Nutrien Impacted by a Temporary Slowdown in Fertilizer Demand; Positive 2020 Outlook

All amounts are in US dollars

SASKATOON, Saskatchewan--()--Nutrien Ltd. (Nutrien) announced today its 2019 third-quarter results, with net earnings from continuing operations of $141 million ($0.24 diluted earnings per share). Third-quarter adjusted net earnings was $0.24 per share and adjusted EBITDA was $785 million. Adjusted net earnings (total and per share amounts), and adjusted EBITDA, together with the related annual guidance, Potash adjusted EBITDA and free cash flow are non-IFRS financial measures. See “Non-IFRS Financial Measures” section for further information.

Nutrien’s third-quarter results and fourth-quarter expectations are impacted by short term market softness. However, we believe that agriculture fundamentals are starting to strengthen and we expect 2020 to be a strong year for crop input demand for which we are well positioned to benefit,” commented Chuck Magro, Nutrien’s President and CEO.

Over the course of the year, we have allocated capital to grow our Retail business while continuing to return significant capital to our shareholders. That is what our integrated business model is designed to do, and we remain confident that it will drive significant long-term value creation,” added Mr. Magro.

Highlights:

  • Retail performed very well with EBITDA increasing 64 percent in the third quarter of 2019 compared to the same period last year due to the delayed timing of crop input demand in the US and stronger margins. Nutrien’s sales, service and supply chain strength helped to grow share in key markets on a year-to-date basis.
  • Potash adjusted EBITDA was down 14 percent in the third quarter of 2019 compared to the third quarter of 2018 due to lower sales volumes caused by a temporary reduction in global demand.
  • Nitrogen EBITDA in the third quarter was 9 percent lower than the same period last year due primarily to lower net realized selling prices for ammonia.
  • Nutrien generated $2.0 billion in free cash flow in the first nine months of 2019, up 28 percent from the same period in 2018.
  • Nutrien announced the close of its acquisition of Ruralco Holdings Limited at the end of the quarter, the third largest agriculture retailer in Australia.
  • Nutrien full-year 2019 adjusted net earnings per share and adjusted EBITDA guidance were lowered to $2.30 to $2.55 per share and $4.0 to $4.3 billion, respectively.

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 4, 2019. 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 as a group. Additional information relating to Nutrien (which, except as otherwise noted, is not incorporated by reference herein), including our 2018 Annual Report dated February 20, 2019, which includes our consolidated financial statements and management’s discussion and analysis and our Annual Information Form, each for the year ended December 31, 2018, can be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. The Company is a foreign private issuer under the rules and regulations of the US Securities and Exchange Commission (“SEC”).

This MD&A is based on the Company’s unaudited interim condensed consolidated financial statements as at and for the three and nine months ended September 30, 2019 (“interim financial statements”) prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) and prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” unless otherwise stated. It contains certain non-IFRS financial measures and forward-looking statements which are described in the “Non-IFRS Financial Measures” section and the “Forward-Looking Statements” section respectively. For the definitions of financial and non-financial terms used in this MD&A, as well as a list of abbreviated company names and sources, see the “Terms”, “Abbreviated Company Names and Sources” and “Terms and Measures” sections of our 2018 Annual Report. All references to per share amounts pertain to diluted net earnings (loss) per share, n/m indicates information that is not meaningful and all financial data are stated in millions of US dollars unless otherwise noted.

Market Outlook

Agriculture and Retail

  • US corn and soybean prices have increased by approximately 10 percent from summertime lows, as the shortened growing season is expected to lead to lower yields and harvested acreage, particularly after parts of the Northern Corn Belt received frost in mid-October.

We believe this will tighten crop inventories and result in approximately 12 million, or about 7 percent, more US corn and soybean acres to be planted in 2020, which is expected to support crop input demand. While there is strong underlying demand for a heavy crop input application season this fall, there is significant risk of a shortened application window created by the late harvest in both the US and Canada.

  • South American corn and soybean prices have increased by approximately 20 percent since July 2019 and growers in Brazil are expected to increase soybean and safrinha corn planting by a combined four to five million acres, or 3 to 4 percent, over last year’s level. We expect this growth to translate into a meaningful increase in crop input demand.
  • Weak palm oil prices had a significant impact on potash demand in South East Asia this quarter. However, prices have recently improved, partly due to new biofuel policy developments in Indonesia and Malaysia.
  • Australia continues to experience drought conditions which could limit crop production and input use over the coming year.

Crop Nutrient Markets

  • Global potash prices declined during the third quarter of 2019 as customers in key offshore markets drew from inventories built by strong first-half 2019 shipments, delaying new annual contracts in China and India. Global producers announced curtailments to rebalance supply over the near term.

We anticipate potash demand to remain subdued through the fourth quarter of 2019 as customers continue to draw down inventory. We are lowering our 2019 projection of global potash deliveries to 64 to 65 million tonnes (previously 65-67 million tonnes). We are also further lowering our potash sales volume guidance to 11.6 to 12.0 million tonnes, which represents an incremental 300,000 tonnes impact to the 700,000 tonne downward revision announced on September 11, 2019 (potash sales volume guidance provided on July 29, 2019 was 12.6 to 13.0 million tonnes).

We expect global potash deliveries to rebound to 67 to 69 million tonnes in 2020 as offshore inventories are depleted, Western Hemisphere planted acreage increases significantly and affordability for growers remains attractive with improved prices for corn, soybeans and palm oil.

  • Global ammonia benchmark prices have increased from third quarter 2019 lows as a result of several unplanned production outages and improved demand, while US urea import prices have recently come under pressure. We expect strong seasonal nitrogen demand, supported by higher planted acreage in the US and Brazil, and strong demand in India due to favorable monsoon conditions and supportive government policies.
  • Dry phosphate fertilizer prices continue to be pressured by the combination of increased supply from Saudi Arabia and Morocco, strong exports from China and lower raw material prices. Liquid fertilizer and industrial phosphates prices continue to demonstrate more stability.

Financial Outlook and Guidance

Based on our nine-month results and market factors detailed above, we have lowered 2019 adjusted net earnings guidance to $2.30 to $2.55 per share (previously $2.70 to $3.00 per share) and adjusted EBITDA guidance to $4.0 to $4.3 billion (previously $4.35 to $4.70 billion). For additional adjustments to related guidance, please see the table below.

The related sensitivities can be found on page 62 of Nutrien’s 2018 Annual Report.

All guidance numbers, including those noted above are outlined in the table below.

2019 Guidance Ranges 1

Low

 

High

 

Adjusted net earnings per share 2

$

2.30 

 

$

2.55 

 

Adjusted EBITDA (billions) 2

$

4.00 

 

$

4.30 

 

Retail EBITDA (billions)

$

1.20 

 

$

1.30 

 

Potash EBITDA (billions)

$

1.60 

 

$

1.70 

 

Nitrogen EBITDA (billions)

$

1.30 

 

$

1.35 

 

Phosphate EBITDA (millions)

$

175 

 

$

200 

 

Potash sales tonnes (millions) 3

 

11.6 

 

 

12.0 

 

Nitrogen sales tonnes (millions) 3

 

10.6 

 

 

10.8 

 

Depreciation and amortization (billions)

$

1.80 

 

$

1.90 

 

Merger and related costs (millions)

$

60 

 

$

70 

 

Effective tax rate on continuing operations

 

23 

%

 

25 

%

Sustaining capital expenditures (billions)

$

1.0 

 

$

1.1 

 

1 See the “Forward-Looking Statements” section of this MD&A.

2 See the “Non-IFRS Financial Measures” section of this MD&A.

 

3 Manufactured products only. Nitrogen excludes ESN® and Rainbow products.

 

Consolidated Results

 

Three Months Ended September 30

 

Nine Months Ended September 30

(millions of US dollars)

2019

 

2018

 

% Change

 

2019

 

2018

 

% Change

Sales 1

4,134

 

3,990

 

4

 

16,482

 

15,761

 

5

Freight, transportation and distribution

246

 

253

 

(3)

 

667

 

675

 

(1)

Cost of goods sold 1

2,748

 

2,582

 

6

 

11,388

 

10,953

 

4

Gross margin

1,140

 

1,155

 

(1)

 

4,427

 

4,133

 

7

Expenses

812

 

2,514

 

(68)

 

2,628

 

4,265

 

(38)

Net earnings (loss) from continuing operations

141

 

(1,067)

 

n/m

 

1,040

 

(327)

 

n/m

Net earnings from discontinued operations

-

 

23

 

(100)

 

-

 

698

 

(100)

Net earnings (loss)

141

 

(1,044)

 

n/m

 

1,040

 

371

 

180

EBITDA 2

785

 

(932)

 

n/m

 

3,162

 

1,062

 

198

Adjusted EBITDA 2

785

 

839

 

(6)

 

3,347

 

3,012

 

11

Free Cash Flow 2

329

 

422

 

(22)

 

2,019

 

1,572

 

28

1 Certain immaterial figures have been reclassified or grouped together for the three and nine months ended September 30, 2018.

2 See the "Non-IFRS Financial Measures" section.

Our third-quarter and first-nine months of 2019 net earnings from continuing operations increased compared to the same periods in 2018 due to a non-cash impairment of our New Brunswick potash facility in 2018, the continued benefit of Merger related synergies and operational improvements, higher potash net realized prices, and strong performance by Retail in the third quarter of 2019 where a compressed US growing season supported demand for higher margin products and services. Net earnings from continuing operations in the 2019 periods were negatively impacted by lower sales of produced crop nutrients caused by a temporary slow down of global demand and the timing of the US application season.

Our net earnings from discontinued operations in 2018 was related to the required divestiture of certain equity investments in connection with the Merger.

Segment Results

In the first quarter of 2019, our Executive Leadership Team reassessed our product groupings and decided to evaluate the performance of ammonium sulfate as part of the Nitrogen segment, rather than the Phosphate and Sulfate segment as reported in 2018. Effective January 1, 2019, we have four reportable operating segments: Retail, Potash, Nitrogen and Phosphate. Comparative amounts presented on a segmented basis have been restated accordingly. We also renamed our “Others” segment to “Corporate and Others”.

Detailed descriptions of our operating segments can be found in our 2018 Annual Report in the “Operating Segment Performance & Outlook” section.

Our discussion of segment results set out on the following pages is a comparison of the results for the three and nine months ended September 30, 2019 to the results for the three and nine months ended September 30, 2018, unless otherwise noted. See Appendix A for a summary of our results for the nine months ended September 30, 2019 by operating segment.

Retail

 

Three Months Ended September 30

(millions of US dollars, except

Dollars

 

Gross Margin

 

Gross Margin (%)

as otherwise noted)

2019

 

2018

 

% Change

 

2019

 

2018

 

% Change

 

2019

 

2018

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crop nutrients 1

769

 

650

 

18

 

175

 

142

 

23

 

23

 

22

Crop protection products

1,318

 

1,086

 

21

 

303

 

236

 

28

 

23

 

22

Seed

60

 

60

 

-

 

17

 

14

 

21

 

28

 

23

Merchandise 2

135

 

161

 

(16)

 

22

 

27

 

(19)

 

16

 

17

Services and other

217

 

174

 

25

 

138

 

114

 

21

 

64

 

66

 

2,499

 

2,131

 

17

 

655

 

533

 

23

 

26

 

25

Cost of goods sold 2

1,844

 

1,598

 

15

 

 

 

 

 

 

 

 

 

 

Gross margin

655

 

533

 

23

 

 

 

 

 

 

 

 

 

 

Expenses 3

617

 

539

 

14

 

 

 

 

 

 

 

 

 

 

Earnings (loss) before finance

 

costs and taxes ("EBIT")

38

 

(6)

 

n/m

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

152

 

122

 

25

 

 

 

 

 

 

 

 

 

 

EBITDA

190

 

116

 

64

 

 

 

 

 

 

 

 

 

 

1 Includes intersegment sales. See Note 2 to the interim financial statements.

2 Certain immaterial figures have been reclassified or grouped together for the three months ended September 30, 2018.

3 Includes selling expenses of $601 million (2018 – $552 million).

  • EBITDA was higher in the third quarter of 2019 as a higher proportion of crop nutrients and crop protection products applications were made in the US during the quarter due to the impact of a wet spring. EBITDA increased in the first nine months of 2019 as sales, service and supply chain strength helped to grow share in key markets. Gross margin percentage increased in the third quarter due to a favorable sales mix of product, and gross margin percentage for the first nine months of 2019 is now in-line with 2018 levels. Expenses as a proportion of sales in the third quarter and first nine months of 2019 were similar to the same periods in 2018.
  • Crop nutrients sales increased in the third quarter and first nine months of 2019 due to higher sales volumes and selling prices. Gross margin percentage also increased in the periods due to strategic purchasing and an increased mix of higher margin specialty and proprietary products.
  • Crop protection products sales in the third quarter and first nine months of 2019 increased as US farmers made more in-season applications due to the excessive moisture experienced earlier in the year. Gross margin percentage increased in the third quarter and was stable in the first nine months of 2019 due to favorable sales product mix and strategic purchasing. This offset the impact of higher competition in an abbreviated pre-emergence season and higher costs of raw materials sourced from China.
  • Seed sales in the third quarter were comparable to the same period last year as higher sales in North America more than offset lower Australian sales, which was caused by prolonged drought conditions. Seed sales in the first nine months of 2019 increased as a result of a greater proportion of sales from higher value corn and cotton seed, which more than offset the impact of lower planted acreage in the US. Gross margin percentage was higher in the third quarter and flat in the first nine months of 2019 due to the timing of vendor programs, which offset replanting discounts earlier in 2019.
  • Services and other sales were higher in the third quarter and first nine months of 2019 due mostly to increased US applications and services resulting from a condensed growing season, as well as the timing of Australian livestock commissions. Gross margin percentage decreased in the quarter compared to the previous year due to the lower margin livestock commissions, while gross margin percentage for the first nine months of 2019 increased significantly due to a greater proportion of higher margin North American sales.

Potash

 

Three Months Ended September 30

(millions of US dollars, except

Dollars

 

Tonnes (thousands)

 

Average per Tonne

as otherwise noted)

2019

 

2018

% Change

 

2019

 

2018

% Change

 

2019

 

2018

% Change

Manufactured product 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

330

 

358

 

(8)

 

1,438

 

1,678

 

(14)

 

229

 

213

 

8

Offshore

379

 

458

 

(17)

 

1,823

 

2,180

 

(16)

 

208

 

210

 

(1)

 

709

 

816

 

(13)

 

3,261

 

3,858

 

(15)

 

218

 

212

 

3

Cost of goods sold

303

 

358

 

(15)

 

 

 

 

 

 

 

94

 

93

 

1

Gross margin - manufactured

406

 

458

 

(11)

 

 

 

 

 

 

 

124

 

119

 

4

Gross margin - other 2

-

 

1

 

(100)

 

Depreciation and amortization

 

34

 

33

 

3

Gross margin - total

406

 

459

 

(12)

 

 

 

 

 

 

 

Impairment of assets

-

 

1,809

 

(100)

 

Gross margin excluding depreciation

 

 

 

 

 

Expenses 3

86

 

89

 

(3)

 

and amortization - manufactured 4

158

 

152

 

4

EBIT

320

 

(1,439)

 

n/m

 

Potash cash cost of product

 

 

 

 

 

 

Depreciation and amortization

110

 

128

 

(14)

 

manufactured 4

 

62

 

56

 

11

EBITDA

430

 

(1,311)

 

n/m

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA 4

430

 

498

 

(14)

 

 

 

 

 

 

 

 

 

 

 

 

1 Includes intersegment sales. See Note 2 to the interim financial statements.

2 Includes other potash and purchased products and is comprised of net sales of $Nil (2018 – $1 million) less cost of goods sold of $Nil (2018 – $Nil).

3 Includes provincial mining and other taxes of $83 million (2018 – $78 million).

4 See the "Non-IFRS Financial Measures" section.

  • EBITDA was higher in the third quarter and first nine months of 2019 due to a non-cash impairment of our New Brunswick potash facility in the same periods of 2018. Adjusted EBITDA decreased in the third quarter of 2019 due mostly to lower sales volumes. Adjusted EBITDA in the first nine months of 2019 was higher than the same period last year as higher net realized selling prices more than offset lower sales volumes and previously announced changes to the Saskatchewan government tax structure.
  • Sales volumes in North America were the second highest of any third quarter, down only from the third quarter record of 2018. North American sales volumes in the first nine months of 2019 were lower due to a wet US spring which postponed some applications. Offshore sales volumes were lower in the third quarter of 2019 as customers in key markets drew upon inventory levels, however, offshore sales volumes for the first nine months of 2019 were the highest on record due to strong demand in the first half of 2019.
  • Net realized selling price increased in the third quarter of 2019 due to higher prices in the North American market. Offshore net realized selling prices in the third quarter were lower than the previous period reflecting pressure from the slowdown in offshore demand and adjustments to Nutrien’s provisional selling price to Canpotex. North American and Offshore net realized selling prices were higher during the first nine months of 2019, similar to increases in major global benchmark prices.
  • Cost of goods sold per tonne was largely unchanged in the third quarter and first nine months of 2019 as higher royalties and higher costs resulting from the timing of mine maintenance were offset by favorable foreign exchange rate changes. Potash cash cost of product manufactured increased in the periods mostly due to the timing of mine maintenance and lower production volumes.

Canpotex Sales by Market

(percentage of sales volumes, except as

Three Months Ended September 30

 

Nine Months Ended September 30

otherwise noted)

2019

2018

% Change

 

2019

2018

% Change

Latin America

44

40

10

 

31

33

(6)

Other Asian markets 1

21

37

(43)

 

27

32

(16)

China

16

7

129

 

23

18

28

India

12

11

9

 

11

9

22

Other markets

7

5

40

 

8

8

-

 

100

100

 

 

100

100

 

1 All Asian markets except China and India.

 

 

 

 

 

 

 

Nitrogen

 

Three Months Ended September 30

(millions of US dollars, except

Dollars

 

Tonnes (thousands)

 

Average per Tonne

as otherwise noted)

2019

 

2018 ¹

% Change

 

2019

 

2018 ¹

% Change

 

2019

 

2018 ¹

% Change

Manufactured product 2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ammonia

144

 

190

 

(24)

 

715

 

750

 

(5)

 

203

 

253

 

(20)

Urea

221

 

198

 

12

 

726

 

691

 

5

 

304

 

286

 

6

Solutions, nitrates and sulfates

168

 

182

 

(8)

 

1,081

 

1,122

 

(4)

 

155

 

163

 

(5)

 

533

 

570

 

(6)

 

2,522

 

2,563

 

(2)

 

211

 

222

 

(5)

Cost of goods sold

416

 

419

 

(1)

 

 

 

 

 

 

 

165

 

164

 

1

Gross margin - manufactured

117

 

151

 

(23)

 

 

 

 

 

 

 

46

 

58

 

(21)

Gross margin - other 3

16

 

13

 

23

 

Depreciation and amortization

 

50

 

45

 

11

Gross margin - total

133

 

164

 

(19)

 

Gross margin excluding depreciation

 

 

 

 

 

Expenses

13

 

9

 

44

 

and amortization - manufactured 4

96

 

103

 

(7)

EBIT

120

 

155

 

(23)

 

Ammonia controllable cash cost

 

 

 

 

 

 

Depreciation and amortization

127

 

115

 

10

 

 of product manufactured 4

 

45

 

44

 

2

EBITDA

247

 

270

 

(9)

 

 

 

 

 

 

 

 

 

 

 

 

1 Restated for the reclassification of sulfate from the Phosphate segment. See Note 2 to the interim financial statements.

2 Includes intersegment sales. See Note 2 to the interim financial statements.

3 Includes other nitrogen (including ESN® and Rainbow) and purchased products and is comprised of net sales of $69 million (2018 – $69 million) less cost of goods sold of $53 million (2018 – $56 million).

4 See the "Non-IFRS Financial Measures" section.

  • EBITDA decreased in the third quarter of 2019 due primarily to lower net realized selling prices. EBITDA in the first nine months of 2019 increased as a result of higher net realized selling prices and higher earnings from equity-accounted investees.
  • Sales volumes were down slightly in the third quarter due to a delay in the start to the fall season across most of North America, resulting from the late maturity of the crop. Sales volumes in the first nine months of 2019 decreased compared to the same period in 2018 due to the extremely wet weather this spring across the US and the late start to the fall season.
  • Net realized selling price of nitrogen decreased in the third quarter of 2019 following most global benchmarks, particularly for international trade ammonia. The net realized selling price of nitrogen in the first nine months of 2019 was up compared to the same period in 2018 as our distribution network and product positioning allowed us to benefit from higher US inland premiums when supply was impacted by elevated water levels on many of the US river systems.
  • Cost of goods sold per tonne of nitrogen was similar for the third quarter and up slightly for the first nine months of 2019 compared to the same periods in 2018 as lower gas costs were offset by a lower proportion of sales from our lower-cost facilities, increased maintenance spend and slightly lower volumes. Ammonia controllable cash cost of product manufactured per tonne was mostly unchanged for the third quarter and first nine months of 2019.

Natural Gas Prices

 

Three Months Ended September 30

 

Nine Months Ended September 30

(US dollars per MMBtu, except as otherwise noted)

2019

 

2018

 

% Change

 

2019

 

2018

 

% Change

Overall gas cost excluding realized derivative impact

2.06

 

2.40

 

(14)

 

2.47

 

2.45

 

1

Realized derivative impact

0.22

 

0.34

 

(35)

 

0.14

 

0.33

 

(58)

Overall gas cost

2.28

 

2.74

 

(17)

 

2.61

 

2.78

 

(6)

 

 

 

 

 

 

 

 

 

 

 

 

Average NYMEX

2.23

 

2.90

 

(23)

 

2.67

 

2.90

 

(8)

Average AECO

0.78

 

1.03

 

(24)

 

1.05

 

1.10

 

(5)

  • Gas costs were lower compared to the third quarter and first nine months of 2018 due to lower benchmark and contract gas prices.

Phosphate

 

Three Months Ended September 30

(millions of US dollars, except

Dollars

 

Tonnes (thousands)

 

Average per Tonne

as otherwise noted)

2019

 

2018 ¹

% Change

 

2019

 

2018 ¹

% Change

 

2019

 

2018 ¹

% Change

Manufactured product 2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fertilizer

164

 

267

 

(39)

 

492

 

650

 

(24)

 

335

 

411

 

(18)

Industrial and feed

106

 

114

 

(7)

 

192

 

228

 

(16)

 

549

 

498

 

10

 

270

 

381

 

(29)

 

684

 

878

 

(22)

 

396

 

434

 

(9)

Cost of goods sold

284

 

355

 

(20)

 

 

 

 

 

 

 

416

 

404

 

3

Gross margin - manufactured

(14)

 

26

 

n/m

 

 

 

 

 

 

 

(20)

 

30

 

n/m

Gross margin - other 3

(1)

 

1

 

n/m

 

Depreciation and amortization

 

85

 

59

 

44

Gross margin - total

(15)

 

27

 

n/m

 

Gross margin excluding depreciation

 

 

 

 

-

Expenses

9

 

4

 

125

 

and amortization - manufactured 4

65

 

89

 

(27)

EBIT

(24)

 

23

 

n/m

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

58

 

52

 

12

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

34

 

75

 

(55)

 

 

 

 

 

 

 

 

 

 

 

 

1 Restated for the reclassification of sulfate to the Nitrogen segment. See Note 2 to the interim financial statements.

2 Includes intersegment sales. See Note 2 to the interim financial statements.

3 Includes other phosphate and purchased products and is comprised of net sales of $44 million (2018 - $29 million) less cost of goods sold of $45 million (2018 - $28 million).

4 See the "Non-IFRS Financial Measures" section.

  • EBITDA decreased in the third quarter and first nine months of 2019 due to lower net realized selling prices, lower sales volumes and higher non-cash asset retirement obligation and inventory adjustments.
  • Sales volumes decreased in the third quarter and first nine months of 2019 due to the conversion of the Redwater facility to ammonium sulfate and delayed demand caused by a late spring planting season in most of North America.
  • Net realized selling price decreased in the third quarter and first nine months of 2019 as higher prices for industrial products were more than offset by lower dry fertilizer prices.
  • Cost of goods sold per tonne increased in the third quarter and first nine months of 2019 compared to the same periods in 2018 mostly due to higher non-cash asset retirement obligation and inventory adjustments and lower sales volumes that more than offset lower raw material costs.

Expenses and Income Below Gross Margin

(millions of US dollars, except as otherwise

Three Months Ended September 30

 

Nine Months Ended September 30

noted)

2019

 

2018

 

% Change

 

2019

 

2018

 

% Change

Selling expenses 1

607

 

560

 

8

 

1,835

 

1,758

 

4

General and administrative expenses 2

97

 

112

 

(13)

 

287

 

312

 

(8)

Provincial mining and other taxes 3

92

 

79

 

16

 

253

 

192

 

32

Share-based compensation

(recovery) expense 4

(21)

 

51

 

n/m

 

95

 

149

 

(36)

Impairment of assets 3

-

 

1,809

 

(100)

 

33

 

1,809

 

(98)

Other expenses (income)

37

 

(97)

 

n/m

 

125

 

45

 

178

Finance costs

147

 

142

 

4

 

413

 

394

 

5

Income tax expense (recovery)

40

 

(434)

 

n/m

 

346

 

(199)

 

n/m

Actual effective tax rate on earnings (loss)

 

from continuing operations (%)

22

 

29

 

(24)

 

25

 

38

 

(34)

Actual effective tax rate including

 

discrete items (%)

22

 

29

 

(24)

 

25

 

38

 

(34)

Other comprehensive (loss) income

(75)

 

1

 

n/m

 

(57)

 

(174)

 

(67)

1 Expenses are primarily in the Retail segment. See the "Segment Results" section for analysis.

2 Includes expenses in the Corporate and Others segment of $65 million for the three months ended September 30, 2019 (2018 - $75 million) and $191 million for the nine months ended September 30, 2019 (2018 - $208 million).

3 Expenses are primarily in the Potash segment. See the "Segment Results" section for analysis.

4 Expenses are reported in the Corporate and Others segment.

  • Share-based compensation (recovery) expense was a recovery in the third quarter of 2019 as our share price decreased, compared to an increase in share price in the comparative period which resulted in an expense. For the first nine months of 2019, the expense was lower due to lower share price appreciation than in the comparative period.
  • Other expenses (income) were higher than the comparative quarter and in the first nine month of 2019 primarily due to a curtailment gain on certain of our defined benefit plans (“Curtailment Gain”) in the comparative periods partially offset by lower Merger and related costs in the current periods.
  • Income tax expense (recovery) - The decrease in the effective tax rates on earnings from continuing operations for the third quarter and first nine months of 2019 compared to the same periods last year is a result of a change in proportionate earnings (loss) between jurisdictions. In 2018, an impairment of Canadian assets contributed to higher effective tax rates.
  • Other comprehensive (loss) income was a loss in the third quarter of 2019 compared to income in the comparative quarter primarily due to the higher net loss on translation of our Retail operations in Canada and Australia as well as a decrease in the fair value of our investment in Sinofert Holdings Limited (“Sinofert”).

Other comprehensive loss was lower in the first nine months of 2019 than in the comparative period due primarily to the lower net loss on translation of our Retail operations in Canada, Argentina and Australia as well as a lower unrealized loss in our investment in Sinofert in 2019. The 2018 losses were partially offset by an actuarial gain on our defined benefit plans.

Financial Condition Review

The following balance sheet categories contained variances that were considered significant:

 

As at

 

 

 

 

(millions of US dollars, except as otherwise noted)

September 30, 2019

 

December 31, 2018

 

$ Change

 

% Change

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

568

 

2,314

 

(1,746)

 

(75)

Receivables

4,843

 

3,342

 

1,501

 

45

Inventories

3,873

 

4,917

 

(1,044)

 

(21)

Prepaid expenses and other current assets

440

 

1,089

 

(649)

 

(60)

Property, plant and equipment

20,045

 

18,796

 

1,249

 

7

Goodwill

11,983

 

11,431

 

552

 

5

Liabilities and Equity

 

 

 

 

 

 

 

Short-term debt

2,287

 

629

 

1,658

 

264

Current portion of long-term debt

501

 

995

 

(494)

 

(50)

Current portion of lease liabilities

219

 

8

 

211

 

n/m

Payables and accrued charges

4,615

 

6,703

 

(2,088)

 

(31)

Long-term debt

8,555

 

7,579

 

976

 

13

Lease liabilities

793

 

12

 

781

 

n/m

Deferred income tax liabilities

3,137

 

2,907

 

230

 

8

Share capital

15,769

 

16,740

 

(971)

 

(6)

Retained earnings

7,399

 

7,745

 

(346)

 

(4)

  • Explanations for changes in Cash and cash equivalents are in the “Sources and Uses of Cash” section.
  • Receivables increased due to a shift in Retail sales to the third quarter of 2019 as a result of unfavorable weather conditions in the second quarter of 2019. Receivables also increased due to the acquisition of Ruralco Holdings Limited (“Ruralco”) which was completed on September 30, 2019.
  • Inventories decreased due to a drawdown from increased seasonal Retail sales activity.
  • Prepaid expenses and other current assets decreased due to the drawdown of prepaid inventory where Retail typically prepays for product at year-end and takes possession of inventory throughout the year.
  • Property, plant and equipment increased primarily due to the addition of “right-of-use” assets from the adoption of the lease standard as discussed in the “Other Financial Information” section. Property, plant and equipment also increased due to recent Retail business acquisitions that were closed in the first nine months of 2019.
  • Goodwill increased as a result of additional goodwill from the recent Retail acquisitions, primarily from Ruralco and Actagro, LLC (“Actagro”), that were closed in the first nine months of 2019.
  • Short-term debt increased primarily from commercial paper issuances as part of our seasonal working capital management.
  • Payables and accrued charges decreased primarily due to lower customer prepayments as Retail customers took delivery of prepaid sales. The decrease was partially offset by an increase in payables and accrued charges from the Ruralco acquisition.
  • Long-term debt (including current portion) increased due to the addition of $1.5 billion in senior notes issued in April 2019 exceeding the repayment of $1 billion in notes that matured in the first nine months of 2019.
  • Lease liabilities (including current portion) increased due to the recognition of approximately $1 billion in lease liabilities from the adoption of the lease standard as discussed in the “Other Financial Information” section.
  • Deferred income tax liabilities increased primarily due to the deferred tax provision recorded on higher earnings from continuing operations.
  • Share capital decreased primarily due to share repurchases.
  • Retained earnings decreased primarily due to the impact of share repurchases and dividends declared exceeding net earnings.

Liquidity and Capital Resources

Sources and Uses of Liquidity

See the “Liquidity & Capital Resources” section of our 2018 Annual Report for information on our sources and uses of liquidity.

Key uses in the third quarter and/or nine months ended September 30, 2019 included:

  • Acquisition of Ruralco, an agriservices business in Australia with over 500 Retail operating locations. In addition, we acquired 54 other Retail locations globally, which included Actagro, Van Horn, Inc. and Security Seed and Chemical, Inc. in the US as well as completing the remainder of the Agrichem acquisition in Brazil. The cash consideration paid for all business acquisitions in the first nine months of 2019 was $837 million (net of cash acquired), including Ruralco for $330 million. See Note 11 to the interim financial statements.
  • Repurchase of 36,066,766 common shares for cancellation at a cost of $1,878 million with an average price per share of $52.07. This completed the purchases under the current normal course issuer bid. See Note 10 to the interim financial statements.
  • Maturity and repayment of $1 billion of long-term debt in the first nine months of 2019. See Note 9 to the interim financial statements.
  • Payment of $244 million and $764 million in dividends to shareholders for the three and nine months ended September 30, 2019, respectively.

We increased our expected quarterly dividend from $0.43 per share to $0.45 per share commencing for dividends declared in the third quarter of 2019 and until otherwise determined by the Board.

Key sources in the third quarter and/or nine months ended September 30, 2019 included:

  • On April 1, 2019, we issued $1.5 billion in senior notes. See Note 9 to the interim financial statements.
  • Commercial paper outstanding increased by $612 million and $1,588 million for the three and nine months ended September 30, 2019, respectively.

We believe that internally generated cash flow, supplemented by available borrowings under our existing financing sources, if necessary, will be sufficient to meet our anticipated capital expenditures and other cash requirements for at least the next 12 months. At this time, we do not reasonably expect any presently known trend or uncertainty to affect our ability to access our historical sources of liquidity.

Sources and Uses of Cash

(millions of US dollars, except as otherwise

Three Months Ended September 30

 

Nine Months Ended September 30

noted)

2019

 

2018

 

% Change

 

2019

 

2018

 

% Change

Cash provided by (used in) operating activities

589

 

(177)

 

n/m

 

1,246

 

84

 

n/m

Cash (used in) provided by investing activities

(904)

 

(479)

 

89

 

(2,133)

 

903

 

n/m

Cash provided by (used in) financing activities

272

 

615

 

(56)

 

(837)

 

821

 

n/m

Effect of exchange rate changes on cash and cash equivalents

(5)

 

(13)

 

(62)

 

(22)

 

(22)

 

-

(Decrease) increase in cash and cash equivalents

(48)

 

(54)

 

(11)

 

(1,746)

 

1,786

 

n/m

Cash and cash equivalents decreased by $48 million this quarter compared to a decrease of $54 million in the comparative quarter, due to:

  • An approximately $400 million increase in cash used for acquisitions and capital expenditures compared to the same period in 2018 primarily from the recent Ruralco acquisition and capital expenditures related to our digital Retail projects, the Potash Full Potential Program, which launched in September 2018, and our ammonium sulfate product expansion at Redwater.
  • Cash payments to shareholders in the form of share repurchases of $459 million in the third quarter of 2018 with no comparatives in the same period in 2019.
  • A decrease in our short-term debt net borrowings by $744 million compared to 2018. We used our short-term debt borrowings in 2018 for share repurchases and dividend payments, which were subsequently repaid using proceeds from the sale of our equity investments.

In addition, the following business activities had cash impacts:

  • Cash provided by operating activities significantly increased by $766 million. Despite a higher opening inventory balance due to unfavorable weather conditions since the end of 2018, we were able to sell through our inventories in the third quarter of 2019 that resulted in a positive impact to our cash flows.
  • The shift in Retail sales and collections to the third quarter of 2019 as a result of unfavorable weather conditions in the second quarter of 2019 also resulted in a positive impact to our cash flows.

Cash and cash equivalents decreased by $1.7 billion in the nine months ended September 30, 2019 compared to an increase of $1.8 billion in the nine months ended September 30, 2018 due to:

  • A decrease of approximately $2.3 billion in cash receipts related to discontinued operations and cash acquired as a result of the Merger compared to 2018.
  • Repayment of $1 billion in long-term debt in the first nine months of 2019.
  • Cash payments to shareholders in the form of share repurchases were approximately $1.9 billion, an increase of $267 million compared to 2018.
  • Approximately $700 million increase in acquisitions and capital expenditures compared to 2018.
  • Cash proceeds from the issuance of long-term debt of $1.5 billion in the first half of 2019 with no issuance in 2018.
  • A decrease in our short-term debt net borrowings by $1.7 billion compared to 2018. We used our short-term debt borrowings in 2018 for share repurchases and dividend payments, which were subsequently repaid using proceeds from the sale of our equity investments.

In addition, the following business activities had cash impacts:

  • Cash provided by operating activities significantly increased by $1.2 billion. Despite higher opening inventory balances due to unfavorable weather conditions since the end of 2018 and inventory purchases in anticipation of higher prices, we were able to sell through our inventories this year, which resulted in a positive impact to our cash flows. This was partially offset by higher accounts payable payments earlier in the year related to inventory purchases, which resulted in a negative impact on our cash flows.
  • Higher selling prices for Potash and Retail crop nutrients compared to 2018 also contributed to the increase.

Cash Requirements

For information about our contractual obligations and other commitments as at December 31, 2018 (excluding planned (but not legally committed) capital expenditures and potential share repurchases) see the “Liquidity & Capital Resources - Cash Requirements” section of our 2018 Annual Report. There were no significant changes to these contractual obligations and other commitments since December 31, 2018 aside from the changes to long-term debt discussed in the “Capital Structure and Management” section.

Capital Structure and Management

Principal Debt Instruments

We use a combination of cash generated from operations and short-term and long-term debt to finance our operations. We are in compliance with our debt covenants and did not have any changes to our credit ratings in the nine months ended September 30, 2019. See the “Capital Structure & Management” section of our 2018 Annual Report for further information.

Short-term Debt

 

As at September 30, 2019

(millions of US dollars)

Outstanding and Committed

 

Remaining Available

 

Credit Limit

Credit facilities 1

2,287

 

3,553

 

5,840

Letter of credit facilities

139

 

155

 

294

1 The credit facilities consist of a $4,500 million unsecured North American revolving term credit facility, a $500 million North American uncommitted revolving demand facility and approximately $840 million of other credit facilities in Europe, Australia and South America. Included in the amount outstanding and committed is $1,979 million of commercial paper and $308 million of other short-term debt. We have a $4,500 million credit limit under our commercial paper program, which is limited to the availability of backup funds backstopped by the $4,500 million unsecured revolving term credit facility. Interest rates on outstanding commercial paper ranged from 2.3 to 2.4 percent.

In the third quarter of 2019, we added a total of $319 million in new credit facilities in Australia, of which $201 million was assumed from the Ruralco acquisition, and $112 million was outstanding at September 30, 2019.

In 2019, we terminated our $500 million accounts receivable securitization program.

Long-term Debt

Our long-term debt consists primarily of notes and lease liabilities. See the “Capital Structure & Management” section of our 2018 Annual Report for information on balances, rates and maturities for our notes. During the first nine months of 2019, $1 billion of our notes matured and were repaid and $1.5 billion in notes were issued. See Note 9 to the interim financial statements.

On January 1, 2019, we adopted IFRS 16 and recognized $1,059 million in lease liabilities with a weighted-average interest rate of 3.5 percent. As of September 30, 2019, we had total lease liabilities outstanding (including current portion) of $1,012 million. There were no changes to our debt covenants as a result of adoption of this standard.

Outstanding Share Data

 

As at October 31, 2019

Common shares

572,900,196

Options to purchase common shares

9,252,416

For more information on our capital structure and management, see Note 25 to our 2018 financial statements.

For more information on our short-term debt and long-term debt, see Note 22 and Note 23 to our 2018 financial statements, supplemented by the discussion under “Principal Debt Instruments” and Note 8 and Note 9 to the interim financial statements.

Quarterly Results

(millions of US dollars, except as otherwise

Nutrien

 

PotashCorp 1

noted)

Q3 2019

Q2 2019

Q1 2019

Q4 2018

Q3 2018

Q2 2018

Q1 2018

 

Q4 2017

Sales 2

4,134

 

8,657

 

3,691

 

3,725

 

3,990

 

8,105

 

3,666

 

1,081

Net earnings (loss) from continuing operations

141

 

858

 

41

 

296

 

(1,067)

 

741

 

(1)

 

(120)

Net earnings from discontinued operations

-

 

-

 

-

 

2,906

 

23

 

675

 

-

 

44

Net earnings (loss)

141

 

858

 

41

 

3,202

 

(1,044)

 

1,416

 

(1)

 

(76)

EBITDA 3

785

 

1,781

 

596

 

944

 

(932)

 

1,507

 

487

 

(43)

Earnings (loss) per share ("EPS") from

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

0.25

 

1.48

 

0.07

 

0.48

 

(1.74)

 

1.18

 

-

 

(0.14)

Diluted

0.24

 

1.47

 

0.07

 

0.48

 

(1.74)

 

1.17

 

-

 

(0.14)

EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

0.25

 

1.48

 

0.07

 

5.23

 

(1.70)

 

2.25

 

-

 

(0.09)

Diluted

0.24

 

1.47

 

0.07

 

5.22

 

(1.70)

 

2.24

 

-

 

(0.09)

1 Comparative figures prior to the Merger are for PotashCorp, the accounting acquirer.

2 Certain immaterial figures have been reclassified for Q1, Q2, Q3 and Q4 of 2018.

3 See the "Non-IFRS Financial Measures" section.

The agricultural products business is seasonal. Crop input sales are primarily concentrated in the spring and fall application seasons. Crop nutrient inventories are normally accumulated leading up to each application season. Our cash collections generally occur after the application season is complete, our customer prepayments are concentrated in December and January and our inventory prepayments are concentrated in the period from November to January. Feed and industrial sales are more evenly distributed throughout the year.

Beginning on January 1, 2018, earnings were impacted by the operations of Agrium acquired in the Merger. In the second quarter and fourth quarter of 2018, earnings were impacted by $0.6 billion and $2.9 billion, respectively, in after-tax gains on the sales of our investments in Sociedad Quimica y Minera de Chile S.A. and Arab Potash Company, which were categorized as discontinued operations. In the third quarter of 2018, earnings were impacted by a $1.8 billion non-cash impairment to property, plant and equipment in the Potash segment. In the fourth quarter of 2017, earnings were impacted by a $276 million non-cash impairment to property, plant and equipment in the Phosphate segment.

Other Financial Information

 

2018 Annual Report Page Reference(s)

Changes during the three and nine months ended September 30, 2019

Off-Balance Sheet Arrangements

71

Operating leases were a significant off-balance sheet arrangement in 2018. Effective January 1, 2019 the adoption of IFRS 16 resulted in recognition of approximately $1 billion of these operating leases on the balance sheet.

Related Party Transactions

146-147

See Note 13 to the interim financial statements. There were no significant changes from our 2018 Annual Report.

Market Risks Associated with
Financial Instruments

119

See Note 7 to the interim financial statements. There were no significant changes from our 2018 Annual Report.

Critical Accounting Estimates

71

There were no changes to our assessment of critical accounting estimates from those disclosed in our 2018 Annual Report.

Recent Accounting Changes

71 and 153

The adoption of IFRS 16 was a significant accounting change as it brought approximately $1 billion of “right-of-use assets” and lease obligations on to the balance sheet and increased EBITDA approximately $70 million in the third quarter of 2019 and $200 million in the first nine months of 2019, due to replacing operating lease expenses with depreciation and amortization and finance costs, largely in the Retail and Nitrogen operating segments.

Controls and Procedures

There has been no change in our internal controls over financial reporting during the three months ended September 30, 2019 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 “Management’s Discussion and Analysis” 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 updated 2019 annual guidance, including expectations regarding our adjusted net earnings per share and adjusted EBITDA (both consolidated and by segment); capital spending expectations for 2019; expectations regarding performance of our operating segments in 2019; our market outlook for 2019 and 2020, including Agriculture and Retail and Crop Nutrient Markets and including anticipated supply and demand for our products and services, expected market and industry conditions with respect to crop nutrient application rates, planted acres, crop mix, prices and the impact of currency fluctuations and import and export volumes; expectations regarding completion of previously announced expansion projects (including timing and volumes of production associated therewith); and acquisitions and divestitures (including expected timing of closing thereof), and the expected synergies associated with various acquisitions, including timing thereof. These forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements. As such, undue reliance should not be placed on these forward-looking statements.

All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions referred to below and elsewhere in this document. Although Nutrien believes that these assumptions are reasonable, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place an undue reliance on these assumptions and such forward-looking statements. The additional key assumptions that have been made include, among other things, assumptions with respect to Nutrien's ability to successfully complete, integrate and realize the anticipated benefits of its already completed and future acquisitions, and that we will be able to implement our standards, controls, procedures and policies at any acquired businesses to realize the expected synergies; that future business, regulatory and industry conditions will be within the parameters expected by Nutrien, including with respect to prices, margins, demand, supply, product availability, supplier agreements, availability and cost of labor and interest, exchange and effective tax rates; the completion of our expansion projects on schedule, as planned and on budget; assumptions with respect to global economic conditions and the accuracy of our market outlook expectations for 2019, 2020 and in the future (including as outlined in the “Market Outlook” and “2019 Guidance” sections of our 2018 Annual Report); the adequacy of our cash generated from operations and our ability to access our credit facilities or capital markets for additional sources of financing; our ability to identify suitable candidates for acquisitions and divestitures and negotiate acceptable terms; our ability to maintain investment grade ratings and achieve our performance targets; and the receipt, on time, of all necessary permits, utilities and project approvals with respect to our expansion projects and that we will have the resources necessary to meet the projects’ approach.

Events or circumstances that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: general global economic, market and business conditions; failure to complete announced and future acquisitions or divestitures at all or on the expected terms and within the expected timeline; 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 and trade restrictions), 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 security risks related to our systems; regional natural gas supply restrictions; counterparty and sovereign risk; delays in completion of turnarounds at our major facilities; gas supply interruptions; any significant impairment of the carrying value of certain assets; risks related to reputational loss; certain complications that may arise in our mining processes; the ability to attract, engage and retain skilled employees and strikes or other forms of work stoppages; and other risk factors detailed from time to time in Nutrien reports filed with the Canadian securities regulators and the Securities and Exchange Commission in the United States.

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

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

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 27 million tonnes of potash, nitrogen and phosphate products world-wide. With this capability and our leading agriculture retail network, we are well positioned to supply the needs of our customers. We operate with a long-term view and are committed to working with our stakeholders as we address our economic, environmental and social priorities. The scale and diversity of our integrated portfolio provides a stable earnings base, multiple avenues for growth and the opportunity to return capital to shareholders.

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

Such data is not incorporated by reference herein.

Nutrien will host a Conference Call on Tuesday, November 5, 2019 at 10:00 am Eastern Time.

  • Telephone Conference dial-in numbers:
    • From Canada and the US 1-877-702-9274
    • International 1-647-689-5529
    • No access code required. Please dial in 15 minutes prior to ensure you are placed on the call in a timely manner.
  • Live Audio Webcast: Visit www.nutrien.com/investors/events

Appendix A - Selected Additional Financial Data

Nine Months Ended September 30, 2019 Operating Segment Results

Retail

 

Nine Months Ended September 30

(millions of US dollars, except

Dollars

 

Gross Margin

 

Gross Margin (%)

as otherwise noted)

2019

 

2018

 

% Change

 

2019

 

2018

 

% Change

 

2019

 

2018

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crop nutrients 1

4,082

 

3,660

 

12

 

846

 

739

 

14

 

21

 

20

Crop protection products

4,348

 

4,218

 

3

 

892

 

885

 

1

 

21

 

21

Seed

1,613

 

1,584

 

2

 

276

 

277

 

-

 

17

 

17

Merchandise 2

387

 

442

 

(12)

 

65

 

76

 

(14)

 

17

 

17

Services and other

620

 

599

 

4

 

425

 

396

 

7

 

69

 

66

 

11,050

 

10,503

 

5

 

2,504

 

2,373

 

6

 

23

 

23

Cost of goods sold 2

8,546

 

8,130

 

5

 

 

 

 

 

 

 

 

 

 

Gross margin

2,504

 

2,373

 

6

 

 

 

 

 

 

 

 

 

 

Expenses 3

1,937

 

1,748

 

11

 

 

 

 

 

 

 

 

 

 

EBIT

567

 

625

 

(9)

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

433

 

367

 

18

 

 

 

 

 

 

 

 

 

 

EBITDA

1,000

 

992

 

1

 

 

 

 

 

 

 

 

 

 

1 Includes intersegment sales. See Note 2 to the interim financial statements.

2 Certain immaterial figures have been reclassified or grouped together for the nine months ended September 30, 2018.

3 Includes selling expenses of $1,816 million (2018 – $1,732 million).

Potash

 

Nine Months Ended September 30

(millions of US dollars, except

Dollars

 

Tonnes (thousands)

 

Average per Tonne

as otherwise noted)

2019

 

2018

% Change

 

2019

 

2018

% Change

 

2019

 

2018

% Change

Manufactured product 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

832

 

830

 

-

 

3,389

 

3,962

 

(14)

 

245

 

209

 

17

Offshore

1,421

 

1,198

 

19

 

6,247

 

6,200

 

1

 

228

 

193

 

18

 

2,253

 

2,028

 

11

 

9,636

 

10,162

 

(5)

 

234

 

200

 

17

Cost of goods sold

892

 

911

 

(2)

 

 

 

 

 

 

 

93

 

90

 

3

Gross margin - manufactured

1,361

 

1,117

 

22

 

 

 

 

 

 

 

141

 

110

 

28

Gross margin - other 2

1

 

1

 

-

 

Depreciation and amortization

 

34

 

31

 

10

Gross margin - total

1,362

 

1,118

 

22

 

 

 

 

 

 

 

Impairment of assets

-

 

1,809

 

(100)

 

Gross margin excluding depreciation

 

 

 

 

 

Expenses 3

242

 

218

 

11

 

and amortization - manufactured 4

175

 

141

 

24

EBIT

1,120

 

(909)

 

n/m

 

Potash cash cost of product

 

 

 

 

 

 

Depreciation and amortization

324

 

312

 

4

 

manufactured 4

 

60

 

58

 

3

EBITDA

1,444

 

(597)

 

n/m

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA 4

1,444

 

1,212

 

19

 

 

 

 

 

 

 

 

 

 

 

 

1 Includes intersegment sales. See Note 2 to the interim financial statements.

2 Includes other potash and purchased products and is comprised of net sales of $1 million (2018 – $2 million) less cost of goods sold of $Nil (2018 – $1 million).

3 Includes provincial mining and other taxes of $237 million (2018 – $188 million).

4 See the "Non-IFRS Financial Measures" section.

Nitrogen

 

Nine Months Ended September 30

(millions of US dollars, except

Dollars

 

Tonnes (thousands)

 

Average per Tonne

as otherwise noted)

2019

 

2018 ¹

% Change

 

2019

 

2018 ¹

% Change

 

2019

 

2018 ¹

% Change

Manufactured product 2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ammonia

602

 

668

 

(10)

 

2,400

 

2,522

 

(5)

 

251

 

265

 

(5)

Urea

739

 

664

 

11

 

2,342

 

2,316

 

1

 

315

 

286

 

10

Solutions, nitrates and sulfates

540

 

549

 

(2)

 

3,166

 

3,249

 

(3)

 

170

 

169

 

1

 

1,881

 

1,881

 

-

 

7,908

 

8,087

 

(2)

 

238

 

233

 

2

Cost of goods sold

1,345

 

1,338

 

1

 

 

 

 

 

 

 

170

 

165

 

3

Gross margin - manufactured

536

 

543

 

(1)

 

 

 

 

 

 

 

68

 

68

 

-

Gross margin - other 3

57

 

53

 

8

 

Depreciation and amortization

 

50

 

41

 

22

Gross margin - total

593

 

596

 

(1)

 

Gross margin excluding depreciation

 

 

 

 

 

Expenses

7

 

36

 

(81)

 

and amortization - manufactured 4

118

 

109

 

8

EBIT

586

 

560

 

5

 

Ammonia controllable cash cost of

 

 

 

 

 

 

Depreciation and amortization

394

 

334

 

18

 

product manufactured 4

 

44

 

42

 

5

EBITDA

980

 

894

 

10

 

 

 

 

 

 

 

 

 

 

 

 

1 Restated for the reclassification of sulfate from the Phosphate segment. See the "Segment Results" section and Note 2 to the interim financial statements.

2 Includes intersegment sales. See Note 2 to the interim financial statements.

3 Includes other nitrogen (including ESN® and Rainbow) and purchased products and is comprised of net sales of $364 million (2018 – $339 million) less cost of goods sold of $307 million (2018 – $286 million).

4 See the "Non-IFRS Financial Measures" section.

Phosphate

 

Nine Months Ended September 30

(millions of US dollars, except

Dollars

 

Tonnes (thousands)

 

Average per Tonne

as otherwise noted)

2019

 

2018 ¹

% Change

 

2019

 

2018 ¹

% Change

 

2019

 

2018 ¹

% Change

Manufactured product 2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fertilizer

635

 

740

 

(14)

 

1,664

 

1,824

 

(9)

 

382

 

406

 

(6)

Industrial and feed

321

 

318

 

1

 

578

 

640

 

(10)

 

555

 

496

 

12

 

956

 

1,058

 

(10)

 

2,242

 

2,464

 

(9)

 

426

 

429

 

(1)

Cost of goods sold

963

 

983

 

(2)

 

 

 

 

 

 

 

429

 

399

 

8

Gross margin - manufactured

(7)

 

75

 

n/m

 

 

 

 

 

 

 

(3)

 

30

 

n/m

Gross margin - other 3

(4)

 

-

 

-

 

Depreciation and amortization

 

80

 

57

 

40

Gross margin - total

(11)

 

75

 

n/m

 

Gross margin excluding depreciation

 

 

 

 

-

Expenses

29

 

13

 

123

 

and amortization - manufactured 4

77

 

87

 

(11)

EBIT

(40)

 

62

 

n/m

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

180

 

140

 

29

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

140

 

202

 

(31)

 

 

 

 

 

 

 

 

 

 

 

 

1 Restated for the reclassification of sulfate to the Nitrogen segment. See the "Segment Results" section and Note 2 to the interim financial statements.

2 Includes intersegment sales. See Note 2 to the interim financial statements.

3 Includes other phosphate and purchased products and is comprised of net sales of $125 million (2018 - $97 million) less cost of goods sold of $129 million (2018 - $97 million).

4 See the "Non-IFRS Financial Measures" section.

Selected Retail measures

Three Months Ended September 30

 

Nine Months Ended September 30

 

2019

 

2018

 

2019

 

2018

Proprietary products margin as a percentage of

 

 

 

 

 

 

 

product line margin (%)

Crop nutrients

31

 

24

 

24

 

23

Crop protection products

39

 

44

 

42

 

46

Seed

20

 

18

 

44

 

42

All Products

27

 

26

 

28

 

30

Crop nutrients sales volumes (tonnes -

 

 

 

 

 

 

 

thousands)

North America

1,202

 

945

 

7,254

 

7,004

International

533

 

545

 

1,677

 

1,695

Total

1,735

 

1,490

 

8,931

 

8,699

Crop nutrients selling price per tonne

 

 

 

 

 

 

 

North America

467

 

459

 

471

 

432

International

389

 

396

 

395

 

372

Total

443

 

436

 

457

 

421

Crop nutrients gross margin per tonne

 

 

 

 

 

 

 

North America

114

 

109

 

103

 

93

International

70

 

71

 

57

 

52

Total

101

 

95

 

95

 

85

 

 

 

 

 

 

 

 

Financial performance measures

 

 

 

 

2019 Target

 

2019 Actuals

Retail EBITDA to sales (%) 1, 2

 

 

 

 

10

 

9

Retail adjusted average working capital to sales (%) 1, 2

 

 

 

20

 

25

Retail cash operating coverage ratio (%) 1, 2

 

 

 

 

60

 

62

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

 

 

 

 

 

936

1 Rolling four quarters ended September 30, 2019.

2 See the "Non-IFRS Financial Measures" section.

Selected Nitrogen measures

Three Months Ended September 30

 

Nine Months Ended September 30

 

2019

 

2018

 

2019

 

2018

Sales volumes (tonnes - thousands)

 

 

 

 

 

 

 

Fertilizer

1,304

 

1,301

 

4,204

 

4,349

Industrial and feed

1,218

 

1,262

 

3,704

 

3,738

Net sales (millions of US dollars)

 

 

 

 

 

 

 

Fertilizer

316

 

302

 

1,155

 

1,085

Industrial and feed

217

 

268

 

726

 

796

Net selling price per tonne

 

 

 

 

 

 

 

Fertilizer

243

 

232

 

275

 

249

Industrial and feed

178

 

212

 

196

 

213

Production measures

Three Months Ended September 30

 

Nine Months Ended September 30

 

2019

 

2018

 

2019

 

2018

Potash production (Product tonnes - thousands)

2,977

 

3,143

 

9,761

 

9,803

Potash shutdown weeks 1

11

 

8

 

27

 

32

Nitrogen production (Ammonia tonnes - thousands) 2

1,529

 

1,551

 

4,763

 

4,825

Ammonia operating rate (%) 3

85

 

94

 

90

 

93

Phosphate production (P2O5 tonnes - thousands) 4

374

 

389

 

1,124

 

1,139

Phosphate P2O5 operating rate (%) 4

87

 

91

 

88

 

89

1 Represents weeks of full production shutdown; excludes the impact of any periods of reduced operating rates and planned routine annual maintenance shutdowns and announced workforce reductions.

2 All figures are provided on a gross production basis.

3 Excludes Trinidad and Joffre.

4 Excludes Redwater, comparative figures were restated to exclude Redwater.

Appendix B - Non-IFRS Financial Measures

We use both IFRS and certain non-IFRS financial measures to assess performance. Non-IFRS financial measures are a numerical measure of a company’s performance, that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measures calculated and presented in accordance with IFRS. In evaluating these measures, investors should consider that the methodology applied in calculating such measures may differ among companies and analysts.

Management believes the non-IFRS financial measures provide transparent and useful supplemental information to investors in order that they may evaluate our financial performance, financial condition and liquidity using the same measures as management. These non-IFRS financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS.

The following section outlines our non-IFRS financial measures, their definitions, why management uses each measure and contains reconciliations to the most directly comparable IFRS measures.

EBITDA, Adjusted EBITDA and Potash Adjusted EBITDA

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

Definition: EBITDA is calculated as net earnings (loss) from continuing operations before finance costs, income taxes and depreciation and amortization. For a reconciliation of the EBITDA amounts disclosed in the “Quarterly Results” section which are not provided below, please refer to the respective news releases for those periods. Adjusted EBITDA is calculated as net earnings (loss) from continuing operations before finance costs, income taxes, depreciation and amortization, Merger and related costs, share-based compensation, Curtailment Gain and impairment of assets.

Why we use the measure and why it is useful to investors: As valuation measurements they exclude the effects of items that primarily reflect the impact of long-term investment and financing decisions, rather than the performance of our day-to-day operations, and as a measure of our ability to service debt and to meet other payment obligations.

 

Three Months Ended September 30

 

Nine Months Ended September 30

(millions of US dollars)

2019

 

2018

 

2019

 

2018

Net earnings (loss) from continuing operations

141

 

(1,067)

 

1,040

 

(327)

Finance costs

147

 

142

 

413

 

394

Income tax expense (recovery)

40

 

(434)

 

346

 

(199)

Depreciation and amortization

457

 

427

 

1,363

 

1,194

EBITDA

785

 

(932)

 

3,162

 

1,062

Merger and related costs

21

 

62

 

57

 

143

Share-based compensation

(21)

 

51

 

95

 

149

Curtailment Gain

-

 

(151)

 

-

 

(151)

Impairment of assets

-

 

1,809

 

33

 

1,809

Adjusted EBITDA

785

 

839

 

3,347

 

3,012

 

Three Months Ended September 30

 

Nine Months Ended September 30

(millions of US dollars)

2019

 

2018

 

2019

 

2018

Potash EBITDA

430

 

(1,311)

 

1,444

 

(597)

Impairment of assets

-

 

1,809

 

-

 

1,809

Potash adjusted EBITDA

430

 

498

 

1,444

 

1,212

Adjusted EBITDA and Adjusted Net Earnings (and the Related Per Share Amounts) Guidance

This guidance is provided on a non-IFRS basis. We do not provide a reconciliation of such forward-looking measures to the most directly comparable financial measures calculated and presented in accordance with IFRS due to unknown variables and the uncertainty related to future results. These unknown variables may include unpredictable transactions of significant value which may be inherently difficult to determine, without unreasonable efforts. Guidance excludes the impacts of Merger and related costs and share-based compensation.

Adjusted Net Earnings (and the Related Per Share Amounts)

Most directly comparable IFRS financial measure: Net earnings from continuing operations and net earnings per share.

Definition: Net earnings from continuing operations before Merger and related costs, share-based compensation and impairment of assets, net of tax.

Why we use the measure and why it is useful to investors: Focuses on the performance of our day-to-day operations excluding the effects of non-operating items.

 

Three Months Ended
September 30, 2019

 

Nine Months Ended
September 30, 2019

 

 

 

 

 

Per

 

 

 

 

 

Per

(millions of US dollars, except as otherwise

Increases

 

 

 

Diluted

 

Increases

 

 

 

Diluted

noted)

(Decreases)

 

Post-Tax

 

Share

 

(Decreases)

 

Post-Tax

 

Share

Net earnings

 

 

141

 

0.24

 

 

 

1,040

 

1.77

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

Merger and related costs

21

 

16

 

0.03

 

57

 

43

 

0.08

Share-based compensation

(21)

 

(16)

 

(0.03)

 

95

 

71

 

0.12

Impairment of assets

-

 

-

 

-

 

33

 

25

 

0.04

Adjusted net earnings

 

 

141

 

0.24

 

 

 

1,179

 

2.01

Free Cash Flow

Most directly comparable IFRS financial measure: Cash provided by operating activities.

Definition: Cash provided by operating activities less sustaining capital expenditures, cash provided by operating activities from discontinued operations and changes in non-cash operating working capital. Sustaining capital expenditures are required to sustain operations at existing levels and include major repairs and maintenance and plant turnarounds.

Why we use the measure and why it is useful to investors: For evaluation of liquidity and financial strength, and as a component of employee remuneration calculations. It is also useful as an indicator of our ability to service debt, meet other payment obligations and make strategic investments. Free cash flow does not represent residual cash flow available for discretionary expenditures.

 

Three Months Ended September 30

 

Nine Months Ended September 30

(millions of US dollars)

2019

 

2018

 

2019

 

2018

Cash provided by (used in) operating activities

589

 

(177)

 

1,246

 

84

Cash provided by operating activities from

 

discontinued operations

-

 

(30)

 

-

 

(156)

Sustaining capital expenditures

(256)

 

(305)

 

(667)

 

(738)

Changes in non-cash operating working capital

(4)

 

934

 

1,440

 

2,382

Free cash flow

329

 

422

 

2,019

 

1,572

Potash Cash Cost of Product Manufactured (“COPM”)

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

Definition: Potash COGS for the period excluding depreciation and amortization expense and inventory and other adjustments divided by the production tonnes for the period.

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

 

Three Months Ended September 30

 

Nine Months Ended September 30

(millions of US dollars, except as otherwise noted)

2019

 

2018

 

2019

 

2018

Total COGS - Potash

303

 

358

 

892

 

912

Change in inventory

(26)

 

(75)

 

(1)

 

(38)

Other adjustments

(4)

 

(19)

 

(16)

 

(9)

COPM

273

 

264

 

875

 

865

Depreciation and amortization included in COPM

(87)

 

(87)

 

(292)

 

(293)

Cash COPM

186

 

177

 

583

 

572

Production tonnes (tonnes - thousands)

2,977

 

3,143

 

9,761

 

9,803

Potash cash COPM per tonne

62

 

56

 

60

 

58

Ammonia Controllable Cash COPM

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

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

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

 

Three Months Ended September 30

 

Nine Months Ended September 30

(millions of US dollars, except as otherwise noted)

2019

 

2018

 

2019

 

2018

Total COGS - Nitrogen

469

 

475

 

1,652

 

1,624

Depreciation and amortization in COGS

(109)

 

(115)

 

(340)

 

(334)

Cash COGS for products other than ammonia

(262)

 

(250)

 

(952)

 

(926)

Ammonia

 

 

 

 

 

 

 

Total cash COGS before other adjustments

98

 

110

 

360

 

364

Other adjustments 1

(2)

 

(2)

 

(35)

 

(28)

Total cash COPM

96

 

108

 

325

 

336

Natural gas and steam costs

(62)

 

(73)

 

(221)

 

(231)

Controllable cash COPM

34

 

35

 

104

 

105

Production tonnes (net tonnes 2 - thousands)

755

 

795

 

2,343

 

2,477

Ammonia controllable cash COPM per tonne

45

 

44

 

44

 

42

1 Includes changes in inventory balances and other adjustments.

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

Gross Margin Excluding Depreciation and Amortization Per Tonne - Manufactured

Most directly comparable IFRS financial measure: Gross margin.

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

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.

Retail EBITDA to Sales

Most directly comparable IFRS financial measure: Retail EBITDA divided by Retail sales.

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

Why we use the measure and why it is useful to investors: To evaluate operational efficiency. A higher or lower percentage represents increased or decreased efficiency, respectively.

 

Rolling four quarters ended September 30, 2019

(millions of US dollars, except as otherwise noted)

Q4 2018

 

Q1 2019

 

Q2 2019

 

Q3 2019

 

Total

EBITDA

214

 

(26)

 

836

 

190

 

1,214

Sales 1

2,017

 

2,039

 

6,512

 

2,499

 

13,067

EBITDA to Sales (%)

 

 

 

 

 

 

 

 

9

1 Certain immaterial figures have been reclassified for Q4 2018.

Retail Adjusted Average Working Capital to Sales

Most directly comparable IFRS financial measure: (Current assets minus current liabilities for Retail) divided by Retail sales.

Definition: Retail average working capital divided by Retail sales for the last four rolling quarters. Given the significance of our recent acquisition (Q3 2019 – Ruralco), and to appropriately reflect our operational efficiency, we revised our calculation to exclude working capital acquired in the quarter each acquisition was completed.

Why we use the measure and why it is useful to investors: To evaluate operational efficiency. A lower or higher percentage represents increased or decreased efficiency, respectively.

 

Rolling four quarters ended September 30, 2019

(millions of US dollars, except as otherwise noted)

Q4 2018

 

Q1 2019

 

Q2 2019

 

Q3 2019

 

Average/Total

Working capital

2,312

 

3,190

 

3,741

 

3,699

 

 

Working capital from recent acquisition

-

 

-

 

-

 

(75)

 

 

Adjusted working capital

2,312

 

3,190

 

3,741

 

3,624

 

3,217

Sales 1

2,017

 

2,039

 

6,512

 

2,499

 

13,067

Adjusted average working capital to sales (%)

 

 

 

 

 

 

 

25

1 Certain immaterial figures have been reclassified for Q4 2018.

Retail Cash Operating Coverage Ratio

Most directly comparable IFRS financial measure: Retail expenses below gross margin as a percentage of Retail gross margin.

Definition: Retail expenses below gross margin 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. Starting in the second quarter of 2019, we no longer adjust for Merger-related adjustments to align with the 2019 target calculations.

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, 2019

(millions of US dollars, except as otherwise noted)

Q4 2018

 

Q1 2019

 

Q2 2019

 

Q3 2019

 

Total

Gross margin

662

 

409

 

1,440

 

655

 

3,166

Depreciation and amortization in cost of goods sold

2

 

2

 

1

 

2

 

7

Gross margin excluding depreciation and amortization

664

 

411

 

1,441

 

657

 

3,173

EBIT

(82)

 

162

 

(691)

 

(38)

 

(649)

Depreciation and amortization

(132)

 

(134)

 

(144)

 

(152)

 

(562)

Operating expenses excluding depreciation and

 

 

 

 

 

 

 

 

 

amortization

450

 

439

 

606

 

467

 

1,962

Cash operating coverage ratio (%)

 

 

 

 

 

 

 

 

62

Retail EBITDA per US Selling Location

Most directly comparable IFRS financial measure: Retail US EBITDA.

Definition: Total Retail US EBITDA for the last four rolling quarters adjusted for acquisitions in those quarters, divided by the number of US locations that have generated sales in the last four rolling quarters adjusted for acquired locations.

Why we use the measure and why it is useful to investors: To assess our US Retail operating performance. Included are locations owned for more than 12 months.

 

Rolling four quarters ended September 30, 2019

(millions of US dollars, except as otherwise noted)

Q4 2018

 

Q1 2019

 

Q2 2019

 

Q3 2019

 

Total

US EBITDA

121

 

(58)

 

672

 

142

 

877

Adjustments for acquisitions

 

 

 

 

 

 

 

 

(22)

US EBITDA adjusted for acquisitions

 

 

 

 

 

 

 

 

855

Number of US selling locations adjusted for acquisitions

 

 

 

 

 

 

 

913

EBITDA per US selling location (thousands of US dollars)

 

 

 

 

 

 

 

936

Condensed Consolidated Financial Statements

Unaudited in millions of dollars except as otherwise noted

Condensed Consolidated Statements of Earnings (Loss)

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30

 

September 30

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

Note 1

 

 

 

Note 1

SALES

Note 2

4,134

 

3,990

 

16,482

 

15,761

Freight, transportation and distribution

 

246

 

253

 

667

 

675

Cost of goods sold

 

2,748

 

2,582

 

11,388

 

10,953

GROSS MARGIN

 

1,140

 

1,155

 

4,427

 

4,133

Selling expenses

 

607

 

560

 

1,835

 

1,758

General and administrative expenses

 

97

 

112

 

287

 

312

Provincial mining and other taxes

 

92

 

79

 

253

 

192

Share-based compensation (recovery) expense

 

(21)

 

51

 

95

 

149

Impairment of assets

Note 3

-

 

1,809

 

33

 

1,809

Other expenses (income)

Note 4

37

 

(97)

 

125

 

45

EARNINGS (LOSS) BEFORE FINANCE COSTS AND INCOME TAXES

328

 

(1,359)

 

1,799

 

(132)

Finance costs

 

147

 

142

 

413

 

394

EARNINGS (LOSS) BEFORE INCOME TAXES

 

181

 

(1,501)

 

1,386

 

(526)

Income tax expense (recovery)

Note 5

40

 

(434)

 

346

 

(199)

NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS

 

141

 

(1,067)

 

1,040

 

(327)

Net earnings from discontinued operations

Note 6

-

 

23

 

-

 

698

NET EARNINGS (LOSS)

 

141

 

(1,044)

 

1,040

 

371

NET EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS

 

 

 

 

 

 

 

Basic

 

0.25

 

(1.74)

 

1.78

 

(0.52)

Diluted

 

0.24

 

(1.74)

 

1.77

 

(0.52)

NET EARNINGS PER SHARE FROM DISCONTINUED OPERATIONS

 

 

 

 

 

 

 

Basic

 

-

 

0.04

 

-

 

1.11

Diluted

 

-

 

0.04

 

-

 

1.11

NET EARNINGS (LOSS) PER SHARE ("EPS")

 

 

 

 

 

 

 

 

Basic

 

0.25

 

(1.70)

 

1.78

 

0.59

Diluted

 

0.24

 

(1.70)

 

1.77

 

0.59

Weighted average shares outstanding for basic EPS

 

572,887,000

 

614,950,000

 

585,421,000

 

629,197,000

Weighted average shares outstanding for diluted EPS

 

573,702,000

 

614,950,000

 

586,335,000

 

629,197,000

Condensed Consolidated Statements of Comprehensive Income (Loss)

 

Three Months Ended

 

Nine Months Ended

 

September 30

 

September 30

(Net of related income taxes)

2019

 

2018

 

2019

 

2018

 

 

 

Note 1

 

 

 

Note 1

NET EARNINGS (LOSS)

141

 

(1,044)

 

1,040

 

371

Other comprehensive (loss) income

 

 

 

 

 

 

 

Items that will not be reclassified to net earnings (loss):

 

 

 

 

 

 

 

Net actuarial gain on defined benefit plans

-

 

-

 

-

 

56

Net fair value (loss) gain on investments

(11)

 

14

 

(26)

 

(79)

Items that have been or may be subsequently reclassified to

 

 

 

 

 

 

 

net earnings (loss):

Loss on currency translation of foreign operations

(71)

 

(8)

 

(36)

 

(146)

Other

7

 

(5)

 

5

 

(5)

OTHER COMPREHENSIVE (LOSS) INCOME

(75)

 

1

 

(57)

 

(174)

COMPREHENSIVE INCOME (LOSS)

66

 

(1,043)

 

983

 

197

 

 

 

 

 

 

 

 

(See Notes to the Condensed Consolidated Financial Statements)

 

Condensed Consolidated Statements of Cash Flows

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30

 

September 30

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

Note 1

 

 

 

Note 1

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net earnings (loss)

 

141

 

(1,044)

 

1,040

 

371

Adjustments for:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

457

 

427

 

1,363

 

1,194

Share-based compensation

 

(21)

 

51

 

95

 

149

Impairment of assets

Note 3

-

 

1,809

 

33

 

1,809

Provision for (recovery of) deferred income tax

 

31

 

(356)

 

178

 

(58)

Gain on sale of investment

Note 6

-

 

-

 

-

 

(841)

Other long-term liabilities and miscellaneous

 

(23)

 

(130)

 

(23)

 

(158)

Changes in non-cash operating working capital:

 

 

 

 

 

 

 

 

Receivables

 

624

 

327

 

(1,427)

 

(1,504)

Inventories

 

541

 

129

 

1,239

 

124

Prepaid expenses and other current assets

 

(23)

 

(117)

 

801

 

737

Payables and accrued charges

 

(1,138)

 

(1,273)

 

(2,053)

 

(1,739)

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

 

589

 

(177)

 

1,246

 

84

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

(518)

 

(352)

 

(1,177)

 

(913)

Business acquisitions, net of cash acquired

Note 11

(348)

 

(140)

 

(837)

 

(385)

Proceeds from disposal of discontinued operations, net of tax

Note 6

-

 

14

 

55

 

1,833

Purchase of investments

 

(42)

 

(15)

 

(164)

 

(123)

Cash acquired in Merger

 

-

 

-

 

-

 

466

Other

 

4

 

14

 

(10)

 

25

CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES

 

(904)

 

(479)

 

(2,133)

 

903

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Transaction costs on long-term debt

 

-

 

-

 

(29)

 

(21)

Proceeds from short-term debt, net

 

575

 

1,319

 

1,534

 

3,214

Proceeds from long-term debt

Note 9

-

 

-

 

1,510

 

-

Repayment of long-term debt

Note 9

(11)

 

(2)

 

(1,010)

 

(8)

Repayment of principal portion of lease liabilities

 

(49)

 

-

 

(166)

 

-

Dividends paid

Note 10

(244)

 

(248)

 

(764)

 

(708)

Repurchase of common shares

Note 10

-

 

(459)

 

(1,930)

 

(1,663)

Issuance of common shares

Note 10

1

 

5

 

18

 

7

CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

 

272

 

615

 

(837)

 

821

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND

 

CASH EQUIVALENTS

 

(5)

 

(13)

 

(22)

 

(22)

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

(48)

 

(54)

 

(1,746)

 

1,786

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

616

 

1,956

 

2,314

 

116

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

568

 

1,902

 

568

 

1,902

Cash and cash equivalents comprised of:

 

 

 

 

 

 

 

 

Cash

 

326

 

580

 

326

 

580

Short-term investments

 

242

 

1,322

 

242

 

1,322

 

 

568

 

1,902

 

568

 

1,902

SUPPLEMENTAL CASH FLOWS INFORMATION

 

 

 

 

 

 

 

 

Interest paid

 

111

 

125

 

353

 

366

Income taxes paid

 

46

 

27

 

1

 

123

Total cash outflow for leases

 

89

 

-

 

253

 

-

 

 

 

 

 

 

 

 

 

(See Notes to the Condensed Consolidated Financial Statements)

 

Condensed Consolidated Statements of Changes in Shareholders’ Equity

 

 

 

 

 

Accumulated Other Comprehensive (Loss) Income ("AOCI")

 

 

 

 

 

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial

 

Loss on

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Fair

 

Gain on

 

Currency

 

 

 

 

 

 

 

 

 

 

 

 

 

Value

 

Defined

 

Translation

 

 

 

 

 

 

 

 

 

Share

 

Contributed

 

(Loss) Gain on

 

Benefit

 

of Foreign

 

 

 

Total

 

Retained

 

Total

 

Capital

 

Surplus

 

Investments

 

Plans 1

 

Operations

 

Other

 

AOCI

 

Earnings

 

Equity 2

BALANCE - DECEMBER 31, 2018

16,740

 

231

 

(7)

 

-

 

(251)

 

(33)

 

(291)

 

7,745

 

24,425

Net earnings

-

 

-

 

-

 

-

 

-

 

-

 

-

 

1,040

 

1,040

Other comprehensive (loss) income

-

 

-

 

(26)

 

-

 

(36)

 

5

 

(57)

 

-

 

(57)

Shares repurchased (Note 10)

(992)

 

-

 

-

 

-

 

-

 

-

 

-

 

(886)

 

(1,878)

Dividends declared

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(496)

 

(496)

Effect of share-based compensation including

 

issuance of common shares

21

 

13

 

-

 

-

 

-

 

-

 

-

 

-

 

34

Transfer of net loss on investment

-

 

-

 

4

 

-

 

-

 

-

 

4

 

(4)

 

-

Transfer of net loss on cash flow hedges

-

 

-

 

-

 

-

 

-

 

8

 

8

 

-

 

8

BALANCE - SEPTEMBER 30, 2019

15,769

 

244

 

(29)

 

-

 

(287)

 

(20)

 

(336)

 

7,399

 

23,076

BALANCE - DECEMBER 31, 2017

1,806

 

230

 

73

 

-

 

(2)

 

(46)

 

25

 

6,242

 

8,303

Merger impact

15,898

 

7

 

-

 

-

 

-

 

-

 

-

 

(1)

 

15,904

Net earnings

-

 

-

 

-

 

-

 

-

 

-

 

-

 

371

 

371

Other comprehensive (loss) income

-

 

-

 

(79)

 

56

 

(146)

 

(5)

 

(174)

 

-

 

(174)

Shares repurchased (Note 10)

(884)

 

(23)

 

-

 

-

 

-

 

-

 

-

 

(756)

 

(1,663)

Dividends declared

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(749)

 

(749)

Effect of share-based compensation including

 

issuance of common shares

8

 

17

 

-

 

-

 

-

 

-

 

-

 

-

 

25

Transfer of net loss on sale of investment (Note 6)

-

 

-

 

19

 

-

 

-

 

-

 

19

 

(19)

 

-

Transfer of net loss on cash flow hedges

-

 

-

 

-

 

-

 

-

 

18

 

18

 

-

 

18

Transfer of net actuarial gain on defined benefit plans

-

 

-

 

-

 

(56)

 

-

 

-

 

(56)

 

56

 

-

BALANCE - SEPTEMBER 30, 2018

16,828

 

231

 

13

 

-

 

(148)

 

(33)

 

(168)

 

5,144

 

22,035

1 Any amounts incurred during a period were closed out to retained earnings at each period-end. Therefore, no balance exists at the beginning or end of period.

2 All equity transactions were attributable to common shareholders.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(See Notes to the Condensed Consolidated Financial Statements)

 

Condensed Consolidated Balance Sheets

As at

 

September 30, 2019

 

December 31, 2018

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

568

 

2,314

Receivables

 

4,843

 

3,342

Inventories

 

3,873

 

4,917

Prepaid expenses and other current assets

 

440

 

1,089

 

 

9,724

 

11,662

Non-current assets

 

 

 

 

Property, plant and equipment

Note 1

20,045

 

18,796

Goodwill

Note 11

11,983

 

11,431

Other intangible assets

 

2,330

 

2,210

Investments

Note 11

809

 

878

Other assets

 

538

 

525

TOTAL ASSETS

 

45,429

 

45,502

LIABILITIES

 

 

 

 

Current liabilities

 

 

 

 

Short-term debt

Note 8

2,287

 

629

Current portion of long-term debt

Note 9

501

 

995

Current portion of lease liabilities

Note 1

219

 

8

Payables and accrued charges

 

4,615

 

6,703

 

 

7,622

 

8,335

Non-current liabilities

 

 

 

 

Long-term debt

Note 9

8,555

 

7,579

Lease liabilities

Note 1

793

 

12

Deferred income tax liabilities

Note 5

3,137

 

2,907

Pension and other post-retirement benefit liabilities

 

425

 

395

Asset retirement obligations and accrued environmental costs

 

1,662

 

1,673

Other non-current liabilities

 

159

 

176

TOTAL LIABILITIES

 

22,353

 

21,077

SHAREHOLDERS’ EQUITY

 

 

 

 

Share capital

Note 10

15,769

 

16,740

Contributed surplus

 

244

 

231

Accumulated other comprehensive loss

 

(336)

 

(291)

Retained earnings

 

7,399

 

7,745

TOTAL SHAREHOLDERS’ EQUITY

 

23,076

 

24,425

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

45,429

 

45,502

 

 

 

 

 

(See Notes to the Condensed Consolidated Financial Statements)

 

Notes to the Condensed Consolidated Financial Statements

As at and for the Three and Nine Months Ended September 30, 2019

NOTE 1 BASIS OF PRESENTATION

Nutrien Ltd. (collectively with its subsidiaries, known as “Nutrien” or the “Company” except to the extent the context otherwise requires) is an integrated ag solutions provider and plays a critical role in helping growers around the globe increase food production in a sustainable manner. Nutrien is the world’s largest provider of crop inputs and services. Disclosures related to the merger of Potash Corporation of Saskatchewan Inc. and Agrium Inc. (the “Merger”) can be found in Note 3 of the Company’s 2018 annual consolidated financial statements.

These unaudited interim condensed consolidated financial statements (“interim financial statements”) are based on International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) and have been prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim Financial Reporting”. The accounting policies and methods of computation used in preparing these interim financial statements are consistent with those used in the preparation of the Company’s 2018 annual consolidated financial statements, with the exception of IFRS 16, “Leases” (“IFRS 16”), which was adopted effective January 1, 2019, and resulted in an increase to property, plant and equipment and recognition of lease liabilities of approximately $1 billion at January 1, 2019. Other impacts from adoption of IFRS 16 are disclosed in Note 13 of Nutrien’s first quarter 2019 unaudited condensed 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 the Company’s 2018 annual consolidated financial statements.

Certain immaterial 2018 figures have been reclassified or grouped together in the condensed consolidated statements of: earnings (loss), comprehensive income (loss), cash flows, changes in shareholders’ equity and in the segment information.

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 4, 2019.

NOTE 2 SEGMENT INFORMATION

The Company’s four reportable operating segments are: Retail, Potash, Nitrogen and Phosphate. The Retail segment distributes crop nutrients, crop protection products, seed and merchandise, and provides services directly to growers through a network of farm centers in North and South America and Australia. The Potash, Nitrogen and Phosphate segments are differentiated by the chemical nutrient contained in the products that each produces. In the first quarter of 2019, the Company’s Chief Operating Decision Maker reassessed product groupings and decided to evaluate the performance of ammonium sulfate as part of the Nitrogen segment, rather than the Phosphate and Sulfate segment reported in the Company’s 2018 annual consolidated financial statements. Comparative amounts for Nitrogen and Phosphate were restated, including EBITDA which is calculated as net earnings (loss) from continuing operations before finance costs, income taxes and depreciation and amortization. For the three months ended September 30, 2018, Nitrogen reflected increases of $31, $9 and $13 in sales, gross margin and EBITDA, respectively, and for the nine months ended September 30, 2018, Nitrogen reflected increases of $91, $32 and $41 in sales, gross margin and EBITDA, respectively, as well as $377 in assets as at December 31, 2018, with corresponding decreases in Phosphate. In addition, the “Others” segment was renamed to “Corporate and Others”.

 

 

Three Months Ended September 30, 2019

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

Retail

 

Potash

 

Nitrogen

 

Phosphate

 

and Others

 

Eliminations

 

Consolidated

Sales

– third party

2,489

 

748

 

564

 

333

 

-

 

-

 

4,134

 

– intersegment

10

 

68

 

115

 

43

 

-

 

(236)

 

-

Sales

– total

2,499

 

816

 

679

 

376

 

-

 

(236)

 

4,134

Freight, transportation and distribution

-

 

107

 

77

 

62

 

-

 

-

 

246

Net sales

2,499

 

709

 

602

 

314

 

-

 

(236)

 

3,888

Cost of goods sold

1,844

 

303

 

469

 

329

 

-

 

(197)

 

2,748

Gross margin

655

 

406

 

133

 

(15)

 

-

 

(39)

 

1,140

Selling expenses

601

 

2

 

7

 

2

 

(5)

 

-

 

607

General and administrative expenses

28

 

-

 

4

 

-

 

65

 

-

 

97

Provincial mining and other taxes

-

 

83

 

1

 

-

 

8

 

-

 

92

Share-based compensation recovery

-

 

-

 

-

 

-

 

(21)

 

-

 

(21)

Other (income) expenses

(12)

 

1

 

1

 

7

 

40

 

-

 

37

Earnings (loss) before finance costs and income taxes

38

 

320

 

120

 

(24)

 

(87)

 

(39)

 

328

Depreciation and amortization

152

 

110

 

127

 

58

 

10

 

-

 

457

EBITDA

190

 

430

 

247

 

34

 

(77)

 

(39)

 

785

Assets – at September 30, 2019

18,996

 

11,939

 

10,807

 

2,207

 

2,029

 

(549)

 

45,429

 

 

Three Months Ended September 30, 2018

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

Retail

 

Potash

 

Nitrogen 1

 

Phosphate 1

 

and Others

 

Eliminations

 

Consolidated

Sales

– third party

2,117

 

880

 

600

 

393

 

-

 

-

 

3,990

 

– intersegment

14

 

62

 

124

 

71

 

-

 

(271)

 

-

Sales

– total

2,131

 

942

 

724

 

464

 

-

 

(271)

 

3,990

Freight, transportation and distribution

-

 

125

 

85

 

54

 

-

 

(11)

 

253

Net sales

2,131

 

817

 

639

 

410

 

-

 

(260)

 

3,737

Cost of goods sold

1,598

 

358

 

475

 

383

 

-

 

(232)

 

2,582

Gross margin

533

 

459

 

164

 

27

 

-

 

(28)

 

1,155

Selling expenses

552

 

3

 

8

 

3

 

(6)

 

-

 

560

General and administrative expenses

25

 

3

 

7

 

2

 

75

 

-

 

112

Provincial mining and other taxes

-

 

78

 

1

 

-

 

-

 

-

 

79

Share-based compensation expense

-

 

-

 

-

 

-

 

51

 

-

 

51

Impairment of assets (Note 3)

-

 

1,809

 

-

 

-

 

-

 

-

 

1,809

Other (income) expenses

(38)

 

5

 

(7)

 

(1)

 

(56)

 

-

 

(97)

(Loss) earnings before finance costs and income taxes

(6)

 

(1,439)

 

155

 

23

 

(64)

 

(28)

 

(1,359)

Depreciation and amortization

122

 

128

 

115

 

52

 

10

 

-

 

427

EBITDA

116

 

(1,311)

 

270

 

75

 

(54)

 

(28)

 

(932)

Assets – at December 31, 2018

17,964

 

11,710

 

10,386

 

2,406

 

3,678

 

(642)

 

45,502

1 Comparative figures have been restated to reflect the change in the sulfate product grouping from Phosphate and Sulfate to Nitrogen.

 

 

Nine Months Ended September 30, 2019

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

Retail

 

Potash

 

Nitrogen

 

Phosphate

 

and Others

 

Eliminations

 

Consolidated

Sales

– third party

11,022

 

2,328

 

2,033

 

1,099

 

-

 

-

 

16,482

 

– intersegment

28

 

178

 

487

 

160

 

-

 

(853)

 

-

Sales

– total

11,050

 

2,506

 

2,520

 

1,259

 

-

 

(853)

 

16,482

Freight, transportation and distribution

-

 

252

 

275

 

178

 

-

 

(38)

 

667

Net sales

11,050

 

2,254

 

2,245

 

1,081

 

-

 

(815)

 

15,815

Cost of goods sold

8,546

 

892

 

1,652

 

1,092

 

-

 

(794)

 

11,388

Gross margin

2,504

 

1,362

 

593

 

(11)

 

-

 

(21)

 

4,427

Selling expenses

1,816

 

7

 

21

 

5

 

(14)

 

-

 

1,835

General and administrative expenses

82

 

-

 

11

 

3

 

191

 

-

 

287

Provincial mining and other taxes

-

 

237

 

2

 

1

 

13

 

-

 

253

Share-based compensation expense

-

 

-

 

-

 

-

 

95

 

-

 

95

Impairment of assets (Note 3)

-

 

-

 

-

 

-

 

33

 

-

 

33

Other expenses (income)

39

 

(2)

 

(27)

 

20

 

95

 

-

 

125

Earnings (loss) before finance costs and income taxes

567

 

1,120

 

586

 

(40)

 

(413)

 

(21)

 

1,799

Depreciation and amortization

433

 

324

 

394

 

180

 

32

 

-

 

1,363

EBITDA

1,000

 

1,444

 

980

 

140

 

(381)

 

(21)

 

3,162

Assets – at September 30, 2019

18,996

 

11,939

 

10,807

 

2,207

 

2,029

 

(549)

 

45,429

 

 

Nine Months Ended September 30, 2018

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

Retail

 

Potash

 

Nitrogen 1

 

Phosphate 1

 

and Others

 

Eliminations

 

Consolidated

Sales

– third party

10,467

 

2,148

 

2,037

 

1,109

 

-

 

-

 

15,761

 

– intersegment

36

 

180

 

462

 

203

 

-

 

(881)

 

-

Sales

– total

10,503

 

2,328

 

2,499

 

1,312

 

-

 

(881)

 

15,761

Freight, transportation and distribution

-

 

298

 

279

 

157

 

-

 

(59)

 

675

Net sales

10,503

 

2,030

 

2,220

 

1,155

 

-

 

(822)

 

15,086

Cost of goods sold

8,130

 

912

 

1,624

 

1,080

 

-

 

(793)

 

10,953

Gross margin

2,373

 

1,118

 

596

 

75

 

-

 

(29)

 

4,133

Selling expenses

1,732

 

9

 

24

 

8

 

(15)

 

-

 

1,758

General and administrative expenses

73

 

8

 

17

 

6

 

208

 

-

 

312

Provincial mining and other taxes

-

 

188

 

2

 

1

 

1

 

-

 

192

Share-based compensation expense

-

 

-

 

-

 

-

 

149

 

-

 

149

Impairment of assets (Note 3)

-

 

1,809

 

-

 

-

 

-

 

-

 

1,809

Other (income) expenses

(57)

 

13

 

(7)

 

(2)

 

98

 

-

 

45

Earnings (loss) before finance costs and income taxes

625

 

(909)

 

560

 

62

 

(441)

 

(29)

 

(132)

Depreciation and amortization

367

 

312

 

334

 

140

 

41

 

-

 

1,194

EBITDA

992

 

(597)

 

894

 

202

 

(400)

 

(29)

 

1,062

Assets – at December 31, 2018

17,964

 

11,710

 

10,386

 

2,406

 

3,678

 

(642)

 

45,502

1 Comparative figures have been restated to reflect the change in the sulfate product grouping from Phosphate and Sulfate to Nitrogen.

The Company disaggregated revenue from contracts with customers by product line or geographic location for each reportable segment to show how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

 

Three Months Ended

 

Nine Months Ended

 

September 30

 

September 30

 

2019

 

2018

 

2019

 

2018

Retail sales by product line

 

 

 

 

 

 

 

Crop nutrients

769

 

650

 

4,082

 

3,660

Crop protection products

1,318

 

1,086

 

4,348

 

4,218

Seed

60

 

60

 

1,613

 

1,584

Merchandise

135

 

161

 

387

 

442

Services and other

217

 

174

 

620

 

599

 

2,499

 

2,131

 

11,050

 

10,503

Potash sales by geography

 

 

 

 

 

 

 

Manufactured product

 

 

 

 

 

 

 

North America

437

 

483

 

1,084

 

1,128

Offshore 1

379

 

458

 

1,421

 

1,198

Other potash and purchased products

-

 

1

 

1

 

2

 

816

 

942

 

2,506

 

2,328

Nitrogen sales by product line 2

 

 

 

 

 

 

 

Manufactured product

 

 

 

 

 

 

 

Ammonia

172

 

225

 

713

 

783

Urea

239

 

217

 

801

 

730

Solutions, nitrates and sulfates

193

 

207

 

613

 

620

Other nitrogen and purchased products

75

 

75

 

393

 

366

 

679

 

724

 

2,520

 

2,499

Phosphate sales by product line 2

 

 

 

 

 

 

 

Manufactured Product

 

 

 

 

 

 

 

Fertilizer

205

 

305

 

752

 

846

Industrial and feed

119

 

126

 

359

 

352

Other phosphate and purchased products

52

 

33

 

148

 

114

 

376

 

464

 

1,259

 

1,312

1 Relates primarily to Canpotex Ltd. ("Canpotex") (Note 13).
2 Comparative figures have been restated to reflect the change in the sulfate product grouping from Phosphate and Sulfate to Nitrogen.

 

NOTE 3 IMPAIRMENT OF ASSETS

During the nine months ended September 30, 2019, the Company recorded an impairment of $33 relating to certain intangible assets.

During the nine months ended September 30, 2018, through a strategic portfolio review, the Company determined the New Brunswick Potash operations would no longer be part of the Company’s medium-term or long-term strategic plans. Accordingly, the New Brunswick cash generating unit was estimated to have a recoverable amount of $50, based on the fair value less costs of disposal. This resulted in an impairment loss of $1,809 ($1,320, net of tax) related to its property, plant and equipment being recorded in the Potash segment for the three and nine months ended September 30, 2018. The estimated recoverable amount was determined to be the salvage value of the assets based on the estimated fair market value of similar used assets and past experience, a Level 3 fair value measurement.

NOTE 4 OTHER EXPENSES (INCOME)

 

Three Months Ended

 

Nine Months Ended

 

September 30

 

September 30

 

2019

 

2018

 

2019

 

2018

Merger and related costs

21

 

62

 

57

 

143

Foreign exchange loss (gain)

2

 

-

 

14

 

(2)

Earnings of equity-accounted investees

(6)

 

(15)

 

(53)

 

(26)

Gain on curtailment of defined benefit pension and other post-retirement benefit plans

-

 

(151)

 

-

 

(151)

Other expenses

20

 

7

 

107

 

81

 

37

 

(97)

 

125

 

45

During the third quarter of 2018, as part of the Company’s continuous assessment of its operations, participation (based on age and years of service) in certain company defined benefit pension and other post-retirement benefit plans was suspended and/or discontinued effective January 1, 2020. As a result, the Company recognized a merger-related gain on curtailment of defined benefit pension and other post-retirement benefit plans of $151.

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 from continuing operations for each jurisdiction.

 

Three Months Ended

 

Nine Months Ended

 

September 30

 

September 30

Income Tax Related to Continuing Operations

2019

 

2018

 

2019

 

2018

Income tax expense (recovery)

40

 

(434)

 

346

 

(199)

Actual effective tax rate on earnings (loss) from continuing operations (%)

22

 

29

 

25

 

38

Actual effective tax rate including discrete items (%)

22

 

29

 

25

 

38

Discrete tax adjustments that impacted the tax rate

1

 

2

 

5

 

-

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, 2019

 

As at December 31, 2018

Current income tax assets

 

 

 

 

Current

Receivables

81

 

248

Non-current

Other assets

36

 

36

Deferred income tax assets

Other assets

269

 

216

Total income tax assets

 

386

 

500

Current income tax liabilities

 

 

 

 

Current

Payables and accrued charges

41

 

47

Non-current

Other non-current liabilities

40

 

64

Deferred income tax liabilities

Deferred income tax liabilities

3,137

 

2,907

Total income tax liabilities

 

3,218

 

3,018

NOTE 6 DISCONTINUED OPERATIONS

During the three and nine months ended September 30, 2019, there were no discontinued operations.

In 2018, the Company’s investments in Sociedad Quimica y Minera de Chile S.A. (“SQM”), Israel Chemical Ltd. (“ICL”) and Arab Potash Company (“APC”) were presented as discontinued operations. During the nine months ended September 30, 2018, the Company sold its investments in ICL, a portion of its investment in SQM and its Conda Phosphate operations for proceeds, net of commissions, of $1,061, $685 and $87, respectively.

Net earnings from discontinued operations were comprised of:

 

Three Months Ended

 

Nine Months Ended

 

September 30, 2018

 

September 30, 2018

Gain on disposal of investment in SQM

-

 

841

Dividend income of SQM, APC and ICL 1

30

 

156

Income tax expense 2

(7)

 

(299)

Net earnings from discontinued operations

23

 

698

1 Dividend income is included in cash provided by operating activities on the condensed consolidated statements of cash flows.

2 For the three months ended September 30, 2018, income tax expense relates to the planned repatriation of dividend income and the remaining excess cash available in Chile. For the nine months ended September 30, 2018, income tax expense is comprised of $255 relating to the disposals of certain SQM shares including the planned repatriation of the net proceeds, and $44 relating to earnings from discontinued operations.

NOTE 7 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 the Company’s finance department. There have been no changes to the Company’s valuation methods presented in Note 13 of the 2018 annual consolidated financial statements and those valuation methods have been applied in these interim financial statements.

The following table presents the Company’s fair value hierarchy for financial assets and financial liabilities carried at fair value on a recurring basis or measured at amortized cost:

 

September 30, 2019

 

December 31, 2018

 

Carrying

 

 

 

 

 

Carrying

 

 

 

 

Financial instruments measured at

Amount

 

Level 1 1

 

Level 2 1

 

Amount

 

Level 1 1

 

Level 2 1

Fair value on a recurring basis

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

568

 

-

 

568

 

2,314

 

-

 

2,314

Derivative instrument assets

5

 

-

 

5

 

5

 

-

 

5

Other current financial assets

- marketable securities 2

192

 

23

 

169

 

97

 

12

 

85

Investments at FVTOCI 3

160

 

160

 

-

 

186

 

186

 

-

Derivative instrument liabilities

(38)

 

-

 

(38)

 

(71)

 

-

 

(71)

Amortized cost

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

 

 

 

 

 

 

 

 

 

 

Senior notes and debentures 4

(494)

 

-

 

(507)

 

(995)

 

-

 

(1,009)

Fixed and floating rate debt

(7)

 

-

 

(7)

 

(8)

 

-

 

(8)

Long-term debt

 

 

 

 

 

 

 

 

 

 

 

Senior notes and debentures 4

(8,532)

 

(4,788)

 

(4,311)

 

(7,569)

 

(1,004)

 

(6,177)

Fixed and floating rate debt

(23)

 

-

 

(23)

 

(22)

 

-

 

(22)

1 During the period ended September 30, 2019, there were no transfers between Level 1 and Level 2 for financial instruments measured at fair value on a recurring basis. The Company’s policy is to recognize transfers at the end of the reporting period.

2 Marketable securities consist of equity and fixed income securities. The Company determines the fair value of equity securities based on the bid price of identical instruments in active markets. The Company values fixed income securities using quoted prices of instruments with similar terms and credit risk.

3 Investments at fair value through other comprehensive income ("FVTOCI") are comprised of shares in Sinofert Holdings Ltd. (“Sinofert”) (December 31, 2018 – Sinofert and other).

4 Carrying amount of liability includes net unamortized debt issue costs.

NOTE 8 SHORT-TERM DEBT

In 2019, the Company terminated its $500 accounts receivable securitization program. There were no loan drawdowns made under this program in 2019.

NOTE 9 LONG-TERM DEBT

The following tables summarize the Company’s long-term debt issuances and repayment activities during the nine months ended September 30, 2019:

 

Rate of interest (%)

 

Maturity

 

Amount

Notes issued 2019

4.200

 

April 1, 2029

 

750

Notes issued 2019

5.000

 

April 1, 2049

 

750

 

 

 

 

 

1,500

The notes issued in 2019 are unsecured, rank equally with Nutrien's existing unsecured debt, and have no sinking fund requirements prior to maturity. Each series is redeemable and provides for redemption prior to maturity, at the Company's option, at specified prices.

 

Rate of interest (%)

 

Maturity

 

Amount

Debentures repaid 2019

6.750

 

January 15, 2019

 

500

Senior Notes repaid 2019

6.500

 

May 15, 2019

 

500

 

 

 

 

 

1,000

NOTE 10 SHARE CAPITAL

Authorized

The Company is authorized to issue an unlimited number of common shares without par value and an unlimited number of preferred shares. The common shares are not redeemable or convertible. The preferred shares may be issued in one or more series with rights and conditions to be determined by the Board of Directors. No preferred shares have been issued.

Issued

 

 

Number of Common Shares

 

Share Capital

Balance – December 31, 2018

 

608,535,477

 

16,740

Issued under option plans and share-settled plans

 

431,485

 

21

Repurchased

 

(36,066,766)

 

(992)

Balance – September 30, 2019

 

572,900,196

 

15,769

Share repurchase programs

 

Board of Directors Approval

 

Expiry

 

Maximum Shares for Repurchase

2018 Normal Course Issuer Bid 1

February 20, 2018

 

February 22, 2019

 

50,363,686

2019 Normal Course Issuer Bid 2

February 20, 2019

 

February 26, 2020

 

30,133,631

1 On December 14, 2018, the normal course issuer bid was increased to permit the repurchase of up to 8 percent of the Company’s outstanding common shares.

2 The normal course issuer bid permitted the repurchase of up to 5 percent of the Company’s outstanding common shares.

The Company has repurchased the maximum authorized amount under the 2019 normal course issuer bid. Purchases under the 2019 normal course issuer bid were made through open market purchases at market price as well as by other means as permitted by applicable securities regulatory authorities, including private agreements.

The following table summarizes the Company’s share repurchase activities during the period:

 

Three Months Ended

 

Nine Months Ended

 

September 30

 

September 30

 

2019

 

2018

 

2019

 

2018

Common shares repurchased for cancellation

-

 

7,271,800

 

36,066,766

 

32,209,923

Average price per share

-

 

54.15

 

52.07

 

51.62

Total cost

-

 

394

 

1,878

 

1,663

Repurchase resulting in a reduction of:

 

 

 

 

 

 

 

Share capital

-

 

199

 

992

 

884

Contributed surplus 1

-

 

-

 

-

 

23

Retained earnings 1

-

 

195

 

886

 

756

1 The excess of net cost over the average book value of the shares.

Dividends declared

The Company declared dividends per share of $0.45 (2018 – $0.40) during the three months ended September 30, 2019, payable on October 17, 2019 to shareholders of record on September 30, 2019, and $0.88 (2018 – $1.20) during the nine months ended September 30, 2019.

In 2019, the Company announced an increase in the expected quarterly dividend from $0.43 per share to $0.45 per share commencing with the quarterly dividend declared in the third quarter of 2019 and until otherwise determined by the Board of Directors.

Anti-dilutive shares

The diluted weighted average shares calculation excluded 979,000 stock options and 118,000 equity-settled performance share units for the three months ended September 30, 2018; and 621,000 stock options and 118,000 equity-settled per