Nutrien earnings outlook sours on pared potash guidance

Canada’s top potash producer Nutrien (TSX: NTR) has guided for lower full-year headline profit as September-quarter sales volumes and prices slid lower than expected.

The Saskatoon, Saskatchewan-based crop nutrient producer, distributor and retailer now guides for adjusted earnings per share of $13.25 to $14.50, below average analyst forecasts calling for $14.45, and down from its prior August 3 forecast of $15.80 to $17.80.

The company expects the lower potash earnings would be more than offset by stronger expected retail earnings.

Nutrien said the adjusted net earnings per share guidance included about $4 billion in share repurchases in 2022.

Nutrien sees potash shipments from Belarus falling 50 to 60% and Russia down 20 to 25% in 2022 compared to the prior year. It, therefore, lowered its global potash shipment forecast to between 60 and 62 million tonnes in 2022, mainly owing to the impact of higher-than-expected inventory and cautious buying in North America and Brazil during the second half of 2022.

It also lowered nitrogen sales volume guidance to reflect the impact of Trinidad gas curtailments during the second half of 2022.

Total potash sales volumes dropped 16% year-on-year to 3.2 million tonnes, reflecting a 59% drop in the critical North American market.

Notwithstanding, Nutrien reported that third-quarter sales improved 36% year-on-year to US$8.2 billion.

Headline profit came in at $2.51, up 82% from the prior year’s quarter, but still missing average analyst forecasts for $3.97. It helped drive free cash flow by 79% to $1.5 billion.

The company is bullish on the underlying demand drivers for potash. It notes global fertilizer supply challenges persist, creating a supportive environment for Nutrien into 2023.

Nutrien expects robust agricultural fundamentals will support increased potash consumption in 2023, and it believes pent-up demand will emerge as inventories are drawn down, and prices stabilize.

“We expect potash supply from Eastern Europe will continue to be constrained in 2023, with shipments from Belarus projected to be down 40 to 60% and Russia down 15 to 30% compared with 2021 levels,” the company said. “Global potash shipments are forecast between 64 to 67 million tonnes in 2023, with projected Nutrien potash sales volumes of about 15 million tonnes.”

Nutrien’s New York-quoted equity closed 3.26% lower and fell another 4.46% in after-market trading to $482.98. The stock has traded in a volatile pattern between the $65.84 to $117.25 bounds and continues to track 16% in the black over the 12-month frame. It has a market cap of $44.8 billion.