PREVIEW-Fertilizer sector set to make biggest profits in years on Russian-Ukrainian conflict

Band Ruhi Soni

May 2 (Reuters) – Fertilizer makers are expected to post their biggest quarterly profits in years, following a shortage of key crop nutrients caused by the Ukraine crisis, analysts said.

Best Fertilizer Manufacturers Nutrien Ltd NTR.TOMosaic Co MOS.N and CF Industries CF.N stand to benefit as sanctions on Russia and Belarus, the world’s second- and third-largest producers of potash, have driven prices of the key nutrient fertilizer to levels not seen since the 2008 food crisis.

“Nutrien, for sure, is going to raise its (earnings) forecast. I’d be shocked if they didn’t,” said Joel Jackson, principal analyst at BMO Capital Markets Equity Research.

THE CONTEXT

Potash prices were already skyrocketing last year due to tight supplies after international sanctions against Belarusian state producer Belaruskali in response to President Alexander Lukashenko’s crackdown on political opponents.

However, events in Ukraine have pushed prices to new heights, with Russia being a major supplier of potash and other crop nutrients such as nitrogen, phosphate, urea and ammonia.

Nutrien, the world’s largest fertilizer maker, said in March it would increase its annual potash production from 1 million tonnes to nearly 15 million tonnes in response to supply uncertainty from ‘Eastern Europe.

Nutrien may struggle to find the manpower to expand capacity, Jackson warned.

High fertilizer prices could eventually be partially offset by soaring natural gas prices, especially for nitrogen-based fertilizer makers such as CF Industries, said Morningstar stock analyst Seth Goldstein.

“For companies like Mosaic and Nutrien that are vertically integrated and mine their own potash, they should feel less cost inflation than maybe a CF that still needs to buy U.S. natural gas to make nitrogen. .”

Analysts will also be watching for comments on demand hit due to higher prices. Farmers are already responding by skimping on fertilizer use, storing for a few years or switching to manure.

European fertilizer makers wowed investors this month, with Germany’s K+S AG SDFGn.DE increasing its full-year base earnings forecast by 40%, while Norway’s Yara International ASA YAR.OL posted stronger-than-expected core earnings, although it reported higher natural gas costs.

FUNDAMENTALS

Company

Refinitiv Q1 revenue estimate

Refinitiv Q1 EPS estimate

Nutrien Ltd NTR.TO, NTR.N

$7.62 billion (up 64% YoY)

$2.56

Mosaic Co MOS.N

$4.08 billion (up 77% YoY)

$2.38

CF Industries Holdings Inc. CF.N

$2.59 billion (up 147% YoY)

$4.21

WALL STREET FEELING

Company

Recommendation

Median price target

Nutrien

15 out of 21 analysts rate the stock “buy” or higher; 6 “maintain”

$120 CAD

Mosaic

10 out of 20 analysts rate the stock “buy” or higher; 10 “maintain”

$75

CF Industries

8 out of 19 analysts rate the stock “buy” or higher; 11 “maintain”

$110

Sanctions leave a gap in global potash productionhttps://tmsnrt.rs/3Kxsnjb

BREAKINGVIEWS-Russia’s fertilizer crisis is cultivating a world of pain

INSIGHT-As sanctions hit Russia, fertilizer shortage puts global food supply at risk

Fertilizer companies were among the top quarterly leadershttps://tmsnrt.rs/37RFvm0

(Reporting by Ruhi Soni in Bengaluru; Editing by Shounak Dasgupta)

((Ruhi.Soni@thomsonreuters.com; Twitter: https://twitter.com/ruhithere))

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