Nutrien Corp. is the world’s largest producer of agricultural fertilizers. This includes nitrogen and phosphates, which it sells in bulk and at the retail level to farmers through a network of more than 2,000 stores.
The shares (TSX: NTR) dropped 13% on Nov. 2 following the release of third quarter earnings, as Nutrien revised the outlook for the year. The shares have rebounded since and are up 12% year-to-date and 21% in the last year.
Nutrien had a strong first half with most of the gains coming after Feb. 24 when Russia invaded Ukraine. The industry is in the middle of a secular recovery, and it received another boost as sanctions were applied to Russian fertilizer producers.
In commentary accompanying third quarter results, Nutrien modestly cut its forecast of potash shipments by about 2.4%, pointing to higher-than-expected inventory and lower demand in North America and Brazil during the second half of the year.
Its cost to make nitrogen fertilizers is also rising with natural gas prices. Natural gas is used as a feedstock. The increases have been passed on to farmers who have responded by cutting fertilizer use.
However, Nutrien expects a rebound in 2023 as inventories are drawn down and prices stabilize. It expects adjusted earnings per share for 2022 to be between $13.25 and $14.50, compared with its previous forecast of US$15.80 to $17.80 a share.
Meanwhile, the company continues to expand its Latin American operations with the late summer purchase of Casa do Adubo S.A., its 6th acquisition in Brazil since 2019. The buyout expands its retail distribution business to 13 states from five.
Nutrien raised its quarterly dividend by 4% to $0.48 quarterly with the February payment. It yields 2.7% at current prices.