Nutrien: When Retail Exposure Pays Dividends

Nutrien's 2020 results will be adversely impacted by lower fertilizer prices.
However, the retail segment inherited from Agrium will provide some stability.
The company intends to maintain its dividend, currently yielding 5%.
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In the current crisis, investments in retail are a cause for concern for many an investor. When it comes to Nutrien (NTR), however, the retail segment - which involves sales to farmers - is expected to be the bright spot in a year marked by lower fertilizer prices.
The company, which just released its Q1 '20 earnings and a reduced FY 2020 guidance, will rely on the legacy Agrium business to mitigate the impact of a weaker potash segment. Nutrien expects to maintain a quarterly dividend of US$ 0.45/sh, which looks reasonable based on free cash flow projections.
Revised Guidance
The Q1 results came with a downward reduction to the 2020 guidance, to take into account the recent weakness in crop nutrient prices:

Source: Nutrien's Q1 earnings presentation
The figures above show a roughly US$ 0.3bn decrease in EBITDA vs previous guidance below:

Source: FY 2019 earnings release
The shortfall comes mainly from the potash segment, which has seen some adverse developments of late:
Competitor Belaruskali has settled its contract with China at a price of $220/metric ton. While this should set a floor on global potash prices, it is marks a $70/metric ton reduction from last year's contract. This kind of price had not been seen since the 2016 potash market trough. Nutrien expects reduced corn use for ethanol production in 2020, resulting in lower corn prices and acreage, and therefore, a reduced need for crop inputs. Generally speaking, crop nutrient prices are down sharply vs the same period last year, as shown by competitor Mosaic's price... Read more