Nutrien Q4 Results Presentation. February 5, 2018

Transcription

1 Nutrien Q4 Results Presentation

2 Forward Looking Statements 2 Certain statements and other information included in this presentation constitute "forward-looking information" or "forward-looking statements" (collectively, "forward-looking statements") under applicable securities laws. All statements in this presentation, other than those relating to historical information or current conditions, are forward-looking statements, including, but not limited to: Nutrien's 2018 annual guidance, including expectations regarding our diluted earnings per share and EBITDA (both consolidated and Retail); statements relating to certain strategic benefits expected to result from the merger of Agrium Inc. and Potash Corporation of Saskatchewan Inc. (the "Merger"), the nature and timing of operating synergies, cost savings and Nutrien's expected capital allocation strategy; Nutrien's strategic priorities; Nutrien's market outlook for 2018, including potash, nitrogen and phosphate outlook and including anticipated supply and demand for our products and services, expected market and industry conditions with respect to crop nutrient application rates, planted acres, crop mix, prices and the impact of currency fluctuations and import and export volumes. Forward-looking statements in this presentation are based on certain key expectations and assumptions made by Nutrien, including expectations and assumptions concerning: Nutrien's ability to successfully integrate and realize the anticipated benefits of its already completed (including the merger of Agrium and PotashCorp) and future acquisitions, and that we will be able to implement our standards, controls, procedures and policies at any acquired businesses to realize the expected synergies; that future business, regulatory and industry conditions will be within the parameters expected by Nutrien, including with respect to prices, margins, demand, supply, product availability, supplier agreements, availability and cost of labor and interest, exchange and effective tax rates; the completion of our expansion projects on schedule, as planned and on budget; assumptions with respect to global economic conditions and the accuracy of our market outlook expectations for 2018 and in the future; the adequacy of our cash generated from operations and our ability to access our credit facilities or capital markets for additional sources of financing; our ability to identify suitable candidates for acquisitions and divestitures and negotiate acceptable terms; ability to maintain investment grade rating and achieve our performance targets; assumptions in respect of our ability to sell equity positions, including the ability to find suitable buyers at expected prices and successfully complete such transactions in a timely manner; the receipt, on time, of all necessary permits, utilities and project approvals with respect to our expansion projects and that we will have the resources necessary to meet the projects approach. Although Nutrien believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Nutrien can give no assurance that they will prove to be correct. Forward-looking statements are subject to various risks and uncertainties which could cause actual results and experience to differ materially from the anticipated results or expectations expressed in this presentation. Key risks and uncertainties include, but are not limited to: general global economic, market and business conditions; the failure to successfully integrate and realize the expected synergies associated with the merger of Agrium and PotashCorp, including within the expected timeframe; weather conditions, including impacts from regional flooding and/or drought conditions; crop planted acreage, yield and prices; the supply and demand and price levels for our products; governmental and regulatory requirements and actions by governmental authorities, including changes in government policy, government ownership requirements, changes in environmental, tax and other laws or regulations and the interpretation thereof; political risks, including civil unrest, actions by armed groups or conflict and malicious acts including terrorism; the occurrence of a major environmental or safety incident; innovation and security risks related to our systems; the inability to find suitable buyers for our equity positions and counterparty and transaction risk associated therewith; regional natural gas supply restrictions; counterparty and sovereign risk; delays in completion of turnarounds at our major facilities; gas supply interruptions at our Egyptian and Argentinian facilities; any significant impairment of the carrying value of certain assets; risks related to reputational loss; certain complications that may arise in our mining processes; the ability to attract, engage and retain skilled employees and strikes or other forms of work stoppages; and other risk factors detailed from time to time in Agrium and PotashCorp reports filed with the Canadian securities regulators and the Securities and Exchange Commission in the United States, including those disclosed in Agrium's annual information form for the year ended December 31, 2016 and its 2016 annual management's discussion and analysis, as well as PotashCorp's Form 10-K for the year ended December 31, 2016 and Form 10-Q filed throughout Nutrien disclaims any intention or obligation to update or revise any forward-looking statements in this presentation as a result of new information or future events, except as may be required under applicable Canadian securities legislation or applicable U.S. federal securities laws. IFRS Advisory Historical financial information relating to Agrium and PotashCorp in this presentation is prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ( IFRS ). Non-IFRS Financial Measures Advisory We consider adjusted net earnings (loss) from continuing operations before finance costs, income tax (recovery) expense and depreciation and amortization ("EBITDA"), adjusted net earnings (loss) per share and guidance relevant earnings (loss) per share, all of which are non-ifrs financial measures, to provide useful information to both management and investors in measuring our financial performance and financial condition. Refer to the disclosure under the heading Selected Non-IFRS Financial Measures and Reconciliations included in our press release dated announcing our fourth quarter 2017 results, each as filed on SEDAR at and EDGAR at under our corporate profile, for a reconciliation of these non-ifrs measures to the most directly comparable measures calculated in accordance with IFRS and for a further discussion of how these measures are calculated and their usefulness to users including management. Non- IFRS financial measures are not recognized measures under IFRS and our method of calculation may not be comparable to that of other companies. These non-ifrs financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS.

3 Nutrien s Unique Global Footprint 3 Nutrien operates across the globe, with a complementary footprint of crop nutrient production and retail distribution assets in 14 countries. Adjusted Combined EBITDA Split 2017 ProForma 1 Retail ~36% ~33% Potash Phosphate ~7% ~24% Nitrogen ~34Mmt 2 Nutrient Production Capacity 500,000 Grower Customers >$32B Market Capitalization (as of Feb 5, 18) $500M Expected Annual Synergies 1 Adjusted combined EBITDA are derived from historical financial information of PotashCorp and Agrium and do not include the effects of a) intersegment eliminations, b) the equity earnings and operating results of completed or anticipated divestitures in connection with the merger, c) allocation of certain corporate costs or d) the impairment charge related to Phosphate. Determination of Adjusted Combined EBITDA required allocation of historical amounts on a basis consistent with how Nutrien will report financial information in the future. This information does not purport to project the future operating results of Nutrien, and is not necessarily indicative of what Nutrien s results of operations would have been had the merger been completed on January 1, Based on nameplate capacity, which may exceed operational capability.

4 Nutrien Provides 2018 Guidance and Q4 Results 4 HIGHLIGHTS Agrium fourth-quarter earnings from continuing operations, adjusted for items not included in guidance, of $ per share 2 (net earnings from continuing operations of $0.19 per share) PotashCorp fourth-quarter adjusted earnings of $0.06 per share (net loss of $0.09 per share) 2017 earnings for Agrium were supported by record Retail EBITDA of $1.2 billion and margins of 10 percent, while stronger potash prices, sales volumes and lower cash costs per tonne benefited both companies Nutrien full-year 2018 guidance of $2.10 to $2.60 earnings per share from continuing operations, excluding incremental D&A related to purchase price allocation of $150 million to $300 million Nutrien 2018 EBITDA 3 of $3.2 billion to $3.7 billion Nutrien sold its equity stake in Israel Chemicals Ltd. (ICL) in January 2018 for net proceeds of $685 million Nutrien announced an agreement to purchase Agrichem, a leading Brazilian specialty plant nutrition company with total annual historical net sales of over $55 million Nutrien achieved over $40 million in run-rate synergies year-to-date All amounts are stated in U.S. dollars. 2 All references to per-share amounts pertain to diluted net income per share. 3 EBITDA is calculated as net (loss) income from continuing operations before finance costs, income tax (recovery) expense, and depreciation and amortization.

5 Fourth Quarter Results Q RESULTS PRESENTATION

6 $USD Millions Agrium Q Retail Gross Profit Bridge 6 Crop nutrient gross profit grew due to increased sales volumes, while gross profit margins per tonne remained relatively flat. Crop protection products gross profit was higher due to increased sales volumes across all regions and an increase in proprietary product sales. Seed results increased due to purchases in the U.S. that were delayed from Q3 pushing sales into Q4. Services and Other results supported by higher livestock export shipments and wool commissions in Australia and high demand for fall nutrient and crop protection application services in North America Q Gross Profit Crop Nutrients Crop Protection Products Seed Merchandise, Services and Other Q Gross Profit Source: Nutrien

7 $USD Millions Agrium Q Wholesale Gross Profit Bridge 7 Potash gross profit grew due to a combination of higher prices and sales volumes which more than offset an increase in the cost of product sold per tonne. Nitrogen gross profit was significantly reduced due to plant outages and lower realized ammonia and UAN prices. Phosphate results were impacted by higher rock and sulfur costs as well as an extended maintenance shutdown at our Redwater facility, which increased cost of product sold per tonne. Wholesale Other results were negatively impacted by lower ammonium sulfate sales due to the shutdown at our Redwater facility ( 51 ) ( 11 ) (5) Q Gross Profit Potash Nitrogen Phosphate Wholesale Other Q Gross Profit Source: Nutrien

8 $USD Millions PotashCorp Q Gross Margin Bridge 8 Potash gross margin grew due to higher prices and reduced per-tonne costs. Nitrogen gross margin benefited from stronger sales prices, more than offsetting higher per-tonne costs. Phosphate gross margin declined due to lower realized selling prices and a $276-million non-cash impairment charge relating to our White Springs and feed phosphate facilities ( 18 ) (276) 50 - (50) Q Gross Margin Potash Nitrogen Phosphate* Phosphate Impairment Charge Q Gross Margin (78) (100) Source: Nutrien * Net of non-cash impairment charge of $276-million.

9 Outlook and Guidance Q RESULTS PRESENTATION

10 Supportive U.S. Grower Economics 10 U.S. Cash Grower Margins 1 US$/Acre Corn Soybeans Wheat Cotton Current cash crop margins support a relatively stable acreage outlook Source: USDA, Green Markets, CME Group, Nutrien /18 margins are based on spot cash crop prices and estimated average fertilizer costs; 2018/19 margins are based on new crop 2018 futures prices less estimated basis and estimated spot retail fertilizer prices

11 Improvement in Global Crop Nutrient Prices 11 Selected Fertilizer Prices Potash - CFR Brazil ($/mt) Urea New Orleans Barge FOB ($/mt) DAP - FOB Tampa ($/mt) 150 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Drivers Potash Agronomic need and affordability supporting demand and higher prices; expect increased shipments in 2018 Nitrogen Strong demand and reduced Chinese exports supporting prices; expect seasonal volatility in 2018 Phosphate Higher input costs and lower exports from US and China support prices; but margins continue to be pressured Source: Fertilizer Week, Nutrien

12 2018 Highlights Record Potash Demand Projected in World Potash Shipments by Region Million Tonnes KCl 20 Previous Record: 15.8mmt (2015) Previous Record: 6.3mmt (2010) Previous Record: 9.6mmt (2017) Previous Record: 11.1mmt (1997) Previous Record: 12.2mmt (2017) Previous Record: 13.7mmt (1997) E 18F E 18F E 18F E 18F E 18F E 18F India Other Asia North America Latin America China Other Mmt Mmt Mmt Mmt Mmt Mmt Expect modest demand growth in line with positive consumption trends that occurred in 2017 Demand supported by robust crop economics and improved moisture conditions Steady demand supported by strong affordability and significant removal of nutrients following consecutive large harvests Favorable crop economics and acreage growth in nutrient deficient regions is supporting record potash demand Strong consumption trends supported by affordability and a shift to more potassium-intensive crops like fruits and vegetables Good affordability and growing demand for NPK fertilizers, including in Africa, are expected to boost potash demand Source: CRU, Fertecon, Industry Publications, Nutrien

13 Tight Chinese Urea Supplies Reduce Exports 13 Chinese Urea Exports Million Tonnes % -47% Chinese Energy Costs (US$/MT) $175 $151 $127 $106 $149 $ China Anthracite Coal (55% of Urea Production) 2018 Current % Chinese Operating Rate* (Percentage) 77% 66% 72% 62% 55% 49% F E 2018 Current * Based on industry consultants estimates. Uncertain how much of the ~50% of Chinese urea capacity not operating is capable of restarting without significant capital investment Source: CRU, Fertecon, Profercy, Nutrien Slide #13

14 Increase in Phosphate Raw Material Costs 14 Selected Raw Material Prices US$/Tonne Sulfur Middle East fob Black Sea Ammonia fob Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Higher input costs have lent support to phosphate prices but continue to weigh on margins Source: Fertilizer Week, Nutrien

15 Nutrien 2018 Annual Guidance Annual Guidance Ranges Low Annual High Earnings per share (a) $2.10 $2.60 Consolidated EBITDA (billions) $3.2 $3.7 Retail EBITDA (billions) $1.2 $1.3 Potash EBITDA (billions) $1.1 $1.3 Nitrogen EBITDA (billions) $0.9 $1.1 Potash sales tonnes (billions) Nitrogen sales tonnes (billions) (b) Effective tax rate on continuing operations 24% 25% Sustaining capital expenditures (billions) $1.0 $ Annual Assumptions and Sensitivities FX rate CAD to USD $1.26 NYMEX natural gas ($US/MMBtu) $3.00 $20/tonne change in realized Potash selling prices ($/share) (c) $0.24 $20/tonne change in realized Ammonia selling prices ($/share) (c) $0.07 $20/tonne change in realized Urea selling prices ($/share) (c) $0.09 (a) All references to per-share amounts pertain to diluted net income per share (b) Excludes ESN, Rainbow and Europe sales. (c) Sensitivities are calculated pre-synergies

16 Nutrien Strategic Priorities Q RESULTS PRESENTATION

17 Nutrien Strategic Priorities Complete Integration Bring people, systems, assets and operations together Align operations and reporting to work as one 2. Deliver Synergies $500M annual runrate expected by the end of 2019 Costs to achieve synergies are below industry benchmark standards 3. Business Unit Strategy Complete portfolio review of combined company Determine key priorities for each business unit Complete required sales of equity investments 4. Capital Priorities Continue to invest in growth opportunities focus on Retail Enhance shareholder returns Strong balance sheet - maintain investment grade credit ratings

18 Significant Value Creation from Merger Synergies 18 Run-Rate Synergies US$ Millions $600 Distribution / Optimization Rail Fleet $500 $400 $300 $200 Optimization Distribution and Warehouse Optimization Logistics Savings Portfolio Integration Production Optimization Phosphate Integration Potash cost efficiencies Nitrogen optimization $125 Procurement Procurement optimization $100 SG&A SG&A Efficiencies $125 + Target $500 $100 $ $0 Highly confident in full synergy realization of synergies by the end of 2019

19 Appendix Q RESULTS PRESENTATION

20 Nutrien Potash and Nitrogen Sales Volumes 20 Expect an increase in potash sales volumes in line with global demand growth and higher nitrogen sales partly due to greater on-stream time for our plants Potash Sales Volumes Million Tonnes Nitrogen Sales Volumes Million Tonnes Guidance Guidance Source: Nutrien 1 Adjusted Combined Sales Volumes 2 Excludes ESN, Rainbow and Europe sales

21 Capacity utilization Ammonia Capacity Utilization Legacy Agrium was a challenging year due to a heavy turnaround schedule but the utilization trend continues to improve, which has supported revenues and costs 100% 95% 90% 85% 89% 91% 92% 93% 96% 100% Ave Ave. 80% Ave F Ave. 75% 2018 Forecast 70% 2020 Target 65% 60% Agrium Ammonia (Excl. Joffre) Notes: Capacity utilization represents production volumes divided by Factbook production capacity (excluding Joffre facility).

22 Capacity utilization Ammonia Capacity Utilization Nutrien 22 Synergy opportunity within our nitrogen portfolio is significant: - Leverage best-practices across Nutrien business - Larger production footprint brings increased marketing flexibility - Increased production presents EBITDA opportunity - Lower capex risk 100% 98% 95% 90% 89% 91% 90% 91% 93% Ave. 85% 80% Ave Ave F Ave. 75% 70% 2018 Forecast 2020 Target 65% 60% Nutrien Ammonia (Excl. Joffre & Trinidad) Notes: Capacity utilization represents production volumes divided by Factbook production capacity (excluding Joffre and Trinidad facilities). Historic capacity adjusted for Lima debottleneck target adjusted for comparability with Legacy Agrium definition of available capacity.

23 Thank you! For further information please visit Nutrien s website at: Follow Nutrien on: twitter.com/nutrienltd facebook.com/nutrienltd linkedin.com/company/nutrien Q RESULTS PRESENTATION