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An interior view of the storage warehouse is seen at Nutrien's Cory potash mine near Saskatoon, Sask., on Aug. 12, 2019.Nayan Sthankiya/Reuters

Nutrien Ltd. NTR-T booked a stronger-than-expected profit in the second quarter, owing to soaring agricultural commodity prices, but weakness in the nitrogen market has forced the company to cut its full-year earnings forecast.

Saskatoon-based Nutrien, the world’s biggest fertilizer company, reported a net profit of US$3.6-billion for three months ended June 30, more than double the US$1.1-billion it earned in the same quarter last year. On an adjusted basis, Nutrien earned US$5.85 a share, 11 more US cents than analysts expected. The growth was driven in part by robust performance in its retail and potash segments.

Nutrien on Wednesday, however, trimmed the midpoint of its 2022 profit forecast to US$16.80 a share compared with US$17.45, citing lower than expected nitrogen earnings. Higher prices for natural gas, which is a key input in the manufacture of nitrogen, is one of main reasons for the weakness.

In the second quarter, Nutrien’s natural-gas-price costs soared by 118 per cent compared with the same quarter a year earlier. Strong demand for natural gas to cool houses in the midst of hotter than normal weather in the United States has cause the price of the commodity to spike in North America, while European natural-gas prices have surged because of shortages after major supplier Russia curtailed exports.

Earlier in the year, Russia’s invasion of Ukraine, a major grain supplier, also caused prices of fertilizer such as potash to rocket to near-record-high levels. In addition, sanctions against Moscow imposed by the European Union, Britain, Canada and the United States crimped exports of fertilizers and grains out of Russia, causing major concerns about global food security.

Nutrien said in June it would boost its annual potash production by more than 20 per cent, to 18 million tonnes, to help fill the void in the fertilizer market.

Over the past few months, the supply shortfall has eased somewhat, with Russia able to find willing buyers for its grains and fertilizers in Middle Eastern countries, China, India and Brazil, despite continuing sanctions by other major importers.

Ukraine also resumed shipments of grain earlier this week under a United Nations-brokered deal to help alleviate the global supply shortfall. Previously, Russia had blockaded Ukraine’s ports to prevent shipments. Ukraine is a major global producer of wheat and corn.

Nutrien is navigating a particularly volatile period in the fertilizer market as it continues to search for a permanent replacement for Mayo Schmidt, its former chief executive. Mr. Schmidt was terminated earlier this year after disputes with the board over his imperious leadership style.

Steve Hansen, analyst with Raymond James, thinks that Ken Seitz, who was appointed as interim president and CEO in January, has a good chance of being made permanent.

Mr. Hansen said Mr. Seitz has proven himself skilled at liaising with investors, and has a lot of experience on the potash side of the business and interacting with Canpotex Ltd., which markets and delivers potash in Canada. Mr. Seitz was head of potash at Nutrien for more than two years, and is a “known entity” for the board, which means he is potentially a safer choice than an external candidate, added Mr. Hansen.

“The one thing that Nutrien can’t afford is another misstep here,” he said. “An external candidate, while it could have its advantages, also comes with a lot of risk.”

Before cutting ties with Mr. Schmidt in January, Nutrien terminated Chuck Magro as CEO in April, 2021, who had been in charge since the company’s formation in 2018 after the merger of Agrium Inc. and Potash Corp. Mr. Magro was let go after a disagreement with the board over a potential joint venture with BHP Group Ltd.

There is precedent for companies sticking with an interim choice for CEO after a controversy hits.

John McKenzie was named the permanent CEO of TMX Group Ltd. last year after initially doing the job on an interim basis. Mr. McKenzie, who had previously been chief financial officer at TMX Group, succeeded Lou Eccleston, who retired early from the stock exchange operator after The Globe and Mail reported allegations by employees that he was a bully and fostered a toxic work environment.

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