Nutrien Q Results Presentation. May 7, 2018

Transcription

1 Nutrien Q 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 (such statements are often accompanied by words such as "anticipate", forecast, "expect", "believe", "may", "will", "should", "estimate", "intend" or other similar words). 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 and first half guidance, including expectations regarding our diluted earnings per share and EBITDA (both consolidated and by segment); expectations regarding net proceeds to be realized from the on-going sale of equity interests; capital spending expectations for 2018; expectations regarding performance of our business segments in 2018; our 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; expectations regarding completion of previously announced expansion projects (including timing and volumes of production associated therewith) and acquisitions and divestitures; and the expected synergies associated with the merger of Agrium and PotashCorp, including timing thereof. These forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements. As such, undue reliance should not be placed on these forward-looking statements. All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions referred to below and elsewhere in this document. Although Nutrien believes that these assumptions are reasonable, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place an undue reliance on these assumptions and such forward-looking statements. The additional key assumptions that have been made include, among other things, assumptions with respect to 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 (including as outlined under Market Outlook ); 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. Events or circumstances that could cause actual results to differ materially from those in the forward-looking statements 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, PotashCorp and Nutrien reports filed with the Canadian securities regulators and the Securities and Exchange Commission in the United States, including those disclosed in Nutrien s business acquisition report dated February 20, 2018, related to the merger of Agrium and PotashCorp. The purpose of our expected diluted earnings per share, consolidated EBITDA and EBITDA by segment guidance range is to assist readers in understanding our expected and targeted financial results, and this information may not be appropriate for other purposes. Non-IFRS Financial Measures Advisory We consider net (loss) earnings from continuing operations before finance costs, income tax (recovery) expense and depreciation and amortization("ebitda") and adjusted net earnings per share and adjusted EBITDA, 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 Non-IFRS Financial Measures and Reconciliations included in our press release dated announcing our first quarter 2018 results, 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. The purpose of our expected diluted earnings per share, consolidated EBITDA and EBITDA guidance range is to assist readers in understanding our expected and targeted financial results, and this information may not be appropriate for other purposes. Nutrien disclaims any intention or obligation to update or revise any forward-looking statements in this document as a result of new information or future events, except as may be required under applicable U.S. federal securities laws or applicable Canadian securities legislation.

3 First Quarter 2018 Results Q RESULTS PRESENTATION

4 Nutrien Q1 Results and 2018 Guidance 4 HIGHLIGHTS Nutrien Ltd. (Nutrien) announced today its 2018 first-quarter results, with a net loss from continuing operations of $1 million 1 ($nil 2 diluted earnings per share) and EBITDA 3 of $487 million. Nutrien first quarter earnings from continuing operations, adjusted for purchase price allocation ($74 1 million or $0.08 per share) and merger-related costs ($66 million or $0.08 per share) not included in guidance, were $ per share. First-quarter EBITDA adjusted for merger related costs was $553 million 4. Retail earnings in the first quarter were impacted by a late spring season in North America, with sales and earnings shifted to the second quarter. Nutrien acquired 29 retail locations with estimated annual revenues of approximately $280 million through April 2018; announced the newly branded Retail business; Nutrien Ag Solutions TM ; and launched an integrated digital platform enabling year-round commercial and agronomic digital management for growers. Potash segment earnings in the first quarter increased due to higher prices, lower production costs, merger synergies and strong offshore sales volumes, despite experiencing significant rail issues during the quarter. Nutrien full year 2018 guidance was raised to $2.20 to $2.60 diluted earnings per share from continuing operations, up from $2.10 to $2.60 previously, and first half 2018 guidance is provided at $1.50 to $1.65 earnings per share. Nutrien executed on its capital priorities by declaring a quarterly dividend of $0.40 per share and repurchasing 10.3 million shares under its normal course issuer bid program year-to-date (approximately 1.6 percent of shares outstanding). Nutrien has achieved $150 million in run-rate synergies as at March 31, We completed our obligor exchange and successfully converted legacy company bonds to a simplified Nutrien indenture platform that aligns covenants and reduces administrative costs. 1 All amounts are stated in U.S. dollars 2 All references to per-share amounts pertain to diluted net earnings per share 3 EBITDA is net (loss) earnings from continuing operations before finance costs, income tax (recovery) expense and depreciation and amortization 4 See Non-IFRS Financial Measures in Nutrien s Q press release

5 Nutrien Q Adjusted EBITDA 1 Comparison 5 Retail EBITDA decreased due to a delayed spring season in North America, moving applications and expected earnings into the second and third quarters. Potash EBITDA was up due to higher sales volumes, increased realized selling prices and a lower cost per tonne. Nitrogen EBITDA was up as higher utilization rates, lower production costs and higher average selling prices, more than offset lower sales volumes caused by a delayed North American planting season. Total Phosphate & Sulfate EBITDA was down due primarily to higher sulfur costs that more than offset higher sales volumes and average realized prices. US$ Millions Q ² Q $546 $553 $522 $328 $240 $250 $261 $39 -$10 $88 $74 -$71 $487 -$100 Consolidated Retail Potash Nitrogen Phosphate and Sulfate Corporate and Other Source: Nutrien 1 See Non-IFRS Financial Measures in Nutrien s Q press release 2 Q amounts are the historical combined results of legacy PotashCorp and Agrium for the three months ended March 31, 2017 and are considered to be non-ifrs measures. See Non-IFRS Financial Measures in Nutrien s Q press release

6 Nutrien Q Retail Gross Margin Bridge 6 Retail gross margin was impacted by cold and wet weather that caused the spring season to be delayed. Sales of crop nutrients and seed were lower as field work was postponed. Sales for merchandise and services increased due to higher animal health, livestock export shipments and wool commissions in Australia. US$ Millions $434 -$18 -$2 -$10 $1 $3 $408 Source: Nutrien 1 Q amounts are the historical combined results of legacy PotashCorp and Agrium for the three months ended March 31, 2017 and are considered to be non-ifrs measures. See Non-IFRS Financial Measures in Nutrien s Q press release

7 Nutrien Q Potash Gross Margin Bridge 7 Potash gross margin was up 48 percent due to higher sales volumes, increased realized selling prices and a lower cost of product sold. Sales volumes totaled 3.1 million tonnes, up 11 percent while average selling prices increased by $19 per tonne. US$ Millions <$1 $295 $ Source: Nutrien 1 Q amounts are the historical combined results of legacy PotashCorp and Agrium for the three months ended March 31, 2017 and are considered to be non-ifrs measures. See Non-IFRS Financial Measures in Nutrien s Q press release

8 Nutrien Q Nitrogen Gross Margin Bridge 8 Nitrogen gross margin declined primarily due to higher depreciation and amortization costs associated with the purchase price allocation. Nitrogen average selling prices were up in the quarter but a delayed spring in North America resulted in lower sales volumes. Costs excluding depreciation and amortization were down due to lower natural gas prices and higher production volumes. US$ Millions -$7 $5 $14 $3 $203 ² -$7 -$55 $55 $188 $148 Q1'17 ¹ Gross Margin Net Selling Price COGS Volumes Other Nitrogen and Purchased Product Non-cash PPA Adjustment Q1'18 ² Gross Margin Source: Nutrien 1 Q amounts are the historical combined results of legacy PotashCorp and Agrium for the three months ended March 31, 2017 and are considered to be non-ifrs measures. See Non-IFRS Financial Measures in Nutrien s Q press release 2 See Non-IFRS Financial Measures in Nutrien s Q press release

9 Nutrien Q Phosphate and Sulfate Gross Margin Bridge 9 Phosphate gross margin declined slightly as higher costs were partially offset by improved pricing and sales volumes. Phosphate prices increased due to the rising input costs and strong global demand in key regions. Cost of sales was impacted by higher sulfur prices. Global sulfur benchmark prices were percent higher in Q versus Q US$ Millions $34 $9 -$16 $3 -$1 $29 Q1'17 ¹ Gross Margin Net Selling Price COGS Volumes Other Phosphate and Purchased Products Q1'18 Gross Margin Source: Nutrien 1 Q amounts are the historical combined results of legacy PotashCorp and Agrium for the three months ended March 31, 2017 and are considered to be non-ifrs measures. See Non-IFRS Financial Measures in Nutrien s Q press release 2 See Non-IFRS Financial Measures in Nutrien s Q press release

10 Outlook and Guidance Q RESULTS PRESENTATION

11 Delayed Nutrient Applications and Planting Progress 11 Percent of Normal Precipitation February 2018 U.S. Corn & Soybean Planting Progress As of May 6 th Corn Soybeans Compressed spring application & planting period expected; Nutrien is competitively positioned to meet customer in-season needs on a timely basis Source: NOAA, USDA, Nutrien

12 Supportive U.S. Grower Economics 12 U.S. Cash Grower Margins 1 US$/Acre Corn Soybeans Wheat Cotton Prospective 2018 cash margins for major crops have improved over the past quarter 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

13 Global Crop Nutrient Prices 13 Selected 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 Mar May Jul Potash Nitrogen Phosphate Market Drivers Strong demand and limited incremental supply from greenfield projects have supported increased prices in most global markets Limited Chinese export supplies and strong Indian demand have provided support; however, this has been offset by delayed spring demand Relatively stable DAP/MAP prices driven by strong Indian demand largely offset by increased Chinese export availability Source: Fertilizer Week, Nutrien

14 Record Global Potash Demand Projected in Global Potash Shipments by Region Million Tonnes KCl 20 Previous Record: 15.8mmt (2015) Previous Record: 6.3mmt (2010) Previous Record: 10.0mmt (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 2018 Highlights Mmt Expect modest demand growth in line with positive consumption trends despite reduced subsidy rates for 2017/18 FY Mmt Demand supported by record palm oil production and robust crop economics for a wide range of key crops Mmt Steady demand supported by strong affordability and significant removal of nutrients following consecutive large harvests Mmt Improved crop economics and acreage growth in nutrient deficient regions has supported strong potash demand Mmt Strong consumption trends supported by affordability and a shift to more potassium-intensive crops like fruits and vegetables Mmt Good affordability and growing demand for NPK fertilizers, including in Africa, are expected to boost potash demand Source: CRU, Fertecon, Industry Publications, Nutrien

15 Tight North American Urea & UAN Supplies 15 FYTD North American Urea Supply 1 Million Tonnes Urea (Jul-Mar) FYTD North American UAN Supply 1 Million Tonnes UAN (Jul-Mar) / / /18E / / /18E Significantly lower offshore imports and higher offshore exports have more than offset increased North American production Source: TFI, U.S. Department of Commerce, Piers, Nutrien 1 Supply is equal to cumulative fertilizer year to date North American production plus offshore imports less offshore exports

16 Phosphate Raw Material Costs 16 Selected Raw Material Prices US$/Tonne Tampa Liquid Sulfur FOB Tampa Ammonia Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Production costs continue to be impacted by higher year-over-year sulfur prices Source: Fertilizer Week, Nutrien

17 Nutrien 2018 Annual Guidance Guidance Ranges (a) (annual guidance except where noted) Low High Adjusted annual earnings per share (b) $2.20 $2.60 Adjusted first-half 2018 earnings per share (b) $1.50 $1.65 Consolidated EBITDA (billions) $3.3 $3.7 Retail EBITDA (billions) $1.2 $1.3 Potash EBITDA (billions) $1.2 $1.4 Nitrogen EBITDA (billions) $1.0 $1.2 Phosphate and Sulfate EBITDA (billions) $0.2 $0.25 Potash sales tonnes (millions) (c) Nitrogen sales tonnes (millions) (c) Depreciation & amortization including purchase price allocation impact (billions) $1.5 $1.7 Integration & synergy costs (millions) $50 $75 Effective tax rate on continuing operations 22% 24% Sustaining capital expenditures (billions) $1.0 $ Annual Assumptions and Sensitivities FX rate CAD to USD $1.27 NYMEX natural gas ($US/MMBtu) $2.90 $1/MMBtu increase in NYMEX ($/share) (d) $(0.19) $20/tonne change in realized Potash selling prices ($/share) (d) $0.25 $20/tonne change in realized Ammonia selling prices ($/share) (d) $0.06 $20/tonne change in realized Urea selling prices ($/share) (d) $0.09 Note: Guidance numbers include the impact of expected in-year realized cash synergies of $175 to $225 million. Excluded from guidance are costs to achieve these ongoing synergies of $50 to $75 million as well as the impact of incremental depreciation and amortization of approximately $250 million to $350 million resulting from the fair valuing of Agrium s assets and liabilities as of January 1, 2018 in accordance with purchase accounting. Income from investments in Arab Potash Company (APC) and Sociedad Quimica y Minera de Chile S.A. (SQM) will be recorded as dividend income (net of tax) in discontinued operations and is expected to range between $140 to $150 million. These amounts are included in our earnings per share guidance but are not included in EBITDA guidance. (a) See Non-IFRS Financial Measures in Nutrien s Q press release (b) All references to per-share amounts pertain to diluted net income per share (c) Potash and nitrogen sales tonnes include manufactured product only. Nitrogen sales tonnes exclude ESN and Rainbow products. (d) Sensitivities are calculated pre-synergies

18 Nutrien Strategic Priorities Q RESULTS PRESENTATION

19 Progress on Strategic Priorities 19 Integration /Synergies $150 million synergy run-rate achieved as at March 31, On track for expected $250 million run-rate by the end of 2018 and $500 million by the end of Completed the divestment of ICL and progressing on SQM and APC. Advanced production and distribution optimization plans across all business segments. Capital Allocation Declared quarterly dividend (27 percent increase) and payout target of 40-60% of free cash flow after sustaining capital. NCIB initiated and one-third complete. Approximately $500 million in shares repurchased as of. Acquired 29 retail locations with estimated revenues of approx. $280 million. Acquired Agrichem Brazil, a leading specialty nutrition and plant health company Launched an Integrated Digital Platform for growers.

20 Significant Value Creation from Merger Synergies 20 Run-Rate Synergies US$ Millions Achieved run-rate synergy as at March 31, 2018 Balance of synergy target $125 $93 $500 $100 $32 $125 $76 $24 + $350 $150 $83 $42 $98 $52 Distribution/ Optimization Production Optimization ++ $150 Procurement SG&A 2019 Target EOY Highly confident in full synergy realization by the end of 2019

21 Launched Nutrien Ag Solutions Digital Platform 21 One integrated portal streamlining access to all of Retail s digital services and solutions Increase ease of use, save time for both grower and agronomist Acquire new grower customers Offering leading-edge crop planning capabilities and precision ag tools Increase customer retention Increase service offerings Allows growers to plan, order and receive product on one omni-channel Future functionality under development; partnering with others to extend reach Designed to augment our industry-leading distribution network, agronomic advice and services

22 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