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Nutrien cuts earnings hopes on 'subdued' potash demand


Nutrien cut its full-year earnings guidance as it downgraded hopes for its potash sales hope for the second time in two months, saying it expected demand “to remain subdued” for the rest of 2019.


The Canada-based farm retail-to-fertilizers group lowered to $4.0bn-4.3bn, from $4.35-4.79m, its forecast for earnings before interest, taxation, depreciation and amortisation (ebitda) in 2019.


The forecast for full-year adjusted earnings per share was lowered to $2.30-2.55, from $2.70-3.00, and short of the $2.67-per-share figure Wall Street has pencilled in.


Chuck Magro, the Nutrien chief executive, said that the group’s prospects had been “impacted by short-term market softness” which had also undermined results for the July-to-September period, when the group reported adjusted earnings per share of $0.24.


That was an improvement on the loss of $1.70 per share reported a year before, but behind investor expectations of a $0.39-per-share profit.


‘Prices declined’

Nutrien forecast that demand for potash, of which it is one of the world’s top producers, will “remain subdued” for the rest of 2019, as buyers extend a round of inventory drawdowns which undermined results in the July-to-September period.


Indeed, in the latest quarter, “global potash prices declined… as customers in key offshore markets drew from inventories built by strong first-half 2019 shipments”.


This trend, evident in delays to new annual potash export contracts with the important Chinese and Indian markets, spurred Nutrien to lower to 64m-65m tonnes its forecast for world potash deliveries this year, from a previous target of 65m-67m tonnes – which was itself cut in September from 67m-69m tonnes.


For the company itself, potash sales this year were now expected at 11.6m-12.0m tonnes, a downgrade of a further 300,000 tonnes on a 700,000-tonne cut unveiled in September, as the Saskatchewan-based group unveiled temporary shutdowns at three mines.


‘Unplanned production outages’

For nitrogen, sales hopes were trimmed too, to 10.6m-10.8m tonnes from 10.6m-11.0m tonnes, with the group noting “across most of North America… a delay in the start of the fall season” for fertilizer applications, a knock-on effect of late-running corn and soybean harvests.


For phosphates, Nutrien said that “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”.


However, it flagged some signs of hope for nitrogen, saying that global ammonia prices had recovered of late as “a result of several unplanned production outages and improved demand”.


In potash, the group said global potash deliveries will in 2020 “rebound to 67m-69m tonnes… 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”.


Retail profits rise

The group unveiled earnings of $141m for the latest quarter, compared with a loss of $1.04bn a year before, on revenues up 3.6% at $4.13bn.


While revenues and margins in fertilizer production fell, Nutrien’s retail division reported a 64% ump to $190m in ebitda for the quarter, on revenues up 18.3% at $769m.


The retail improvement reflected largely the realisation of demand delayed by the sodden US spring, which prevented fieldwork and led to a historically slow planting season.


“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.”

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