Nutrien CEO Abruptly Resigns

No changes to our outlook - we think the shares are fairly valued. 

Ruth Saldanha 4 January, 2022 | 11:56AM
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Potash train

Earlier this morning, (Jan. 4) Nutrien (NTRannounced the resignation of Mayo Schmidt from his role as CEO and as a member of the board of directors. The company also announced Ken Seitz, CEO of the potash business, will be named interim CEO.

The press release stated that Seitz brings extensive global leadership experience in the agriculture and mining sectors and is well-positioned to progress the company’s stated strategy and lead the integrated business during the transition. It added that the Board of Directors will work with an executive search firm to begin a global search to select a long-term leader that will take the company into its next phase, which will consider internal and external candidates.

Seitz has over 25 years of global management experience, and was the former President and CEO of Canpotex, the potash marketing joint venture between Nutrien and Mosaic.

“We were surprised by the abrupt departure, given that Schmidt was CEO for less than a year. However, given Seitz's experience leading the potash business, we expect no change to the company's strategy. Nutrien should continue to focus on the reduction of its fertilizer unit production costs, while expanding its retail business through the development of proprietary products and increased digital offerings. As such, we maintain our exemplary capital allocation rating,” said Seth Goldstein, senior equity analyst at Morningstar.

When asked what this means for corporate governance at the firm, Goldstein said that he merely sees the move as meaning Schmidt was not the right long-term fit for the Nutrien CEO role. “This could be due to a number of reasons, but until we have more information I don’t see a big implication for Nutrien’s corporate governance simply from his departure,” he added.

As his outlook is intact, Goldstein maintains his $84 fair value estimate for Nutrien, and his narrow economic moat rating. “I maintain my Examplary capital allocation rating because I have been a fan of Nutrien’s strategy. I didn’t think the company’s strategy would change when Mayo Schmidt took over last year, and I see no reason why it would change now. I think investors can expect Nutrien will continue to focus on unit production cost reductions for its potash and nitrogen operations, while expanding retail business profit margins through the development of proprietary products and increased digital offerings.”

Nutrien shares were down over 6% at the time of writing as the market reacted negatively to the surprise resignation, especially given that the company did not provide any details behind the move.

“However, with the stock trading a little above our fair value estimate and in 3-star territory, we view Nutrien shares as fairly valued. As such, we recommend investors wait for the stock to fall further and offer a margin of safety before considering an entry position. We expect Nutrien will report strong fourth-quarter results and will likely carry solid momentum into 2022, amid cyclically high fertilizer prices and increased farmer plantings. However, as fertilizer prices fall to midcycle levels over the next several years, we expect Nutrien's profits will fall, partially offset by lower potash and nitrogen unit production costs,” Goldstein said.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Nutrien Ltd91.45 USD2.30Rating
Nutrien Ltd117.43 CAD1.79Rating

About Author

Ruth Saldanha

Ruth Saldanha  Editorial Manager at Morningstar.ca. Follow her on Twitter @KarishmaRuth.

 
 
 

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