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Highlights
Fertilizer stocks like Nutrien (TSX:NTR) and Itafos (TSXV:IFOS) could be one to watch amid the ongoing potash deficit crisis
A TSX company mentioned here saw its net profit increase by 941 per cent YoY in Q1 FY2022.
A TSXV stock listed below rocketed by over 331 per cent in a year.
Fertilizer stocks like Nutrien (TSX:NTR) and Itafos (TSXV:IFOS) could be one to watch amid the ongoing potash deficit crisis, where the global fertilizer market is said to be eyeing Canada’s potash resources.
Nutrien recently pointed out that financial sanctions against Russia and Belarus, which accounts for about 40 per cent of the world’s potash production, have substantially constrained potash supply. The Canadian fertilizer giant added that the ongoing crisis and resultant international response has and may continue to widely affect the crop nutrient market (supply and prices) and impact the global economy.
Considering that market uncertainty in the fertilizer market could continue, Canadian provinces are likely to see growing demand for new potash and fertilizer projects to meet demand in the market. So, let us have a look at the two Canadian fertilizer stocks.
Nutrien Ltd (TSX: NTR)
Nutrien posted sales of US$ 7.65 billion in the first three months of fiscal 2022, representing a positive change of 64 per cent year-on-year (YoY). The fertilizer producer saw its gross margin grow by 182 per cent YoY to US$ 3.25 billion in the latest quarter.
Notably, Nutrien’s net profit increased by 941 per cent YoY to US$ 1.38 billion in Q1 FY2022. The agriculture company saw its adjusted expand 224 per cent YoY to US$ 2.61 billion in the first quarter of fiscal 2022. However, its cash used in operating activities amounted to US$ 62 million in the latest quarter, down from C$ 152 million a year ago.
The fertilizer company saw its free cash flow (FCF) swell 281 per cent YoY to US$ 1.81 billion in Q1 FY2022. Its potash sales volume guidance also increased to 14.5 to 15.1 million tonnes this year.
NTR stocks galloped by over 88 per cent in 12 months and held a Relative Strength Index (RSI) of 46.34 at the time of writing this on May 3, according to Refinitiv.
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Itafos Inc (TSXV: IFOS)
Itafos Inc is a junior fertilizer company that produces and supplies phosphate and speciality fertilizers. The TSXV company reported a revenue of US$ 413.2 million in the last quarter of fiscal 2021 compared to US$ 75.1 million in Q4 2020.
Itafos generated a net profit of US$ 24.3 million in Q4 FY2021 against a net loss of US$ 9.4 million a year ago. Its free cash flow also grew from US$ 5.6 million in Q4 2020 to US$ 28.8 million in the latest quarter.
IFOS stock rocketed by over 331 per cent in a year and had an RSI value of 52.29 on May 3, as per Refinitiv data.
Bottomline
The tightening global fertilizer supply could boost the earnings and cash flows for companies like Nutrien and Itafos in 2022. Such companies could also expand their production capabilities and help ease the supply worries in the fertilizer markets.
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Please note, the above content constitutes a very preliminary observation based on the industry, and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.
