First quarter 2021 financial results released by both Nutrien and CF Industries this week have shown significant increases in their net earnings and EBITDA compared to the same period of last year. While sales volumes have declined at both producers compared to previously owing to lower production levels, the higher sales pricing for fertilizer products have boosted earnings.
Nutrien’s free cash flow in the first quarter of 2021 was at $476m, more than double that generated in Q1 2020, while its adjusted EBITDA increased by nearly 60% to $806m over the same period, the producer stated.
Total sales during the quarter were at $4.67bn, an 11% increase from $4.20bn during Q1 2020, and its net earnings grew to $133m, from a loss of $35m over the same period.
Nutrien’s net earnings and adjusted EBITDA increased significantly in the first quarter of 2021 owing to Ag Solutions earnings growth, higher crop nutrient net realised selling prices, and higher North American potash sales, the firm noted.
It’s adjusted EBITDA for the nitrogen segment increased 27% during Q1 2021 to $300m versus Q1 2020, primarily due to higher net realised selling prices. While, sales volumes decreased for urea and solutions, nitrates and sulphates owing to lower opening inventories this year, after a strong fall application season and reduced production in Trinidad.
The producer notes that the recent rally in crop prices highlights the tightness in global supply and demand balances, as well as the sensitivity to any potential supply risk in 2021. However, it adds that planting is in full swing across much of North America and that US corn and soybean acreage combined could be approximately 4m. acres above the USDA’s Prospective Plantings report.
Nutrien anticipates crop input expenditures will increase more than 3% in key markets where they operate, supported by higher planted acreage and crop prices, as well as higher crop protection and crop nutrient prices.
Meanwhile, CF Industries’ Q1 2021 net earnings attributable to common stockholders was at $151m, up from $68m compared to the same quarter of 2020, while its adjusted EBITDA increased to $398m, from $318m over the same period.
The producer’s net sales during the first quarter of this year grew to $1.05bn, from $971m in Q1 2020. Its average selling prices were higher compared to the same period of last year across most segments due to decreased global supply availability, with higher global energy costs driving lower global operating rates. Sales volumes in Q1 2021 were lower over the period due to lower supply availability from lower production, the firm noted.
The average cost of natural gas was at $3.22/MMBtu, compared to the average cost of natural gas in cost of sales of $2.61/MMBtu in Q1 2020 due to higher natural gas costs in the United Kingdom, as well as higher daily gas prices in North America due to severe winter weather.
The severe weather conditions in the US temporarily restricted natural gas availability at several of CF Industries’ units, and this resulted in the firm’s gross ammonia production during Q1 2021 declining to 2.5m. tonnes, compared to 2.7m. tonnes during Q1 2020.
CF Industries therefore expects gross ammonia production in 2021 to be at approximately 9.5 – 10m tons. This is lower than 2020 production owing to the higher number of planned maintenance activities and the plant outages from the forced February shut-downs due to natural gas availability issues.
Production of urea was down slightly over the period to 1.2m tonnes from 1.3m tonnes, while AN production also declined to 475,000t from 515,000t. UAN production increased to 1.7m tonnes, from 1.6m tonnes in Q1 2020.
CF Industries expects the global nitrogen pricing outlook will remain positive, as low global coarse grains stocks-to-use ratios and higher energy prices in Europe and Asia have significantly tightened the global nitrogen supply and demand balance. It adds that these dynamics are highly favourable for low-cost nitrogen producers and appear sustainable into at least 2022.
The producer also expects to see strong nitrogen demand in North America, with 90-92m planted corn acres in the United States, higher canola plantings in Canada and industrial use rising with higher economic activity in 2021.
By Neha Popat, Nitrogen Market Reporter