Nutrien Ltd. NTR-T is buying Brazilian retail fertilizer company Casa do Adubo S.A. as it forges ahead on an expansion into Latin America despite a difficult global economic environment.
Saskatoon-based Nutrien, the world’s biggest fertilizer company, did not disclose financial terms for the deal, but said it would add roughly US$400-million in sales and expand its reach in Brazil to 13 states from five. Since 2020, Nutrien has made five acquisitions in Brazil. The company said its sales across Latin America – which also includes operations in Argentina, Chile and Uruguay – are now predicted to hit US$2.2-billion.
Interim chief executive Ken Seitz said in a statement that the acquisition of privately held Casa do Adubo will help farmers increase crop production and feed a growing population at a time of global food insecurity.
Brazil has emerged as one of Nutrien’s most important sources of international growth in recent years.
“Arable land is still growing in Brazil, and the Brazilian agriculture market should continue to grow, which provides more opportunities for Nutrien,” said Seth Goldstein, an analyst with Morningstar Inc. “Strategically it makes sense from a long-term standpoint.”
The expansion in Nutrien’s retail unit comes about 15 months after it terminated chief executive Chuck Magro, who had wanted to sell the business. The Globe and Mail reported last year that Mr. Magro planned to unload the retail segment to raise money for a joint venture on the Jansen potash project in Saskatchewan with BHP Group Ltd. BHP later forged ahead on its own.
Mr. Magro was replaced by former chair Mayo Schmidt, who was in favour of retaining the retail division. Mr. Schmidt himself was let go just eight months later after clashes with the board over his imperious leadership style, The Globe reported. Mr. Seitz took over in January.
A few months after Russia invaded Ukraine, Nutrien shares spiked to a record high, as analysts predicted blockbuster profits for the company amid pressures in the global food supply. Ukraine, known as the breadbasket of Europe, is a major producer of both wheat and corn. In addition, sanctions against Moscow imposed by the European Union, Britain, Canada and the United States crimped exports of both potash and grains out of Russia. Last month, Nutrien said it would boost its annual potash production to 18 million tonnes, up more than 20 per cent, to help fill the void in the fertilizer market.
However, over the past few months, the supply shortfall has eased more quickly than expected, with Russia able to find willing buyers for its grains and fertilizers despite the sanctions – namely, Middle Eastern countries, China, India and Brazil.
In addition, Belarus, which had been subject to international sanctions months before the invasion of Ukraine, found a workaround by shipping its potash to Russia, which in turn has been able to sell it internationally. The easing on the supply side of the market has caused fertilizer prices to plummet and Nutrien shares are down about 30 per cent from their peak. Mr. Goldstein predicts that fertilizer prices will continue to moderate and that likely means lower profits for Nutrien over the next couple of years.
Like most companies exposed to commodities, Nutrien is also under pressure because of the gloomy economic environment around the globe. With inflation hitting multidecade highs in many countries, economists fear that substantial and successive interest rate hikes by central banks are likely to cause a global recession.
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Niall McGee