Fertilizer producer Nutrien Ltd. NTR-T is scaling back operations in Brazil, the world’s largest agricultural exporter, after a series of setbacks in the region that included a US$220-million loss on unauthorized derivatives trades.
Over the past four years, Saskatoon-based Nutrien expanded its fertilizer sales business in Brazil by making a series of acquisitions. In August, the company announced a US$335-million impairment on the value of the division there – the latest in a series of writedowns in the South American unit totalling roughly US$800-million over the past year.
Nutrien, the world’s largest potash producer, also announced an employee made currency derivatives trades in Brazil “outside of the company’s internal policy and authority limits,” resulting in a US$220-million loss. Nutrien vice-president Megan Fielding said Nutrien closed the derivatives positions in July and the employee is no longer with the company.
Nutrien chief executive officer Ken Seitz said in a conference call with analysts this month the company launched a strategic review of its Brazilian operations and has already closed 21 retail outlets in the country. When questioned about the derivatives losses, Mr. Seitz said: “We identified that quickly, we dealt with it quickly and we have remediated the issue.”
Last year, Nutrien’s global sales were US$29-billion, with Brazil accounting for U$1-billion of the total. The South American nation is the global leader in arable land and agricultural exports.
Brazil is an important region for Nutrien, as one of the “fastest-growing agricultural markets in the world,” Mr. Seitz said at an Investor Day presentation June 12. However, he added that while “the long-term prospects remain attractive, the near-term market challenges have required us to adapt our strategy.”
When Nutrien completes the restructuring of its Brazilian operations, Ms. Fielding said the division will be “leaner and more focused,” with the same structure as North American and Australian retail divisions that have delivered strong financial results “throughout the commodity cycle.”
When Nutrien announced the derivatives loss and Brazilian write down on Aug. 8, the company also said chief financial officer Pedro Farah had moved into an advisory role and would depart at the end of the year. The new CFO, Nutrien’s former chief commercial officer, Mark Thompson, started Monday. Mr. Thompson has been with Nutrien for 13 years, mainly as an executive in the retail division.
Mr. Farah joined Nutrien in 2019 after spending seven years as treasurer of Walmart Inc. He was born and educated in Brazil, and worked at several Brazilian financial institutions early in his career. Nutrien paid its now former CFO US$3.8-million last year.
Over the past 12 months, Nutrien’s share price has fallen 23 per cent on the Toronto Stock Exchange and analysts say the company now trades at a valuation significantly below historic levels.
“Sentiment on Nutrien is at a low point, with concerns around weak ag fundamentals, retail recovery, potash supply adds, low cash conversion and a lack of clear positive catalysts,” RBC Dominion Securities Inc. analyst Andrew Wong said in a report. “The Brazil derivatives issue added to negative sentiment, even if not significantly material financially.”
Earlier this year, Nutrien said it is considering divesting its retail businesses in Argentina, Chile and Uruguay, which account for 2 per cent of the earnings in its retail division.
Nutrien is also scaling back capital spending in North America. In August, the company cancelled plans to build an ammonia plant in Louisiana and took a US$195-million writedown on the project. The US$2-billion facility was previously expected to begin production in 2027.
Nutrien is Canada’s largest fertilizer company. It was created in 2018 by the merger of miner Potash Corp. of Saskatchewan Inc. and Agrium Inc., a Calgary-based company that mixed potash mining with a large retail division. Since then, the company has cycled through three CEOs, surprising markets by parting ways with Chuck Magro in 2021 and his replacement, Mayo Schmidt, just eight months later.
Mr. Seitz joined Nutrien in 2019 as head of its potash division and succeeded Mr. Schmidt in 2022. Prior to that, he was CEO of Canpotex Ltd., the Saskatoon-based company that sells potash around the world for Nutrien and Tampa-based fertilizer producer Mosaic Co.