War in Ukraine will drive demand for Nutrien products for years: CEO

CALGARY — Saskatoon-based fertilizer giant Nutrien Ltd. hit record profits in the first six months of 2022 as war in Ukraine destabilized agricultural markets and heightened fears for global food security.

The Canadian company, which is the world’s largest fertilizer producer, raked in $5 billion in profits in the first half of the year as farm input prices hit multi-year highs.

For the three months ended June 30, Nutrien’s net income increased 224% to US$3.6 billion. (The company said its second-quarter earnings were hurt by a non-cash impairment reversal related to its US$450 million phosphate operations.)

The company on Wednesday revised its full-year 2022 profit forecast to $14 billion to $15.5 billion from $14.5 billion and $16.5 billion, due to lower oil prices. nitrogen and rising natural gas costs.

However, despite the slightly lower outlook, interim CEO Ken Seitz told analysts on a conference call Thursday that the ripple effects of the conflict in Eastern Europe will continue to drive demand for Nutrien products for many years to come. years.

“We believe structural changes in the global energy, agriculture and fertilizer markets will provide a supportive environment for Nutrien well beyond 2022,” Seitz said.

Record temperatures in Europe this summer have reduced summer crop yields, Seitz said. Although agricultural commodity prices have been affected over the past month by greater market volatility, they are still 25 to 35 percent above the 10-year average, he said.

While the recent agreement to reopen Ukrainian wheat exports via the Black Sea would be a positive development for global food security if there was a sustained increase in shipments, Seitz said, it will not be enough to stabilize agricultural markets. global.

“Analysts believe volumes will continue to be challenged by labor and logistical constraints in addition to ongoing military strikes in the region,” he added. “Ukraine’s grain production and export levels are expected to drop significantly from 2021, leaving little room for any supply issues in other regions during this growing season.”

In June, Nutrien announced plans to increase potash production capacity to 18 million tonnes per year by 2025, a 40% increase from 2020 levels, to meet growing global demand. .

Seitz told analysts on Wednesday that potash shipments from Russia and Belarus were down about 25% and 50%, respectively, in the first half of 2022. Although Russian potash exports are not currently sanctioned, they were affected by restrictions on financing activities. that facilitate exports.

“The impact of the sanctions on supplies to Belarus has been greater due to the loss of access to tidal waters via Lithuania,” Seitz said.

Nutrien’s potash sales volumes for the three months ended June 30 were 3.7 million tonnes, a second quarter record.

Nutrien, which was created in 2018 from the merger between PotashCorp of Saskatchewan and Calgary-based Agrium Inc., has six potash mines in Saskatchewan and two major phosphate mines in the United States. It is also the world’s third largest producer of nitrogen. . (Potash, phosphate and nitrogen are the three main plant nutrients used in commercial fertilizers.)

The company exports its products worldwide, with Brazil, China, India, Indonesia and Malaysia accounting for 70% of its overseas sales.

This report from The Canadian Press was first published on August 4, 2022.

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