Nutrien Ltd. significantly raised its profit forecast for the year after announcing a record first-quarter profit due to soaring commodity prices and concerns about global food security due to the invasion of Ukraine by the Russia.
The Saskatoon-based company, which is the world’s largest fertilizer producer and reports in US dollars, earned a record US$1.4 billion in the quarter ended March 31. That equates to $2.49 per share, more than 10 times the 22 cents per share. he won during the same period of 2021.
Nutrien also raised its full-year 2022 earnings forecast by 50%. It said on Tuesday that it now expects to earn between $16.20 and $18.70 per share this year, against a target previous $10.20 to $11.80.
Nutrien – which was created in 2018 from the merger between PotashCorp of Saskatchewan and Agrium Inc. of Calgary – has seen its share price rise more than 20% since March 1 due to the impact of geopolitical events on fertilizer markets and prices.
According to the company, Russia and Belarus account for around 40% of the world’s production and export of potash, an essential nutrient used in agriculture.
Financial sanctions imposed on Russia and Belarus due to the war in Ukraine mean that potash exports from the region are down around 20% in the first quarter of 2022 compared to the same period in 2021.
“There is no quick or easy solution to overcome this level of supply disruption,” Nutrien’s interim CEO Ken Seitz said on a conference call. (The company has yet to name a permanent replacement for former CEO Mayo Schmidt, who stepped down in January after just nine months on the job.)
“We believe these issues could extend well beyond this year.”
Nutrien has over 20 million tonnes of capacity at six potash mines in Saskatchewan. It also owns two large phosphate mines in the United States and is the world’s third largest producer of nitrogen. Potash, phosphate and nitrogen are the three main plant nutrients used in commercial fertilizers.
For 2022, Nutrien said it expects to produce between 14.5 and 15.1 million tonnes of potash. This reflects the company’s announcement in March that it will increase its potash production capacity by nearly one million tonnes to help meet global demand.
Production could increase
However, Seitz said on Tuesday that the company is currently investigating the possibility of expanding production even further. He said more details would be released at the company’s Investor Day on June 9.
“We will be watching developments in the global market closely as we assess opportunities to increase our potash production capacity beyond 15 million tonnes,” Seitz said.
“Increasing production on a sustained basis requires opening new land, installing additional equipment and infrastructure, hiring more people, and securing outbound logistics. These are decisions that require careful planning because they have long-term impacts on our operations and our employees.
In an email, Edward Jones analyst Matt Arnold said Nutrien had been careful not to hurt fertilizer prices by adding too much capacity in the past, and said he expects that the company also remains disciplined in future decisions.
“We only expect significant capacity additions if the company is confident that the Russian-Ukrainian conflict will affect exports from Russia and Belarus in a more lasting way, and not just this year,” Arnold said.
Nutrien’s sales in the quarter totaled $7.6 billion, compared to $4.7 billion in the prior quarter.
The company’s stock price was trading at $137.05 in the early afternoon on the Toronto Stock Exchange, up $9.22 or 7.2%.