Nutrien cautions sales could take a hit from potential rail strike

The world's largest potash producer warned its sales volumes for 2024 could take a hit if a possible strike by thousands of Canadian rail workers goes ahead this month.

Nutrien Ltd. executives said on a conference call with analysts Thursday that the company is now factoring a potential short-lived rail strike into its potash sales volume guidance for the year.

"Obviously we're concerned about the potential for a rail strike … given the impact this would have not only on Nutrien but on our customers and the broader economy," said Mark Thompson, Nutrien's chief commercial officer, who will become the company's new chief financial officer on Aug. 26.

"Really, any work stoppage would have some impact on the business."

Through its marketing and delivery subsidiary Canpotex Ltd., Saskatoon-based Nutrien moves potash produced at its Canadian mines by rail to North American ports for export to global markets.

Currently, Canada's two major railways are in separate mediated talks with the Teamsters Canada Rail Conference, the union which represents about 9,300 engineers, conductors and yard workers at the two companies.

While CN Rail said last month it does not believe the situation will escalate to a full-fledged strike or lockout, Canadian Pacific Kansas City (CPKC) CEO Keith Creel warned his company and the union remain "far apart" and predicted a work stoppage is "most probable" toward the end of the month.

Both railways are awaiting a decision, expected Friday, from the country's labour board on whether some shipments would be considered essential services in the event of a strike.

A work stoppage cannot occur until the Canada Industrial Relations Board hands down its ruling, which may include a potential cooling-off period. The Canada Labour Code also requires 72 hours' notice ahead of a strike.

If workers at both railways were to strike simultaneously, Thompson said it would be an "unprecedented" situation for Canadian shippers.

Strong global demand for potash has allowed Nutrien to slightly increase its sales volume forecast for the year — to between 13.2 and 13.8 million tonnes, up from a previous forecast of 13.0 and 13.8 million tonnes — but a week-long rail strike would likely result in the company coming in at the lower end of that range.

If a strike does not happen, Nutrien's potash sales are likely to come in at the higher end of its forecast, Thompson said.

Canadian shippers and exporters have dealt with several rail strikes in recent years, though never by both major railways at the same time.

In March 2022, a strike by conductors, engineers and yard workers at Canadian Pacific lasted several days before both parties agreed to binding arbitration toward a new contract.

In November 2019, a rail strike gripped the country for eight days until CN and 3,000 railroaders reached a tentative deal.

Nutrien — which reported net earnings of $392 million US in its second quarter, down from $448 million US a year earlier — said lower fertilizer selling prices in the quarter more than offset higher sales volumes and lower operating costs.

The company lowered its earnings forecast for its retail segment, citing ongoing market instability in Brazil as well as the impact of delayed planting by farmers in North America in the second quarter.

Nutrien now expects adjusted earnings from its retail segment for the year to be between $1.5 billion US and $1.7 billion US, down from a previous range of between $1.65 billion US and $1.85 billion US.