Le Lézard
Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Dividend, Conference Call, Webcast

Nutrien Demonstrates Strength & Stability: Ag Solutions EBITDA Up 20 Percent & Excellent Operational Results


Nutrien Ltd. (TSX and NYSE: NTR) announced today its 2020 second-quarter results, with net earnings of $765 million ($1.34 diluted earnings per share). Second-quarter adjusted net earnings were $1.45 per share and adjusted EBITDA was $1.72 billion. Adjusted net earnings per share and adjusted EBITDA, together with the related guidance, free cash flow including changes in non-cash operating working capital and cash cost of product manufactured are non-IFRS financial measures. See the "Non-IFRS Financial Measures" section for further information.

"Nutrien delivered compelling second-quarter and first-half results supported by strong growth in our Retail Ag Solutions earnings and excellent operational performance across our Potash and Nitrogen business units. Nutrien's many competitive advantages were apparent this quarter, including the quality of our assets and impressive free cash flow generation, even at the bottom of the commodity cycle. Our digital platform continues to exceed expectations. We now expect to reach $1 billion in online orders by the end of the year and are introducing new data-driven offerings to help farmers make quicker and more informed decisions for their business," commented Chuck Magro, Nutrien's President and CEO.

Highlights:

Management's Discussion and Analysis

The following management's discussion and analysis ("MD&A") is the responsibility of management and is dated as of August 10, 2020. The Board of Directors ("Board") of Nutrien carries out its responsibility for review of this disclosure principally through its audit committee, comprised exclusively of independent directors. The audit committee reviews and, prior to its publication approves this disclosure pursuant to the authority delegated to it by the Board. The term "Nutrien" refers to Nutrien Ltd. and the terms "we", "us", "our", "Nutrien" and "the Company" refer to Nutrien and, as applicable, Nutrien and its direct and indirect subsidiaries on a consolidated basis. Additional information relating to Nutrien (which, except as otherwise noted, is not incorporated by reference herein), including our 2019 Annual Report dated February 19, 2020, which includes our annual audited consolidated financial statements and MD&A and our Annual Information Form, each for the year ended December 31, 2019, can be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. No update is provided to the disclosure in our annual MD&A except for material information since the date of our annual MD&A. The Company is a foreign private issuer under the rules and regulations of the US Securities and Exchange Commission ("SEC").

This MD&A is based on the Company's unaudited interim condensed consolidated financial statements as at and for the three and six months ended June 30, 2020 ("interim financial statements") based on International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS") and prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" unless otherwise stated. This MD&A contains certain non-IFRS financial measures and forward-looking statements which are described in the "Non-IFRS Financial Measures" and the "Forward-Looking Statements" sections, respectively.

Market Outlook

Agriculture and Retail

Crop Nutrient Markets

Financial Outlook and Guidance

Based on market factors detailed above, we are lowering the top of the range for our 2020 adjusted net earnings guidance to $1.50 to $1.90 per share (from $1.50 to $2.10 per share previously) and adjusted EBITDA guidance to $3.5 to $3.8 billion (from $3.5 to $3.9 billion previously).

All guidance numbers, including those noted above are outlined in the tables below. Refer to page 46 of Nutrien's 2019 Annual Report for related sensitivities.

2020 Guidance Ranges 1

Low

 

High

 

Adjusted net earnings per share 2

$

1.50 

 

$

1.90 

 

Adjusted EBITDA (billions) 2

$

3.5 

 

$

3.8 

 

Retail EBITDA (billions)

$

1.4 

 

$

1.5 

 

Potash EBITDA (billions)

$

1.0 

 

$

1.2 

 

Nitrogen EBITDA (billions)

$

1.1 

 

$

1.2 

 

Phosphate EBITDA (millions)

$

200 

 

$

 250

 

Potash sales tonnes (millions) 3

 

12.1

 

 

 12.5

 

Nitrogen sales tonnes (millions) 3

 

 10.9

 

 

 11.5

 

Depreciation and amortization (billions)

$

 1.85

 

$

 1.95

 

Effective tax rate

 

 19

%

 

 21

%

Sustaining capital expenditures (billions)

$

 0.9

 

$

 1.0

 

1 See the "Forward-Looking Statements" section.

2 See the "Non-IFRS Financial Measures" section.

3 Manufactured products only. Nitrogen excludes ESN® and Rainbow products.

Consolidated Results

 

Three Months Ended June 30

 

Six Months Ended June 30

(millions of US dollars)

2020

 

2019

 

% Change

 

2020

 

2019

 

% Change

Sales

8,416

 

8,693

 

(3)

 

12,602

 

12,412

 

2

Freight, transportation and distribution

237

 

215

 

10

 

449

 

386

 

16

Cost of goods sold

6,024

 

6,166

 

(2)

 

9,125

 

8,739

 

4

Gross margin

2,155

 

2,312

 

(7)

 

3,028

 

3,287

 

(8)

Expenses

1,016

 

1,017

 

-

 

1,807

 

1,816

 

-

Net earnings

765

 

858

 

(11)

 

730

 

899

 

(19)

EBITDA 1

1,656

 

1,781

 

(7)

 

2,211

 

2,377

 

(7)

Adjusted EBITDA 1

1,721

 

1,870

 

(8)

 

2,229

 

2,574

 

(13)

Free cash flow ("FCF") 1

1,173

 

1,308

 

(10)

 

1,354

 

1,690

 

(20)

FCF including changes in non-cash operating working capital 1

1,611

 

929

 

73

 

922

 

246

 

275

1 See the "Non-IFRS Financial Measures" section.

Our second-quarter and first-half 2020 net earnings were lower than the same periods in 2019 primarily due to significantly lower crop nutrient prices. This was mostly offset by strong Retail revenue and gross margin growth, higher crop nutrient volume sales, solid operational results and the benefit of an asset retirement obligation change in estimate. COVID-19 had limited impact on our business in the periods.

Segment Results

Our discussion of segment results set out on the following pages is a comparison of the results for the three and six months ended June 30, 2020 to the results for the three and six months ended June 30, 2019, respectively, unless otherwise noted.

Retail

 

Three Months Ended June 30

(millions of US dollars, except

Dollars

 

Gross Margin

 

Gross Margin (%)

as otherwise noted)

2020

 

2019

 

% Change

 

2020

 

2019

 

% Change

 

2020

 

2019

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crop nutrients

2,527

 

2,626

 

(4)

 

559

 

540

 

4

 

22

 

21

Crop protection products

2,436

 

2,286

 

7

 

547

 

472

 

16

 

22

 

21

Seed

1,141

 

1,197

 

(5)

 

219

 

209

 

5

 

19

 

17

Merchandise

253

 

144

 

76

 

45

 

24

 

88

 

18

 

17

Services and other

392

 

259

 

51

 

242

 

195

 

24

 

62

 

75

 

6,749

 

6,512

 

4

 

1,612

 

1,440

 

12

 

24

 

22

Cost of goods sold

5,137

 

5,072

 

1

 

 

 

 

 

 

 

 

 

 

Gross margin

1,612

 

1,440

 

12

 

 

 

 

 

 

 

 

 

 

Expenses 1

811

 

749

 

8

 

 

 

 

 

 

 

 

 

 

Earnings before finance costs and taxes ("EBIT")

801

 

691

 

16

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

163

 

145

 

12

 

 

 

 

 

 

 

 

 

 

EBITDA

964

 

836

 

15

 

 

 

 

 

 

 

 

 

 

1 Includes selling expenses of $764 million (2019 ? $683 million).

 

 

Six Months Ended June 30

(millions of US dollars, except

Dollars

 

Gross Margin

 

Gross Margin (%)

as otherwise noted)

2020

 

2019

 

% Change

 

2020

 

2019

 

% Change

 

2020

 

2019

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crop nutrients

3,312

 

3,313

 

-

 

715

 

671

 

7

 

22

 

20

Crop protection products

3,446

 

3,030

 

14

 

704

 

589

 

20

 

20

 

19

Seed

1,535

 

1,553

 

(1)

 

278

 

259

 

7

 

18

 

17

Merchandise

469

 

252

 

86

 

79

 

43

 

84

 

17

 

17

Services and other

636

 

403

 

58

 

365

 

287

 

27

 

57

 

71

 

9,398

 

8,551

 

10

 

2,141

 

1,849

 

16

 

23

 

22

Cost of goods sold

7,257

 

6,702

 

8

 

 

 

 

 

 

 

 

 

 

Gross margin

2,141

 

1,849

 

16

 

 

 

 

 

 

 

 

 

 

Expenses 1

1,488

 

1,320

 

13

 

 

 

 

 

 

 

 

 

 

EBIT

653

 

529

 

23

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

318

 

281

 

13

 

 

 

 

 

 

 

 

 

 

EBITDA

971

 

810

 

20

 

 

 

 

 

 

 

 

 

 

1 Includes selling expenses of $1,399 million (2019 ? $1,215 million).

Potash

 

Three Months Ended June 30

(millions of US dollars, except

Dollars

 

Tonnes (thousands)

 

Average per Tonne

as otherwise noted)

2020

 

2019

% Change

 

2020

 

2019

% Change

 

2020

 

2019

% Change

Manufactured product

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

232

 

257

 

(10)

 

1,201

 

975

 

23

 

194

 

264

 

(27)

Offshore

356

 

591

 

(40)

 

2,414

 

2,480

 

(3)

 

147

 

238

 

(38)

 

588

 

848

 

(31)

 

3,615

 

3,455

 

5

 

163

 

246

 

(34)

Cost of goods sold

310

 

317

 

(2)

 

 

 

 

 

 

 

86

 

92

 

(7)

Gross margin - manufactured

278

 

531

 

(48)

 

 

 

 

 

 

 

77

 

154

 

(50)

Gross margin - other 1

-

 

-

 

-

 

Depreciation and amortization

 

30

 

33

 

(9)

Gross margin - total

278

 

531

 

(48)

 

Gross margin excluding depreciation

 

 

 

 

 

Expenses 2

52

 

92

 

(43)

 

and amortization - manufactured 3

107

 

187

 

(43)

EBIT

226

 

439

 

(49)

 

Potash cash cost of product

 

 

 

 

 

 

Depreciation and amortization

109

 

114

 

(4)

 

manufactured 3

 

52

 

59

 

(12)

EBITDA

335

 

553

 

(39)

 

 

 

 

 

 

 

 

 

 

 

 

1 Includes other potash and purchased products and is comprised of net sales of $Nil (2019 ? $Nil) less cost of goods sold of $Nil (2019 ? $Nil).

2 Includes provincial mining and other taxes of $46 million (2019 ? $91 million).

3 See the "Non-IFRS Financial Measures" section.

 

 

Six Months Ended June 30

(millions of US dollars, except

Dollars

 

Tonnes (thousands)

 

Average per Tonne

as otherwise noted)

2020

 

2019

% Change

 

2020

 

2019

% Change

 

2020

 

2019

% Change

Manufactured product

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

457

 

502

 

(9)

 

2,348

 

1,951

 

20

 

195

 

257

 

(24)

Offshore

648

 

1,042

 

(38)

 

4,144

 

4,424

 

(6)

 

156

 

235

 

(34)

 

1,105

 

1,544

 

(28)

 

6,492

 

6,375

 

2

 

170

 

242

 

(30)

Cost of goods sold

575

 

589

 

(2)

 

 

 

 

 

 

 

88

 

92

 

(4)

Gross margin - manufactured

530

 

955

 

(45)

 

 

 

 

 

 

 

82

 

150

 

(45)

Gross margin - other 1

-

 

1

 

(100)

 

Depreciation and amortization

 

32

 

34

 

(6)

Gross margin - total

530

 

956

 

(45)

 

Gross margin excluding depreciation

 

 

 

 

 

Expenses 2

115

 

156

 

(26)

 

and amortization - manufactured

114

 

184

 

(38)

EBIT

415

 

800

 

(48)

 

Potash cash cost of product

 

 

 

 

 

 

Depreciation and amortization

205

 

214

 

(4)

 

manufactured

 

56

 

59

 

(5)

EBITDA

620

 

1,014

 

(39)

 

 

 

 

 

 

 

 

 

 

 

 

1 Includes other potash and purchased products and is comprised of net sales of $Nil million (2019 ? $1 million) less cost of goods sold of $Nil (2019 ? $Nil).

2 Includes provincial mining and other taxes of $103 million (2019 ? $154 million).

Canpotex Sales by Market

(percentage of sales volumes, except as

Three Months Ended June 30

 

Six Months Ended June 30

otherwise noted)

2020

2019

% Change

 

2020

2019

% Change

Latin America

36

29

24

 

31

24

29

Other Asian markets 1

26

27

(4)

 

28

30

(7)

China

19

25

(24)

 

22

27

(19)

India

12

9

33

 

12

10

20

Other markets

7

10

(30)

 

7

9

(22)

 

100

100

 

 

100

100

 

1 All Asian markets except China and India.

 

 

 

 

 

 

 

Nitrogen

 

Three Months Ended June 30

(millions of US dollars, except

Dollars

 

Tonnes (thousands)

 

Average per Tonne

as otherwise noted)

2020

 

2019

% Change

 

2020

 

2019

% Change

 

2020

 

2019

% Change

Manufactured product

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ammonia

229

 

296

 

(23)

 

935

 

1,041

 

(10)

 

244

 

285

 

(14)

Urea

273

 

305

 

(10)

 

1,000

 

969

 

3

 

273

 

314

 

(13)

Solutions, nitrates and sulfates

194

 

201

 

(3)

 

1,255

 

1,137

 

10

 

154

 

177

 

(13)

 

696

 

802

 

(13)

 

3,190

 

3,147

 

1

 

218

 

255

 

(15)

Cost of goods sold

508

 

531

 

(4)

 

 

 

 

 

 

 

159

 

169

 

(6)

Gross margin - manufactured

188

 

271

 

(31)

 

 

 

 

 

 

 

59

 

86

 

(31)

Gross margin - other 1

20

 

23

 

(13)

 

Depreciation and amortization

 

54

 

49

 

10

Gross margin - total

208

 

294

 

(29)

 

Gross margin excluding depreciation

 

 

 

 

 

Expenses (income)

(3)

 

(11)

 

(73)

 

and amortization - manufactured

113

 

135

 

(16)

EBIT

211

 

305

 

(31)

 

Ammonia controllable cash cost of

 

 

 

 

 

 

Depreciation and amortization

172

 

154

 

12

 

product manufactured 2

 

40

 

45

 

(11)

EBITDA

383

 

459

 

(17)

 

 

 

 

 

 

 

 

 

 

 

 

1 Includes other nitrogen (including ESN® and Rainbow) and purchased products and is comprised of net sales of $157 million (2019 ? $164 million) less cost of goods sold of $137 million (2019 ? $141 million).

2 See the "Non-IFRS Financial Measures" section.

 

 

Six Months Ended June 30

(millions of US dollars, except

Dollars

 

Tonnes (thousands)

 

Average per Tonne

as otherwise noted)

2020

 

2019

% Change

 

2020

 

2019

% Change

 

2020

 

2019

% Change

Manufactured product

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ammonia

359

 

458

 

(22)

 

1,502

 

1,685

 

(11)

 

239

 

272

 

(12)

Urea

510

 

518

 

(2)

 

1,856

 

1,616

 

15

 

275

 

321

 

(14)

Solutions, nitrates and sulfates

357

 

372

 

(4)

 

2,360

 

2,085

 

13

 

151

 

178

 

(15)

 

1,226

 

1,348

 

(9)

 

5,718

 

5,386

 

6

 

214

 

250

 

(14)

Cost of goods sold

952

 

929

 

2

 

 

 

 

 

 

 

166

 

172

 

(3)

Gross margin - manufactured

274

 

419

 

(35)

 

 

 

 

 

 

 

48

 

78

 

(38)

Gross margin - other 1

31

 

41

 

(24)

 

Depreciation and amortization

 

56

 

50

 

12

Gross margin - total

305

 

460

 

(34)

 

Gross margin excluding depreciation

 

 

 

 

 

Expenses (income)

8

 

(6)

 

n/m

 

and amortization - manufactured

104

 

128

 

(19)

EBIT

297

 

466

 

(36)

 

Ammonia controllable cash cost of

 

 

 

 

 

 

Depreciation and amortization

322

 

267

 

21

 

product manufactured

 

43

 

44

 

(2)

EBITDA

619

 

733

 

(16)

 

 

 

 

 

 

 

 

 

 

 

 

1 Includes other nitrogen (including ESN® and Rainbow) and purchased products and is comprised of net sales of $305 million (2019 ? $295 million) less cost of goods sold of $274 million (2019 ? $254 million).

Natural Gas Prices

 

Three Months Ended June 30

 

Six Months Ended June 30

(US dollars per MMBtu, except as otherwise noted)

2020

 

2019

 

% Change

 

2020

 

2019

 

% Change

Overall gas cost excluding realized derivative impact

2.09

 

2.34

 

(11)

 

2.16

 

2.68

 

(19)

Realized derivative impact

0.06

 

0.17

 

(65)

 

0.06

 

0.10

 

(40)

Overall gas cost

2.15

 

2.51

 

(14)

 

2.22

 

2.78

 

(20)

 

 

 

 

 

 

 

 

 

 

 

 

Average NYMEX

1.72

 

2.64

 

(35)

 

1.83

 

2.89

 

(37)

Average AECO

1.37

 

0.88

 

56

 

1.50

 

1.18

 

27

Phosphate

 

Three Months Ended June 30

(millions of US dollars, except

Dollars

 

Tonnes (thousands)

 

Average per Tonne

as otherwise noted)

2020

 

2019

% Change

 

2020

 

2019

% Change

 

2020

 

2019

% Change

Manufactured product

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fertilizer

146

 

263

 

(44)

 

472

 

681

 

(31)

 

309

 

385

 

(20)

Industrial and feed

104

 

104

 

-

 

194

 

182

 

7

 

538

 

569

 

(5)

 

250

 

367

 

(32)

 

666

 

863

 

(23)

 

375

 

424

 

(12)

Cost of goods sold

224

 

375

 

(40)

 

 

 

 

 

 

 

335

 

434

 

(23)

Gross margin - manufactured

26

 

(8)

 

n/m

 

 

 

 

 

 

 

40

 

(10)

 

n/m

Gross margin - other 1

2

 

(2)

 

n/m

 

Depreciation and amortization

 

84

 

72

 

17

Gross margin - total

28

 

(10)

 

n/m

 

Gross margin excluding depreciation

 

 

 

 

 

Expenses

7

 

14

 

(50)

 

and amortization - manufactured

124

 

62

 

100

EBIT

21

 

(24)

 

n/m

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

56

 

62

 

(10)

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

77

 

38

 

103

 

 

 

 

 

 

 

 

 

 

 

 

1 Includes other phosphate and purchased products and is comprised of net sales of $27 million (2019 - $51 million) less cost of goods sold of $25 million (2019 - $53 million).

 

Six Months Ended June 30

(millions of US dollars, except

Dollars

 

Tonnes (thousands)

 

Average per Tonne

as otherwise noted)

2020

 

2019

% Change

 

2020

 

2019

% Change

 

2020

 

2019

% Change

Manufactured product

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fertilizer

319

 

471

 

(32)

 

1,040

 

1,172

 

(11)

 

307

 

401

 

(23)

Industrial and feed

210

 

215

 

(2)

 

385

 

386

 

-

 

546

 

556

 

(2)

 

529

 

686

 

(23)

 

1,425

 

1,558

 

(9)

 

372

 

440

 

(15)

Cost of goods sold

511

 

679

 

(25)

 

 

 

 

 

 

 

359

 

436

 

(18)

Gross margin - manufactured

18

 

7

 

157

 

 

 

 

 

 

 

13

 

4

 

225

Gross margin - other 1

3

 

(3)

 

n/m

 

Depreciation and amortization

 

84

 

78

 

8

Gross margin - total

21

 

4

 

425

 

Gross margin excluding depreciation

 

 

 

 

 

Expenses

17

 

20

 

(15)

 

and amortization - manufactured

97

 

82

 

18

EBIT

4

 

(16)

 

n/m

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

119

 

122

 

(2)

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

123

 

106

 

16

 

 

 

 

 

 

 

 

 

 

 

 

1 Includes other phosphate and purchased products and is comprised of net sales of $61 million (2019 - $81 million) less cost of goods sold of $58 million (2019 - $84 million).

Corporate and Others

 

Three Months Ended June 30

 

Six Months Ended June 30

(millions of US dollars, except as otherwise noted)

2020

 

2019

 

% Change

 

2020

 

2019

 

% Change

Sales 1

20

 

36

 

(44)

 

47

 

64

 

(27)

Cost of goods sold

18

 

36

 

(50)

 

43

 

64

 

(33)

Gross margin

2

 

-

 

n/m

 

4

 

-

 

n/m

Selling expenses

(8)

 

(3)

 

167

 

(13)

 

(9)

 

44

General and administrative expenses

65

 

62

 

5

 

125

 

126

 

(1)

Provincial mining and other taxes

1

 

4

 

(75)

 

1

 

5

 

(80)

Share-based compensation expense (recovery)

12

 

59

 

(80)

 

(20)

 

116

 

n/m

Impairment of assets

-

 

-

 

-

 

-

 

33

 

(100)

Other expenses

79

 

51

 

55

 

86

 

55

 

56

EBIT

(147)

 

(173)

 

(15)

 

(175)

 

(326)

 

(46)

Depreciation and amortization

17

 

11

 

55

 

26

 

22

 

18

EBITDA

(130)

 

(162)

 

(20)

 

(149)

 

(304)

 

(51)

 

 

 

 

 

 

 

 

 

 

 

 

Finance costs

139

 

143

 

(3)

 

272

 

266

 

2

Income tax expense

235

 

294

 

(20)

 

219

 

306

 

(28)

Other comprehensive income (loss)

201

 

(14)

 

n/m

 

(157)

 

18

 

n/m

1 Primarily relates to our non-core Canadian business.

Financial Condition Review

The following balance sheet categories contained variances that were considered significant:

 

As at

 

 

 

 

(millions of US dollars, except as otherwise noted)

June 30, 2020

 

December 31, 2019

 

$ Change

 

% Change

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

1,415

 

671

 

744

 

111

Receivables

5,712

 

3,542

 

2,170

 

61

Inventories

4,199

 

4,975

 

(776)

 

(16)

Prepaid expenses and other current assets

444

 

1,477

 

(1,033)

 

(70)

Liabilities and Equity

 

 

 

 

 

 

 

Short-term debt

1,247

 

976

 

271

 

28

Current portion of long-term debt

-

 

502

 

(502)

 

(100)

Payables and accrued charges

7,306

 

7,437

 

(131)

 

(2)

Long-term debt

10,032

 

8,553

 

1,479

 

17

Retained earnings

7,320

 

7,101

 

219

 

3

Liquidity and Capital Resources

Sources and Uses of Liquidity

We believe that internally generated cash flow, supplemented by available borrowings under our existing financing sources, if necessary, will be sufficient to meet our anticipated capital expenditures and other cash requirements for at least the next 12 months. As further developments and impacts of COVID-19 are highly uncertain and cannot be predicted, we continue to monitor our liquidity position. Refer to the "Capital Structure and Management" section for details on our existing long-term debt and credit facilities.

Key uses in the second quarter and/or six months ended June 30, 2020 included:

Key sources in the second quarter and/or six months ended June 30, 2020 included:

In March and April 2020, in response to the market uncertainty caused by the COVID-19 pandemic, we established new committed revolving credit facilities totaling approximately $1.5 billion. We closed these credit facilities after the issuance of the new notes as described above. We also use commercial paper as a source of liquidity. For the three and six months ended June 30, 2020, outstanding commercial paper decreased by $646 million and increased by $355 million, respectively.

Sources and Uses of Cash

 

Three Months Ended June 30

 

Six Months Ended June 30

(millions of US dollars, except as otherwise noted)

2020

 

2019

 

% Change

 

2020

 

2019

 

% Change

Cash provided by operating activities

1,756

 

1,172

 

50

 

1,230

 

657

 

87

Cash used in investing activities

(408)

 

(420)

 

(3)

 

(853)

 

(1,229)

 

(31)

Cash (used in) provided by financing activities

(3,139)

 

(500)

 

528

 

380

 

(1,109)

 

n/m

Effect of exchange rate changes on cash and cash equivalents

24

 

(9)

 

n/m

 

(13)

 

(17)

 

(24)

(Decrease) increase in cash and cash equivalents

(1,767)

 

243

 

n/m

 

744

 

(1,698)

 

n/m

Cash and cash equivalents decreased by $1,767 million this quarter compared to an increase of $243 million in the comparative quarter in 2019, due to:

Cash and cash equivalents increased by $744 million in the first half of 2020 compared to a decrease of $1,698 million in the first half of 2019, due to:

Capital Structure and Management

Principal Debt Instruments

In response to the COVID-19 pandemic, we continue to monitor our liquidity position. We added new credit facilities of $1.5 billion in March and April 2020, which we subsequently closed in May 2020 after the issuance of the new notes described below. We use a combination of cash generated from operations and short-term and long-term debt to finance our operations. We are in compliance with our debt covenants and did not have any changes to our credit ratings in the six months ended June 30, 2020.

Short-term Debt

 

As at June 30, 2020

(millions of US dollars)

Rate of Interest (%)

Total Facility Limit

Outstanding and Committed

Remaining Available

Credit facilities

 

 

 

 

Unsecured revolving term credit facility

NIL

4,500

-

4,500

Uncommitted revolving demand facility

NIL

500

-

500

Other credit facilities 1

0.9 - 11.8

640

242

398

Commercial paper

0.4 - 2.8

 

1,005

 

Total

 

 

1,247

 

1 Other credit facilities are unsecured and consist of South American facilities with debt of $184 (December 31, 2019 ? $149) and interest rates ranging from 2.4 percent to 11.8 percent, Australian facilities with debt of $27 (December 31, 2019 ? $157) and an interest rate of 1.3 percent, and Other facilities with debt of $31 (December 31, 2019 ? $20) and interest rates ranging from 0.9 percent to 4.0 percent.

The amount available under the commercial paper program is limited to the availability of backup funds under the $4,500 million unsecured revolving term credit facility and excess cash invested in highly liquid securities.

Long-term Debt

Our long-term debt consists primarily of notes. See the "Capital Structure and Management" section of our 2019 Annual Report for information on balances, rates and maturities for our notes. On May 13, 2020, we issued $1.5 billion in notes. See Note 7 to the interim financial statements. During the first half of 2020, we repaid the $500 million 4.875 percent notes that matured March 30, 2020.

Outstanding Share Data

 

As at August 7, 2020

Common shares

569,145,935

Options to purchase common shares

11,177,625

For more information on our capital structure and management, see Note 26 to our 2019 financial statements.

Quarterly Results

(millions of US dollars, except as otherwise noted)

Q2 2020

Q1 2020

Q4 2019

Q3 2019

Q2 2019

Q1 2019

Q4 2018

Q3 2018

Sales

8,416

 

4,186

 

3,442

 

4,169

 

8,693

 

3,719

 

3,762

 

4,034

Net earnings (loss) from continuing operations

765

 

(35)

 

(48)

 

141

 

858

 

41

 

296

 

(1,067)

Net earnings from discontinued operations

-

 

-

 

-

 

-

 

-

 

-

 

2,906

 

23

Net earnings (loss)

765

 

(35)

 

(48)

 

141

 

858

 

41

 

3,202

 

(1,044)

EBITDA

1,656

 

555

 

499

 

785

 

1,781

 

596

 

944

 

(932)

Earnings (loss) per share ("EPS") from continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

1.34

 

(0.06)

 

(0.08)

 

0.25

 

1.48

 

0.07

 

0.48

 

(1.74)

Diluted

1.34

 

(0.06)

 

(0.08)

 

0.24

 

1.47

 

0.07

 

0.48

 

(1.74)

EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

1.34

 

(0.06)

 

(0.08)

 

0.25

 

1.48

 

0.07

 

5.23

 

(1.70)

Diluted

1.34

 

(0.06)

 

(0.08)

 

0.24

 

1.47

 

0.07

 

5.22

 

(1.70)

 

Seasonality in our business results from increased demand for products during the planting season. Crop input sales are generally higher in the spring and fall application seasons. Crop nutrient inventories are normally accumulated leading up to each application season. Our cash collections generally occur after the application season is complete, while customer prepayments made to us are concentrated in December and January and inventory prepayments paid to our vendors are typically concentrated in the period from November to January. Feed and industrial sales are more evenly distributed throughout the year.

Since the fourth quarter of 2019, Potash earnings were impacted by lower net realized selling prices caused by a temporary slowdown in global demand. In the fourth quarter of 2018, earnings were impacted by $2.9 billion in after-tax gains on the sales of our investments in Sociedad Quimica y Minera de Chile S.A. and Arab Potash Company, which were categorized as discontinued operations. In the third quarter of 2018, earnings were impacted by a $1.8 billion non-cash impairment to property, plant and equipment in the Potash segment.

Risk Factors

Coronavirus Disease (COVID-19) Pandemic

Epidemics, pandemics or other such crises or public health concerns in regions of the world where we have operations or source material or sell products, could impact or disrupt our business. Specifically, the ongoing COVID-19 outbreak has resulted in travel restrictions and extended shutdowns of certain businesses around the world, as well as a deterioration of general economic conditions. These or any governmental or other regulatory developments or health concerns in countries in which we operate could result in operational restrictions or social and economic instability, or labor shortages. More specifically, there remains uncertainty relating to the potential impact that COVID-19 could eventually have on our business. It is still possible that COVID-19 could impact our operations, create supply chain disruptions and/or limit our ability to timely sell or distribute our products in the future which would negatively impact our business, financial condition and operating results. It is also possible the fallout from COVID-19 could negatively impact our customers, even though the agriculture sector is classified as an essential service. Any significant long-term downturn in the global economy or agricultural markets could impact the Company's access to capital or credit ratings, or our customers' access to liquidity, which could increase our counterparty credit exposure.

Controls and Procedures

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, and National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with IFRS. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

There have been changes to our internal control over financial reporting during the quarter ended June 30, 2020. As part of our digital transformation, we have implemented a new enterprise resource planning system in the Retail segment resulting in a more automated control environment for our Canadian and Loveland Products operations. This change has materially affected our internal control over financial reporting.

Also, with the acquisition of Ruralco and the integration of the Australian Retail operations, the internal control over the Australian Retail operations will come into scope of the Company's internal control over financial reporting for the fourth quarter of 2020. The acquisition of Ruralco was previously excluded from management's evaluation of the effectiveness of the Company's internal control over financial reporting as of December 31, 2019 due to the proximity of the acquisition to year-end. The integration of the Australian Retail operations is expected to materially affect our internal control over financial reporting.

COVID-19 has also affected our business. During the quarter, corporate office staff and many site administrative staff have worked from home. This change has required certain processes and controls that were previously done or documented manually to be completed and retained in electronic form. This change has not materially affected our internal control over financial reporting.

Except as discussed herein, there have been no changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Forward-Looking Statements

Certain statements and other information included and incorporated by reference in this document 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 document, other than those relating to historical information or current conditions, are forward-looking statements, including, but not limited to: Nutrien's 2020 annual guidance, including expectations regarding our adjusted net earnings per share, adjusted EBITDA and EBITDA by segment; capital spending expectations for 2020; expectations regarding our liquidity; expectations regarding performance of our operating segments in 2020; our operating segment market outlooks and market conditions for 2020, including the impact of COVID-19 thereon, and the 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; and acquisitions and divestitures, and the expected synergies associated with various acquisitions, 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 we believe that these assumptions are reasonable, having regard to our experience and our perception of historical trends, 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. Current conditions, economic and otherwise, render assumptions, although reasonable when made, subject to greater uncertainty. The additional key assumptions that have been made include, among other things, assumptions with respect to our ability to successfully complete, integrate and realize the anticipated benefits of our already completed 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 us, 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 2020 and in the future; our expectations regarding the impacts, direct and indirect, of COVID-19 on our business, customers, business partners, employees, supply chain, other stakeholders and the overall economy; 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; our ability to maintain investment grade ratings and achieve our performance targets; and 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; failure to complete announced and future acquisitions or divestitures at all or on the expected terms and within the expected timeline; climate change and 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 (including tariffs, trade restrictions and climate change initiatives), 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 cybersecurity risks related to our systems, including our costs of addressing or mitigating such risks; regional natural gas supply restrictions; counterparty and sovereign risk; delays in completion of turnarounds at our major facilities; gas supply interruptions; 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; the COVID-19 pandemic and its resulting effects on economic conditions, restrictions imposed by public health authorities or governments, fiscal and monetary responses by governments and financial institutions and disruptions to global supply chains; and other risk factors detailed from time to time in Nutrien reports filed with the Canadian securities regulators and the SEC in the United States.

The purpose of our expected adjusted net earnings per share, adjusted EBITDA and EBITDA by segment guidance ranges are to assist readers in understanding our expected 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 Canadian securities legislation or applicable US federal securities laws.

Terms and Definitions

For the definitions of certain financial and non-financial terms used in this document, as well as a list of abbreviated company names and sources, see the "Terms and Definitions" section of our 2019 Annual Report dated February 19, 2020. All references to per share amounts pertain to diluted net earnings (loss) per share, "n/m" indicates information that is not meaningful and all financial data are stated in millions of US dollars, unless otherwise noted.

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 25 million tonnes of potash, nitrogen and phosphate 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.

Selected financial data for download can be found in our data tool at www.nutrien.com/investors/interactive-datatool

Such data is not incorporated by reference herein.

Nutrien will host a Conference Call on Tuesday, August 11, 2020 at 10:00 am Eastern Time.

Appendix A - Selected Additional Financial Data

Selected Retail measures

Three Months Ended June 30

 

Six Months Ended June 30

 

2020

 

2019

 

2020

 

2019

Proprietary products margin as a percentage of product line margin (%)

 

 

 

 

 

 

 

Crop nutrients

24

 

23

 

26

 

23

Crop protection products

42

 

44

 

42

 

43

Seed

47

 

42

 

44

 

42

All products

29

 

29

 

28

 

28

Crop nutrients sales volumes (tonnes - thousands)

 

 

 

 

 

 

 

North America

5,098

 

4,913

 

6,524

 

6,052

International

1,024

 

704

 

1,623

 

1,144

Total

6,122

 

5,617

 

8,147

 

7,196

Crop nutrients selling price per tonne

 

 

 

 

 

 

 

North America

427

 

472

 

425

 

472

International

340

 

433

 

332

 

397

Total

413

 

467

 

406

 

460

Crop nutrients gross margin per tonne

 

 

 

 

 

 

 

North America

101

 

102

 

100

 

101

International

42

 

56

 

40

 

51

Total

91

 

96

 

88

 

93

 

 

 

 

 

 

 

 

Financial performance measures

 

 

 

 

2020 Target

 

2020 Actuals

Retail EBITDA to sales (%) 1, 2

 

 

 

 

10

 

10

Retail adjusted average working capital to sales (%) 1, 2

 

 

 

21

 

18

Retail cash operating coverage ratio (%) 1, 2

 

 

 

 

61

 

61

Retail normalized comparable store sales (%) 2

 

 

 

 

 

 

6

Retail EBITDA per US selling location (thousands of US dollars) 1, 2

 

 

 

1,000

 

1,075

1 Rolling four quarters ended June 30, 2020.

2 See the "Non-IFRS Financial Measures" section.

Nutrien Financial

As at June 30, 2020

(millions of US dollars)

Current

31-90 days

past due

>90 days

past due

Allowance 2

Total

Nutrien Financial receivables 1

2,068

32

24

(16)

2,108

1 See the "Non-IFRS Financial Measures" section.

2 Allowance for expected credit losses of receivables from customers.

 

 

 

 

 

 

Selected Nitrogen measures

Three Months Ended June 30

 

Six Months Ended June 30

 

2020

 

2019

 

2020

 

2019

Sales volumes (tonnes - thousands)

 

 

 

 

 

 

 

Fertilizer

2,173

 

1,882

 

3,584

 

2,900

Industrial and feed

1,017

 

1,265

 

2,134

 

2,486

Net sales (millions of US dollars)

 

 

 

 

 

 

 

Fertilizer

510

 

555

 

828

 

839

Industrial and feed

186

 

247

 

398

 

509

Net selling price per tonne

 

 

 

 

 

 

 

Fertilizer

235

 

295

 

231

 

289

Industrial and feed

182

 

196

 

186

 

205

 

Production measures

Three Months Ended June 30

 

Six Months Ended June 30

 

2020

 

2019

 

2020

 

2019

Potash production (Product tonnes - thousands)

3,346

 

3,285

 

6,381

 

6,784

Potash shutdown weeks 1

22

 

15

 

34

 

16

Nitrogen production (Ammonia tonnes - thousands) 2

1,619

 

1,599

 

3,066

 

3,234

Ammonia operating rate (%) 3

97

 

91

 

94

 

92

Phosphate production (P2O5 tonnes - thousands) 4

357

 

357

 

729

 

750

Phosphate P2O5 operating rate (%) 4

84

 

84

 

86

 

89

1 Represents weeks of full production shutdown, excluding the impact of any periods of reduced operating rates and planned routine annual maintenance shutdowns and announced workforce reductions.

2 All figures are provided on a gross production basis.

3 Excludes Trinidad and Joffre.

4 Excludes Redwater.

Appendix B - Non-IFRS Financial Measures

We use both IFRS and certain non-IFRS financial measures to assess performance. Non-IFRS financial measures are numerical measures of a company's performance, that either exclude or include amounts that are not normally excluded or included in the most directly comparable measures calculated and presented in accordance with IFRS. In evaluating these measures, investors should consider that the methodology applied in calculating such measures may differ among companies and analysts.

Management believes the non-IFRS financial measures provide transparent and useful supplemental information to help investors evaluate our financial performance, financial condition and liquidity using the same measures as management. 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 following section outlines our non-IFRS financial measures, their definitions and why management uses each measure. It includes reconciliations to the most directly comparable IFRS measures. Except as otherwise described herein, our non-IFRS financial measures are calculated on a consistent basis from period to period and are adjusted for specific items in each period, as applicable. As non-recurring or unusual items arise, we generally exclude these items in our calculation.

EBITDA and Adjusted EBITDA

Most directly comparable IFRS financial measure: Net earnings (loss).

Definition: EBITDA is calculated as net earnings (loss) before finance costs, income taxes and depreciation and amortization. Adjusted EBITDA is calculated as net earnings (loss) before finance costs, income taxes, depreciation and amortization, Merger and related costs, certain acquisition and integration related costs, share-based compensation, impairment of assets, certain foreign exchange gain/loss (net of related derivatives), and COVID-19 related expenses. In 2020, we have amended our calculation of adjusted EBITDA to adjust for the impact of COVID-19 related expenses. There were no similar expenses in the comparative period.

Why we use the measure and why it is useful to investors: These are meaningful measures because they are not impacted by long-term investment and financing decisions, but rather focus on the performance of our day-to-day operations. These provide a measure of our ability to service debt and to meet other payment obligations.

 

Three Months Ended June 30

 

Six Months Ended June 30

(millions of US dollars)

2020

 

2019 1

 

2020

 

2019 1

Net earnings

765

 

858

 

730

 

899

Finance costs

139

 

143

 

272

 

266

Income tax expense

235

 

294

 

219

 

306

Depreciation and amortization

517

 

486

 

990

 

906

EBITDA

1,656

 

1,781

 

2,211

 

2,377

Merger and related costs

-

 

25

 

-

 

36

Acquisition and integration related costs

18

 

-

 

28

 

-

Share-based compensation expense (recovery)

12

 

59

 

(20)

 

116

Impairment of assets

-

 

-

 

-

 

33

COVID-19 related expenses

17

 

-

 

19

 

-

Foreign exchange loss (gain), net of related derivatives

18

 

5

 

(9)

 

12

Adjusted EBITDA

1,721

 

1,870

 

2,229

 

2,574

1 In the fourth quarter of 2019, we amended our calculations of adjusted EBITDA and restated the comparative periods to exclude the impact of foreign exchange gain/loss, net of related derivatives, as foreign exchange changes are not indicative of our operating performance.

Adjusted EBITDA and Adjusted Net Earnings Per Share Guidance

This guidance is provided on a non-IFRS basis. We do not provide a reconciliation of such forward-looking measures to the most directly comparable financial measures calculated and presented in accordance with IFRS due to unknown variables and the uncertainty related to future results. These unknown variables may include unpredictable transactions of significant value that may be inherently difficult to determine, without unreasonable efforts. Guidance excludes the impacts of acquisition and integration related costs, share-based compensation, certain foreign exchange gain/loss (net of related derivatives), and COVID-19 related expenses.

Adjusted Net Earnings and Adjusted Net Earnings Per Share

Most directly comparable IFRS financial measure: Net earnings (loss) and net earnings (loss) per share.

Definition: Net earnings (loss) before certain acquisition and integration related costs, share-based compensation, certain foreign exchange gain/loss (net of related derivatives), and COVID-19 related expenses (including those recorded under finance costs), net of tax. In 2020, we have amended our calculation of adjusted net loss to adjust for the impact of COVID-19 related expenses.

Why we use the measure and why it is useful to investors: Focuses on the performance of our day-to-day operations excluding the effects of non-operating items.

 

Three Months Ended
June 30, 2020

 

Six Months Ended
June 30, 2020

 

 

 

 

 

Per

 

 

 

 

 

Per

(millions of US dollars, except as otherwise

Increases

 

 

 

Diluted

 

Increases

 

 

 

Diluted

noted)

(Decreases)

 

Post-Tax

 

Share

 

(Decreases)

 

Post-Tax

 

Share

Net earnings

 

 

765

 

1.34

 

 

 

730

 

1.28

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

Acquisition and integration related costs

18

 

14

 

0.03

 

28

 

22

 

0.04

Share-based compensation expense (recovery)

12

 

9

 

0.02

 

(20)

 

(15)

 

(0.03)

COVID-19 related expenses

29

 

22

 

0.04

 

31

 

24

 

0.04

Foreign exchange loss (gain), net of related derivatives

18

 

14

 

0.02

 

(9)

 

(7)

 

(0.01)

Adjusted net earnings

 

 

824

 

1.45

 

 

 

754

 

1.32

Free Cash Flow and Free Cash Flow Including Changes in Non-Cash Operating Working Capital

Most directly comparable IFRS financial measure: Cash from operations before working capital changes.

Definition: Cash from operations before working capital changes less sustaining capital expenditures. We also calculate a similar measure which includes changes in non-cash operating working capital.

Why we use the measure and why it is useful to investors: For evaluation of liquidity and financial strength, and as a component of employee remuneration calculations. These are also useful as an indicator of our ability to service debt, meet other payment obligations and make strategic investments. These do not represent residual cash flow available for discretionary expenditures.

 

Three Months Ended June 30

 

Six Months Ended June 30

(millions of US dollars)

2020

 

2019

 

2020

 

2019

Cash from operations before working capital changes

1,318

 

1,551

 

1,662

 

2,101

Sustaining capital expenditures

(145)

 

(243)

 

(308)

 

(411)

Free cash flow

1,173

 

1,308

 

1,354

 

1,690

Changes in non-cash operating working capital

438

 

(379)

 

(432)

 

(1,444)

Free cash flow including changes in non-cash operating working capital

1,611

 

929

 

922

 

246

Potash Cash Cost of Product Manufactured ("COPM")

Most directly comparable IFRS financial measure: Cost of goods sold ("COGS") for the Potash segment.

Definition: Potash COGS for the period excluding depreciation and amortization expense and inventory and other adjustments divided by the production tonnes for the period.

Why we use the measure and why it is useful to investors: To assess operational performance. Potash cash COPM excludes the effects of production from other periods and long-term investment decisions, supporting a focus on the performance of our day-to-day operations.

 

Three Months Ended June 30

 

Six Months Ended June 30

(millions of US dollars, except as otherwise noted)

2020

 

2019

 

2020

 

2019

Total COGS - Potash

310

 

317

 

575

 

589

Change in inventory

(40)

 

(19)

 

(32)

 

25

Other adjustments

(3)

 

(5)

 

(5)

 

(12)

COPM

267

 

293

 

538

 

602

Depreciation and amortization included in COPM

(92)

 

(100)

 

(181)

 

(205)

Cash COPM

175

 

193

 

357

 

397

Production tonnes (tonnes - thousands)

3,346

 

3,285

 

6,381

 

6,784

Potash cash COPM per tonne

52

 

59

 

56

 

59

Ammonia Controllable Cash COPM

Most directly comparable IFRS financial measure: COGS for the Nitrogen segment.

Definition: The total of COGS for the Nitrogen segment excluding depreciation and amortization expense included in COGS, cash COGS for products other than ammonia, other adjustments, and natural gas and steam costs, divided by net ammonia production tonnes.

Why we use the measure and why it is useful to investors: To assess operational performance. Ammonia controllable cash COPM excludes the effects of production from other periods, the costs of natural gas and steam, and long-term investment decisions, supporting a focus on the performance of our day-to-day operations.

 

Three Months Ended June 30

 

Six Months Ended June 30

(millions of US dollars, except as otherwise noted)

2020

 

2019

 

2020

 

2019

Total COGS - Nitrogen

645

 

672

 

1,226

 

1,183

Depreciation and amortization in COGS

(152)

 

(136)

 

(282)

 

(231)

Cash COGS for products other than ammonia

(369)

 

(383)

 

(730)

 

(690)

Ammonia

 

 

 

 

 

 

 

Total cash COGS before other adjustments

124

 

153

 

214

 

262

Other adjustments 1

(46)

 

(50)

 

(35)

 

(33)

Total cash COPM

78

 

103

 

179

 

229

Natural gas and steam costs

(53)

 

(68)

 

(119)

 

(159)

Controllable cash COPM

25

 

35

 

60

 

70

Production tonnes (net tonnes 2 - thousands)

644

 

784

 

1,388

 

1,588

Ammonia controllable cash COPM per tonne

40

 

45

 

43

 

44

1 Includes changes in inventory balances and other adjustments.

2 Ammonia tonnes available for sale, as not upgraded to other Nitrogen products.

Gross Margin Excluding Depreciation and Amortization Per Tonne - Manufactured

Most directly comparable IFRS financial measure: Gross margin.

Definition: Gross margin from manufactured products per tonne less depreciation and amortization per tonne. Reconciliations are provided in the "Segment Results" section.

Why we use the measure and why it is useful to investors: Focuses on the performance of our day-to-day operations, which excludes the effects of items that primarily reflect the impact of long-term investment and financing decisions.

Retail EBITDA to Sales

Most directly comparable IFRS financial measure: Retail EBITDA divided by Retail sales.

Definition: Retail EBITDA divided by Retail sales for the last four rolling quarters.

Why we use the measure and why it is useful to investors: To evaluate operational efficiency. A higher or lower percentage represents increased or decreased efficiency, respectively.

 

Rolling four quarters ended June 30, 2020

(millions of US dollars, except as otherwise noted)

Q3 2019

 

Q4 2019

 

Q1 2020

 

Q2 2020

 

Total

EBITDA

190

 

231

 

7

 

964

 

1,392

Sales

2,499

 

2,171

 

2,649

 

6,749

 

14,068

EBITDA to sales (%)

 

 

 

 

 

 

 

 

10

Nutrien Financial Receivables

Most directly comparable IFRS financial measure: Receivables.

Definition: Nutrien Financial receivables are a subcategory of US Retail receivables managed in the Nutrien Financial portfolio, segregated predominately according to credit quality. We manage our credit portfolio based on a combination of customer credit metrics, past experience with the customer and by managing exposure to any single customer.

Why we use the measure and why it is useful to investors: Used by credit rating agencies and other users to evaluate overall credit risk.

(millions of US dollars)

 

 

 

As at June 30, 2020

Nutrien Financial receivables

 

 

 

 

2,108

Non-Nutrien Financial receivables

3,604

Receivables

 

 

 

 

5,712

 

 

 

 

 

 

Retail Adjusted Average Working Capital to Sales

Most directly comparable IFRS financial measure: (Current assets minus current liabilities for Retail) divided by Retail sales.

Definition: Retail adjusted average working capital divided by Retail adjusted sales for the last four rolling quarters. We exclude in our calculations the working capital and sales of certain acquisitions (such as Ruralco) during the first year of acquisition. We have amended our calculation to adjust for the sales of certain recently acquired businesses.

Why we use the measure and why it is useful to investors: To evaluate operational efficiency. A lower or higher percentage represents increased or decreased efficiency, respectively.

 

Rolling four quarters ended, June 30, 2020

(millions of US dollars, except as otherwise noted)

Q3 2019

 

Q4 2019

 

Q1 2020

 

Q2 2020

 

Average/Total

Working capital

3,699

 

1,759

 

2,288

 

2,030

 

 

Working capital from certain recent acquisitions

(75)

 

(138)

 

(108)

 

63

 

 

Adjusted working capital

3,624

 

1,621

 

2,180

 

2,093

 

2,380

 

 

 

 

 

 

 

 

 

 

Sales

2,499

 

2,171

 

2,649

 

6,749

 

 

Sales from certain recent acquisitions

-

 

(249)

 

(348)

 

(338)

 

 

Adjusted sales

2,499

 

1,922

 

2,301

 

6,411

 

13,133

Adjusted average working capital to sales (%)

 

 

 

 

 

 

 

 

18

Retail Cash Operating Coverage Ratio

Most directly comparable IFRS financial measure: Retail operating expenses as a percentage of Retail gross margin.

Definition: Retail operating expenses excluding depreciation and amortization expense, divided by Retail gross margin excluding depreciation and amortization expense in cost of goods sold for the last four rolling quarters.

Why we use the measure and why it is useful to investors: To understand the costs and underlying economics of our Retail operations and to assess our Retail operating performance and ability to generate free cash flow.

 

Rolling four quarters ended June 30, 2020

(millions of US dollars, except as otherwise noted)

Q3 2019

 

Q4 2019

 

Q1 2020

 

Q2 2020

 

Total

Operating expenses 1

617

 

667

 

677

 

811

 

2,772

Depreciation and amortization in operating expenses

(150)

 

(160)

 

(153)

 

(161)

 

(624)

Operating expenses excluding depreciation and amortization

467

 

507

 

524

 

650

 

2,148

 

 

 

 

 

 

 

 

 

 

Gross margin

655

 

736

 

529

 

1,612

 

3,532

Depreciation and amortization in cost of goods sold

2

 

2

 

2

 

2

 

8

Gross margin excluding depreciation and amortization

657

 

738

 

531

 

1,614

 

3,540

Cash operating coverage ratio (%)

 

 

 

 

 

 

 

 

61

1 Includes Retail expenses below gross margin including selling expenses, general and administrative expenses and other (income) expenses.

Retail EBITDA per US Selling Location

Most directly comparable IFRS financial measure: Retail US EBITDA.

Definition: Total Retail US EBITDA for the last four rolling quarters adjusted for acquisitions in those quarters, divided by the number of US locations that have generated sales in the last four rolling quarters adjusted for acquired locations.

Why we use the measure and why it is useful to investors: To assess our US Retail operating performance. Includes locations we have owned for more than 12 months.

 

Rolling four quarters ended June 30, 2020

(millions of US dollars, except as otherwise noted)

Q3 2019

 

Q4 2019

 

Q1 2020

 

Q2 2020

 

Total

US EBITDA

142

 

143

 

(44)

 

766

 

1,007

Adjustments for acquisitions

 

 

 

 

 

 

 

 

(23)

US EBITDA adjusted for acquisitions

 

 

 

 

 

 

 

 

984

Number of US selling locations adjusted for acquisitions

 

 

 

 

 

 

 

 

915

EBITDA per US selling location (thousands of US dollars)

 

 

 

 

 

 

 

1,075

Retail Normalized Comparable Store Sales

Most directly comparable IFRS financial measure: Retail sales from comparable base as a component of total Retail sales.

Definition: Prior year comparable store sales adjusted for published potash, nitrogen and phosphate benchmark prices and foreign exchange rates used in the current year. We retain sales of closed locations in the comparable base if the closed location is in close proximity to an existing location, unless we plan to exit the market area or are unable to economically or logistically serve it. We do not adjust for temporary closures, expansions or renovations of stores.

Why we use the measure and why it is useful to investors: To evaluate sales growth by adjusting for fluctuations in commodity prices and foreign exchange rates. Includes locations we have owned for more than 12 months.

 

Six Months Ended June 30

(millions of US dollars, except as otherwise noted)

2020

 

2019

Sales from comparable base

 

 

 

Current period

8,602

 

8,307

Prior period

8,551

 

8,372

Comparable store sales (%)

1

 

(1)

Prior period normalized for benchmark prices and foreign exchange rates

8,104

 

8,587

Normalized comparable store sales (%)

6

 

(3)

 

Condensed Consolidated Financial Statements

Unaudited in millions of US dollars except as otherwise noted

Condensed Consolidated Statements of Earnings

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30

 

June 30

 

Note

2020

 

2019

 

2020

 

2019

 

 

 

 

Note 1

 

 

 

Note 1

SALES

2

8,416

 

8,693

 

12,602

 

12,412

Freight, transportation and distribution

 

237

 

215

 

449

 

386

Cost of goods sold

 

6,024

 

6,166

 

9,125

 

8,739

GROSS MARGIN

 

2,155

 

2,312

 

3,028

 

3,287

Selling expenses

 

763

 

690

 

1,405

 

1,228

General and administrative expenses

 

101

 

95

 

205

 

190

Provincial mining and other taxes

 

48

 

96

 

105

 

161

Share-based compensation expense (recovery)

 

12

 

59

 

(20)

 

116

Impairment of assets

 

-

 

-

 

-

 

33

Other expenses

3

92

 

77

 

112

 

88

EARNINGS BEFORE FINANCE COSTS AND INCOME TAXES

1,139

 

1,295

 

1,221

 

1,471

Finance costs

 

139

 

143

 

272

 

266

EARNINGS BEFORE INCOME TAXES

 

1,000

 

1,152

 

949

 

1,205

Income tax expense

4

235

 

294

 

219

 

306

NET EARNINGS

 

765

 

858

 

730

 

899

NET EARNINGS PER SHARE ("EPS")

 

 

 

 

 

 

 

 

Basic

 

1.34

 

1.48

 

1.28

 

1.52

Diluted

 

1.34

 

1.47

 

1.28

 

1.52

Weighted average shares outstanding for basic EPS

 

569,146,000

 

581,433,000

 

570,157,000

 

591,792,000

Weighted average shares outstanding for diluted EPS

 

569,146,000

 

582,360,000

 

570,157,000

 

592,714,000

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income

 

Three Months Ended

 

Six Months Ended

 

June 30

 

June 30

(Net of related income taxes)

2020

 

2019

 

2020

 

2019

NET EARNINGS

765

 

858

 

730

 

899

Other comprehensive income (loss)

 

 

 

 

 

 

 

Items that will not be reclassified to net earnings:

 

 

 

 

 

 

 

Net actuarial gain on defined benefit plans

-

 

-

 

3

 

-

Net fair value loss on investments

(2)

 

(24)

 

(21)

 

(15)

Items that have been or may be subsequently reclassified to net earnings:

 

 

 

 

 

 

 

Gain (loss) on currency translation of foreign operations

194

 

16

 

(121)

 

35

Other

9

 

(6)

 

(18)

 

(2)

OTHER COMPREHENSIVE INCOME (LOSS)

201

 

(14)

 

(157)

 

18

COMPREHENSIVE INCOME

966

 

844

 

573

 

917

 

 

 

 

 

 

 

 

(See Notes to the Condensed Consolidated Financial Statements)

Condensed Consolidated Statements of Cash Flows

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30

 

June 30

 

Note

2020

 

2019

 

2020

 

2019

 

 

 

 

Note 1

 

 

 

Note 1

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net earnings

 

765

 

858

 

730

 

899

Adjustments for:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

517

 

486

 

990

 

906

Share-based compensation expense (recovery)

 

12

 

59

 

(20)

 

116

Impairment of assets

 

-

 

-

 

-

 

33

Provision for deferred income tax

 

84

 

150

 

62

 

147

Other long-term liabilities and miscellaneous

 

(60)

 

(2)

 

(100)

 

-

Cash from operations before working capital changes

 

1,318

 

1,551

 

1,662

 

2,101

Changes in non-cash operating working capital:

 

 

 

 

 

 

 

 

Receivables

 

(1,824)

 

(1,905)

 

(2,147)

 

(2,051)

Inventories

 

2,174

 

2,207

 

746

 

698

Prepaid expenses and other current assets

 

247

 

369

 

1,013

 

824

Payables and accrued charges

 

(159)

 

(1,050)

 

(44)

 

(915)

CASH PROVIDED BY OPERATING ACTIVITIES

 

1,756

 

1,172

 

1,230

 

657

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

(298)

 

(369)

 

(661)

 

(659)

Additions to intangible assets

 

(36)

 

(37)

 

(68)

 

(75)

Business acquisitions, net of cash acquired

9

(116)

 

(2)

 

(173)

 

(489)

Proceeds from disposal of discontinued operations, net of tax

 

-

 

45

 

-

 

55

Purchase of investments

 

(29)

 

(96)

 

(66)

 

(122)

Other

 

71

 

39

 

115

 

61

CASH USED IN INVESTING ACTIVITIES

 

(408)

 

(420)

 

(853)

 

(1,229)

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Transaction costs on long-term debt

 

(15)

 

(29)

 

(15)

 

(29)

(Repayment of) proceeds from short-term debt, net

 

(4,290)

 

(45)

 

204

 

959

Proceeds from long-term debt

7

1,500

 

1,510

 

1,506

 

1,510

Repayment of long-term debt

7

(6)

 

(500)

 

(507)

 

(1,000)

Repayment of principal portion of lease liabilities

 

(70)

 

(63)

 

(134)

 

(116)

Dividends paid

8

(258)

 

(256)

 

(514)

 

(520)

Repurchase of common shares

8

-

 

(1,132)

 

(160)

 

(1,930)

Issuance of common shares

 

-

 

15

 

-

 

17

CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

 

(3,139)

 

(500)

 

380

 

(1,109)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND

CASH EQUIVALENTS

 

24

 

(9)

 

(13)

 

(17)

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

(1,767)

 

243

 

744

 

(1,698)

CASH AND CASH EQUIVALENTS ? BEGINNING OF PERIOD

 

3,182

 

373

 

671

 

2,314

CASH AND CASH EQUIVALENTS ? END OF PERIOD

 

1,415

 

616

 

1,415

 

616

Cash and cash equivalents comprised of:

 

 

 

 

 

 

 

 

Cash

 

1,106

 

378

 

1,106

 

378

Short-term investments

 

309

 

238

 

309

 

238

 

 

1,415

 

616

 

1,415

 

616

SUPPLEMENTAL CASH FLOWS INFORMATION

 

 

 

 

 

 

 

 

Interest paid

 

153

 

128

 

249

 

242

Income taxes paid (received)

 

30

 

70

 

65

 

(45)

Total cash outflow for leases

 

96

 

88

 

188

 

164

 

 

 

 

 

 

 

 

 

(See Notes to the Condensed Consolidated Financial Statements)

Condensed Consolidated Statements of Changes in Shareholders' Equity

 

 

 

 

 

 

 

Accumulated Other Comprehensive (Loss) Income ("AOCI")

 

 

 

 

 

 

 

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial

 

Loss on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Fair

 

Gain on

 

Currency

 

 

 

 

 

 

 

 

 

Number of

 

 

 

 

 

Value

 

Defined

 

Translation

 

 

 

 

 

 

 

 

 

Common

 

Share

 

Contributed

 

Loss on

 

Benefit

 

of Foreign

 

 

 

Total

 

Retained

 

Total

 

Shares

 

Capital

 

Surplus

 

Investments

 

Plans 1

 

Operations

 

Other

 

AOCI

 

Earnings

 

Equity 2

BALANCE ? DECEMBER 31, 2018

608,535,477

 

16,740

 

231

 

(7)

 

-

 

(251)

 

(33)

 

(291)

 

7,745

 

24,425

Net earnings

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

899

 

899

Other comprehensive (loss) income

-

 

-

 

-

 

(15)

 

-

 

35

 

(2)

 

18

 

-

 

18

Shares repurchased (Note 8)

(36,066,766)

 

(992)

 

-

 

-

 

-

 

-

 

-

 

-

 

(886)

 

(1,878)

Dividends declared

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(244)

 

(244)

Effect of share-based compensation including issuance of common shares

397,889

 

20

 

7

 

-

 

-

 

-

 

-

 

-

 

-

 

27

Transfer of net loss on sale of investment

-

 

-

 

-

 

3

 

-

 

-

 

-

 

3

 

(3)

 

-

Transfer of net loss on cash flow hedges

-

 

-

 

-

 

-

 

-

 

-

 

4

 

4

 

-

 

4

BALANCE ? JUNE 30, 2019

572,866,600

 

15,768

 

238

 

(19)

 

-

 

(216)

 

(31)

 

(266)

 

7,511

 

23,251

BALANCE - DECEMBER 31, 2019

572,942,809

 

15,771

 

248

 

(29)

 

-

 

(204)

 

(18)

 

(251)

 

7,101

 

22,869

Net earnings

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

730

 

730

Other comprehensive (loss) income

-

 

-

 

-

 

(21)

 

3

 

(121)

 

(18)

 

(157)

 

-

 

(157)

Shares repurchased (Note 8)

(3,832,580)

 

(105)

 

(55)

 

-

 

-

 

-

 

-

 

-

 

-

 

(160)

Dividends declared

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(514)

 

(514)

Effect of share-based compensation including issuance of common shares

35,706

 

1

 

7

 

-

 

-

 

-

 

-

 

-

 

-

 

8

Transfer of net loss on cash flow hedges

-

 

-

 

-

 

-

 

-

 

-

 

11

 

11

 

-

 

11

Transfer of net actuarial gain on defined benefit plans

-

 

-

 

-

 

-

 

(3)

 

-

 

-

 

(3)

 

3

 

-

BALANCE ? JUNE 30, 2020

569,145,935

 

15,667

 

200

 

(50)

 

-

 

(325)

 

(25)

 

(400)

 

7,320

 

22,787

1 Any amounts incurred during a period were transferred to retained earnings at each period-end. Therefore, no balance exists at the beginning or end of period.

2 All equity transactions were attributable to common shareholders.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(See Notes to the Condensed Consolidated Financial Statements)

Condensed Consolidated Balance Sheets

 

 

June 30

 

December 31

As at

Note

2020

 

2019

 

2019

 

 

 

 

Note 1

 

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

1,415

 

616

 

671

Receivables

 

5,712

 

5,200

 

3,542

Inventories

 

4,199

 

4,346

 

4,975

Prepaid expenses and other current assets

 

444

 

383

 

1,477

 

 

11,770

 

10,545

 

10,665

Non-current assets

 

 

 

 

 

 

Property, plant and equipment

 

20,178

 

19,840

 

20,335

Goodwill

9

12,096

 

11,716

 

11,986

Other intangible assets

 

2,376

 

2,291

 

2,428

Investments

 

803

 

796

 

821

Other assets

 

578

 

518

 

564

TOTAL ASSETS

 

47,801

 

45,706

 

46,799

LIABILITIES

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Short-term debt

6

1,247

 

1,609

 

976

Current portion of long-term debt

7

-

 

503

 

502

Current portion of lease liabilities

 

228

 

208

 

214

Payables and accrued charges

 

7,306

 

5,483

 

7,437

 

 

8,781

 

7,803

 

9,129

Non-current liabilities

 

 

 

 

 

 

Long-term debt

7

10,032

 

8,558

 

8,553

Lease liabilities

 

841

 

770

 

859

Deferred income tax liabilities

4

3,212

 

3,082

 

3,145

Pension and other post-retirement benefit liabilities

 

435

 

420

 

433

Asset retirement obligations and accrued environmental costs

 

1,575

 

1,657

 

1,650

Other non-current liabilities

 

138

 

165

 

161

TOTAL LIABILITIES

 

25,014

 

22,455

 

23,930

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Share capital

8

15,667

 

15,768

 

15,771

Contributed surplus

 

200

 

238

 

248

Accumulated other comprehensive loss

 

(400)

 

(266)

 

(251)

Retained earnings

 

7,320

 

7,511

 

7,101

TOTAL SHAREHOLDERS' EQUITY

 

22,787

 

23,251

 

22,869

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

47,801

 

45,706

 

46,799

 

 

 

 

 

 

 

(See Notes to the Condensed Consolidated Financial Statements)

Notes to the Condensed Consolidated Financial Statements

As at and for the Three and Six Months Ended June 30, 2020

NOTE 1 BASIS OF PRESENTATION

Nutrien Ltd. (collectively with its subsidiaries, known as "Nutrien", "we", "us", "our" or the "Company") is the world's largest provider of crop inputs and services. Nutrien plays a critical role in helping growers around the globe increase food production in a sustainable manner.

These unaudited interim condensed consolidated financial statements ("interim financial statements") are based on International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS") and have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting". The accounting policies and methods of computation used in preparing these interim financial statements are consistent with those used in the preparation of our 2019 annual consolidated financial statements. These interim 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 our 2019 annual consolidated financial statements.

Certain immaterial 2019 figures have been reclassified in the condensed consolidated statements of earnings, condensed consolidated statements of cash flows, condensed consolidated balance sheets and segment information.

In management's opinion, the interim financial statements include all adjustments necessary to fairly present such information in all material respects. Interim results are not necessarily indicative of the results expected for any other interim period or the fiscal year. On March 11, 2020, the World Health Organization declared the novel strain of coronavirus ("COVID-19") a global pandemic. We have assessed our accounting estimates and other matters that require the use of forecasted financial information for the impact of the COVID-19 pandemic. The assessment included estimates of the unknown future impacts of the pandemic using information that is reasonably available at this time. Accounting estimates and other matters assessed include the allowance for expected credit losses of receivables from customers, inventory valuation, goodwill and other long-lived assets, financial assets, tax assets, pension obligation and assets, and revenue recognition. Based on the current assessment, there was not a material impact to these interim financial statements. As additional information becomes available, the future assessment of these estimates, including expectations about the severity, duration and scope of the pandemic, could differ materially in future reporting periods.

These interim financial statements were authorized by the audit committee of the Board of Directors for issue on August 10, 2020.

NOTE 2 SEGMENT INFORMATION

The Company has four reportable operating segments: Retail, Potash, Nitrogen and Phosphate. 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 segments are differentiated by the chemical nutrient contained in the products that each produces. Sales reported under our Corporate and Others segment primarily relates to our non-core Canadian business.

 

 

Three Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

Retail

 

Potash

 

Nitrogen

 

Phosphate

 

and Others

 

Eliminations

 

Consolidated

Sales

? third party

6,739

 

617

 

755

 

285

 

20

 

-

 

8,416

 

? intersegment

10

 

64

 

246

 

49

 

-

 

(369)

 

-

Sales

? total

6,749

 

681

 

1,001

 

334

 

20

 

(369)

 

8,416

Freight, transportation and distribution

-

 

93

 

148

 

57

 

-

 

(61)

 

237

Net sales

6,749

 

588

 

853

 

277

 

20

 

(308)

 

8,179

Cost of goods sold

5,137

 

310

 

645

 

249

 

18

 

(335)

 

6,024

Gross margin

1,612

 

278

 

208

 

28

 

2

 

27

 

2,155

Selling expenses

764

 

1

 

5

 

1

 

(8)

 

-

 

763

General and administrative expenses

30

 

1

 

2

 

3

 

65

 

-

 

101

Provincial mining and other taxes

-

 

46

 

1

 

-

 

1

 

-

 

48

Share-based compensation expense

-

 

-

 

-

 

-

 

12

 

-

 

12

Other expenses (income)

17

 

4

 

(11)

 

3

 

79

 

-

 

92

Earnings (loss) before finance costs and income taxes

801

 

226

 

211

 

21

 

(147)

 

27

 

1,139

Depreciation and amortization

163

 

109

 

172

 

56

 

17

 

-

 

517

EBITDA 1

964

 

335

 

383

 

77

 

(130)

 

27

 

1,656

Assets ? at June 30, 2020

20,529

 

11,915

 

10,708

 

2,111

 

2,835

 

(297)

 

47,801

1 EBITDA is calculated as net earnings (loss) before finance costs, income taxes, and depreciation and amortization.

 
 

 

 

Three Months Ended June 30, 2019

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

Retail

 

Potash

 

Nitrogen

 

Phosphate

 

and Others

 

Eliminations

 

Consolidated

Sales

? third party

6,503

 

873

 

857

 

424

 

36

 

-

 

8,693

 

? intersegment

9

 

47

 

235

 

60

 

-

 

(351)

 

-

Sales

? total

6,512

 

920

 

1,092

 

484

 

36

 

(351)

 

8,693

Freight, transportation and distribution

-

 

72

 

126

 

66

 

-

 

(49)

 

215

Net sales

6,512

 

848

 

966

 

418

 

36

 

(302)

 

8,478

Cost of goods sold

5,072

 

317

 

672

 

428

 

36

 

(359)

 

6,166

Gross margin

1,440

 

531

 

294

 

(10)

 

-

 

57

 

2,312

Selling expenses

683

 

1

 

7

 

2

 

(3)

 

-

 

690

General and administrative expenses

27

 

-

 

5

 

1

 

62

 

-

 

95

Provincial mining and other taxes

-

 

91

 

-

 

1

 

4

 

-

 

96

Share-based compensation expense

-

 

-

 

-

 

-

 

59

 

-

 

59

Other expenses (income)

39

 

-

 

(23)

 

10

 

51

 

-

 

77

Earnings (loss) before finance costs and income taxes

691

 

439

 

305

 

(24)

 

(173)

 

57

 

1,295

Depreciation and amortization

145

 

114

 

154

 

62

 

11

 

-

 

486

EBITDA

836

 

553

 

459

 

38

 

(162)

 

57

 

1,781

Assets ? at December 31, 2019

19,990

 

11,696

 

10,991

 

2,198

 

2,129

 

(205)

 

46,799

 
 

 

 

Six Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

Retail

 

Potash

 

Nitrogen

 

Phosphate

 

and Others

 

Eliminations

 

Consolidated

Sales

? third party

9,379

 

1,164

 

1,401

 

611

 

47

 

-

 

12,602

 

? intersegment

19

 

128

 

378

 

106

 

-

 

(631)

 

-

Sales

? total

9,398

 

1,292

 

1,779

 

717

 

47

 

(631)

 

12,602

Freight, transportation and distribution

-

 

187

 

248

 

127

 

-

 

(113)

 

449

Net sales

9,398

 

1,105

 

1,531

 

590

 

47

 

(518)

 

12,153

Cost of goods sold

7,257

 

575

 

1,226

 

569

 

43

 

(545)

 

9,125

Gross margin

2,141

 

530

 

305

 

21

 

4

 

27

 

3,028

Selling expenses

1,399

 

4

 

12

 

3

 

(13)

 

-

 

1,405

General and administrative expenses

68

 

3

 

4

 

5

 

125

 

-

 

205

Provincial mining and other taxes

-

 

103

 

1

 

-

 

1

 

-

 

105

Share-based compensation recovery

-

 

-

 

-

 

-

 

(20)

 

-

 

(20)

Other expenses (income)

21

 

5

 

(9)

 

9

 

86

 

-

 

112

Earnings (loss) before finance costs and income taxes

653

 

415

 

297

 

4

 

(175)

 

27

 

1,221

Depreciation and amortization

318

 

205

 

322

 

119

 

26

 

-

 

990

EBITDA

971

 

620

 

619

 

123

 

(149)

 

27

 

2,211

Assets ? at June 30, 2020

20,529

 

11,915

 

10,708

 

2,111

 

2,835

 

(297)

 

47,801

 
 

 

 

Six Months Ended June 30, 2019

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

Retail

 

Potash

 

Nitrogen

 

Phosphate

 

and Others

 

Eliminations

 

Consolidated

Sales

? third party

8,533

 

1,580

 

1,469

 

766

 

64

 

-

 

12,412

 

? intersegment

18

 

110

 

372

 

117

 

-

 

(617)

 

-

Sales

? total

8,551

 

1,690

 

1,841

 

883

 

64

 

(617)

 

12,412

Freight, transportation and distribution

-

 

145

 

198

 

116

 

-

 

(73)

 

386

Net sales

8,551

 

1,545

 

1,643

 

767

 

64

 

(544)

 

12,026

Cost of goods sold

6,702

 

589

 

1,183

 

763

 

64

 

(562)

 

8,739

Gross margin

1,849

 

956

 

460

 

4

 

-

 

18

 

3,287

Selling expenses

1,215

 

5

 

14

 

3

 

(9)

 

-

 

1,228

General and administrative expenses

54

 

-

 

7

 

3

 

126

 

-

 

190

Provincial mining and other taxes

-

 

154

 

1

 

1

 

5

 

-

 

161

Share-based compensation expense

-

 

-

 

-

 

-

 

116

 

-

 

116

Impairment of assets

-

 

-

 

-

 

-

 

33

 

-

 

33

Other expenses (income)

51

 

(3)

 

(28)

 

13

 

55

 

-

 

88

Earnings (loss) before finance costs and income taxes

529

 

800

 

466

 

(16)

 

(326)

 

18

 

1,471

Depreciation and amortization

281

 

214

 

267

 

122

 

22

 

-

 

906

EBITDA

810

 

1,014

 

733

 

106

 

(304)

 

18

 

2,377

Assets ? at December 31, 2019

19,990

 

11,696

 

10,991

 

2,198

 

2,129

 

(205)

 

46,799

Presented below is revenue from contracts with customers disaggregated by product line or geographic location for each reportable segment to show how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

 

Three Months Ended

 

Six Months Ended

 

June 30

 

June 30

 

2020

 

2019

 

2020

 

2019

Retail sales by product line

 

 

 

 

 

 

 

Crop nutrients

2,527

 

2,626

 

3,312

 

3,313

Crop protection products

2,436

 

2,286

 

3,446

 

3,030

Seed

1,141

 

1,197

 

1,535

 

1,553

Merchandise

253

 

144

 

469

 

252

Services and other

392

 

259

 

636

 

403

 

6,749

 

6,512

 

9,398

 

8,551

Potash sales by geography

 

 

 

 

 

 

 

Manufactured product

 

 

 

 

 

 

 

North America

325

 

329

 

644

 

647

Offshore 1

356

 

591

 

648

 

1,042

Other potash and purchased products

-

 

-

 

-

 

1

 

681

 

920

 

1,292

 

1,690

Nitrogen sales by product line

 

 

 

 

 

 

 

Manufactured product

 

 

 

 

 

 

 

Ammonia

291

 

354

 

447

 

541

Urea

304

 

331

 

566

 

562

Solutions, nitrates and sulfates

233

 

229

 

429

 

420

Other nitrogen and purchased products

173

 

178

 

337

 

318

 

1,001

 

1,092

 

1,779

 

1,841

Phosphate sales by product line

 

 

 

 

 

 

 

Manufactured product

 

 

 

 

 

 

 

Fertilizer

185

 

307

 

406

 

547

Industrial and feed

117

 

116

 

237

 

240

Other phosphate and purchased products

32

 

61

 

74

 

96

 

334

 

484

 

717

 

883

1 Relates to Canpotex Limited ("Canpotex") (Note 11).

NOTE 3 OTHER EXPENSES (INCOME)

 

Three Months Ended

 

Six Months Ended

 

June 30

 

June 30

 

2020

 

2019

 

2020

 

2019

Merger and related costs

-

 

25

 

-

 

36

Acquisition and integration related costs

18

 

-

 

28

 

-

Foreign exchange loss (gain), net of related derivatives

18

 

5

 

(13)

 

12

Earnings of equity-accounted investees

(13)

 

(30)

 

(23)

 

(47)

Bad debts

21

 

29

 

27

 

35

COVID-19 related expenses

17

 

-

 

19

 

-

Other expenses

31

 

48

 

74

 

52

 

92

 

77

 

112

 

88

NOTE 4 INCOME TAXES

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

 

Three Months Ended

 

Six Months Ended

 

June 30

 

June 30

 

2020

 

2019

 

2020

 

2019

Income tax expense

235

 

294

 

219

 

306

Actual effective tax rate on earnings (%)

25

 

26

 

24

 

25

Actual effective tax rate including discrete items (%)

24

 

26

 

23

 

25

Discrete tax adjustments that impacted the tax rate

(13)

 

(11)

 

(11)

 

4

Income tax balances within the condensed consolidated balance sheets were comprised of the following:

Income Tax Assets and Liabilities

Balance Sheet Location

As at June 30, 2020

 

As at December 31, 2019

Income tax assets

 

 

 

 

Current

Receivables

43

 

104

Non-current

Other assets

71

 

36

Deferred income tax assets

Other assets

265

 

249

Total income tax assets

 

379

 

389

Income tax liabilities

 

 

 

 

Current

Payables and accrued charges

89

 

43

Non-current

Other non-current liabilities

43

 

44

Deferred income tax liabilities

Deferred income tax liabilities

3,212

 

3,145

Total income tax liabilities

 

3,344

 

3,232

NOTE 5 FINANCIAL INSTRUMENTS

Fair Value

Estimated fair values for financial instruments are designed to approximate amounts for which the instruments could be exchanged in a current arm's-length transaction between knowledgeable, willing parties. The valuation policies and procedures for financial reporting purposes are determined by our finance department. There have been no changes to our valuation methods presented in Note 12 of the 2019 annual consolidated financial statements and those valuation methods have been applied in these interim financial statements.

The following table presents our fair value hierarchy for financial instruments carried at fair value on a recurring basis or measured at amortized cost:

 

June 30, 2020

 

December 31, 2019

 

Carrying

 

 

 

 

 

Carrying

 

 

 

 

Financial assets (liabilities) measured at

Amount

 

Level 1 1

 

Level 2 1

 

Amount

 

Level 1 1

 

Level 2 1

Fair value on a recurring basis

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

1,415

 

-

 

1,415

 

671

 

-

 

671

Derivative instrument assets

24

 

-

 

24

 

5

 

-

 

5

Other current financial assets - marketable securities 2

152

 

22

 

130

 

193

 

27

 

166

Investments at FVTOCI 3

139

 

139

 

-

 

161

 

161

 

-

Derivative instrument liabilities

(31)

 

-

 

(31)

 

(33)

 

-

 

(33)

Amortized cost

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

 

 

 

 

 

 

 

 

 

 

Notes and debentures

-

 

-

 

-

 

(494)

 

-

 

(503)

Fixed and floating rate debt

-

 

-

 

-

 

(8)

 

-

 

(8)

Long-term debt

 

 

 

 

 

 

 

 

 

 

 

Notes and debentures

(10,001)

 

(8,715)

 

(2,392)

 

(8,528)

 

(1,726)

 

(7,440)

Fixed and floating rate debt

(31)

 

-

 

(31)

 

(25)

 

-

 

(25)

1 During the period ended June 30, 2020, there were no transfers between Level 1 and Level 2 for financial instruments measured at fair value on a recurring basis.

2 Marketable securities consist of equity and fixed income securities. We determine the fair value of equity securities based on the bid price of identical instruments in active markets. We value fixed income securities using quoted prices of instruments with similar terms and credit risk.

3 Investments at fair value through other comprehensive income ("FVTOCI") are comprised of shares in Sinofert Holdings Ltd.

NOTE 6 SHORT-TERM DEBT

Short-term debt was comprised of:

 

Rate of Interest (%)

 

Total Facility Limit as at June 30, 2020

 

As at June 30, 2020

 

As at December 31, 2019

Credit facilities

 

 

 

 

 

 

 

Unsecured revolving term credit facility

NIL

 

4,500

 

-

 

-

Uncommitted revolving demand facility

NIL

 

500

 

-

 

-

Other credit facilities 1

0.9 - 11.8

 

640

 

242

 

326

Commercial paper

0.4 - 2.8

 

 

 

1,005

 

650

 

 

 

 

 

1,247

 

976

1 Other credit facilities are unsecured and consist of South American facilities with debt of $184 (December 31, 2019 ? $149) and interest rates ranging from 2.4 percent to 11.8 percent, Australian facilities with debt of $27 (December 31, 2019 ? $157) and an interest rate of 1.3 percent, and Other facilities with debt of $31 (December 31, 2019 ? $20) and interest rates ranging from 0.9 percent to 4.0 percent.

The amount available under the commercial paper program is limited to the availability of backup funds under the $4,500 unsecured revolving term credit facility and excess cash invested in highly liquid securities.

During the six months ended June 30, 2020, we entered into new committed revolving credit facilities totaling approximately $1,500, all with the same principal covenants and events of default as our existing credit facilities. We closed these credit facilities after the issuance of the new notes as described in Note 7.

NOTE 7 LONG-TERM DEBT

The following tables summarize our long-term debt issuances and repayment activities during the six months ended June 30, 2020:

 

Rate of interest (%)

 

Maturity

 

Amount

Notes issued 2020

1.900

 

May 13, 2023

 

500

Notes issued 2020

2.950

 

May 13, 2030

 

500

Notes issued 2020

3.950

 

May 13, 2050

 

500

 

 

 

 

 

1,500

The notes issued in 2020 are unsecured, rank equally with our existing unsecured notes, and have no sinking fund requirements prior to maturity. Each series is redeemable and provides for redemption prior to maturity, at our option, at specified prices.

 

Rate of interest (%)

 

Maturity

 

Amount

Notes repaid 2020

4.875

 

March 30, 2020

 

500

In March 2020, we filed a base shelf prospectus in Canada and the US qualifying the issuance of up to $5,000 of common shares, debt and other securities during a period of 25 months from March 16, 2020. Issuance of securities requires us to file a prospectus supplement and is subject to availability of funding in capital markets. During the six months ended June 30, 2020, we filed a prospectus supplement to issue $1,500 of notes, as described above.

NOTE 8 SHARE CAPITAL

Share repurchase programs

 

Board of Directors Approval

 

Expiry

 

Maximum Shares for Repurchase

2019 Normal Course Issuer Bid 1

February 20, 2019

 

February 26, 2020

 

42,164,420

2020 Normal Course Issuer Bid 2

February 18, 2020

 

February 26, 2021

 

28,572,458

1 The 2019 normal course issuer bid permitted the repurchase of up to 7 percent of our outstanding common shares for cancellation. As of the expiry date, we had repurchased 33,256,668 of the maximum shares for repurchase.

2 The 2020 normal course issuer bid permits the repurchase of up to 5 percent of our outstanding common shares for cancellation and can expire earlier than the date above if we acquire the maximum number of common shares allowable or otherwise decide not to make any further repurchases.

Purchases under the normal course issuer bids were, or may be, made through open market purchases at market prices as well as by other means permitted by applicable securities regulatory authorities, including private agreements.

The following table summarizes our share repurchase activities during the period:

 

Three Months Ended

 

Six Months Ended

 

June 30

 

June 30

 

2020

 

2019

 

2020

 

2019

Number of common shares repurchased for cancellation

-

 

20,590,564

 

3,832,580

 

36,066,766

Average price per share (US dollars)

-

 

52.27

 

41.96

 

52.07

Total cost

-

 

1,076

 

160

 

1,878

Dividends declared

We declared dividends per share of $0.45 (2019 ? $0.43) during the three months ended June 30, 2020, payable on July 17, 2020 to shareholders of record on June 30, 2020 and $0.90 (2019 ? $0.43) during the six months ended June 30, 2020.

Subsequent to June 30, 2020, we declared a quarterly dividend of $0.45 per share payable on October 16, 2020 to shareholders of record on September 30, 2020. The total estimated dividend to be paid is $256.

NOTE 9 BUSINESS ACQUISITIONS

Ruralco

On September 30, 2019, we acquired Ruralco Holdings Limited ("Ruralco") for a purchase price, net of cash and cash equivalents acquired, of $330. We have engaged independent valuation experts to assist in determining the fair value of certain assets acquired and liabilities assumed.

Other Acquisitions

During the six months ended June 30, 2020, we acquired several businesses, the largest of which was Tec Agro Group, a leading agriculture retailer in Brazil. The acquired businesses include 29 Retail locations in North and South America and Australia. Expected benefits of the acquisitions include expansion of geographical coverage for the sale of crop input products and services, an increased customer base and workforce and synergies between Nutrien and the acquired businesses.

The preliminary values allocated to the acquired assets and assumed liabilities based upon fair values were as follows:

 

June 30, 2020

 

Ruralco (Estimate)

 

 

Other Acquisitions

 

Preliminary

 

Adjustments

 

Revised Fair Value

 

 

Receivables

318

 

-

 

318

1

 

75

Inventories

115

 

-

 

115

 

 

62

Prepaid expenses and other current assets

8

 

-

 

8

 

 

2

Property, plant and equipment

136

 

-

 

136

 

 

40

Goodwill

189

 

18

 

207

 

 

147

Other intangible assets

210

 

-

 

210

 

 

-

Investments

15

 

-

 

15

 

 

-

Other assets

16

 

-

 

16

 

 

1

Total assets

1,007

 

18

 

1,025

 

 

327

Short-term debt

167

 

-

 

167

 

 

36

Payables and accrued charges

342

 

21

 

363

 

 

108

Lease liabilities, including current portion

110

 

-

 

110

 

 

-

Deferred income tax liabilities

45

 

(3)

 

42

 

 

1

Other non-current liabilities

13

 

-

 

13

 

 

9

Total liabilities

677

 

18

 

695

 

 

154

Total consideration

330

 

-

 

330

 

 

173

1 Includes receivables from customers with gross contractual amounts of $260, of which $5 are considered to be uncollectible.

The preliminary value relating to Ruralco, included in the above table, was previously reported in our first quarter financial statements. The purchase price allocation is not final as we continue 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. We estimated the preliminary purchase price allocation as of the date of the acquisition based on information that was available and continue to adjust those estimates as new information that existed at the date of acquisition becomes available. We will finalize the amounts recognized by September 30, 2020. All measurement period adjustments were offset against goodwill.

Financial information related to business acquisitions is as follows:

Pro Forma 1

 

 

 

 

 

 

Other Acquisitions

Sales

 

 

 

 

 

 

260

EBIT

 

 

 

 

 

 

19

1 Estimated annual sales and earnings before finance costs and income taxes ("EBIT") if acquisitions occurred at January 1, 2020.