Sanctions a double-edged Sword for Nutrien

Another major global company in the resource sector has benefited indirectly from the Ukraine invasion – but this one will be highly qualified with both good and bad sides to the impact.

 Rather than oil, gas or coal, it’s Canadian global fertiliser giant Nutrien (TSE:NTR) that has revealed a record profit for the June quarter.

The world’s largest fertiliser producer posted net earnings of $US3.60 billion in the June quarter, more than three times the $US1.1 billion earned in the June, 2021 quarter.

The $US3.6 billion figure included a non-cash reversal of a previous impairment of $US450 million relating to its phosphate operations. Which means the actual result was closer to $US3.15 billion – still a very strong result.

For the first half of 2022, net earnings rose to $US5 billion from $US1.246 billion in the first half of 2021.

For the strong result, Nutrien can thank the sanctions on Russia and Belarus – the world’s second- and third-largest fertiliser suppliers – over the invasion of Ukraine.

The sanctions have crimped an already tight supply of crucial crop nutrients like potash and nitrogen, and sent their prices soaring.

During the June quarter, prices approached levels not seen since the all-time highs of the 2008 food crisis.

The surge in global prices more than offset higher natural gas costs and lower sales volumes which saw Nutrien downgrade its outlook for the rest of 2022.

Nutrien blamed higher natural gas costs (thanks Vlad as well) which are impacting its nitrogen business.

“We expect supply challenges across global energy, agriculture and fertilizer markets to persist well beyond 2022,” the company said in its statement.

Nutrien said it expects fertiliser demand to remain strong, as high crop prices and low grain stocks are expected to incentivise farmers to use more plant nutrients to boost yields.

“We expect supply challenges across global energy, agriculture and fertiliser markets to persist well beyond 2022,” Nutrien’s interim Chief Executive Ken Seitz said in a statement.

The comment echoes those of rivals CF Industries Holdings and Mosaic Co, which also reported higher quarterly profits this week.

Looking at the rest of 2022, Nutrien said it now expects 2022 adjusted earnings between $US15.80 and $US17.80 a share, compared with its previous expectation of $US16.20 to $US18.70.

Nutrien shares eased 0.4% to $C105.30.