Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nutrien Ltd (NTR, Financial) delivered an adjusted EBITDA of $3.3 billion in the first half of 2024, supported by increased crop input margins and strong global potash demand.
- The company achieved record potash sales volumes in the first half, leveraging its global supply chain to meet increased demand.
- Nutrien Ltd (NTR) reported a 17% increase in retail adjusted EBITDA, driven by increased gross margins across all major product lines.
- The company successfully reduced its controllable cash cost of potash production to $53 per tonne, aided by higher production volumes and mine automation investments.
- Nutrien Ltd (NTR) raised its full-year global potash shipment forecast to 69 million to 72 million tonnes, reflecting strong underlying consumption trends in major markets.
Negative Points
- The company's potash segment experienced a decline in adjusted EBITDA due to lower benchmark prices compared to the previous year.
- Nutrien Ltd (NTR) faced challenges in the Brazilian market, leading to the closure of 21 selling locations and curtailment of three fertilizer blenders.
- The company incurred a loss on foreign currency derivatives in Brazil, impacting financial performance.
- Nutrien Ltd (NTR) lowered its full-year retail adjusted EBITDA guidance due to a more moderate recovery in Brazilian retail earnings and delayed planting in North America.
- The phosphate sales volume guidance was reduced due to extended turnaround activity and delayed mine equipment moves.
Q & A Highlights
Q: Could you speak to what you're seeing in end market grower demands and inventory levels in your major regions?
A: Kenneth Seitz, President and CEO, noted that despite softening ag commodity prices, grower affordability remains strong, and incentives exist for maximizing yields. Jeff Tarsi, EVP and President of Global Retail, added that they have seen strong margins across all product lines and have successfully reduced inventory levels, particularly in Brazil. He expects strong demand for nutrients in the fall, contingent on weather conditions.
Q: Could it make sense to curtail production or shut down one of the higher-cost potash mines to save costs?
A: Kenneth Seitz, President and CEO, explained that the flexibility of having six mines allows Nutrien to respond to customer needs, especially with shifting trade flows and product demands. Curtailing a mine would limit this flexibility, which is currently advantageous.
Q: Can you explain the situation with the unauthorized derivatives contract in Brazil and your use of derivatives as a risk management strategy?
A: Kenneth Seitz, President and CEO, stated that the issue was not in the normal course and was quickly identified and remediated. Pedro Farah, CFO, added that they use a typical combination of forwards and options for hedging, and controls have been put in place to prevent future occurrences.
Q: How do you reconcile the recent guidance reduction in retail EBITDA with your growth targets set at the Investor Day?
A: Kenneth Seitz, President and CEO, affirmed belief in the growth targets, attributing the guidance reduction to challenges in Brazil and weather impacts in North America. He emphasized ongoing strategic actions in Brazil and expects stabilization and growth in the future.
Q: With the potential rail strike, how does this affect your potash volume guidance?
A: Mark Thompson, EVP and Chief Commercial Officer, explained that the guidance accounts for a potential short rail strike. Without such disruptions, they expect to trend towards the higher end of their potash sales volume guidance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
