Nutrien is the world’s largest provider of plant inputs, services and solutions. The company produces and sells over 27 million tons of potash, nitrogen and phosphate products worldwide for customers in the agricultural, industrial and animal feed sectors.
The company has a large agricultural retail network serving over 500,000 producer accounts in more than 2,000 retail locations. The company operates and invests in 14 countries.
The company offers its customers complete solutions for agriculture, including nutrients, crop protection products, seeds, service and digital tools. The company operates in the following segments: retail (~ 71% of sales in 2020), potash (~ 10%), nitrogen (~ 13%) and phosphate (~ 6%). It has a unique global presence and well-positioned assets in the Americas and Australia.
Nutrien generates almost 70% of its sales in the US and the remainder 30% in international markets. It operates across the entire agricultural value chain from the soil to the producer.
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Sales growth and market presence
With nearly 50 years of history, Nutrien has grown to scale, innovation and technology to meet the growing and changing needs of its customers. The company has a large fleet of nutrient and crop protection equipment and a variety of digital tools in North America to better serve its growers’ customers.
The company is the world’s largest potash producer with over 20 million tons of potash capacity in its low-cost mines and the third largest nitrogen producer in the world. It operates two large integrated phosphate mining and processing plants. Potash, nitrogen and phosphate are widely used in the fertilizer, feed and industrial sectors, and Nutrien has a solid chance to capitalize on this opportunity.
Nutrien continues to grow both organically and through acquisitions and contributions from its own product lines. Last year, annual run rate synergies were achieved of $ 650 million.
The company had strong growers economics, delivering record first quarter results for the nutrien retail business, higher retail nutrient and potash sales prices and volumes, and strong global agricultural markets and a rebound in industrial nitrogen demand and higher nitrogen sales prices.
The company also saw strong market share growth and continued to benefit from the use of its digital platform and operational improvements. Nutrien expects high US producer margins in 2021 for high crop prices and fertilizer affordability.
Nutrien has historically paid stable and growing dividends over the years. The strength of the dividend is underpinned by the stability of retail profits and strong potash and nitrogen businesses. The company has increased its dividend by 15% since 2018 and bought back 12% of its shares. Nutrien has an attractive annual return of 3% but has a high payout ratio. Most recently, it has increased its dividend by 2% over the past decade and at a rate of 18% + CAGR.
Nutrien has a strong balance sheet, stable dividend, and significant access to liquidity. The company’s retail business is attractive and its low-cost manufacturing facilities ensure stable earnings. The nutrien wholesale business (potash, nitrogen and phosphate) should benefit from a surge in fertilizer prices, which is expected to be a catalyst for earnings growth.
The company is an essential service provider delivering the food the world continues to need, so it is recession-proof. The scale and diversity of Nutrien’s integrated portfolio continue to provide a stable earnings base and multiple growth opportunities. Tight supply and demand fundamentals as well as an increase in US acreage and US export sales and improvement in Ag and fertilizer fundamentals should provide a strong tailwind for nutrien in 2021.
The company predicts American farmers will plant 10 million additional acres in 2021 to meet growing demand for grain.
Nutrien expects the payout ratio to be in line with the target of 40% -60%. The company estimates its adjusted earnings per share in the range of $ 2.55 to $ 3.25 in 2021 and additional adjusted EBITDA of $ 1 billion by 2025. It continues to strive to improve its digital offering to drive costs down to reduce working capital and increase its market share. Nutrien continues to invest in its retail business to expand its network in core markets, improve its product offerings and drive organic growth.
Nutrien faces intense competition in most of the developed agricultural markets. The company competes with medium-sized national retailers, co-operatives and smaller independent businesses in North America and Australia, and smaller independent owners in Brazil. A cost-effective world-class production platform, an extensive distribution network and direct relationships with producers are the main competitive strengths.
As a large fertilizer company, Nutrien feeds the future by helping growers increase food production in a sustainable way. With large manufacturing capabilities and a leading agricultural retail network, the company is well positioned to meet customer needs and deliver long-term value to shareholders. Harvest prices were less affected than other raw materials in the global economic downturn.
The company should benefit from a favorable crop economy, high levels of affordability for farmers and limited inventory build-up in the coming year. The growing demand for plant inputs, high quality food and a growing population is a strong tailwind for the company.
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