NutrienNTR76,53 $
Nutrien (NYSE: NTR) one of the largest fertilizer companies in the world, services and solutions for growing crops. Potash fertilizer enterprises in Canada account for more than 20% of global capacities.
About company
Nutrien has offices in 13 countries, more than 2000 outlets, including 800 branches in the USA, Canada, Australia and South America, the company serves more than 500 thousand customers.
The company operates in the following segments:
- Crop Nutrients – Dry and Liquid Macronutrient Products, including potassium, nitrogen and phosphate, patented liquid trace elements and nutrient services. The share in the cost of products sold at the end of 2021 amounted to 40,19%.
- Crop protection products – products of various third-party suppliers and licensed products to maintain crop quality and control plant diseases, weeds and other pests. The share in the cost of products sold at the end of 2021 amounted to 13,05%.
- Seeds – various third-party seed brands and licensed seed product lines. The share in the cost of products sold at the end of 2021 amounted to 12,18%.
- Goods — fences, feed additives, products for animal health, related to animal husbandry, equipment, related to storage and irrigation, and other products. The share in the cost of products sold at the end of 2021 amounted to 9,54%.
- Finance – Financial Solutions for Retail Branches and Customers, sale of agricultural products and services. The share in the cost of products sold at the end of 2021 amounted to 1,07%.
- Services and More – Product Application Studies, soil and leaf testing, crop exploration and precision agricultural services, and water supply. The share in the cost of products sold at the end of 2021 amounted to 5,93%.
- Elimination – exclusion of interest and service charges. Share in the cost of products sold by the results 2021 year was −0.96%.
Structure of the cost of sales of products by segments, million dollars
| 2020 | 2021 | Changes | |
|---|---|---|---|
| Nutrients for crops | 5200 | 7290 | 40,19% |
| Crop protection products | 5602 | 6333 | 13,05% |
| Seed | 1790 | 2008 | 12,18% |
| Goods | 943 | 1033 | 9,54% |
| Finance | 129 | 189 | 46,51% |
| Services & More | 1241 | 1051 | −15,31% |
| Elimination | −120 | −170 | 41,67% |
Revenue by country, million dollars
| 2021 | Changes | |
|---|---|---|
| USA | 16 009 | 57,77% |
| Canada | 3094 | 11,16% |
| Australia | 3591 | 12,96% |
| Latin America, China, India, etc.. | 2398 | 8,65% |
| Thailand | 258 | 0,93% |
| Brazil | 567 | 2,05% |
| Other | 1795 | 6,48% |
| Total | 27 712 | 100% |
Margin on gross profit by segment for 2021
| Nutrients for crops | 21% |
| Crop protection products | 37% |
| Seed | 30% |
| Goods | 17% |
| Finance | 100% |
| Services & More | 84% |
| Elimination | 100% |
Financial indicators
For 2021, sales increased by 32,5% to 27.7 billion due to higher selling prices in all segments of the company, increase in sales volumes of potash fertilizers, organic sales growth.
Gross profit increased by 79,6% to 9.4 billion, and the margin is on 4 pip up to 30%. Operating profit increased more than in 5 times up to 4.8 billion due to slower growth in expenses over gross profit, and a $824 million impairment of assets in the phosphate business.
As a result, net profit increased almost in 7 times — up to 3.1 billion. Free cash flow increased by 135% to $4.3 billion due to higher non-cash operating capital income.
In 2022, the company expects an increase in prices for phosphate and nitrogen fertilizers. According to company forecasts, adjusted EBITDA will be in the range of 10 to $11.2 billion, up from $7.1 billion in 2021. Adjusted profit from continuing operations will be from 10.2 to 11,8 $ per share compared to 6,23 $ in 2021.
Financial indicators, million dollars
| 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|
| Sales | 12 103 | 19 636 | 20 023 | 20 908 | 27 712 |
| Gross profit | 2946 | 5392 | 5441 | 5239 | 9409 |
| Gross profit margin | 24,34% | 27,46% | 0,76% | 1,12% | 20,99% |
| Net profit | 315 | 3573 | 992 | 459 | 3179 |
| free cash flow | 630 | 1975 | 2157 | 1830 | 4300 |
Balance sheet indicators of the company, million dollars
| 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|
| Assets | 17 942 | 45 502 | 46 799 | 47 192 | 49 954 |
| Capital | 6128 | 24 425 | 22 869 | 22 365 | 23 652 |
| Total debt | 5275 | 8208 | 9529 | 10 206 | 8066 |
| Assets | 4809 | 5844 | 8858 | 8752 | 7567 |
Market
Expected, that the global fertilizer market will grow at a CAGR rate 2,4% between 2021 and 2027 and will reach $210 billion. Asia-Pacific region will dominate the fertilizer market due to the presence of the largest fertilizer consumers in China, India and other countries in the region.
In December 2018, the World Fertilizer platform announced, that China is the largest consumer of urea and accounts for a third of the world's total consumption. Global trends in increasing demand for fertilizers in the world: world population growth, reduction of arable land, rapid urbanization and the outflow of agricultural workers. All this forces farmers to increase agricultural production through the use of fertilizers..
In addition to the growth in demand for fertilizers, there is also the potential for an increase in the price of fertilizers.. According to the European Fertilizer Association Fertilizers Europe, in the cost of fertilizer production, the share of natural gas is up to 80% — the price of fertilizers is highly dependent on the price of gas. In the most advantageous position will be those fertilizer producers, that have the nearest access to cheap gas, including the American Henry Hub.
Besides, the price of the main agricultural product - grain - has already increased significantly, whereas other costs, including fertilizers, still lagging behind, which allows us to talk about a further increase in prices for fertilizers.
Nutrien Company, seeing favorable market conditions, as well as the uncertainty of potash supplies from Eastern Europe, plans to increase potash production capacity to about 15 million tonnes in 2022, What's on 20% more, than in 2020. And if the plan is implemented, then we can expect an increase in the company's financial performance in the medium term.
Comparison with competitors
Mosaic was chosen as a comparison., CF Industries, Yara International.
The revenue growth rate will show, how successful the company is in its market, whether the company's products are in demand. The ROE profitability ratio shows the financial return on the use of capital and allows you to assess the quality of work of financial managers.
Comparison of indicators
| Revenue growth rate | Average ROE | ROIC − WACC | |
|---|---|---|---|
| Nutrien | 43,52% | 9,144% | 4% |
| Mosaic | 10,77% | 3,188% | 0% |
| CF Industries | 9,63% | 15,376% | 8% |
| Yara International | 8,02% | 8,410% | 4% |
What multipliers say
Most Nutrien multiples indicate that the stock price is undervalued compared to its counterparts., which allows you to consider the company for purchase at current levels. Compared to the median agricultural industry, fertilizer producers look overvalued..
Company multipliers
| P / E | P / BV | P / S | EV / EBITDA | |
|---|---|---|---|---|
| Nutrien | 18,90 | 2,44 | 2,20 | 10,30 |
| Mosaic | 16,75 | 2,40 | 2,20 | 9,14 |
| CF Industries | 24,80 | 6,90 | 3,50 | 9,20 |
| Yara International | 20,09 | 1,83 | 0,91 | 7,75 |
| Mean | 20,10 | 3,40 | 2,20 | 9,10 |
| Rise / fall potential | 7% | 39% | 2% | −12% |
| Agriculture Industry Median | 17,30 | 2,38 | 1,66 | 11,45 |
| Rise / fall potential | −8% | −2% | −23% | 11% |
Dividends and buyback program
In the reporting period, the company paid dividends for $ 1.04 billion and repurchased shares for $ 1.03 billion, which brought potential returns to investors in 4,4%.
Dividend growth rate over the past 5 years is 8,04%. Average dividend payout ratio for 5 years exceeds 100%, which indicates the unreliability of dividend payments at this level in the future. In 2022, the company plans to allocate at least 2 billion for buyback of shares — this will be a support for the price of Nutrien shares in the medium term.
Profitability indicators
| 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|
| Dividend per share | 1,25 | 1,63 | 1,76 | 1,8 | 1,84 |
| Payout ratio | 278 | 29 | 104 | 222 | 33 |
| Potential dividend yield | 2,42 | 3,47 | 3,67 | 3,74 | 2,45 |
| Buyback Yield | 0 | 6,27 | 6,96 | 0,58 | 1,99 |
| Total return | 2,4 | 9,7 | 10,6 | 4,3 | 4,4 |
What's the bottom line?
At the end of 2021, the company showed an increase in financial performance due to favorable fertilizer market conditions. Nutrien is the leader in efficiency among analogues.
Demand and price of fertilizers, As expected, will continue to grow due to high gas prices, restrictions on supplies from Eastern Europe, as well as long-term trends in the growth of the world's population. This together gives the potential for the growth of stock quotes and the preservation of dividend payments.. Considering the estimation of multipliers, Nutrien shares can be considered as for medium-term, and for longer-term investments.
