Nutrien is the world’s largest provider of crop inputs, services, and solutions. The company engages in the production and distribution of over 27 million tonnes of potash, nitrogen, and phosphate products, for agricultural, industrial, and feed customers worldwide.
It has a large agriculture retail network servicing over 500,000 grower accounts at more than 2,000 retail locations. The company has operations and investments in 14 countries.
The company provides its customers with complete agriculture solutions including nutrients, crop protection products, seed, service, and digital tools. The company operates through segments: Retail (~71% of 2020 revenue), Potash (~10%), Nitrogen (~13%), and Phosphate (~6%). It has a unique global footprint and well-positioned assets in North and South America and Australia.
Nutrien derives nearly 70% of its revenues from the US and the balance 30% from international markets. It operates across the entire agricultural value chain from the ground to the grower.
Key Investment Data
- Opportunity Score: 40
- Ticker: TSE:NTR
- Sector: Basic Materials
- Industry: Agricultural Inputs
- Market Cap: 43.71B
- P/E: 36.07
- Dividend Yield: 3.01%
- Payout Ratio (TTM): 108.00%
- Canadian Dividend Aristocrat: NO
- Chowder Score: Members Only
- Revenue Growth: Members Only
- Dividend Growth: Members Only
- Dividend Growth Fit: 4/10
- Dividend Income Fit: 4/10
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Revenue Growth & Market Exposure
With a history dating back almost 50 years, Nutrien has built an extensive size and scale, and innovation and technology, to address the growing and changing needs of its customers. The company has a large fleet of nutrient and crop protection application equipment and a host of digital tools in North America to better serve its grower customers.
The company is the world’s largest potash producer with over 20 million tonnes of potash capacity at its low-cost mines and the third-largest nitrogen producer in the world. It operates two large integrated phosphate mining and processing facilities. Potash, nitrogen, and phosphate have a large number of uses in the fertilizer, feed, and industrial space and Nutrien stands a solid chance to gain from this opportunity.
Nutrien continues to grow both organically as well as through acquisitions and contributions from its proprietary product lines. It has achieved annual run-rate synergies with $650 million in the last year.
The company witnessed strong grower economics that drove record results for Nutrien’s retail business in Q1, higher crop nutrient sales prices and volumes in Retail and Potash businesses, and strong global agriculture markets and a recovery in industrial nitrogen demand driving higher selling prices in the Nitrogen business.
The company also witnessed strong market share growth and continued to benefit from the utilization of its digital platform and operational improvements. Nutrien expects high US grower margins on strong crop prices and fertilizer affordability levels in 2021.
Nutrien has a history of paying stable and growing dividends over the years. The strength of its dividend is underpinned by the stability of its retail earnings and strong Potash and Nitrogen business. The company has increased its dividend by 15% and repurchased 12% of its shares since 2018. Nutrien sports an attractive annual yield of 3% but has a high payout ratio. It last raised its dividend by 2% and at a rate of 18%+ CAGR in the last ten years.
Nutrien has a strong balance sheet, a stable dividend, and substantial access to liquidity. The company’s retail business is attractive and its low-cost production assets provide earnings stability. Nutrien’s wholesale business (potash, nitrogen, and phosphate) should benefit from a rebound in fertilizer prices, which is expected to provide a catalyst for earnings growth.
The company is an essential service provider supplying food that the world continues to need and is hence, recession-proof. The scale and diversity of Nutrien’s integrated portfolio further provide a stable earnings base and multiple avenues for growth. Tight supply and demand fundamentals, as well as increased US major crop acreage and US export sales, and improving Ag and fertilizer fundamentals, should act as strong tailwinds for Nutrien in 2021.
The company expects American farmers to plant 10 million additional acres in 2021 to meet rising crop demand.
Nutrien expects its dividend payout ratio to be in line with its target of 40%-60%. The company estimates its adjusted EPS in the range of $2.55-$3.25 in 2021 and an additional adjusted EBITDA of $1 billion by 2025. It continues its efforts towards enhancing its digital offerings, driving down costs, reducing working capital, and growing its market share. Nutrien also continues to invest in its retail business to expand its network in core markets, enhance its product offerings, and drive organic growth.
Nutrien faces extensive competition in most developed retail agricultural markets. The company competes with mid-sized national retailers, co-operatives, and smaller independent operations in North America and Australia, and smaller independent owners in Brazil. World-class low-cost production platform, extensive distribution network, and direct relationships with growers are its key competitive strengths.
As a large fertilizer company, Nutrien is feeding the future by helping growers increase food production in a sustainable manner. With large production capacities and a leading agriculture retail network, the company is well-positioned to supply the needs of its customers and deliver long-term value for shareholders. Crop prices have been less impacted than other commodities in the global economic downturn.
The company should benefit from favorable crop economics, high affordability levels for farmers and limited inventory build in the coming year. Growing demand for crop inputs, high-quality food, and increasing population acts as strong tailwinds for the company.