Nutrien outlook falls below expectations as trade dispute weighs on prices

SASKATOON — Nutrien Ltd. says lower crop prices last year from trade uncertainty and high crop yields put pressure on its customers but that it expects the situation to improve this year.

Prices are already improving for key crops and the fundamentals have improved, said company CEO Chuck Magro on an earnings call Thursday.

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"We do expect farmer economics to improve in 2019, crop prices are up."

He said farmers in the key U.S. market had a tough time last year as a trade dispute saw China impose tariffs on some U.S. crops.

"Crop prices started to recover early in the year... but then the trade uncertainty hit, that provided a significant amount of pressure on crop prices, and that has hurt our farmer customers."

Trade uncertainty remains an issue with the potential for the U.S. to raise tariffs to 25 per cent on US$200 billion worth of Chinese goods, while the record production from last year continues to weigh on prices.

The pressures factored into Nutrien's expected earnings of between $2.80 and $3.20 per share for this year, below analyst expectations of $3.38 per share according to Thomson Reuters Eikon.

Magro said that a resolution of the trade dispute would help but that it expects this year to be better than last either way.

"If we had a trade settlement we do expect crop prices to rise, but overall we still expect 2019 to be a better year than 2018."

The company said it earned US$3.57 billion last year, compared with a combined net income of US$327 million for PotashCorp and Agrium Inc. a year earlier before the two merged to form Nutrien.

The earnings include several global subsidiaries the company was required to sell as part of the merger. Total proceeds from the sales last year came in at US$6.4 billion, while net earnings from discontinued operations were US$3.6 billion.

In the fourth quarter last year, the company had net earnings from continuing operations of US$335 million, or 54 cents per share, slightly off the US$336 million or 55 cents per share expected by analysts according to Thomson Reuters Eikon.

It says low potash inventories in China and Brazil, along with slower supply growth, will help boost demand this year, even as U.S. inventories are elevated from high rainfall and farmers holding back on applying fertilizer because of the trade uncertainty in the fourth quarter.

Magro said retail will be the company's focus for growth capital, where its strategy is to focus on proprietary products.

The company announced on Tuesday it had agreed a US$340 million deal to buy Actagro LLC, which produces soil and health products and technologies.

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