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Nutrien's 2nd Quarter and 1st Half Results Demonstrate Strength in a Compressed Season

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Nutrien's 2nd Quarter and 1st Half Results Demonstrate Strength in a Compressed Season

PR Newswire

NYSE, TSX: NTR

SASKATOON, August 1, 2018 /PRNewswire/ - Nutrien Ltd. (Nutrien) announced today its 2018 second-quarter results, with net earnings from continuing operations of $741 million1 ($1.172 earnings per share) and EBITDA3 of $1.5 billion.

HIGHLIGHTS

  • Nutrien's second-quarter adjusted net earnings was $1.48 per share4, adjusted for purchase price allocation ($0.02 per share), merger-related costs ($0.02 per share), share-based compensation ($0.10 per share) and dividend income from discontinued operations ($0.17 per share). Second-quarter adjusted EBITDA5 was $1.6 billion, adjusted for merger-related costs and share-based compensation.

  • Retail first-half EBITDA was up 10 percent over last year4 as a result of strong seed and crop protection product margins and excellent demand for crop inputs in the second quarter, demonstrating the value of our distribution network in a compressed season.

  • Potash segment EBITDA was 34 percent higher in the first half of 2018 compared to the same period last year4 due to higher realized prices, strong offshore sales volumes and lower production costs.

  • Nitrogen EBITDA improved by 17 percent in the first half of 2018 compared to the same period last year4 as a result of lower production costs, higher urea prices and increased sales volumes.

  • Nutrien full-year 2018 adjusted annual earnings per share and adjusted consolidated EBITDA guidance were raised to $2.40 to $2.70 earnings per share and $3.7 to $4.0 billion, respectively (up from $2.20 to $2.60 earnings per share and $3.3 to $3.7 billion). The adjusted annual earnings per share guidance includes approximately $100 million in additional annual depreciation and amortization in phosphate and sulfate, related to the conversion of our Redwater phosphate facility to produce ammonia sulfate.

  • Nutrien repurchased 29.3 million shares under its normal course issuer bid program year-to-date.

  • Nutrien enhanced its digital ag and omni-channel offering with the recently announced acquisitions of Waypoint Analytical, Inc. and Agrible, Inc.

  • Nutrien decided to close its small phosphate facility at Geismar, Louisiana, by the end of 2018 and will no longer require offshore phosphate rock imports starting in 2019.

  • Nutrien agreed to sell its Sociedad Química y Minera de Chile S.A. (SQM) series A shares and its stake in Arab Potash Company (APC), and closed the auction of its SQM series B shares. Total net proceeds of required equity divestments are expected to be approximately $5 billion by the end of 2018.

  • Nutrien has achieved $246 million in run-rate synergies as at June 30, 2018 and now expects to achieve $350 million in run-rate synergies by the end of 2018, up from the initial estimate of $250 million.

"Nutrien delivered strong second quarter and first half results, demonstrating the value of our integrated business model and extensive supply chain capabilities, in what was a very compressed spring application season. We also advanced our strategic plan, making significant progress on selling the remaining equity investments, repurchasing our shares and growing our Retail business," commented Chuck Magro, Nutrien's President and CEO. "We have raised our annual guidance due to firm market fundamentals; this, combined with our rapid pace of synergy realization and a strong balance sheet, will provide us with numerous options to enhance shareholder value," added Mr. Magro.

MARKET OUTLOOK

Agriculture and Crop Input Fundamentals

  • Most U.S. crop prices have declined over the past quarter, driven by a combination of favorable U.S. crop prospects and uncertainty over escalating trade restrictions.

  • The U.S. Department of Agriculture (USDA) is projecting an 11 percent decline in global grain ending stocks relative to last year. Key supportive fundamentals include an estimated 23 percent decline in projected U.S. corn ending stocks year-over-year, an 18 million tonne reduction in Russian wheat production and a significant decline in Argentine corn and soybean production in 2017/18.

  • U.S. corn and soybean condition ratings continue to be above average. As a result, growers have invested in plant health and nutritional products to preserve yield potential.

  • U.S. crops are developing at a significantly faster than average rate. This is expected to be positive for the fall fertilizer application window, but is still dependent on weather conditions through the fall season.

  • Crop protection demand in the third quarter has been supported by missed pre-seed burn-off and resulting increased weed pressure in the U.S.

  • Western Canada and Australia have recently received timely precipitation, which has provided support to crop input demand, however, there continues to be dry areas in both regions.

Potash

  • Strong global potash demand in major spot markets has maintained tight supply and provided support for potash prices. Many global exporters are reportedly sold out until the fourth quarter of 2018. We increased our projection of 2018 global potash shipments between 65 and 67 million tonnes.

  • Global potash projects continue to ramp-up, but in most cases at a slower pace than anticipated and the impact of this incremental production has been more than offset by strong demand and reduced production from some regions.

  • Demand for summer fill in North America has been strong and indicates the potential for a robust fall application season.

  • Brazilian agricultural fundamentals are strong, driven by supportive local soybean prices; however, there is uncertainty about the cost of inland freight as a result of truckers' disputes. While there have been some shipping bottlenecks, there have been improvements in recent weeks and we expect a strong application season driven by increased soybean area.

Nitrogen

  • Tight urea supply in China, closures of ammonia and urea capacity in Ukraine, uncertainty regarding Iranian nitrogen availability and seasonal maintenance shut-downs have more than offset capacity additions, providing support for nitrogen prices.

  • In addition to tighter supply from existing producers, there are fewer projects under construction in 2018 and they are experiencing delays, which has been particularly supportive of ammonia prices of late.

  • North American nitrogen supplies were lower than estimated demand in the 2017/18 fertilizer year, driven by a more than 25 percent decline in offshore imports year-over-year.

  • Higher production costs for marginal producers are also supporting nitrogen prices as natural gas prices in Europe are up between 35 and 50 percent year-over-year, while anthracite coal prices in China are up approximately 25 percent.

Phosphate and Sulfate

  • Slower than expected ramp-up of new capacity, combined with plant closures and higher raw material costs year-over-year, continue to support phosphate prices.

FINANCIAL OUTLOOK AND GUIDANCE

Taking the above factors into consideration, we have revised our annual guidance ranges as follows:

We raised our guidance range for Potash sales volumes and EBITDA to 12.3 to 12.8 million tonnes and $1.4 to $1.6 billion, respectively. Nitrogen sales volumes are now expected to be 10.3 to 10.7 million tonnes and we raised the bottom end of our EBITDA guidance range from $1.0 billion to $1.1 billion. Phosphate EBITDA guidance has increased to $0.2 to $0.3 billion (up from $0.2 to $0.25 billion).

Our effective tax rate on continuing operations range has been increased to 23 to 25 percent due to changes in forecasted earnings mix.

Dividend income from investments in APC and SQM is recorded net of tax in discontinued operations and is now expected to approximate $130 million. This is included in our adjusted annual earnings per share guidance, but is not included in adjusted consolidated EBITDA guidance.

Based on these factors, we are increasing our full-year 2018 adjusted earnings guidance to $2.40 to $2.70 per share (previously $2.20 to $2.60 per share) and adjusted consolidated EBITDA guidance to $3.7 to $4.0 billion (previously $3.3 to $3.7 billion).

Excluded from guidance are expected costs to achieve these ongoing synergies of $50 to $75 million, share-based compensation as well as the impact of incremental depreciation and amortization of $150 to $225 million resulting from the fair valuing of Agrium's assets and liabilities as of January 1, 2018 in accordance with purchase accounting.

All annual guidance numbers, including those noted above, are outlined in the table below:




2018 Guidance Ranges






(Annual Guidance, except where noted) 

Low

High

Adjusted annual earnings per share

$2.40

$2.70

Adjusted Consolidated EBITDA (billions)

$3.7

$4.0

Retail EBITDA (billions)

$1.2

$1.3

Potash EBITDA (billions)

$1.4

$1.6

Nitrogen EBITDA (billions)

$1.1

$1.2

Phosphate and Sulfate EBITDA (billions)

$0.2

$0.3

Potash sales tonnes (millions) (a)

12.3

12.8

Nitrogen sales tonnes (millions) (a)

10.3

10.7

Depreciation and amortization including purchase price allocation impact (billions)

$1.5

$1.7

Integration and synergy costs (millions)

$50

$75

Effective tax rate on continuing operations

23%

25%

Sustaining capital expenditures (billions)

$1.0

$1.1







2018 Annual Assumptions & Sensitivities






FX rate CAD to USD


$1.28

NYMEX natural gas ($US/MMBtu)


$2.90

$1/MMBtu increase in NYMEX ($/share) (b)


$(0.20)

$20/tonne change in realized Potash selling prices ($/share)(b)


$0.26

$20/tonne change in realized Ammonia selling prices ($/share)(b)


$0.06

$20/tonne change in realized Urea selling prices ($/share)(b)


$0.09



(a)

Potash and nitrogen sales tonnes include manufactured product only. Nitrogen sales tonnes exclude ESN® and Rainbow products.

(b)

Sensitivities are calculated pre-synergies resulting from the merger.

 

SECOND-QUARTER RESULTS

The comparative figures throughout this release are the historical combined results of legacy Potash Corporation of Saskatchewan Inc. (PotashCorp) and Agrium Inc. (Agrium) for the three and six months ended June 30, 2017 and are considered to be non-IFRS measures. For International Financial Reporting Standards (IFRS) purposes, the comparative amounts are the results of legacy PotashCorp, which is the accounting acquirer. Compared to the IFRS figures, the change is the result of the merger involving Agrium and PotashCorp. Refer to the Selected Non-IFRS Financial Measures and Reconciliations and Supplemental Information section.

Consolidated



Three months ended June 30


2018
Actual

2017
Combined

Change

(millions of U.S. dollars)




Sales

8,145

7,348

797

Freight, transportation and distribution

(214)

(234)

20

Cost of goods sold

(5,800)

(5,323)

(477)

Gross margin

2,131

1,791

340

Expenses

(980)

(796)

(184)

Net earnings from continuing operations

741

705

36

 

Nutrien second-quarter net earnings from continuing operations totaled $741 million, up from the $705 million earned in the second quarter of 2017. Results for the quarter were supported by record EBITDA in Retail and higher prices and strong volumes across our crop nutrient business segments. Depreciation and amortization increased by $45 million this quarter, in part due to the purchase price allocation (PPA) impact. The comparative amount of PotashCorp for IFRS purposes is detailed in the financial report of Nutrien for the second quarter of 2018 and its management's discussion and analysis for the same period, both of which will be made available under Nutrien's profile, provided on SEDAR at www.sedar.com and on EDGAR at www.sec.gov in August 2018.

Retail



Three months ended June 30


2018
Actual

2017
Combined

Change

(millions of U.S. dollars)




Sales

6,342

5,707

635

Cost of goods sold

(4,910)

(4,408)

(502)

Gross margin

1,432

1,299

133

EBIT6

764

689

75

EBITDA

886

760

126

Selling and general and administrative expenses

(682)

(602)

(80)

 

  • EBITDA – Second-quarter Retail EBITDA reached a record of $886 million, a 17 percent increase from the same period last year.
  • North American Retail EBITDA increased by $89 million this quarter compared to the same period last year, as crop input demand surged following a delayed spring season in the U.S. and Canada. International Retail EBITDA was up 42 percent year-over-year (excluding foreign exchange gains) due to higher nutrient and livestock sales. Year-to-date, normalized comparable store sales4 is up 1 percent.

  • Selling and general and administrative expenses – Retail selling and general and administrative expenses increased by 13 percent this quarter compared to the same period in 2017, primarily due to higher depreciation and amortization expense as a result of the PPA. Selling expenses as a percentage of sales was 11 percent this quarter, similar to the same quarter last year as higher depreciation and amortization expense is offset by higher sales.



Three months ended June 30


Sales


Gross margin


Gross
margin
(%)

(millions of U.S. dollars, except where noted)

2018

2017

Change


2018

2017

Change


2018

2017

Crop nutrients

2,326

1,989

337


474

419

55


20

21

Crop protection products

2,358

2,236

122


521

485

36


22

22

Seed

1,183

1,080

103


219

199

20


19

18

Merchandise

201

175

26


26

27

(1)


13

15

Services and other

274

227

47


192

169

23


70

74

 

  • Crop nutrients – Second-quarter sales increased 17 percent compared to the same period last year as deliveries to all key regions were higher year-over-year. First-half sales volumes were up 7 percent versus the same period last year. Gross margin increased 13 percent this quarter while gross margin per tonne was flat due to higher costs associated with delivering higher volumes in a condensed period.

  • Crop protection products – Sales in the quarter were 5 percent higher than in the same period last year despite wet weather challenges in the U.S. and dry weather in Australia. Gross margin was up 7 percent this quarter over the same period last year and percentage gross margins were up slightly for both the quarter and the half compared to 2017 levels.

  • Seed – Sales in the second quarter increased 10 percent from the same period in 2017, due to strong demand in the U.S. and Canada following the delayed planting season. Gross margin also increased 10 percent due to the increased volume while gross margin rates increased 1 percentage point due to a larger proportion of proprietary sales.

  • Merchandise – Sales increased 15 percent in the second quarter due to higher fuel sales in Canada and higher animal health and fencing sales volumes in Australia. Gross margin rates decreased by 2 percentage points during the quarter due to lower margins on Canadian fuel sales.

  • Services and other – Sales increased by 21 percent and gross margin by 14 percent this quarter compared to the same period last year, due to higher livestock export shipments and wool commissions in Australia. Gross margin rates decreased due to the mix of services and products sold.

Potash




Three months ended June 30


2018
Actual

2017
Combined

Change

(millions of U.S. dollars)




Net sales4

638

535

103

Cost of goods sold

(274)

(273)

(1)

Gross margin

364

262

102

EBIT

293

204

89

EBITDA

386

292

94

Provincial mining taxes

(62)

(46)

(16)

 

  • EBITDA – Potash EBITDA was 32 percent higher in the quarter compared to the same period last year due to a combination of strong offshore sales volumes, increased realized selling prices and a lower cost of goods sold per tonne.



Three months ended June 30


2018
Actual

2017
Combined

Change

Manufactured products




Sales volumes (tonnes 000's)




North America

1,030

1,029

1

Offshore

2,149

2,046

103

Total

3,179

3,075

104

Net selling price ($/tonne)



-

North America

216

198

18

Offshore

194

161

33

Average

201

174

27

Cost of goods sold ($/tonne)

(86)

(89)

3

Gross margin ($/tonne)

115

85

30

Depreciation and amortization ($/tonne)

29

29

-

Gross margin excluding depreciation and amortization  ($/tonne)4

144

114

30

 

  • Volumes – Sales volumes were up due to strong offshore demand and a higher Canpotex Limited (Canpotex) allocation compared to the second quarter of 2017. The largest portion of Canpotex's volumes for the quarter were sold to Latin America (32 percent), China and India (21 percent and 9 percent, respectively) and other Asian markets (29 percent).

  • Price – Offshore and domestic selling prices were markedly higher in the second quarter due to strong global demand. Our weighted average realized potash selling price was up 16 percent from the second quarter in 2017.

  • Costs – Cost per tonne of product sold was 3 percent lower compared to the prior year's second quarter, due to a larger proportion of supply produced at our lowest cost facilities and realized synergies.

Nitrogen




Three months ended June 30


2018
Actual

2017
Combined

Change

(millions of U.S. dollars)




Net sales

856

820

36

Cost of goods sold

(595)

(624)

29

Gross margin

261

196

65

EBIT

250

184

66

EBITDA

335

260

75

 

  • EBITDA – Total nitrogen EBITDA in the quarter was up 29 percent as lower production costs, higher urea prices and increased sales volumes more than offset lower realized prices for ammonia.




Three months ended June 30


2018
Actual

2017
Combined

Change

Manufactured products




Sales volumes (tonnes 000's)




Ammonia

1,028

1,064

(36)

Urea

901

751

150

Solutions and nitrates

1,133

1,008

125

Total

3,062

2,823

239

Net selling price ($/tonne)



-

Ammonia

263

303

(40)

Urea

281

239

42

Solutions and nitrates

167

163

4

Average

233

236

(3)

Cost of goods sold ($/tonne)

(155)

(172)

17

Gross margin ($/tonne)

78

64

14

Depreciation and amortization ($/tonne)

28

27

1

Gross margin excluding depreciation and amortization ($/tonne)

106

91

15

 

  • Volumes – Total nitrogen sales volumes were up 8 percent in the second quarter as higher urea, solutions and nitrates sales more than offset lower ammonia sales. Ammonia sales volumes decreased due to the continued ramp-up of our urea expansion project at Borger, Texas, as well as higher urea production at our Trinidad facility, which reduced net ammonia available for sale. Urea, solutions and nitrates sales volumes were up 16 percent year-over-year on a combined basis as a result of the increased upgrade to urea and strong operating rates across the business.

  • Price – Higher realized prices for urea, solutions and nitrates mostly offset lower realized prices for ammonia caused by lower Tampa ammonia benchmark prices and lower natural gas costs. Our weighted average realized selling price for nitrogen was down 1 percent from the second quarter of 2017.

  • Costs – Cost of goods sold per tonne of nitrogen was 10 percent lower than the second quarter of 2017 due to significantly lower natural gas costs and higher production volumes which were used to allocate fixed costs. Depreciation and amortization per tonne was flat year-over-year resulting from year-to-date adjustments to the PPA, which remains provisional until December 31, 2018 when valuation adjustments must be finalized. Second-quarter AECO gas prices continue to be favorable to our cost position, with prices $1.25/MMBtu lower than the same period in 2017.




Three months ended June 30


2018
Actual

2017
Combined

Change

(U.S. dollars per MMBtu)




Overall gas cost excluding realized derivative impact

2.20

2.88

(0.68)

Realized derivative impact

0.38

0.29

0.09

Overall gas cost

2.58

3.17

(0.59)

Average NYMEX

2.80

3.18

(0.38)

Average AECO

0.80

2.05

(1.25)

 

Phosphate and Sulfate




Three months ended June 30


2018
Actual

2017
Combined

Change

(millions of U.S. dollars)




Net sales

394

317

77

Cost of goods sold

(352)

(315)

(37)

Gross margin

42

2

40

EBIT

39

(5)

44

EBITDA

81

57

24

 

  • EBITDA – Total phosphate and sulfate EBITDA was up 42 percent from the second quarter in 2017 as a result of increased sales volumes at higher realized prices, which more than offset increased sulfur costs.




Three months ended June 30


2018
Actual

2017
Combined

Change

Manufactured products




Sales volumes (tonnes 000's)




Fertilizer

569

472

97

Industrial and feed

191

210

(19)

Ammonium sulfate

87

111

(24)

Total

847

793

54

Net selling price ($/tonne)




Fertilizer

410

355

55

Industrial and feed

513

501

12

Ammonium sulfate

271

259

12

Average

419

380

39

Cost of goods sold ($/tonne)

(371)

(380)

9

Gross margin ($/tonne)

48

-

48

Depreciation and amortization ($/tonne)

50

78

(28)

Gross margin excluding depreciation and amortization  ($/tonne)

98

78

20

 

  • Volumes – Total phosphate sales volumes in the quarter were 7 percent higher than the second quarter of 2017, supported by strong global fertilizer demand and increased production levels at our phosphate facilities.

  • Price – The average combined realized selling price for fertilizer, industrial and feed and ammonium sulfate was up 10 percent in the quarter due to strong global phosphate demand and higher global sulfur benchmark prices.

  • Costs – Cost of goods sold per tonne was 2 percent lower than the second quarter of 2017 due to lower depreciation and amortization from a lower carrying value of U.S. phosphate assets as a result of impairments in 2017.

Other




Three months ended June 30


2018
Actual

2017
Combined

Change

(millions of U.S. dollars)




General and administrative expenses

(147)

(63)

(84)

Other expenses

(81)

(49)

(32)

Finance costs

(133)

(126)

(7)

Income tax expense

(277)

(164)

(113)

  • General and administrative expenses were higher compared to the second quarter of 2017 due primarily to an increase in our share-based compensation expense by $82 million as a result of a higher Nutrien share price, an improvement in our relative ranking in total shareholder return and progress towards synergy targets.

  • Tax - Ordinary earnings for the three months ended June 30, 2018 were higher as compared to the same period in 2017. In addition, in second-quarter 2017, a deferred tax recovery of $68 million was recorded as a result of a Saskatchewan income tax rate decrease. As a result of these two items, income tax expense increased for the three months ended June 30, 2018 as compared to the same period last year.

SYNERGIES

Synergy Program Commitments




Category

December 31, 2019 Synergy

Run Rate – Initial Target

Synergy Run Rate Achieved

to June 30, 2018

Distribution and retail integration/optimization

~$150 million

$68 million

Production optimization

~$125 million

$60 million

SG&A optimization

~$125 million

$75 million

Procurement

~$100 million

$43 million

Total

    $500 million

$246 million

 

  • Nutrien has achieved synergies ahead of schedule, capturing $246 million in run-rate synergies as at June 30, 2018. We now expect to achieve $350 million in run-rate synergies by the end of 2018, up from the initial estimate of $250 million.

Notes
1. All amounts are stated in U.S. dollars.

2. All references to per-share amounts pertain to diluted net earnings per share.

3. Earnings before interest, taxes, depreciation, and amortization (EBITDA) is calculated as net earnings from continuing operations before finance costs, income tax (expense) recovery, depreciation and amortization. This is a non-IFRS measure. Refer to Selected Non-IFRS Financial Measures and Reconciliations and Supplemental Information.

4. This is a non-IFRS measure. Refer to Selected Non-IFRS Financial Measures and Reconciliations and Supplemental Information.

5. Adjusted EBITDA is calculated as net earnings from continuing operations before finance costs, income tax (expense) recovery, depreciation and amortization and adjusted for merger-related costs and share-based compensation expense. This is a Non-IFRS measure. Refer to Selected Non-IFRS Financial Measures and Reconciliations and Supplemental Information.

6. Earnings before interest and taxes (EBIT) is calculated as net earnings from continuing operations before finance costs and income tax (expense) recovery.

About Nutrien

Nutrien is the world's largest provider of crop inputs and services, playing a critical role in helping growers increase food production in a sustainable manner. We produce and distribute over 26 million tonnes of potash, nitrogen and phosphate and sulfate products world-wide. With this capability and our leading agriculture retail network, we are well positioned to supply the needs of our customers. We operate with a long-term view and are committed to working with our stakeholders as we address our economic, environmental and social priorities. The scale and diversity of our integrated portfolio provides a stable earnings base, multiple avenues for growth and the opportunity to return capital to shareholders. For further information visit us at www.nutrien.com.

Forward-Looking Statements

Certain statements and other information included in this news release 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 news release, other than those relating to historical information or current conditions, are forward-looking statements, including, but not limited to: Nutrien's 2018 annual and second-half guidance, including expectations regarding our adjusted diluted earnings per share and EBITDA (both adjusted 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 and sulfate 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 adjusted diluted earnings per share, adjusted 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.

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.

FOR FURTHER INFORMATION:

Investor and Media Relations:
Richard Downey
Vice President, Investor & Corporate Relations
(403) 225-7357
Investors@nutrien.com

Investor Relations:
Jeff Holzman
Senior Director, Investor Relations
(306) 933-8545

Todd Coakwell
Director, Investor Relations
(403) 225-7437

Contact us at: www.nutrien.com

____________________________________________________________________________________________________________________

Nutrien will host a Conference Call on Thursday, August 2, 2018 at 10:00 am Eastern Time.

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Nutrien Ltd. 

Condensed Consolidated Statements of Earnings

(in millions of US dollars except as otherwise noted)

(unaudited)







Three Months Ended

Six Months Ended


June 30

June 30


2018

2017

2018

2017



(Note 11)


(Note 11)






Sales (Note 3)

$

8,145

$

1,120

$

11,840

$

2,232

Freight, transportation and distribution

(214)

(116)

(422)

(249)

Cost of goods sold (Note 3)

(5,800)

(744)

(8,440)

(1,450)

Gross Margin

2,131

260

2,978

533

Selling expenses

(666)

(8)

(1,198)

(17)

General and administrative expenses

(179)

(40)

(298)

(81)

Provincial mining and other taxes

(65)

(43)

(113)

(76)

Earnings of equity-accounted investees

4

3

11

3

Other expenses (Note 4)

(74)

(23)

(153)

(38)

Earnings before Finance Costs and Income Taxes

1,151

149

1,227

324

Finance costs

(133)

(61)

(252)

(120)

Earnings before Income Taxes

1,018

88

975

204

Income tax (expense) recovery (Note 5)

(277)

64

(235)

54

Net Earnings from Continuing Operations

741

152

740

258

Net earnings from discontinued operations (Note 6)

675

49

675

92

Net Earnings 

$

1,416

$

201

$

1,415

$

350






Net Earnings per Share from Continuing Operations






Basic

$

1.18

$

0.18

$

1.16

$

0.31


Diluted                                                                                                  

$

1.17

$

0.18

$

1.16

$

0.31







Net Earnings per Share from Continuing and Discontinued Operations






Basic

$

2.25

$

0.24

$

2.22

$

0.42


Diluted

$

2.24

$

0.24

$

2.22

$

0.42







Dividends Declared per Share 

$

0.40

$

0.10

$

0.80

$

0.20







Weighted Average Shares Outstanding (Note 2)






Basic

630,548,000

840,060,000

636,438,000

839,959,000


Diluted

631,073,000

840,124,000

636,971,000

840,111,000







(See Notes to the Condensed Consolidated Financial Statements)


 

Nutrien Ltd. 

Condensed Consolidated Statements of Comprehensive Income

(in millions of US dollars)

(unaudited)







Three Months Ended

Six Months Ended


June 30

June 30


2018

2017

2018

2017

(Net of related income taxes)


(Note 11)


(Note 11)






Net Earnings

$

1,416

$

201

$

1,415

$

350

Other Comprehensive (Loss) Income






Items that will not be reclassified to net earnings:







Net actuarial (loss) gain on defined benefit plans(1)

(1)

-

56

-



Financial instruments measured at FVTOCI (2)








Net fair value (loss) gain on investments 

(10)

60

(93)

93


Items that have been or may be subsequently reclassified to







net earnings:







Cash flow hedges






Net fair value gain (loss) during the period (3)  

3

(2)

1

(7)




Reclassification of net loss to earnings (4)

-

11

-

19



Foreign currency translation








Loss on translation of net foreign operations

(97)

-

(138)

-



Equity-accounted investees








Share of other comprehensive (loss) income

-

-

(1)

3

Other Comprehensive (Loss) Income

(105)

69

(175)

108

Comprehensive Income

$

1,311

$

270

$

1,240

$

458



(1)

Net of income taxes of $1 (2017 – $NIL) for the three months ended June 30, 2018 and $(16) (2017 – $NIL) for the six months ended June 30, 2018.

(2)

As at June 30, 2018, financial instruments measured at fair value through other comprehensive income ("FVTOCI") are comprised of shares in Sinofert Holdings Limited ("Sinofert") and other (June 30, 2017 - Israel Chemicals Ltd. ("ICL"), Sinofert and other). The company's investment in ICL was classified as held for sale at December 31, 2017 and the divestiture of all equity interests in ICL was completed on January 24, 2018.

(3)

Cash flow hedges are comprised of natural gas derivative instruments and were net of income taxes of $(1) (2017 - $1) for the three months ended June 30, 2018 and $NIL (2017 - $4) for the six months ended June 30, 2018.

(4)

Net of income taxes of $NIL (2017 - $(6)) for the three months ended June 30, 2018 and $NIL (2017 - $(11)) for the six months ended June 30, 2018.

(See Notes to the Condensed Consolidated Financial Statements)


 

Nutrien Ltd. 

Condensed Consolidated Statements of Cash Flows

(in millions of US dollars)

(unaudited)









Three Months Ended

Six Months Ended



June 30

June 30



2018

2017

2018

2017







Operating Activities





Net earnings

$

1,416

$

201

$

1,415

$

350

Adjustments to reconcile net earnings to cash






provided by operating activities (Note 7)

(107)

151

294

295

Changes in non-cash operating working capital (Note 7)

(708)

(24)

(1,448)

(94)

Cash provided by operating activities

601

328

261

551







Investing Activities





Cash acquired in Merger (Note 2)

-

-

466

-

Business acquisitions, net of cash acquired

(60)

-

(245)

-

Additions to property, plant and equipment

(323)

(128)

(561)

(261)

Proceeds from disposal of discontinued operations (Note 6)

1,067

-

1,819

-

Purchase of investments

(108)

-

(108)

-

Other

10

(2)

11

(1)

Cash provided by (used in) investing activities

586

(130)

1,382

(262)







Financing Activities





Finance costs on long-term debt

(15)

-

(21)

(1)

Proceeds from (repayment of) short-term debt

1,399

(81)

1,895

(60)

Repayment of long-term debt

(6)

-

(6)

-

Dividends paid

(255)

(82)

(460)

(164)

Repurchase of common shares (Note 9)

(803)

-

(1,204)

-

Issuance of common shares

1

-

2

1

Cash provided by (used in) financing activities

321

(163)

206

(224)

Effect of exchange rate changes on cash and cash equivalents

(12)

-

(9)

-

Increase in Cash and Cash Equivalents

1,496

35

1,840

65

Cash and Cash Equivalents, Beginning of Period

460

62

116

32

Cash and Cash Equivalents, End of Period

$

1,956

$

97

$

1,956

$

97







Cash and cash equivalents comprised of:






Cash

$

595

$

28

$

595

$

28


Short-term investments

1,361

69

1,361

69



$

1,956

$

97

$

1,956

$

97

(See Notes to the Condensed Consolidated Financial Statements)

 

Nutrien Ltd. 

Condensed Consolidated Statement of Changes in Shareholders' Equity

(in millions of US dollars)

(unaudited)

















Accumulated Other Comprehensive (Loss) Income





Share

Capital

Contributed

Surplus

Net fair value

loss on

investments 

(1),(2)

Net (loss) gain

on derivatives

designated as

cash flow hedges

Net

actuarial

gain on

defined

benefit plans (3)

Translation loss

of net foreign 

operations

(Note 11)

Comprehensive

loss of 

equity-accounted 

investees

(Note 11)

Total

Accumulated

Other

Comprehensive

Income (Loss)

Retained

Earnings

Total

Equity















Balance - December 31, 2017

$

1,806

$

230

$

73

$

(43)

$

-

$

(2)

$

(3)

$

25

$

6,242

$

8,303

Merger impact (Note 2, Note 9)

15,898

7

-

-

-

-

-

-

(1)

15,904

Net earnings

-

-

-

-

-

-

-

-

1,415

1,415

Other comprehensive (loss) income

-

-

(93)

1

56

(138)

(1)

(175)

-

(175)

Shares repurchased

(685)

(23)

-

-

-

-

-

-

(561)

(1,269)

Dividends declared

-

-

-

-

-

-

-

-

(507)

(507)

Effect of share-based compensation 












including issuance of common shares 

5

9

-

-

-

-

-

-

-

14

Transfer of net actuarial gain on












defined benefit plans

-

-

-

-

(56)



(56)

56

-

Transfer of net loss on sale












of investment

-

-

19

-

-

-

-

19

(19)

-

Transfer of net loss on cash flow hedges (4)

-

-

-

15

-

-

-

15

-

15

Balance - June 30, 2018

$

17,024

$

223

$

(1)

$

(27)

$

-

$

(140)

$

(4)

$

(172)

$

6,625

$

23,700



(1)

The company adopted IFRS 9 "Financial Instruments" in 2018 and reclassified available-for-sale investments as financial instruments measured at FVTOCI.

(2)

The company divested its equity interests in the investment in ICL on January 24, 2018. The loss on sale of ICL of $(19) was transferred to retained earnings at June 30, 2018. The cumulative net unrealized gain at December 31, 2017 was $4.

(3)

Any amounts incurred during a period are closed out to retained earnings at each period-end. Therefore, no balance exists at the beginning or end of period.

(4)

Net of income taxes of $(2) for the three months ended June 30, 2018 and $(4) for the six months ended June 30, 2018.


(See Notes to the Condensed Consolidated Financial Statements)

 

Nutrien Ltd. 

Condensed Consolidated Balance Sheets

(in millions of US dollars except share amounts)

(unaudited)




As at


June 30

2018

(Note 2)

December 31

2017

(Note 11)






Assets




Current assets





Cash and cash equivalents

$

1,956

$

116



Receivables 

4,746

489



Inventories 

4,089

788



Prepaid expenses and other current assets

323

72




11,114

1,465



Assets held for sale (Note 6)

945

1,858




12,059

3,323


Non-current assets





Property, plant and equipment 

20,450

12,971



Goodwill (Note 2)

10,990

97



Other intangible assets

2,277

69



Investments

862

292



Other assets

432

246

Total Assets

$

47,070

$

16,998











Liabilities




Current liabilities





Short-term debt (Note 8)

$

3,459

$

730



Current portion of long-term debt (Note 8)

1,018

-



Payables and accrued charges

5,923

836




10,400

1,566



Deferred income tax liabilities on assets held for sale (Note 6) 

28

36




10,428

1,602


Non-current liabilities





Long-term debt (Note 8)

7,586

3,711



Deferred income tax liabilities

3,017

2,205



Pension and other post-retirement benefit liabilities

530

440



Asset retirement obligations and accrued environmental costs

1,617

651



Other non-current liabilities

192

86

Total Liabilities

23,370

8,695






Shareholders' Equity




Share capital (Note 9)

17,024

1,806



Unlimited authorization of common shares without par value; issued and
outstanding 619,364,958 and 840,223,041 at June 30, 2018 and
December 31, 2017, respectively




Contributed surplus 

223

230


Accumulated other comprehensive (loss) income

(172)

25


Retained earnings 

6,625

6,242

Total Shareholders' Equity

23,700

8,303

Total Liabilities and Shareholders' Equity

$

47,070

$

16,998




(See Notes to the Condensed Consolidated Financial Statements)



 

Nutrien Ltd.
Notes to the Condensed Consolidated Financial Statements
As at and for the Three and Six Months Ended June 30, 2018
(in millions of US dollars except as otherwise noted) 
(unaudited)

1. Significant Accounting Policies

On January 1, 2018, Potash Corporation of Saskatchewan Inc. ("PotashCorp") and Agrium Inc. ("Agrium") combined their businesses in a transaction by way of a plan of arrangement (the "Merger") by becoming wholly-owned subsidiaries of a new parent company named Nutrien Ltd. (collectively with its subsidiaries, known as "Nutrien" or "the company" except to the extent the context otherwise requires). Nutrien is the world's largest provider of crop inputs and services.

The company's accounting policies are in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS"). The accounting policies and methods of computation used in preparing these unaudited interim condensed consolidated financial statements are consistent with those used in the preparation of Nutrien's first quarter 2018 unaudited condensed consolidated first quarter financial statements ("first quarter financial statements"). PotashCorp is the acquirer for accounting purposes, and as a result, figures and related notes for 2017 and prior reflect the historical operations of PotashCorp. The financial statements and related notes of Nutrien in 2018 and beyond reflect the consolidated operations of Nutrien.

These unaudited interim condensed consolidated financial statements include the accounts of Nutrien and its subsidiaries; however, they do not include all disclosures normally provided in annual consolidated financial statements and should be read in conjunction with the company's first quarter financial statements. Further, while the financial figures included in this preliminary interim results news release have been computed in accordance with IFRS applicable to interim periods, this news release does not contain sufficient information to constitute an interim financial report as that term is defined in International Accounting Standard ("IAS") 34, "Interim Financial Reporting". The company expects to file an interim financial report that complies with IAS 34 in its 2018 second quarter report in August 2018.

In management's opinion, the unaudited interim condensed consolidated financial statements include all adjustments necessary to present fairly such information in all material respects. Interim results are not necessarily indicative of the results expected for the fiscal year.

2. Merger of Equals

As described in Note 1, PotashCorp and Agrium combined their businesses in a merger of equals. Further information relating to the merger of equals was previously described in Note 2 of the company's first quarter financial statements.

The company has engaged independent valuation experts to assist in determining the fair value of certain assets acquired and liabilities assumed and related deferred income tax impacts in connection with the Merger. The purchase price allocation is not final as the company is continuing to obtain and verify information required to determine the fair value of certain assets and liabilities and the amount of deferred income taxes arising on their recognition. The company estimated the preliminary purchase price allocation as of the date of the Merger based on information that was available and continues to adjust those estimates as new information becomes available that existed at the date of acquisition. The company expects to finalize the amounts recognized as it obtains the information necessary to complete the analysis, and in any event, not later than December 31, 2018.

Due to the inherent complexity associated with valuations and the timing of the Merger, the numbers below are provisional. Further adjustments to the fair values presented in the following table may occur:



Preliminary

fair value as

previously

reported (1)

Adjustments (2)

Estimated fair

value as at

June 30, 2018







Cash and cash equivalents

$

466

$

-

$

466


Receivables

2,424

(2)

2,422


Inventories

3,321

(18)

3,303


Prepaid expenses and other current assets

1,124

-

1,124


Assets held for sale

105

(10)

95


Property, plant and equipment

7,783

(217)

7,566


Goodwill

10,455

382

10,837


Other intangible assets

2,318

30

2,348


Investments

522

6

528


Other assets

123

-

123

Total Assets

28,641

171

28,812







Short-term debt

$

867

$

-

$

867


Payables and accrued charges

5,223

3

5,226


Long-term debt

4,941

-

4,941


Deferred income tax liabilities

498

(6)

492


Pension and other post-retirement benefits liabilities

142

-

142


Asset retirement obligations and accrued environmental costs

888

167

1,055


Other non-current liabilities

72

7

79

Total Liabilities

12,631

171

12,802

Net assets (consideration for the Merger)

$

16,010

$

-

$

16,010

(1)

As previously reported in the company's first quarter financial statements.

(2)

The company recorded adjustments to the preliminary fair value in the second quarter of 2018 to reflect facts and circumstances in existence as of the date of acquisition. These adjustments primarily related to changes in preliminary valuation assumptions, including recording of accrued retirement obligations and refinement of property, plant and equipment and intangibles estimates based on new information available that existed at the date of acquisition. All measurement period adjustments were offset against goodwill.

 

3.   Segment Information

The company has four reportable operating segments: retail, potash, nitrogen and phosphate and sulfate. The retail segment distributes crop nutrients, crop protection products, seed and merchandise and provides services directly to growers through a network of farm centers in North and South America and Australia. The potash, nitrogen and phosphate and sulfate segments are differentiated by the chemical nutrient contained in the products that each produces.


Three Months Ended June 30, 2018


Retail

Potash

Nitrogen

Phosphate

and Sulfate

Others

Eliminations

Consolidated









Sales

- third party

$

6,331

$

666

$

781

$

367

$

-

$

-

$

8,145


- intersegment

11

50

188

79

-

(328)

-

Sales

- total

6,342

716

969

446

-

(328)

8,145

Freight, transportation and distribution 

-

(78)

(113)

(52)

-

29

(214)

Net sales

6,342

638

856

394

-

(299)


Cost of goods sold

(4,910)

(274)

(595)

(352)

-

331

(5,800)

Gross margin

1,432

364

261

42

-

32

2,131


Selling expenses

(657)

(3)

(8)

(2)

4

-

(666)


General and administrative expenses

(25)

(2)

(4)

(1)

(147)

-

(179)


Provincial mining and other taxes

-

(62)

(1)

(1)

(1)

-

(65)


Earnings of equity-accounted










investees                          

3

-

3

-

(2)

-

4


Other income (expenses)

11

(4)

(1)

1

(81)

-

(74)

Earnings before finance costs and 









income taxes

764

293

250

39

(227)

32

1,151

Depreciation and amortization

122

93

85

42

14

-

356

EBITDA (1)

886

386

335

81

(213)

32

1,507

(1) See reconciliation of non-IFRS measure in the Selected Non-IFRS Financial Measures and Reconciliations and Supplemental Information section. 

 




Three Months Ended June 30, 2017




Potash

Nitrogen

Phosphate

and Sulfate

Others

Eliminations

Consolidated










Sales

- third party

$

461

$

384

$

275

$

-

$

-

$

1,120


- intersegment

-

17

-

-

(17)

-

Sales - total

461

401

275

-

(17)

1,120

Freight, transportation and distribution

(50)

(32)

(34)

-

-

(116)

Net sales

411

369

241

-

(17)


Cost of goods sold

(193)

(301)

(267)

-

17

(744)

Gross margin 

218

68

(26)

-

-

260


Selling expenses

(2)

(4)

(2)

-

-

(8)


General and administrative expenses

(2)

(1)

(1)

(36)

-

(40)


Provincial mining and other taxes

(43)

-

-

-

-

(43)


Earnings of equity-accounted









investees

-

2

-

1

-

3


Other expenses

(5)

(2)

(1)

(15)

-

(23)








Earnings before finance costs and income taxes

166

63

(30)

(50)

-

149

Depreciation and amortization

56

47

56

9

-

168

EBITDA

222

110

26

(41)

-

317

 




Six Months Ended June 30, 2018




Retail

Potash

Nitrogen

Phosphate

andSulfate

Others

Eliminations

Consolidated











Sales

- third party

$

8,419

$

1,268

$

1,405

$

748

$

-

$

-

$

11,840


- intersegment

22

118

310

160

-

(610)

-

Sales - total

8,441

1,386

1,715

908

-

(610)

11,840

Freight, transportation and distribution

-

(173)

(187)

(110)

-

48

(422)

Net sales

8,441

1,213

1,528

798

-

(562)


Cost of goods sold

(6,601)

(554)

(1,119)

(727)

-

561

(8,440)

Gross margin

1,840

659

409

71

-

(1)

2,978


Selling expenses

(1,180)

(6)

(16)

(5)

9

-

(1,198)


General and administrative expenses

(48)

(5)

(10)

(4)

(231)

-

(298)


Provincial mining and other taxes

-

(110)

(1)

(1)

(1)

-

(113)


Earnings of equity-accounted










investees

5

-

7

-

(1)

-

11


Other income (expenses)

14

(8)

(7)

1

(153)

-

(153)

Earnings before finance costs and 









income taxes

631

530

382

62

(377)

(1)

1,227

Depreciation and amortization

245

184

214

93

31

-

767

EBITDA

876

714

596

155

(346)

(1)

1,994














Six Months Ended June 30, 2017





Potash

Nitrogen

Phosphate
and Sulfate

Others

Eliminations

Consolidated











Sales

- third party


$

890

$

759

$

583

$

-

$

-

$

2,232


- intersegment


-

39

-

-

(39)

-

Sales - total


890

798

583

-

(39)

2,232

Freight, transportation and distribution


(114)

(64)

(71)

-

-

(249)

Net sales


776

734

512

-

(39)


Cost of goods sold


(393)

(569)

(527)

-

39

(1,450)

Gross margin 


383

165

(15)

-

-

533


Selling expenses


(4)

(8)

(4)

(1)

-

(17)


General and administrative expenses


(4)

(2)

(2)

(73)

-

(81)


Provincial mining and other taxes


(76)

-

-

-

-

(76)


Earnings of equity-accounted










investees


-

2

-

1

-

3


Other expenses


(10)

(4)

(2)

(22)

-

(38)

Earnings before finance costs and 









income taxes


289

153

(23)

(95)

-

324

Depreciation and amortization


111

97

114

18

-

340

EBITDA


400

250

91

(77)

-

664

 

4. Other Expenses


Three Months Ended

Six Months Ended


June 30

June 30


2018

2017

2018

2017



(Note 11)


(Note 11)

Foreign exchange (loss) gain

$

-

$

(9)

$

2

$

(8)

Merger and related costs

(15)

(14)

(81)

(23)

Other expenses

(59)

-

(74)

(7)


$

(74)

$

(23)

$

(153)

$

(38)


 

5. Income Tax (Expense) Recovery

A separate estimated average annual effective tax rate was determined for each taxing jurisdiction and applied individually to the interim period pre-tax income from continuing operations of each jurisdiction.

Income Tax Related to Continuing Operations


Three Months Ended

Six Months Ended


June 30

June 30


2018

2017

2018

2017

Income tax (expense) recovery

$

(277)

$

64

$

(235)

$

54

Actual effective tax rate on ordinary earnings

27%

9%

24%

11%

Actual effective tax rate including discrete items

27%

(72%)

24%

(27%)

Discrete tax adjustments that impacted the tax rate 

$

(1)

$

71

$

2

$

76

 

The actual effective tax rate on ordinary earnings for the three and six months ended June 30, 2018 increased compared to the same periods last year primarily due to significantly higher income in high tax jurisdictions. Tax adjustments included a deferred tax recovery of $68 in the second quarter of 2017 resulting from a Saskatchewan income tax rate decrease.

 

6. Discontinued Operations

The company's investments in Sociedad Quimica y Minera de Chile S.A. ("SQM"), ICL and Arab Potash Company ("APC") were classified as held for sale and as discontinued operations in December 2017, due to regulatory requirements to dispose of these investments in connection with the Merger. The company's share of earnings, dividend income and associated income tax (expense) recovery pertaining to these investments were reclassified from earnings before income taxes and income tax (expense) recovery to net earnings from discontinued operations on the condensed consolidated statement of earnings.

For the six months ended June 30, 2018:










Impact of Sale on: 


Proceeds

(Loss) Gain

on Sale

 

Net of

Income
taxes

AOCI

Net Earnings

and Retained

Earnings

Sale of shares in ICL(1)

$

685

$

(19)

$

-

$

(19)

$

-

Sale of Conda (2)

73

-

-

-

-

Sale of shares in SQM (3)

1,061

841

586

-

586

Total

$

1,819

$

822

$

586

$

(19)

$

586

(1)

In the first quarter of 2018, the company completed the sale of its equity interests in ICL through a private secondary offering.

(2)

In the first quarter of 2018, the company completed the sale of its Conda phosphate operations.

(3)

In the second quarter of 2018, the company completed the sale of a portion of its equity interest in SQM.

 

On May 17, 2018, the company entered into an agreement with a third party for the sale of its remaining equity interest in SQM for approximately $4,066 before taxes and closing costs. The agreement is subject to customary closing conditions (including applicable regulatory approvals) and is expected to close by the fourth quarter of 2018.

On July 23, 2018, the company entered into an agreement with a third party for the sale of the company's equity interest in APC for approximately $502. The agreement is subject to customary closing conditions (including applicable regulatory approvals) and is expected to close by the fourth quarter of 2018.

Net Earnings from Discontinued Operations 






Three Months Ended

Six Months Ended


June 30

June 30


2018

2017

2018

2017

Share of earnings of SQM and APC (1)

$

-

$

47

$

-

$

85

Dividend income of SQM, APC and ICL (1)

126

4

126

12

Gain on disposal of investment in SQM

841

-

841

-

Income tax expense (2)

(292)

(2)

(292)

(5)

Net earnings from discontinued operations

$

675

$

49

$

675

$

92






Net Earnings per Share from Discontinued Operations






Basic

$

1.07

$

0.06

$

1.06

$

0.11


Diluted                                                               

$

1.07

$

0.06

$

1.06

$

0.11

(1)

The company's investments in SQM and APC were classified as discontinued operations at December 1, 2017 and December 31, 2017, respectively, and, as a result, equity accounting in respect of these investments ceased after such dates.

(2)

For 2018, income tax expense is comprised of $255 relating to the disposals of certain SQM shares including the planned repatriation of the net proceeds, and $37 relating to earnings from discontinued operations ($19 for the planned repatriation of dividend income received from SQM and $18 for the planned repatriation of the remaining excess cash available in Chile).

 

Cash flows from Discontinued Operations







Three Months Ended

Six Months Ended



June 30

June 30



2018

2017

2018

2017

Operating Activities






Dividends from discontinued operations

$

126

$

88

$

126

$

95

Cash provided by operating activities

$

126

$

88

$

126

$

95







Investing activities






Proceeds from disposal of discontinued operations

$

1,067

$

-

$

1,819

$

-

Cash provided by investing activities

$

1,067

$

-

$

1,819

$

-

 

7.  Consolidated Statements of Cash Flows




Three Months Ended

Six Months Ended




June 30

June 30




2018

2017

2018

2017





(Note 11)


(Note 11)

Reconciliation of cash provided by operating activities





Net earnings

$

1,416

$

201

$

1,415

$

350

Adjustments to reconcile net earnings to cash provided by





 operating activities






Gain on sale of investment in SQM

(841)

-

(841)

-


Depreciation and amortization

356

168

767

340


Net (undistributed) distributed earnings of equity-accounted investees

(2)

35

(8)

(2)


Share-based compensation

82

2

98

7


Provision for (recovery of) deferred income tax

306

(82)

298

(96)


Asset retirement obligations and accrued environmental costs

(10)

3

(28)

2


Other long-term liabilities and miscellaneous

2

25

8

44


Subtotal of adjustments

(107)

151

294

295









Changes in non-cash operating working capital






Receivables

(1,644)

23

(1,831)

38


Inventories

1,696

(9)

(5)

(58)


Prepaid expenses and other current assets

209

(9)

854

(14)


Payables and accrued charges

(969)

(29)

(466)

(60)


Subtotal of changes in non-cash operating working capital

(708)

(24)

(1,448)

(94)

Cash provided by operating activities

$

601

$

328

$

261

$

551








Supplemental cash flows disclosure







Interest paid

$

127

$

74

$

241

$

103



Income taxes paid                                                                            

$

67

$

38

$

96

$

53

 

8. Debt

In the second quarter of 2018, the company launched a commercial paper program having an aggregate authorized amount of $4,500. Nutrien has discontinued new issuances under the legacy commercial paper programs of PotashCorp and Agrium.

In the second quarter of 2018, the company replaced the existing $3,500 unsecured revolving credit facility and the $2,500 multi-jurisdictional unsecured revolving credit facility with a new Nutrien $4,500 unsecured revolving cred it facility ("Nutrien Credit Facility "). The Nutrien Credit Facility matures April 10, 2023, subject to extension at the request of Nutrien provided that the resulting maturity date shall not exceed five years from the date specified in the request. Principal covenants and events of default under the Nutrien Credit Facility include a debt to capital ratio of less than or equal to 0.65:1 and other customary events of default and covenant provisions. Non-compliance with such covenants could result in accelerated repayment and/or termination of the credit facility.

In the second quarter of 2018, the company exchanged an aggregate of $7,578 of legacy companies' senior notes and debentures for the same amount of new notes issued by Nutrien (the "Nutrien Notes"). The Nutrien Notes have interest rates and maturities identical to those of the applicable exchanged series of senior notes or debentures. A small portion of senior notes and debentures, excluding the 7.800 percent debentures due in 2027 (the "2027 debentures"), were not exchanged and remain outstanding with the issuing subsidiary. The indentures governing these remaining senior notes and debentures have been amended to eliminate certain covenants and events of default provisions. In addition, none of the 2027 debentures were exchanged, but debt holders consented to amend the financial reporting covenant in the indenture governing the 2027 debentures to allow Nutrien's financial reports, rather than the reports of the issuing subsidiary, to satisfy the reporting obligations thereunder.

The debt exchange is accounted for as a modification of debt without substantial modification of terms as the financial terms of the Nutrien Notes were identical to the exchanged senior notes and debentures and there is no substantial difference between the present value of cash flows under the Nutrien Notes compared to the notes and debentures. Accordingly, there is no gain or loss on the exchange. The transaction costs from the debt exchange of $19 were recorded to the carrying amount of the long-term debt and will be amortized over the life of the Nutrien Notes.

Further information relating to the Nutrien Notes was previously described in Note 21 of the company's first quarter financial statements.

 

9. Share Capital

On February 20, 2018, the company's Board of Directors approved a share repurchase program of up to five percent of the company's outstanding common shares over a one-year period through a normal course issuer bid. Purchases under the normal course issuer bid will be made through open market purchases at market price, as well as by other means as may be permitted by applicable securities regulatory authorities, including private agreements. Purchases of common shares commenced on February 23, 2018 and will expire on the earlier of February 22, 2019, the date on which the company has acquired the maximum number of common shares allowable or the date on which the company determines not to make any further repurchases.

The company repurchased for cancellation 15,616,536 common shares during the three months ended June 30, 2018, at a cost of $812 and an average price per share of $52.00. During the six months ended June 30, 2018, the company repurchased for cancellation 24,938,123 common shares at a cost of $1,269 and an average price per share of $50.88. The repurchase resulted in a reduction of share capital of $685, and the excess of net cost over the average book value of the shares was recorded as a reduction of contributed surplus of $23 and a reduction of retained earnings of $561.

As of July 31, 2018, an additional 4,400,000 common shares were repurchased for cancellation at a cost of $235 and an average price per share of $53.31.

 

10.  Share-Based Compensation

During the six months ended June 30, 2018, the company issued stock options under its 2018 Stock Option Plan and performance share units ("PSUs") and restricted share units ("RSUs") under its 2018 PSU/RSU plan and deferred share units ("DSUs") under its 2018 DSU Plan, in each case to eligible employees or directors. Total compensation expense for all share-based compensation plans was $82 (2017 - $3) for the three months ended June 30, 2018 and $98 (2017 - $9) for the six months ended June 30, 2018. Information on stock options, PSUs, RSUs, DSUs and stock appreciation rights ("SARs"), including assumed legacy awards, is summarized below:




Units Granted
in 2018

Units
Outstanding as
at June 30, 2018

Stock Options



1,875,162

10,507,105

PSUs



623,643

1,967,398

RSUs



444,001

768,310

DSUs



30,315

536,210

SARs



-

2,662,224

 

11. Comparative Figures

As described in Note 1, the comparative figures are PotashCorp only. To conform with Nutrien's new method of presentation and as a result of discontinued operations described in Note 6, comparative figures were reclassified as follows, with no impact to net earnings.


Condensed Consolidated Statements of Earnings






Three Months Ended June 30, 2017


Previously
Reported

Reclassification
Amounts


Reported after
Reclassifications



Cost of goods sold

$

(749)

$

5


$

(744)

Selling and administrative expenses

(48)

48


-

Selling expenses

-

(8)


(8)

General and administrative expenses

-

(40)


(40)

Provincial mining and other taxes

(44)

1


(43)

Earnings of equity-accounted investees

49

(46)

(1)

3

Dividend income

4

(4)

(1)

-

Other expenses

(16)

(7)


(23)

Income taxes

62

2

(1)

64

Net earnings from discontinued operations

-

49

(1)

49


$

(742)

$

-


(742)

(1) Includes reclassifications as a result of discontinued operations described in Note 6. 








Six Months Ended June 30, 2017


Previously
Reported

Reclassification
Amounts


Reported after
Reclassifications



Cost of goods sold

$

(1,460)

$

10


$

(1,450)

Selling and administrative expenses

(98)

98


-

Selling expenses

-

(17)


(17)

General and administrative expenses

-

(81)


(81)

Provincial mining and other taxes

(78)

2


(76)

Earnings of equity-accounted investees

88

(85)

(1)

3

Dividend income

12

(12)

(1)

-

Other expenses

(26)

(12)


(38)

Income taxes

49

5

(1)

54

Net earnings from discontinued operations

-

92

(1)

92


$

(1,513)

$

-


$

(1,513)

(1) Includes reclassifications as a result of discontinued operations described in Note 6. 






Condensed Consolidated Statement of Comprehensive Income






Six Months Ended June 30, 2017


Previously
Reported

Reclassification
Amounts


Reported after
Reclassifications



Other

$

3

$

(3)


$

-

Loss on translation of net foreign operations

-

-


-

Equity-accounted investees 






Share of other comprehensive income

-

3


3


$

3

$

-


$

3






Condensed Consolidated Statements of Cash Flows






Three Months Ended June 30, 2017


Previously
Reported

Reclassification
Amounts


Reported after
Reclassifications



Pension and other post-retirement benefits

$

18

$

(18)


$

-

Other long-term liabilities and miscellaneous

7

18


25


$

25

$

-


$

25







Six Months Ended June 30, 2017


Previously
Reported

Reclassification
Amounts


Reported after
Reclassifications



Pension and other post-retirement benefits

$

33

$

(33)


$

-

Other long-term liabilities and miscellaneous

11

33


44


$

44

$

-


$

44



 

 

Condensed Consolidated Statement of Shareholders' Equity


As at December 31, 2017


Previously
Reported

Reclassification
Amounts

Reported after
Reclassifications



Other

$

(5)

$

5

$

-

Translation loss of net foreign operations

-

(2)

(2)

Comprehensive loss of equity-accounted investees

-

(3)

(3)


$

(5)

$

-

$

(5)





Condensed Consolidated Balance Sheet





As at December 31, 2017


Previously
Reported

Reclassification
Amounts

Reported after
Reclassifications



Intangible assets

$

166

$

(166)

$

-

Goodwill

-

97

97

Other intangible assets

-

69

69


$

166

$

-

$

166





Investments in equity-accounted investees

$

30

$

(30)

$

-

Available-for-sale investments

262

(262)

-

Investments

-

292

292


$

292

$

-

$

292





Short-term debt and current portion of long-term debt

$

730

$

(730)

$

-

Short-term debt

-

730

730


$

730

$

-

$

730





Payables and accrued charges

$

807

$

29

$

836

Current portion of derivative instrument liabilities

29

(29)

-


$

836

$

-

$

836





Other non-current liabilities

$

51

$

35

$

86

Derivative instrument liabilities

35

(35)

-


$

86

$

-

$

86

 

12.  Subsequent Events

Subsequent to June 30, 2018, the company assessed the Argentinian economy to be hyperinflationary as the cumulative inflation rate in Argentina over three years exceeded 100 percent. Other factors indicating a hyperinflationary economy were present, including a significant depreciation of the Argentine peso and an increase in local interest rates by the Banco Central de la República Argentina, which has been granted a $50,000 stand-by support facility by the International Monetary Fund.

A wholly-owned subsidiary of the company, Agroservicios Pampeanos S.A. ("ASP"), is a crop input retailer based in Argentina with the Argentine peso as its functional currency. As of June 30, 2018, the carrying values of the assets and liabilities of ASP amounted to approximately $200 and $180, respectively. The company also has a 50 percent interest in Profertil S.A. ("Profertil"), which owns a nitrogen facility in Bahia Blanca, Argentina. The company's investment in Profertil is accounted for under the equity method, with a carrying value of $179 as of the financial position date. The functional currency of Profertil is the US Dollar.

In light of the changes in the economic environment in Argentina, the company expects to apply hyperinflation accounting to its affected operations beginning July 1, 2018. Under hyperinflation accounting, the financial results, cash flows and financial position of the affected operations are restated, using a general price index, for changes in the general purchasing power of the functional currency so that all amounts are presented in terms of the measuring unit current at the end of the reporting period. The company is assessing the impact that this would have on its financial position and its results of operations.

Nutrien Ltd.

Selected Financial Data

(unaudited)




Three Months Ended

Six Months Ended



June 30

June 30



2018

2017

2018

2017




(Nutrien) (1)


(Nutrien) (1)

Retail Sales (US $ millions)






Crop nutrients

$

2,326

$

1,989

$

3,010

$

2,703


Crop protection products

2,358

2,236

3,132

3,108


Seed

1,183

1,080

1,524

1,462


Merchandise

201

175

350

309


Services and other

274

227

425

365


Sales

$

6,342

$

5,707

$

8,441

$

7,947







Retail Gross Margin (US $ millions)






Crop nutrients

$

474

$

419

$

597

$

560


Crop protection products

521

485

649

615


Seed

219

199

263

253


Merchandise

26

27

49

49


Services and other

192

169

282

256


Gross Margin

$

1,432

$

1,299

$

1,840

$

1,733







Crop Nutrients Sales Volumes (tonnes - thousands)






North America

4,774

4,249

6,059

5,739


International

732

648

1,150

1,000


Crop Nutrients Sales Volumes

5,506

4,897

7,209

6,739







Crop Nutrients Sales Price per Tonne






North America

$

429

$

415

$

428

$

413


International

379

351

361

332


Crop Nutrients Sales Price per Tonne

$

423

$

406

$

418

$

401







Crop Nutrients Gross Margin per Tonne






North America

$

92

$

94

$

91

$

93


International

48

28

43

29


Crop Nutrients Gross Margin per Tonne

$

86

$

86

$

83

$

83







Retail Store Sales Metrics (%)






Comparable store sales



3%

-5%


Normalized comparable store sales (1)



1%

-1%







Proprietary products sales as a percentage of product line sales






Crop nutrients

9%

9%

9%

9%


Crop protection products

27%

27%

27%

26%


Seed

30%

29%

27%

26%


All Products

19%

19%

18%

18%







Retail Financial Measures (%)










Rolling four
quarters June
30, 2018(2)





Target  (3)

Actuals

EBITDA to sales



10%

10%

Average working capital to sales



19%

19%

Cash operating coverage ratio



59%

60%

(1)

Represents information for legacy Agrium in 2017. Legacy PotashCorp did not have retail operations. Normalized comparable store sales is considered non-IFRS measure. See reconciliations and descriptions of this non-IFRS measure in the Selected Non-IFRS Financial Measures and Reconciliations and Supplemental Information section. 

(2)

EBITDA to sales, average working capital to sales and cash operating coverage ratio are considered non-IFRS measures. See reconciliations and descriptions of these non-IFRS measures in the Selected Non-IFRS Financial Measures and Reconciliations and Supplemental Information section.

(3)

Targets are for the 2018 calendar year.

 


Nutrien Ltd.

Selected Financial Data

(unaudited)










Three Months Ended

Six Months Ended




June 30

June 30




2018

2017

2018

2017





(Nutrien) (1)


(Nutrien) (1)








Potash Sales Volumes (tonnes - thousands)






Manufactured Product







North America

1,030

1,029

2,284

2,266



Offshore

2,149

2,046

4,020

3,624


Sales Volumes - Manufactured

3,179

3,075

6,304

5,890








Potash Net Sales (US $ millions)






Manufactured Product







North America

$

222

$

205

$

472

$

434



Offshore

416

330

740

566


Other potash and purchased products

-

-

1

4


Net Sales (1)

$

638

$

535

$

1,213

$

1,004








Manufactured Product






Net Selling Price per Tonne







North America                                                                                   

$

216

$

198

$

207

$

191



Offshore

$

194

$

161

$

184

$

156



Average 

$

201

$

174

$

192

$

170


Cost of Goods Sold per Tonne

$

(86)

$

(89)

$

(88)

$

(91)


Gross Margin per Tonne

$

115

$

85

$

104

$

79


Depreciation and Amortization per Tonne

$

29

$

29

$

29

$

29


Gross Margin excluding Depreciation and Amortization per Tonne (1)

$

144

$

114

$

133

$

108


(1) Combined historical results of legacy PotashCorp and legacy Agrium, net sales and gross margin excluding depreciation and amortization are considered non-IFRS measures. See reconciliations and descriptions of these non-IFRS measures in the Selected Non-IFRS Financial Measures and Reconciliations and Supplemental Information section. 



 

Nutrien Ltd.

Selected Financial Data

(unaudited)










Three Months Ended

Six Months Ended




June 30

June 30




2018

2017

2018

2017





(Nutrien) (1)


(Nutrien) (1)








Average Natural Gas Cost in Production per MMBtu

$

2.58

$

3.17

$

2.80

$

3.19

Nitrogen Sales Volumes (tonnes - thousands)






Manufactured Product







Ammonia

1,028

1,064

1,772

1,879



Urea

901

751

1,625

1,432



Solutions and nitrates

1,133

1,008

1,968

1,893


Sales Volumes - Manufactured

3,062

2,823

5,365

5,204









Fertilizer

1,699

1,633

2,889

2,800


Industrial and Feed

1,363

1,190

2,476

2,404


Sales Volumes - Manufactured

3,062

2,823

5,365

5,204








Nitrogen Net Sales (US $ millions)






Manufactured Product







Ammonia

$

270

$

322

$

478

$

554



Urea

254

179

466

369



Solutions and nitrates

189

165

326

314


Other nitrogen and purchased products

143

154

258

289


Net Sales (1)

$

856

$

820

$

1,528

$

1,526









Fertilizer

$

437

$

396

$

742

$

680


Industrial and Feed

276

270

528

557


Other nitrogen and purchased products

143

154

258

289


Net Sales (1)

$

856

$

820

$

1,528

$

1,526








Manufactured Product






Net Selling Price per Tonne







Ammonia

$

263

$

303

$

270

$

295



Urea

$

281

$

239

$

287

$

258



Solutions and nitrates

$

167

$

163

$

166

$

166



Average 

$

233

$

236

$

237

$

238



Fertilizer

$

257

$

242

$

257

$

243



Industrial and Feed

$

203

$

227

$

213

$

231



Average 

$

233

$

236

$

237

$

238


Cost of Goods Sold per Tonne

$

(155)

$

(172)

$

(167)

$

(170)


Gross Margin per Tonne

$

78

$

64

$

70

$

68


Depreciation and Amortization per Tonne

$

28

$

27

$

40

$

28


Gross Margin excluding Depreciation and Amortization per Tonne (1)

$

106

$

91

$

110

$

96

(1) Combined historical results of legacy PotashCorp and legacy Agrium, net sales and gross margin excluding depreciation and amortization are considered non-IFRS measures. See reconciliations and descriptions of these non-IFRS measures in the Selected Non-IFRS Financial Measures and Reconciliations and Supplemental Information section. 

 

Nutrien Ltd.

Selected Financial Data

(unaudited)










Three Months Ended

Six Months Ended




June 30

June 30




2018

2017

2018

2017





(Nutrien) (1)


(Nutrien)(1)








Phosphate and Sulfate Sales Volumes (tonnes - thousands)






Manufactured Product







Fertilizer

569

472

1,174

978



Industrial and Feed

191

210

412

449



Ammonium sulfate

87

111

159

199


Sales Volumes - Manufactured

847

793

1,745

1,626








Phosphate and Sulfate Net Sales (US $ millions)






Manufactured Product







Fertilizer

$

233

$

168

$

473

$

358



Industrial and Feed

98

105

204

223



Ammonium sulfate

23

29

41

49


Other phosphate and purchased products

40

15

80

26


Net Sales (1)

$

394

$

317

$

798

$

656








Manufactured Product






Net Selling Price per Tonne







Fertilizer