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Nutrien to tweak phosphate unit, eyes growth with coming cash

Nutrien Ltd. plans to restructure part of its phosphate business, concentrating production at fewer operations and boosting ammonium sulfate output at its Redwater facility in Alberta.

Nutrien President and CEO Charles Magro in a presentation at the BMO Global Metals & Mining conference Feb. 27 called the decision a post-merger change of plans following the combination of Agrium Inc. and Potash Corp. of Saskatchewan Inc., which created the fertilizer juggernaut.

In his address, Magro also tackled the question of what Nutrien may choose to do with billions of dollars in cash that could come its way from asset sales and coming profits.

On the restructuring, Magro said Nutrien's phosphate volume will largely remain unchanged but processing will shift from three to two facilities. Nutrien will repurpose Redwater, a 600,000-tonne-per-day plant, to focus on ammonium sulfate, while Nutrien's Aurora and White Springs facilities in the U.S., with extra capacity, will pick up the phosphate slack lost from Redwater.

Nutrien will spend less than US$80 million on restructuring but expects to gain US$80 million in synergies, Magro said.

Apart from the benefit of lowering operating costs, Magro said Nutrien wants to focus more on the growing ammonium sulfate market. He noted canola crops depend on ammonium sulfate and it is used, especially, in Western Canada.

What to do with cash

In his remarks, Magro also addressed what Nutrien may do with a growing cash pile should assets sales go ahead as planned.

Nutrien recently sold its stake in Israel Chemicals Ltd. for US$685 million and plans to off-load interests in Sociedad Quimica y Minera de Chile SA and Arab Potash Co. Plc, which are expected to be worth billions of dollars.

Combined with potential free cash flow, Magro said Nutrien may need to allocate between US$7 billion and US$8 billion in the next few years.

In spending it, Nutrien will seek the "highest long-term value for our shareholders," Magro said. Some cash could be used to boost growth, for example in Nutrien's retail segment. Magro also said Nutrien is engaged in a sizable share buyback program.

On fertilizer markets, Magro described a cautious but optimistic outlook with supply and demand balance tightening after years of global production growth.