Fertilizer sector set for largest income in years on Russia-Ukraine battle By Reuters


© Reuters. FILE PHOTO: An inside view of the storage warehouse is seen at Nutrien’s Cory potash mine close to Saskatoon, Saskatchewan, Canada August 12, 2019. REUTERS/Nayan Sthankiya/File Photograph

By Ruhi Soni

(Reuters) – Fertilizer makers are set to publish their largest quarterly income in years, following a provide squeeze of important crop vitamins as a result of Ukraine disaster, in response to analysts.

Prime fertilizer makers Nutrien (NYSE:) Ltd, Mosaic Co (NYSE:) and CF Industries (NYSE:) are anticipated to profit as sanctions on Russia and Belarus, the world’s No. 2 and three producers of potash, despatched costs of the important thing fertilizer nutrient to ranges not seen for the reason that 2008 meals disaster.

“Nutrien, for positive, goes to boost their (earnings) steerage. I would be shocked if they do not,” stated Joel Jackson, senior analyst at BMO Capital Markets Fairness Analysis.

THE CONTEXT

Costs of potash have been already hovering final 12 months on tight provides after worldwide sanctions on Belarus’ state-owned producer Belaruskali in response to President Alexander Lukashenko’s crackdown in opposition to political opponents.

Nevertheless, occasions in Ukraine have pushed costs to new highs as Russia is likely one of the prime suppliers of potash and different crop vitamins akin to nitrogen, phosphate, urea and ammonia.

Nutrien, the world’s largest fertilizer maker, stated in March it will ramp up its annual potash output by 1 million tonnes to just about 15 million tonnes in response to the uncertainty of provide from Japanese Europe.

Nutrien could face challenges to find the labor to ramp up its capability, Jackson warned.

Excessive fertilizer costs could finally be partially offset by hovering costs, significantly for nitrogen-based fertilizer makers akin to CF Industries, Morningstar fairness analyst Seth Goldstein stated.

“For firms like Mosaic and Nutrien which can be vertically built-in and mining their very own potash, they need to really feel the price inflation lower than maybe a CF who nonetheless wants to purchase U.S. pure gasoline to make nitrogen.”

Analysts may even look out for feedback on demand getting hit on account of increased costs. Farmers are already reacting by skimping on fertilizer use, stockpiling for a couple of years, or switching to manure.

European fertilizer makers this month wowed traders, with Germany’s Okay+S AG elevating its full-year core revenue forecast by 40%, whereas Norway’s Yara Worldwide (OTC:) ASA posted a stronger-than-expected core revenue even because it flagged increased pure gasoline prices.

FUNDAMENTALS

Firm

Refinitiv Q1 Refinitiv Q1 EPS

income estimate estimate

Nutrien Ltd $7.62 billion $2.56

(up 64% YoY)

Mosaic Co $4.08 billion $2.38

(up 77% YoY)

CF Industries $2.59 billion $4.21

Holdings Inc (up 147% YoY)

WALL STREET SENTIMENT

Firm Advice Median

Value Goal (NYSE:)

Nutrien 15 of 21 analysts charge the inventory C$120

“purchase” or increased; 6 “maintain”

Mosaic 10 of 20 analysts charge the inventory $75

“purchase” or increased; 10 “maintain”

CF Industries eight of 19 analysts charge the inventory “purchase” $110

or increased; 11 “maintain”

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