Nutrien Ltd 6-K, filed Nov 3, 2022
Nutrien Ltd. (NTR)
About this 6-K
Nutrien Ltd filed this 6-K on November 3, 2022.
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: November, 2022
Commission File Number: 001-38336
NUTRIEN LTD.
(Name of registrant)
| Suite 1700, 211 19th Street East Saskatoon, Saskatchewan, Canada S7K 5R6 |
| (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): ☐
Exhibits 99.2 and 99.3 to this report on Form 6-K shall be incorporated by reference into the registrant’s Registration Statements on Form S-8 (File Nos. 333-222384, 333-222385 and 333-226295) and on Form F-10 (File No. 333-263275) under the Securities Act of 1933, as amended.
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: November 2, 2022 | By: | /s/ Robert A. Kirkpatrick | ||
| Name: | Robert A. Kirkpatrick | |||
| Title: | SVP & Corporate Secretary | |||
EXHIBIT INDEX
| Exhibit |
Description of Exhibit | |
| 99.1 | News Release dated November 2, 2022 | |
| 99.2 | Management’s Discussion and Analysis | |
| 99.3 | Interim Financial Statements and Notes | |
Exhibit 99.1
|
News Release | |
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NYSE, TSX: NTR
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November 2, 2022 – all amounts are in US dollars except as otherwise noted
Nutrien Delivers Earnings Growth and Expects Strong Market Fundamentals in 2023
Nutrien revised full-year 2022 earnings guidance to reflect lower near-term potash sales volumes and prices; continue to advance strategic growth initiatives based on a positive multi-year view of the fundamentals.
SASKATOON, Saskatchewan - Nutrien Ltd. (TSX and NYSE: NTR) announced today its third quarter 2022 results, with net earnings of $1.6 billion ($2.94 diluted net earnings per share), which includes a non-cash impairment reversal of $330 million relating to our Phosphate operations. Third quarter 2022 adjusted net earnings per share1 were $2.51 and adjusted EBITDA1 was $2.5 billion.
“Nutrien has delivered record earnings in 2022 due to the strength of agriculture fundamentals, higher fertilizer prices and excellent Retail performance. During the third quarter, we saw a temporary reduction in potash purchasing in North America and Brazil, which has impacted our sales volumes and realized prices in the second half of the year. However, the underlying demand drivers remain strong and global fertilizer supply challenges still persist, creating a supportive environment for Nutrien as we look ahead to 2023 and beyond,” commented Ken Seitz, Nutrien’s President and CEO.
“We are focused on efficiently supplying our customers with the products and services they need to help sustainably feed a growing world. We continue to take a multi-year view of the market and remain confident that our additional low-cost potash and nitrogen production capability will be required to meet future demand,” added Mr. Seitz.
Highlights:
| • | Nutrien generated record net earnings of $6.6 billion and adjusted EBITDA1 of $10.1 billion in the first nine months of 2022 due to higher realized prices and strong Retail performance, more than offsetting a reduction in fertilizer sales volumes. As a result, cash provided by operating activities improved to $3.4 billion in the first nine months of 2022. |
| • | Nutrien revised full-year 2022 adjusted EBITDA guidance1 and adjusted net earnings per share guidance1 to $12.2 to $13.2 billion and $13.25 to $14.50 per share, respectively. |
| • | Nutrien Ag Solutions (“Retail”) delivered record adjusted EBITDA in the first nine months of 2022, due to supportive market conditions in key regions where we operate. Retail cash operating coverage ratio1 as at September 30, 2022 improved to 55 percent compared to 59 percent for the same period in 2021 driven by higher margins. |
| • | Potash adjusted EBITDA increased in the third quarter and the first nine months of 2022 compared to the prior year due to higher net realized selling prices and record offshore sales volumes, more than offsetting lower North American sales volumes. |
| • | Nitrogen third quarter and first nine months of 2022 adjusted EBITDA increased compared to the prior year due to higher net realized selling prices that more than offset higher natural gas costs and lower ammonia and urea sales volumes. |
| • | In the third quarter of 2022, we recognized a non-cash impairment reversal of $330 million associated with our Phosphate operations and $780 million for the first nine months due to a more favorable outlook for phosphate margins. |
| • | Nutrien repurchased approximately 40 million shares year-to-date as of November 1, 2022, under our share repurchase programs, for a total of approximately $3.5 billion. Nutrien plans to allocate approximately $4 billion to share repurchases in 2022. While some repurchases may now extend into the first quarter of 2023 due to lower forecasted operating cash flow in 2022, we still intend on completing our existing 10 percent share repurchase program prior to its expiry in February 2023. |
1. These (and any related guidance, if applicable) are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section for further information.
1
Management’s Discussion and Analysis
The following management’s discussion and analysis (“MD&A”) is the responsibility of management and is dated as of November 2, 2022. The Board of Directors (“Board”) of Nutrien carries out its responsibility for review of this disclosure principally through its audit committee, comprised exclusively of independent directors. The audit committee reviews and, prior to its publication, approves this disclosure pursuant to the authority delegated to it by the Board. The term “Nutrien” refers to Nutrien Ltd. and the terms “we”, “us”, “our”, “Nutrien” and “the Company” refer to Nutrien and, as applicable, Nutrien and its direct and indirect subsidiaries on a consolidated basis. Additional information relating to Nutrien (which, except as otherwise noted, is not incorporated by reference herein), including our annual report dated February 17, 2022 (“2021 Annual Report”), which includes our annual audited consolidated financial statements and MD&A, and our annual information form dated February 17, 2022 (“2021 Annual Information Form”), each for the year ended December 31, 2021, can be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. No update is provided to the disclosure in our 2021 annual MD&A except for material information since the date of our annual MD&A. The Company is a foreign private issuer under the rules and regulations of the US Securities and Exchange Commission (the “SEC”).
This MD&A is based on and should be read in conjunction with the Company’s unaudited interim condensed consolidated financial statements as at and for the three and nine months ended September 30, 2022 (“interim financial statements”) based on International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting”, unless otherwise noted. This MD&A contains certain non-IFRS financial measures and ratios and forward-looking statements, which are described in the “Non-IFRS Financial Measures” and the “Forward-Looking Statements” sections, respectively.
Market Outlook and Guidance
Agriculture and Retail
| • | Global grain stocks-to-use ratio, excluding China, is projected to decline to the lowest level in more than a quarter century, driven by reduced corn and wheat production expectations in the US and Europe. As a result of historically tight supply and demand balances, spot prices of corn, soybeans and wheat are up 25 to 50 percent compared to the 10-year average and we expect strong futures prices will provide an incentive for growers to boost production in 2023. |
| • | The re-opening of the Black Sea to Ukrainian grain exports positively impacted exports from the region but there is uncertainty over the continuation of the United Nations brokered agreement with Russia. The US Department of Agriculture (USDA) projects that Ukrainian grain exports will decline by 44 percent year-over-year in 2023, in large part driven by reduced production levels. |
| • | Weather has been favorable in North America and we anticipate that the rapid pace of harvest will support strong fall ammonia demand and normal application rates of potash, phosphate and crop protection products. |
| • | South American spring crop planting is proceeding with a mix of planting conditions. Argentina continues to be impacted by La Nina-related drought, while planting conditions in much of Brazil have generally been favorable. We expect that Brazilian soybean acreage will increase by 3 to 4 percent, which is also expected to support a proportional increase in safrinha corn acreage. |
Crop Nutrient Markets
| • | Potash shipments from Belarus are projected to be down 50 to 60 percent and Russia down 20 to 25 percent in 2022 compared to the prior year, in line with our previous expectations. We have lowered our global potash shipment forecast to between 60 and 62 million tonnes in 2022, largely due to the impact of higher-than-expected inventory and cautious buying in North America and Brazil during the second half of 2022. |
| • | We expect robust agricultural fundamentals will support increased potash consumption in 2023 and believe pent-up demand will emerge as inventories are drawn down and prices stabilize. We expect potash supply from Eastern Europe will continue to be constrained in 2023, with shipments from Belarus projected to be down 40 to 60 percent and Russia down 15 to 30 percent compared to 2021 levels. Global potash shipments are forecast between 64 to 67 million tonnes in 2023, with projected Nutrien potash sales volumes of approximately 15 million tonnes. |
| • | Nitrogen prices continue to be supported by historically high European natural gas prices that have led to significant curtailments of ammonia and downstream nitrogen products. Shifts in global nitrogen trade flows have led to higher US exports and lower import volumes, which we expect will result in a tight North American supply and demand balance entering 2023. |
| • | Chinese urea and phosphate export restrictions have limited exports in 2022 and are expected to persist into 2023. The restrictions have led to low Chinese phosphate operating rates, maintaining relatively tight global phosphate supplies, while contributing to lower global sulfur prices and supporting phosphate production margins. |
2
Financial Guidance
| • | Nutrien revised its full-year 2022 adjusted EBITDA guidance and full-year 2022 adjusted net earnings per share guidance primarily due to lower expected Potash earnings as a result of lower potash sales volumes and realized prices, which more than offset stronger expected Retail earnings. Adjusted net earnings per share guidance includes our plan to allocate approximately $4 billion to share repurchases in 2022. |
| • | Nutrien lowered potash sales volume guidance primarily to reflect the impact of the compressed spring application season in North America that resulted in higher inventory carry-over and cautious purchasing. |
| • | Nutrien lowered nitrogen sales volume guidance to reflect the impact of Trinidad gas curtailments during the second half of 2022. |
All guidance numbers, including those noted above are outlined in the table below. Refer to page 53 of Nutrien’s 2021 Annual Report for related assumptions and sensitivities.
| Guidance Ranges 1 as of | ||||||||||||||||
| Nov 2, 2022 | Aug 3, 2022 | |||||||||||||||
| (billions of US dollars, except as otherwise noted) | Low | High | Low | High | ||||||||||||
| Adjusted net earnings per share 2 |
13.25 | 14.50 | 15.80 | 17.80 | ||||||||||||
| Adjusted EBITDA 2 |
12.2 | 13.2 | 14.0 | 15.5 | ||||||||||||
| Retail adjusted EBITDA |
2.15 | 2.25 | 2.10 | 2.20 | ||||||||||||
| Potash adjusted EBITDA |
5.8 | 6.2 | 7.6 | 8.2 | ||||||||||||
| Nitrogen adjusted EBITDA |
4.1 | 4.4 | 4.0 | 4.7 | ||||||||||||
| Phosphate adjusted EBITDA (in millions of US dollars) |
700 | 800 | 750 | 850 | ||||||||||||
| Potash sales tonnes (millions) 3 |
12.5 | 12.9 | 14.3 | 14.9 | ||||||||||||
| Nitrogen sales tonnes (millions) 3 |
10.4 | 10.5 | 10.6 | 11.0 | ||||||||||||
| Depreciation and amortization |
2.0 | 2.1 | 2.0 | 2.1 | ||||||||||||
| Effective tax rate on adjusted earnings (%) |
25.0 | 26.0 | 25.5 | 26.5 | ||||||||||||
| Sustaining capital expenditures 4 |
1.3 | 1.4 | 1.3 | 1.4 | ||||||||||||
1 See the “Forward-Looking Statements” section.
2 These are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section.
3 Manufactured product only. Nitrogen sales tonnes excludes ESN® products.
4 This is a supplementary financial measure. See the “Other Financial Measures” section.
3
Consolidated Results
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) |
2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||
| Sales |
8,188 | 6,024 | 36 | 30,351 | 20,445 | 48 | ||||||||||||||||||
| Freight, transportation and distribution |
204 | 220 | (7 | ) | 628 | 653 | (4 | ) | ||||||||||||||||
| Cost of goods sold |
4,722 | 3,639 | 30 | 17,205 | 13,589 | 27 | ||||||||||||||||||
| Gross margin |
3,262 | 2,165 | 51 | 12,518 | 6,203 | 102 | ||||||||||||||||||
| Expenses |
1,056 | 1,108 | (5 | ) | 3,368 | 3,249 | 4 | |||||||||||||||||
| Net earnings |
1,583 | 726 | 118 | 6,569 | 1,972 | 233 | ||||||||||||||||||
| Adjusted EBITDA 1 |
2,467 | 1,642 | 50 | 10,075 | 4,663 | 116 | ||||||||||||||||||
| Diluted net earnings per share |
2.94 | 1.25 | 135 | 11.96 | 3.41 | 251 | ||||||||||||||||||
| Adjusted net earnings per share 1 |
2.51 | 1.38 | 82 | 11.10 | 3.75 | 196 | ||||||||||||||||||
| Cash provided by (used in) operating activities |
878 | (1,565 | ) | n/m | 3,374 | 249 | n/m | |||||||||||||||||
| Free cash flow 1 |
1,543 | 862 | 79 | 6,770 | 2,751 | 146 | ||||||||||||||||||
| Free cash flow including changes in non-cash operating working capital 1 |
450 | (1,890 | ) | n/m | 2,496 | (544 | ) | n/m | ||||||||||||||||
1 These are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section.
Net earnings and adjusted EBITDA increased in the third quarter and first nine months of 2022 compared to the same periods in 2021. This was due to higher net realized selling prices from global supply uncertainties across our nutrient businesses and strong Retail performance. In the third quarter of 2022, we recorded a non-cash impairment reversal of $330 million related to our Phosphate operations, which impacted net earnings and brings the total impairment reversal to $780 million for the first nine months of 2022. Cash provided by operating activities increased in the third quarter and first nine months of 2022 compared to the same periods in 2021 due primarily to higher net earnings.
Segment Results
Our discussion of segment results set out on the following pages is a comparison of the results for the three and nine months ended September 30, 2022 to the results for the three and nine months ended September 30, 2021, unless otherwise noted.
4
Nutrien Ag Solutions (“Retail”)
| Three Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except | Dollars | Gross Margin | Gross Margin (%) | |||||||||||||||||||||||||||||||||||||
| as otherwise noted) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | ||||||||||||||||||||||||||||||||
| Sales |
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| Crop nutrients |
1,605 | 1,194 | 34 | 214 | 246 | (13 | ) | 13 | 21 | |||||||||||||||||||||||||||||||
| Crop protection products |
1,716 | 1,469 | 17 | 436 | 374 | 17 | 25 | 25 | ||||||||||||||||||||||||||||||||
| Seed |
134 | 140 | (4 | ) | 33 | 56 | (41 | ) | 25 | 40 | ||||||||||||||||||||||||||||||
| Merchandise |
241 | 265 | (9 | ) | 41 | 44 | (7 | ) | 17 | 17 | ||||||||||||||||||||||||||||||
| Nutrien Financial |
65 | 54 | 20 | 65 | 54 | 20 | 100 | 100 | ||||||||||||||||||||||||||||||||
| Services and other 1 |
244 | 252 | (3 | ) | 153 | 170 | (10 | ) | 63 | 67 | ||||||||||||||||||||||||||||||
| Nutrien Financial elimination 1, 2 |
(25 | ) | (27 | ) | (7 | ) | (25 | ) | (27 | ) | (7 | ) | 100 | 100 | ||||||||||||||||||||||||||
| 3,980 | 3,347 | 19 | 917 | 917 | - | 23 | 27 | |||||||||||||||||||||||||||||||||
| Cost of goods sold |
3,063 | 2,430 | 26 | |||||||||||||||||||||||||||||||||||||
| Gross margin |
917 | 917 | - | |||||||||||||||||||||||||||||||||||||
| Expenses ³ |
890 | 808 | 10 | |||||||||||||||||||||||||||||||||||||
| Earnings before finance costs and taxes (“EBIT”) |
27 | 109 | (75 | ) | ||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
206 | 182 | 13 | |||||||||||||||||||||||||||||||||||||
| EBITDA |
233 | 291 | (20 | ) | ||||||||||||||||||||||||||||||||||||
| Adjustments 4 |
2 | - | n/m | |||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA |
235 | 291 | (19 | ) | ||||||||||||||||||||||||||||||||||||
| 1 Certain immaterial figures have been reclassified for the three months ended September 30, 2021. |
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| 2 Represents elimination for the interest and service fees charged by Nutrien Financial to Retail branches. |
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| 3 Includes selling expenses of $821 million (2021 – $746 million). |
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| 4 See Note 2 to the interim financial statements. |
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| Nine Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except | Dollars | Gross Margin | Gross Margin (%) | |||||||||||||||||||||||||||||||||||||
| as otherwise noted) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | ||||||||||||||||||||||||||||||||
| Sales |
||||||||||||||||||||||||||||||||||||||||
| Crop nutrients |
7,740 | 5,255 | 47 | 1,417 | 1,169 | 21 | 18 | 22 | ||||||||||||||||||||||||||||||||
| Crop protection products |
6,086 | 5,220 | 17 | 1,523 | 1,137 | 34 | 25 | 22 | ||||||||||||||||||||||||||||||||
| Seed |
1,861 | 1,819 | 2 | 382 | 362 | 6 | 21 | 20 | ||||||||||||||||||||||||||||||||
| Merchandise |
755 | 763 | (1 | ) | 133 | 127 | 5 | 18 | 17 | |||||||||||||||||||||||||||||||
| Nutrien Financial |
205 | 138 | 49 | 205 | 138 | 49 | 100 | 100 | ||||||||||||||||||||||||||||||||
| Services and other 1 |
729 | 737 | (1 | ) | 555 | 570 | (3 | ) | 76 | 77 | ||||||||||||||||||||||||||||||
| Nutrien Financial elimination 1 |
(113 | ) | (76 | ) | 49 | (113 | ) | (76 | ) | 49 | 100 | 100 | ||||||||||||||||||||||||||||
| 17,263 | 13,856 | 25 | 4,102 | 3,427 | 20 | 24 | 25 | |||||||||||||||||||||||||||||||||
| Cost of goods sold |
13,161 | 10,429 | 26 | |||||||||||||||||||||||||||||||||||||
| Gross margin |
4,102 | 3,427 | 20 | |||||||||||||||||||||||||||||||||||||
| Expenses ² |
2,733 | 2,467 | 11 | |||||||||||||||||||||||||||||||||||||
| EBIT |
1,369 | 960 | 43 | |||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
550 | 528 | 4 | |||||||||||||||||||||||||||||||||||||
| EBITDA |
1,919 | 1,488 | 29 | |||||||||||||||||||||||||||||||||||||
| Adjustments 3 |
(17 | ) | 9 | n/m | ||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA |
1,902 | 1,497 | 27 | |||||||||||||||||||||||||||||||||||||
| 1 Certain immaterial figures have been reclassified for the nine months ended September 30, 2021. |
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| 2 Includes selling expenses of $2,556 million (2021 – $2,276 million). |
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| 3 See Note 2 to the interim financial statements. |
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| • | Adjusted EBITDA in the first nine months of 2022 increased due to higher sales and gross margins across nearly all product categories and regions where we operate. This was supported by strong agriculture fundamentals, higher selling prices and growth in proprietary products sales. Adjusted EBITDA decreased in the third quarter of 2022 compared to the prior year’s record results as strong crop protection product margins were offset by lower margins in other product categories as well as inflation on certain expense items in 2022. Retail cash operating coverage ratio1 improved as at September 30, 2022 to 55 percent from 59 percent in the same period in 2021 due to significantly higher gross margin. |
1. These (and any related guidance, if applicable) are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section for further information.
5
| • | Crop nutrients sales increased in the third quarter and first nine months of 2022 due to higher selling prices. Gross margin and gross margin per tonne increased in the first nine months of 2022 compared to the same period last year due to strategic procurement and the timing of inventory purchasing in the first half of 2022, with a decrease in the third quarter of 2022 due to higher cost inventory. Sales volumes decreased in the first nine months of 2022 due to reduced application resulting from a delayed planting season in North America and earlier engagement in the prior year in a rising price environment. |
| • | Crop protection products sales and gross margin increased in the third quarter and first nine months of 2022, particularly in North America, due to higher prices along with increased sales and gross margin in proprietary products. Gross margin as a percentage of sales increased in the first nine months of 2022, supported by the reliability of our supply chain and strategic procurement in a rising price environment. |
| • | Seed sales and gross margin increased in the first nine months of 2022 due to higher pricing and an increase in proprietary seed margins, with a decrease in the third quarter of 2022 as a result of timing and mix of seed sales compared to the same period in 2021. |
| • | Merchandise gross margin for the first nine months of 2022 increased due to strong margin performance in Australia animal health products from increased flock and herd sizes, with a decrease in the third quarter of 2022 due to an unfavorable foreign exchange rate impact on Australian dollars. |
| • | Nutrien Financial sales increased in the third quarter and first nine months of 2022 due to higher utilization and adoption of our programs and a higher interest-bearing trade receivable balance, driven by strong commodity pricing. |
| • | Services and other decreased in the third quarter and first nine months of 2022 mainly due to lower livestock volumes as wet conditions in Australia impeded movement, along with an unfavorable foreign exchange rate impact on Australian dollars. |
Potash
| Three Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except | Dollars | Tonnes (thousands) | Average per Tonne | |||||||||||||||||||||||||||||||||||||||
| as otherwise noted) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||||||||||||||||||
| Manufactured product |
||||||||||||||||||||||||||||||||||||||||||
| Net sales |
||||||||||||||||||||||||||||||||||||||||||
| North America |
436 | 483 | (10 | ) | 619 | 1,515 | (59 | ) | 703 | 319 | 120 | |||||||||||||||||||||||||||||||
| Offshore |
1,568 | 705 | 122 | 2,548 | 2,276 | 12 | 616 | 310 | 99 | |||||||||||||||||||||||||||||||||
| 2,004 | 1,188 | 69 | 3,167 | 3,791 | (16 | ) | 633 | 313 | 102 | |||||||||||||||||||||||||||||||||
| Cost of goods sold |
386 | 372 | 4 | 122 | 98 | 24 | ||||||||||||||||||||||||||||||||||||
| Gross margin - total |
1,618 | 816 | 98 | 511 | 215 | 138 | ||||||||||||||||||||||||||||||||||||
| Expenses ¹ |
352 | 146 | 141 | Depreciation and amortization |
|
35 | 35 | 2 | ||||||||||||||||||||||||||||||||||
| EBIT |
1,266 | 670 | 89 | Gross margin excluding depreciation |
|
|||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
112 | 131 | (15 | ) | and amortization - manufactured 3 |
|
546 | 250 | 119 | |||||||||||||||||||||||||||||||||
| EBITDA |
1,378 | 801 | 72 | Potash controllable cash cost of |
|
|||||||||||||||||||||||||||||||||||||
| Adjustments 2 |
- | 7 | (100 | ) | product manufactured 3 |
|
70 | 55 | 27 | |||||||||||||||||||||||||||||||||
| Adjusted EBITDA |
1,378 | 808 | 71 | |||||||||||||||||||||||||||||||||||||||
1 Includes provincial mining taxes of $348 million (2021 – $128 million).
2 See Note 2 to the interim financial statements.
3 These are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section.
6
| Nine Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except | Dollars | Tonnes (thousands) | Average per Tonne | |||||||||||||||||||||||||||||||||||||||
| as otherwise noted) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||||||||||||||||||
| Manufactured product |
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| Net sales |
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| North America |
1,949 | 1,141 | 71 | 2,770 | 4,157 | (33 | ) | 703 | 275 | 156 | ||||||||||||||||||||||||||||||||
| Offshore |
4,573 | 1,475 | 210 | 7,149 | 6,412 | 11 | 640 | 230 | 178 | |||||||||||||||||||||||||||||||||
| 6,522 | 2,616 | 149 | 9,919 | 10,569 | (6 | ) | 658 | 248 | 165 | |||||||||||||||||||||||||||||||||
| Cost of goods sold |
1,090 | 980 | 11 | 110 | 93 | 18 | ||||||||||||||||||||||||||||||||||||
| Gross margin - total |
5,432 | 1,636 | 232 | 548 | 155 | 254 | ||||||||||||||||||||||||||||||||||||
| Expenses ¹ |
975 | 333 | 193 | Depreciation and amortization |
|
36 | 35 | 2 | ||||||||||||||||||||||||||||||||||
| EBIT |
4,457 | 1,303 | 242 | Gross margin excluding depreciation |
|
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| Depreciation and amortization |
354 | 371 | (5 | ) | and amortization - manufactured |
|
584 | 190 | 207 | |||||||||||||||||||||||||||||||||
| EBITDA |
4,811 | 1,674 | 187 | Potash controllable cash cost of |
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| Adjustments 2 |
- | 9 | (100 | ) | product manufactured |
|
56 | 51 | 10 | |||||||||||||||||||||||||||||||||
| Adjusted EBITDA |
4,811 | 1,683 | 186 | |||||||||||||||||||||||||||||||||||||||
1 Includes provincial mining taxes of $959 million (2021 – $293 million).
2 See Note 2 to the interim financial statements.
| • | Adjusted EBITDA increased in the third quarter and first nine months of 2022 due to higher net realized selling prices and strong offshore sales volumes, which more than offset lower North American sales volumes, higher royalties and provincial mining taxes. |
| • | Sales volumes decreased in the third quarter and first nine months of 2022 due to a compressed North American spring application season that resulted in high inventory carry-over along with cautious purchasing. Offshore sales volumes were the highest of any first nine-month period on record due to strong demand and reduced supply from Eastern Europe. |
| • | Net realized selling price increased in the third quarter and first nine months of 2022 due to the impact of supply constraints, in particular related to uncertainty on future supply from Russia and Belarus. Net realized prices decreased from the second quarter of 2022 due to a decline in benchmark pricing, particularly in Brazil and North America. |
| • | Cost of goods sold per tonne in the first nine months of 2022 increased primarily due to higher royalties resulting from increased net realized selling prices. Potash controllable cash cost of product manufactured increased in the third quarter due to lower production volumes and a pull forward of maintenance activities. |
Canpotex Sales by Market
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||
| (percentage of sales volumes, except as otherwise noted) | 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||
| Latin America |
35 | 48 | (13 | ) | 36 | 38 | (2 | ) | ||||||||||||||||
| Other Asian markets 1 |
32 | 28 | 4 | 34 | 35 | (1 | ) | |||||||||||||||||
| China |
15 | 7 | 8 | 14 | 11 | 3 | ||||||||||||||||||
| Other markets |
10 | 8 | 2 | 9 | 10 | (1 | ) | |||||||||||||||||
| India |
8 | 9 | (1 | ) | 7 | 6 | 1 | |||||||||||||||||
| 100 | 100 | 100 | 100 | |||||||||||||||||||||
1 All Asian markets except China and India.
7
Nitrogen
| Three Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except | Dollars | Tonnes (thousands) | Average per Tonne | |||||||||||||||||||||||||||||||||||||||
| as otherwise noted) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||||||||||||||||||
| Manufactured product |
||||||||||||||||||||||||||||||||||||||||||
| Net sales |
||||||||||||||||||||||||||||||||||||||||||
| Ammonia |
649 | 368 | 76 | 701 | 721 | (3 | ) | 927 | 509 | 82 | ||||||||||||||||||||||||||||||||
| Urea |
393 | 316 | 24 | 651 | 659 | (1 | ) | 603 | 480 | 26 | ||||||||||||||||||||||||||||||||
| Solutions, nitrates and sulfates |
465 | 289 | 61 | 1,274 | 1,141 | 12 | 365 | 253 | 44 | |||||||||||||||||||||||||||||||||
| 1,507 | 973 | 55 | 2,626 | 2,521 | 4 | 574 | 386 | 49 | ||||||||||||||||||||||||||||||||||
| Cost of goods sold |
872 | 591 | 48 | 333 | 234 | 42 | ||||||||||||||||||||||||||||||||||||
| Gross margin - manufactured |
635 | 382 | 66 | 241 | 152 | 59 | ||||||||||||||||||||||||||||||||||||
| Gross margin - other 1 |
29 | 24 | 21 | Depreciation and amortization |
|
54 | 50 | 8 | ||||||||||||||||||||||||||||||||||
| Gross margin - total |
664 | 406 | 64 | Gross margin excluding depreciation |
|
|||||||||||||||||||||||||||||||||||||
| (Income) expenses |
(50 | ) | (1 | ) | n/m | and amortization - manufactured 2 |
|
295 | 202 | 46 | ||||||||||||||||||||||||||||||||
| EBIT |
714 | 407 | 75 | Ammonia controllable cash cost of |
|
|||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
141 | 125 | 13 | product manufactured 2 |
|
62 | 53 | 17 | ||||||||||||||||||||||||||||||||||
| EBITDA/ Adjusted EBITDA |
855 | 532 | 61 | |||||||||||||||||||||||||||||||||||||||
1 Includes other nitrogen (including ESN®) and purchased products and comprises net sales of $264 million (2021 – $128 million) less cost of goods sold of $235 million (2021 – $104 million).
2 These are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section.
| Nine Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except | Dollars | Tonnes (thousands) | Average per Tonne | |||||||||||||||||||||||||||||||||||||||
| as otherwise noted) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||||||||||||||||||
| Manufactured product |
||||||||||||||||||||||||||||||||||||||||||
| Net sales |
||||||||||||||||||||||||||||||||||||||||||
| Ammonia |
1,952 | 874 | 123 | 1,939 | 2,129 | (9 | ) | 1,007 | 411 | 145 | ||||||||||||||||||||||||||||||||
| Urea |
1,457 | 911 | 60 | 2,052 | 2,235 | (8 | ) | 710 | 407 | 74 | ||||||||||||||||||||||||||||||||
| Solutions, nitrates and sulfates |
1,440 | 743 | 94 | 3,495 | 3,526 | (1 | ) | 412 | 211 | 95 | ||||||||||||||||||||||||||||||||
| 4,849 | 2,528 | 92 | 7,486 | 7,890 | (5 | ) | 648 | 320 | 103 | |||||||||||||||||||||||||||||||||
| Cost of goods sold |
2,351 | 1,628 | 44 | 314 | 206 | 52 | ||||||||||||||||||||||||||||||||||||
| Gross margin - manufactured |
2,498 | 900 | 178 | 334 | 114 | 193 | ||||||||||||||||||||||||||||||||||||
| Gross margin - other 1 |
84 | 72 | 17 | Depreciation and amortization |
|
54 | 52 | 4 | ||||||||||||||||||||||||||||||||||
| Gross margin - total |
2,582 | 972 | 166 | Gross margin excluding depreciation |
|
|||||||||||||||||||||||||||||||||||||
| (Income) expenses |
(105 | ) | (1 | ) | n/m | and amortization - manufactured |
|
388 | 166 | 134 | ||||||||||||||||||||||||||||||||
| EBIT |
2,687 | 973 | 176 | Ammonia controllable cash cost of |
|
|||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
403 | 409 | (1 | ) | product manufactured |
|
59 | 52 | 13 | |||||||||||||||||||||||||||||||||
| EBITDA |
3,090 | 1,382 | 124 | |||||||||||||||||||||||||||||||||||||||
| Adjustments 2 |
- | 5 | (100 | ) | ||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA |
3,090 | 1,387 | 123 | |||||||||||||||||||||||||||||||||||||||
1 Includes other nitrogen (including ESN®) and purchased products and comprises net sales of $892 million (2021 – $512 million) less cost of goods sold of $808 million (2021 – $440 million).
2 See Note 2 to the interim financial statements.
| • | Adjusted EBITDA increased in the third quarter and first nine months of 2022 primarily due to higher net realized selling prices and higher earnings from equity-accounted investees, which more than offset higher natural gas costs and lower ammonia and urea volumes. |
| • | Sales volumes increased in the third quarter of 2022 due to strong demand and higher offshore urea ammonium nitrate (UAN) sales that more than offset the impact of gas curtailments in Trinidad. Sales volumes in the first nine months of 2022 decreased due to unplanned plant outages and a compressed North American spring application season. |
| • | Net realized selling price in the third quarter and first nine months of 2022 were higher due to strong benchmark prices resulting from tight global supply and higher energy prices in key nitrogen producing regions. Net realized selling prices decreased from the second quarter of 2022 due to a seasonal reset in benchmark prices that resulted in lower Nitrogen summer fill pricing. |
| • | Cost of goods sold per tonne in the third quarter and first nine months of 2022 increased primarily due to higher natural gas, raw material and other input costs. Ammonia controllable cash cost of product manufactured increased in the third quarter and first nine months due to higher input costs, mainly electricity costs. |
8
Natural Gas Prices in Cost of Production
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||
| (US dollars per MMBtu, except as otherwise noted) |
2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||
| Overall gas cost excluding realized derivative impact |
8.33 | 4.77 | 75 | 7.92 | 3.92 | 102 | ||||||||||||||||||
| Realized derivative impact |
(0.09 | ) | 0.01 | n/m | (0.06 | ) | 0.02 | n/m | ||||||||||||||||
| Overall gas cost |
8.24 | 4.78 | 72 | 7.86 | 3.94 | 99 | ||||||||||||||||||
| Average NYMEX |
8.20 | 4.01 | 104 | 6.77 | 3.18 | 113 | ||||||||||||||||||
| Average AECO |
4.46 | 2.83 | 58 | 4.34 | 2.48 | 75 | ||||||||||||||||||
| • | Natural gas prices in our cost of production increased in the third quarter and first nine months of 2022 as a result of higher North American gas index prices and increased gas costs in Trinidad, where our gas prices are linked to ammonia benchmark prices. |
Phosphate
| Three Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except | Dollars | Tonnes (thousands) | Average per Tonne | |||||||||||||||||||||||||||||||||||||||
| as otherwise noted) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||||||||||||||||||
| Manufactured product |
||||||||||||||||||||||||||||||||||||||||||
| Net sales |
||||||||||||||||||||||||||||||||||||||||||
| Fertilizer |
375 | 269 | 39 | 479 | 428 | 12 | 782 | 628 | 25 | |||||||||||||||||||||||||||||||||
| Industrial and feed |
192 | 132 | 45 | 161 | 192 | (16 | ) | 1,198 | 689 | 74 | ||||||||||||||||||||||||||||||||
| 567 | 401 | 41 | 640 | 620 | 3 | 886 | 648 | 37 | ||||||||||||||||||||||||||||||||||
| Cost of goods sold |
445 | 300 | 48 | 695 | 484 | 44 | ||||||||||||||||||||||||||||||||||||
| Gross margin - manufactured |
122 | 101 | 21 | 191 | 164 | 16 | ||||||||||||||||||||||||||||||||||||
| Gross margin - other 1 |
(8 | ) | 7 | n/m | Depreciation and amortization |
|
75 | 63 | 19 | |||||||||||||||||||||||||||||||||
| Gross margin - total |
114 | 108 | 6 | Gross margin excluding depreciation |
|
|||||||||||||||||||||||||||||||||||||
| (Income) expenses |
(311 | ) | 12 | n/m | and amortization - manufactured 3 |
|
266 | 227 | 17 | |||||||||||||||||||||||||||||||||
| EBIT |
425 | 96 | 343 | |||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
48 | 39 | 23 | |||||||||||||||||||||||||||||||||||||||
| EBITDA |
473 | 135 | 250 | |||||||||||||||||||||||||||||||||||||||
| Adjustments 2 |
(330 | ) | - | n/m | ||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA |
143 | 135 | 6 | |||||||||||||||||||||||||||||||||||||||
1 Includes other phosphate and purchased products and comprises net sales of $84 million (2021 – $47 million) less cost of goods sold of $92 million (2021 – $40 million).
2 See Notes 2 and 3 to the interim financial statements. Includes impairment reversal of assets of $330 million (2021 – nil).
3 This is a non-IFRS financial measure. See the “Non-IFRS Financial Measures” section.
| Nine Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except | Dollars | Tonnes (thousands) | Average per Tonne | |||||||||||||||||||||||||||||||||||||||
| as otherwise noted) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||||||||||||||||||
| Manufactured product |
||||||||||||||||||||||||||||||||||||||||||
| Net sales |
||||||||||||||||||||||||||||||||||||||||||
| Fertilizer |
1,093 | 731 | 50 | 1,305 | 1,331 | (2 | ) | 837 | 549 | 52 | ||||||||||||||||||||||||||||||||
| Industrial and feed |
551 | 365 | 51 | 542 | 577 | (6 | ) | 1,017 | 633 | 61 | ||||||||||||||||||||||||||||||||
| 1,644 | 1,096 | 50 | 1,847 | 1,908 | (3 | ) | 890 | 575 | 55 | |||||||||||||||||||||||||||||||||
| Cost of goods sold |
1,157 | 853 | 36 | 626 | 448 | 40 | ||||||||||||||||||||||||||||||||||||
| Gross margin - manufactured |
487 | 243 | 100 | 264 | 127 | 108 | ||||||||||||||||||||||||||||||||||||
| Gross margin - other 1 |
(10 | ) | 15 | n/m | Depreciation and amortization |
|
70 | 59 | 20 | |||||||||||||||||||||||||||||||||
| Gross margin - total |
477 | 258 | 85 | Gross margin excluding depreciation |
|
|||||||||||||||||||||||||||||||||||||
| (Income) expenses |
(739 | ) | 26 | n/m | and amortization - manufactured |
|
334 | 186 | 80 | |||||||||||||||||||||||||||||||||
| EBIT |
1,216 | 232 | 424 | |||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
130 | 112 | 16 | |||||||||||||||||||||||||||||||||||||||
| EBITDA |
1,346 | 344 | 291 | |||||||||||||||||||||||||||||||||||||||
| Adjustments 2 |
(780 | ) | - | n/m | ||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA |
566 | 344 | 65 | |||||||||||||||||||||||||||||||||||||||
1 Includes other phosphate and purchased products and comprises net sales of $232 million (2021 – $140 million) less cost of goods sold of $242 million (2021 – $125 million).
2 See Notes 2 and 3 to the interim financial statements. Includes impairment reversal of assets of $780 million (2021 – nil).
9
| • | Adjusted EBITDA increased in the third quarter and first nine months of 2022 mainly due to higher net realized selling prices, which more than offset higher raw material costs. Included with expenses in the third quarter of 2022, we recognized a $330 million non-cash impairment of assets reversal, which is deducted from adjusted EBITDA. This brings the total impairment reversal to $780 million for the first nine months of 2022 and is due to a more favorable outlook for phosphate margins. |
| • | Sales volumes increased in the third quarter of 2022 due to strong offshore fertilizer sales, offsetting lower industrial sales that were impacted by an unplanned plant outage. Sales volumes in the first nine months of 2022 decreased due to a condensed North American spring application season and lower production volumes. |
| • | Net realized selling price increased in the third quarter and first nine months of 2022 aligned with the increase in global benchmark prices. Industrial and feed net realized selling prices increased to a greater extent than fertilizer prices in the third quarter of 2022, which reflects the typical lag in industrial and feed price realizations relative to spot fertilizer prices. |
| • | Cost of goods sold per tonne increased in the third quarter and first nine months of 2022 primarily due to significantly higher sulfur and ammonia input costs. |
Corporate and Others
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) |
2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||
| Selling expenses |
(2 | ) | (9 | ) | (78 | ) | (6 | ) | (24 | ) | (75 | ) | ||||||||||||
| General and administrative expenses |
80 | 58 | 38 | 227 | 182 | 25 | ||||||||||||||||||
| Share-based compensation expense |
39 | 64 | (39 | ) | 122 | 125 | (2 | ) | ||||||||||||||||
| Other expenses |
59 | 30 | 97 | 160 | 141 | 13 | ||||||||||||||||||
| EBIT |
(176 | ) | (143 | ) | 23 | (503 | ) | (424 | ) | 19 | ||||||||||||||
| Depreciation and amortization |
19 | 12 | 58 | 55 | 34 | 62 | ||||||||||||||||||
| EBITDA |
(157 | ) | (131 | ) | 20 | (448 | ) | (390 | ) | 15 | ||||||||||||||
| Adjustments 1 |
63 | 89 | (29 | ) | 230 | 232 | (1 | ) | ||||||||||||||||
| Adjusted EBITDA |
(94 | ) | (42 | ) | 124 | (218 | ) | (158 | ) | 38 | ||||||||||||||
1 See Note 2 to the interim financial statements.
| • | General and administrative expenses were higher in the third quarter and first nine months of 2022 compared to the same periods in 2021 mainly due to increased depreciation expense, higher donations and higher information technology-related expenses. |
| • | Other expenses were higher in the third quarter and first nine months of 2022 compared to the same periods in 2021 mainly due to higher foreign exchange losses related to our US dollar denominated liabilities in our South American operations and higher information technology project-related costs. This was partially offset by the absence of cloud computing related expenses from our change in accounting policy and lower COVID-19 related expenses. |
10
Finance Costs, Income Taxes and Other Comprehensive (Loss) Income
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||
| Finance costs |
136 | 122 | 11 | 375 | 367 | 2 | ||||||||||||||||||
| Income tax expense |
487 | 209 | 133 | 2,206 | 615 | 259 | ||||||||||||||||||
| Other comprehensive (loss) income |
(230 | ) | (79 | ) | 191 | (296 | ) | 6 | n/m | |||||||||||||||
| • | Finance costs were higher in the third quarter and first nine months of 2022 compared to the same periods in 2021 mainly due to higher interest rates and a higher short-term debt balance, mostly offset by a lower long-term debt balance resulting from the early extinguishment of a portion of our long-term debt in the fourth quarter of 2021. |
| • | Income tax expense was higher as a result of higher earnings in the third quarter and first nine months of 2022 compared to the same periods in 2021. |
| • | Other comprehensive (loss) income is primarily driven by changes in the currency translation of our foreign operations and our investment in Sinofert Holdings Ltd. (“Sinofert”). In the third quarter and first nine months of 2022, we had fair value losses on our investment in Sinofert due to share price decreases, compared to fair value gains due to share price increases in the same periods of 2021. In the third quarter and first nine months of 2022, we had higher losses on foreign currency translation of our Retail operations, mainly in Australia and Canada compared to the same periods in 2021. These currencies depreciated relative to the US dollar as at September 30, 2022 compared to June 30, 2022 and December 31, 2021 levels, which led to losses in the third quarter and the first nine months of 2022. This was partially offset by a net actuarial gain on our defined benefit pension plans in the third quarter of 2022. |
11
Liquidity and Capital Resources
Sources and Uses of Liquidity
We continued to manage our capital in accordance with our capital allocation strategy. We believe that our internally generated cash flow, supplemented by available borrowings under new or existing financing sources, if necessary, will be sufficient to meet our anticipated capital expenditures, planned growth and development activities, and other cash requirements for the foreseeable future. Refer to the “Capital Structure and Management” section for details on our existing long-term debt and credit facilities.
Sources and Uses of Cash
| (millions of US dollars, except as otherwise noted) | Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||||
| Cash provided by (used in) operating activities |
878 | (1,565 | ) | n/m | 3,374 | 249 | n/m | |||||||||||||||||
| Cash used in investing activities |
(705 | ) | (523 | ) | 35 | (1,679 | ) | (1,342 | ) | 25 | ||||||||||||||
| Cash (used in) provided by financing activities |
(29 | ) | 757 | n/m | (1,319 | ) | 117 | n/m | ||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents |
(32 | ) | (20 | ) | 60 | (52 | ) | (35 | ) | 49 | ||||||||||||||
| Increase (decrease) in cash and cash equivalents |
112 | (1,351 | ) | n/m | 324 | (1,011 | ) | n/m | ||||||||||||||||
| Cash provided by |
• Cash provided by operating activities was higher in the third quarter and first nine months of 2022 compared to the same periods in 2021 due to higher net earnings driven by higher selling prices from global supply uncertainties, offset by working capital requirements. | |
| Cash used in |
• Cash used in investing activities in the third quarter and first nine months of 2022 was higher compared to the same periods in 2021 mainly due to higher spending to maintain the safety and reliability of our assets and to increase our potash production capabilities. | |
| Cash (used in) |
• Cash used in financing activities in the third quarter and first nine months of 2022 was higher compared to the same periods in 2021 due to increased share repurchases, partially offset with increased commercial paper and credit facility drawdowns to temporarily finance working capital requirements. | |
Financial Condition Review
The following balance sheet categories contain variances that are considered material:
| As at | ||||||||||||||||
| (millions of US dollars, except as otherwise noted) |
September 30, 2022 | December 31, 2021 | $ Change | % Change | ||||||||||||
| Assets |
||||||||||||||||
| Cash and cash equivalents |
823 | 499 | 324 | 65 | ||||||||||||
| Receivables |
8,591 | 5,366 | 3,225 | 60 | ||||||||||||
| Inventories |
6,545 | 6,328 | 217 | 3 | ||||||||||||
| Prepaid expenses and other current assets |
737 | 1,653 | (916 | ) | (55 | ) | ||||||||||
| Property, plant and equipment |
21,022 | 20,016 | 1,006 | 5 | ||||||||||||
| Liabilities and Equity |
||||||||||||||||
| Short-term debt |
4,454 | 1,560 | 2,894 | 186 | ||||||||||||
| Current portion of long-term debt |
1,016 | 545 | 471 | 86 | ||||||||||||
| Payables and accrued charges |
8,760 | 10,052 | (1,292 | ) | (13 | ) | ||||||||||
| Long-term debt |
7,020 | 7,521 | (501 | ) | (7 | ) | ||||||||||
| Deferred income tax liabilities |
3,489 | 3,165 | 324 | 10 | ||||||||||||
| Asset retirement obligations and accrued environmental costs |
1,320 | 1,566 | (246 | ) | (16 | ) | ||||||||||
| Share capital |
14,588 | 15,457 | (869 | ) | (6 | ) | ||||||||||
| Accumulated other comprehensive loss |
(498 | ) | (146 | ) | (352 | ) | 241 | |||||||||
| Retained earnings |
11,787 | 8,192 | 3,595 | 44 | ||||||||||||
12
| • | Explanations for changes in Cash and cash equivalents are in the “Sources and Uses of Cash” section. |
| • | Receivables increased due to higher sales across all of our segments as a result of higher crop nutrient net realized selling prices consistent with higher benchmark pricing, as well as higher Retail vendor rebates receivables. |
| • | Inventories increased primarily due to higher cost to produce and/or purchase inventory across all our segments. We held higher than average levels of finished products inventory in our Nitrogen and Phosphate segments, resulting from timing of sales, turnarounds at our Nitrogen facilities at year-end and higher input costs. This was partially offset by a decrease in inventory in our Retail segment driven by seasonality. Generally, we carry higher inventory levels at year-end and during the early part of the year in preparation for the upcoming planting and application seasons. Throughout the year, inventory levels decrease as we sell to our customers. |
| • | Prepaid expenses and other current assets decreased due to the drawdown of prepaid inventory where Retail typically prepays for products at year-end and takes possession of inventory throughout the year. |
| • | Property, plant and equipment increased due to impairment reversals in the Phosphate segment. |
| • | Short-term debt increased due to additional commercial paper issuances and borrowings under our credit facilities for our seasonal working capital requirements and for share repurchases. |
| • | Payables and accrued charges decreased due to the seasonality of our Retail segment. Throughout the year, we settle our vendor obligations and customer prepayments decrease as drawdowns occur. As at September 30, 2022, we had higher payables balances compared to the same period in 2021 due to higher input costs from inflation and tight global supply. |
| • | Long-term debt decreased due to a reclassification to the current portion of long-term debt of our $500 million notes maturing May 2023. |
| • | Deferred income tax liabilities increased primarily in the NPK businesses in the US and Canada, partially offset by US Retail recoveries. The reversal of the Phosphate impairment also resulted in an increase in the deferred tax liability of $161 million. |
| • | Asset retirement obligations and accrued environment costs decreased due to changes in discount rates, reclassification to the current portion of asset retirement obligations and increased spending on remediation to restore our sites. |
| • | Share capital decreased from shares repurchased under our normal course issuer bids partially offset by exercise of stock options. |
| • | Accumulated other comprehensive loss increased due to a loss on currency translation of our foreign operations. |
| • | Retained earnings increased as net earnings in the first nine months of 2022 exceeded dividends declared and share repurchases. |
Capital Structure and Management
Principal Debt Instruments
As part of the normal course of business, we closely monitor our liquidity position. We use a combination of cash generated from operations and short-term and long-term debt to finance our operations. We were in compliance with our debt covenants and did not have any changes to our credit ratings in the nine months ended September 30, 2022.
13
|
|
As at September 30, 2022 | |||||||||||||||
| Outstanding and Committed | ||||||||||||||||
| (millions of US dollars) | Rate of Interest (%) | Total Facility Limit | Short-Term Debt | Long-Term Debt | ||||||||||||
| Credit facilities |
||||||||||||||||
| Unsecured revolving term credit facility |
n/a | 4,500 | - | - | ||||||||||||
| Unsecured revolving term credit facility |
4.1 | 2,000 | 1,000 | - | ||||||||||||
| Uncommitted revolving demand facility |
4.0 | 1,000 | 500 | - | ||||||||||||
| Other credit facilities |
760 | |||||||||||||||
| South American |
1.5 - 21.7 | 194 | 108 | |||||||||||||
| Australian |
3.6 | 97 | - | |||||||||||||
| Other |
3.3 - 4.0 | 8 | 3 | |||||||||||||
| Commercial paper |
2.9 - 4.0 | 2,530 | - | |||||||||||||
| Other short-term debt |
n/a | 125 | 7 | |||||||||||||
| Total |
|
|
|
|
|
|
4,454 | 118 | ||||||||
The amount available under the commercial paper program is limited to the availability of backup funds under the $4,500 million unsecured revolving term credit facility and excess cash invested in highly liquid securities. During the third quarter of 2022, we extended the maturity date of the $4,500 million unsecured revolving term credit facility from June 4, 2026 to September 14, 2027. There was no change to the total facility limit or the significant agreement terms from those we disclosed in our 2021 Annual Report.
During the third quarter of 2022, we entered into a new $2,000 million revolving term credit facility, with the same principal covenants and events of default as our existing $4,500 million unsecured revolving term credit facility. The $2,000 million non-revolving term credit facilities we entered into in July 2022 to help temporarily manage normal seasonal working capital swings were closed prior to September 30, 2022.
Our long-term debt consists primarily of notes. See the “Capital Structure and Management” section of our 2021 Annual Report for information on balances, rates and maturities for our notes. Subsequent to the third quarter of 2022, we repaid the $500 million 3.15 percent notes that matured October 1, 2022.
Outstanding Share Data
|
|
As at November 1, 2022 | |||
| Common shares |
520,183,851 | |||
| Options to purchase common shares |
3,920,176 | |||
We repurchased approximately 40 million shares year-to-date as of November 1, 2022, under our share repurchase programs, for a total of approximately $3.5 billion and plan to allocate a total of approximately $4 billion to share repurchases in 2022. While some of the previously expected approximately $5 billion in repurchases may now extend into the first quarter of 2023 due to lower forecasted operating cash flow in 2022, we still intend on completing our existing 10 percent share repurchase program prior to its expiry in February 2023.
For more information on our capital structure and management, see Note 24 to our 2021 annual financial statements.
Quarterly Results
| (millions of US dollars, except as otherwise noted) | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | Q2 2021 | Q1 2021 | Q4 2020 | ||||||||
| Sales |
8,188 | 14,506 | 7,657 | 7,267 | 6,024 | 9,763 | 4,658 | 4,052 | ||||||||
| Net earnings |
1,583 | 3,601 | 1,385 | 1,207 | 726 | 1,113 | 133 | 316 | ||||||||
| Net earnings attributable to equity holders of Nutrien |
1,577 | 3,593 | 1,378 | 1,201 | 717 | 1,108 | 127 | 316 | ||||||||
| Net earnings per share attributable to equity holders of Nutrien |
||||||||||||||||
| Basic |
2.95 | 6.53 | 2.49 | 2.11 | 1.26 | 1.94 | 0.22 | 0.55 | ||||||||
| Diluted |
2.94 | 6.51 | 2.49 | 2.11 | 1.25 | 1.94 | 0.22 | 0.55 | ||||||||
Seasonality in our business results from increased demand for products during the planting season. Crop input sales are generally higher in the spring and fall application seasons. Crop input inventories are normally accumulated leading up to each application season. Our cash collections generally occur after the application season is complete, while customer prepayments made to us are concentrated in December and January and inventory prepayments paid to our suppliers are typically concentrated in the period from November to January. Feed and industrial sales are more evenly distributed throughout the year.
14
Our earnings are significantly affected by fertilizer benchmark prices, which have been volatile over the last two years and are affected by demand-supply conditions, grower affordability and weather.
In the third and second quarters of 2022, earnings were impacted by $330 million and $450 million non-cash impairment reversals at White Springs and Aurora, respectively, of property, plant and equipment in the Phosphate segment related to higher forecasted global prices and a more favorable outlook for phosphate margins. In the fourth quarter of 2021, earnings were impacted by a $142 million loss resulting from the early extinguishment of long-term debt. In the fourth quarter of 2020, earnings were impacted by a $250 million net gain on disposal of our investment in Misr Fertilizers Production Company S.A.E..
Critical Accounting Estimates
Our significant accounting policies are disclosed in our 2021 Annual Report. We have discussed the development, selection and application of our key accounting policies, and the critical accounting estimates and assumptions they involve, with the audit committee of the Board. Our critical accounting estimates are discussed on page 49 of our 2021 Annual Report. Other than the critical accounting estimates discussed below, there were no material changes in the three or nine months ended September 30, 2022 to our critical accounting estimates.
Impairment of Assets
Long-Lived Asset Impairment and Reversals
In the three months ended September 30, 2022, we continued to revise our near-term pricing forecasts due to continued global export restrictions from major producers and continued our review of our previously impaired Phosphate cash-generating unit (“CGU”), White Springs. In 2017 and 2020, we recorded an impairment of assets at our White Springs CGU relating to property, plant and equipment of $250 million and $215 million respectively, as a result of lower long-term forecasted global phosphate prices. Due to increases in our forecast, the recoverable amount of our White Springs CGU is above its carrying amount. As a result, during the three months ended September 30, 2022, we recorded a full impairment reversal, net of depreciation, of $330 million in the statement of earnings relating to property, plant and equipment. Refer to Note 3 to the interim financial statements.
The recoverable amount estimate is most sensitive to the following key assumptions: our internal sales and input price forecasts, which consider projections from independent third-party data sources, discount rate, and expected mine life. We used key assumptions that were based on historical data and estimates of future results from internal sources, external price benchmarks, and mineral reserve technical reports, as well as industry and market trends.
Goodwill Impairment Indicators
CGUs or groups of CGUs that have goodwill allocated to them must be assessed for impairment when events or circumstances indicate there could be an impairment, or at least annually. Based on our assumptions at the time of our impairment testing, the recoverable amount of each of our CGUs or groups of CGUs was greater than or approximately equal to their carrying amounts. Key assumptions in our testing models may change, and changes that could reasonably be expected to occur may cause impairment. Such change in assumptions could be driven by global supply and demand, other market factors, changes in regulations, and other future events outside our control.
During the nine months ended September 30, 2022, North American central banks continued to increase their benchmark borrowing rates. Benchmark borrowing rates are used as the risk-free rate which is a component of determining our discount rate for impairment testing. As a result of these increases, we revised our discount rates and increased our Retail – North America group of CGUs discount rate to 8.5 percent (previous impairment analysis – 8.0 percent at June 30, 2022) and this triggered an impairment test to be performed.
The Retail – North America group of CGUs have $6.9 billion in associated goodwill. Goodwill is more susceptible to impairment risk if there is an increase in the discount rate, or a deterioration in business operating results or economic conditions and actual results do not meet our forecasts. As at September 30, 2022, the Retail – North America group of CGUs carrying amount was equal to its recoverable amount. A 25 basis point increase in the discount rate will result in an impairment of the carrying amount of goodwill of approximately $500 million. A decrease in forecasted EBITDA and cash flows or a reduction in the terminal growth rate will also result in impairment in the future. Refer to Note 3 to the interim financial statements.
15
Risk Factors
Russia and Ukraine Conflict
The current conflict between Ukraine and Russia and the international response has, and may continue to have, potential wide-ranging consequences for global market volatility and economic conditions, including energy and commodity prices. Certain countries including Canada, the United States, Australia and certain European countries have imposed strict financial and trade sanctions against Russia, with Russia and Belarus imposing retaliatory sanctions of their own, which have had, and may continue to have, far-reaching effects on the global economy, energy and commodity prices, food security and crop nutrient supply and prices. The short-, medium- and long-term implications of the conflict in Ukraine are difficult to predict with any degree of certainty at this time. While Nutrien does not have operations in Ukraine or Russia, there remains uncertainty relating to the potential impact of the conflict and its effect on global food security, growers and the market outlook for crop nutrient market supply and demand fundamentals and nutrient prices, and it could have a material and adverse effect on our business, financial condition and results of operations. Depending on the extent, duration, and severity of the conflict, it may have the effect of heightening many of the other risks Nutrien is subject to and which are described in our 2021 Annual Report and 2021 Annual Information Form, including, without limitation, risks relating to market fundamentals and conditions (such as sanctions and trade flows and the impact thereof on crop nutrient supply and demand); cybersecurity threats; energy and commodity prices; inflationary pressures, interest rates and costs of capital; and supply chains and cost-effective and timely transportation.
Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, and National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with IFRS. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
There has been no change in our internal control over financial reporting during the three months ended September 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Forward-Looking Statements
Certain statements and other information included in this document, including within the “Market Outlook and Guidance” section, constitute “forward-looking information” or “forward-looking statements” (collectively, “forward-looking statements”) under applicable securities laws (such statements are often accompanied by words such as “anticipate”, “forecast”, “expect”, “believe”, “may”, “will”, “should”, “estimate”, “intend” or other similar words). All statements in this document, other than those relating to historical information or current conditions, are forward-looking statements, including, but not limited to: Nutrien’s business strategies, plans, prospects and opportunities; Nutrien’s 2022 full-year guidance, including expectations regarding our adjusted net earnings per share and adjusted EBITDA (consolidated and by segment); expectations regarding our growth and capital allocation intentions and strategies; our advancement of strategic growth initiatives; capital spending expectations for 2022; our intention to complete our existing share repurchase program in 2022 and 2023, including the funds allocated thereto; expectations regarding performance of our operating segments in 2022 and 2023 including projected potash sales volumes; our operating segment market outlooks and market conditions and fundamentals for 2022 as well as our expectations for market conditions and fundamentals in 2023 and beyond, and the anticipated supply and demand for our products and services, expected market and industry conditions with respect to crop nutrient application rates, planted acres, grower crop investment, crop mix, production expenses, shipments, consumption, prices and the impact of seasonality, import and export volumes and economic sanctions; Nutrien’s ability to develop innovative and sustainable solutions; the negotiation of sales contracts; acquisitions and divestitures and the anticipated benefits thereof; and the potential impairment of goodwill associated with our Retail – North America group of CGUs. These forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements. As such, undue reliance should not be placed on these forward-looking statements.
16
All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions referred to below and elsewhere in this document. Although we believe that these assumptions are reasonable, having regard to our experience and our perception of historical trends, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place undue reliance on these assumptions and such forward-looking statements. Current conditions, economic and otherwise, render assumptions, although reasonable when made, subject to greater uncertainty. The additional key assumptions that have been made include, among other things, assumptions with respect to our ability to successfully complete, integrate and realize the anticipated benefits of our already completed and future acquisitions and divestitures, and that we will be able to implement our standards, controls, procedures and policies in respect of any acquired businesses and to realize the expected synergies; that future business, regulatory and industry conditions will be within the parameters expected by us, including with respect to prices, expenses, margins, demand, supply, product availability, shipments, consumption, supplier agreements, availability and cost of labor and interest, exchange and effective tax rates; assumptions with respect to global economic conditions and the accuracy of our market outlook expectations for 2022 and in the future; assumptions with respect to our intention to complete share repurchases under our share repurchase program, including the funding thereof, existing and future market conditions, including with respect to the price of our common shares, and compliance with respect to applicable limitations under securities laws and regulations and stock exchange policies; our expectations regarding the impacts, direct and indirect, of the COVID-19 pandemic on our business, customers, business partners, employees, supply chain, other stakeholders and the overall global economy; our expectations regarding the impacts, direct and indirect, of the conflict between Ukraine and Russia on, among other things, global supply and demand, energy and commodity prices, global interest rates, supply chains and the global macroeconomic environment, including inflation; the adequacy of our cash generated from operations and our ability to access our credit facilities or capital markets for additional sources of financing; our expectations regarding the impact of certain factors on the carrying amount of goodwill associated with our Retail – North America group of CGUs; our ability to identify suitable candidates for acquisitions and divestitures and negotiate acceptable terms; our ability to maintain investment grade ratings and achieve our performance targets; our ability to successfully negotiate sales contracts; and our ability to successfully implement new initiatives and programs.
Events or circumstances that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: general global economic, market and business conditions; failure to complete announced and future acquisitions or divestitures at all or on the expected terms and within the expected timeline; seasonality; climate change and weather conditions, including impacts from regional flooding and/or drought conditions; crop planted acreage, yield and prices; the supply and demand and price levels for our products; governmental and regulatory requirements and actions by governmental authorities, including changes in government policy (including tariffs, trade restrictions and climate change initiatives), government ownership requirements, changes in environmental, tax and other laws or regulations and the interpretation thereof; political risks, including civil unrest, actions by armed groups or conflict and malicious acts including terrorism; the occurrence of a major environmental or safety incident; innovation and cybersecurity risks related to our systems, including our costs of addressing or mitigating such risks; counterparty and sovereign risk; delays in completion of turnarounds at our major facilities; interruptions of or constraints in availability of key inputs, including natural gas and sulfur; any significant impairment of the carrying amount of certain assets; risks related to reputational loss; certain complications that may arise in our mining processes; the ability to attract, engage and retain skilled employees and strikes or other forms of work stoppages; the COVID-19 pandemic, including variants of the COVID-19 virus and the efficiency and distribution of vaccines, and its resulting effects on economic conditions, restrictions imposed by public health authorities or governments, including government-imposed vaccine mandates, fiscal and monetary responses by governments and financial institutions and disruptions to global supply chains; the conflict between Ukraine and Russia and its potential impact on, among other things, global market conditions and supply and demand, energy and commodity prices; interest rates, supply chains and the global economy generally; our ability to execute on our strategies related to environmental, social and governance matters, and achieve related expectations; the risk that rising interest rates and/or deteriorated business operating results may result in the impairment of goodwill attributed to certain of our cash generating units; and other risk factors detailed from time to time in Nutrien reports filed with the Canadian securities regulators and the SEC in the United States.
The purpose of our adjusted net earnings per share, adjusted EBITDA (consolidated and by segment) and sustaining capital expenditures guidance ranges are to assist readers in understanding our expected and targeted financial results, and this information may not be appropriate for other purposes.
The forward-looking statements in this document are made as of the date hereof and Nutrien disclaims any intention or obligation to update or revise any forward-looking statements in this document as a result of new information or future events, except as may be required under applicable Canadian securities legislation or applicable US federal securities laws.
17
Terms and Definitions
For the definitions of certain financial and non-financial terms used in this document, as well as a list of abbreviated company names and sources, see the “Terms & Definitions” section of our 2021 Annual Report. All references to per share amounts pertain to diluted net earnings (loss) per share, “n/m” indicates information that is not meaningful, and all financial amounts are stated in millions of US dollars, unless otherwise noted.
About Nutrien
Nutrien is the world’s largest provider of crop inputs and services, playing a critical role in helping growers increase food production in a sustainable manner. We produce and distribute approximately 27 million tonnes of potash, nitrogen and phosphate products world-wide. With this capability and our leading agriculture retail network, we are well positioned to supply the needs of our customers. We operate with a long-term view and are committed to working with our stakeholders as we address our economic, environmental and social priorities. The scale and diversity of our integrated portfolio provides a stable earnings base, multiple avenues for growth and the opportunity to return capital to shareholders.
For Further Information:
Investor Relations:
Jeff Holzman
Vice President, Investor Relations
(306) 933-8545
Investors@nutrien.com
Media Relations:
Megan Fielding
Vice President, Brand & Culture Communications
(403) 797-3015
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 Thursday, November 3, 2022 at 10:00 a.m. Eastern Time.
Telephone Conference dial-in numbers:
| • | From Canada and the US 1-888-886-7786 |
| • | International 1-416-764-8683 |
| • | No access code required. Please dial in 15 minutes prior to ensure you are placed on the call in a timely manner. |
Live Audio Webcast: Visit https://www.nutrien.com/investors/events/2022-q3-earnings-conference-call
18
Appendix A - Selected Additional Financial Data
| Selected Retail Measures |
Three Months Ended September 30 |
Nine Months Ended September 30 | ||||||
| 2022 | 2021 | 2022 | 2021 | |||||
| Proprietary products margin as a percentage of product line margin (%) |
||||||||
| Crop nutrients |
35 | 26 | 22 | 24 | ||||
| Crop protection products |
41 | 41 | 41 | 41 | ||||
| Seed |
62 | 48 | 45 | 45 | ||||
| All products |
30 | 27 | 27 | 27 | ||||
| Crop nutrients sales volumes (tonnes – thousands) |
||||||||
| North America |
1,066 | 1,112 | 6,286 | 7,729 | ||||
| International |
782 | 898 | 2,732 | 2,833 | ||||
| Total |
1,848 | 2,010 | 9,018 | 10,562 | ||||
| Crop nutrients selling price per tonne |
||||||||
| North America |
836 | 602 | 908 | 510 | ||||
| International |
913 | 585 | 744 | 464 | ||||
| Total |
869 | 595 | 858 | 498 | ||||
| Crop nutrients gross margin per tonne |
||||||||
| North America |
155 | 147 | 191 | 127 | ||||
| International |
64 | 95 | 80 | 67 | ||||
| Total |
117 | 124 | 157 | 111 | ||||
| Financial performance measures |
2022 | 2021 | ||||||
| Retail adjusted EBITDA margin (%) 1, 2 |
11 | 11 | ||||||
| Retail adjusted EBITDA per US selling location (thousands of US dollars) 1, 2, 3 |
1,913 | 1,362 | ||||||
| Retail adjusted average working capital to sales (%) 1, 4 |
16 | 12 | ||||||
| Retail adjusted average working capital to sales excluding Nutrien Financial (%) 1, 4 |
1 | (1) | ||||||
| Nutrien Financial adjusted net interest margin (%) 1, 4 |
6.7 | 6.4 | ||||||
| Retail cash operating coverage ratio (%) 1, 4 |
55 | 59 | ||||||
1 Rolling four quarters ended September 30, 2022 and 2021.
2 These are supplementary financial measures. See the “Other Financial Measures” section.
3 Excluding acquisitions.
4 These are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section.
| Nutrien Financial | As at September 30, 2022 | As at Dec 31, 2021 |
||||||||||||||||||||||||||||||
| (millions of US dollars) | Current | <31 days past due |
31–90 past due |
>90 days past due |
Gross Receivables |
Allowance 1 | Net Receivables |
Net Receivables |
||||||||||||||||||||||||
| North America |
3,009 | 49 | 138 | 77 | 3,273 | (34 | ) | 3,239 | 1,488 | |||||||||||||||||||||||
| International |
572 | 8 | 56 | 25 | 661 | (2 | ) | 659 | 662 | |||||||||||||||||||||||
| Nutrien Financial receivables |
3,581 | 57 | 194 | 102 | 3,934 | (36 | ) | 3,898 | 2,150 | |||||||||||||||||||||||
1 Bad debt expense on the above receivables for the nine months ended September 30, 2022 was $10 million (2021 – $9 million) in the Retail segment.
19
| Selected Nitrogen Measures | Three Months Ended September 30 |
Nine Months Ended September 30 | ||||||
| 2022 | 2021 | 2022 | 2021 | |||||
| Sales volumes (tonnes – thousands) |
||||||||
| Fertilizer |
1,417 | 1,320 | 3,963 | 4,450 | ||||
| Industrial and feed |
1,209 | 1,201 | 3,523 | 3,440 | ||||
| Net sales (millions of US dollars) |
||||||||
| Fertilizer |
764 | 533 | 2,658 | 1,503 | ||||
| Industrial and feed |
743 | 440 | 2,191 | 1,025 | ||||
| Net selling price per tonne |
||||||||
| Fertilizer |
539 | 404 | 671 | 338 | ||||
| Industrial and feed |
614 | 366 | 622 | 298 | ||||
| Production Measures | Three Months Ended September 30 |
Nine Months Ended September 30 | ||||||
| 2022 | 2021 | 2022 | 2021 | |||||
| Potash production (Product tonnes – thousands) |
2,742 |
3,199 |
10,066 |
10,149 | ||||
| Potash shutdown weeks 1 |
10 |
10 |
15 |
14 | ||||
| Ammonia production – total 2 |
1,483 |
1,414 |
4,359 |
4,355 | ||||
| Ammonia production – adjusted 2, 3 |
1,009 |
856 |
3,015 |
2,863 | ||||
| Ammonia operating rate (%) 3 |
91 |
77 |
92 |
87 | ||||
|
P2O5 production (P2O5 tonnes – thousands) |
335 |
384 |
1,063 |
1,109 | ||||
| P2O5 operating rate (%) |
78 | 90 | 84 | 87 | ||||
| 1 Represents weeks of full production shutdown, including inventory adjustments and unplanned events, excluding the impact of any periods of reduced operating rates, planned routine annual maintenance shutdowns and announced workforce reductions. 2 All figures are provided on a gross production basis in thousands of product tonnes. 3 Excludes Trinidad and Joffre. | ||||||||
20
Appendix B - Non-IFRS Financial Measures
We use both IFRS measures and certain non-IFRS financial measures to assess performance. Non-IFRS financial measures are financial measures disclosed by a company that (a) depict historical or expected future financial performance, financial position or cash flow of a company, (b) with respect to their composition, exclude amounts that are included in, or include amounts that are excluded from, the composition of the most directly comparable financial measure disclosed in the primary financial statements of the company, (c) are not disclosed in the financial statements of the company and (d) are not a ratio, fraction, percentage or similar representation. Non-IFRS ratios are financial measures disclosed by a company that are in the form of a ratio, fraction, percentage or similar representation that has a non-IFRS financial measure as one or more of its components, and that are not disclosed in the financial statements of the company.
These non-IFRS financial measures and non-IFRS ratios are not standardized financial measures under IFRS and, therefore, are unlikely to be comparable to similar financial measures presented by other companies. Management believes these non-IFRS financial measures and non-IFRS ratios provide transparent and useful supplemental information to help investors evaluate our financial performance, financial condition and liquidity using the same measures as management. These non-IFRS financial measures and non-IFRS ratios should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS.
The following section outlines our non-IFRS financial measures and non-IFRS ratios, their compositions, and why management uses each measure. It also includes reconciliations to the most directly comparable IFRS measures. Except as otherwise described herein, our non-IFRS financial measures and non-IFRS ratios are calculated on a consistent basis from period to period and are adjusted for specific items in each period, as applicable. As additional non-recurring or unusual items arise in the future, we generally exclude these items in our calculations.
Adjusted EBITDA (Consolidated)
Most directly comparable IFRS financial measure: Net earnings (loss).
Definition: Adjusted EBITDA is calculated as net earnings (loss) before finance costs, income taxes, depreciation and amortization, share-based compensation and certain foreign exchange gain/loss (net of related derivatives). We also adjust this measure for the following other income and expenses that are excluded when management evaluates the performance of our day-to-day operations: integration and restructuring related costs, impairment or reversal of impairment of assets, COVID-19 related expenses, gain or loss on disposal of certain businesses and investments, and IFRS adoption transition adjustments.
Why we use the measure and why it is useful to investors: It is not impacted by long-term investment and financing decisions, but rather focuses on the performance of our day-to-day operations. It provides a measure of our ability to service debt and to meet other payment obligations, and as a component of employee remuneration calculations.
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||
| (millions of US dollars) |
2022 | 2021 | 2022 | 2021 | ||||||||||||
| Net earnings |
1,583 | 726 | 6,569 | 1,972 | ||||||||||||
| Finance costs |
136 | 122 | 375 | 367 | ||||||||||||
| Income tax expense |
487 | 209 | 2,206 | 615 | ||||||||||||
| Depreciation and amortization |
526 | 489 | 1,492 | 1,454 | ||||||||||||
| EBITDA 1 |
2,732 | 1,546 | 10,642 | 4,408 | ||||||||||||
| Share-based compensation expense |
39 | 64 | 122 | 125 | ||||||||||||
| Foreign exchange loss, net of related derivatives |
11 | 1 | 67 | 1 | ||||||||||||
| Integration and restructuring related costs |
15 | 8 | 35 | 47 | ||||||||||||
| (Reversal) impairment of assets |
(330 | ) | 7 | (780 | ) | 12 | ||||||||||
| COVID-19 related expenses 2 |
- | 16 | 8 | 34 | ||||||||||||
| Gain on disposal of investment |
- | - | (19 | ) | - | |||||||||||
| Cloud computing transition adjustment 3 |
- | - | - | 36 | ||||||||||||
| Adjusted EBITDA |
2,467 | 1,642 | 10,075 | 4,663 | ||||||||||||
| 1 EBITDA is calculated as net earnings before finance costs, income taxes, and depreciation and amortization. 2 COVID-19 related expenses primarily consist of increased cleaning and sanitization costs, the purchase of personal protective equipment, discretionary supplemental employee costs, and costs related to construction delays from access limitations and other government restrictions. 3 Cloud computing transition adjustment relates to cloud computing costs in prior years that no longer qualify for capitalization based on an agenda decision issued by the IFRS Interpretations Committee in April 2021. |
| |||||||||||||||
21
Adjusted Net Earnings and Adjusted Net Earnings Per Share
Most directly comparable IFRS financial measure: Net earnings (loss) and net earnings (loss) per share.
Definition: Adjusted net earnings and related per share information are calculated as net earnings (loss) before share-based compensation and certain foreign exchange gain/loss (net of related derivatives), net of tax. We also adjust this measure for the following other income and expenses (net of tax) that are excluded when management evaluates the performance of our day-to-day operations: certain integration and restructuring related costs, impairment or reversal of impairment of assets, COVID-19 related expenses (including those recorded under finance costs), gain or loss on disposal of certain businesses and investments, IFRS adoption transition adjustments, gain/loss on early extinguishment of debt or on settlement of derivatives due to discontinuance of hedge accounting. In 2022, we amended our calculation of adjusted net earnings to adjust for a gain on settlement of a derivative due to discontinued hedge accounting. There was no similar gain or loss in the comparative period. We generally apply the annual forecasted effective tax rate to our adjustments during the year and, at year-end, we apply the actual effective tax rate. If the effective tax rate is significantly different from our forecasted effective tax rate due to adjustments or discrete tax impacts, we apply a tax rate that excludes those items. For material adjustments, we apply a tax rate specific to the adjustment.
Why we use the measure and why it is useful to investors: Focuses on the performance of our day-to-day operations and is used as a component of employee remuneration calculations.
| Three Months Ended September 30, 2022 |
Nine Months Ended September 30, 2022 |
|||||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) |
|
Increases (Decreases) |
|
Post-Tax | |
Per Diluted Share |
|
|
Increases (Decreases) |
|
Post-Tax | |
Per Diluted Share |
| ||||||||||
| Net earnings attributable to equity holders of Nutrien |
1,577 | 2.94 | 6,548 | 11.96 | ||||||||||||||||||||
| Adjustments: |
||||||||||||||||||||||||
| Share-based compensation expense |
39 | 30 | 0.06 | 122 | 91 | 0.17 | ||||||||||||||||||
| Foreign exchange loss, net of related derivatives |
11 | 8 | 0.01 | 67 | 50 | 0.09 | ||||||||||||||||||
| Integration and restructuring related costs |
15 | 11 | 0.02 | 35 | 26 | 0.05 | ||||||||||||||||||
| Impairment reversal of assets |
(330 | ) | (265 | ) | (0.49 | ) | (780 | ) | (619 | ) | (1.13 | ) | ||||||||||||
| COVID-19 related expenses |
- | - | - | 8 | 6 | 0.01 | ||||||||||||||||||
| Gain on disposal of investment |
- | - | - | (19 | ) | (14 | ) | (0.03 | ) | |||||||||||||||
| Gain on settlement of discontinued hedge accounting derivative |
(18 | ) | (14 | ) | (0.03 | ) | (18 | ) | (13 | ) | (0.02 | ) | ||||||||||||
| Adjusted net earnings |
1,347 | 2.51 | 6,075 | 11.10 | ||||||||||||||||||||
| Three Months Ended September 30, 2021 |
Nine Months Ended September 30, 2021 |
|||||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) |
|
Increases (Decreases) |
|
Post-Tax | |
Per Diluted Share |
|
|
Increases (Decreases) |
|
Post-Tax | |
Per Diluted Share |
| ||||||||||
| Net earnings attributable to equity holders of Nutrien |
717 | 1.25 | 1,952 | 3.41 | ||||||||||||||||||||
| Adjustments: |
||||||||||||||||||||||||
| Share-based compensation expense |
64 | 48 | 0.09 | 125 | 94 | 0.16 | ||||||||||||||||||
| Foreign exchange loss, net of related derivatives |
1 | 1 | - | 1 | 1 | - | ||||||||||||||||||
| Integration and restructuring related costs |
8 | 6 | 0.01 | 47 | 35 | 0.06 | ||||||||||||||||||
| Impairment of assets |
7 | 5 | 0.01 | 12 | 9 | 0.02 | ||||||||||||||||||
| COVID-19 related expenses |
16 | 12 | 0.02 | 34 | 26 | 0.05 | ||||||||||||||||||
| Cloud computing transition adjustment |
- | - | - | 36 | 27 | 0.05 | ||||||||||||||||||
| Adjusted net earnings |
789 | 1.38 | 2,144 | 3.75 | ||||||||||||||||||||
22
Adjusted EBITDA (Consolidated) and Adjusted Net Earnings Per Share Guidance
Adjusted EBITDA and adjusted net earnings per share guidance are forward-looking non-IFRS financial measures. We do not provide a reconciliation of such forward-looking measures to the most directly comparable financial measures calculated and presented in accordance with IFRS because a meaningful or accurate calculation of reconciling items and the information is not available without unreasonable effort due to unknown variables, including the timing and amount of certain reconciling items, and the uncertainty related to future results. These unknown variables may include unpredictable transactions of significant value that may be inherently difficult to determine without unreasonable efforts. The probable significance of such unavailable information, which could be material to future results, cannot be addressed. Guidance for adjusted EBITDA and adjusted net earnings per share excludes certain items such as, but not limited to, the impacts of share-based compensation, certain foreign exchange gain/loss (net of related derivatives), integration and restructuring related costs, impairment or reversal of impairment of assets, COVID-19 related expenses (including those recorded under finance costs), gain or loss on disposal of certain businesses and investments, IFRS adoption transition adjustments, and gain/loss on early extinguishment of debt or on settlement of derivatives due to discontinuance of hedge accounting.
Free Cash Flow and Free Cash Flow Including Changes in Non-Cash Operating Working Capital
Most directly comparable IFRS financial measure: Cash provided by (used in) operating activities.
Definition: Free cash flow is calculated as cash provided by (used in) operating activities less sustaining capital expenditures and before changes in non-cash operating working capital. Free cash flow including non-cash operating working capital is calculated as cash provided by operating activities less sustaining capital expenditures.
Why we use the measure and why it is useful to investors: For evaluation of liquidity and financial strength. These are also useful as indicators of our ability to service debt, meet other payment obligations and make strategic investments. These do not represent residual cash flow available for discretionary expenditures.
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||
| (millions of US dollars) |
2022 | 2021 | 2022 | 2021 | ||||||||||||||||
| Cash provided by (used in) operating activities |
878 | (1,565 | ) | 3,374 | 249 | |||||||||||||||
| Sustaining capital expenditures |
(428 | ) | (325 | ) | (878 | ) | (793 | ) | ||||||||||||
| Free cash flow including changes in non-cash operating working capital |
450 | (1,890 | ) | 2,496 | (544 | ) | ||||||||||||||
| Changes in non-cash operating working capital |
(1,093 | ) | (2,752 | ) | (4,274 | ) | (3,295 | ) | ||||||||||||
| Free cash flow |
1,543 | 862 | 6,770 | 2,751 | ||||||||||||||||
Gross Margin Excluding Depreciation and Amortization Per Tonne - Manufactured
Most directly comparable IFRS financial measure: Gross margin.
Definition: Gross margin per tonne less depreciation and amortization per tonne for manufactured products. Reconciliations are provided in the “Segment Results” section.
Why we use the measure and why it is useful to investors: Focuses on the performance of our day-to-day operations, which excludes the effects of items that primarily reflect the impact of long-term investment and financing decisions.
23
Potash Controllable Cash Cost of Product Manufactured (“COPM”) Per Tonne
Most directly comparable IFRS financial measure: Cost of goods sold (“COGS”) for the Potash segment.
Definition: Total Potash COGS excluding depreciation and amortization expense included in COPM, royalties, natural gas costs and carbon taxes, change in inventory, and other adjustments, divided by potash production tonnes.
Why we use the measure and why it is useful to investors: To assess operational performance. In 2022, we replaced Potash cash COPM with this new financial measure. Potash controllable cash COPM excludes the effects of production from other periods and the impacts of our long-term investment decisions. Potash controllable cash COPM also excludes royalties and natural gas costs and carbon taxes, which management does not consider controllable, as they are primarily driven by regulatory and market conditions.
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||
| Total COGS – Potash |
386 | 372 | 1,090 | 980 | ||||||||||||||||
| Change in inventory |
(52 | ) | (58 | ) | 20 | (42 | ) | |||||||||||||
| Other adjustments 1 |
(5 | ) | (1 | ) | (29 | ) | (7 | ) | ||||||||||||
| COPM |
329 | 313 | 1,081 | 931 | ||||||||||||||||
| Depreciation and amortization in COPM |
(84 | ) | (101 | ) | (317 | ) | (315 | ) | ||||||||||||
| Royalties in COPM |
(42 | ) | (24 | ) | (150 | ) | (60 | ) | ||||||||||||
| Natural gas costs and carbon taxes in COPM |
(9 | ) | (11 | ) | (45 | ) | (34 | ) | ||||||||||||
| Controllable cash COPM |
194 | 177 | 569 | 522 | ||||||||||||||||
| Production tonnes (tonnes – thousands) |
2,742 | 3,199 | 10,066 | 10,149 | ||||||||||||||||
| Potash controllable cash COPM per tonne |
70 | 55 | 56 | 51 | ||||||||||||||||
| 1 Other adjustments include unallocated production overhead that is recognized as part of cost of goods sold but is not included in the measurement of inventory and changes in inventory balances. |
| |||||||||||||||||||
Ammonia Controllable Cash COPM Per Tonne
Most directly comparable IFRS financial measure: Total manufactured COGS for the Nitrogen segment.
Definition: Total Nitrogen COGS excluding depreciation and amortization expense included in COGS, cash COGS for products other than ammonia, other adjustments, and natural gas and steam costs, divided by net ammonia production tonnes.
Why we use the measure and why it is useful to investors: To assess operational performance. Ammonia controllable cash COPM excludes the effects of production from other periods, the costs of natural gas and steam, and long-term investment decisions, supporting a focus on the performance of our day-to-day operations.
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||
| (millions of US dollars, except as otherwise noted) |
2022 | 2021 | 2022 | 2021 | ||||||||||||||||
| Total Manufactured COGS – Nitrogen |
872 | 591 | 2,351 | 1,628 | ||||||||||||||||
| Total Other COGS – Nitrogen |
235 | 104 | 808 | 440 | ||||||||||||||||
| Total COGS – Nitrogen |
1,107 | 695 | 3,159 | 2,068 | ||||||||||||||||
| Depreciation and amortization in COGS |
(117 | ) | (105 | ) | (334 | ) | (347 | ) | ||||||||||||
| Cash COGS for products other than ammonia |
(640 | ) | (380 | ) | (1,912 | ) | (1,221 | ) | ||||||||||||
| Ammonia |
||||||||||||||||||||
| Total cash COGS before other adjustments |
350 | 210 | 913 | 500 | ||||||||||||||||
| Other adjustments 1 |
(31 | ) | (36 | ) | (145 | ) | (66 | ) | ||||||||||||
| Total cash COPM |
319 | 174 | 768 | 434 | ||||||||||||||||
| Natural gas and steam costs |
(267 | ) | (137 | ) | (643 | ) | (329 | ) | ||||||||||||
| Controllable cash COPM |
52 | 37 | 125 | 105 | ||||||||||||||||
| Production tonnes (net tonnes 2 – thousands) |
819 | 706 | 2,099 | 2,011 | ||||||||||||||||
| Ammonia controllable cash COPM per tonne |
62 | 53 | 59 | 52 | ||||||||||||||||
1 Other adjustments include unallocated production overhead that is recognized as part of cost of goods sold but is not included in the measurement of inventory and changes in inventory balances.
2 Ammonia tonnes available for sale, as not upgraded to other Nitrogen products.
24
Retail Adjusted Average Working Capital to Sales and Retail Adjusted Average Working Capital to Sales Excluding Nutrien Financial
Definition: Retail adjusted average working capital divided by Retail adjusted sales for the last four rolling quarters. We exclude in our calculations the sales and working capital of certain acquisitions during the first year following the acquisition. We also look at this metric excluding Nutrien Financial revenue and working capital.
Why we use the measure and why it is useful to investors: To evaluate operational efficiency. A lower or higher percentage represents increased or decreased efficiency, respectively. The metric excluding Nutrien Financial shows the impact that the working capital of Nutrien Financial has on the ratio.
| Rolling four quarters ended September 30, 2022 | ||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | Q4 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Average/Total | |||||||||||||||
| Current assets |
9,924 | 12,392 | 12,487 | 11,262 | ||||||||||||||||
| Current liabilities |
(7,828 | ) | (9,223 | ) | (9,177 | ) | (5,889 | ) | ||||||||||||
| Working capital |
2,096 | 3,169 | 3,310 | 5,373 | 3,487 | |||||||||||||||
| Working capital from certain recent acquisitions |
- | - | - | - | ||||||||||||||||
| Adjusted working capital |
2,096 | 3,169 | 3,310 | 5,373 | 3,487 | |||||||||||||||
| Nutrien Financial working capital |
(2,150 | ) | (2,274 | ) | (4,404 | ) | (3,898 | ) | ||||||||||||
| Adjusted working capital excluding Nutrien Financial |
(54 | ) | 895 | (1,094 | ) | 1,475 | 306 | |||||||||||||
| Sales |
3,878 | 3,861 | 9,422 | 3,980 | ||||||||||||||||
| Sales from certain recent acquisitions |
- | - | - | - | ||||||||||||||||
| Adjusted sales |
3,878 | 3,861 | 9,422 | 3,980 | 21,141 | |||||||||||||||
| Nutrien Financial revenue |
(51 | ) | (49 | ) | (91 | ) | (65 | ) | ||||||||||||
| Adjusted sales excluding Nutrien Financial |
3,827 | 3,812 | 9,331 | 3,915 | 20,885 | |||||||||||||||
| Adjusted average working capital to sales (%) |
16 | |||||||||||||||||||
| Adjusted average working capital to sales excluding Nutrien Financial (%) |
|
1 | ||||||||||||||||||
| Rolling four quarters ended September 30, 2021 | ||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | Q4 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Average/Total | |||||||||||||||
| Current assets |
8,013 | 9,160 | 9,300 | 8,945 | ||||||||||||||||
| Current liabilities |
(6,856 | ) | (7,530 | ) | (7,952 | ) | (5,062 | ) | ||||||||||||
| Working capital |
1,157 | 1,630 | 1,348 | 3,883 | 2,005 | |||||||||||||||
| Working capital from certain recent acquisitions |
- | - | - | - | ||||||||||||||||
| Adjusted working capital |
1,157 | 1,630 | 1,348 | 3,883 | 2,005 | |||||||||||||||
| Nutrien Financial working capital |
(1,392 | ) | (1,221 | ) | (3,072 | ) | (2,820 | ) | ||||||||||||
| Adjusted working capital excluding Nutrien Financial |
(235 | ) | 409 | (1,724 | ) | 1,063 | (122) | |||||||||||||
| Sales |
2,618 | 2,972 | 7,537 | 3,347 | ||||||||||||||||
| Sales from certain recent acquisitions |
- | - | - | - | ||||||||||||||||
| Adjusted sales |
2,618 | 2,972 | 7,537 | 3,347 | 16,474 | |||||||||||||||
| Nutrien Financial revenue |
(37 | ) | (25 | ) | (59 | ) | (54 | ) | ||||||||||||
| Adjusted sales excluding Nutrien Financial |
2,581 | 2,947 | 7,478 | 3,293 | 16,299 | |||||||||||||||
| Adjusted average working capital to sales (%) |
12 | |||||||||||||||||||
| Adjusted average working capital to sales excluding Nutrien Financial (%) |
|
(1) | ||||||||||||||||||
25
Nutrien Financial Adjusted Net Interest Margin
Definition: Nutrien Financial revenue less deemed interest expense divided by average Nutrien Financial receivables outstanding for the last four rolling quarters.
Why we use the measure and why it is useful to investors: Used by credit rating agencies and other users to evaluate financial performance of Nutrien Financial.
| Rolling four quarters ended September 30, 2022 | ||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | Q4 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Total/Average | |||||||||||||||
| Nutrien Financial revenue |
51 | 49 | 91 | 65 | ||||||||||||||||
| Deemed interest expense 1 |
(12 | ) | (6 | ) | (12 | ) | (12 | ) | ||||||||||||
| Net interest |
39 | 43 | 79 | 53 | 214 | |||||||||||||||
| Average Nutrien Financial receivables |
2,150 | 2,274 | 4,404 | 3,898 | 3,182 | |||||||||||||||
| Nutrien Financial adjusted net interest margin (%) |
6.7 | |||||||||||||||||||
| 1 Average borrowing rate applied to the notional debt required to fund the portfolio of receivables from customers monitored and serviced by Nutrien Financial.
|
| |||||||||||||||||||
| Rolling four quarters ended September 30, 2021 | ||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | Q4 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Total/Average | |||||||||||||||
| Nutrien Financial revenue |
37 | 25 | 59 | 54 | ||||||||||||||||
| Deemed interest expense 1 |
(14 | ) | (6 | ) | (8 | ) | (10 | ) | ||||||||||||
| Net interest |
23 | 19 | 51 | 44 | 137 | |||||||||||||||
| Average Nutrien Financial receivables |
1,392 | 1,221 | 3,072 | 2,820 | 2,126 | |||||||||||||||
| Nutrien Financial adjusted net interest margin (%) |
6.4 | |||||||||||||||||||
| 1 Average borrowing rate applied to the notional debt required to fund the portfolio of receivables from customers monitored and serviced by Nutrien Financial. |
| |||||||||||||||||||
26
Retail Cash Operating Coverage Ratio
Definition: Retail selling, general and administrative, and other expenses, excluding depreciation and amortization expense, divided by Retail gross margin excluding depreciation and amortization expense in cost of goods sold, for the last four rolling quarters.
Why we use the measure and why it is useful to investors: To understand the costs and underlying economics of our Retail operations and to assess our Retail operating performance and ability to generate free cash flow.
| Rolling four quarters ended September 30, 2022 | ||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | Q4 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Total | |||||||||||||||
| Selling expenses |
848 | 722 | 1,013 | 821 | 3,404 | |||||||||||||||
| General and administrative expenses |
43 | 45 | 54 | 50 | 192 | |||||||||||||||
| Other expenses (income) |
20 | (12 | ) | 21 | 19 | 48 | ||||||||||||||
| Operating expenses |
911 | 755 | 1,088 | 890 | 3,644 | |||||||||||||||
| Depreciation and amortization in operating expenses |
(173 | ) | (167 | ) | (171 | ) | (204 | ) | (715) | |||||||||||
| Operating expenses excluding depreciation and amortization |
738 | 588 | 917 | 686 | 2,929 | |||||||||||||||
| Gross margin |
1,173 | 845 | 2,340 | 917 | 5,275 | |||||||||||||||
| Depreciation and amortization in cost of goods sold |
5 | 2 | 4 | 2 | 13 | |||||||||||||||
| Gross margin excluding depreciation and amortization |
1,178 | 847 | 2,344 | 919 | 5,288 | |||||||||||||||
| Cash operating coverage ratio (%) |
55 | |||||||||||||||||||
|
Rolling four quarters ended September 30, 2021 |
||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | Q4 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Total | |||||||||||||||
| Selling expenses |
727 | 667 | 863 | 746 | 3,003 | |||||||||||||||
| General and administrative expenses |
33 | 39 | 41 | 45 | 158 | |||||||||||||||
| Other expenses (income) |
8 | 15 | 34 | 17 | 74 | |||||||||||||||
| Operating expenses |
768 | 721 | 938 | 808 | 3,235 | |||||||||||||||
| Depreciation and amortization in operating expenses |
(177 | ) | (175 | ) | (166 | ) | (180 | ) | (698) | |||||||||||
| Operating expenses excluding depreciation and amortization |
591 | 546 | 772 | 628 | 2,537 | |||||||||||||||
| Gross margin |
885 | 652 | 1,858 | 917 | 4,312 | |||||||||||||||
| Depreciation and amortization in cost of goods sold |
3 | 2 | 3 | 2 | 10 | |||||||||||||||
| Gross margin excluding depreciation and amortization |
888 | 654 | 1,861 | 919 | 4,322 | |||||||||||||||
| Cash operating coverage ratio (%) |
59 | |||||||||||||||||||
Appendix C – Other Financial Measures
Supplementary Financial Measures
Supplementary financial measures are financial measures disclosed by a company that (a) are, or are intended to be, disclosed on a periodic basis to depict the historical or expected future financial performance, financial position or cash flow of a company, (b) are not disclosed in the financial statements of the company, (c) are not non-IFRS financial measures, and (d) are not non-IFRS ratios.
The following section provides an explanation of the composition of those supplementary financial measures if not previously provided.
Retail adjusted EBITDA margin: Retail adjusted EBITDA divided by Retail sales for the last four rolling quarters.
Sustaining capital expenditures: Represents capital expenditures that are required to sustain operations at existing levels and include major repairs and maintenance, and plant turnarounds.
Retail adjusted EBITDA per US selling location: Calculated as total Retail US adjusted EBITDA for the last four rolling quarters, representing the organic EBITDA component, which excludes acquisitions in those quarters, divided by the number of US locations that have generated sales in the last four rolling quarters, adjusted for acquired locations in those quarters.
27
| Unaudited | In millions of US dollars except as otherwise noted |
Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Earnings
| Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||||
| Note | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| SALES |
2 | 8,188 | 6,024 | 30,351 | 20,445 | |||||||||||||
| Freight, transportation and distribution |
204 | 220 | 628 | 653 | ||||||||||||||
| Cost of goods sold |
4,722 | 3,639 | 17,205 | 13,589 | ||||||||||||||
| GROSS MARGIN |
3,262 | 2,165 | 12,518 | 6,203 | ||||||||||||||
| Selling expenses |
826 | 749 | 2,570 | 2,287 | ||||||||||||||
| General and administrative expenses |
137 | 110 | 403 | 329 | ||||||||||||||
| Provincial mining taxes |
348 | 128 | 959 | 293 | ||||||||||||||
| Share-based compensation expense |
39 | 64 | 122 | 125 | ||||||||||||||
| (Reversal) impairment of assets |
3 | (330 | ) | 7 | (780 | ) | 12 | |||||||||||
| Other expenses |
4 | 36 | 50 | 94 | 203 | |||||||||||||
| EARNINGS BEFORE FINANCE COSTS AND INCOME TAXES |
2,206 | 1,057 | 9,150 | 2,954 | ||||||||||||||
| Finance costs |
136 | 122 | 375 | 367 | ||||||||||||||
| EARNINGS BEFORE INCOME TAXES |
2,070 | 935 | 8,775 | 2,587 | ||||||||||||||
| Income tax expense |
5 | 487 | 209 | 2,206 | 615 | |||||||||||||
| NET EARNINGS |
1,583 | 726 | 6,569 | 1,972 | ||||||||||||||
| Attributable to |
||||||||||||||||||
| Equity holders of Nutrien |
1,577 | 717 | 6,548 | 1,952 | ||||||||||||||
| Non-controlling interest |
6 | 9 | 21 | 20 | ||||||||||||||
| NET EARNINGS |
1,583 | 726 | 6,569 | 1,972 | ||||||||||||||
| NET EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF NUTRIEN (“EPS”) |
| |||||||||||||||||
| Basic |
2.95 | 1.26 | 12.00 | 3.42 | ||||||||||||||
| Diluted |
2.94 | 1.25 | 11.96 | 3.41 | ||||||||||||||
| Weighted average shares outstanding for basic EPS |
534,839,000 | 570,627,000 | 545,776,000 | 570,216,000 | ||||||||||||||
| Weighted average shares outstanding for diluted EPS |
536,164,000 | 572,224,000 | 547,449,000 | 571,735,000 | ||||||||||||||
| Condensed Consolidated Statements of Comprehensive Income |
| |||||||||||||||||
| Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||||
| (Net of related income taxes) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| NET EARNINGS |
1,583 | 726 | 6,569 | 1,972 | ||||||||||||||
| Other comprehensive (loss) income |
||||||||||||||||||
| Items that will not be reclassified to net earnings: |
||||||||||||||||||
| Net actuarial gain on defined benefit plans |
60 | - | 61 | - | ||||||||||||||
| Net fair value (loss) gain on investments |
(54 | ) | 46 | (61 | ) | 116 | ||||||||||||
| Items that have been or may be subsequently reclassified to net earnings: |
||||||||||||||||||
| Loss on currency translation of foreign operations |
(191 | ) | (124 | ) | (272 | ) | (129 | ) | ||||||||||
| Other |
(45 | ) | (1 | ) | (24 | ) | 19 | |||||||||||
| OTHER COMPREHENSIVE (LOSS) INCOME |
(230 | ) | (79 | ) | (296 | ) | 6 | |||||||||||
| COMPREHENSIVE INCOME |
1,353 | 647 | 6,273 | 1,978 | ||||||||||||||
| Attributable to |
||||||||||||||||||
| Equity holders of Nutrien |
1,348 | 638 | 6,254 | 1,959 | ||||||||||||||
| Non-controlling interest |
5 | 9 | 19 | 19 | ||||||||||||||
| COMPREHENSIVE INCOME |
1,353 | 647 | 6,273 | 1,978 | ||||||||||||||
(See Notes to the Condensed Consolidated Financial Statements)
28
| Unaudited | In millions of US dollars except as otherwise noted |
Condensed Consolidated Statements of Cash Flows
| Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||||
| Note | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| Note 1 | Note 1 | |||||||||||||||||
| OPERATING ACTIVITIES |
||||||||||||||||||
| Net earnings |
1,583 | 726 | 6,569 | 1,972 | ||||||||||||||
| Adjustments for: |
||||||||||||||||||
| Depreciation and amortization |
526 | 489 | 1,492 | 1,454 | ||||||||||||||
| Share-based compensation expense |
39 | 64 | 122 | 125 | ||||||||||||||
| (Reversal) impairment of assets |
3 | (330 | ) | 7 | (780 | ) | 12 | |||||||||||
| Provision for (recovery of) deferred income tax |
160 | (87 | ) | 152 | (97 | ) | ||||||||||||
| Gain on disposal of investment |
4 | - | - | (19 | ) | - | ||||||||||||
| Cloud computing transition adjustment |
4 | - | - | - | 36 | |||||||||||||
| Other long-term assets, liabilities and miscellaneous |
(7 | ) | (12 | ) | 112 | 42 | ||||||||||||
| Cash from operations before working capital changes |
1,971 | 1,187 | 7,648 | 3,544 | ||||||||||||||
| Changes in non-cash operating working capital: |
||||||||||||||||||
| Receivables |
1,240 | (266 | ) | (3,602 | ) | (3,101 | ) | |||||||||||
| Inventories |
517 | 130 | (344 | ) | 193 | |||||||||||||
| Prepaid expenses and other current assets |
(44 | ) | (133 | ) | 1,018 | 865 | ||||||||||||
| Payables and accrued charges |
(2,806 | ) | (2,483 | ) | (1,346 | ) | (1,252 | ) | ||||||||||
| CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
878 | (1,565 | ) | 3,374 | 249 | |||||||||||||
| INVESTING ACTIVITIES |
||||||||||||||||||
| Capital expenditures 1 |
(636 | ) | (492 | ) | (1,464 | ) | (1,238 | ) | ||||||||||
| Business acquisitions, net of cash acquired |
(10 | ) | (30 | ) | (78 | ) | (70 | ) | ||||||||||
| Other |
(90 | ) | (19 | ) | (60 | ) | (57 | ) | ||||||||||
| Net changes in non-cash working capital |
31 | 18 | (77 | ) | 23 | |||||||||||||
| CASH USED IN INVESTING ACTIVITIES |
(705 | ) | (523 | ) | (1,679 | ) | (1,342 | ) | ||||||||||
| FINANCING ACTIVITIES |
||||||||||||||||||
| Transaction costs related to debt |
(3 | ) | - | (3 | ) | (7 | ) | |||||||||||
| Proceeds from short-term debt, net |
2,017 | 1,040 | 2,867 | 1,037 | ||||||||||||||
| Proceeds from long-term debt |
- | 81 | 41 | 89 | ||||||||||||||
| Repayment of long-term debt |
(22 | ) | - | (50 | ) | (5 | ) | |||||||||||
| Repayment of principal portion of lease liabilities |
(83 | ) | (78 | ) | (256 | ) | (242 | ) | ||||||||||
| Dividends paid to Nutrien’s shareholders |
8 | (259 | ) | (261 | ) | (780 | ) | (779 | ) | |||||||||
| Repurchase of common shares |
8 | (1,700 | ) | (148 | ) | (3,306 | ) | (150 | ) | |||||||||
| Issuance of common shares |
4 | 125 | 168 | 188 | ||||||||||||||
| Other |
17 | (2 | ) | - | (14 | ) | ||||||||||||
| CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES |
(29 | ) | 757 | (1,319 | ) | 117 | ||||||||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(32 | ) | (20 | ) | (52 | ) | (35 | ) | ||||||||||
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
112 | (1,351 | ) | 324 | (1,011 | ) | ||||||||||||
| CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD |
711 | 1,794 | 499 | 1,454 | ||||||||||||||
| CASH AND CASH EQUIVALENTS – END OF PERIOD |
823 | 443 | 823 | 443 | ||||||||||||||
| Cash and cash equivalents comprised of: |
||||||||||||||||||
| Cash |
428 | 315 | 428 | 315 | ||||||||||||||
| Short-term investments |
395 | 128 | 395 | 128 | ||||||||||||||
| 823 | 443 | 823 | 443 | |||||||||||||||
| SUPPLEMENTAL CASH FLOWS INFORMATION |
||||||||||||||||||
| Interest paid |
80 | 81 | 280 | 319 | ||||||||||||||
| Income taxes paid |
318 | 212 | 1,503 | 356 | ||||||||||||||
| Total cash outflow for leases |
111 | 91 | 339 | 299 | ||||||||||||||
1 Includes additions to property, plant and equipment and intangible assets for the three months ended September 30, 2022 of $584 and $52 (2021 – $463 and $29), respectively, and for the nine months ended September 30, 2022 of $1,317 and $147 (2021 – $1,171 and $67), respectively.
(See Notes to the Condensed Consolidated Financial Statements)
29
| Unaudited | In millions of US dollars except as otherwise noted |
Condensed Consolidated Statements of Changes in Shareholders’ Equity
| Accumulated Other Comprehensive (Loss) Income (“AOCI”) |
||||||||||||||||||||||||||||||||||||||||
| Number of Common Shares |
Share Capital |
Contributed Surplus |
Loss on Currency Translation of Foreign Operations |
Other | Total AOCI |
Retained Earnings |
Equity Holders of Nutrien |
Non- Controlling Interest |
Total Equity |
|||||||||||||||||||||||||||||||
| BALANCE – DECEMBER 31, 2020 |
569,260,406 | 15,673 | 205 | (62 | ) | (57 | ) | (119 | ) | 6,606 | 22,365 | 38 | 22,403 | |||||||||||||||||||||||||||
| Net earnings |
- | - | - | - | - | - | 1,952 | 1,952 | 20 | 1,972 | ||||||||||||||||||||||||||||||
| Other comprehensive (loss) income |
- | - | - | (128 | ) | 135 | 7 | - | 7 | (1 | ) | 6 | ||||||||||||||||||||||||||||
| Shares repurchased (Note 8) |
(2,460,097 | ) | (68 | ) | (46 | ) | - | - | - | (36 | ) | (150 | ) | - | (150 | ) | ||||||||||||||||||||||||
| Dividends declared |
- | - | - | - | - | - | (786 | ) | (786 | ) | - | (786 | ) | |||||||||||||||||||||||||||
| Non-controlling interest transactions |
- | - | - | - | - | - | (1 | ) | (1 | ) | (14 | ) | (15 | ) | ||||||||||||||||||||||||||
| Effect of share-based compensation including issuance of common shares |
4,166,620 | 213 | (12 | ) | - | - | - | - | 201 | - | 201 | |||||||||||||||||||||||||||||
| Transfer of net gain on cash flow hedges |
- | - | - | - | (10 | ) | (10 | ) | - | (10 | ) | - | (10 | ) | ||||||||||||||||||||||||||
| Share cancellation |
(210,173 | ) | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| BALANCE – SEPTEMBER 30, 2021 |
570,756,756 | 15,818 | 147 | (190 | ) | 68 | (122 | ) | 7,735 | 23,578 | 43 | 23,621 | ||||||||||||||||||||||||||||
| BALANCE – DECEMBER 31, 2021 |
557,492,516 | 15,457 | 149 | (176 | ) | 30 | (146 | ) | 8,192 | 23,652 | 47 | 23,699 | ||||||||||||||||||||||||||||
| Net earnings |
- | - | - | - | - | - | 6,548 | 6,548 | 21 | 6,569 | ||||||||||||||||||||||||||||||
| Other comprehensive loss |
- | - | - | (270 | ) | (24 | ) | (294 | ) | - | (294 | ) | (2 | ) | (296 | ) | ||||||||||||||||||||||||
| Shares repurchased (Note 8) |
(38,387,969 | ) | (1,070 | ) | (23 | ) | - | - | - | (2,241 | ) | (3,334 | ) | - | (3,334 | ) | ||||||||||||||||||||||||
| Dividends declared |
- | - | - | - | - | - | (773 | ) | (773 | ) | - | (773 | ) | |||||||||||||||||||||||||||
| Non-controlling interest transactions |
- | - | - | - | - | - | - | - | (18 | ) | (18 | ) | ||||||||||||||||||||||||||||
| Effect of share-based compensation including issuance of common shares |
3,058,561 | 201 | (19 | ) | - | - | - | - | 182 | - | 182 | |||||||||||||||||||||||||||||
| Transfer of net loss on cash flow hedges |
- | - | - | - | 3 | 3 | - | 3 | - | 3 | ||||||||||||||||||||||||||||||
| Transfer of net actuarial gain on defined benefit plans |
- | - | - | - | (61 | ) | (61 | ) | 61 | - | - | - | ||||||||||||||||||||||||||||
| BALANCE – SEPTEMBER 30, 2022 |
522,163,108 | 14,588 | 107 | (446 | ) | (52 | ) | (498 | ) | 11,787 | 25,984 | 48 | 26,032 | |||||||||||||||||||||||||||
| (See Notes to the Condensed Consolidated Financial Statements) |
| |||||||||||||||||||||||||||||||||||||||
30
| Unaudited | In millions of US dollars except as otherwise noted |
Condensed Consolidated Balance Sheets
| September 30 | December 31 | |||||||||||||||
| As at | Note | 2022 | 2021 | 2021 | ||||||||||||
| ASSETS |
||||||||||||||||
| Current assets |
||||||||||||||||
| Cash and cash equivalents |
823 | 443 | 499 | |||||||||||||
| Receivables |
8,591 | 6,911 | 5,366 | |||||||||||||
| Inventories |
6,545 | 4,674 | 6,328 | |||||||||||||
| Prepaid expenses and other current assets |
737 | 654 | 1,653 | |||||||||||||
| 16,696 | 12,682 | 13,846 | ||||||||||||||
| Non-current assets |
||||||||||||||||
| Property, plant and equipment |
3 | 21,022 | 19,704 | 20,016 | ||||||||||||
| Goodwill |
12,180 | 12,220 | 12,220 | |||||||||||||
| Other intangible assets |
2,217 | 2,349 | 2,340 | |||||||||||||
| Investments |
772 | 682 | 703 | |||||||||||||
| Other assets |
937 | 679 | 829 | |||||||||||||
| TOTAL ASSETS |
53,824 | 48,316 | 49,954 | |||||||||||||
| LIABILITIES |
||||||||||||||||
| Current liabilities |
||||||||||||||||
| Short-term debt |
7 | 4,454 | 1,255 | 1,560 | ||||||||||||
| Current portion of long-term debt |
1,016 | 46 | 545 | |||||||||||||
| Current portion of lease liabilities |
303 | 281 | 286 | |||||||||||||
| Payables and accrued charges |
8,760 | 6,930 | 10,052 | |||||||||||||
| 14,533 | 8,512 | 12,443 | ||||||||||||||
| Non-current liabilities |
||||||||||||||||
| Long-term debt |
7,020 | 10,094 | 7,521 | |||||||||||||
| Lease liabilities |
884 | 896 | 934 | |||||||||||||
| Deferred income tax liabilities |
5 | 3,489 | 3,043 | 3,165 | ||||||||||||
| Pension and other post-retirement benefit liabilities |
337 | 451 | 419 | |||||||||||||
| Asset retirement obligations and accrued environmental costs |
1,320 | 1,523 | 1,566 | |||||||||||||
| Other non-current liabilities |
209 | 176 | 207 | |||||||||||||
| TOTAL LIABILITIES |
27,792 | 24,695 | 26,255 | |||||||||||||
| SHAREHOLDERS’ EQUITY |
||||||||||||||||
| Share capital |
8 | 14,588 | 15,818 | 15,457 | ||||||||||||
| Contributed surplus |
107 | 147 | 149 | |||||||||||||
| Accumulated other comprehensive loss |
(498 | ) | (122 | ) | (146 | ) | ||||||||||
| Retained earnings |
11,787 | 7,735 | 8,192 | |||||||||||||
| Equity holders of Nutrien |
25,984 | 23,578 | 23,652 | |||||||||||||
| Non-controlling interest |
48 | 43 | 47 | |||||||||||||
| TOTAL SHAREHOLDERS’ EQUITY |
26,032 | 23,621 | 23,699 | |||||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
53,824 | 48,316 | 49,954 | |||||||||||||
(See Notes to the Condensed Consolidated Financial Statements)
31
| Unaudited | In millions of US dollars except as otherwise noted |
Notes to the Condensed Consolidated Financial Statements
As at and for the Three and Nine Months Ended September 30, 2022
NOTE 1 BASIS OF PRESENTATION
Nutrien Ltd. (collectively with its subsidiaries, known as “Nutrien”, “we”, “us”, “our” or “the Company”) is the world’s largest provider of crop inputs and services. Nutrien plays a critical role in helping growers around the globe increase food production in a sustainable manner.
These unaudited interim condensed consolidated financial statements (“interim financial statements”) are based on International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and have been prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting”. The accounting policies and methods of computation used in preparing these interim financial statements are materially consistent with those used in the preparation of our 2021 annual consolidated financial statements. These interim financial statements include the accounts of Nutrien and its subsidiaries; however, they do not include all disclosures normally provided in annual consolidated financial statements and should be read in conjunction with our 2021 annual audited consolidated financial statements.
Certain immaterial 2021 figures have been reclassified in the condensed consolidated statements of cash flows and segment note.
In management’s opinion, the interim financial statements include all adjustments necessary to fairly present such information in all material respects. Interim results are not necessarily indicative of the results expected for any other interim period or the fiscal year.
These interim financial statements were authorized by the audit committee of the Board of Directors for issue on November 2, 2022.
NOTE 2 SEGMENT INFORMATION
The Company has four reportable operating segments: Nutrien Ag Solutions (“Retail”), Potash, Nitrogen and Phosphate. The Retail segment distributes crop nutrients, crop protection products, seed and merchandise, and it provides services directly to growers through a network of farm centers in North America, South America and Australia. The Potash, Nitrogen and Phosphate segments are differentiated by the chemical nutrient contained in the products that each produce.
32
| Unaudited | In millions of US dollars except as otherwise noted |
| Three Months Ended September 30, 2022 | ||||||||||||||||||||||||||||
| Retail | Potash | Nitrogen | Phosphate | Corporate and Others |
Eliminations | Consolidated | ||||||||||||||||||||||
| Sales – third party |
3,967 | 1,968 | 1,666 | 587 | - | - | 8,188 | |||||||||||||||||||||
|
– intersegment |
13 | 84 | 236 | 126 | - | (459 | ) | - | ||||||||||||||||||||
| Sales – total |
3,980 | 2,052 | 1,902 | 713 | - | (459 | ) | 8,188 | ||||||||||||||||||||
| Freight, transportation and distribution |
- | 48 | 131 | 62 | - | (37 | ) | 204 | ||||||||||||||||||||
| Net sales |
3,980 | 2,004 | 1,771 | 651 | - | (422 | ) | 7,984 | ||||||||||||||||||||
| Cost of goods sold |
3,063 | 386 | 1,107 | 537 | - | (371 | ) | 4,722 | ||||||||||||||||||||
| Gross margin |
917 | 1,618 | 664 | 114 | - | (51 | ) | 3,262 | ||||||||||||||||||||
| Selling expenses |
821 | 3 | 7 | 1 | (2 | ) | (4 | ) | 826 | |||||||||||||||||||
| General and administrative expenses |
50 | 2 | 2 | 3 | 80 | - | 137 | |||||||||||||||||||||
| Provincial mining taxes |
- | 348 | - | - | - | - | 348 | |||||||||||||||||||||
| Share-based compensation expense |
- | - | - | - | 39 | - | 39 | |||||||||||||||||||||
| Impairment reversal of assets |
- | - | - | (330 | ) | - | - | (330 | ) | |||||||||||||||||||
| Other expenses (income) |
19 | (1 | ) | (59 | ) | 15 | 59 | 3 | 36 | |||||||||||||||||||
| Earnings (loss) before finance costs and income taxes |
27 | 1,266 | 714 | 425 | (176 | ) | (50 | ) | 2,206 | |||||||||||||||||||
| Depreciation and amortization |
206 | 112 | 141 | 48 | 19 | - | 526 | |||||||||||||||||||||
| EBITDA 1 |
233 | 1,378 | 855 | 473 | (157 | ) | (50 | ) | 2,732 | |||||||||||||||||||
| Integration and restructuring related costs |
2 | - | - | - | 13 | - | 15 | |||||||||||||||||||||
| Share-based compensation expense |
- | - | - | - | 39 | - | 39 | |||||||||||||||||||||
| Impairment reversal of assets |
- | - | - | (330 | ) | - | - | (330 | ) | |||||||||||||||||||
| Foreign exchange loss, net of |
- | - | - | - | 11 | - | 11 | |||||||||||||||||||||
| Adjusted EBITDA |
235 | 1,378 | 855 | 143 | (94 | ) | (50 | ) | 2,467 | |||||||||||||||||||
| Assets – at September 30, 2022 |
23,507 | 14,078 | 11,802 | 2,742 | 2,500 | (805 | ) | 53,824 | ||||||||||||||||||||
| 1 EBITDA is calculated as net earnings (loss) before finance costs, income taxes, and depreciation and amortization. |
| |||||||||||||||||||||||||||
| Three Months Ended September 30, 2021 | ||||||||||||||||||||||||||||
| Retail | Potash | Nitrogen | Phosphate | Corporate and Others |
Eliminations | Consolidated | ||||||||||||||||||||||
| Sales – third party |
3,336 | 1,188 | 1,037 | 463 | - | - | 6,024 | |||||||||||||||||||||
|
– intersegment |
11 | 107 | 162 | 39 | - | (319 | ) | - | ||||||||||||||||||||
| Sales – total |
3,347 | 1,295 | 1,199 | 502 | - | (319 | ) | 6,024 | ||||||||||||||||||||
| Freight, transportation and distribution |
- | 107 | 98 | 54 | - | (39 | ) | 220 | ||||||||||||||||||||
| Net sales |
3,347 | 1,188 | 1,101 | 448 | - | (280 | ) | 5,804 | ||||||||||||||||||||
| Cost of goods sold |
2,430 | 372 | 695 | 340 | - | (198 | ) | 3,639 | ||||||||||||||||||||
| Gross margin |
917 | 816 | 406 | 108 | - | (82 | ) | 2,165 | ||||||||||||||||||||
| Selling expenses |
746 | 3 | 7 | 2 | (9 | ) | - | 749 | ||||||||||||||||||||
| General and administrative expenses |
45 | 1 | 3 | 3 | 58 | - | 110 | |||||||||||||||||||||
| Provincial mining taxes |
- | 128 | - | - | - | - | 128 | |||||||||||||||||||||
| Share-based compensation expense |
- | - | - | - | 64 | - | 64 | |||||||||||||||||||||
| Impairment of assets |
- | 7 | - | - | - | - | 7 | |||||||||||||||||||||
| Other expenses (income) |
17 | 7 | (11 | ) | 7 | 30 | - | 50 | ||||||||||||||||||||
| Earnings (loss) before finance costs and income taxes |
109 | 670 | 407 | 96 | (143 | ) | (82 | ) | 1,057 | |||||||||||||||||||
| Depreciation and amortization |
182 | 131 | 125 | 39 | 12 | - | 489 | |||||||||||||||||||||
| EBITDA |
291 | 801 | 532 | 135 | (131 | ) | (82 | ) | 1,546 | |||||||||||||||||||
| Integration and restructuring related costs |
- | - | - | - | 8 | - | 8 | |||||||||||||||||||||
| Share-based compensation expense |
- | - | - | - | 64 | - | 64 | |||||||||||||||||||||
| Impairment of assets |
- | 7 | - | - | - | - | 7 | |||||||||||||||||||||
| COVID-19 related expenses |
- | - | - | - | 16 | - | 16 | |||||||||||||||||||||
| Foreign exchange loss, net of |
- | - | - | - | 1 | - | 1 | |||||||||||||||||||||
| Adjusted EBITDA |
291 | 808 | 532 | 135 | (42 | ) | (82 | ) | 1,642 | |||||||||||||||||||
| Assets – at December 31, 2021 |
22,387 | 13,148 | 11,093 | 1,699 | 2,266 | (639 | ) | 49,954 | ||||||||||||||||||||
33
| Unaudited | In millions of US dollars except as otherwise noted |
| Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||||||
| Retail | Potash | Nitrogen | Phosphate | Corporate and Others |
Eliminations | Consolidated | ||||||||||||||||||||||
| Sales – third party |
17,177 | 6,345 | 5,078 | 1,751 | - | - | 30,351 | |||||||||||||||||||||
|
– intersegment |
86 | 396 | 1,021 | 303 | - | (1,806 | ) | - | ||||||||||||||||||||
| Sales – total |
17,263 | 6,741 | 6,099 | 2,054 | - | (1,806 | ) | 30,351 | ||||||||||||||||||||
| Freight, transportation and distribution |
- | 219 | 358 | 178 | - | (127 | ) | 628 | ||||||||||||||||||||
| Net sales |
17,263 | 6,522 | 5,741 | 1,876 | - | (1,679 | ) | 29,723 | ||||||||||||||||||||
| Cost of goods sold |
13,161 | 1,090 | 3,159 | 1,399 | - | (1,604 | ) | 17,205 | ||||||||||||||||||||
| Gross margin |
4,102 | 5,432 | 2,582 | 477 | - | (75 | ) | 12,518 | ||||||||||||||||||||
| Selling expenses |
2,556 | 9 | 22 | 5 | (6 | ) | (16 | ) | 2,570 | |||||||||||||||||||
| General and administrative expenses |
149 | 6 | 12 | 9 | 227 | - | 403 | |||||||||||||||||||||
| Provincial mining taxes |
- | 959 | - | - | - | - | 959 | |||||||||||||||||||||
| Share-based compensation expense |
- | - | - | - | 122 | - | 122 | |||||||||||||||||||||
| Impairment reversal of assets |
- | - | - | (780 | ) | - | - | (780 | ) | |||||||||||||||||||
| Other expenses (income) |
28 | 1 | (139 | ) | 27 | 160 | 17 | 94 | ||||||||||||||||||||
| Earnings (loss) before finance costs and income taxes |
1,369 | 4,457 | 2,687 | 1,216 | (503 | ) | (76 | ) | 9,150 | |||||||||||||||||||
| Depreciation and amortization |
550 | 354 | 403 | 130 | 55 | - | 1,492 | |||||||||||||||||||||
| EBITDA |
1,919 | 4,811 | 3,090 | 1,346 | (448 | ) | (76 | ) | 10,642 | |||||||||||||||||||
| Integration and restructuring related costs |
2 | - | - | - | 33 | - | 35 | |||||||||||||||||||||
| Share-based compensation expense |
- | - | - | - | 122 | - | 122 | |||||||||||||||||||||
| Impairment reversal of assets |
- | - | - | (780 | ) | - | - | (780 | ) | |||||||||||||||||||
| COVID-19 related expenses |
- | - | - | - | 8 | - | 8 | |||||||||||||||||||||
| Foreign exchange loss, net of |
- | - | - | - | 67 | - | 67 | |||||||||||||||||||||
| Gain on disposal of investment |
(19 | ) | - | - | - | - | - | (19 | ) | |||||||||||||||||||
| Adjusted EBITDA |
1,902 | 4,811 | 3,090 | 566 | (218 | ) | (76 | ) | 10,075 | |||||||||||||||||||
| Assets – at September 30, 2022 |
23,507 | 14,078 | 11,802 | 2,742 | 2,500 | (805 | ) | 53,824 | ||||||||||||||||||||
| Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||||||
| Retail | Potash | Nitrogen | Phosphate | Corporate and Others |
Eliminations | Consolidated | ||||||||||||||||||||||
| Sales – third party |
13,818 | 2,663 | 2,740 | 1,224 | - | - | 20,445 | |||||||||||||||||||||
|
– intersegment |
38 | 258 | 629 | 171 | - | (1,096 | ) | - | ||||||||||||||||||||
| Sales – total |
13,856 | 2,921 | 3,369 | 1,395 | - | (1,096 | ) | 20,445 | ||||||||||||||||||||
| Freight, transportation and distribution |
- | 305 | 329 | 159 | - | (140 | ) | 653 | ||||||||||||||||||||
| Net sales |
13,856 | 2,616 | 3,040 | 1,236 | - | (956 | ) | 19,792 | ||||||||||||||||||||
| Cost of goods sold |
10,429 | 980 | 2,068 | 978 | - | (866 | ) | 13,589 | ||||||||||||||||||||
| Gross margin |
3,427 | 1,636 | 972 | 258 | - | (90 | ) | 6,203 | ||||||||||||||||||||
| Selling expenses |
2,276 | 8 | 22 | 5 | (24 | ) | - | 2,287 | ||||||||||||||||||||
| General and administrative expenses |
125 | 6 | 8 | 8 | 182 | - | 329 | |||||||||||||||||||||
| Provincial mining taxes |
- | 293 | - | - | - | - | 293 | |||||||||||||||||||||
| Share-based compensation expense |
- | - | - | - | 125 | - | 125 | |||||||||||||||||||||
| Impairment of assets |
- | 7 | 5 | - | - | - | 12 | |||||||||||||||||||||
| Other expenses (income) |
66 | 19 | (36 | ) | 13 | 141 | - | 203 | ||||||||||||||||||||
| Earnings (loss) before finance costs and income taxes |
960 | 1,303 | 973 | 232 | (424 | ) | (90 | ) | 2,954 | |||||||||||||||||||
| Depreciation and amortization |
528 | 371 | 409 | 112 | 34 | - | 1,454 | |||||||||||||||||||||
| EBITDA |
1,488 | 1,674 | 1,382 | 344 | (390 | ) | (90 | ) | 4,408 | |||||||||||||||||||
| Integration and restructuring related costs |
8 | - | - | - | 39 | - | 47 | |||||||||||||||||||||
| Share-based compensation expense |
- | - | - | - | 125 | - | 125 | |||||||||||||||||||||
| Impairment of assets |
- | 7 | 5 | - | - | - | 12 | |||||||||||||||||||||
| COVID-19 related expenses |
- | - | - | - | 34 | - | 34 | |||||||||||||||||||||
| Foreign exchange loss, net of |
- | - | - | - | 1 | - | 1 | |||||||||||||||||||||
| Cloud computing transition adjustment |
1 | 2 | - | - | 33 | - | 36 | |||||||||||||||||||||
| Adjusted EBITDA |
1,497 | 1,683 | 1,387 | 344 | (158 | ) | (90 | ) | 4,663 | |||||||||||||||||||
| Assets – at December 31, 2021 |
22,387 | 13,148 | 11,093 | 1,699 | 2,266 | (639 | ) | 49,954 | ||||||||||||||||||||
34
| Unaudited | In millions of US dollars except as otherwise noted |
Presented below is revenue from contracts with customers disaggregated by product line or geographic location for each reportable segment.
| Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Retail sales by product line |
||||||||||||||||
| Crop nutrients |
1,605 | 1,194 | 7,740 | 5,255 | ||||||||||||
| Crop protection products |
1,716 | 1,469 | 6,086 | 5,220 | ||||||||||||
| Seed |
134 | 140 | 1,861 | 1,819 | ||||||||||||
| Merchandise |
241 | 265 | 755 | 763 | ||||||||||||
| Nutrien Financial |
65 | 54 | 205 | 138 | ||||||||||||
| Services and other 1 |
244 | 252 | 729 | 737 | ||||||||||||
| Nutrien Financial elimination 1,2 |
(25 | ) | (27 | ) | (113 | ) | (76 | ) | ||||||||
| 3,980 | 3,347 | 17,263 | 13,856 | |||||||||||||
| Potash sales by geography |
||||||||||||||||
| Manufactured product |
||||||||||||||||
| North America |
484 | 590 | 2,168 | 1,446 | ||||||||||||
| Offshore 3 |
1,568 | 705 | 4,573 | 1,475 | ||||||||||||
| 2,052 | 1,295 | 6,741 | 2,921 | |||||||||||||
| Nitrogen sales by product line |
||||||||||||||||
| Manufactured product |
||||||||||||||||
| Ammonia |
695 | 401 | 2,072 | 994 | ||||||||||||
| Urea |
422 | 339 | 1,543 | 985 | ||||||||||||
| Solutions, nitrates and sulfates |
512 | 326 | 1,564 | 852 | ||||||||||||
| Other nitrogen and purchased products |
273 | 133 | 920 | 538 | ||||||||||||
| 1,902 | 1,199 | 6,099 | 3,369 | |||||||||||||
| Phosphate sales by product line |
||||||||||||||||
| Manufactured product |
||||||||||||||||
| Fertilizer |
414 | 306 | 1,204 | 836 | ||||||||||||
| Industrial and feed |
206 | 146 | 594 | 405 | ||||||||||||
| Other phosphate and purchased products |
93 | 50 | 256 | 154 | ||||||||||||
| 713 | 502 | 2,054 | 1,395 | |||||||||||||
| 1 | Certain immaterial 2021 figures have been reclassified. |
| 2 | Represents elimination for the interest and service fees charged by Nutrien Financial to Retail branches. |
| 3 | Relates to Canpotex Limited (“Canpotex”) (Note 10) and includes provisional pricing adjustments for the three months ended September 30, 2022 of $(187) (2021 – $109) and the nine months ended September 30, 2022 of $66 (2021 – $160). |
NOTE 3 IMPAIRMENT OF ASSETS
Phosphate Impairment Reversal
In the three months ended September 30, 2022, we continued to revise our near-term pricing forecasts due to continued global export restrictions from major producers and continued our review of our previously impaired Phosphate cash-generating unit (“CGU”), White Springs.
In 2017 and 2020, we recorded a total impairment of assets at our White Springs CGU relating to property, plant and equipment of $250 and $215, respectively. Due to increases in our forecast, the recoverable amount of our White Springs CGU is $770 which is above its carrying amount of $425. As a result, during the three months ended September 30, 2022, we recorded a full impairment reversal, net of depreciation, of $330 in the statement of earnings relating to property, plant and equipment.
35
| Unaudited | In millions of US dollars except as otherwise noted |
During the nine months ended September 30, 2022, we recorded the following impairment reversals:
| CGU | Aurora | White Springs | ||||||
| Segment |
Phosphate | |||||||
| Impairment reversal indicator |
Higher forecasted global prices | |||||||
| Date of impairment reversal |
June 30, 2022 | September 30, 2022 | ||||||
| Pre-tax impairment reversal amount ($) |
450 | 330 | ||||||
| Valuation methodology |
Fair value less costs of disposal (“FVLCD”) a level 3 measurement | Value in use (“VIU”) | ||||||
| Valuation technique |
Five-year DCF1 plus terminal year to end of mine life | DCF1 to end of mine life | ||||||
| Key assumptions |
||||||||
| End of mine life 2 (year) |
2050 | 2030 | ||||||
| Long-term growth rate (%) |
2.0 | n/a | ||||||
| Post-tax discount rate (%) |
10.4 | 12.0 (pre-tax - 15.2) 3 | ||||||
| Forecasted EBITDA 4 ($) |
3,090 | 980 | ||||||
| 1 Discounted Cash Flow. |
||||||||
| 2 Includes proven and probable reserves. |
||||||||
| 3 Discount rate used in the previous measurement was 12.0% (pre-tax – 16.0%). |
|
|||||||
| 4 First five years of the forecast period. |
||||||||
The recoverable amount estimate is most sensitive to the following key assumptions: our internal sales and input price forecasts, which consider projections from independent third-party data sources, discount rate, and expected mine life. We used key assumptions that were based on historical data and estimates of future results from internal sources, external price benchmarks, and mineral reserve technical reports, as well as industry and market trends.
Goodwill Impairment Indicators
During the nine months ended September 30, 2022, North American central banks continued to increase their benchmark borrowing rates. Benchmark borrowing rates are used as the risk-free rate which is a component of determining our discount rate for impairment testing. As a result of these increases, we revised our discount rates and increased our Retail – North America group of CGUs discount rate to 8.5 percent (previous impairment analysis – 8.0 percent at June 30, 2022) and this triggered an impairment test to be performed. We used the FVLCD methodology based on after-tax discounted cash flows (five-year projections and a terminal year thereafter) and incorporated assumptions an independent market participant would apply. FVLCD is a Level 3 measurement.
| Retail - North America group of CGUs | As at June 30, 2022 | As at September 30, 2022 | ||||||
| Carrying amount of goodwill (billions) |
6.9 | 6.9 | ||||||
| Excess carrying amount over recoverable amount (billions) |
0.8 | nil | ||||||
| Excess carrying amount over recoverable amount (%) |
7 | nil | ||||||
Goodwill is more susceptible to impairment risk if there is an increase in the discount rate, or a deterioration in business operating results or economic conditions and actual results do not meet our forecasts. As at September 30, 2022, the Retail – North America group of CGUs carrying amount was equal to its recoverable amount. A 25 basis point increase in the discount rate will result in an impairment of the carrying amount of goodwill of approximately $500. A decrease in forecasted EBITDA and cash flows or a reduction in the terminal growth rate will also result in impairment in the future.
| Key Assumptions | Value Used in Impairment Model |
|||
| Terminal growth rate (%) |
2.5 | |||
| Forecasted EBITDA over forecast period (billions) |
7.6 | |||
| Discount rate (%) |
8.5 | |||
36
| Unaudited | In millions of US dollars except as otherwise noted |
NOTE 4 OTHER EXPENSES (INCOME)
| Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Integration and restructuring related costs |
15 | 8 | 35 | 47 | ||||||||||||
| Foreign exchange loss, net of related derivatives |
11 | 1 | 67 | 4 | ||||||||||||
| Earnings of equity-accounted investees |
(82 | ) | (21 | ) | (200 | ) | (43 | ) | ||||||||
| Bad debt expense |
4 | 7 | 18 | 22 | ||||||||||||
| COVID-19 related expenses |
- | 16 | 8 | 34 | ||||||||||||
| Gain on disposal of investment |
- | - | (19 | ) | - | |||||||||||
| Cloud computing transition adjustment |
- | - | - | 36 | ||||||||||||
| Other expenses |
88 | 39 | 185 | 103 | ||||||||||||
| 36 | 50 | 94 | 203 | |||||||||||||
NOTE 5 INCOME TAXES
A separate estimated average annual effective income tax rate was determined for each taxing jurisdiction and applied individually to the interim period pre-tax earnings for each jurisdiction.
| Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Income tax expense |
487 | 209 | 2,206 | 615 | ||||||||||||
| Actual effective tax rate on earnings (%) |
24 | 23 | 25 | 24 | ||||||||||||
| Actual effective tax rate including discrete items (%) |
24 | 22 | 25 | 24 | ||||||||||||
| Discrete tax adjustments that impacted the tax rate |
(12 | ) | (10 | ) | 8 | (13 | ) | |||||||||
Income tax balances within the condensed consolidated balance sheets were comprised of the following:
| Income Tax Assets and Liabilities | Balance Sheet Location | As at September 30, 2022 | As at December 31, 2021 | |||
| Income tax assets |
||||||
| Current |
Receivables |
49 | 223 | |||
| Non-current |
Other assets |
132 | 166 | |||
| Deferred income tax assets |
Other assets |
427 | 262 | |||
| Total income tax assets |
608 | 651 | ||||
| Income tax liabilities |
||||||
| Current |
Payables and accrued charges |
943 | 606 | |||
| Non-current |
Other non-current liabilities |
51 | 44 | |||
| Deferred income tax liabilities |
Deferred income tax liabilities |
3,489 | 3,165 | |||
| Total income tax liabilities |
4,483 | 3,815 | ||||
37
| Unaudited | In millions of US dollars except as otherwise noted |
NOTE 6 FINANCIAL INSTRUMENTS
Fair Value
Estimated fair values for financial instruments are designed to approximate amounts for which the instruments could be exchanged in a current arm’s-length transaction between knowledgeable, willing parties. The valuation policies and procedures for financial reporting purposes are determined by our finance department. There have been no changes to our valuation methods presented in Note 10 of the 2021 annual consolidated financial statements and those valuation methods have been applied in these interim financial statements.
The following table presents our fair value hierarchy for financial instruments carried at fair value on a recurring basis or measured at amortized cost:
| September 30, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||
| Financial assets (liabilities) measured at | Carrying Amount |
Level 1 | Level 2 | Level 3 | Carrying Amount |
Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
| Fair value on a recurring basis 1 |
||||||||||||||||||||||||||||||||
| Cash and cash equivalents |
823 | - | 823 | - | 499 | - | 499 | - | ||||||||||||||||||||||||
| Derivative instrument assets |
11 | - | 11 | - | 19 | - | 19 | - | ||||||||||||||||||||||||
| Other current financial assets - marketable securities 2 |
189 | 24 | 165 | - | 134 | 19 | 115 | - | ||||||||||||||||||||||||
| Investments at FVTOCI 3 |
183 | 173 | - | 10 | 244 | 234 | - | 10 | ||||||||||||||||||||||||
| Derivative instrument liabilities |
(51 | ) | - | (51 | ) | - | (20 | ) | - | (20 | ) | - | ||||||||||||||||||||
| Amortized cost |
||||||||||||||||||||||||||||||||
| Current portion of long-term debt |
||||||||||||||||||||||||||||||||
| Notes and debentures |
(999 | ) | (491 | ) | (500 | ) | - | (500 | ) | (506 | ) | - | - | |||||||||||||||||||
| Fixed and floating rate debt |
(17 | ) | - | (17 | ) | - | (45 | ) | - | (45 | ) | - | ||||||||||||||||||||
| Long-term debt |
||||||||||||||||||||||||||||||||
| Notes and debentures |
(6,902 | ) | (1,362 | ) | (4,740 | ) | - | (7,424 | ) | (4,021 | ) | (4,709 | ) | - | ||||||||||||||||||
| Fixed and floating rate debt |
(118 | ) | - | (118 | ) | - | (97 | ) | - | (97 | ) | - | ||||||||||||||||||||
| 1 | During the periods ended September 30, 2022 and December 31, 2021, there were no transfers between levelling for financial instruments measured at fair value on a recurring basis. |
| 2 | Marketable securities consist of equity and fixed income securities. We determine the fair value of equity securities based on the bid price of identical instruments in active markets. We value fixed income securities using quoted prices of instruments with similar terms and credit risk. |
| 3 | Investments at fair value through other comprehensive income (“FVTOCI”) is primarily comprised of shares in Sinofert Holdings Ltd. |
NOTE 7 SHORT-TERM DEBT
Short-term debt was comprised of:
| |
Rate of Interest (%) |
|
|
Total Facility Limit as at September 30, 2022 |
|
|
As at September 30, 2022 |
|
|
As at December 31, 2021 |
| |||||
| Credit facilities |
||||||||||||||||
| Unsecured revolving term credit facility |
n/a | 4,500 | - | - | ||||||||||||
| Unsecured revolving term credit facility |
4.1 | 2,000 | 1,000 | - | ||||||||||||
| Uncommitted revolving demand facility |
4.0 | 1,000 | 500 | - | ||||||||||||
| Other credit facilities 1 |
760 | |||||||||||||||
| South American |
1.5 - 21.7 | 194 | 74 | |||||||||||||
| Australian |
3.6 | 97 | 211 | |||||||||||||
| Other |
3.3 | 8 | 28 | |||||||||||||
| Commercial paper |
2.9 - 4.0 | 2,530 | 1,170 | |||||||||||||
| Other short-term debt |
n/a | 125 | 77 | |||||||||||||
| 4,454 | 1,560 | |||||||||||||||
| 1 Total facility limit amounts include some facilities with maturities in excess of one year. |
| |||||||||||||||
The amount available under the commercial paper program is limited to the availability of backup funds under the $4,500 unsecured revolving term credit facility and excess cash invested in highly liquid securities. During the three months ended September 30, 2022, we extended the maturity date of the $4,500 unsecured revolving term credit facility from June 4, 2026 to September 14, 2027. There was no change to the total facility limit or the significant agreement terms from those we disclosed in our 2021 Annual Report.
38
| Unaudited | In millions of US dollars except as otherwise noted |
During the three months ended September 30, 2022, we entered into a new $2,000 revolving term credit facility, with the same principal covenants and events of default as our existing $4,500 unsecured revolving term credit facility. The $2,000 non-revolving term credit facilities we entered into in July 2022 to help temporarily manage normal seasonal working capital swings were closed prior to September 30, 2022.
NOTE 8 SHARE CAPITAL
Share Repurchase Programs
| Commencement Date |
Expiry | Maximum Shares for Repurchase |
Maximum Shares for Repurchase (%) |
Number of Shares Repurchased |
||||||||||||||||
| 2020 Normal Course Issuer Bid |
February 27, 2020 | February 26, 2021 | 28,572,458 | 5 | 710,100 | |||||||||||||||
| 2021 Normal Course Issuer Bid |
March 1, 2021 | February 28, 2022 | 28,468,448 | 5 | 22,186,395 | |||||||||||||||
| 2022 Normal Course Issuer Bid 1 |
March 1, 2022 | February 28, 2023 | 55,111,110 | 10 | 32,183,728 | |||||||||||||||
| 1 The 2022 normal course issuer bid will expire earlier than the date above if we acquire the maximum number of common shares allowable or otherwise decide not to make any further repurchases. |
| |||||||||||||||||||
Purchases under the normal course issuer bids were, or may be, made through open market purchases at market prices as well as by other means permitted by applicable securities laws, including private agreements.
The following table summarizes our share repurchase activities during the period:
| Three Months Ended September 30 |
Nine Months Ended September 30 | |||||||
|
|
2022 | 2021 | 2022 | 2021 | ||||
| Number of common shares repurchased for cancellation | 19,027,561 | 2,427,369 | 38,387,969 | 2,460,097 | ||||
| Average price per share (US dollars) | 89.25 | 61.18 | 86.85 | 61.07 | ||||
| Total cost | 1,698 | 148 | 3,334 | 150 | ||||
As of November 1, 2022, an additional 1,981,462 common shares were repurchased for cancellation at a cost of $165 and an average price per share of $83.25.
Dividends Declared
We declared a dividend per share of $0.48 (2021 – $0.46) during the three months ended September 30, 2022, payable on October 14, 2022 to shareholders of record on September 30, 2022.
NOTE 9 SEASONALITY
Seasonality in our business results from increased demand for products during planting season. Crop input sales are generally higher in spring and fall application seasons. Crop input inventories are normally accumulated leading up to each application season. The results of this seasonality have a corresponding effect on receivables from customers and rebates receivables, inventories, prepaid expenses and other current assets and trade payables. Our short-term debt also fluctuates during the year to meet working capital needs. Our cash collections generally occur after the application season is complete, while customer prepayments made to us are typically concentrated in December and January and inventory prepayments paid to our suppliers are typically concentrated in the period from November to January. Feed and industrial sales are more evenly distributed throughout the year.
NOTE 10 RELATED PARTY TRANSACTIONS
We sell potash outside Canada and the United States exclusively through Canpotex. Canpotex sells potash to buyers in export markets pursuant to term and spot contracts at agreed upon prices. Our revenue is recognized at the amount received from Canpotex representing proceeds from their sale of potash, less net costs of Canpotex. Sales to Canpotex are shown in Note 2.
| As at | September 30, 2022 | December 31, 2021 | ||
| Receivables from Canpotex |
1,454 | 828 | ||
39
| Unaudited | In millions of US dollars except as otherwise noted |
NOTE 11 BUSINESS COMBINATIONS
Subsequent to September 30, 2022, we completed the previously announced acquisition of Casa do Adubo S.A. (“Casa do Adubo”) on October 1, 2022 for a preliminary purchase price, net of cash and cash equivalents acquired, of $279. We acquired 100% of the issued and outstanding Casa do Adubo stock. Casa do Adubo is an agriculture retailer in Brazil with 39 retail locations and 10 distribution centers. The expected benefits of the acquisition resulting in goodwill include: synergies from expected reduction in operating costs, wider distribution channel for selling products, a large assembled workforce and a potential increase in our customer base.
We have engaged independent valuation experts to assist in determining the fair value of certain assets acquired and liabilities assumed and related deferred income tax impacts. Given the transaction closed on October 1, 2022, as at the date of our interim financial statements we do not have sufficient information to determine fair values and complete the purchase price allocation or the proforma financial information disclosures. As part of our due diligence process, we are continuing to obtain and verify information required to determine the fair value of certain assets acquired and liabilities assumed and the amount of deferred income taxes arising on their recognition. We expect to finalize the amounts recognized as we obtain the information necessary to complete the analysis within one year from the date of the acquisition.
The Casa do Adubo acquisition was completed at the close of business on October 1, 2022, therefore, our consolidated statements of earnings did not include any impacts from Casa do Adubo for the three and nine months ended September 30, 2022. Financial information related to Casa do Adubo is as follows:
| 2022 Pro Forma 1 | ||||
| Sales |
440 | |||
| EBITDA |
40 | |||
| 1 Estimated annual sales and EBITDA if acquisition occurred at January 1, 2022. Net earnings before income taxes is not available. |
| |||
40
Exhibit 99.2
NUTRIEN LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS
AS AT AND FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2022
Management’s Discussion and Analysis
The following management’s discussion and analysis (“MD&A”) is the responsibility of management and is dated as of November 2, 2022. The Board of Directors (“Board”) of Nutrien carries out its responsibility for review of this disclosure principally through its audit committee, comprised exclusively of independent directors. The audit committee reviews and, prior to its publication, approves this disclosure pursuant to the authority delegated to it by the Board. The term “Nutrien” refers to Nutrien Ltd. and the terms “we”, “us”, “our”, “Nutrien” and “the Company” refer to Nutrien and, as applicable, Nutrien and its direct and indirect subsidiaries on a consolidated basis. Additional information relating to Nutrien (which, except as otherwise noted, is not incorporated by reference herein), including our annual report dated February 17, 2022 (“2021 Annual Report”), which includes our annual audited consolidated financial statements and MD&A, and our annual information form dated February 17, 2022 (“2021 Annual Information Form”), each for the year ended December 31, 2021, can be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. No update is provided to the disclosure in our 2021 annual MD&A except for material information since the date of our annual MD&A. The Company is a foreign private issuer under the rules and regulations of the US Securities and Exchange Commission (the “SEC”).
This MD&A is based on and should be read in conjunction with the Company’s unaudited interim condensed consolidated financial statements as at and for the three and nine months ended September 30, 2022 (“interim financial statements”) based on International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting”, unless otherwise noted. This MD&A contains certain non-IFRS financial measures and ratios and forward-looking statements, which are described in the “Non-IFRS Financial Measures” and the “Forward-Looking Statements” sections, respectively.
Market Outlook and Guidance
Agriculture and Retail
| • | Global grain stocks-to-use ratio, excluding China, is projected to decline to the lowest level in more than a quarter century, driven by reduced corn and wheat production expectations in the US and Europe. As a result of historically tight supply and demand balances, spot prices of corn, soybeans and wheat are up 25 to 50 percent compared to the 10-year average and we expect strong futures prices will provide an incentive for growers to boost production in 2023. |
| • | The re-opening of the Black Sea to Ukrainian grain exports positively impacted exports from the region but there is uncertainty over the continuation of the United Nations brokered agreement with Russia. The US Department of Agriculture (USDA) projects that Ukrainian grain exports will decline by 44 percent year-over-year in 2023, in large part driven by reduced production levels. |
| • | Weather has been favorable in North America and we anticipate that the rapid pace of harvest will support strong fall ammonia demand and normal application rates of potash, phosphate and crop protection products. |
| • | South American spring crop planting is proceeding with a mix of planting conditions. Argentina continues to be impacted by La Nina-related drought, while planting conditions in much of Brazil have generally been favorable. We expect that Brazilian soybean acreage will increase by 3 to 4 percent, which is also expected to support a proportional increase in safrinha corn acreage. |
Crop Nutrient Markets
| • | Potash shipments from Belarus are projected to be down 50 to 60 percent and Russia down 20 to 25 percent in 2022 compared to the prior year, in line with our previous expectations. We have lowered our global potash shipment forecast to between 60 and 62 million tonnes in 2022, largely due to the impact of higher-than-expected inventory and cautious buying in North America and Brazil during the second half of 2022. |
| • | We expect robust agricultural fundamentals will support increased potash consumption in 2023 and believe pent-up demand will emerge as inventories are drawn down and prices stabilize. We expect potash supply from Eastern Europe will continue to be constrained in 2023, with shipments from Belarus projected to be down 40 to 60 percent and Russia down 15 to 30 percent compared to 2021 levels. Global potash shipments are forecast between 64 to 67 million tonnes in 2023, with projected Nutrien potash sales volumes of approximately 15 million tonnes. |
| • | Nitrogen prices continue to be supported by historically high European natural gas prices that have led to significant curtailments of ammonia and downstream nitrogen products. Shifts in global nitrogen trade flows have led to higher US exports and lower import volumes, which we expect will result in a tight North American supply and demand balance entering 2023. |
| • | Chinese urea and phosphate export restrictions have limited exports in 2022 and are expected to persist into 2023. The restrictions have led to low Chinese phosphate operating rates, maintaining relatively tight global phosphate supplies, while contributing to lower global sulfur prices and supporting phosphate production margins. |
2
Financial Guidance
| • | Nutrien revised its full-year 2022 adjusted EBITDA guidance and full-year 2022 adjusted net earnings per share guidance primarily due to lower expected Potash earnings as a result of lower potash sales volumes and realized prices, which more than offset stronger expected Retail earnings. Adjusted net earnings per share guidance includes our plan to allocate approximately $4 billion to share repurchases in 2022. |
| • | Nutrien lowered potash sales volume guidance primarily to reflect the impact of the compressed spring application season in North America that resulted in higher inventory carry-over and cautious purchasing. |
| • | Nutrien lowered nitrogen sales volume guidance to reflect the impact of Trinidad gas curtailments during the second half of 2022. |
All guidance numbers, including those noted above are outlined in the table below. Refer to page 53 of Nutrien’s 2021 Annual Report for related assumptions and sensitivities.
| Guidance Ranges 1 as of | ||||||||||||||||
| Nov 2, 2022 | Aug 3, 2022 | |||||||||||||||
| (billions of US dollars, except as otherwise noted) | Low | High | Low | High | ||||||||||||
| Adjusted net earnings per share 2 |
13.25 | 14.50 | 15.80 | 17.80 | ||||||||||||
| Adjusted EBITDA 2 |
12.2 | 13.2 | 14.0 | 15.5 | ||||||||||||
| Retail adjusted EBITDA |
2.15 | 2.25 | 2.10 | 2.20 | ||||||||||||
| Potash adjusted EBITDA |
5.8 | 6.2 | 7.6 | 8.2 | ||||||||||||
| Nitrogen adjusted EBITDA |
4.1 | 4.4 | 4.0 | 4.7 | ||||||||||||
| Phosphate adjusted EBITDA (in millions of US dollars) |
700 | 800 | 750 | 850 | ||||||||||||
| Potash sales tonnes (millions) 3 |
12.5 | 12.9 | 14.3 | 14.9 | ||||||||||||
| Nitrogen sales tonnes (millions) 3 |
10.4 | 10.5 | 10.6 | 11.0 | ||||||||||||
| Depreciation and amortization |
2.0 | 2.1 | 2.0 | 2.1 | ||||||||||||
| Effective tax rate on adjusted earnings (%) |
25.0 | 26.0 | 25.5 | 26.5 | ||||||||||||
| Sustaining capital expenditures 4 |
1.3 | 1.4 | 1.3 | 1.4 | ||||||||||||
1 See the “Forward-Looking Statements” section.
2 These are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section.
3 Manufactured product only. Nitrogen sales tonnes excludes ESN® products.
4 This is a supplementary financial measure. See the “Other Financial Measures” section.
3
Consolidated Results
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) |
2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||
| Sales |
8,188 | 6,024 | 36 | 30,351 | 20,445 | 48 | ||||||||||||||||||
| Freight, transportation and distribution |
204 | 220 | (7 | ) | 628 | 653 | (4 | ) | ||||||||||||||||
| Cost of goods sold |
4,722 | 3,639 | 30 | 17,205 | 13,589 | 27 | ||||||||||||||||||
| Gross margin |
3,262 | 2,165 | 51 | 12,518 | 6,203 | 102 | ||||||||||||||||||
| Expenses |
1,056 | 1,108 | (5 | ) | 3,368 | 3,249 | 4 | |||||||||||||||||
| Net earnings |
1,583 | 726 | 118 | 6,569 | 1,972 | 233 | ||||||||||||||||||
| Adjusted EBITDA 1 |
2,467 | 1,642 | 50 | 10,075 | 4,663 | 116 | ||||||||||||||||||
| Diluted net earnings per share |
2.94 | 1.25 | 135 | 11.96 | 3.41 | 251 | ||||||||||||||||||
| Adjusted net earnings per share 1 |
2.51 | 1.38 | 82 | 11.10 | 3.75 | 196 | ||||||||||||||||||
| Cash provided by (used in) operating activities |
878 | (1,565 | ) | n/m | 3,374 | 249 | n/m | |||||||||||||||||
| Free cash flow 1 |
1,543 | 862 | 79 | 6,770 | 2,751 | 146 | ||||||||||||||||||
| Free cash flow including changes in non-cash operating working capital 1 |
450 | (1,890 | ) | n/m | 2,496 | (544 | ) | n/m | ||||||||||||||||
1 These are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section.
Net earnings and adjusted EBITDA increased in the third quarter and first nine months of 2022 compared to the same periods in 2021. This was due to higher net realized selling prices from global supply uncertainties across our nutrient businesses and strong Retail performance. In the third quarter of 2022, we recorded a non-cash impairment reversal of $330 million related to our Phosphate operations, which impacted net earnings and brings the total impairment reversal to $780 million for the first nine months of 2022. Cash provided by operating activities increased in the third quarter and first nine months of 2022 compared to the same periods in 2021 due primarily to higher net earnings.
Segment Results
Our discussion of segment results set out on the following pages is a comparison of the results for the three and nine months ended September 30, 2022 to the results for the three and nine months ended September 30, 2021, unless otherwise noted.
4
Nutrien Ag Solutions (“Retail”)
| Three Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except | Dollars | Gross Margin | Gross Margin (%) | |||||||||||||||||||||||||||||||||||||
| as otherwise noted) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | ||||||||||||||||||||||||||||||||
| Sales |
||||||||||||||||||||||||||||||||||||||||
| Crop nutrients |
1,605 | 1,194 | 34 | 214 | 246 | (13 | ) | 13 | 21 | |||||||||||||||||||||||||||||||
| Crop protection products |
1,716 | 1,469 | 17 | 436 | 374 | 17 | 25 | 25 | ||||||||||||||||||||||||||||||||
| Seed |
134 | 140 | (4 | ) | 33 | 56 | (41 | ) | 25 | 40 | ||||||||||||||||||||||||||||||
| Merchandise |
241 | 265 | (9 | ) | 41 | 44 | (7 | ) | 17 | 17 | ||||||||||||||||||||||||||||||
| Nutrien Financial |
65 | 54 | 20 | 65 | 54 | 20 | 100 | 100 | ||||||||||||||||||||||||||||||||
| Services and other 1 |
244 | 252 | (3 | ) | 153 | 170 | (10 | ) | 63 | 67 | ||||||||||||||||||||||||||||||
| Nutrien Financial elimination 1, 2 |
(25 | ) | (27 | ) | (7 | ) | (25 | ) | (27 | ) | (7 | ) | 100 | 100 | ||||||||||||||||||||||||||
| 3,980 | 3,347 | 19 | 917 | 917 | - | 23 | 27 | |||||||||||||||||||||||||||||||||
| Cost of goods sold |
3,063 | 2,430 | 26 | |||||||||||||||||||||||||||||||||||||
| Gross margin |
917 | 917 | - | |||||||||||||||||||||||||||||||||||||
| Expenses ³ |
890 | 808 | 10 | |||||||||||||||||||||||||||||||||||||
| Earnings before finance costs and taxes (“EBIT”) |
27 | 109 | (75 | ) | ||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
206 | 182 | 13 | |||||||||||||||||||||||||||||||||||||
| EBITDA |
233 | 291 | (20 | ) | ||||||||||||||||||||||||||||||||||||
| Adjustments 4 |
2 | - | n/m | |||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA |
235 | 291 | (19 | ) | ||||||||||||||||||||||||||||||||||||
| 1 Certain immaterial figures have been reclassified for the three months ended September 30, 2021. |
| |||||||||||||||||||||||||||||||||||||||
| 2 Represents elimination for the interest and service fees charged by Nutrien Financial to Retail branches. |
| |||||||||||||||||||||||||||||||||||||||
| 3 Includes selling expenses of $821 million (2021 – $746 million). |
| |||||||||||||||||||||||||||||||||||||||
| 4 See Note 2 to the interim financial statements. |
| |||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except | Dollars | Gross Margin | Gross Margin (%) | |||||||||||||||||||||||||||||||||||||
| as otherwise noted) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | ||||||||||||||||||||||||||||||||
| Sales |
||||||||||||||||||||||||||||||||||||||||
| Crop nutrients |
7,740 | 5,255 | 47 | 1,417 | 1,169 | 21 | 18 | 22 | ||||||||||||||||||||||||||||||||
| Crop protection products |
6,086 | 5,220 | 17 | 1,523 | 1,137 | 34 | 25 | 22 | ||||||||||||||||||||||||||||||||
| Seed |
1,861 | 1,819 | 2 | 382 | 362 | 6 | 21 | 20 | ||||||||||||||||||||||||||||||||
| Merchandise |
755 | 763 | (1 | ) | 133 | 127 | 5 | 18 | 17 | |||||||||||||||||||||||||||||||
| Nutrien Financial |
205 | 138 | 49 | 205 | 138 | 49 | 100 | 100 | ||||||||||||||||||||||||||||||||
| Services and other 1 |
729 | 737 | (1 | ) | 555 | 570 | (3 | ) | 76 | 77 | ||||||||||||||||||||||||||||||
| Nutrien Financial elimination 1 |
(113 | ) | (76 | ) | 49 | (113 | ) | (76 | ) | 49 | 100 | 100 | ||||||||||||||||||||||||||||
| 17,263 | 13,856 | 25 | 4,102 | 3,427 | 20 | 24 | 25 | |||||||||||||||||||||||||||||||||
| Cost of goods sold |
13,161 | 10,429 | 26 | |||||||||||||||||||||||||||||||||||||
| Gross margin |
4,102 | 3,427 | 20 | |||||||||||||||||||||||||||||||||||||
| Expenses ² |
2,733 | 2,467 | 11 | |||||||||||||||||||||||||||||||||||||
| EBIT |
1,369 | 960 | 43 | |||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
550 | 528 | 4 | |||||||||||||||||||||||||||||||||||||
| EBITDA |
1,919 | 1,488 | 29 | |||||||||||||||||||||||||||||||||||||
| Adjustments 3 |
(17 | ) | 9 | n/m | ||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA |
1,902 | 1,497 | 27 | |||||||||||||||||||||||||||||||||||||
| 1 Certain immaterial figures have been reclassified for the nine months ended September 30, 2021. |
| |||||||||||||||||||||||||||||||||||||||
| 2 Includes selling expenses of $2,556 million (2021 – $2,276 million). |
| |||||||||||||||||||||||||||||||||||||||
| 3 See Note 2 to the interim financial statements. |
| |||||||||||||||||||||||||||||||||||||||
| • | Adjusted EBITDA in the first nine months of 2022 increased due to higher sales and gross margins across nearly all product categories and regions where we operate. This was supported by strong agriculture fundamentals, higher selling prices and growth in proprietary products sales. Adjusted EBITDA decreased in the third quarter of 2022 compared to the prior year’s record results as strong crop protection product margins were offset by lower margins in other product categories as well as inflation on certain expense items in 2022. Retail cash operating coverage ratio1 improved as at September 30, 2022 to 55 percent from 59 percent in the same period in 2021 due to significantly higher gross margin. |
1. These (and any related guidance, if applicable) are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section for further information.
5
| • | Crop nutrients sales increased in the third quarter and first nine months of 2022 due to higher selling prices. Gross margin and gross margin per tonne increased in the first nine months of 2022 compared to the same period last year due to strategic procurement and the timing of inventory purchasing in the first half of 2022, with a decrease in the third quarter of 2022 due to higher cost inventory. Sales volumes decreased in the first nine months of 2022 due to reduced application resulting from a delayed planting season in North America and earlier engagement in the prior year in a rising price environment. |
| • | Crop protection products sales and gross margin increased in the third quarter and first nine months of 2022, particularly in North America, due to higher prices along with increased sales and gross margin in proprietary products. Gross margin as a percentage of sales increased in the first nine months of 2022, supported by the reliability of our supply chain and strategic procurement in a rising price environment. |
| • | Seed sales and gross margin increased in the first nine months of 2022 due to higher pricing and an increase in proprietary seed margins, with a decrease in the third quarter of 2022 as a result of timing and mix of seed sales compared to the same period in 2021. |
| • | Merchandise gross margin for the first nine months of 2022 increased due to strong margin performance in Australia animal health products from increased flock and herd sizes, with a decrease in the third quarter of 2022 due to an unfavorable foreign exchange rate impact on Australian dollars. |
| • | Nutrien Financial sales increased in the third quarter and first nine months of 2022 due to higher utilization and adoption of our programs and a higher interest-bearing trade receivable balance, driven by strong commodity pricing. |
| • | Services and other decreased in the third quarter and first nine months of 2022 mainly due to lower livestock volumes as wet conditions in Australia impeded movement, along with an unfavorable foreign exchange rate impact on Australian dollars. |
Potash
| Three Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except | Dollars | Tonnes (thousands) | Average per Tonne | |||||||||||||||||||||||||||||||||||||||
| as otherwise noted) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||||||||||||||||||
| Manufactured product |
||||||||||||||||||||||||||||||||||||||||||
| Net sales |
||||||||||||||||||||||||||||||||||||||||||
| North America |
436 | 483 | (10 | ) | 619 | 1,515 | (59 | ) | 703 | 319 | 120 | |||||||||||||||||||||||||||||||
| Offshore |
1,568 | 705 | 122 | 2,548 | 2,276 | 12 | 616 | 310 | 99 | |||||||||||||||||||||||||||||||||
| 2,004 | 1,188 | 69 | 3,167 | 3,791 | (16 | ) | 633 | 313 | 102 | |||||||||||||||||||||||||||||||||
| Cost of goods sold |
386 | 372 | 4 | 122 | 98 | 24 | ||||||||||||||||||||||||||||||||||||
| Gross margin - total |
1,618 | 816 | 98 | 511 | 215 | 138 | ||||||||||||||||||||||||||||||||||||
| Expenses ¹ |
352 | 146 | 141 | Depreciation and amortization |
|
35 | 35 | 2 | ||||||||||||||||||||||||||||||||||
| EBIT |
1,266 | 670 | 89 | Gross margin excluding depreciation |
|
|||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
112 | 131 | (15 | ) | and amortization - manufactured 3 |
|
546 | 250 | 119 | |||||||||||||||||||||||||||||||||
| EBITDA |
1,378 | 801 | 72 | Potash controllable cash cost of |
|
|||||||||||||||||||||||||||||||||||||
| Adjustments 2 |
- | 7 | (100 | ) | product manufactured 3 |
|
70 | 55 | 27 | |||||||||||||||||||||||||||||||||
| Adjusted EBITDA |
1,378 | 808 | 71 | |||||||||||||||||||||||||||||||||||||||
1 Includes provincial mining taxes of $348 million (2021 – $128 million).
2 See Note 2 to the interim financial statements.
3 These are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section.
6
| Nine Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except | Dollars | Tonnes (thousands) | Average per Tonne | |||||||||||||||||||||||||||||||||||||||
| as otherwise noted) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||||||||||||||||||
| Manufactured product |
||||||||||||||||||||||||||||||||||||||||||
| Net sales |
||||||||||||||||||||||||||||||||||||||||||
| North America |
1,949 | 1,141 | 71 | 2,770 | 4,157 | (33 | ) | 703 | 275 | 156 | ||||||||||||||||||||||||||||||||
| Offshore |
4,573 | 1,475 | 210 | 7,149 | 6,412 | 11 | 640 | 230 | 178 | |||||||||||||||||||||||||||||||||
| 6,522 | 2,616 | 149 | 9,919 | 10,569 | (6 | ) | 658 | 248 | 165 | |||||||||||||||||||||||||||||||||
| Cost of goods sold |
1,090 | 980 | 11 | 110 | 93 | 18 | ||||||||||||||||||||||||||||||||||||
| Gross margin - total |
5,432 | 1,636 | 232 | 548 | 155 | 254 | ||||||||||||||||||||||||||||||||||||
| Expenses ¹ |
975 | 333 | 193 | Depreciation and amortization |
|
36 | 35 | 2 | ||||||||||||||||||||||||||||||||||
| EBIT |
4,457 | 1,303 | 242 | Gross margin excluding depreciation |
|
|||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
354 | 371 | (5 | ) | and amortization - manufactured |
|
584 | 190 | 207 | |||||||||||||||||||||||||||||||||
| EBITDA |
4,811 | 1,674 | 187 | Potash controllable cash cost of |
|
|||||||||||||||||||||||||||||||||||||
| Adjustments 2 |
- | 9 | (100 | ) | product manufactured |
|
56 | 51 | 10 | |||||||||||||||||||||||||||||||||
| Adjusted EBITDA |
4,811 | 1,683 | 186 | |||||||||||||||||||||||||||||||||||||||
1 Includes provincial mining taxes of $959 million (2021 – $293 million).
2 See Note 2 to the interim financial statements.
| • | Adjusted EBITDA increased in the third quarter and first nine months of 2022 due to higher net realized selling prices and strong offshore sales volumes, which more than offset lower North American sales volumes, higher royalties and provincial mining taxes. |
| • | Sales volumes decreased in the third quarter and first nine months of 2022 due to a compressed North American spring application season that resulted in high inventory carry-over along with cautious purchasing. Offshore sales volumes were the highest of any first nine-month period on record due to strong demand and reduced supply from Eastern Europe. |
| • | Net realized selling price increased in the third quarter and first nine months of 2022 due to the impact of supply constraints, in particular related to uncertainty on future supply from Russia and Belarus. Net realized prices decreased from the second quarter of 2022 due to a decline in benchmark pricing, particularly in Brazil and North America. |
| • | Cost of goods sold per tonne in the first nine months of 2022 increased primarily due to higher royalties resulting from increased net realized selling prices. Potash controllable cash cost of product manufactured increased in the third quarter due to lower production volumes and a pull forward of maintenance activities. |
Canpotex Sales by Market
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||
| (percentage of sales volumes, except as otherwise noted) | 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||
| Latin America |
35 | 48 | (13 | ) | 36 | 38 | (2 | ) | ||||||||||||||||
| Other Asian markets 1 |
32 | 28 | 4 | 34 | 35 | (1 | ) | |||||||||||||||||
| China |
15 | 7 | 8 | 14 | 11 | 3 | ||||||||||||||||||
| Other markets |
10 | 8 | 2 | 9 | 10 | (1 | ) | |||||||||||||||||
| India |
8 | 9 | (1 | ) | 7 | 6 | 1 | |||||||||||||||||
| 100 | 100 | 100 | 100 | |||||||||||||||||||||
1 All Asian markets except China and India.
7
Nitrogen
| Three Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except | Dollars | Tonnes (thousands) | Average per Tonne | |||||||||||||||||||||||||||||||||||||||
| as otherwise noted) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||||||||||||||||||
| Manufactured product |
||||||||||||||||||||||||||||||||||||||||||
| Net sales |
||||||||||||||||||||||||||||||||||||||||||
| Ammonia |
649 | 368 | 76 | 701 | 721 | (3 | ) | 927 | 509 | 82 | ||||||||||||||||||||||||||||||||
| Urea |
393 | 316 | 24 | 651 | 659 | (1 | ) | 603 | 480 | 26 | ||||||||||||||||||||||||||||||||
| Solutions, nitrates and sulfates |
465 | 289 | 61 | 1,274 | 1,141 | 12 | 365 | 253 | 44 | |||||||||||||||||||||||||||||||||
| 1,507 | 973 | 55 | 2,626 | 2,521 | 4 | 574 | 386 | 49 | ||||||||||||||||||||||||||||||||||
| Cost of goods sold |
872 | 591 | 48 | 333 | 234 | 42 | ||||||||||||||||||||||||||||||||||||
| Gross margin - manufactured |
635 | 382 | 66 | 241 | 152 | 59 | ||||||||||||||||||||||||||||||||||||
| Gross margin - other 1 |
29 | 24 | 21 | Depreciation and amortization |
|
54 | 50 | 8 | ||||||||||||||||||||||||||||||||||
| Gross margin - total |
664 | 406 | 64 | Gross margin excluding depreciation |
|
|||||||||||||||||||||||||||||||||||||
| (Income) expenses |
(50 | ) | (1 | ) | n/m | and amortization - manufactured 2 |
|
295 | 202 | 46 | ||||||||||||||||||||||||||||||||
| EBIT |
714 | 407 | 75 | Ammonia controllable cash cost of |
|
|||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
141 | 125 | 13 | product manufactured 2 |
|
62 | 53 | 17 | ||||||||||||||||||||||||||||||||||
| EBITDA/ Adjusted EBITDA |
855 | 532 | 61 | |||||||||||||||||||||||||||||||||||||||
1 Includes other nitrogen (including ESN®) and purchased products and comprises net sales of $264 million (2021 – $128 million) less cost of goods sold of $235 million (2021 – $104 million).
2 These are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section.
| Nine Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except | Dollars | Tonnes (thousands) | Average per Tonne | |||||||||||||||||||||||||||||||||||||||
| as otherwise noted) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||||||||||||||||||
| Manufactured product |
||||||||||||||||||||||||||||||||||||||||||
| Net sales |
||||||||||||||||||||||||||||||||||||||||||
| Ammonia |
1,952 | 874 | 123 | 1,939 | 2,129 | (9 | ) | 1,007 | 411 | 145 | ||||||||||||||||||||||||||||||||
| Urea |
1,457 | 911 | 60 | 2,052 | 2,235 | (8 | ) | 710 | 407 | 74 | ||||||||||||||||||||||||||||||||
| Solutions, nitrates and sulfates |
1,440 | 743 | 94 | 3,495 | 3,526 | (1 | ) | 412 | 211 | 95 | ||||||||||||||||||||||||||||||||
| 4,849 | 2,528 | 92 | 7,486 | 7,890 | (5 | ) | 648 | 320 | 103 | |||||||||||||||||||||||||||||||||
| Cost of goods sold |
2,351 | 1,628 | 44 | 314 | 206 | 52 | ||||||||||||||||||||||||||||||||||||
| Gross margin - manufactured |
2,498 | 900 | 178 | 334 | 114 | 193 | ||||||||||||||||||||||||||||||||||||
| Gross margin - other 1 |
84 | 72 | 17 | Depreciation and amortization |
|
54 | 52 | 4 | ||||||||||||||||||||||||||||||||||
| Gross margin - total |
2,582 | 972 | 166 | Gross margin excluding depreciation |
|
|||||||||||||||||||||||||||||||||||||
| (Income) expenses |
(105 | ) | (1 | ) | n/m | and amortization - manufactured |
|
388 | 166 | 134 | ||||||||||||||||||||||||||||||||
| EBIT |
2,687 | 973 | 176 | Ammonia controllable cash cost of |
|
|||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
403 | 409 | (1 | ) | product manufactured |
|
59 | 52 | 13 | |||||||||||||||||||||||||||||||||
| EBITDA |
3,090 | 1,382 | 124 | |||||||||||||||||||||||||||||||||||||||
| Adjustments 2 |
- | 5 | (100 | ) | ||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA |
3,090 | 1,387 | 123 | |||||||||||||||||||||||||||||||||||||||
1 Includes other nitrogen (including ESN®) and purchased products and comprises net sales of $892 million (2021 – $512 million) less cost of goods sold of $808 million (2021 – $440 million).
2 See Note 2 to the interim financial statements.
| • | Adjusted EBITDA increased in the third quarter and first nine months of 2022 primarily due to higher net realized selling prices and higher earnings from equity-accounted investees, which more than offset higher natural gas costs and lower ammonia and urea volumes. |
| • | Sales volumes increased in the third quarter of 2022 due to strong demand and higher offshore urea ammonium nitrate (UAN) sales that more than offset the impact of gas curtailments in Trinidad. Sales volumes in the first nine months of 2022 decreased due to unplanned plant outages and a compressed North American spring application season. |
| • | Net realized selling price in the third quarter and first nine months of 2022 were higher due to strong benchmark prices resulting from tight global supply and higher energy prices in key nitrogen producing regions. Net realized selling prices decreased from the second quarter of 2022 due to a seasonal reset in benchmark prices that resulted in lower Nitrogen summer fill pricing. |
| • | Cost of goods sold per tonne in the third quarter and first nine months of 2022 increased primarily due to higher natural gas, raw material and other input costs. Ammonia controllable cash cost of product manufactured increased in the third quarter and first nine months due to higher input costs, mainly electricity costs. |
8
Natural Gas Prices in Cost of Production
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||
| (US dollars per MMBtu, except as otherwise noted) |
2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||
| Overall gas cost excluding realized derivative impact |
8.33 | 4.77 | 75 | 7.92 | 3.92 | 102 | ||||||||||||||||||
| Realized derivative impact |
(0.09 | ) | 0.01 | n/m | (0.06 | ) | 0.02 | n/m | ||||||||||||||||
| Overall gas cost |
8.24 | 4.78 | 72 | 7.86 | 3.94 | 99 | ||||||||||||||||||
| Average NYMEX |
8.20 | 4.01 | 104 | 6.77 | 3.18 | 113 | ||||||||||||||||||
| Average AECO |
4.46 | 2.83 | 58 | 4.34 | 2.48 | 75 | ||||||||||||||||||
| • | Natural gas prices in our cost of production increased in the third quarter and first nine months of 2022 as a result of higher North American gas index prices and increased gas costs in Trinidad, where our gas prices are linked to ammonia benchmark prices. |
Phosphate
| Three Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except | Dollars | Tonnes (thousands) | Average per Tonne | |||||||||||||||||||||||||||||||||||||||
| as otherwise noted) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||||||||||||||||||
| Manufactured product |
||||||||||||||||||||||||||||||||||||||||||
| Net sales |
||||||||||||||||||||||||||||||||||||||||||
| Fertilizer |
375 | 269 | 39 | 479 | 428 | 12 | 782 | 628 | 25 | |||||||||||||||||||||||||||||||||
| Industrial and feed |
192 | 132 | 45 | 161 | 192 | (16 | ) | 1,198 | 689 | 74 | ||||||||||||||||||||||||||||||||
| 567 | 401 | 41 | 640 | 620 | 3 | 886 | 648 | 37 | ||||||||||||||||||||||||||||||||||
| Cost of goods sold |
445 | 300 | 48 | 695 | 484 | 44 | ||||||||||||||||||||||||||||||||||||
| Gross margin - manufactured |
122 | 101 | 21 | 191 | 164 | 16 | ||||||||||||||||||||||||||||||||||||
| Gross margin - other 1 |
(8 | ) | 7 | n/m | Depreciation and amortization |
|
75 | 63 | 19 | |||||||||||||||||||||||||||||||||
| Gross margin - total |
114 | 108 | 6 | Gross margin excluding depreciation |
|
|||||||||||||||||||||||||||||||||||||
| (Income) expenses |
(311 | ) | 12 | n/m | and amortization - manufactured 3 |
|
266 | 227 | 17 | |||||||||||||||||||||||||||||||||
| EBIT |
425 | 96 | 343 | |||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
48 | 39 | 23 | |||||||||||||||||||||||||||||||||||||||
| EBITDA |
473 | 135 | 250 | |||||||||||||||||||||||||||||||||||||||
| Adjustments 2 |
(330 | ) | - | n/m | ||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA |
143 | 135 | 6 | |||||||||||||||||||||||||||||||||||||||
1 Includes other phosphate and purchased products and comprises net sales of $84 million (2021 – $47 million) less cost of goods sold of $92 million (2021 – $40 million).
2 See Notes 2 and 3 to the interim financial statements. Includes impairment reversal of assets of $330 million (2021 – nil).
3 This is a non-IFRS financial measure. See the “Non-IFRS Financial Measures” section.
| Nine Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||||
| (millions of US dollars, except | Dollars | Tonnes (thousands) | Average per Tonne | |||||||||||||||||||||||||||||||||||||||
| as otherwise noted) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||||||||||||||||||
| Manufactured product |
||||||||||||||||||||||||||||||||||||||||||
| Net sales |
||||||||||||||||||||||||||||||||||||||||||
| Fertilizer |
1,093 | 731 | 50 | 1,305 | 1,331 | (2 | ) | 837 | 549 | 52 | ||||||||||||||||||||||||||||||||
| Industrial and feed |
551 | 365 | 51 | 542 | 577 | (6 | ) | 1,017 | 633 | 61 | ||||||||||||||||||||||||||||||||
| 1,644 | 1,096 | 50 | 1,847 | 1,908 | (3 | ) | 890 | 575 | 55 | |||||||||||||||||||||||||||||||||
| Cost of goods sold |
1,157 | 853 | 36 | 626 | 448 | 40 | ||||||||||||||||||||||||||||||||||||
| Gross margin - manufactured |
487 | 243 | 100 | 264 | 127 | 108 | ||||||||||||||||||||||||||||||||||||
| Gross margin - other 1 |
(10 | ) | 15 | n/m | Depreciation and amortization |
|
70 | 59 | 20 | |||||||||||||||||||||||||||||||||
| Gross margin - total |
477 | 258 | 85 | Gross margin excluding depreciation |
|
|||||||||||||||||||||||||||||||||||||
| (Income) expenses |
(739 | ) | 26 | n/m | and amortization - manufactured |
|
334 | 186 | 80 | |||||||||||||||||||||||||||||||||
| EBIT |
1,216 | 232 | 424 | |||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
130 | 112 | 16 | |||||||||||||||||||||||||||||||||||||||
| EBITDA |
1,346 | 344 | 291 | |||||||||||||||||||||||||||||||||||||||
| Adjustments 2 |
(780 | ) | - | n/m | ||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA |
566 | 344 | 65 | |||||||||||||||||||||||||||||||||||||||
1 Includes other phosphate and purchased products and comprises net sales of $232 million (2021 – $140 million) less cost of goods sold of $242 million (2021 – $125 million).
2 See Notes 2 and 3 to the interim financial statements. Includes impairment reversal of assets of $780 million (2021 – nil).
9
| • | Adjusted EBITDA increased in the third quarter and first nine months of 2022 mainly due to higher net realized selling prices, which more than offset higher raw material costs. Included with expenses in the third quarter of 2022, we recognized a $330 million non-cash impairment of assets reversal, which is deducted from adjusted EBITDA. This brings the total impairment reversal to $780 million for the first nine months of 2022 and is due to a more favorable outlook for phosphate margins. |
| • | Sales volumes increased in the third quarter of 2022 due to strong offshore fertilizer sales, offsetting lower industrial sales that were impacted by an unplanned plant outage. Sales volumes in the first nine months of 2022 decreased due to a condensed North American spring application season and lower production volumes. |
| • | Net realized selling price increased in the third quarter and first nine months of 2022 aligned with the increase in global benchmark prices. Industrial and feed net realized selling prices increased to a greater extent than fertilizer prices in the third quarter of 2022, which reflects the typical lag in industrial and feed price realizations relative to spot fertilizer prices. |
| • | Cost of goods sold per tonne increased in the third quarter and first nine months of 2022 primarily due to significantly higher sulfur and ammonia input costs. |
Corporate and Others
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) |
2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||
| Selling expenses |
(2 | ) | (9 | ) | (78 | ) | (6 | ) | (24 | ) | (75 | ) | ||||||||||||
| General and administrative expenses |
80 | 58 | 38 | 227 | 182 | 25 | ||||||||||||||||||
| Share-based compensation expense |
39 | 64 | (39 | ) | 122 | 125 | (2 | ) | ||||||||||||||||
| Other expenses |
59 | 30 | 97 | 160 | 141 | 13 | ||||||||||||||||||
| EBIT |
(176 | ) | (143 | ) | 23 | (503 | ) | (424 | ) | 19 | ||||||||||||||
| Depreciation and amortization |
19 | 12 | 58 | 55 | 34 | 62 | ||||||||||||||||||
| EBITDA |
(157 | ) | (131 | ) | 20 | (448 | ) | (390 | ) | 15 | ||||||||||||||
| Adjustments 1 |
63 | 89 | (29 | ) | 230 | 232 | (1 | ) | ||||||||||||||||
| Adjusted EBITDA |
(94 | ) | (42 | ) | 124 | (218 | ) | (158 | ) | 38 | ||||||||||||||
1 See Note 2 to the interim financial statements.
| • | General and administrative expenses were higher in the third quarter and first nine months of 2022 compared to the same periods in 2021 mainly due to increased depreciation expense, higher donations and higher information technology-related expenses. |
| • | Other expenses were higher in the third quarter and first nine months of 2022 compared to the same periods in 2021 mainly due to higher foreign exchange losses related to our US dollar denominated liabilities in our South American operations and higher information technology project-related costs. This was partially offset by the absence of cloud computing related expenses from our change in accounting policy and lower COVID-19 related expenses. |
10
Finance Costs, Income Taxes and Other Comprehensive (Loss) Income
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||
| Finance costs |
136 | 122 | 11 | 375 | 367 | 2 | ||||||||||||||||||
| Income tax expense |
487 | 209 | 133 | 2,206 | 615 | 259 | ||||||||||||||||||
| Other comprehensive (loss) income |
(230 | ) | (79 | ) | 191 | (296 | ) | 6 | n/m | |||||||||||||||
| • | Finance costs were higher in the third quarter and first nine months of 2022 compared to the same periods in 2021 mainly due to higher interest rates and a higher short-term debt balance, mostly offset by a lower long-term debt balance resulting from the early extinguishment of a portion of our long-term debt in the fourth quarter of 2021. |
| • | Income tax expense was higher as a result of higher earnings in the third quarter and first nine months of 2022 compared to the same periods in 2021. |
| • | Other comprehensive (loss) income is primarily driven by changes in the currency translation of our foreign operations and our investment in Sinofert Holdings Ltd. (“Sinofert”). In the third quarter and first nine months of 2022, we had fair value losses on our investment in Sinofert due to share price decreases, compared to fair value gains due to share price increases in the same periods of 2021. In the third quarter and first nine months of 2022, we had higher losses on foreign currency translation of our Retail operations, mainly in Australia and Canada compared to the same periods in 2021. These currencies depreciated relative to the US dollar as at September 30, 2022 compared to June 30, 2022 and December 31, 2021 levels, which led to losses in the third quarter and the first nine months of 2022. This was partially offset by a net actuarial gain on our defined benefit pension plans in the third quarter of 2022. |
11
Liquidity and Capital Resources
Sources and Uses of Liquidity
We continued to manage our capital in accordance with our capital allocation strategy. We believe that our internally generated cash flow, supplemented by available borrowings under new or existing financing sources, if necessary, will be sufficient to meet our anticipated capital expenditures, planned growth and development activities, and other cash requirements for the foreseeable future. Refer to the “Capital Structure and Management” section for details on our existing long-term debt and credit facilities.
Sources and Uses of Cash
| (millions of US dollars, except as otherwise noted) | Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||||
| Cash provided by (used in) operating activities |
878 | (1,565 | ) | n/m | 3,374 | 249 | n/m | |||||||||||||||||
| Cash used in investing activities |
(705 | ) | (523 | ) | 35 | (1,679 | ) | (1,342 | ) | 25 | ||||||||||||||
| Cash (used in) provided by financing activities |
(29 | ) | 757 | n/m | (1,319 | ) | 117 | n/m | ||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents |
(32 | ) | (20 | ) | 60 | (52 | ) | (35 | ) | 49 | ||||||||||||||
| Increase (decrease) in cash and cash equivalents |
112 | (1,351 | ) | n/m | 324 | (1,011 | ) | n/m | ||||||||||||||||
| Cash provided by |
• Cash provided by operating activities was higher in the third quarter and first nine months of 2022 compared to the same periods in 2021 due to higher net earnings driven by higher selling prices from global supply uncertainties, offset by working capital requirements. | |
| Cash used in |
• Cash used in investing activities in the third quarter and first nine months of 2022 was higher compared to the same periods in 2021 mainly due to higher spending to maintain the safety and reliability of our assets and to increase our potash production capabilities. | |
| Cash (used in) |
• Cash used in financing activities in the third quarter and first nine months of 2022 was higher compared to the same periods in 2021 due to increased share repurchases, partially offset with increased commercial paper and credit facility drawdowns to temporarily finance working capital requirements. | |
Financial Condition Review
The following balance sheet categories contain variances that are considered material:
| As at | ||||||||||||||||
| (millions of US dollars, except as otherwise noted) |
September 30, 2022 | December 31, 2021 | $ Change | % Change | ||||||||||||
| Assets |
||||||||||||||||
| Cash and cash equivalents |
823 | 499 | 324 | 65 | ||||||||||||
| Receivables |
8,591 | 5,366 | 3,225 | 60 | ||||||||||||
| Inventories |
6,545 | 6,328 | 217 | 3 | ||||||||||||
| Prepaid expenses and other current assets |
737 | 1,653 | (916 | ) | (55 | ) | ||||||||||
| Property, plant and equipment |
21,022 | 20,016 | 1,006 | 5 | ||||||||||||
| Liabilities and Equity |
||||||||||||||||
| Short-term debt |
4,454 | 1,560 | 2,894 | 186 | ||||||||||||
| Current portion of long-term debt |
1,016 | 545 | 471 | 86 | ||||||||||||
| Payables and accrued charges |
8,760 | 10,052 | (1,292 | ) | (13 | ) | ||||||||||
| Long-term debt |
7,020 | 7,521 | (501 | ) | (7 | ) | ||||||||||
| Deferred income tax liabilities |
3,489 | 3,165 | 324 | 10 | ||||||||||||
| Asset retirement obligations and accrued environmental costs |
1,320 | 1,566 | (246 | ) | (16 | ) | ||||||||||
| Share capital |
14,588 | 15,457 | (869 | ) | (6 | ) | ||||||||||
| Accumulated other comprehensive loss |
(498 | ) | (146 | ) | (352 | ) | 241 | |||||||||
| Retained earnings |
11,787 | 8,192 | 3,595 | 44 | ||||||||||||
12
| • | Explanations for changes in Cash and cash equivalents are in the “Sources and Uses of Cash” section. |
| • | Receivables increased due to higher sales across all of our segments as a result of higher crop nutrient net realized selling prices consistent with higher benchmark pricing, as well as higher Retail vendor rebates receivables. |
| • | Inventories increased primarily due to higher cost to produce and/or purchase inventory across all our segments. We held higher than average levels of finished products inventory in our Nitrogen and Phosphate segments, resulting from timing of sales, turnarounds at our Nitrogen facilities at year-end and higher input costs. This was partially offset by a decrease in inventory in our Retail segment driven by seasonality. Generally, we carry higher inventory levels at year-end and during the early part of the year in preparation for the upcoming planting and application seasons. Throughout the year, inventory levels decrease as we sell to our customers. |
| • | Prepaid expenses and other current assets decreased due to the drawdown of prepaid inventory where Retail typically prepays for products at year-end and takes possession of inventory throughout the year. |
| • | Property, plant and equipment increased due to impairment reversals in the Phosphate segment. |
| • | Short-term debt increased due to additional commercial paper issuances and borrowings under our credit facilities for our seasonal working capital requirements and for share repurchases. |
| • | Payables and accrued charges decreased due to the seasonality of our Retail segment. Throughout the year, we settle our vendor obligations and customer prepayments decrease as drawdowns occur. As at September 30, 2022, we had higher payables balances compared to the same period in 2021 due to higher input costs from inflation and tight global supply. |
| • | Long-term debt decreased due to a reclassification to the current portion of long-term debt of our $500 million notes maturing May 2023. |
| • | Deferred income tax liabilities increased primarily in the NPK businesses in the US and Canada, partially offset by US Retail recoveries. The reversal of the Phosphate impairment also resulted in an increase in the deferred tax liability of $161 million. |
| • | Asset retirement obligations and accrued environment costs decreased due to changes in discount rates, reclassification to the current portion of asset retirement obligations and increased spending on remediation to restore our sites. |
| • | Share capital decreased from shares repurchased under our normal course issuer bids partially offset by exercise of stock options. |
| • | Accumulated other comprehensive loss increased due to a loss on currency translation of our foreign operations. |
| • | Retained earnings increased as net earnings in the first nine months of 2022 exceeded dividends declared and share repurchases. |
Capital Structure and Management
Principal Debt Instruments
As part of the normal course of business, we closely monitor our liquidity position. We use a combination of cash generated from operations and short-term and long-term debt to finance our operations. We were in compliance with our debt covenants and did not have any changes to our credit ratings in the nine months ended September 30, 2022.
13
|
|
As at September 30, 2022 | |||||||||||||||
| Outstanding and Committed | ||||||||||||||||
| (millions of US dollars) | Rate of Interest (%) | Total Facility Limit | Short-Term Debt | Long-Term Debt | ||||||||||||
| Credit facilities |
||||||||||||||||
| Unsecured revolving term credit facility |
n/a | 4,500 | - | - | ||||||||||||
| Unsecured revolving term credit facility |
4.1 | 2,000 | 1,000 | - | ||||||||||||
| Uncommitted revolving demand facility |
4.0 | 1,000 | 500 | - | ||||||||||||
| Other credit facilities |
760 | |||||||||||||||
| South American |
1.5 - 21.7 | 194 | 108 | |||||||||||||
| Australian |
3.6 | 97 | - | |||||||||||||
| Other |
3.3 - 4.0 | 8 | 3 | |||||||||||||
| Commercial paper |
2.9 - 4.0 | 2,530 | - | |||||||||||||
| Other short-term debt |
n/a | 125 | 7 | |||||||||||||
| Total |
|
|
|
|
|
|
4,454 | 118 | ||||||||
The amount available under the commercial paper program is limited to the availability of backup funds under the $4,500 million unsecured revolving term credit facility and excess cash invested in highly liquid securities. During the third quarter of 2022, we extended the maturity date of the $4,500 million unsecured revolving term credit facility from June 4, 2026 to September 14, 2027. There was no change to the total facility limit or the significant agreement terms from those we disclosed in our 2021 Annual Report.
During the third quarter of 2022, we entered into a new $2,000 million revolving term credit facility, with the same principal covenants and events of default as our existing $4,500 million unsecured revolving term credit facility. The $2,000 million non-revolving term credit facilities we entered into in July 2022 to help temporarily manage normal seasonal working capital swings were closed prior to September 30, 2022.
Our long-term debt consists primarily of notes. See the “Capital Structure and Management” section of our 2021 Annual Report for information on balances, rates and maturities for our notes. Subsequent to the third quarter of 2022, we repaid the $500 million 3.15 percent notes that matured October 1, 2022.
Outstanding Share Data
|
|
As at November 1, 2022 | |||
| Common shares |
520,183,851 | |||
| Options to purchase common shares |
3,920,176 | |||
We repurchased approximately 40 million shares year-to-date as of November 1, 2022, under our share repurchase programs, for a total of approximately $3.5 billion and plan to allocate a total of approximately $4 billion to share repurchases in 2022. While some of the previously expected approximately $5 billion in repurchases may now extend into the first quarter of 2023 due to lower forecasted operating cash flow in 2022, we still intend on completing our existing 10 percent share repurchase program prior to its expiry in February 2023.
For more information on our capital structure and management, see Note 24 to our 2021 annual financial statements.
Quarterly Results
| (millions of US dollars, except as otherwise noted) | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | Q2 2021 | Q1 2021 | Q4 2020 | ||||||||
| Sales |
8,188 | 14,506 | 7,657 | 7,267 | 6,024 | 9,763 | 4,658 | 4,052 | ||||||||
| Net earnings |
1,583 | 3,601 | 1,385 | 1,207 | 726 | 1,113 | 133 | 316 | ||||||||
| Net earnings attributable to equity holders of Nutrien |
1,577 | 3,593 | 1,378 | 1,201 | 717 | 1,108 | 127 | 316 | ||||||||
| Net earnings per share attributable to equity holders of Nutrien |
||||||||||||||||
| Basic |
2.95 | 6.53 | 2.49 | 2.11 | 1.26 | 1.94 | 0.22 | 0.55 | ||||||||
| Diluted |
2.94 | 6.51 | 2.49 | 2.11 | 1.25 | 1.94 | 0.22 | 0.55 | ||||||||
Seasonality in our business results from increased demand for products during the planting season. Crop input sales are generally higher in the spring and fall application seasons. Crop input inventories are normally accumulated leading up to each application season. Our cash collections generally occur after the application season is complete, while customer prepayments made to us are concentrated in December and January and inventory prepayments paid to our suppliers are typically concentrated in the period from November to January. Feed and industrial sales are more evenly distributed throughout the year.
14
Our earnings are significantly affected by fertilizer benchmark prices, which have been volatile over the last two years and are affected by demand-supply conditions, grower affordability and weather.
In the third and second quarters of 2022, earnings were impacted by $330 million and $450 million non-cash impairment reversals at White Springs and Aurora, respectively, of property, plant and equipment in the Phosphate segment related to higher forecasted global prices and a more favorable outlook for phosphate margins. In the fourth quarter of 2021, earnings were impacted by a $142 million loss resulting from the early extinguishment of long-term debt. In the fourth quarter of 2020, earnings were impacted by a $250 million net gain on disposal of our investment in Misr Fertilizers Production Company S.A.E..
Critical Accounting Estimates
Our significant accounting policies are disclosed in our 2021 Annual Report. We have discussed the development, selection and application of our key accounting policies, and the critical accounting estimates and assumptions they involve, with the audit committee of the Board. Our critical accounting estimates are discussed on page 49 of our 2021 Annual Report. Other than the critical accounting estimates discussed below, there were no material changes in the three or nine months ended September 30, 2022 to our critical accounting estimates.
Impairment of Assets
Long-Lived Asset Impairment and Reversals
In the three months ended September 30, 2022, we continued to revise our near-term pricing forecasts due to continued global export restrictions from major producers and continued our review of our previously impaired Phosphate cash-generating unit (“CGU”), White Springs. In 2017 and 2020, we recorded an impairment of assets at our White Springs CGU relating to property, plant and equipment of $250 million and $215 million respectively, as a result of lower long-term forecasted global phosphate prices. Due to increases in our forecast, the recoverable amount of our White Springs CGU is above its carrying amount. As a result, during the three months ended September 30, 2022, we recorded a full impairment reversal, net of depreciation, of $330 million in the statement of earnings relating to property, plant and equipment. Refer to Note 3 to the interim financial statements.
The recoverable amount estimate is most sensitive to the following key assumptions: our internal sales and input price forecasts, which consider projections from independent third-party data sources, discount rate, and expected mine life. We used key assumptions that were based on historical data and estimates of future results from internal sources, external price benchmarks, and mineral reserve technical reports, as well as industry and market trends.
Goodwill Impairment Indicators
CGUs or groups of CGUs that have goodwill allocated to them must be assessed for impairment when events or circumstances indicate there could be an impairment, or at least annually. Based on our assumptions at the time of our impairment testing, the recoverable amount of each of our CGUs or groups of CGUs was greater than or approximately equal to their carrying amounts. Key assumptions in our testing models may change, and changes that could reasonably be expected to occur may cause impairment. Such change in assumptions could be driven by global supply and demand, other market factors, changes in regulations, and other future events outside our control.
During the nine months ended September 30, 2022, North American central banks continued to increase their benchmark borrowing rates. Benchmark borrowing rates are used as the risk-free rate which is a component of determining our discount rate for impairment testing. As a result of these increases, we revised our discount rates and increased our Retail – North America group of CGUs discount rate to 8.5 percent (previous impairment analysis – 8.0 percent at June 30, 2022) and this triggered an impairment test to be performed.
The Retail – North America group of CGUs have $6.9 billion in associated goodwill. Goodwill is more susceptible to impairment risk if there is an increase in the discount rate, or a deterioration in business operating results or economic conditions and actual results do not meet our forecasts. As at September 30, 2022, the Retail – North America group of CGUs carrying amount was equal to its recoverable amount. A 25 basis point increase in the discount rate will result in an impairment of the carrying amount of goodwill of approximately $500 million. A decrease in forecasted EBITDA and cash flows or a reduction in the terminal growth rate will also result in impairment in the future. Refer to Note 3 to the interim financial statements.
15
Risk Factors
Russia and Ukraine Conflict
The current conflict between Ukraine and Russia and the international response has, and may continue to have, potential wide-ranging consequences for global market volatility and economic conditions, including energy and commodity prices. Certain countries including Canada, the United States, Australia and certain European countries have imposed strict financial and trade sanctions against Russia, with Russia and Belarus imposing retaliatory sanctions of their own, which have had, and may continue to have, far-reaching effects on the global economy, energy and commodity prices, food security and crop nutrient supply and prices. The short-, medium- and long-term implications of the conflict in Ukraine are difficult to predict with any degree of certainty at this time. While Nutrien does not have operations in Ukraine or Russia, there remains uncertainty relating to the potential impact of the conflict and its effect on global food security, growers and the market outlook for crop nutrient market supply and demand fundamentals and nutrient prices, and it could have a material and adverse effect on our business, financial condition and results of operations. Depending on the extent, duration, and severity of the conflict, it may have the effect of heightening many of the other risks Nutrien is subject to and which are described in our 2021 Annual Report and 2021 Annual Information Form, including, without limitation, risks relating to market fundamentals and conditions (such as sanctions and trade flows and the impact thereof on crop nutrient supply and demand); cybersecurity threats; energy and commodity prices; inflationary pressures, interest rates and costs of capital; and supply chains and cost-effective and timely transportation.
Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, and National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with IFRS. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
There has been no change in our internal control over financial reporting during the three months ended September 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Forward-Looking Statements
Certain statements and other information included in this document, including within the “Market Outlook and Guidance” section, constitute “forward-looking information” or “forward-looking statements” (collectively, “forward-looking statements”) under applicable securities laws (such statements are often accompanied by words such as “anticipate”, “forecast”, “expect”, “believe”, “may”, “will”, “should”, “estimate”, “intend” or other similar words). All statements in this document, other than those relating to historical information or current conditions, are forward-looking statements, including, but not limited to: Nutrien’s business strategies, plans, prospects and opportunities; Nutrien’s 2022 full-year guidance, including expectations regarding our adjusted net earnings per share and adjusted EBITDA (consolidated and by segment); expectations regarding our growth and capital allocation intentions and strategies; our advancement of strategic growth initiatives; capital spending expectations for 2022; our intention to complete our existing share repurchase program in 2022 and 2023, including the funds allocated thereto; expectations regarding performance of our operating segments in 2022 and 2023 including projected potash sales volumes; our operating segment market outlooks and market conditions and fundamentals for 2022 as well as our expectations for market conditions and fundamentals in 2023 and beyond, and the anticipated supply and demand for our products and services, expected market and industry conditions with respect to crop nutrient application rates, planted acres, grower crop investment, crop mix, production expenses, shipments, consumption, prices and the impact of seasonality, import and export volumes and economic sanctions; Nutrien’s ability to develop innovative and sustainable solutions; the negotiation of sales contracts; acquisitions and divestitures and the anticipated benefits thereof; and the potential impairment of goodwill associated with our Retail – North America group of CGUs. These forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements. As such, undue reliance should not be placed on these forward-looking statements.
16
All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions referred to below and elsewhere in this document. Although we believe that these assumptions are reasonable, having regard to our experience and our perception of historical trends, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place undue reliance on these assumptions and such forward-looking statements. Current conditions, economic and otherwise, render assumptions, although reasonable when made, subject to greater uncertainty. The additional key assumptions that have been made include, among other things, assumptions with respect to our ability to successfully complete, integrate and realize the anticipated benefits of our already completed and future acquisitions and divestitures, and that we will be able to implement our standards, controls, procedures and policies in respect of any acquired businesses and to realize the expected synergies; that future business, regulatory and industry conditions will be within the parameters expected by us, including with respect to prices, expenses, margins, demand, supply, product availability, shipments, consumption, supplier agreements, availability and cost of labor and interest, exchange and effective tax rates; assumptions with respect to global economic conditions and the accuracy of our market outlook expectations for 2022 and in the future; assumptions with respect to our intention to complete share repurchases under our share repurchase program, including the funding thereof, existing and future market conditions, including with respect to the price of our common shares, and compliance with respect to applicable limitations under securities laws and regulations and stock exchange policies; our expectations regarding the impacts, direct and indirect, of the COVID-19 pandemic on our business, customers, business partners, employees, supply chain, other stakeholders and the overall global economy; our expectations regarding the impacts, direct and indirect, of the conflict between Ukraine and Russia on, among other things, global supply and demand, energy and commodity prices, global interest rates, supply chains and the global macroeconomic environment, including inflation; the adequacy of our cash generated from operations and our ability to access our credit facilities or capital markets for additional sources of financing; our expectations regarding the impact of certain factors on the carrying amount of goodwill associated with our Retail – North America group of CGUs; our ability to identify suitable candidates for acquisitions and divestitures and negotiate acceptable terms; our ability to maintain investment grade ratings and achieve our performance targets; our ability to successfully negotiate sales contracts; and our ability to successfully implement new initiatives and programs.
Events or circumstances that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: general global economic, market and business conditions; failure to complete announced and future acquisitions or divestitures at all or on the expected terms and within the expected timeline; seasonality; climate change and weather conditions, including impacts from regional flooding and/or drought conditions; crop planted acreage, yield and prices; the supply and demand and price levels for our products; governmental and regulatory requirements and actions by governmental authorities, including changes in government policy (including tariffs, trade restrictions and climate change initiatives), government ownership requirements, changes in environmental, tax and other laws or regulations and the interpretation thereof; political risks, including civil unrest, actions by armed groups or conflict and malicious acts including terrorism; the occurrence of a major environmental or safety incident; innovation and cybersecurity risks related to our systems, including our costs of addressing or mitigating such risks; counterparty and sovereign risk; delays in completion of turnarounds at our major facilities; interruptions of or constraints in availability of key inputs, including natural gas and sulfur; any significant impairment of the carrying amount of certain assets; risks related to reputational loss; certain complications that may arise in our mining processes; the ability to attract, engage and retain skilled employees and strikes or other forms of work stoppages; the COVID-19 pandemic, including variants of the COVID-19 virus and the efficiency and distribution of vaccines, and its resulting effects on economic conditions, restrictions imposed by public health authorities or governments, including government-imposed vaccine mandates, fiscal and monetary responses by governments and financial institutions and disruptions to global supply chains; the conflict between Ukraine and Russia and its potential impact on, among other things, global market conditions and supply and demand, energy and commodity prices; interest rates, supply chains and the global economy generally; our ability to execute on our strategies related to environmental, social and governance matters, and achieve related expectations; the risk that rising interest rates and/or deteriorated business operating results may result in the impairment of goodwill attributed to certain of our cash generating units; and other risk factors detailed from time to time in Nutrien reports filed with the Canadian securities regulators and the SEC in the United States.
The purpose of our adjusted net earnings per share, adjusted EBITDA (consolidated and by segment) and sustaining capital expenditures guidance ranges are to assist readers in understanding our expected and targeted financial results, and this information may not be appropriate for other purposes.
The forward-looking statements in this document are made as of the date hereof and Nutrien disclaims any intention or obligation to update or revise any forward-looking statements in this document as a result of new information or future events, except as may be required under applicable Canadian securities legislation or applicable US federal securities laws.
17
Terms and Definitions
For the definitions of certain financial and non-financial terms used in this document, as well as a list of abbreviated company names and sources, see the “Terms & Definitions” section of our 2021 Annual Report. All references to per share amounts pertain to diluted net earnings (loss) per share, “n/m” indicates information that is not meaningful, and all financial amounts are stated in millions of US dollars, unless otherwise noted.
18
Appendix A - Selected Additional Financial Data
| Selected Retail Measures |
Three Months Ended September 30 |
Nine Months Ended September 30 | ||||||
| 2022 | 2021 | 2022 | 2021 | |||||
| Proprietary products margin as a percentage of product line margin (%) |
||||||||
| Crop nutrients |
35 | 26 | 22 | 24 | ||||
| Crop protection products |
41 | 41 | 41 | 41 | ||||
| Seed |
62 | 48 | 45 | 45 | ||||
| All products |
30 | 27 | 27 | 27 | ||||
| Crop nutrients sales volumes (tonnes – thousands) |
||||||||
| North America |
1,066 | 1,112 | 6,286 | 7,729 | ||||
| International |
782 | 898 | 2,732 | 2,833 | ||||
| Total |
1,848 | 2,010 | 9,018 | 10,562 | ||||
| Crop nutrients selling price per tonne |
||||||||
| North America |
836 | 602 | 908 | 510 | ||||
| International |
913 | 585 | 744 | 464 | ||||
| Total |
869 | 595 | 858 | 498 | ||||
| Crop nutrients gross margin per tonne |
||||||||
| North America |
155 | 147 | 191 | 127 | ||||
| International |
64 | 95 | 80 | 67 | ||||
| Total |
117 | 124 | 157 | 111 | ||||
| Financial performance measures |
2022 | 2021 | ||||||
| Retail adjusted EBITDA margin (%) 1, 2 |
11 | 11 | ||||||
| Retail adjusted EBITDA per US selling location (thousands of US dollars) 1, 2, 3 |
1,913 | 1,362 | ||||||
| Retail adjusted average working capital to sales (%) 1, 4 |
16 | 12 | ||||||
| Retail adjusted average working capital to sales excluding Nutrien Financial (%) 1, 4 |
1 | (1) | ||||||
| Nutrien Financial adjusted net interest margin (%) 1, 4 |
6.7 | 6.4 | ||||||
| Retail cash operating coverage ratio (%) 1, 4 |
55 | 59 | ||||||
1 Rolling four quarters ended September 30, 2022 and 2021.
2 These are supplementary financial measures. See the “Other Financial Measures” section.
3 Excluding acquisitions.
4 These are non-IFRS financial measures. See the “Non-IFRS Financial Measures” section.
| Nutrien Financial | As at September 30, 2022 | As at Dec 31, 2021 |
||||||||||||||||||||||||||||||
| (millions of US dollars) | Current | <31 days past due |
31–90 past due |
>90 days past due |
Gross Receivables |
Allowance 1 | Net Receivables |
Net Receivables |
||||||||||||||||||||||||
| North America |
3,009 | 49 | 138 | 77 | 3,273 | (34 | ) | 3,239 | 1,488 | |||||||||||||||||||||||
| International |
572 | 8 | 56 | 25 | 661 | (2 | ) | 659 | 662 | |||||||||||||||||||||||
| Nutrien Financial receivables |
3,581 | 57 | 194 | 102 | 3,934 | (36 | ) | 3,898 | 2,150 | |||||||||||||||||||||||
1 Bad debt expense on the above receivables for the nine months ended September 30, 2022 was $10 million (2021 – $9 million) in the Retail segment.
19
| Selected Nitrogen Measures | Three Months Ended September 30 |
Nine Months Ended September 30 | ||||||
| 2022 | 2021 | 2022 | 2021 | |||||
| Sales volumes (tonnes – thousands) |
||||||||
| Fertilizer |
1,417 | 1,320 | 3,963 | 4,450 | ||||
| Industrial and feed |
1,209 | 1,201 | 3,523 | 3,440 | ||||
| Net sales (millions of US dollars) |
||||||||
| Fertilizer |
764 | 533 | 2,658 | 1,503 | ||||
| Industrial and feed |
743 | 440 | 2,191 | 1,025 | ||||
| Net selling price per tonne |
||||||||
| Fertilizer |
539 | 404 | 671 | 338 | ||||
| Industrial and feed |
614 | 366 | 622 | 298 | ||||
| Production Measures | Three Months Ended September 30 |
Nine Months Ended September 30 | ||||||
| 2022 | 2021 | 2022 | 2021 | |||||
| Potash production (Product tonnes – thousands) |
2,742 |
3,199 |
10,066 |
10,149 | ||||
| Potash shutdown weeks 1 |
10 |
10 |
15 |
14 | ||||
| Ammonia production – total 2 |
1,483 |
1,414 |
4,359 |
4,355 | ||||
| Ammonia production – adjusted 2, 3 |
1,009 |
856 |
3,015 |
2,863 | ||||
| Ammonia operating rate (%) 3 |
91 |
77 |
92 |
87 | ||||
|
P2O5 production (P2O5 tonnes – thousands) |
335 |
384 |
1,063 |
1,109 | ||||
| P2O5 operating rate (%) |
78 | 90 | 84 | 87 | ||||
| 1 Represents weeks of full production shutdown, including inventory adjustments and unplanned events, excluding the impact of any periods of reduced operating rates, planned routine annual maintenance shutdowns and announced workforce reductions. 2 All figures are provided on a gross production basis in thousands of product tonnes. 3 Excludes Trinidad and Joffre. | ||||||||
20
Appendix B - Non-IFRS Financial Measures
We use both IFRS measures and certain non-IFRS financial measures to assess performance. Non-IFRS financial measures are financial measures disclosed by a company that (a) depict historical or expected future financial performance, financial position or cash flow of a company, (b) with respect to their composition, exclude amounts that are included in, or include amounts that are excluded from, the composition of the most directly comparable financial measure disclosed in the primary financial statements of the company, (c) are not disclosed in the financial statements of the company and (d) are not a ratio, fraction, percentage or similar representation. Non-IFRS ratios are financial measures disclosed by a company that are in the form of a ratio, fraction, percentage or similar representation that has a non-IFRS financial measure as one or more of its components, and that are not disclosed in the financial statements of the company.
These non-IFRS financial measures and non-IFRS ratios are not standardized financial measures under IFRS and, therefore, are unlikely to be comparable to similar financial measures presented by other companies. Management believes these non-IFRS financial measures and non-IFRS ratios provide transparent and useful supplemental information to help investors evaluate our financial performance, financial condition and liquidity using the same measures as management. These non-IFRS financial measures and non-IFRS ratios should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS.
The following section outlines our non-IFRS financial measures and non-IFRS ratios, their compositions, and why management uses each measure. It also includes reconciliations to the most directly comparable IFRS measures. Except as otherwise described herein, our non-IFRS financial measures and non-IFRS ratios are calculated on a consistent basis from period to period and are adjusted for specific items in each period, as applicable. As additional non-recurring or unusual items arise in the future, we generally exclude these items in our calculations.
Adjusted EBITDA (Consolidated)
Most directly comparable IFRS financial measure: Net earnings (loss).
Definition: Adjusted EBITDA is calculated as net earnings (loss) before finance costs, income taxes, depreciation and amortization, share-based compensation and certain foreign exchange gain/loss (net of related derivatives). We also adjust this measure for the following other income and expenses that are excluded when management evaluates the performance of our day-to-day operations: integration and restructuring related costs, impairment or reversal of impairment of assets, COVID-19 related expenses, gain or loss on disposal of certain businesses and investments, and IFRS adoption transition adjustments.
Why we use the measure and why it is useful to investors: It is not impacted by long-term investment and financing decisions, but rather focuses on the performance of our day-to-day operations. It provides a measure of our ability to service debt and to meet other payment obligations, and as a component of employee remuneration calculations.
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||
| (millions of US dollars) |
2022 | 2021 | 2022 | 2021 | ||||||||||||
| Net earnings |
1,583 | 726 | 6,569 | 1,972 | ||||||||||||
| Finance costs |
136 | 122 | 375 | 367 | ||||||||||||
| Income tax expense |
487 | 209 | 2,206 | 615 | ||||||||||||
| Depreciation and amortization |
526 | 489 | 1,492 | 1,454 | ||||||||||||
| EBITDA 1 |
2,732 | 1,546 | 10,642 | 4,408 | ||||||||||||
| Share-based compensation expense |
39 | 64 | 122 | 125 | ||||||||||||
| Foreign exchange loss, net of related derivatives |
11 | 1 | 67 | 1 | ||||||||||||
| Integration and restructuring related costs |
15 | 8 | 35 | 47 | ||||||||||||
| (Reversal) impairment of assets |
(330 | ) | 7 | (780 | ) | 12 | ||||||||||
| COVID-19 related expenses 2 |
- | 16 | 8 | 34 | ||||||||||||
| Gain on disposal of investment |
- | - | (19 | ) | - | |||||||||||
| Cloud computing transition adjustment 3 |
- | - | - | 36 | ||||||||||||
| Adjusted EBITDA |
2,467 | 1,642 | 10,075 | 4,663 | ||||||||||||
| 1 EBITDA is calculated as net earnings before finance costs, income taxes, and depreciation and amortization. 2 COVID-19 related expenses primarily consist of increased cleaning and sanitization costs, the purchase of personal protective equipment, discretionary supplemental employee costs, and costs related to construction delays from access limitations and other government restrictions. 3 Cloud computing transition adjustment relates to cloud computing costs in prior years that no longer qualify for capitalization based on an agenda decision issued by the IFRS Interpretations Committee in April 2021. |
| |||||||||||||||
21
Adjusted Net Earnings and Adjusted Net Earnings Per Share
Most directly comparable IFRS financial measure: Net earnings (loss) and net earnings (loss) per share.
Definition: Adjusted net earnings and related per share information are calculated as net earnings (loss) before share-based compensation and certain foreign exchange gain/loss (net of related derivatives), net of tax. We also adjust this measure for the following other income and expenses (net of tax) that are excluded when management evaluates the performance of our day-to-day operations: certain integration and restructuring related costs, impairment or reversal of impairment of assets, COVID-19 related expenses (including those recorded under finance costs), gain or loss on disposal of certain businesses and investments, IFRS adoption transition adjustments, gain/loss on early extinguishment of debt or on settlement of derivatives due to discontinuance of hedge accounting. In 2022, we amended our calculation of adjusted net earnings to adjust for a gain on settlement of a derivative due to discontinued hedge accounting. There was no similar gain or loss in the comparative period. We generally apply the annual forecasted effective tax rate to our adjustments during the year and, at year-end, we apply the actual effective tax rate. If the effective tax rate is significantly different from our forecasted effective tax rate due to adjustments or discrete tax impacts, we apply a tax rate that excludes those items. For material adjustments, we apply a tax rate specific to the adjustment.
Why we use the measure and why it is useful to investors: Focuses on the performance of our day-to-day operations and is used as a component of employee remuneration calculations.
| Three Months Ended September 30, 2022 |
Nine Months Ended September 30, 2022 |
|||||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) |
|
Increases (Decreases) |
|
Post-Tax | |
Per Diluted Share |
|
|
Increases (Decreases) |
|
Post-Tax | |
Per Diluted Share |
| ||||||||||
| Net earnings attributable to equity holders of Nutrien |
1,577 | 2.94 | 6,548 | 11.96 | ||||||||||||||||||||
| Adjustments: |
||||||||||||||||||||||||
| Share-based compensation expense |
39 | 30 | 0.06 | 122 | 91 | 0.17 | ||||||||||||||||||
| Foreign exchange loss, net of related derivatives |
11 | 8 | 0.01 | 67 | 50 | 0.09 | ||||||||||||||||||
| Integration and restructuring related costs |
15 | 11 | 0.02 | 35 | 26 | 0.05 | ||||||||||||||||||
| Impairment reversal of assets |
(330 | ) | (265 | ) | (0.49 | ) | (780 | ) | (619 | ) | (1.13 | ) | ||||||||||||
| COVID-19 related expenses |
- | - | - | 8 | 6 | 0.01 | ||||||||||||||||||
| Gain on disposal of investment |
- | - | - | (19 | ) | (14 | ) | (0.03 | ) | |||||||||||||||
| Gain on settlement of discontinued hedge accounting derivative |
(18 | ) | (14 | ) | (0.03 | ) | (18 | ) | (13 | ) | (0.02 | ) | ||||||||||||
| Adjusted net earnings |
1,347 | 2.51 | 6,075 | 11.10 | ||||||||||||||||||||
| Three Months Ended September 30, 2021 |
Nine Months Ended September 30, 2021 |
|||||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) |
|
Increases (Decreases) |
|
Post-Tax | |
Per Diluted Share |
|
|
Increases (Decreases) |
|
Post-Tax | |
Per Diluted Share |
| ||||||||||
| Net earnings attributable to equity holders of Nutrien |
717 | 1.25 | 1,952 | 3.41 | ||||||||||||||||||||
| Adjustments: |
||||||||||||||||||||||||
| Share-based compensation expense |
64 | 48 | 0.09 | 125 | 94 | 0.16 | ||||||||||||||||||
| Foreign exchange loss, net of related derivatives |
1 | 1 | - | 1 | 1 | - | ||||||||||||||||||
| Integration and restructuring related costs |
8 | 6 | 0.01 | 47 | 35 | 0.06 | ||||||||||||||||||
| Impairment of assets |
7 | 5 | 0.01 | 12 | 9 | 0.02 | ||||||||||||||||||
| COVID-19 related expenses |
16 | 12 | 0.02 | 34 | 26 | 0.05 | ||||||||||||||||||
| Cloud computing transition adjustment |
- | - | - | 36 | 27 | 0.05 | ||||||||||||||||||
| Adjusted net earnings |
789 | 1.38 | 2,144 | 3.75 | ||||||||||||||||||||
22
Adjusted EBITDA (Consolidated) and Adjusted Net Earnings Per Share Guidance
Adjusted EBITDA and adjusted net earnings per share guidance are forward-looking non-IFRS financial measures. We do not provide a reconciliation of such forward-looking measures to the most directly comparable financial measures calculated and presented in accordance with IFRS because a meaningful or accurate calculation of reconciling items and the information is not available without unreasonable effort due to unknown variables, including the timing and amount of certain reconciling items, and the uncertainty related to future results. These unknown variables may include unpredictable transactions of significant value that may be inherently difficult to determine without unreasonable efforts. The probable significance of such unavailable information, which could be material to future results, cannot be addressed. Guidance for adjusted EBITDA and adjusted net earnings per share excludes certain items such as, but not limited to, the impacts of share-based compensation, certain foreign exchange gain/loss (net of related derivatives), integration and restructuring related costs, impairment or reversal of impairment of assets, COVID-19 related expenses (including those recorded under finance costs), gain or loss on disposal of certain businesses and investments, IFRS adoption transition adjustments, and gain/loss on early extinguishment of debt or on settlement of derivatives due to discontinuance of hedge accounting.
Free Cash Flow and Free Cash Flow Including Changes in Non-Cash Operating Working Capital
Most directly comparable IFRS financial measure: Cash provided by (used in) operating activities.
Definition: Free cash flow is calculated as cash provided by (used in) operating activities less sustaining capital expenditures and before changes in non-cash operating working capital. Free cash flow including non-cash operating working capital is calculated as cash provided by operating activities less sustaining capital expenditures.
Why we use the measure and why it is useful to investors: For evaluation of liquidity and financial strength. These are also useful as indicators of our ability to service debt, meet other payment obligations and make strategic investments. These do not represent residual cash flow available for discretionary expenditures.
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||
| (millions of US dollars) |
2022 | 2021 | 2022 | 2021 | ||||||||||||||||
| Cash provided by (used in) operating activities |
878 | (1,565 | ) | 3,374 | 249 | |||||||||||||||
| Sustaining capital expenditures |
(428 | ) | (325 | ) | (878 | ) | (793 | ) | ||||||||||||
| Free cash flow including changes in non-cash operating working capital |
450 | (1,890 | ) | 2,496 | (544 | ) | ||||||||||||||
| Changes in non-cash operating working capital |
(1,093 | ) | (2,752 | ) | (4,274 | ) | (3,295 | ) | ||||||||||||
| Free cash flow |
1,543 | 862 | 6,770 | 2,751 | ||||||||||||||||
Gross Margin Excluding Depreciation and Amortization Per Tonne - Manufactured
Most directly comparable IFRS financial measure: Gross margin.
Definition: Gross margin per tonne less depreciation and amortization per tonne for manufactured products. Reconciliations are provided in the “Segment Results” section.
Why we use the measure and why it is useful to investors: Focuses on the performance of our day-to-day operations, which excludes the effects of items that primarily reflect the impact of long-term investment and financing decisions.
23
Potash Controllable Cash Cost of Product Manufactured (“COPM”) Per Tonne
Most directly comparable IFRS financial measure: Cost of goods sold (“COGS”) for the Potash segment.
Definition: Total Potash COGS excluding depreciation and amortization expense included in COPM, royalties, natural gas costs and carbon taxes, change in inventory, and other adjustments, divided by potash production tonnes.
Why we use the measure and why it is useful to investors: To assess operational performance. In 2022, we replaced Potash cash COPM with this new financial measure. Potash controllable cash COPM excludes the effects of production from other periods and the impacts of our long-term investment decisions. Potash controllable cash COPM also excludes royalties and natural gas costs and carbon taxes, which management does not consider controllable, as they are primarily driven by regulatory and market conditions.
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||
| Total COGS – Potash |
386 | 372 | 1,090 | 980 | ||||||||||||||||
| Change in inventory |
(52 | ) | (58 | ) | 20 | (42 | ) | |||||||||||||
| Other adjustments 1 |
(5 | ) | (1 | ) | (29 | ) | (7 | ) | ||||||||||||
| COPM |
329 | 313 | 1,081 | 931 | ||||||||||||||||
| Depreciation and amortization in COPM |
(84 | ) | (101 | ) | (317 | ) | (315 | ) | ||||||||||||
| Royalties in COPM |
(42 | ) | (24 | ) | (150 | ) | (60 | ) | ||||||||||||
| Natural gas costs and carbon taxes in COPM |
(9 | ) | (11 | ) | (45 | ) | (34 | ) | ||||||||||||
| Controllable cash COPM |
194 | 177 | 569 | 522 | ||||||||||||||||
| Production tonnes (tonnes – thousands) |
2,742 | 3,199 | 10,066 | 10,149 | ||||||||||||||||
| Potash controllable cash COPM per tonne |
70 | 55 | 56 | 51 | ||||||||||||||||
| 1 Other adjustments include unallocated production overhead that is recognized as part of cost of goods sold but is not included in the measurement of inventory and changes in inventory balances. |
| |||||||||||||||||||
Ammonia Controllable Cash COPM Per Tonne
Most directly comparable IFRS financial measure: Total manufactured COGS for the Nitrogen segment.
Definition: Total Nitrogen COGS excluding depreciation and amortization expense included in COGS, cash COGS for products other than ammonia, other adjustments, and natural gas and steam costs, divided by net ammonia production tonnes.
Why we use the measure and why it is useful to investors: To assess operational performance. Ammonia controllable cash COPM excludes the effects of production from other periods, the costs of natural gas and steam, and long-term investment decisions, supporting a focus on the performance of our day-to-day operations.
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||
| (millions of US dollars, except as otherwise noted) |
2022 | 2021 | 2022 | 2021 | ||||||||||||||||
| Total Manufactured COGS – Nitrogen |
872 | 591 | 2,351 | 1,628 | ||||||||||||||||
| Total Other COGS – Nitrogen |
235 | 104 | 808 | 440 | ||||||||||||||||
| Total COGS – Nitrogen |
1,107 | 695 | 3,159 | 2,068 | ||||||||||||||||
| Depreciation and amortization in COGS |
(117 | ) | (105 | ) | (334 | ) | (347 | ) | ||||||||||||
| Cash COGS for products other than ammonia |
(640 | ) | (380 | ) | (1,912 | ) | (1,221 | ) | ||||||||||||
| Ammonia |
||||||||||||||||||||
| Total cash COGS before other adjustments |
350 | 210 | 913 | 500 | ||||||||||||||||
| Other adjustments 1 |
(31 | ) | (36 | ) | (145 | ) | (66 | ) | ||||||||||||
| Total cash COPM |
319 | 174 | 768 | 434 | ||||||||||||||||
| Natural gas and steam costs |
(267 | ) | (137 | ) | (643 | ) | (329 | ) | ||||||||||||
| Controllable cash COPM |
52 | 37 | 125 | 105 | ||||||||||||||||
| Production tonnes (net tonnes 2 – thousands) |
819 | 706 | 2,099 | 2,011 | ||||||||||||||||
| Ammonia controllable cash COPM per tonne |
62 | 53 | 59 | 52 | ||||||||||||||||
1 Other adjustments include unallocated production overhead that is recognized as part of cost of goods sold but is not included in the measurement of inventory and changes in inventory balances.
2 Ammonia tonnes available for sale, as not upgraded to other Nitrogen products.
24
Retail Adjusted Average Working Capital to Sales and Retail Adjusted Average Working Capital to Sales Excluding Nutrien Financial
Definition: Retail adjusted average working capital divided by Retail adjusted sales for the last four rolling quarters. We exclude in our calculations the sales and working capital of certain acquisitions during the first year following the acquisition. We also look at this metric excluding Nutrien Financial revenue and working capital.
Why we use the measure and why it is useful to investors: To evaluate operational efficiency. A lower or higher percentage represents increased or decreased efficiency, respectively. The metric excluding Nutrien Financial shows the impact that the working capital of Nutrien Financial has on the ratio.
| Rolling four quarters ended September 30, 2022 | ||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | Q4 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Average/Total | |||||||||||||||
| Current assets |
9,924 | 12,392 | 12,487 | 11,262 | ||||||||||||||||
| Current liabilities |
(7,828 | ) | (9,223 | ) | (9,177 | ) | (5,889 | ) | ||||||||||||
| Working capital |
2,096 | 3,169 | 3,310 | 5,373 | 3,487 | |||||||||||||||
| Working capital from certain recent acquisitions |
- | - | - | - | ||||||||||||||||
| Adjusted working capital |
2,096 | 3,169 | 3,310 | 5,373 | 3,487 | |||||||||||||||
| Nutrien Financial working capital |
(2,150 | ) | (2,274 | ) | (4,404 | ) | (3,898 | ) | ||||||||||||
| Adjusted working capital excluding Nutrien Financial |
(54 | ) | 895 | (1,094 | ) | 1,475 | 306 | |||||||||||||
| Sales |
3,878 | 3,861 | 9,422 | 3,980 | ||||||||||||||||
| Sales from certain recent acquisitions |
- | - | - | - | ||||||||||||||||
| Adjusted sales |
3,878 | 3,861 | 9,422 | 3,980 | 21,141 | |||||||||||||||
| Nutrien Financial revenue |
(51 | ) | (49 | ) | (91 | ) | (65 | ) | ||||||||||||
| Adjusted sales excluding Nutrien Financial |
3,827 | 3,812 | 9,331 | 3,915 | 20,885 | |||||||||||||||
| Adjusted average working capital to sales (%) |
16 | |||||||||||||||||||
| Adjusted average working capital to sales excluding Nutrien Financial (%) |
|
1 | ||||||||||||||||||
| Rolling four quarters ended September 30, 2021 | ||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | Q4 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Average/Total | |||||||||||||||
| Current assets |
8,013 | 9,160 | 9,300 | 8,945 | ||||||||||||||||
| Current liabilities |
(6,856 | ) | (7,530 | ) | (7,952 | ) | (5,062 | ) | ||||||||||||
| Working capital |
1,157 | 1,630 | 1,348 | 3,883 | 2,005 | |||||||||||||||
| Working capital from certain recent acquisitions |
- | - | - | - | ||||||||||||||||
| Adjusted working capital |
1,157 | 1,630 | 1,348 | 3,883 | 2,005 | |||||||||||||||
| Nutrien Financial working capital |
(1,392 | ) | (1,221 | ) | (3,072 | ) | (2,820 | ) | ||||||||||||
| Adjusted working capital excluding Nutrien Financial |
(235 | ) | 409 | (1,724 | ) | 1,063 | (122) | |||||||||||||
| Sales |
2,618 | 2,972 | 7,537 | 3,347 | ||||||||||||||||
| Sales from certain recent acquisitions |
- | - | - | - | ||||||||||||||||
| Adjusted sales |
2,618 | 2,972 | 7,537 | 3,347 | 16,474 | |||||||||||||||
| Nutrien Financial revenue |
(37 | ) | (25 | ) | (59 | ) | (54 | ) | ||||||||||||
| Adjusted sales excluding Nutrien Financial |
2,581 | 2,947 | 7,478 | 3,293 | 16,299 | |||||||||||||||
| Adjusted average working capital to sales (%) |
12 | |||||||||||||||||||
| Adjusted average working capital to sales excluding Nutrien Financial (%) |
|
(1) | ||||||||||||||||||
25
Nutrien Financial Adjusted Net Interest Margin
Definition: Nutrien Financial revenue less deemed interest expense divided by average Nutrien Financial receivables outstanding for the last four rolling quarters.
Why we use the measure and why it is useful to investors: Used by credit rating agencies and other users to evaluate financial performance of Nutrien Financial.
| Rolling four quarters ended September 30, 2022 | ||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | Q4 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Total/Average | |||||||||||||||
| Nutrien Financial revenue |
51 | 49 | 91 | 65 | ||||||||||||||||
| Deemed interest expense 1 |
(12 | ) | (6 | ) | (12 | ) | (12 | ) | ||||||||||||
| Net interest |
39 | 43 | 79 | 53 | 214 | |||||||||||||||
| Average Nutrien Financial receivables |
2,150 | 2,274 | 4,404 | 3,898 | 3,182 | |||||||||||||||
| Nutrien Financial adjusted net interest margin (%) |
6.7 | |||||||||||||||||||
| 1 Average borrowing rate applied to the notional debt required to fund the portfolio of receivables from customers monitored and serviced by Nutrien Financial.
|
| |||||||||||||||||||
| Rolling four quarters ended September 30, 2021 | ||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | Q4 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Total/Average | |||||||||||||||
| Nutrien Financial revenue |
37 | 25 | 59 | 54 | ||||||||||||||||
| Deemed interest expense 1 |
(14 | ) | (6 | ) | (8 | ) | (10 | ) | ||||||||||||
| Net interest |
23 | 19 | 51 | 44 | 137 | |||||||||||||||
| Average Nutrien Financial receivables |
1,392 | 1,221 | 3,072 | 2,820 | 2,126 | |||||||||||||||
| Nutrien Financial adjusted net interest margin (%) |
6.4 | |||||||||||||||||||
| 1 Average borrowing rate applied to the notional debt required to fund the portfolio of receivables from customers monitored and serviced by Nutrien Financial. |
| |||||||||||||||||||
26
Retail Cash Operating Coverage Ratio
Definition: Retail selling, general and administrative, and other expenses, excluding depreciation and amortization expense, divided by Retail gross margin excluding depreciation and amortization expense in cost of goods sold, for the last four rolling quarters.
Why we use the measure and why it is useful to investors: To understand the costs and underlying economics of our Retail operations and to assess our Retail operating performance and ability to generate free cash flow.
| Rolling four quarters ended September 30, 2022 | ||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | Q4 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Total | |||||||||||||||
| Selling expenses |
848 | 722 | 1,013 | 821 | 3,404 | |||||||||||||||
| General and administrative expenses |
43 | 45 | 54 | 50 | 192 | |||||||||||||||
| Other expenses (income) |
20 | (12 | ) | 21 | 19 | 48 | ||||||||||||||
| Operating expenses |
911 | 755 | 1,088 | 890 | 3,644 | |||||||||||||||
| Depreciation and amortization in operating expenses |
(173 | ) | (167 | ) | (171 | ) | (204 | ) | (715) | |||||||||||
| Operating expenses excluding depreciation and amortization |
738 | 588 | 917 | 686 | 2,929 | |||||||||||||||
| Gross margin |
1,173 | 845 | 2,340 | 917 | 5,275 | |||||||||||||||
| Depreciation and amortization in cost of goods sold |
5 | 2 | 4 | 2 | 13 | |||||||||||||||
| Gross margin excluding depreciation and amortization |
1,178 | 847 | 2,344 | 919 | 5,288 | |||||||||||||||
| Cash operating coverage ratio (%) |
55 | |||||||||||||||||||
|
Rolling four quarters ended September 30, 2021 |
||||||||||||||||||||
| (millions of US dollars, except as otherwise noted) | Q4 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Total | |||||||||||||||
| Selling expenses |
727 | 667 | 863 | 746 | 3,003 | |||||||||||||||
| General and administrative expenses |
33 | 39 | 41 | 45 | 158 | |||||||||||||||
| Other expenses (income) |
8 | 15 | 34 | 17 | 74 | |||||||||||||||
| Operating expenses |
768 | 721 | 938 | 808 | 3,235 | |||||||||||||||
| Depreciation and amortization in operating expenses |
(177 | ) | (175 | ) | (166 | ) | (180 | ) | (698) | |||||||||||
| Operating expenses excluding depreciation and amortization |
591 | 546 | 772 | 628 | 2,537 | |||||||||||||||
| Gross margin |
885 | 652 | 1,858 | 917 | 4,312 | |||||||||||||||
| Depreciation and amortization in cost of goods sold |
3 | 2 | 3 | 2 | 10 | |||||||||||||||
| Gross margin excluding depreciation and amortization |
888 | 654 | 1,861 | 919 | 4,322 | |||||||||||||||
| Cash operating coverage ratio (%) |
59 | |||||||||||||||||||
Appendix C – Other Financial Measures
Supplementary Financial Measures
Supplementary financial measures are financial measures disclosed by a company that (a) are, or are intended to be, disclosed on a periodic basis to depict the historical or expected future financial performance, financial position or cash flow of a company, (b) are not disclosed in the financial statements of the company, (c) are not non-IFRS financial measures, and (d) are not non-IFRS ratios.
The following section provides an explanation of the composition of those supplementary financial measures if not previously provided.
Retail adjusted EBITDA margin: Retail adjusted EBITDA divided by Retail sales for the last four rolling quarters.
Sustaining capital expenditures: Represents capital expenditures that are required to sustain operations at existing levels and include major repairs and maintenance, and plant turnarounds.
Retail adjusted EBITDA per US selling location: Calculated as total Retail US adjusted EBITDA for the last four rolling quarters, representing the organic EBITDA component, which excludes acquisitions in those quarters, divided by the number of US locations that have generated sales in the last four rolling quarters, adjusted for acquired locations in those quarters.
27
Exhibit 99.3
NUTRIEN LTD.
INTERIM FINANCIAL STATEMENTS AND NOTES
AS AT AND FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2022
| Unaudited | In millions of US dollars except as otherwise noted |
Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Earnings
| Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||||
| Note | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| SALES |
2 | 8,188 | 6,024 | 30,351 | 20,445 | |||||||||||||
| Freight, transportation and distribution |
204 | 220 | 628 | 653 | ||||||||||||||
| Cost of goods sold |
4,722 | 3,639 | 17,205 | 13,589 | ||||||||||||||
| GROSS MARGIN |
3,262 | 2,165 | 12,518 | 6,203 | ||||||||||||||
| Selling expenses |
826 | 749 | 2,570 | 2,287 | ||||||||||||||
| General and administrative expenses |
137 | 110 | 403 | 329 | ||||||||||||||
| Provincial mining taxes |
348 | 128 | 959 | 293 | ||||||||||||||
| Share-based compensation expense |
39 | 64 | 122 | 125 | ||||||||||||||
| (Reversal) impairment of assets |
3 | (330 | ) | 7 | (780 | ) | 12 | |||||||||||
| Other expenses |
4 | 36 | 50 | 94 | 203 | |||||||||||||
| EARNINGS BEFORE FINANCE COSTS AND INCOME TAXES |
2,206 | 1,057 | 9,150 | 2,954 | ||||||||||||||
| Finance costs |
136 | 122 | 375 | 367 | ||||||||||||||
| EARNINGS BEFORE INCOME TAXES |
2,070 | 935 | 8,775 | 2,587 | ||||||||||||||
| Income tax expense |
5 | 487 | 209 | 2,206 | 615 | |||||||||||||
| NET EARNINGS |
1,583 | 726 | 6,569 | 1,972 | ||||||||||||||
| Attributable to |
||||||||||||||||||
| Equity holders of Nutrien |
1,577 | 717 | 6,548 | 1,952 | ||||||||||||||
| Non-controlling interest |
6 | 9 | 21 | 20 | ||||||||||||||
| NET EARNINGS |
1,583 | 726 | 6,569 | 1,972 | ||||||||||||||
| NET EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF NUTRIEN (“EPS”) |
| |||||||||||||||||
| Basic |
2.95 | 1.26 | 12.00 | 3.42 | ||||||||||||||
| Diluted |
2.94 | 1.25 | 11.96 | 3.41 | ||||||||||||||
| Weighted average shares outstanding for basic EPS |
534,839,000 | 570,627,000 | 545,776,000 | 570,216,000 | ||||||||||||||
| Weighted average shares outstanding for diluted EPS |
536,164,000 | 572,224,000 | 547,449,000 | 571,735,000 | ||||||||||||||
| Condensed Consolidated Statements of Comprehensive Income |
| |||||||||||||||||
| Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||||
| (Net of related income taxes) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| NET EARNINGS |
1,583 | 726 | 6,569 | 1,972 | ||||||||||||||
| Other comprehensive (loss) income |
||||||||||||||||||
| Items that will not be reclassified to net earnings: |
||||||||||||||||||
| Net actuarial gain on defined benefit plans |
60 | - | 61 | - | ||||||||||||||
| Net fair value (loss) gain on investments |
(54 | ) | 46 | (61 | ) | 116 | ||||||||||||
| Items that have been or may be subsequently reclassified to net earnings: |
||||||||||||||||||
| Loss on currency translation of foreign operations |
(191 | ) | (124 | ) | (272 | ) | (129 | ) | ||||||||||
| Other |
(45 | ) | (1 | ) | (24 | ) | 19 | |||||||||||
| OTHER COMPREHENSIVE (LOSS) INCOME |
(230 | ) | (79 | ) | (296 | ) | 6 | |||||||||||
| COMPREHENSIVE INCOME |
1,353 | 647 | 6,273 | 1,978 | ||||||||||||||
| Attributable to |
||||||||||||||||||
| Equity holders of Nutrien |
1,348 | 638 | 6,254 | 1,959 | ||||||||||||||
| Non-controlling interest |
5 | 9 | 19 | 19 | ||||||||||||||
| COMPREHENSIVE INCOME |
1,353 | 647 | 6,273 | 1,978 | ||||||||||||||
(See Notes to the Condensed Consolidated Financial Statements)
28
| Unaudited | In millions of US dollars except as otherwise noted |
Condensed Consolidated Statements of Cash Flows
| Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||||
| Note | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| Note 1 | Note 1 | |||||||||||||||||
| OPERATING ACTIVITIES |
||||||||||||||||||
| Net earnings |
1,583 | 726 | 6,569 | 1,972 | ||||||||||||||
| Adjustments for: |
||||||||||||||||||
| Depreciation and amortization |
526 | 489 | 1,492 | 1,454 | ||||||||||||||
| Share-based compensation expense |
39 | 64 | 122 | 125 | ||||||||||||||
| (Reversal) impairment of assets |
3 | (330 | ) | 7 | (780 | ) | 12 | |||||||||||
| Provision for (recovery of) deferred income tax |
160 | (87 | ) | 152 | (97 | ) | ||||||||||||
| Gain on disposal of investment |
4 | - | - | (19 | ) | - | ||||||||||||
| Cloud computing transition adjustment |
4 | - | - | - | 36 | |||||||||||||
| Other long-term assets, liabilities and miscellaneous |
(7 | ) | (12 | ) | 112 | 42 | ||||||||||||
| Cash from operations before working capital changes |
1,971 | 1,187 | 7,648 | 3,544 | ||||||||||||||
| Changes in non-cash operating working capital: |
||||||||||||||||||
| Receivables |
1,240 | (266 | ) | (3,602 | ) | (3,101 | ) | |||||||||||
| Inventories |
517 | 130 | (344 | ) | 193 | |||||||||||||
| Prepaid expenses and other current assets |
(44 | ) | (133 | ) | 1,018 | 865 | ||||||||||||
| Payables and accrued charges |
(2,806 | ) | (2,483 | ) | (1,346 | ) | (1,252 | ) | ||||||||||
| CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
878 | (1,565 | ) | 3,374 | 249 | |||||||||||||
| INVESTING ACTIVITIES |
||||||||||||||||||
| Capital expenditures 1 |
(636 | ) | (492 | ) | (1,464 | ) | (1,238 | ) | ||||||||||
| Business acquisitions, net of cash acquired |
(10 | ) | (30 | ) | (78 | ) | (70 | ) | ||||||||||
| Other |
(90 | ) | (19 | ) | (60 | ) | (57 | ) | ||||||||||
| Net changes in non-cash working capital |
31 | 18 | (77 | ) | 23 | |||||||||||||
| CASH USED IN INVESTING ACTIVITIES |
(705 | ) | (523 | ) | (1,679 | ) | (1,342 | ) | ||||||||||
| FINANCING ACTIVITIES |
||||||||||||||||||
| Transaction costs related to debt |
(3 | ) | - | (3 | ) | (7 | ) | |||||||||||
| Proceeds from short-term debt, net |
2,017 | 1,040 | 2,867 | 1,037 | ||||||||||||||
| Proceeds from long-term debt |
- | 81 | 41 | 89 | ||||||||||||||
| Repayment of long-term debt |
(22 | ) | - | (50 | ) | (5 | ) | |||||||||||
| Repayment of principal portion of lease liabilities |
(83 | ) | (78 | ) | (256 | ) | (242 | ) | ||||||||||
| Dividends paid to Nutrien’s shareholders |
8 | (259 | ) | (261 | ) | (780 | ) | (779 | ) | |||||||||
| Repurchase of common shares |
8 | (1,700 | ) | (148 | ) | (3,306 | ) | (150 | ) | |||||||||
| Issuance of common shares |
4 | 125 | 168 | 188 | ||||||||||||||
| Other |
17 | (2 | ) | - | (14 | ) | ||||||||||||
| CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES |
(29 | ) | 757 | (1,319 | ) | 117 | ||||||||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(32 | ) | (20 | ) | (52 | ) | (35 | ) | ||||||||||
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
112 | (1,351 | ) | 324 | (1,011 | ) | ||||||||||||
| CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD |
711 | 1,794 | 499 | 1,454 | ||||||||||||||
| CASH AND CASH EQUIVALENTS – END OF PERIOD |
823 | 443 | 823 | 443 | ||||||||||||||
| Cash and cash equivalents comprised of: |
||||||||||||||||||
| Cash |
428 | 315 | 428 | 315 | ||||||||||||||
| Short-term investments |
395 | 128 | 395 | 128 | ||||||||||||||
| 823 | 443 | 823 | 443 | |||||||||||||||
| SUPPLEMENTAL CASH FLOWS INFORMATION |
||||||||||||||||||
| Interest paid |
80 | 81 | 280 | 319 | ||||||||||||||
| Income taxes paid |
318 | 212 | 1,503 | 356 | ||||||||||||||
| Total cash outflow for leases |
111 | 91 | 339 | 299 | ||||||||||||||
1 Includes additions to property, plant and equipment and intangible assets for the three months ended September 30, 2022 of $584 and $52 (2021 – $463 and $29), respectively, and for the nine months ended September 30, 2022 of $1,317 and $147 (2021 – $1,171 and $67), respectively.
(See Notes to the Condensed Consolidated Financial Statements)
29
| Unaudited | In millions of US dollars except as otherwise noted |
Condensed Consolidated Statements of Changes in Shareholders’ Equity
| Accumulated Other Comprehensive (Loss) Income (“AOCI”) |
||||||||||||||||||||||||||||||||||||||||
| Number of Common Shares |
Share Capital |
Contributed Surplus |
Loss on Currency Translation of Foreign Operations |
Other | Total AOCI |
Retained Earnings |
Equity Holders of Nutrien |
Non- Controlling Interest |
Total Equity |
|||||||||||||||||||||||||||||||
| BALANCE – DECEMBER 31, 2020 |
569,260,406 | 15,673 | 205 | (62 | ) | (57 | ) | (119 | ) | 6,606 | 22,365 | 38 | 22,403 | |||||||||||||||||||||||||||
| Net earnings |
- | - | - | - | - | - | 1,952 | 1,952 | 20 | 1,972 | ||||||||||||||||||||||||||||||
| Other comprehensive (loss) income |
- | - | - | (128 | ) | 135 | 7 | - | 7 | (1 | ) | 6 | ||||||||||||||||||||||||||||
| Shares repurchased (Note 8) |
(2,460,097 | ) | (68 | ) | (46 | ) | - | - | - | (36 | ) | (150 | ) | - | (150 | ) | ||||||||||||||||||||||||
| Dividends declared |
- | - | - | - | - | - | (786 | ) | (786 | ) | - | (786 | ) | |||||||||||||||||||||||||||
| Non-controlling interest transactions |
- | - | - | - | - | - | (1 | ) | (1 | ) | (14 | ) | (15 | ) | ||||||||||||||||||||||||||
| Effect of share-based compensation including issuance of common shares |
4,166,620 | 213 | (12 | ) | - | - | - | - | 201 | - | 201 | |||||||||||||||||||||||||||||
| Transfer of net gain on cash flow hedges |
- | - | - | - | (10 | ) | (10 | ) | - | (10 | ) | - | (10 | ) | ||||||||||||||||||||||||||
| Share cancellation |
(210,173 | ) | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| BALANCE – SEPTEMBER 30, 2021 |
570,756,756 | 15,818 | 147 | (190 | ) | 68 | (122 | ) | 7,735 | 23,578 | 43 | 23,621 | ||||||||||||||||||||||||||||
| BALANCE – DECEMBER 31, 2021 |
557,492,516 | 15,457 | 149 | (176 | ) | 30 | (146 | ) | 8,192 | 23,652 | 47 | 23,699 | ||||||||||||||||||||||||||||
| Net earnings |
- | - | - | - | - | - | 6,548 | 6,548 | 21 | 6,569 | ||||||||||||||||||||||||||||||
| Other comprehensive loss |
- | - | - | (270 | ) | (24 | ) | (294 | ) | - | (294 | ) | (2 | ) | (296 | ) | ||||||||||||||||||||||||
| Shares repurchased (Note 8) |
(38,387,969 | ) | (1,070 | ) | (23 | ) | - | - | - | (2,241 | ) | (3,334 | ) | - | (3,334 | ) | ||||||||||||||||||||||||
| Dividends declared |
- | - | - | - | - | - | (773 | ) | (773 | ) | - | (773 | ) | |||||||||||||||||||||||||||
| Non-controlling interest transactions |
- | - | - | - | - | - | - | - | (18 | ) | (18 | ) | ||||||||||||||||||||||||||||
| Effect of share-based compensation including issuance of common shares |
3,058,561 | 201 | (19 | ) | - | - | - | - | 182 | - | 182 | |||||||||||||||||||||||||||||
| Transfer of net loss on cash flow hedges |
- | - | - | - | 3 | 3 | - | 3 | - | 3 | ||||||||||||||||||||||||||||||
| Transfer of net actuarial gain on defined benefit plans |
- | - | - | - | (61 | ) | (61 | ) | 61 | - | - | - | ||||||||||||||||||||||||||||
| BALANCE – SEPTEMBER 30, 2022 |
522,163,108 | 14,588 | 107 | (446 | ) | (52 | ) | (498 | ) | 11,787 | 25,984 | 48 | 26,032 | |||||||||||||||||||||||||||
| (See Notes to the Condensed Consolidated Financial Statements) |
| |||||||||||||||||||||||||||||||||||||||
30
| Unaudited | In millions of US dollars except as otherwise noted |
Condensed Consolidated Balance Sheets
| September 30 | December 31 | |||||||||||||||
| As at | Note | 2022 | 2021 | 2021 | ||||||||||||
| ASSETS |
||||||||||||||||
| Current assets |
||||||||||||||||
| Cash and cash equivalents |
823 | 443 | 499 | |||||||||||||
| Receivables |
8,591 | 6,911 | 5,366 | |||||||||||||
| Inventories |
6,545 | 4,674 | 6,328 | |||||||||||||
| Prepaid expenses and other current assets |
737 | 654 | 1,653 | |||||||||||||
| 16,696 | 12,682 | 13,846 | ||||||||||||||
| Non-current assets |
||||||||||||||||
| Property, plant and equipment |
3 | 21,022 | 19,704 | 20,016 | ||||||||||||
| Goodwill |
12,180 | 12,220 | 12,220 | |||||||||||||
| Other intangible assets |
2,217 | 2,349 | 2,340 | |||||||||||||
| Investments |
772 | 682 | 703 | |||||||||||||
| Other assets |
937 | 679 | 829 | |||||||||||||
| TOTAL ASSETS |
53,824 | 48,316 | 49,954 | |||||||||||||
| LIABILITIES |
||||||||||||||||
| Current liabilities |
||||||||||||||||
| Short-term debt |
7 | 4,454 | 1,255 | 1,560 | ||||||||||||
| Current portion of long-term debt |
1,016 | 46 | 545 | |||||||||||||
| Current portion of lease liabilities |
303 | 281 | 286 | |||||||||||||
| Payables and accrued charges |
8,760 | 6,930 | 10,052 | |||||||||||||
| 14,533 | 8,512 | 12,443 | ||||||||||||||
| Non-current liabilities |
||||||||||||||||
| Long-term debt |
7,020 | 10,094 | 7,521 | |||||||||||||
| Lease liabilities |
884 | 896 | 934 | |||||||||||||
| Deferred income tax liabilities |
5 | 3,489 | 3,043 | 3,165 | ||||||||||||
| Pension and other post-retirement benefit liabilities |
337 | 451 | 419 | |||||||||||||
| Asset retirement obligations and accrued environmental costs |
1,320 | 1,523 | 1,566 | |||||||||||||
| Other non-current liabilities |
209 | 176 | 207 | |||||||||||||
| TOTAL LIABILITIES |
27,792 | 24,695 | 26,255 | |||||||||||||
| SHAREHOLDERS’ EQUITY |
||||||||||||||||
| Share capital |
8 | 14,588 | 15,818 | 15,457 | ||||||||||||
| Contributed surplus |
107 | 147 | 149 | |||||||||||||
| Accumulated other comprehensive loss |
(498 | ) | (122 | ) | (146 | ) | ||||||||||
| Retained earnings |
11,787 | 7,735 | 8,192 | |||||||||||||
| Equity holders of Nutrien |
25,984 | 23,578 | 23,652 | |||||||||||||
| Non-controlling interest |
48 | 43 | 47 | |||||||||||||
| TOTAL SHAREHOLDERS’ EQUITY |
26,032 | 23,621 | 23,699 | |||||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
53,824 | 48,316 | 49,954 | |||||||||||||
(See Notes to the Condensed Consolidated Financial Statements)
31
| Unaudited | In millions of US dollars except as otherwise noted |
Notes to the Condensed Consolidated Financial Statements
As at and for the Three and Nine Months Ended September 30, 2022
NOTE 1 BASIS OF PRESENTATION
Nutrien Ltd. (collectively with its subsidiaries, known as “Nutrien”, “we”, “us”, “our” or “the Company”) is the world’s largest provider of crop inputs and services. Nutrien plays a critical role in helping growers around the globe increase food production in a sustainable manner.
These unaudited interim condensed consolidated financial statements (“interim financial statements”) are based on International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and have been prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting”. The accounting policies and methods of computation used in preparing these interim financial statements are materially consistent with those used in the preparation of our 2021 annual consolidated financial statements. These interim financial statements include the accounts of Nutrien and its subsidiaries; however, they do not include all disclosures normally provided in annual consolidated financial statements and should be read in conjunction with our 2021 annual audited consolidated financial statements.
Certain immaterial 2021 figures have been reclassified in the condensed consolidated statements of cash flows and segment note.
In management’s opinion, the interim financial statements include all adjustments necessary to fairly present such information in all material respects. Interim results are not necessarily indicative of the results expected for any other interim period or the fiscal year.
These interim financial statements were authorized by the audit committee of the Board of Directors for issue on November 2, 2022.
NOTE 2 SEGMENT INFORMATION
The Company has four reportable operating segments: Nutrien Ag Solutions (“Retail”), Potash, Nitrogen and Phosphate. The Retail segment distributes crop nutrients, crop protection products, seed and merchandise, and it provides services directly to growers through a network of farm centers in North America, South America and Australia. The Potash, Nitrogen and Phosphate segments are differentiated by the chemical nutrient contained in the products that each produce.
32
| Unaudited | In millions of US dollars except as otherwise noted |
| Three Months Ended September 30, 2022 | ||||||||||||||||||||||||||||
| Retail | Potash | Nitrogen | Phosphate | Corporate and Others |
Eliminations | Consolidated | ||||||||||||||||||||||
| Sales – third party |
3,967 | 1,968 | 1,666 | 587 | - | - | 8,188 | |||||||||||||||||||||
|
– intersegment |
13 | 84 | 236 | 126 | - | (459 | ) | - | ||||||||||||||||||||
| Sales – total |
3,980 | 2,052 | 1,902 | 713 | - | (459 | ) | 8,188 | ||||||||||||||||||||
| Freight, transportation and distribution |
- | 48 | 131 | 62 | - | (37 | ) | 204 | ||||||||||||||||||||
| Net sales |
3,980 | 2,004 | 1,771 | 651 | - | (422 | ) | 7,984 | ||||||||||||||||||||
| Cost of goods sold |
3,063 | 386 | 1,107 | 537 | - | (371 | ) | 4,722 | ||||||||||||||||||||
| Gross margin |
917 | 1,618 | 664 | 114 | - | (51 | ) | 3,262 | ||||||||||||||||||||
| Selling expenses |
821 | 3 | 7 | 1 | (2 | ) | (4 | ) | 826 | |||||||||||||||||||
| General and administrative expenses |
50 | 2 | 2 | 3 | 80 | - | 137 | |||||||||||||||||||||
| Provincial mining taxes |
- | 348 | - | - | - | - | 348 | |||||||||||||||||||||
| Share-based compensation expense |
- | - | - | - | 39 | - | 39 | |||||||||||||||||||||
| Impairment reversal of assets |
- | - | - | (330 | ) | - | - | (330 | ) | |||||||||||||||||||
| Other expenses (income) |
19 | (1 | ) | (59 | ) | 15 | 59 | 3 | 36 | |||||||||||||||||||
| Earnings (loss) before finance costs and income taxes |
27 | 1,266 | 714 | 425 | (176 | ) | (50 | ) | 2,206 | |||||||||||||||||||
| Depreciation and amortization |
206 | 112 | 141 | 48 | 19 | - | 526 | |||||||||||||||||||||
| EBITDA 1 |
233 | 1,378 | 855 | 473 | (157 | ) | (50 | ) | 2,732 | |||||||||||||||||||
| Integration and restructuring related costs |
2 | - | - | - | 13 | - | 15 | |||||||||||||||||||||
| Share-based compensation expense |
- | - | - | - | 39 | - | 39 | |||||||||||||||||||||
| Impairment reversal of assets |
- | - | - | (330 | ) | - | - | (330 | ) | |||||||||||||||||||
| Foreign exchange loss, net of |
- | - | - | - | 11 | - | 11 | |||||||||||||||||||||
| Adjusted EBITDA |
235 | 1,378 | 855 | 143 | (94 | ) | (50 | ) | 2,467 | |||||||||||||||||||
| Assets – at September 30, 2022 |
23,507 | 14,078 | 11,802 | 2,742 | 2,500 | (805 | ) | 53,824 | ||||||||||||||||||||
| 1 EBITDA is calculated as net earnings (loss) before finance costs, income taxes, and depreciation and amortization. |
| |||||||||||||||||||||||||||
| Three Months Ended September 30, 2021 | ||||||||||||||||||||||||||||
| Retail | Potash | Nitrogen | Phosphate | Corporate and Others |
Eliminations | Consolidated | ||||||||||||||||||||||
| Sales – third party |
3,336 | 1,188 | 1,037 | 463 | - | - | 6,024 | |||||||||||||||||||||
|
– intersegment |
11 | 107 | 162 | 39 | - | (319 | ) | - | ||||||||||||||||||||
| Sales – total |
3,347 | 1,295 | 1,199 | 502 | - | (319 | ) | 6,024 | ||||||||||||||||||||
| Freight, transportation and distribution |
- | 107 | 98 | 54 | - | (39 | ) | 220 | ||||||||||||||||||||
| Net sales |
3,347 | 1,188 | 1,101 | 448 | - | (280 | ) | 5,804 | ||||||||||||||||||||
| Cost of goods sold |
2,430 | 372 | 695 | 340 | - | (198 | ) | 3,639 | ||||||||||||||||||||
| Gross margin |
917 | 816 | 406 | 108 | - | (82 | ) | 2,165 | ||||||||||||||||||||
| Selling expenses |
746 | 3 | 7 | 2 | (9 | ) | - | 749 | ||||||||||||||||||||
| General and administrative expenses |
45 | 1 | 3 | 3 | 58 | - | 110 | |||||||||||||||||||||
| Provincial mining taxes |
- | 128 | - | - | - | - | 128 | |||||||||||||||||||||
| Share-based compensation expense |
- | - | - | - | 64 | - | 64 | |||||||||||||||||||||
| Impairment of assets |
- | 7 | - | - | - | - | 7 | |||||||||||||||||||||
| Other expenses (income) |
17 | 7 | (11 | ) | 7 | 30 | - | 50 | ||||||||||||||||||||
| Earnings (loss) before finance costs and income taxes |
109 | 670 | 407 | 96 | (143 | ) | (82 | ) | 1,057 | |||||||||||||||||||
| Depreciation and amortization |
182 | 131 | 125 | 39 | 12 | - | 489 | |||||||||||||||||||||
| EBITDA |
291 | 801 | 532 | 135 | (131 | ) | (82 | ) | 1,546 | |||||||||||||||||||
| Integration and restructuring related costs |
- | - | - | - | 8 | - | 8 | |||||||||||||||||||||
| Share-based compensation expense |
- | - | - | - | 64 | - | 64 | |||||||||||||||||||||
| Impairment of assets |
- | 7 | - | - | - | - | 7 | |||||||||||||||||||||
| COVID-19 related expenses |
- | - | - | - | 16 | - | 16 | |||||||||||||||||||||
| Foreign exchange loss, net of |
- | - | - | - | 1 | - | 1 | |||||||||||||||||||||
| Adjusted EBITDA |
291 | 808 | 532 | 135 | (42 | ) | (82 | ) | 1,642 | |||||||||||||||||||
| Assets – at December 31, 2021 |
22,387 | 13,148 | 11,093 | 1,699 | 2,266 | (639 | ) | 49,954 | ||||||||||||||||||||
33
| Unaudited | In millions of US dollars except as otherwise noted |
| Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||||||
| Retail | Potash | Nitrogen | Phosphate | Corporate and Others |
Eliminations | Consolidated | ||||||||||||||||||||||
| Sales – third party |
17,177 | 6,345 | 5,078 | 1,751 | - | - | 30,351 | |||||||||||||||||||||
|
– intersegment |
86 | 396 | 1,021 | 303 | - | (1,806 | ) | - | ||||||||||||||||||||
| Sales – total |
17,263 | 6,741 | 6,099 | 2,054 | - | (1,806 | ) | 30,351 | ||||||||||||||||||||
| Freight, transportation and distribution |
- | 219 | 358 | 178 | - | (127 | ) | 628 | ||||||||||||||||||||
| Net sales |
17,263 | 6,522 | 5,741 | 1,876 | - | (1,679 | ) | 29,723 | ||||||||||||||||||||
| Cost of goods sold |
13,161 | 1,090 | 3,159 | 1,399 | - | (1,604 | ) | 17,205 | ||||||||||||||||||||
| Gross margin |
4,102 | 5,432 | 2,582 | 477 | - | (75 | ) | 12,518 | ||||||||||||||||||||
| Selling expenses |
2,556 | 9 | 22 | 5 | (6 | ) | (16 | ) | 2,570 | |||||||||||||||||||
| General and administrative expenses |
149 | 6 | 12 | 9 | 227 | - | 403 | |||||||||||||||||||||
| Provincial mining taxes |
- | 959 | - | - | - | - | 959 | |||||||||||||||||||||
| Share-based compensation expense |
- | - | - | - | 122 | - | 122 | |||||||||||||||||||||
| Impairment reversal of assets |
- | - | - | (780 | ) | - | - | (780 | ) | |||||||||||||||||||
| Other expenses (income) |
28 | 1 | (139 | ) | 27 | 160 | 17 | 94 | ||||||||||||||||||||
| Earnings (loss) before finance costs and income taxes |
1,369 | 4,457 | 2,687 | 1,216 | (503 | ) | (76 | ) | 9,150 | |||||||||||||||||||
| Depreciation and amortization |
550 | 354 | 403 | 130 | 55 | - | 1,492 | |||||||||||||||||||||
| EBITDA |
1,919 | 4,811 | 3,090 | 1,346 | (448 | ) | (76 | ) | 10,642 | |||||||||||||||||||
| Integration and restructuring related costs |
2 | - | - | - | 33 | - | 35 | |||||||||||||||||||||
| Share-based compensation expense |
- | - | - | - | 122 | - | 122 | |||||||||||||||||||||
| Impairment reversal of assets |
- | - | - | (780 | ) | - | - | (780 | ) | |||||||||||||||||||
| COVID-19 related expenses |
- | - | - | - | 8 | - | 8 | |||||||||||||||||||||
| Foreign exchange loss, net of |
- | - | - | - | 67 | - | 67 | |||||||||||||||||||||
| Gain on disposal of investment |
(19 | ) | - | - | - | - | - | (19 | ) | |||||||||||||||||||
| Adjusted EBITDA |
1,902 | 4,811 | 3,090 | 566 | (218 | ) | (76 | ) | 10,075 | |||||||||||||||||||
| Assets – at September 30, 2022 |
23,507 | 14,078 | 11,802 | 2,742 | 2,500 | (805 | ) | 53,824 | ||||||||||||||||||||
| Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||||||
| Retail | Potash | Nitrogen | Phosphate | Corporate and Others |
Eliminations | Consolidated | ||||||||||||||||||||||
| Sales – third party |
13,818 | 2,663 | 2,740 | 1,224 | - | - | 20,445 | |||||||||||||||||||||
|
– intersegment |
38 | 258 | 629 | 171 | - | (1,096 | ) | - | ||||||||||||||||||||
| Sales – total |
13,856 | 2,921 | 3,369 | 1,395 | - | (1,096 | ) | 20,445 | ||||||||||||||||||||
| Freight, transportation and distribution |
- | 305 | 329 | 159 | - | (140 | ) | 653 | ||||||||||||||||||||
| Net sales |
13,856 | 2,616 | 3,040 | 1,236 | - | (956 | ) | 19,792 | ||||||||||||||||||||
| Cost of goods sold |
10,429 | 980 | 2,068 | 978 | - | (866 | ) | 13,589 | ||||||||||||||||||||
| Gross margin |
3,427 | 1,636 | 972 | 258 | - | (90 | ) | 6,203 | ||||||||||||||||||||
| Selling expenses |
2,276 | 8 | 22 | 5 | (24 | ) | - | 2,287 | ||||||||||||||||||||
| General and administrative expenses |
125 | 6 | 8 | 8 | 182 | - | 329 | |||||||||||||||||||||
| Provincial mining taxes |
- | 293 | - | - | - | - | 293 | |||||||||||||||||||||
| Share-based compensation expense |
- | - | - | - | 125 | - | 125 | |||||||||||||||||||||
| Impairment of assets |
- | 7 | 5 | - | - | - | 12 | |||||||||||||||||||||
| Other expenses (income) |
66 | 19 | (36 | ) | 13 | 141 | - | 203 | ||||||||||||||||||||
| Earnings (loss) before finance costs and income taxes |
960 | 1,303 | 973 | 232 | (424 | ) | (90 | ) | 2,954 | |||||||||||||||||||
| Depreciation and amortization |
528 | 371 | 409 | 112 | 34 | - | 1,454 | |||||||||||||||||||||
| EBITDA |
1,488 | 1,674 | 1,382 | 344 | (390 | ) | (90 | ) | 4,408 | |||||||||||||||||||
| Integration and restructuring related costs |
8 | - | - | - | 39 | - | 47 | |||||||||||||||||||||
| Share-based compensation expense |
- | - | - | - | 125 | - | 125 | |||||||||||||||||||||
| Impairment of assets |
- | 7 | 5 | - | - | - | 12 | |||||||||||||||||||||
| COVID-19 related expenses |
- | - | - | - | 34 | - | 34 | |||||||||||||||||||||
| Foreign exchange loss, net of |
- | - | - | - | 1 | - | 1 | |||||||||||||||||||||
| Cloud computing transition adjustment |
1 | 2 | - | - | 33 | - | 36 | |||||||||||||||||||||
| Adjusted EBITDA |
1,497 | 1,683 | 1,387 | 344 | (158 | ) | (90 | ) | 4,663 | |||||||||||||||||||
| Assets – at December 31, 2021 |
22,387 | 13,148 | 11,093 | 1,699 | 2,266 | (639 | ) | 49,954 | ||||||||||||||||||||
34
| Unaudited | In millions of US dollars except as otherwise noted |
Presented below is revenue from contracts with customers disaggregated by product line or geographic location for each reportable segment.
| Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Retail sales by product line |
||||||||||||||||
| Crop nutrients |
1,605 | 1,194 | 7,740 | 5,255 | ||||||||||||
| Crop protection products |
1,716 | 1,469 | 6,086 | 5,220 | ||||||||||||
| Seed |
134 | 140 | 1,861 | 1,819 | ||||||||||||
| Merchandise |
241 | 265 | 755 | 763 | ||||||||||||
| Nutrien Financial |
65 | 54 | 205 | 138 | ||||||||||||
| Services and other 1 |
244 | 252 | 729 | 737 | ||||||||||||
| Nutrien Financial elimination 1,2 |
(25 | ) | (27 | ) | (113 | ) | (76 | ) | ||||||||
| 3,980 | 3,347 | 17,263 | 13,856 | |||||||||||||
| Potash sales by geography |
||||||||||||||||
| Manufactured product |
||||||||||||||||
| North America |
484 | 590 | 2,168 | 1,446 | ||||||||||||
| Offshore 3 |
1,568 | 705 | 4,573 | 1,475 | ||||||||||||
| 2,052 | 1,295 | 6,741 | 2,921 | |||||||||||||
| Nitrogen sales by product line |
||||||||||||||||
| Manufactured product |
||||||||||||||||
| Ammonia |
695 | 401 | 2,072 | 994 | ||||||||||||
| Urea |
422 | 339 | 1,543 | 985 | ||||||||||||
| Solutions, nitrates and sulfates |
512 | 326 | 1,564 | 852 | ||||||||||||
| Other nitrogen and purchased products |
273 | 133 | 920 | 538 | ||||||||||||
| 1,902 | 1,199 | 6,099 | 3,369 | |||||||||||||
| Phosphate sales by product line |
||||||||||||||||
| Manufactured product |
||||||||||||||||
| Fertilizer |
414 | 306 | 1,204 | 836 | ||||||||||||
| Industrial and feed |
206 | 146 | 594 | 405 | ||||||||||||
| Other phosphate and purchased products |
93 | 50 | 256 | 154 | ||||||||||||
| 713 | 502 | 2,054 | 1,395 | |||||||||||||
| 1 | Certain immaterial 2021 figures have been reclassified. |
| 2 | Represents elimination for the interest and service fees charged by Nutrien Financial to Retail branches. |
| 3 | Relates to Canpotex Limited (“Canpotex”) (Note 10) and includes provisional pricing adjustments for the three months ended September 30, 2022 of $(187) (2021 – $109) and the nine months ended September 30, 2022 of $66 (2021 – $160). |
NOTE 3 IMPAIRMENT OF ASSETS
Phosphate Impairment Reversal
In the three months ended September 30, 2022, we continued to revise our near-term pricing forecasts due to continued global export restrictions from major producers and continued our review of our previously impaired Phosphate cash-generating unit (“CGU”), White Springs.
In 2017 and 2020, we recorded a total impairment of assets at our White Springs CGU relating to property, plant and equipment of $250 and $215, respectively. Due to increases in our forecast, the recoverable amount of our White Springs CGU is $770 which is above its carrying amount of $425. As a result, during the three months ended September 30, 2022, we recorded a full impairment reversal, net of depreciation, of $330 in the statement of earnings relating to property, plant and equipment.
35
| Unaudited | In millions of US dollars except as otherwise noted |
During the nine months ended September 30, 2022, we recorded the following impairment reversals:
| CGU | Aurora | White Springs | ||||||
| Segment |
Phosphate | |||||||
| Impairment reversal indicator |
Higher forecasted global prices | |||||||
| Date of impairment reversal |
June 30, 2022 | September 30, 2022 | ||||||
| Pre-tax impairment reversal amount ($) |
450 | 330 | ||||||
| Valuation methodology |
Fair value less costs of disposal (“FVLCD”) a level 3 measurement | Value in use (“VIU”) | ||||||
| Valuation technique |
Five-year DCF1 plus terminal year to end of mine life | DCF1 to end of mine life | ||||||
| Key assumptions |
||||||||
| End of mine life 2 (year) |
2050 | 2030 | ||||||
| Long-term growth rate (%) |
2.0 | n/a | ||||||
| Post-tax discount rate (%) |
10.4 | 12.0 (pre-tax - 15.2) 3 | ||||||
| Forecasted EBITDA 4 ($) |
3,090 | 980 | ||||||
| 1 Discounted Cash Flow. |
||||||||
| 2 Includes proven and probable reserves. |
||||||||
| 3 Discount rate used in the previous measurement was 12.0% (pre-tax – 16.0%). |
|
|||||||
| 4 First five years of the forecast period. |
||||||||
The recoverable amount estimate is most sensitive to the following key assumptions: our internal sales and input price forecasts, which consider projections from independent third-party data sources, discount rate, and expected mine life. We used key assumptions that were based on historical data and estimates of future results from internal sources, external price benchmarks, and mineral reserve technical reports, as well as industry and market trends.
Goodwill Impairment Indicators
During the nine months ended September 30, 2022, North American central banks continued to increase their benchmark borrowing rates. Benchmark borrowing rates are used as the risk-free rate which is a component of determining our discount rate for impairment testing. As a result of these increases, we revised our discount rates and increased our Retail – North America group of CGUs discount rate to 8.5 percent (previous impairment analysis – 8.0 percent at June 30, 2022) and this triggered an impairment test to be performed. We used the FVLCD methodology based on after-tax discounted cash flows (five-year projections and a terminal year thereafter) and incorporated assumptions an independent market participant would apply. FVLCD is a Level 3 measurement.
| Retail - North America group of CGUs | As at June 30, 2022 | As at September 30, 2022 | ||||||
| Carrying amount of goodwill (billions) |
6.9 | 6.9 | ||||||
| Excess carrying amount over recoverable amount (billions) |
0.8 | nil | ||||||
| Excess carrying amount over recoverable amount (%) |
7 | nil | ||||||
Goodwill is more susceptible to impairment risk if there is an increase in the discount rate, or a deterioration in business operating results or economic conditions and actual results do not meet our forecasts. As at September 30, 2022, the Retail – North America group of CGUs carrying amount was equal to its recoverable amount. A 25 basis point increase in the discount rate will result in an impairment of the carrying amount of goodwill of approximately $500. A decrease in forecasted EBITDA and cash flows or a reduction in the terminal growth rate will also result in impairment in the future.
| Key Assumptions | Value Used in Impairment Model |
|||
| Terminal growth rate (%) |
2.5 | |||
| Forecasted EBITDA over forecast period (billions) |
7.6 | |||
| Discount rate (%) |
8.5 | |||
36
| Unaudited | In millions of US dollars except as otherwise noted |
NOTE 4 OTHER EXPENSES (INCOME)
| Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Integration and restructuring related costs |
15 | 8 | 35 | 47 | ||||||||||||
| Foreign exchange loss, net of related derivatives |
11 | 1 | 67 | 4 | ||||||||||||
| Earnings of equity-accounted investees |
(82 | ) | (21 | ) | (200 | ) | (43 | ) | ||||||||
| Bad debt expense |
4 | 7 | 18 | 22 | ||||||||||||
| COVID-19 related expenses |
- | 16 | 8 | 34 | ||||||||||||
| Gain on disposal of investment |
- | - | (19 | ) | - | |||||||||||
| Cloud computing transition adjustment |
- | - | - | 36 | ||||||||||||
| Other expenses |
88 | 39 | 185 | 103 | ||||||||||||
| 36 | 50 | 94 | 203 | |||||||||||||
NOTE 5 INCOME TAXES
A separate estimated average annual effective income tax rate was determined for each taxing jurisdiction and applied individually to the interim period pre-tax earnings for each jurisdiction.
| Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Income tax expense |
487 | 209 | 2,206 | 615 | ||||||||||||
| Actual effective tax rate on earnings (%) |
24 | 23 | 25 | 24 | ||||||||||||
| Actual effective tax rate including discrete items (%) |
24 | 22 | 25 | 24 | ||||||||||||
| Discrete tax adjustments that impacted the tax rate |
(12 | ) | (10 | ) | 8 | (13 | ) | |||||||||
Income tax balances within the condensed consolidated balance sheets were comprised of the following:
| Income Tax Assets and Liabilities | Balance Sheet Location | As at September 30, 2022 | As at December 31, 2021 | |||
| Income tax assets |
||||||
| Current |
Receivables |
49 | 223 | |||
| Non-current |
Other assets |
132 | 166 | |||
| Deferred income tax assets |
Other assets |
427 | 262 | |||
| Total income tax assets |
608 | 651 | ||||
| Income tax liabilities |
||||||
| Current |
Payables and accrued charges |
943 | 606 | |||
| Non-current |
Other non-current liabilities |
51 | 44 | |||
| Deferred income tax liabilities |
Deferred income tax liabilities |
3,489 | 3,165 | |||
| Total income tax liabilities |
4,483 | 3,815 | ||||
37
| Unaudited | In millions of US dollars except as otherwise noted |
NOTE 6 FINANCIAL INSTRUMENTS
Fair Value
Estimated fair values for financial instruments are designed to approximate amounts for which the instruments could be exchanged in a current arm’s-length transaction between knowledgeable, willing parties. The valuation policies and procedures for financial reporting purposes are determined by our finance department. There have been no changes to our valuation methods presented in Note 10 of the 2021 annual consolidated financial statements and those valuation methods have been applied in these interim financial statements.
The following table presents our fair value hierarchy for financial instruments carried at fair value on a recurring basis or measured at amortized cost:
| September 30, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||
| Financial assets (liabilities) measured at | Carrying Amount |
Level 1 | Level 2 | Level 3 | Carrying Amount |
Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
| Fair value on a recurring basis 1 |
||||||||||||||||||||||||||||||||
| Cash and cash equivalents |
823 | - | 823 | - | 499 | - | 499 | - | ||||||||||||||||||||||||
| Derivative instrument assets |
11 | - | 11 | - | 19 | - | 19 | - | ||||||||||||||||||||||||
| Other current financial assets - marketable securities 2 |
189 | 24 | 165 | - | 134 | 19 | 115 | - | ||||||||||||||||||||||||
| Investments at FVTOCI 3 |
183 | 173 | - | 10 | 244 | 234 | - | 10 | ||||||||||||||||||||||||
| Derivative instrument liabilities |
(51 | ) | - | (51 | ) | - | (20 | ) | - | (20 | ) | - | ||||||||||||||||||||
| Amortized cost |
||||||||||||||||||||||||||||||||
| Current portion of long-term debt |
||||||||||||||||||||||||||||||||
| Notes and debentures |
(999 | ) | (491 | ) | (500 | ) | - | (500 | ) | (506 | ) | - | - | |||||||||||||||||||
| Fixed and floating rate debt |
(17 | ) | - | (17 | ) | - | (45 | ) | - | (45 | ) | - | ||||||||||||||||||||
| Long-term debt |
||||||||||||||||||||||||||||||||
| Notes and debentures |
(6,902 | ) | (1,362 | ) | (4,740 | ) | - | (7,424 | ) | (4,021 | ) | (4,709 | ) | - | ||||||||||||||||||
| Fixed and floating rate debt |
(118 | ) | - | (118 | ) | - | (97 | ) | - | (97 | ) | - | ||||||||||||||||||||
| 1 | During the periods ended September 30, 2022 and December 31, 2021, there were no transfers between levelling for financial instruments measured at fair value on a recurring basis. |
| 2 | Marketable securities consist of equity and fixed income securities. We determine the fair value of equity securities based on the bid price of identical instruments in active markets. We value fixed income securities using quoted prices of instruments with similar terms and credit risk. |
| 3 | Investments at fair value through other comprehensive income (“FVTOCI”) is primarily comprised of shares in Sinofert Holdings Ltd. |
NOTE 7 SHORT-TERM DEBT
Short-term debt was comprised of:
| |
Rate of Interest (%) |
|
|
Total Facility Limit as at September 30, 2022 |
|
|
As at September 30, 2022 |
|
|
As at December 31, 2021 |
| |||||
| Credit facilities |
||||||||||||||||
| Unsecured revolving term credit facility |
n/a | 4,500 | - | - | ||||||||||||
| Unsecured revolving term credit facility |
4.1 | 2,000 | 1,000 | - | ||||||||||||
| Uncommitted revolving demand facility |
4.0 | 1,000 | 500 | - | ||||||||||||
| Other credit facilities 1 |
760 | |||||||||||||||
| South American |
1.5 - 21.7 | 194 | 74 | |||||||||||||
| Australian |
3.6 | 97 | 211 | |||||||||||||
| Other |
3.3 | 8 | 28 | |||||||||||||
| Commercial paper |
2.9 - 4.0 | 2,530 | 1,170 | |||||||||||||
| Other short-term debt |
n/a | 125 | 77 | |||||||||||||
| 4,454 | 1,560 | |||||||||||||||
| 1 Total facility limit amounts include some facilities with maturities in excess of one year. |
| |||||||||||||||
The amount available under the commercial paper program is limited to the availability of backup funds under the $4,500 unsecured revolving term credit facility and excess cash invested in highly liquid securities. During the three months ended September 30, 2022, we extended the maturity date of the $4,500 unsecured revolving term credit facility from June 4, 2026 to September 14, 2027. There was no change to the total facility limit or the significant agreement terms from those we disclosed in our 2021 Annual Report.
38
| Unaudited | In millions of US dollars except as otherwise noted |
During the three months ended September 30, 2022, we entered into a new $2,000 revolving term credit facility, with the same principal covenants and events of default as our existing $4,500 unsecured revolving term credit facility. The $2,000 non-revolving term credit facilities we entered into in July 2022 to help temporarily manage normal seasonal working capital swings were closed prior to September 30, 2022.
NOTE 8 SHARE CAPITAL
Share Repurchase Programs
| Commencement Date |
Expiry | Maximum Shares for Repurchase |
Maximum Shares for Repurchase (%) |
Number of Shares Repurchased |
||||||||||||||||
| 2020 Normal Course Issuer Bid |
February 27, 2020 | February 26, 2021 | 28,572,458 | 5 | 710,100 | |||||||||||||||
| 2021 Normal Course Issuer Bid |
March 1, 2021 | February 28, 2022 | 28,468,448 | 5 | 22,186,395 | |||||||||||||||
| 2022 Normal Course Issuer Bid 1 |
March 1, 2022 | February 28, 2023 | 55,111,110 | 10 | 32,183,728 | |||||||||||||||
| 1 The 2022 normal course issuer bid will expire earlier than the date above if we acquire the maximum number of common shares allowable or otherwise decide not to make any further repurchases. |
| |||||||||||||||||||
Purchases under the normal course issuer bids were, or may be, made through open market purchases at market prices as well as by other means permitted by applicable securities laws, including private agreements.
The following table summarizes our share repurchase activities during the period:
| Three Months Ended September 30 |
Nine Months Ended September 30 | |||||||
|
|
2022 | 2021 | 2022 | 2021 | ||||
| Number of common shares repurchased for cancellation | 19,027,561 | 2,427,369 | 38,387,969 | 2,460,097 | ||||
| Average price per share (US dollars) | 89.25 | 61.18 | 86.85 | 61.07 | ||||
| Total cost | 1,698 | 148 | 3,334 | 150 | ||||
As of November 1, 2022, an additional 1,981,462 common shares were repurchased for cancellation at a cost of $165 and an average price per share of $83.25.
Dividends Declared
We declared a dividend per share of $0.48 (2021 – $0.46) during the three months ended September 30, 2022, payable on October 14, 2022 to shareholders of record on September 30, 2022.
NOTE 9 SEASONALITY
Seasonality in our business results from increased demand for products during planting season. Crop input sales are generally higher in spring and fall application seasons. Crop input inventories are normally accumulated leading up to each application season. The results of this seasonality have a corresponding effect on receivables from customers and rebates receivables, inventories, prepaid expenses and other current assets and trade payables. Our short-term debt also fluctuates during the year to meet working capital needs. Our cash collections generally occur after the application season is complete, while customer prepayments made to us are typically concentrated in December and January and inventory prepayments paid to our suppliers are typically concentrated in the period from November to January. Feed and industrial sales are more evenly distributed throughout the year.
NOTE 10 RELATED PARTY TRANSACTIONS
We sell potash outside Canada and the United States exclusively through Canpotex. Canpotex sells potash to buyers in export markets pursuant to term and spot contracts at agreed upon prices. Our revenue is recognized at the amount received from Canpotex representing proceeds from their sale of potash, less net costs of Canpotex. Sales to Canpotex are shown in Note 2.
| As at | September 30, 2022 | December 31, 2021 | ||
| Receivables from Canpotex |
1,454 | 828 | ||
39
| Unaudited | In millions of US dollars except as otherwise noted |
NOTE 11 BUSINESS COMBINATIONS
Subsequent to September 30, 2022, we completed the previously announced acquisition of Casa do Adubo S.A. (“Casa do Adubo”) on October 1, 2022 for a preliminary purchase price, net of cash and cash equivalents acquired, of $279. We acquired 100% of the issued and outstanding Casa do Adubo stock. Casa do Adubo is an agriculture retailer in Brazil with 39 retail locations and 10 distribution centers. The expected benefits of the acquisition resulting in goodwill include: synergies from expected reduction in operating costs, wider distribution channel for selling products, a large assembled workforce and a potential increase in our customer base.
We have engaged independent valuation experts to assist in determining the fair value of certain assets acquired and liabilities assumed and related deferred income tax impacts. Given the transaction closed on October 1, 2022, as at the date of our interim financial statements we do not have sufficient information to determine fair values and complete the purchase price allocation or the proforma financial information disclosures. As part of our due diligence process, we are continuing to obtain and verify information required to determine the fair value of certain assets acquired and liabilities assumed and the amount of deferred income taxes arising on their recognition. We expect to finalize the amounts recognized as we obtain the information necessary to complete the analysis within one year from the date of the acquisition.
The Casa do Adubo acquisition was completed at the close of business on October 1, 2022, therefore, our consolidated statements of earnings did not include any impacts from Casa do Adubo for the three and nine months ended September 30, 2022. Financial information related to Casa do Adubo is as follows:
| 2022 Pro Forma 1 | ||||
| Sales |
440 | |||
| EBITDA |
40 | |||
| 1 Estimated annual sales and EBITDA if acquisition occurred at January 1, 2022. Net earnings before income taxes is not available. |
| |||
40