Strong potash demand helps Nutrien weather challenges

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Saskatoon-based Nutrien Ltd. earned US$25 million in its third quarter, down from US$82 million a year ago, as some negative changes in the agricultural industry outweighed continued strong demand for potash.

“We are in an ag environment where we’ve seen softening of corn and soybean prices,” chief executive Ken Seitz said while describing the company’s quarterly results as reasonable.

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As a result, he said the company is looking to continue focusing on its own costs while also looking to deliver to their customers.

Seitz said management has not seen potash prices settling in, but added Nutrien is revising its global shipment range to 70 tonnes to 72 million tonnes for the year, which is being driven by stronger expected demand in Brazil and Southeast Asia. The company is forecasting global potash shipments of 71 tonnes and 74 million tonnes in 2025.

“We haven’t seen potash prices firming; there’s probably some runway for that into 2025,” he said.

The optimistic outlook on potash is a result of growing demand in emerging markets along with growth in established markets. In North America, Seitz said there are farmers using potash to produce more crops such as corn and soybeans without adding more land.

“We call that a mature market,” he said.

Overseas, Seitz said Nutrien is seeing growing demand in a number of markets, including India, where he said potash has been historically underapplied in crop production.

“They continue to move toward more balanced fertilization, so we’re seeing growing demand in India,” he said.

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Southeast Asia is another market where potash demand is increasing, which Seitz said is due to increasing demand for palm oil, a major crop in many countries. He said Nutrien is expecting continued growth in this part of the world due to coming regulatory changes.

“In 2025, we’re going to see a biodiesel mandate,” he said. “That’s going to put more additional demand onto the palm oil business.”

Seitz said China is also expected to continue being a big market. In recent years, he said that country has been using 17 tonnes to 18 million tonnes of potash per year.

The outlook for Brazil, which has historically been a major market, is positive, too. Seitz said Brazil is unique compared to other parts of the world because the number of acres dedicated to crops is growing.

“You don’t have to cut down a tree in Brazil to add another 100 million acres of row crop,” he said.

This past year, Brazil was set to apply a record amount of crop fertilizers and nutrients. Seitz said Nutrien is working to position itself to meet growing demand in the country.

“Brazil is a tropical cell; they need fertilizer and can’t grow without it,” he said.

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While the potash side of the business is strong, Nutrien reported some challenges in other parts of its business, such as nitrogen, where the company experienced production volume issues at some of its Alberta facilities due to weather and technical issues. Despite these problems, Seitz said they are optimistic about the overall market.

“As we head into the balance of the year, we’re seeing relative strength on nitrogen pricing,” he said.

The company’s retail business also dealt with some challenges because good growing conditions for farmers in North America led to a decrease in demand for its products, specifically pest management products.

Nutrien had revenues of more than US$5.3 billion in the third quarter and adjusted net earnings per share of 39 cents U.S., compared to US$5.6 billion and 35 cents U.S., respectively, in the same quarter a year ago.

The consensus estimate for net earnings per share was 44 cents U.S., according to Zacks Investment Research Inc. Revenue came in 0.28 per cent lower than expected.

During the third quarter, Nutrien announced a change to its senior leadership team, with the appointment of Mark Thompson as chief financial officer. Previously, he served as the company’s chief commercial officer.

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Seitz said the move had been in the making for a while.

“I would say (it was) a seamless and smooth transition,” he said.

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