||||||||||||||||||||||||||||||||||||
| Manufactured product 2 |
||||||||||||||||||||||||||||||||||||||||||||
| Net sales |
||||||||||||||||||||||||||||||||||||||||||||
| Fertilizer |
155 | 255 | (39 | ) | 466 | 601 | (22 | ) | 334 | 423 | (21 | ) | ||||||||||||||||||||||||||||||||
| Industrial and feed |
105 | 106 | (1 | ) | 181 | 207 | (13 | ) | 581 | 513 | 13 | |||||||||||||||||||||||||||||||||
| 260 | 361 | (28 | ) | 647 | 808 | (20 | ) | 403 | 446 | (10 | ) | |||||||||||||||||||||||||||||||||
| Cost of goods sold |
255 | 346 | (26 | ) | 395 | 428 | (8 | ) | ||||||||||||||||||||||||||||||||||||
| Gross margin - manufactured |
5 | 15 | (67 | ) | 8 | 18 | (56 | ) | ||||||||||||||||||||||||||||||||||||
| Gross margin - other 3 |
1 | (2 | ) | n/m | Depreciation and amortization | 88 | 66 | 33 | ||||||||||||||||||||||||||||||||||||
| Gross margin - total |
6 | 13 | (54 | ) | Gross margin excluding depreciation |
|||||||||||||||||||||||||||||||||||||||
| Expenses |
9 | 13 | (31 | ) | and amortization - manufactured 4 |
96 | 84 | 14 | ||||||||||||||||||||||||||||||||||||
| EBIT |
(3 | ) | - | - | ||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
57 | 53 | 8 | |||||||||||||||||||||||||||||||||||||||||
| EBITDA |
54 | 53 | 2 | |||||||||||||||||||||||||||||||||||||||||
1 Restated for the reclassification of sulfate to the Nitrogen segment. See Note 2 to the condensed consolidated financial statements.
2 Includes intersegment sales. See Note 2 to the condensed consolidated financial statements.
3 Includes other phosphate and purchased products and is comprised of net sales of $27 million (2018 – $45 million) less cost of goods sold of $26 million (2018 - $47 million).
4 See the “Non-IFRS Financial Measures” section.
| • | EBITDA increased in the fourth quarter of 2019 due to lower phosphate rock and other raw material costs that were partially offset by lower sales volumes and lower net realized selling prices. EBITDA decreased in 2019 relative to 2018 due primarily to lower net realized selling prices and lower sales volumes. |
| • | Sales volumes decreased in the fourth quarter and the full year of 2019 due primarily to reduced fertilizer application in North America caused by adverse weather in both the spring and fall application seasons. Industrial and feed sales volumes in the same periods decreased due to the timing of sales. |
| • | Net realized selling price decreased in the fourth quarter and full year of 2019 compared to the same periods in 2018 as higher prices for industrial products were more than offset by lower dry phosphate fertilizer prices. |
| • | Cost of goods sold per tonne decreased in the fourth quarter compared to the same period in 2018 due to benefits from the conversion of our Redwater facility to ammonium sulfate and lower raw material costs. Cost of goods sold per tonne increased in the full year of 2019 due to higher non-cash asset retirement adjustments, and lower sales volumes that more than offset lower raw material costs. |
7
Forward-Looking Statements
Certain statements and other information included and incorporated by reference in this document 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 2020 annual guidance, including expectations regarding our adjusted net earnings per share and adjusted EBITDA (both consolidated and by segment); capital spending expectations for 2020; expectations regarding performance of our operating segments in 2020; our operating segment market outlooks and market conditions for 2020, and including anticipated supply and demand for our products and services, expected market and industry conditions with respect to crop nutrient application rates, planted acres, crop mix, prices and the impact of currency fluctuations and import and export volumes; and acquisitions and divestitures, and the expected synergies associated with various acquisitions, including timing thereof. 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, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place an undue reliance on these assumptions and such forward-looking statements. 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 that we will be able to implement our standards, controls, procedures and policies at any acquired businesses to realize the expected synergies; that future business, regulatory and industry conditions will be within the parameters expected by us, including with respect to prices, margins, demand, supply, product availability, supplier agreements, availability and cost of labor and interest, exchange and effective tax rates; the completion of our expansion projects on schedule, as planned and on budget; assumptions with respect to global economic conditions and the accuracy of our market outlook expectations for 2020 and in the future; the adequacy of our cash generated from operations and our ability to access our credit facilities or capital markets for additional sources of financing; our ability to identify suitable candidates for acquisitions and divestitures and negotiate acceptable terms; our ability to maintain investment grade ratings and achieve our performance targets; and the receipt, on time, of all necessary permits, utilities and project approvals with respect to our expansion projects and that we will have the resources necessary to meet the projects’ approach.
Events or circumstances that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: general global economic, market and business conditions; failure to complete announced and future acquisitions or divestitures at all or on the expected terms and within the expected timeline; climate change and weather conditions, including impacts from regional flooding and/or drought conditions; crop planted acreage, yield and prices; the supply and demand and price levels for our products; governmental and regulatory requirements and actions by governmental authorities, including changes in government policy (including tariffs, trade restrictions and climate change initiatives), government ownership requirements, changes in environmental, tax and other laws or regulations and the interpretation thereof; political risks, including civil unrest, actions by armed groups or conflict and malicious acts including terrorism; the occurrence of a major environmental or safety incident; innovation and cybersecurity risks related to our systems, including our costs of addressing or mitigating such risks; regional natural gas supply restrictions; counterparty and sovereign risk; delays in completion of turnarounds at our major facilities; gas supply interruptions; any significant impairment of the carrying value 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; and other risk factors detailed from time to time in Nutrien reports filed with the Canadian securities regulators and the Securities and Exchange Commission in the United States.
The purpose of our expected adjusted net earnings per share, adjusted EBITDA and EBITDA by segment guidance ranges, as well as our adjusted net earnings per share and adjusted EBITDA price and volume and input cost sensitivities ranges, are to assist readers in understanding our expected and targeted financial results, and this information may not be appropriate for other purposes.
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.
8
Terms and References
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”, “Abbreviated Company Names and Sources” and “Terms and Measures” sections of our 2018 Annual Report dated February 20, 2019. 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 data 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 around the globe increase food production in a sustainable manner. We produce and distribute 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.
For Further Information:
Investor and Media Relations:
Richard Downey
Vice President, Investor & Corporate Relations
(403) 225-7357
Investors@nutrien.com
Investor Relations
Tim Mizuno
Senior Manager, Investor Relations
(306) 933-8548
Contact us at: www.nutrien.com
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 Wednesday, February 19, 2020 at 10:00 am Eastern Time.
| • | Telephone Conference dial-in numbers: |
| • | From Canada and the US 1-877-702-9274 |
| • | International 1-647-689-5529 |
| • | 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 www.nutrien.com/investors/events |
9
Appendix A - Selected Additional Financial Data
Twelve Months Ended December 31, 2019 Operating Segment Results
Retail
| Twelve Months Ended December 31 | ||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) |
Dollars | Gross Margin | Gross Margin (%) | |||||||||||||||||||||||||||||||||||||
| 2019 | 2018 | % Change | 2019 | 2018 | % Change | 2019 | 2018 | |||||||||||||||||||||||||||||||||
| Sales |
||||||||||||||||||||||||||||||||||||||||
| Crop nutrients 1 |
4,989 | 4,577 | 9 | 1,032 | 923 | 12 | 21 | 20 | ||||||||||||||||||||||||||||||||
| Crop protection products |
4,983 | 4,862 | 2 | 1,173 | 1,155 | 2 | 24 | 24 | ||||||||||||||||||||||||||||||||
| Seed |
1,712 | 1,687 | 1 | 336 | 333 | 1 | 20 | 20 | ||||||||||||||||||||||||||||||||
| Merchandise 2 |
598 | 584 | 2 | 109 | 103 | 6 | 18 | 18 | ||||||||||||||||||||||||||||||||
| Services and other |
939 | 810 | 16 | 590 | 521 | 13 | 63 | 64 | ||||||||||||||||||||||||||||||||
| 13,221 | 12,520 | 6 | 3,240 | 3,035 | 7 | 25 | 24 | |||||||||||||||||||||||||||||||||
| Cost of goods sold 2 |
9,981 | 9,485 | 5 | |||||||||||||||||||||||||||||||||||||
| Gross margin |
3,240 | 3,035 | 7 | |||||||||||||||||||||||||||||||||||||
| Expenses 3 |
2,604 | 2,328 | 12 | |||||||||||||||||||||||||||||||||||||
| EBIT |
636 | 707 | (10 | ) | ||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
595 | 499 | 19 | |||||||||||||||||||||||||||||||||||||
| EBITDA |
1,231 | 1,206 | 2 | |||||||||||||||||||||||||||||||||||||
1 Includes intersegment sales. See Note 2 to the condensed consolidated financial statements.
2 Certain immaterial figures have been reclassified or grouped together for the twelve months ended December 31, 2018.
3 Includes selling expenses of $2,484 million (2018 – $2,303 million).
Potash
| Twelve Months Ended December 31 | ||||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) |
Dollars | Tonnes (thousands) | Average per Tonne | |||||||||||||||||||||||||||||||||||||||
| 2019 | 2018 | % Change | 2019 | 2018 | % Change | 2019 | 2018 | % Change | ||||||||||||||||||||||||||||||||||
| Manufactured product 1 |
||||||||||||||||||||||||||||||||||||||||||
| Net sales |
||||||||||||||||||||||||||||||||||||||||||
| North America |
978 | 1,007 | (3 | ) | 4,040 | 4,693 | (14 | ) | 242 | 214 | 13 | |||||||||||||||||||||||||||||||
| Offshore |
1,625 | 1,657 | (2 | ) | 7,481 | 8,326 | (10 | ) | 217 | 199 | 9 | |||||||||||||||||||||||||||||||
| 2,603 | 2,664 | (2 | ) | 11,521 | 13,019 | (12 | ) | 226 | 205 | 10 | ||||||||||||||||||||||||||||||||
| Cost of goods sold |
1,103 | 1,182 | (7 | ) | 96 | 91 | 5 | |||||||||||||||||||||||||||||||||||
| Gross margin - manufactured |
1,500 | 1,482 | 1 | 130 | 114 | 14 | ||||||||||||||||||||||||||||||||||||
| Gross margin - other 2 |
1 | 2 | (50 | ) | Depreciation and amortization |
|
34 | 31 | 10 | |||||||||||||||||||||||||||||||||
| Gross margin - total |
1,501 | 1,484 | 1 | |||||||||||||||||||||||||||||||||||||||
| Impairment of assets |
- | 1,809 | (100 | ) | Gross margin excluding depreciation |
|
||||||||||||||||||||||||||||||||||||
| Expenses 3 |
298 | 282 | 6 | and amortization - manufactured 4 |
|
164 | 145 | 13 | ||||||||||||||||||||||||||||||||||
| EBIT |
1,203 | (607 | ) | n/m | Potash cash cost of product |
|
||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
390 | 404 | (3 | ) | manufactured 4 |
|
63 | 60 | 5 | |||||||||||||||||||||||||||||||||
| EBITDA |
1,593 | (203 | ) | n/m | ||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA 4 |
1,593 | 1,606 | (1 | ) | ||||||||||||||||||||||||||||||||||||||
1 Includes intersegment sales. See Note 2 to the condensed consolidated financial statements.
2 Includes other potash and purchased products and is comprised of net sales of $1 million (2018 – $3 million) less cost of goods sold of $Nil (2018 – $1 million).
3 Includes provincial mining and other taxes of $287 million (2018 – $244 million).
4 See the “Non-IFRS Financial Measures” section.
10
Nitrogen
| Twelve Months Ended December 31 | ||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) |
Dollars | Tonnes (thousands) | Average per Tonne | |||||||||||||||||||||||||||||||||||||
| 2019 | 2018 1 | % Change | 2019 | 2018 1 | % Change | 2019 | 2018 1 | % Change | ||||||||||||||||||||||||||||||||
| Manufactured product 2 |
||||||||||||||||||||||||||||||||||||||||
| Net sales |
||||||||||||||||||||||||||||||||||||||||
| Ammonia |
743 | 903 | (18) | 2,971 | 3,330 | (11) | 250 | 271 | (8) | |||||||||||||||||||||||||||||||
| Urea |
932 | 895 | 4 | 3,037 | 3,003 | 1 | 307 | 298 | 3 | |||||||||||||||||||||||||||||||
| Solutions, nitrates and sulfates |
706 | 729 | (3) | 4,262 | 4,265 | - | 166 | 171 | (3) | |||||||||||||||||||||||||||||||
| 2,381 | 2,527 | (6) | 10,270 | 10,598 | (3) | 232 | 238 | (3) | ||||||||||||||||||||||||||||||||
| Cost of goods sold |
1,749 | 1,777 | (2) | 170 | 168 | 1 | ||||||||||||||||||||||||||||||||||
| Gross margin - manufactured |
632 | 750 | (16) | 62 | 70 | (11) | ||||||||||||||||||||||||||||||||||
| Gross margin - other 3 |
68 | 70 | (3) | Depreciation and amortization |
|
52 | 42 | 24 | ||||||||||||||||||||||||||||||||
| Gross margin - total |
700 | 820 | (15) | Gross margin excluding depreciation |
|
|||||||||||||||||||||||||||||||||||
| (Income) Expenses |
(4 | ) | 47 | n/m | and amortization - manufactured 4 |
|
114 | 112 | 2 | |||||||||||||||||||||||||||||||
| EBIT |
704 | 773 | (9) | Ammonia controllable cash cost of |
|
|||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
535 | 442 | 21 | product manufactured 4 |
|
45 | 43 | 5 | ||||||||||||||||||||||||||||||||
| EBITDA |
1,239 | 1,215 | 2 | |||||||||||||||||||||||||||||||||||||
1 Restated for the reclassification of sulfate from the Phosphate segment. See the “Segment Results” section and Note 2 to the condensed consolidated financial statements.
2 Includes intersegment sales. See Note 2 to the condensed consolidated financial statements.
3 Includes other nitrogen (including ESN® and Rainbow) and purchased products and is comprised of net sales of $467 million (2018 – $438 million) less cost of goods sold of $399 million (2018 – $368 million).
4 See the “Non-IFRS Financial Measures” section.
Phosphate
| Twelve Months Ended December 31 | ||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) |
Dollars | Tonnes (thousands) | Average per Tonne | |||||||||||||||||||||||||||||||||||||
| 2019 | 2018 1 | % Change | 2019 | 2018 1 | % Change | 2019 | 2018 1 | % Change | ||||||||||||||||||||||||||||||||
| Manufactured product 2 |
||||||||||||||||||||||||||||||||||||||||
| Net sales |
||||||||||||||||||||||||||||||||||||||||
| Fertilizer |
790 | 995 | (21) | 2,130 | 2,425 | (12) | 371 | 410 | (10) | |||||||||||||||||||||||||||||||
| Industrial and feed |
426 | 424 | - | 759 | 847 | (10) | 561 | 500 | 12 | |||||||||||||||||||||||||||||||
| 1,216 | 1,419 | (14) | 2,889 | 3,272 | (12) | 421 | 434 | (3) | ||||||||||||||||||||||||||||||||
| Cost of goods sold |
1,218 | 1,329 | (8) | 422 | 406 | 4 | ||||||||||||||||||||||||||||||||||
| Gross margin - manufactured |
(2 | ) | 90 | n/m | (1 | ) | 28 | n/m | ||||||||||||||||||||||||||||||||
| Gross margin - other 3 |
(3 | ) | (2 | ) | 50 | Depreciation and amortization |
|
82 | 59 | 39 | ||||||||||||||||||||||||||||||
| Gross margin - total |
(5 | ) | 88 | n/m | Gross margin excluding depreciation |
|
||||||||||||||||||||||||||||||||||
| Expenses |
38 | 26 | 46 | and amortization - manufactured 4 |
|
81 | 87 | (7) | ||||||||||||||||||||||||||||||||
| EBIT |
(43 | ) | 62 | n/m | ||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
237 | 193 | 23 | |||||||||||||||||||||||||||||||||||||
| EBITDA |
194 | 255 | (24) | |||||||||||||||||||||||||||||||||||||
1 Restated for the reclassification of sulfate to the Nitrogen segment. See the “Segment Results” section and Note 2 to the condensed consolidated financial statements.
2 Includes intersegment sales. See Note 2 to the condensed consolidated financial statements.
3 Includes other phosphate and purchased products and is comprised of net sales of $152 million (2018 – $142 million) less cost of goods sold of $155 million (2018 – $144 million).
4 See the “Non-IFRS Financial Measures” section.
11
| Selected Retail measures | Three Months Ended December 31 | Twelve Months Ended December 31 | ||||||||||||||
|
|
2019 | 2018 | 2019 | 2018 | ||||||||||||
| Proprietary products margin as a percentage of product line margin (%) |
||||||||||||||||
| Crop nutrients |
15 | 11 | 23 | 21 | ||||||||||||
| Crop protection products |
8 | 8 | 34 | 37 | ||||||||||||
| Seed |
11 | 16 | 38 | 38 | ||||||||||||
| All Products |
8 | 8 | 24 | 25 | ||||||||||||
| Crop nutrients sales volumes (tonnes - thousands) |
||||||||||||||||
| North America |
1,558 | 1,543 | 8,812 | 8,547 | ||||||||||||
| International |
559 | 447 | 2,236 | 2,142 | ||||||||||||
| Total |
2,117 | 1,990 | 11,048 | 10,689 | ||||||||||||
| Crop nutrients selling price per tonne |
||||||||||||||||
| North America |
436 | 456 | 465 | 437 | ||||||||||||
| International |
408 | 479 | 398 | 395 | ||||||||||||
| Total |
428 | 461 | 452 | 428 | ||||||||||||
| Crop nutrients gross margin per tonne |
||||||||||||||||
| North America |
95 | 96 | 102 | 94 | ||||||||||||
| International |
68 | 80 | 60 | 57 | ||||||||||||
| Total |
88 | 92 | 93 | 86 | ||||||||||||
| Financial performance measures | 2019 Target | 2019 Actuals | ||||||||||||||
| Retail EBITDA to sales (%) 1, 2 |
10 | 9 | ||||||||||||||
| Retail adjusted average working capital to sales (%) 1, 2 |
|
20 | 23 | |||||||||||||
| Retail cash operating coverage ratio (%) 1, 2 |
|
60 | 62 | |||||||||||||
| Retail normalized comparable store sales (%) 2 |
|
(1 | ) | |||||||||||||
| Retail EBITDA per US selling location (thousands of US dollars) 1, 2 |
|
967 | ||||||||||||||
1 Rolling four quarters ended December 31, 2019.
2 See the “Non-IFRS Financial Measures” section.
| Selected Nitrogen measures | Three Months Ended December 31 | Twelve Months Ended December 31 | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Sales volumes (tonnes - thousands) |
||||||||||||||||
| Fertilizer |
1,350 | 1,331 | 5,554 | 5,680 | ||||||||||||
| Industrial and feed |
1,012 | 1,180 | 4,716 | 4,918 | ||||||||||||
| Net sales (millions of US dollars) |
||||||||||||||||
| Fertilizer |
311 | 359 | 1,466 | 1,444 | ||||||||||||
| Industrial and feed |
189 | 287 | 915 | 1,083 | ||||||||||||
| Net selling price per tonne |
||||||||||||||||
| Fertilizer |
230 | 269 | 264 | 254 | ||||||||||||
| Industrial and feed |
187 | 243 | 194 | 220 | ||||||||||||
| Production measures | Three Months Ended December 31 | Twelve Months Ended December 31 | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Potash production (Product tonnes - thousands) |
1,939 | 3,039 | 11,700 | 12,842 | ||||||||||||
| Potash shutdown weeks 1 |
28 | 7 | 55 | 39 | ||||||||||||
| Nitrogen production (Ammonia tonnes - thousands) 2 |
1,401 | 1,547 | 6,164 | 6,372 | ||||||||||||
| Ammonia operating rate (%) 3 |
94 | 87 | 91 | 92 | ||||||||||||
| Phosphate production (P2O5 tonnes - thousands) 4 |
390 | 412 | 1,514 | 1,551 | ||||||||||||
| Phosphate P2O5 operating rate (%) 4 |
91 | 96 | 89 | 91 | ||||||||||||
1 Represents weeks of full production shutdown, excluding the impact of any periods of reduced operating rates and planned routine annual maintenance shutdowns and announced workforce reductions.
2 All figures are provided on a gross production basis.
3 Excludes Trinidad and Joffre.
4 Excludes Redwater. Comparative figures were restated to exclude Redwater.
12
Appendix B - Non-IFRS Financial Measures
We use both IFRS and certain non-IFRS financial measures to assess performance. Non-IFRS financial measures are numerical measures of a company’s performance, that either exclude or include amounts that are not normally excluded or included in the most directly comparable measures calculated and presented in accordance with IFRS. In evaluating these measures, investors should consider that the methodology applied in calculating such measures may differ among companies and analysts.
Management believes the non-IFRS financial measures provide transparent and useful supplemental information to help investors evaluate our financial performance, financial condition and liquidity using the same measures as management. These non-IFRS financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS.
The following section outlines our non-IFRS financial measures, their definitions and why management uses each measure. It includes reconciliations to the most directly comparable IFRS measures.
EBITDA, Adjusted EBITDA and Potash Adjusted EBITDA
Most directly comparable IFRS financial measure: Net earnings (loss) from continuing operations.
Definition: EBITDA is calculated as net earnings (loss) from continuing operations before finance costs, income taxes and depreciation and amortization. Adjusted EBITDA is calculated as net earnings (loss) from continuing operations before finance costs, income taxes, depreciation and amortization, Merger and related costs, acquisition and integration related costs, share-based compensation, defined benefit plans curtailment gain, impairment of assets, and foreign exchange gain/loss, net of related derivatives. In the fourth quarter of 2019, we amended our calculations of adjusted EBITDA and restated the comparative periods to exclude the impact of foreign exchange gain/loss, net of related derivatives, as foreign exchange changes are not indicative of our operating performance. We have also amended our calculations of adjusted EBITDA to adjust for acquisition and integration related costs for certain acquisitions such as Ruralco. There were no similar acquisitions in the comparative periods.
Why we use the measure and why it is useful to investors: These are meaningful measures because they are not impacted by long-term investment and financing decisions, but rather focus on the performance of our day-to-day operations. These provide a measure of our ability to service debt and to meet other payment obligations.
| Three Months Ended December 31 | Twelve Months Ended December 31 | |||||||||||||||
| (millions of US dollars) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Net (loss) earnings from continuing operations |
(48 | ) | 296 | 992 | (31 | ) | ||||||||||
| Finance costs |
141 | 144 | 554 | 538 | ||||||||||||
| Income tax (recovery) expense |
(30 | ) | 106 | 316 | (93 | ) | ||||||||||
| Depreciation and amortization |
436 | 398 | 1,799 | 1,592 | ||||||||||||
| EBITDA |
499 | 944 | 3,661 | 2,006 | ||||||||||||
| Merger and related costs |
25 | 27 | 82 | 170 | ||||||||||||
| Acquisition and integration related costs |
16 | - | 16 | - | ||||||||||||
| Share-based compensation |
9 | (33 | ) | 104 | 116 | |||||||||||
| Defined benefit plans curtailment gain |
- | (6 | ) | - | (157 | ) | ||||||||||
| Impairment of assets |
87 | - | 120 | 1,809 | ||||||||||||
| Foreign exchange loss (gain), net of related derivatives |
28 | (8 | ) | 42 | (10 | ) | ||||||||||
| Adjusted EBITDA |
664 | 924 | 4,025 | 3,934 | ||||||||||||
| Three Months Ended December 31 | Twelve Months Ended December 31 | |||||||||||||||
| (millions of US dollars) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Potash EBITDA |
149 | 394 | 1,593 | (203 | ) | |||||||||||
| Impairment of assets |
- | - | - | 1,809 | ||||||||||||
| Potash adjusted EBITDA |
149 | 394 | 1,593 | 1,606 | ||||||||||||
13
Adjusted EBITDA, Adjusted Net Earnings and Adjusted Net Earnings Per Share Guidance
This guidance is provided on a non-IFRS basis. We do not provide a reconciliation of such forward-looking measures to the most directly comparable financial measures calculated and presented in accordance with IFRS due to unknown variables and the uncertainty related to future results. These unknown variables may include unpredictable transactions of significant value that may be inherently difficult to determine, without unreasonable efforts. Guidance excludes the impacts of acquisition and integration related costs, share-based compensation and foreign exchange gain/loss, net of related derivatives.
Adjusted Net Earnings and Adjusted Net Earnings Per Share
Most directly comparable IFRS financial measure: Net earnings from continuing operations and net earnings per share.
Definition: Net earnings from continuing operations before Merger and related costs, acquisition and integration related costs, share-based compensation, impairment of assets and foreign exchange gain/loss (net of related derivatives), net of tax. In the fourth quarter of 2019, we amended our calculations of adjusted net earnings to exclude the impact of foreign exchange gain/loss, net of derivatives, as foreign exchange changes are not indicative of our operating performance. We have also amended our calculations of adjusted net earnings to adjust for acquisition and integration related costs for certain acquisitions such as Ruralco.
Why we use the measure and why it is useful to investors: Focuses on the performance of our day-to-day operations excluding the effects of non-operating items.
| Three Months Ended December 31, 2019 |
Twelve Months Ended December 31, 2019 |
|||||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) |
Increases (Decreases) |
Post-Tax | Per Diluted Share |
Increases (Decreases) |
Post-Tax | Per Diluted Share |
||||||||||||||||||
| Net (loss) earnings from continuing operations |
(48 | ) | (0.08 | ) | 992 | 1.70 | ||||||||||||||||||
| Adjustments: |
||||||||||||||||||||||||
| Merger and related costs |
25 | 15 | 0.02 | 82 | 62 | 0.10 | ||||||||||||||||||
| Acquisition and integration related costs |
16 | 11 | 0.02 | 16 | 12 | 0.02 | ||||||||||||||||||
| Share-based compensation |
9 | 6 | 0.01 | 104 | 79 | 0.14 | ||||||||||||||||||
| Impairment of assets |
87 | 53 | 0.09 | 120 | 91 | 0.16 | ||||||||||||||||||
| Foreign exchange loss, net of related derivatives |
28 | 17 | 0.03 | 42 | 32 | 0.05 | ||||||||||||||||||
| Adjusted net earnings |
54 | 0.09 | 1,268 | 2.17 | ||||||||||||||||||||
Free Cash Flow and Free Cash Flow Including Changes in Non-Cash Working Capital
Most directly comparable IFRS financial measure: Cash from operations before working capital changes.
Definition: Cash from operations before working capital changes less sustaining capital expenditures and cash provided by operating activities from discontinued operations. We also calculate this measure including changes in non-cash working capital.
Why we use the measure and why it is useful to investors: For evaluation of liquidity and financial strength, and as a component of employee remuneration calculations. These are also useful as an indicator 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 December 31 | Twelve Months Ended December 31 | |||||||||||||||
| (millions of US dollars) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Cash from operations before working capital changes |
489 | 724 | 3,175 | 3,190 | ||||||||||||
| Cash used in (provided by) operating activities from discontinued operations |
- | 26 | - | (130 | ) | |||||||||||
| Sustaining capital expenditures |
(351 | ) | (347 | ) | (1,018 | ) | (1,085 | ) | ||||||||
| Free cash flow |
138 | 403 | 2,157 | 1,975 | ||||||||||||
| Changes in non-cash working capital |
1,930 | 1,244 | 490 | (1,138 | ) | |||||||||||
| Free cash flow including changes in non-cash working capital |
2,068 | 1,647 | 2,647 | 837 | ||||||||||||
14
Potash Cash Cost of Product Manufactured (“COPM”)
Most directly comparable IFRS financial measure: Cost of goods sold (“COGS”) for the Potash segment.
Definition: Potash COGS for the period excluding depreciation and amortization expense and inventory and other adjustments divided by the production tonnes for the period.
Why we use the measure and why it is useful to investors: To assess operational performance. Potash cash COPM excludes the effects of production from other periods and long-term investment decisions, supporting a focus on the performance of our day-to-day operations.
| Three Months Ended December 31 | Twelve Months Ended December 31 | |||||||||||||||
| (millions of US dollars, except as otherwise noted) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Total COGS - Potash |
211 | 271 | 1,103 | 1,183 | ||||||||||||
| Change in inventory |
11 | 33 | 10 | (5 | ) | |||||||||||
| Other adjustments |
- | (4 | ) | (16 | ) | (14 | ) | |||||||||
| COPM |
222 | 300 | 1,097 | 1,164 | ||||||||||||
| Depreciation and amortization included in COPM |
(63 | ) | (98 | ) | (355 | ) | (391 | ) | ||||||||
| Cash COPM |
159 | 202 | 742 | 773 | ||||||||||||
| Production tonnes (tonnes - thousands) |
1,939 | 3,039 | 11,700 | 12,842 | ||||||||||||
| Potash cash COPM per tonne |
82 | 67 | 63 | 60 | ||||||||||||
Ammonia Controllable Cash COPM
Most directly comparable IFRS financial measure: COGS for the Nitrogen segment.
Definition: The total of COGS for the Nitrogen segment excluding depreciation and amortization expense included in COGS, cash COGS for products other than ammonia, other adjustments, and natural gas and steam costs, divided by net ammonia production tonnes.
Why we use the measure and why it is useful to investors: To assess operational performance. Ammonia controllable cash COPM excludes the effects of production from other periods, the costs of natural gas and steam, and long-term investment decisions, supporting a focus on the performance of our day-to-day operations.
| Three Months Ended December 31 | Twelve Months Ended December 31 | |||||||||||||||
| (millions of US dollars, except as otherwise noted) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Total COGS - Nitrogen |
496 | 521 | 2,148 | 2,145 | ||||||||||||
| Depreciation and amortization in COGS |
(122 | ) | (108 | ) | (462 | ) | (442 | ) | ||||||||
| Cash COGS for products other than ammonia |
(274 | ) | (286 | ) | (1,226 | ) | (1,212 | ) | ||||||||
| Ammonia |
||||||||||||||||
| Total cash COGS before other adjustments |
100 | 127 | 460 | 491 | ||||||||||||
| Other adjustments 1 |
(22 | ) | - | (57 | ) | (28 | ) | |||||||||
| Total cash COPM |
78 | 127 | 403 | 463 | ||||||||||||
| Natural gas and steam costs |
(52 | ) | (90 | ) | (273 | ) | (321 | ) | ||||||||
| Controllable cash COPM |
26 | 37 | 130 | 142 | ||||||||||||
| Production tonnes (net tonnes 2 - thousands) |
544 | 843 | 2,887 | 3,320 | ||||||||||||
| Ammonia controllable cash COPM per tonne |
48 | 44 | 45 | 43 | ||||||||||||
1 Includes changes in inventory balances and other adjustments.
2 Ammonia tonnes available for sale, as not upgraded to other Nitrogen products.
Gross Margin Excluding Depreciation and Amortization Per Tonne - Manufactured
Most directly comparable IFRS financial measure: Gross margin.
Definition: Gross margin from manufactured products per tonne less depreciation and amortization per tonne. Reconciliations are provided in the “Segment Results” section and “Appendix A - Selected Additional Financial Data”.
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.
15
Retail EBITDA to Sales
Most directly comparable IFRS financial measure: Retail EBITDA divided by Retail sales.
Definition: Retail EBITDA divided by Retail sales for the last four rolling quarters.
Why we use the measure and why it is useful to investors: To evaluate operational efficiency. A higher or lower percentage represents increased or decreased efficiency, respectively.
| Rolling four quarters ended December 31, 2019 | ||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Total | |||||||||||||||
| EBITDA |
(26 | ) | 836 | 190 | 231 | 1,231 | ||||||||||||||
| Sales |
2,039 | 6,512 | 2,499 | 2,171 | 13,221 | |||||||||||||||
| EBITDA to Sales (%) |
9 | |||||||||||||||||||
Retail Adjusted Average Working Capital to Sales
Most directly comparable IFRS financial measure: (Current assets minus current liabilities for Retail) divided by Retail sales.
Definition: Retail average working capital divided by Retail sales for the last four rolling quarters excluding working capital acquired in the quarter certain recent acquisitions, such as Ruralco, were completed.
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.
| Rolling four quarters ended December 31, 2019 | ||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Average/Total | |||||||||||||||
| Working capital |
3,190 | 3,741 | 3,699 | 1,759 | ||||||||||||||||
| Working capital from certain recent acquisitions |
- | - | (75 | ) | (138 | ) | ||||||||||||||
| Adjusted working capital |
3,190 | 3,741 | 3,624 | 1,621 | 3,044 | |||||||||||||||
| Sales |
2,039 | 6,512 | 2,499 | 2,171 | 13,221 | |||||||||||||||
| Adjusted average working capital to sales (%) |
23 | |||||||||||||||||||
Retail Cash Operating Coverage Ratio
Most directly comparable IFRS financial measure: Retail operating expenses 1 as a percentage of Retail gross margin.
Definition: Retail operating expenses excluding depreciation and amortization expense, divided by Retail gross margin excluding depreciation and amortization expense in cost of goods sold for the last four rolling quarters.
Why we use the measure and why it is useful to investors: To understand the costs and underlying economics of our Retail operations and to assess our Retail operating performance and ability to generate free cash flow.
| Rolling four quarters ended December 31, 2019 | ||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Total | |||||||||||||||
| Gross margin |
409 | 1,440 | 655 | 736 | 3,240 | |||||||||||||||
| Depreciation and amortization in cost of goods sold |
2 | 1 | 2 | 2 | 7 | |||||||||||||||
| Gross margin excluding depreciation and amortization |
411 | 1,441 | 657 | 738 | 3,247 | |||||||||||||||
| Operating expenses |
571 | 749 | 617 | 667 | 2,604 | |||||||||||||||
| Depreciation and amortization in operating expenses |
(132 | ) | (143 | ) | (150 | ) | (160 | ) | (585 | ) | ||||||||||
| Operating expenses excluding depreciation and amortization |
439 | 606 | 467 | 507 | 2,019 | |||||||||||||||
| Cash operating coverage ratio (%) |
62 | |||||||||||||||||||
1 Includes Retail expenses below gross margin including selling expenses, general and administrative expenses and other (income) expenses.
16
Retail EBITDA per US Selling Location
Most directly comparable IFRS financial measure: Retail US EBITDA.
Definition: Total Retail US EBITDA for the last four rolling quarters adjusted for acquisitions in those quarters, divided by the number of US locations that have generated sales in the last four rolling quarters adjusted for acquired locations.
Why we use the measure and why it is useful to investors: To assess our US Retail operating performance. Includes locations we have owned for more than 12 months.
| Rolling four quarters ended December 31, 2019 | ||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Total | |||||||||||||||
| US EBITDA |
(58 | ) | 672 | 142 | 143 | 899 | ||||||||||||||
| Adjustments for acquisitions |
(27 | ) | ||||||||||||||||||
| US EBITDA adjusted for acquisitions |
872 | |||||||||||||||||||
| Number of US selling locations adjusted for acquisitions |
902 | |||||||||||||||||||
| EBITDA per US selling location (thousands of US dollars) |
|
967 | ||||||||||||||||||
Retail Normalized Comparable Store Sales
Most directly comparable IFRS financial measure: Retail sales from comparable base as a component of total Retail sales.
Definition: Prior year comparable store sales adjusted for published potash, nitrogen and phosphate benchmark prices and foreign exchange rates used in the current year. We retain sales of closed locations in the comparable base if the closed location is in close proximity to an existing location, unless we plan to exit the market area or are unable to economically or logistically serve it. We do not adjust for temporary closures, expansions or renovations of stores.
Why we use the measure and why it is useful to investors: To evaluate sales growth by adjusting for fluctuations in commodity prices and foreign exchange rates. Includes locations we have owned for more than 12 months.
| Twelve Months Ended December 31 | ||||||||
| (millions of US dollars, except as otherwise noted) | 2019 | 2018 | ||||||
| Sales from comparable base |
||||||||
| Current period |
12,568 | 12,253 | ||||||
| Prior period |
12,520 | 1 | 12,103 | |||||
| Comparable store sales (%) |
0 | 1 | ||||||
| Prior period normalized for benchmark prices and foreign exchange rates |
12,636 | 1 | 12,363 | |||||
| Normalized comparable store sales (%) |
(1 | ) | (1 | ) | ||||
1 Certain immaterial figures have been reclassified for 2018.
17
| Unaudited | In millions of US dollars except as otherwise noted |
Condensed Consolidated Financial Statements
Condensed Consolidated Statements of (Loss) Earnings
| Three Months Ended December 31 |
Twelve Months Ended December 31 |
|||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||||||
| Note 1 | Note 1 | |||||||||||||||||||
| SALES |
Note 2 | 3,442 | 3,762 | 20,023 | 19,636 | |||||||||||||||
| Freight, transportation and distribution |
172 | 189 | 768 | 864 | ||||||||||||||||
| Cost of goods sold |
2,256 | 2,314 | 13,814 | 13,380 | ||||||||||||||||
| GROSS MARGIN |
1,014 | 1,259 | 5,441 | 5,392 | ||||||||||||||||
| Selling expenses |
670 | 579 | 2,505 | 2,337 | ||||||||||||||||
| General and administrative expenses |
117 | 111 | 404 | 423 | ||||||||||||||||
| Provincial mining and other taxes |
39 | 58 | 292 | 250 | ||||||||||||||||
| Share-based compensation expense (recovery) |
9 | (33 | ) | 104 | 116 | |||||||||||||||
| Impairment of assets |
87 | - | 120 | 1,809 | ||||||||||||||||
| Other expenses (income) |
29 | (2 | ) | 154 | 43 | |||||||||||||||
| EARNINGS BEFORE FINANCE COSTS AND INCOME TAXES |
|
63 | 546 | 1,862 | 414 | |||||||||||||||
| Finance costs |
141 | 144 | 554 | 538 | ||||||||||||||||
| (LOSS) EARNINGS BEFORE INCOME TAXES |
(78 | ) | 402 | 1,308 | (124 | ) | ||||||||||||||
| Income tax (recovery) expense |
(30 | ) | 106 | 316 | (93 | ) | ||||||||||||||
| NET (LOSS) EARNINGS FROM CONTINUING OPERATIONS |
|
(48 | ) | 296 | 992 | (31 | ) | |||||||||||||
| Net earnings from discontinued operations |
- | 2,906 | - | 3,604 | ||||||||||||||||
| NET (LOSS) EARNINGS |
(48 | ) | 3,202 | 992 | 3,573 | |||||||||||||||
| NET (LOSS) EARNINGS PER SHARE FROM CONTINUING OPERATIONS |
|
|||||||||||||||||||
| Basic |
(0.08 | ) | 0.48 | 1.70 | (0.05 | ) | ||||||||||||||
| Diluted |
(0.08 | ) | 0.48 | 1.70 | (0.05 | ) | ||||||||||||||
| NET EARNINGS PER SHARE FROM DISCONTINUED OPERATIONS |
|
|||||||||||||||||||
| Basic |
- | 4.75 | - | 5.77 | ||||||||||||||||
| Diluted |
- | 4.74 | - | 5.77 | ||||||||||||||||
| NET (LOSS) EARNINGS PER SHARE (“EPS”) |
||||||||||||||||||||
| Basic |
(0.08 | ) | 5.23 | 1.70 | 5.72 | |||||||||||||||
| Diluted |
(0.08 | ) | 5.22 | 1.70 | 5.72 | |||||||||||||||
| Weighted average shares outstanding for basic EPS |
572,916,000 | 612,151,000 | 582,269,000 | 624,900,000 | ||||||||||||||||
| Weighted average shares outstanding for diluted EPS |
572,916,000 | 612,947,000 | 583,102,000 | 624,900,000 | ||||||||||||||||
| Condensed Consolidated Statements of Comprehensive Income |
| |||||||||||||||||||
| Three Months Ended December 31 |
Twelve Months Ended December 31 |
|||||||||||||||||||
| (Net of related income taxes) | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||
| NET (LOSS) EARNINGS |
(48 | ) | 3,202 | 992 | 3,573 | |||||||||||||||
| Other comprehensive income (loss) |
||||||||||||||||||||
| Items that will not be reclassified to net (loss) earnings: |
||||||||||||||||||||
| Net actuarial gain (loss) on defined benefit plans |
7 | (2 | ) | 7 | 54 | |||||||||||||||
| Net fair value gain (loss) on investments |
1 | (20 | ) | (25 | ) | (99 | ) | |||||||||||||
| Items that have been or may be subsequently reclassified to net (loss) earnings: |
||||||||||||||||||||
| Gain (loss) on currency translation of foreign operations |
83 | (103 | ) | 47 | (249 | ) | ||||||||||||||
| Other |
2 | (3 | ) | 7 | (8 | ) | ||||||||||||||
| OTHER COMPREHENSIVE INCOME (LOSS) |
93 | (128 | ) | 36 | (302 | ) | ||||||||||||||
| COMPREHENSIVE INCOME |
45 | 3,074 | 1,028 | 3,271 | ||||||||||||||||
(See Notes to the Condensed Consolidated Financial Statements)
18
| Unaudited | In millions of US dollars except as otherwise noted |
Condensed Consolidated Statements of Cash Flows
| Three Months Ended December 31 |
Twelve Months Ended December 31 |
|||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Note 1 | Note 1 | |||||||||||||||
| OPERATING ACTIVITIES |
||||||||||||||||
| Net (loss) earnings |
(48 | ) | 3,202 | 992 | 3,573 | |||||||||||
| Adjustments for: |
||||||||||||||||
| Depreciation and amortization |
436 | 398 | 1,799 | 1,592 | ||||||||||||
| Share-based compensation |
9 | (33 | ) | 104 | 116 | |||||||||||
| Impairment of assets |
87 | - | 120 | 1,809 | ||||||||||||
| (Recovery of) provision for deferred income tax |
(1 | ) | (232 | ) | 177 | (290 | ) | |||||||||
| Gain on sale of investments in Sociedad Quimica y Minera de Chile S.A. (“SQM”) and Arab Potash Company |
- | (3,558 | ) | - | (4,399 | ) | ||||||||||
| Income tax related to the sale of the investment in SQM |
- | 977 | - | 977 | ||||||||||||
| Other long-term liabilities and miscellaneous |
6 | (30 | ) | (17 | ) | (188 | ) | |||||||||
| Cash from operations before working capital changes |
489 | 724 | 3,175 | 3,190 | ||||||||||||
| Changes in non-cash operating working capital: |
||||||||||||||||
| Receivables |
1,363 | 1,351 | (64 | ) | (153 | ) | ||||||||||
| Inventories |
(1,049 | ) | (1,011 | ) | 190 | (887 | ) | |||||||||
| Prepaid expenses and other current assets |
(1,039 | ) | (176 | ) | (238 | ) | 561 | |||||||||
| Payables and accrued charges |
2,655 | 1,080 | 602 | (659 | ) | |||||||||||
| CASH PROVIDED BY OPERATING ACTIVITIES |
2,419 | 1,968 | 3,665 | 2,052 | ||||||||||||
| INVESTING ACTIVITIES |
||||||||||||||||
| Additions to property, plant and equipment |
(551 | ) | (492 | ) | (1,728 | ) | (1,405 | ) | ||||||||
| Additions to intangible assets |
(45 | ) | (51 | ) | (163 | ) | (102 | ) | ||||||||
| Business acquisitions, net of cash acquired |
(74 | ) | (48 | ) | (911 | ) | (433 | ) | ||||||||
| Proceeds from disposal of discontinued operations, net of tax |
- | 3,561 | 55 | 5,394 | ||||||||||||
| Purchase of investments |
(34 | ) | (12 | ) | (198 | ) | (135 | ) | ||||||||
| Cash acquired in Merger |
- | - | - | 466 | ||||||||||||
| Other |
39 | 26 | 147 | 102 | ||||||||||||
| CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES |
(665 | ) | 2,984 | (2,798 | ) | 3,887 | ||||||||||
| FINANCING ACTIVITIES |
||||||||||||||||
| Transaction costs on long-term debt |
- | - | (29 | ) | (21 | ) | ||||||||||
| (Repayment of) proceeds from short-term debt, net |
(1,318 | ) | (4,141 | ) | 216 | (927 | ) | |||||||||
| Proceeds from long-term debt |
- | - | 1,510 | - | ||||||||||||
| Repayment of long-term debt |
- | (4 | ) | (1,010 | ) | (12 | ) | |||||||||
| Repayment of principal portion of lease liabilities |
(68 | ) | - | (234 | ) | - | ||||||||||
| Dividends paid |
(258 | ) | (244 | ) | (1,022 | ) | (952 | ) | ||||||||
| Repurchase of common shares |
- | (137 | ) | (1,930 | ) | (1,800 | ) | |||||||||
| Issuance of common shares |
2 | - | 20 | 7 | ||||||||||||
| CASH USED IN FINANCING ACTIVITIES |
(1,642 | ) | (4,526 | ) | (2,479 | ) | (3,705 | ) | ||||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(9 | ) | (14 | ) | (31 | ) | (36 | ) | ||||||||
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
103 | 412 | (1,643 | ) | 2,198 | |||||||||||
| CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD |
568 | 1,902 | 2,314 | 116 | ||||||||||||
| CASH AND CASH EQUIVALENTS – END OF PERIOD |
671 | 2,314 | 671 | 2,314 | ||||||||||||
| Cash and cash equivalents comprised of: |
||||||||||||||||
| Cash |
532 | 1,506 | 532 | 1,506 | ||||||||||||
| Short-term investments |
139 | 808 | 139 | 808 | ||||||||||||
| 671 | 2,314 | 671 | 2,314 | |||||||||||||
| SUPPLEMENTAL CASH FLOWS INFORMATION |
||||||||||||||||
| Interest paid |
152 | 141 | 505 | 507 | ||||||||||||
| Income taxes paid |
28 | 1,032 | 29 | 1,155 | ||||||||||||
| Total cash outflow for leases |
92 | - | 345 | - | ||||||||||||
(See Notes to the Condensed Consolidated Financial Statements)
19
| Unaudited | In millions of US dollars except as otherwise noted |
Condensed Consolidated Statements of Changes in Shareholders’ Equity
| Accumulated Other Comprehensive (Loss) Income (“AOCI”) | ||||||||||||||||||||||||||||||||||||
| Share Capital |
Contributed Surplus |
Net Fair Value Gain (Loss) on Investments |
Net Actuarial Gain on Defined Benefit Plans 1 |
Loss on Currency Translation of Foreign Operations |
Other | Total AOCI |
Retained Earnings |
Total Equity 2 |
||||||||||||||||||||||||||||
| BALANCE – DECEMBER 31, 2017 |
1,806 | 230 | 73 | - | (2 | ) | (46 | ) | 25 | 6,242 | 8,303 | |||||||||||||||||||||||||
| Merger impact |
15,898 | 7 | - | - | - | - | - | (1 | ) | 15,904 | ||||||||||||||||||||||||||
| Net earnings |
- | - | - | - | - | - | - | 3,573 | 3,573 | |||||||||||||||||||||||||||
| Other comprehensive (loss) income |
- | - | (99 | ) | 54 | (249 | ) | (8 | ) | (302 | ) | - | (302 | ) | ||||||||||||||||||||||
| Shares repurchased |
(998 | ) | (23 | ) | - | - | - | - | - | (831 | ) | (1,852 | ) | |||||||||||||||||||||||
| Dividends declared |
- | - | - | - | - | - | - | (1,273 | ) | (1,273 | ) | |||||||||||||||||||||||||
| Effect of share-based compensation including issuance of common shares |
34 | 17 | - | - | - | - | - | - | 51 | |||||||||||||||||||||||||||
| Transfer of net loss on sale of investment |
- | - | 19 | - | - | - | 19 | (19 | ) | - | ||||||||||||||||||||||||||
| Transfer of net loss on cash flow hedges |
- | - | - | - | - | 21 | 21 | - | 21 | |||||||||||||||||||||||||||
| Transfer of net actuarial gain on defined benefit plans |
- | - | - | (54 | ) | - | - | (54 | ) | 54 | - | |||||||||||||||||||||||||
| BALANCE – DECEMBER 31, 2018 |
16,740 | 231 | (7 | ) | - | (251 | ) | (33 | ) | (291 | ) | 7,745 | 24,425 | |||||||||||||||||||||||
| Net earnings |
- | - | - | - | - | - | - | 992 | 992 | |||||||||||||||||||||||||||
| Other comprehensive (loss) income |
- | - | (25 | ) | 7 | 47 | 7 | 36 | - | 36 | ||||||||||||||||||||||||||
| Shares repurchased |
(992 | ) | - | - | - | - | - | - | (886 | ) | (1,878 | ) | ||||||||||||||||||||||||
| Dividends declared |
- | - | - | - | - | - | - | (754 | ) | (754 | ) | |||||||||||||||||||||||||
| Effect of share-based compensation including issuance of common shares |
23 | 17 | - | - | - | - | - | - | 40 | |||||||||||||||||||||||||||
| Transfer of net loss on investment |
- | - | 3 | - | - | - | 3 | (3 | ) | - | ||||||||||||||||||||||||||
| Transfer of net loss on cash flow hedges |
- | - | - | - | - | 8 | 8 | - | 8 | |||||||||||||||||||||||||||
| Transfer of net actuarial gain on defined benefit plans |
- | - | - | (7 | ) | - | - | (7 | ) | 7 | - | |||||||||||||||||||||||||
| BALANCE – DECEMBER 31, 2019 |
15,771 | 248 | (29 | ) | - | (204 | ) | (18 | ) | (251 | ) | 7,101 | 22,869 | |||||||||||||||||||||||
1 Any amounts incurred during a period were closed out to retained earnings at each period-end. Therefore, no balance exists at the beginning or end of period.
2 All equity transactions were attributable to common shareholders.
(See Notes to the Condensed Consolidated Financial Statements)
20
| Unaudited | In millions of US dollars except as otherwise noted |
Condensed Consolidated Balance Sheets
| As at | December 31, 2019 | December 31, 2018 | ||||||||||
| ASSETS |
||||||||||||
| Current assets |
||||||||||||
| Cash and cash equivalents |
671 | 2,314 | ||||||||||
| Receivables |
3,542 | 3,342 | ||||||||||
| Inventories |
4,975 | 4,917 | ||||||||||
| Prepaid expenses and other current assets |
1,477 | 1,089 | ||||||||||
| 10,665 | 11,662 | |||||||||||
| Non-current assets |
||||||||||||
| Property, plant and equipment |
Note 1 | 20,335 | 18,796 | |||||||||
| Goodwill |
11,986 | 11,431 | ||||||||||
| Other intangible assets |
2,428 | 2,210 | ||||||||||
| Investments |
821 | 878 | ||||||||||
| Other assets |
564 | 525 | ||||||||||
| TOTAL ASSETS |
46,799 | 45,502 | ||||||||||
| LIABILITIES |
||||||||||||
| Current liabilities |
||||||||||||
| Short-term debt |
976 | 629 | ||||||||||
| Current portion of long-term debt |
502 | 995 | ||||||||||
| Current portion of lease liabilities |
Note 1 | 214 | 8 | |||||||||
| Payables and accrued charges |
7,437 | 6,703 | ||||||||||
| 9,129 | 8,335 | |||||||||||
| Non-current liabilities |
||||||||||||
| Long-term debt |
8,553 | 7,579 | ||||||||||
| Lease liabilities |
Note 1 | 859 | 12 | |||||||||
| Deferred income tax liabilities |
3,145 | 2,907 | ||||||||||
| Pension and other post-retirement benefit liabilities |
433 | 395 | ||||||||||
| Asset retirement obligations and accrued environmental costs |
1,650 | 1,673 | ||||||||||
| Other non-current liabilities |
161 | 176 | ||||||||||
| TOTAL LIABILITIES |
23,930 | 21,077 | ||||||||||
| SHAREHOLDERS’ EQUITY |
||||||||||||
| Share capital |
15,771 | 16,740 | ||||||||||
| Contributed surplus |
248 | 231 | ||||||||||
| Accumulated other comprehensive loss |
(251 | ) | (291 | ) | ||||||||
| Retained earnings |
7,101 | 7,745 | ||||||||||
| TOTAL SHAREHOLDERS’ EQUITY |
22,869 | 24,425 | ||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
46,799 | 45,502 | ||||||||||
(See Notes to the Condensed Consolidated Financial Statements)
21
| Unaudited | In millions of US dollars except as otherwise noted |
Notes to the Condensed Consolidated Financial Statements
As at and for the Three and Twelve Months Ended December 31, 2019
NOTE 1 BASIS OF PRESENTATION
Nutrien Ltd. (collectively with its subsidiaries, known as “Nutrien”, “we”, “us, “our” or the “Company”) is the world’s largest provider of crop inputs and services. Nutrien plays a critical role in helping growers around the globe increase food production in a sustainable manner. Disclosures related to the merger of Potash Corporation of Saskatchewan Inc. and Agrium Inc. (the “Merger”) can be found in Note 3 of our 2018 annual consolidated financial statements.
Our accounting policies are in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). The accounting policies and methods of computation used in preparing these unaudited condensed consolidated financial statements are consistent with those used in the preparation of our 2018 annual consolidated financial statements, with the exception of IFRS 16, “Leases” (“IFRS 16”), which was adopted effective January 1, 2019, and resulted in an increase to property, plant and equipment and recognition of lease liabilities of approximately $1 billion at January 1, 2019. Other impacts from adoption of IFRS 16 are disclosed in Note 13 of our first quarter 2019 unaudited condensed consolidated financial statements.
These unaudited condensed consolidated financial statements include the accounts of Nutrien and its subsidiaries; however, they do not include all disclosures normally provided in annual consolidated financial statements and should be read in conjunction with our 2018 annual consolidated financial statements. Our 2019 annual consolidated financial statements which are expected to be issued in February 2020 will include additional information under IFRS.
Certain immaterial 2018 figures have been reclassified or grouped together in the condensed consolidated statements of earnings, condensed consolidated statements of cash flows, and in the segment information.
In management’s opinion, the unaudited condensed consolidated financial statements include all adjustments necessary to fairly present such information in all material respects.
NOTE 2 SEGMENT INFORMATION
The Company’s four reportable operating segments are: Retail, Potash, Nitrogen and Phosphate. The Retail segment distributes crop nutrients, crop protection products, seed and merchandise, and provides services directly to growers through a network of farm centers in North and South America and Australia. The Potash, Nitrogen and Phosphate segments are differentiated by the chemical nutrient contained in the products that each produces. In the first quarter of 2019, our Chief Operating Decision Maker reassessed product groupings and decided to evaluate the performance of ammonium sulfate as part of the Nitrogen segment, rather than the Phosphate and Sulfate segment, as previously reported in our 2018 annual consolidated financial statements. Comparative amounts for the Nitrogen and Phosphate segments were restated, including EBITDA, which is calculated as net earnings (loss) from continuing operations before finance costs, income taxes and depreciation and amortization. For the three months ended December 31, 2018, Nitrogen reflected increases of $30, $8 and $12 in sales, gross margin and EBITDA, respectively, and for the twelve months ended December 31, 2018, Nitrogen reflected increases of $121, $40 and $53 in sales, gross margin and EBITDA, respectively, as well as $377 in assets as at December 31, 2018, with corresponding decreases in Phosphate. In addition, the “Others” segment was renamed to “Corporate and Others”.
22
| Unaudited | In millions of US dollars except as otherwise noted |
| Three Months Ended December 31, 2019 | ||||||||||||||||||||||||||||
| Retail | Potash | Nitrogen | Phosphate | Corporate and Others |
Eliminations | Consolidated | ||||||||||||||||||||||
| Sales – third party |
2,161 | 374 | 575 | 298 | 34 | - | 3,442 | |||||||||||||||||||||
| – intersegment |
10 | 29 | 125 | 43 | - | (207 | ) | - | ||||||||||||||||||||
| Sales – total |
2,171 | 403 | 700 | 341 | 34 | (207 | ) | 3,442 | ||||||||||||||||||||
| Freight, transportation and distribution |
- | 53 | 97 | 54 | - | (32 | ) | 172 | ||||||||||||||||||||
| Net sales |
2,171 | 350 | 603 | 287 | 34 | (175 | ) | 3,270 | ||||||||||||||||||||
| Cost of goods sold |
1,435 | 211 | 496 | 281 | 34 | (201 | ) | 2,256 | ||||||||||||||||||||
| Gross margin |
736 | 139 | 107 | 6 | - | 26 | 1,014 | |||||||||||||||||||||
| Selling expenses |
668 | 2 | 4 | - | (4 | ) | - | 670 | ||||||||||||||||||||
| General and administrative expenses |
30 | 6 | 4 | 4 | 73 | - | 117 | |||||||||||||||||||||
| Provincial mining and other taxes |
- | 50 | - | - | (11 | ) | - | 39 | ||||||||||||||||||||
| Share-based compensation expense |
- | - | - | - | 9 | - | 9 | |||||||||||||||||||||
| Impairment of assets |
- | - | - | - | 87 | - | 87 | |||||||||||||||||||||
| Other (income) expenses |
(31 | ) | (2 | ) | (19 | ) | 5 | 76 | - | 29 | ||||||||||||||||||
| Earnings (loss) before finance costs and income taxes |
69 | 83 | 118 | (3 | ) | (230 | ) | 26 | 63 | |||||||||||||||||||
| Depreciation and amortization |
162 | 66 | 141 | 57 | 10 | - | 436 | |||||||||||||||||||||
| EBITDA |
231 | 149 | 259 | 54 | (220 | ) | 26 | 499 | ||||||||||||||||||||
| Assets – at December 31, 2019 |
19,990 | 11,696 | 10,991 | 2,198 | 2,129 | (205 | ) | 46,799 | ||||||||||||||||||||
| Three Months Ended December 31, 2018 | ||||||||||||||||||||||||||||
| Retail | Potash | Nitrogen 1 | Phosphate 1 | Corporate and Others |
Eliminations | Consolidated | ||||||||||||||||||||||
| Sales – third party |
2,003 | 648 | 675 | 399 | 37 | - | 3,762 | |||||||||||||||||||||
| – intersegment |
14 | 40 | 164 | 65 | - | (283 | ) | - | ||||||||||||||||||||
| Sales – total |
2,017 | 688 | 839 | 464 | 37 | (283 | ) | 3,762 | ||||||||||||||||||||
| Freight, transportation and distribution |
- | 51 | 94 | 58 | - | (14 | ) | 189 | ||||||||||||||||||||
| Net sales |
2,017 | 637 | 745 | 406 | 37 | (269 | ) | 3,573 | ||||||||||||||||||||
| Cost of goods sold |
1,355 | 271 | 521 | 393 | 37 | (263 | ) | 2,314 | ||||||||||||||||||||
| Gross margin |
662 | 366 | 224 | 13 | - | (6 | ) | 1,259 | ||||||||||||||||||||
| Selling expenses |
571 | 5 | 8 | 2 | (7 | ) | - | 579 | ||||||||||||||||||||
| General and administrative expenses |
27 | 2 | 3 | 3 | 76 | - | 111 | |||||||||||||||||||||
| Provincial mining and other taxes |
- | 56 | 1 | - | 1 | - | 58 | |||||||||||||||||||||
| Share-based compensation recovery |
- | - | - | - | (33 | ) | - | (33 | ) | |||||||||||||||||||
| Other (income) expenses |
(18 | ) | 1 | (1 | ) | 8 | 8 | - | (2 | ) | ||||||||||||||||||
| Earnings (loss) before finance costs and income taxes |
82 | 302 | 213 | - | (45 | ) | (6 | ) | 546 | |||||||||||||||||||
| Depreciation and amortization |
132 | 92 | 108 | 53 | 13 | - | 398 | |||||||||||||||||||||
| EBITDA |
214 | 394 | 321 | 53 | (32 | ) | (6 | ) | 944 | |||||||||||||||||||
| Assets – at December 31, 2018 |
17,964 | 11,710 | 10,386 | 2,406 | 3,678 | (642 | ) | 45,502 | ||||||||||||||||||||
1 Comparative figures have been restated to reflect the change in the sulfate product grouping from Phosphate and Sulfate to Nitrogen.
23
| Unaudited | In millions of US dollars except as otherwise noted |
| Twelve Months Ended December 31, 2019 | ||||||||||||||||||||||||||||
| Retail | Potash | Nitrogen | Phosphate | Corporate and Others |
Eliminations | Consolidated | ||||||||||||||||||||||
| Sales – third party |
13,183 | 2,702 | 2,608 | 1,397 | 133 | - | 20,023 | |||||||||||||||||||||
| – intersegment |
38 | 207 | 612 | 203 | - | (1,060 | ) | - | ||||||||||||||||||||
| Sales – total |
13,221 | 2,909 | 3,220 | 1,600 | 133 | (1,060 | ) | 20,023 | ||||||||||||||||||||
| Freight, transportation and distribution |
- | 305 | 372 | 232 | - | (141 | ) | 768 | ||||||||||||||||||||
| Net sales |
13,221 | 2,604 | 2,848 | 1,368 | 133 | (919 | ) | 19,255 | ||||||||||||||||||||
| Cost of goods sold |
9,981 | 1,103 | 2,148 | 1,373 | 133 | (924 | ) | 13,814 | ||||||||||||||||||||
| Gross margin |
3,240 | 1,501 | 700 | (5 | ) | - | 5 | 5,441 | ||||||||||||||||||||
| Selling expenses |
2,484 | 9 | 25 | 5 | (18 | ) | - | 2,505 | ||||||||||||||||||||
| General and administrative expenses |
112 | 6 | 15 | 7 | 264 | - | 404 | |||||||||||||||||||||
| Provincial mining and other taxes |
- | 287 | 2 | 1 | 2 | - | 292 | |||||||||||||||||||||
| Share-based compensation expense |
- | - | - | - | 104 | - | 104 | |||||||||||||||||||||
| Impairment of assets |
- | - | - | - | 120 | - | 120 | |||||||||||||||||||||
| Other expenses (income) |
8 | (4 | ) | (46 | ) | 25 | 171 | - | 154 | |||||||||||||||||||
| Earnings (loss) before finance costs and income taxes |
636 | 1,203 | 704 | (43 | ) | (643 | ) | 5 | 1,862 | |||||||||||||||||||
| Depreciation and amortization |
595 | 390 | 535 | 237 | 42 | - | 1,799 | |||||||||||||||||||||
| EBITDA |
1,231 | 1,593 | 1,239 | 194 | (601 | ) | 5 | 3,661 | ||||||||||||||||||||
| Assets – at December 31, 2019 |
19,990 | 11,696 | 10,991 | 2,198 | 2,129 | (205 | ) | 46,799 | ||||||||||||||||||||
| Twelve Months Ended December 31, 2018 | ||||||||||||||||||||||||||||
| Retail | Potash | Nitrogen 1 | Phosphate 1 | Corporate and Others |
Eliminations | Consolidated | ||||||||||||||||||||||
| Sales – third party |
12,470 | 2,796 | 2,712 | 1,508 | 150 | - | 19,636 | |||||||||||||||||||||
| – intersegment |
50 | 220 | 626 | 268 | - | (1,164 | ) | - | ||||||||||||||||||||
| Sales – total |
12,520 | 3,016 | 3,338 | 1,776 | 150 | (1,164 | ) | 19,636 | ||||||||||||||||||||
| Freight, transportation and distribution |
- | 349 | 373 | 215 | - | (73 | ) | 864 | ||||||||||||||||||||
| Net sales |
12,520 | 2,667 | 2,965 | 1,561 | 150 | (1,091 | ) | 18,772 | ||||||||||||||||||||
| Cost of goods sold |
9,485 | 1,183 | 2,145 | 1,473 | 150 | (1,056 | ) | 13,380 | ||||||||||||||||||||
| Gross margin |
3,035 | 1,484 | 820 | 88 | - | (35 | ) | 5,392 | ||||||||||||||||||||
| Selling expenses |
2,303 | 14 | 32 | 10 | (22 | ) | - | 2,337 | ||||||||||||||||||||
| General and administrative expenses |
100 | 10 | 20 | 9 | 284 | - | 423 | |||||||||||||||||||||
| Provincial mining and other taxes |
- | 244 | 3 | 1 | 2 | - | 250 | |||||||||||||||||||||
| Share-based compensation expense |
- | - | - | - | 116 | - | 116 | |||||||||||||||||||||
| Impairment of assets |
- | 1,809 | - | - | - | - | 1,809 | |||||||||||||||||||||
| Other (income) expenses |
(75 | ) | 14 | (8 | ) | 6 | 106 | - | 43 | |||||||||||||||||||
| Earnings (loss) before finance costs and income taxes |
707 | (607 | ) | 773 | 62 | (486 | ) | (35 | ) | 414 | ||||||||||||||||||
| Depreciation and amortization |
499 | 404 | 442 | 193 | 54 | - | 1,592 | |||||||||||||||||||||
| EBITDA |
1,206 | (203 | ) | 1,215 | 255 | (432 | ) | (35 | ) | 2,006 | ||||||||||||||||||
| Assets – at December 31, 2018 |
17,964 | 11,710 | 10,386 | 2,406 | 3,678 | (642 | ) | 45,502 | ||||||||||||||||||||
1 Comparative figures have been restated to reflect the change in the sulfate product grouping from Phosphate and Sulfate to Nitrogen.
24